Fitch Ratings has affirmed
The Outlook is Stable.
Fitch has withdrawn BOCK's Support Rating as it is no longer relevant to the agency's coverage following the publication of its updated Bank Rating Criteria on
Key Rating Drivers
IDRs Driven by Shareholder Support: BOCK's IDRs are driven by Fitch's view of a high probability of support from the parent bank,
Shareholder Support Factors: Fitch's view of a high probability of support from BOC is based on full ownership, high levels of management and operational integration between the parent and the subsidiary, significant reputational risks for BOC in a case of the subsidiary's default as well as low cost of potential support given BOCK's small size relative to the parent's (below 0.1% of BOC's assets at end-3Q21).
Country Ceiling Constraint: BOCK's Foreign-Currency IDR (two notches below BOC's IDR) is constrained by
Short-Term IDRs, National Rating: BOCK's 'F2' Short-Term IDRs, the lower of two possible options mapping to a Long-Term 'BBB+' under Fitch's criteria, due to the bank's Long-Term IDRs being constrained by the Country Ceiling. '
Viability Rating Not Assigned: Fitch did not assign BOCK a Viability Rating (VR) because we view the bank as a deeply integrated subsidiary. It has a limited commercial franchise and is heavily reliant on the parent bank in business origination and risk management. Operational integration between the subsidiary and the parent is significant as BOC's management controls all strategic decision-making at the subsidiary level. Under Fitch's criteria, deeply integrated subsidiaries are usually not assigned VRs.
Liquid Assets, Good Loan Quality: BOCK's assets mainly comprise liquid assets, which totalled a high 88% of total assets at end-3Q21. These included cash, short-term placements in
Good Profitability: BOCK's below-market funding costs (below 1% in the last four years) and limited loan impairment charges (0.3% of average gross loans in 12 months to end-3Q21), drive healthy profitability. Return on average equity amounted to 15% in the same period.
High Capitalisation: BOCK's regulatory Tier 1 and Total capital ratios both equalled a high 106% of risk-weighted assets at end-3Q21, one of the highest among Kazakh banks. Capitalisation is supported by its low-risk asset structure and an extended record of profit retention.
Concentrated, Stable Customer Funding: Low-cost customer accounts made up a high 98% of total liabilities at end-3Q21, comprising predominantly current accounts by Chinese companies or local entities with links to
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A downgrade of BOCK's IDRs would follow a downgrade of the Country Ceiling. Ratings could also be downgraded in case of (i) a multi-notch downgrade of BOC's IDRs; (ii) sale of the bank to a lower-rated owner; or (iii) Fitch's view of a weakening propensity of BOC to support its subsidiary. However, none of these scenarios is currently viewed as likely by Fitch.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
BOCK's IDRs and SSR could be upgraded if
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
BOCK's IDRs are driven by potential support from BOC.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
RATING ACTIONS
Entity / Debt
Rating
Prior
LT IDR
BBB+
Affirmed
BBB+
ST IDR
F2
Affirmed
F2
LC LT IDR
BBB+
Affirmed
BBB+
LC ST IDR
F2
Affirmed
F2
Natl LT
Affirmed
Support
WD
Withdrawn
2
Shareholder Support
bbb+
New Rating
Page
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VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
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