Loan behavior: changes for June 2022

The total loan portfolio of banks excluding REPO loans increased by 700.8 billion tenge or 3.4% in June. This is a record indicator of monthly growth in 2022 – the ratio of June in the increase was 41%. In total, since the beginning of the year by 1.7 trillion tenge or 8.9%. Detailed dynamics are published in the form of interactive graphs in “Economy in numbers” section : https://jusananalytics.kz/en/dinamika-kreditov/.

Historically, Halyk Bank ratio accounts for most of the total loan portfolio – 35.1% (+3.9 p.p. since the beginning of the year), followed by Kaspi – 12.6% (+0.65 p.p.) and Otbasy Bank – 11.8% (+1.0 p.p.). The Top 5 is closed by BCC – 7.5% (+1.2 p.p.) and Jusan – 5.4% (+0.2 p.p.).

The Herfindahl-Hirschman Index on loans for June shows a value close to highly concentrated markets (over 1,800) – 1,731 points, for the same period in 2021 was 1,522 points. The growth is due to the gradual withdrawal of Russian subsidiary banks from the market. Following the sector consolidation, we expect a shift in the lending market towards a highly concentrated one.

Almost all banks, except Sberbank, demonstrate a double-digit increase in the loan portfolio. In 3 out of 10 banks, the increase is partly due to the loans from Russian banks under sanctions. Among the banks that did not participate in the portfolio purchases of Russian subsidiaries, Forte (+27%), RBC (+19.7%), Otbasy (19.2%) and Jusan (12.2%) have shown double-digit growth since the beginning of the year. At the same time, the increase in the loan portfolio of retail banks amounted to 3-6%.

It should be noted that retail banks demonstrate relatively lower loan portfolio growth values than full-service banks in 2022.

Within the lending power assessment, we note the following banks that conduct active business with a high potential to increase lending to the economy: Freedom Finance Bank, Jusan, Forte and Altyn Bank.

Home Credit has reached the credit activity peak under its current liquidity position. Despite relatively good liquidity reserves, the expansion of lending activities at RBC, Eurasian, Kaspi and Nurbank is limited by the amount of equity. Sberbank’s lending power is limited by the lack of equity and liquidity reserve.

The average ratio of non-performing loans for June 2022 was 4.87% (an increase of 0.67 p.p. since the beginning of the year). A relatively high level of non-performing loans is observed in Jusan (11.29%), Sberbank (6.46%) and Eurasian Bank (6.39%). At the same time, from the beginning of the year, the NPL 90+ ratio at Jusan increased by 1.36 p.p., Sberbank by 2.32 p.p. and Eurasian by 0.61 p.p.

It should be noted that despite the high NPL 90+ ratio, the above banks maintain the level of provisioning of non-performing loans much higher than 100%. This indicates full coverage of the relevant risks. The ratio of provisions from NPL90+ at Jusan was 231%, Halyk Bank – 277% and Otbasy Bank – 460%. A relatively low level of the total provision ratio to non-performing loans is observed in Forte and Home Credit – below 95%.

In general, there is a tendency to switch to a more conservative provisioning policy in most banks, except for those that previously were in the active phase of working with non-performing loans.

At the same time, the average level of the cost of risk in the banking system, calculated as the ratio of net provisions created to the loan portfolio over 12 months, is still below the optimal, in our opinion, level of 2% or higher. A value of more than 2% is observed in Jusan, BCC, Eurasian and Home Credit. This indicates a rather cautious quality assessment of the loans issued, as well as active work to cover risks and improve the portfolio.

Out of the 10 banks with the largest volume of loans, the cost of risk is significantly lower than the average level for the sector only in Halyk Bank (0.4%), Forte (0.9%) and Otbasy Bank (-0.2%). This may indicate both the good quality of the loan portfolio and a rather optimistic provisioning policy.

Retail banks have a sensible increase in the cost of risk, and this may indicate a significant revision of the insolvency assessment of the population towards a deterioration.

The average loan yield for June was 12%. There was an increase of 0.86 p.p. compared to the same period last year. In general, compared to the values of the previous year, the portfolio yield of all banks increased in 2022.

The maximum value of the portfolio yield is still reserved by retail banks. Among the full-service banks, the largest value of loan yield is observed at Jusan (+13.7 p.p. compared to the same period and +11.6 p.p. since the beginning of the year).

The relatively low level of the portfolio yield for June this year is observed at Otbasy Bank – 6.98% (9.4% for June 2021), BCC – 9.18% (9.12%) and RBC – 9.76% (10.7%). Concerning the same period last year, the following banks have a yield decrease: Otbasy Bank (-2.4 p.p.), RBC (0.3 p.p.), Forte (-0.2 p.p.) and Eurasian Bank (-0.2 p.p.).

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