OREANDA-NEWS. On October 03, 2007 Standard & Poor's Ratings Services said that it revised its outlook on Bank TuranAlem (BTA), JSC Eurasian Bank, and Eurasia Insurance Co. to stable from positive, reported the press-centre of KASE.

At the same time, the 'BB/B' counterparty credit ratings on BTA, the 'B/B' counterparty credit ratings on Eurasian Bank, and the 'B' long-term counterparty credit rating on Eurasia Insurance were affirmed.

Furthermore, Standard & Poor's commented on its CreditWatch placement of ATF Bank. The 'B+' long-term counterparty credit rating on ATF Bank remains on CreditWatch with positive implications where it had been placed on June 22, 2007. At the same time, the 'B' short-term counterparty credit rating was affirmed.

These rating actions reflect the diminished likelihood of upgrades under the current adverse international and domestic financial environment in the Republic of Kazakhstan (foreign currency, BBB/Watch Neg/A-3; local currency, BBB+/Watch Neg/A-2). "This follows yesterday's placement of the sovereign credit ratings on CreditWatch with negative implications due to growing concern about the more adverse international financial environment, which affects Kazakhstan through the very substantial external financing needs of the domestic banking system," said Standard & Poor's credit analyst Magar Kouyoumdjian.

"Given the government's supportive attitude toward the banking system, as well as some selective sectors such as construction, this increases the likelihood of realization of contingent liabilities on the sovereign. Furthermore, economic slowdown through reduced bank financing could affect the government's fiscal prospects," added Mr. Kouyoumdjian".

The CreditWatch status of ATF Bank is related to the proposed acquisition of a majority shareholding in the bank by UniCredito Italiano SpA (A+/Stable/A-1) through its subsidiary, Bank Austria Creditanstalt AG (A+/Stable/A-1).

Although economic and bank fundamentals still remain strong, liquidity has come under pressure due to the heavy reliance of banks on external financing. The longer the tightening of global liquidity persists, the greater the refinancing risk to Kazakh banks. Kazakh banks have so far weathered the current liquidity tightening environment. They have overcome the immediate impact of the global liquidity squeeze through adequate asset liability management, strong shareholder and government support, as well as some successful rollovers of debt.

However, the slowdown in financing of the real economy by the banking system will have a cooling effect on economic growth and lead to increased levels of problem loans. Such a slowdown would reveal the true extent of asset quality problems.

Although a moderation in credit growth was overdue, things are likely to get worse before they get better. "Although Standard & Poor's is currently not taking any further rating actions on private Kazakh commercial banks, we will continue to carefully watch the ongoing liquidity pressures in the banking system, as well as pressure on the bank's financial stability emanating from any strong uptick in asset quality problems due to the cooling of the economy," added Mr. Kouyoumdjian.