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Moody's places on review for possible downgrade Valut-Tranzit Bank's (Kazakhstan) B1/E+ ratings; affirms not-prime short-term foreign currency deposit rating

May 02, 2006 | CBonds

Moody's Investors Service has placed on review for possible downgrade the B1 long-term foreign currency deposit rating and the E+ Financial Strength Rating (FSR) of Valut-Tranzit Bank (Kazakhstan). The Not-Prime short-term foreign currency deposit rating is not affected by this rating action.

This rating action reflects (i) Moody's expectations regarding deterioration in the bank's financial fundamentals, namely asset quality, in 2005 on the back of more strict evaluation of risks inherent to the bank's lending activities (release of the 2005 audited IFRS financials has been somewhat delayed); (ii) the failure of two attempts to sell the bank to outside investors which could have helped to re-capitalise the bank if need be; (iii) the build-up of negative publicity which increases the level of jitteriness among the bank's depositors and creditors and reduces their level of confidence. According to the bank's senior management, there has been no material pressure on liquidity or loss of customers in the first quarter of 2006.

At the same time, Moody's notes that there are a few positive factors underpinning the ratings at their current level rather than prompting a straight downgrade to a lower level. Firstly, we believe that even if the bank were to get into financial difficulties a fair degree of external support may be forthcoming from the authorities and/or outside investors though its extent and timeliness are uncertain. Secondly, there is no evidence that the bank is not a going concern.

The review will focus on Valut-Tranzit Bank's financial performance, liquidity and solvency, ability to manage its business and defend its franchise under the adverse business conditions described above. We will also try to ascertain which external support mechanisms from outside investors and/or authorities are available to the bank. This review is expected to be concluded within the next few months.

Company: Valut-Transit Bank

Full company nameOpen Joint Stock Company "Valut-Transit Bank"
Country of riskKazakhstan


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