Kazakhstan Says Loan Quality May Improve on Fund, Tax Breaks

    Kazakhstan’s central bank said commercial lenders expect their loan quality to improve as the Central Asian nation sets up a fund to buy distressed assets and introduces tax breaks.
    Thirty-five percent of banks expect their loan quality to improve “insignificantly” this quarter, while 51 percent said it will remain unchanged, the National Bank of Kazakhstan in Almaty said in a quarterly survey e-mailed today.
    Credit quality continued to recover slowly in the second quarter as banks extended loan duration to stave off delinquencies, the regulator said.
    Kazakhstan plans to create a fund to acquire problem loans held by local lenders, central bank Chairman Grigori Marchenko has said. The government is also considering tax amendments to facilitate writedowns of bad loans. The state took control of three lenders including BTA Bank, the nation’s largest bank at the time, in 2009 after credit markets froze and a property bubble burst.
    Kazakhstan’s 39 banks posted a combined profit of KZT 10.2 billion ($70 million) in the first half compared with 268 million tenge a year earlier, while the amount of cash set aside to cover loan losses shrank 9 percent to KZT 2.9 trillion, according to the central bank’s financial oversight committee.
    Thirty-seven of the nation’s banks responded to the survey, with 69 percent saying the pace of corporate foreclosures will stay unchanged and 28 percent expecting an insignificant increase. Seventy-one percent said the pace of foreclosures on loans to households will stay the same, and 19 percent predicted an insignificant increase.
    The lenders surveyed by the central bank were asked to choose among five possible answers: significant increase, insignificant increase, no change, insignificant decrease and significant decrease, reports Nariman Gizitdinov, Bloomberg