RAM Ratings has reaffirmed the AA2/Stable/- rating of Development Bank of Kazakhstan Joint-Stock Company’s (DBK or the Bank) Sukuk Murabahah Programme of up to RM1.5 billion.

Published on 27 September 2013

RAM Ratings has reaffirmed the AA2/Stable/- rating of Development Bank of Kazakhstan Joint-Stock Company’s (DBK or the Bank) Sukuk Murabahah Programme of up to RM1.5 billion. The rating reflects the strong support that DBK enjoys from the Government of Kazakhstan (GOK or the Government).
As a development financial institution, the Bank plays a strategic role in facilitating the GOK’s goal of economic diversification, given that the country’s economy is highly dependent on the oil and gas sector. The GOK has been supportive of DBK’s operations with capital infusions and the provision of credit lines. On 4 June 2013, the trust management of the Bank, which is 100% owned by the GOK, via its sovereign wealth fund, Samruk Kazyna, was transferred to Baiterek JSC, another entity wholly-owned by the government. Accordingly, we expect the level of government support for DBK to remain high. 
Given DBK’s public-policy role, a social-development agenda is embedded in some of its credits, which may entail a higher level of credit risk. As at end-June 2013, about 45.4% (or KZT228 billion) of the Bank’s gross loans remained impaired. We note that the Bank has plans to reduce its gross impaired loans (GILs) (through the sale of GILs to the Investment Fund of Kazakhstan or a loan restructuring exercise), which may reduce its GIL ratio to below 20%.
Meanwhile, DBK remains heavily reliant on wholesale borrowings to match its loan assets which generally have longer tenures. This exposes the Bank to refinancing risk, which however is not currently viewed as a major threat. Under RAM’s stress test, DBK’s capitalisation provides a sufficient buffer against credit losses. As at end-June 2013, its tier-1 risk-weighted capital-adequacy ratio stood at 14.7%.
Media contact
Chew Wei Li
603 7628 1025
weili@ram.com.my