(The following statement was released by the rating agency)
Nov 30 -
-- Our ratings on the 100% state-owned Development Bank of Kazakhstan (DBK) are
equalized with the ratings on the sovereign, the Republic of Kazakhstan.
-- This reflects our view of the "almost certain" likelihood of timely and sufficient
extraordinary support to DBK from the government of Kazakhstan.
-- We are therefore affirming our foreign and local currency counterparty credit ratings on
DBK at 'BBB+/A-2'.
-- The stable outlook on DBK mirrors our outlook on the long-term ratings on the Republic of
On Nov. 30, 2012, Standard & Poor's Ratings Services affirmed its foreign and local currency
counterparty credit ratings on the state-owned Development Bank of Kazakhstan at 'BBB+/A-2'. The
national scale rating is 'kzAAA'. The outlook is stable.
The ratings on DBK are equalized with the ratings on its sole owner, the Republic of
Kazakhstan, based on our assessment that there is an "almost certain" likelihood that the
government would provide timely and extraordinary support sufficient to service all debt, should
the need arise. Our assessment of the likelihood of extraordinary support is based on our view
-- DBK's "integral" link to the government, demonstrated by the state's 100% ownership and
regular injections into the bank's capital. The government continues to be closely involved in
defining DBK's strategy through state-owned holding company Samruk-Kazyna
(BBB+/Stable/A-2) and the Ministry of Industry and New Technology (MINT). The government has
four representatives on the board of directors of DBK including the deputy prime minister, who
chairs the board.
-- DBK's "critical" public policy role as the primary vehicle for providing long-term credit
to the nonextractive sectors of the Kazakh economy, the expansion of which is one of the
government's main aims. DBK is to play a key role in implementing the government's medium-term
strategic development plan. In recent years, it has offset dwindling project financing from
commercial banks. In view of substantial development needs in Kazakhstan's infrastructure and
manufacturing sectors, we believe DBK will continue to play a vital role.
The monitoring of the bank's activities is done by both Samruk-Kazyna and MINT. Oversight of
DBK shifted to MINT from Samruk-Kazyna in November 2011. The transfer is part of the
government's medium-term strategic development plan, for which MINT is responsible. MINT serves
as trust manager of DBK. That said, Samruk-Kazyna remains the sole owner of DBK and any change
in strategy or operations are subject to approval by Samruk-Kazyna.
Capital injections from the government have supported the bank in the past. In September
2009, the government increased DBK's capital by 181% for the purpose of both the government's
program for industrial and innovation development and the launch of its anti-crisis program.
DBK's strategy includes provisions that, if its debt-to-equity ratio reaches a certain maximum
and the capital adequacy ratio reaches a certain minimum, this will serve as a guaranteed
trigger for the government to inject more capital into DBK. DBK also gets support from the
government through budget loans, as well as loans (including subordinated loans) on favorable
terms from Samruk-Kazyna. That said, the government does not guarantee any of DBK's obligations.
DBK's stand-alone credit profile (SACP) is 'b+', reflecting the bank's anchor of 'bb-', as
well as its "adequate" business position, "strong" capital and earnings, "moderate" risk
position, "below average" funding, and "adequate" liquidity, as our criteria define these terms.
The bank's SACP balances our view of the extremely high credit risk and weak governance and
transparency in Kazakhstan, as well as DBK's heavy reliance on wholesale funding, against the
bank's strong capital and liquidity positions.
The stable outlook on DBK reflects our outlook on Kazakhstan. It also reflects our opinion
that we are unlikely to change our assessment of DBK's role in the economy as "critical" and its
link with the government as "integral". We would likely raise or lower the ratings on DBK if we
raised or lowered the ratings on the sovereign.
We expect strong ongoing government support for DBK by way of a long-term commitment to
increase the bank's capital. We do not anticipate any changes in policy or the regulatory
framework that would weaken the bank's key role in the government's development plans. However,
a deviation from DBK's role in government policy, or signs of weakening government support,
would result in downward ratings pressure.
Related Criteria And Research
-- Rating Government-Related Entities: Methodology and Assumptions, Dec 9, 2010
-- Banking Industry Country Risk Assessment: Kazakhstan, May 15, 2012
-- Banks: Rating Methodology And Assumptions, Nov. 9, 2011
-- Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011
-- Bank Capital Methodology And Assumptions, Dec. 6, 2010
Development Bank of Kazakhstan
Sovereign Credit Rating BBB+/Stable/A-2
Kazakhstan National Scale kzAAA/--/--
Senior Unsecured BBB+