OREANDA-NEWS. February 03, 2011. Moody's assessment is primarily based on Delta Bank's audited financial statements for 2009 prepared under IFRS. At the same time, the rating agency cautions that its assessment, in part, incorporates information from Delta Bank's non-audited interim statements under the local GAAP for the first nine months of 2010, reported the press-centre of KASE.

RATINGS RATIONALE

The change of the outlook on the bank's ratings was triggered by the most recent KZT3 billion (USD20 million) injection into the bank's capital."The injection of the bank's capital has bolstered Delta Bank's shareholders' equity and should help Delta Bank to qualify under the new minimum capital requirements effective from July 2011," says Semyon Isakov, a Moody's Assistant Vice-President - Analyst and lead analyst for the bank. Delta Bank's unaudited shareholders' equity reached KZT11.6 billion (USD79 million) as of YE2010 following the injection. The current volume of equity is considered comfortable by Moody's, taking into account the minimum equity requirement of KZT10 billion, effective 1 July 2011.

According to Moody's, Delta Bank's E+ BFSR, which translates into a Baseline Credit Assessment (BCA) of B3, reflects: (i) the bank's vulnerable liquidity profile, given its reliance on the short-term and concentrated corporate deposit base; (ii) very high exposure to the agriculture sector, coupled with the high single-name concentrations to grain traders prevailing in the loan book; (iii) in Moody's view, low transparency of shareholder structure and (iv) historically high credit risk appetite. More positively, the rating reflects the high level of regulatory capital adequacy and high net interest margin that help the bank to maintain sound recurring earning power in order to absorb ongoing credit losses.

Delta Bank's B3 local and foreign-currency deposit ratings incorporate Moody's assessment of no probability of systemic support, and are based on the bank's BCA of B3.

Negative pressure could be exerted on Delta Bank's BFSR and local-currency deposit ratings in the event of a material deterioration in its liquidity profile or in asset quality, resulting in substantial contraction of regulatory capital. Conversely, an improved liquidity profile and a substantial decrease in loan concentration levels, both by sector and by names, could exert upward pressure on the bank's deposit ratings.

Moody's previous rating action on Delta Bank was implemented on 24 February 2009, when the E+ BFSR and B3 deposit ratings were confirmed with a negative outlook.

The principal methodologies used in rating Delta Bank were "Bank Financial Strength Ratings: Global Methodology", published in February 2007, and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", published in March 2007.

Headquartered in Almaty, Kazakhstan, Delta Bank reported local GAAP total assets of KZT38.1 billion, shareholder equity of KZT8.4 billion and net income of KZT31 million at end-September 2010.