OREANDA-NEWS. August 17, 2009. Fitch Ratings has affirmed Kazakhstan-based Bank Centercredit's (BCC) Long-term Issuer Default Rating (IDR) at B' and maintained the rating Outlook as Evolving. A full rating breakdown is provided at the end of this comment, reported the press-centre of KASE.

The rating action follows clarifications received by Fitch from BCC and Kookmin Bank (Kookmin, rated 'A+'/Negative Outlook) on the planned acquisitions of BCC shares by Kookmin and the International Finance Corporation (IFC). These transactions are expected by the parties to be completed in H209-H110. Fitch's current understanding is that Kookmin will likely increase its stake in BCC's total share capital to 40.1% from the current 30.6%, but that this will be partly achieved through the issuance of preference shares, while the IFC would acquire a 10% stake. Fitch has also been informed that Kookmin would receive the right to convert its preferred stock into common shares, which could result in Kookmin and the IFC jointly holding a controlling stake in BCC. Fitch also understands that the IFC may contribute USD85m of subordinated debt, which together with a planned equity injection of a similar size would result in around a 15% increase to end-H109 regulatory capital.

As Kookmin is now apparently unlikely to consolidate a majority stake in BCC in the short term, a multi notch upgrade of BCC's ratings is not anticipated in the near future. However, the upcoming share transactions, if completed, would further increase Kookmin's stake in BCC, strengthen BCC's capital and support further operational integration between Kookmin and BCC, all of which Fitch would regard as positive for BCC's credit profile.

The Evolving Outlook reflects the potential for some uplift to BCC's ratings should Kookmin's participation in BCC's ownership and management continue to increase without significant deterioration in other aspects of BCC's credit profile. At the same time, the Outlook also takes into account the potential for a rating downgrade should asset quality continue to deteriorate without Kookmin increasing its role at BCC.

Although BCC's reported loan impairment has increased, asset quality continues to be less bad than at most peers. BCC's statutory reporting indicates that loans overdue by 90 days rose to 4.7% at end-H109 from 2.5% at end-2008, whilst one day overdues stood at 11.7%, up from 7.7% at the beginning of the year. Restructured loans were 10.5% at end-H109, according to management figures. BCC's loss absorption capacity looked solid at end-H109, with a regulatory capital ratio of 20.1% and reserves/loans ratio of 11.7%. However, the large tier 2 component (33.2% of total capital at end-H109) undermines somewhat the quality of capital.

A Credit Update on BCC will be available shortly at www.fitchratings.com. The rating actions are as follows:

Long-term IDR: affirmed at 'B'; Outlook Evolving
Short-term IDR: affirmed at 'B'
Support Rating: affirmed at '5'
Individual Rating: affirmed at 'D/E'
Senior unsecured debt affirmed at 'B', Recovery Rating at 'RR4'