UPDATE 2-Kazakhstan central bank approves $1.2 bln assistance for four banks

(Adds details, background)

ALMATY, Oct 18 (Reuters) - Kazakhstan’s central bank, which launched a support programme for the banking sector last month, has approved an assistance package worth 410 billion tenge ($1.23 billion) for four local banks, the regulator said on Wednesday.

The scope of the programme underscores the depth of asset quality problems in Kazakhstan, where the oil-exporting economy has suffered two heavy blows over the last decade, the 2008 global crisis and the 2014 plunge in energy prices.

The four banks are mid-sized lenders ATF Bank, Eurasian Bank, Tsesna Bank and Bank CenterCredit, the central banks said, adding that the funds to assist the lenders had been approved by the central bank’s board in September and October.

The total state support programme for Kazakhstan’s banking sector, as announced previously by the central bank, is to amount to around $2 billion.

This year the central bank started conducting stress tests of the banking sector, which consists of 33 banks.

As of mid-2017, bad loans comprised 11 percent of the loan portfolio, central bank data show, but the regulator itself has admitted the real figure was likely higher.

The four banks named in the central bank’s statement on Wednesday - which have combined assets of $16.9 billion - have a high level of non-performing loans, and the central bank outlined the urgent steps that need to be taken.

“The above-mentioned banks and their large shareholders have provided plans of actions aimed to increase financial stability, improve the quality of assets and reduce the share of non-performing loans, as well as written obligations to conduct additional capitalisation of the banks,” the central bank said.

Under the plan announced in August, the central bank will invest twice the amount provided by participating lenders’ shareholders in purchasing banks’ subordinated bonds.

The banks will then invest the cash they receive in government bonds. Such capital injections will allow them to wrote off bad loans.

The four banks named by the regulator on Wednesday are not the only ones struggling with bad debt. Most Kazakh lenders have suffered heavily over the last decades as whole industries such as property development and agriculture went underwater.

Another medium-sized lender, RBK Bank, this month limited cash withdrawals amid liquidity shortages and Central Bank Governor Daniyar Akishev said on Wednesday the central bank had asked its shareholders to present an action plan.

RBK which has assets of $3.1 billion and another Kazakh lender, Qazaq Banki, this month called off a planned merger. Rating agency Standard and Poor’s said on Wednesday its ratings on Qazaq Banki, who assets stand at $1.3 billion, remained on CreditWatch Negative. (Reporting by Mariya Gordeyeva; Writing by Dmitry Solovyov and Olzhas Auyezov; Editing by Polina Devitt/Jeremy Gaunt)