S&P shares its vision on perspectives of the banking sector in Kazakhstan and predicts record-high profit

The international rating agency S&P held a conference in Almaty and shared its vision for the future of the banking sector in Kazakhstan. According to Sergey Voronenko, senior analyst in the agency, despite uncertainty credit entities in Kazakhstan are still profitable and are even claiming record-high profit.

«This year is going to be a profitable year in terms of the volume of gains. We are expecting that the return on equity capital here will be about 25% to 30% on average, which is much higher than in other developing economies,» Voronenko said.

In turn, interest margin (a measure of the difference between the interest income and the amount of interest paid) is going to stay at 6% as it has been for the several past years. The expert thinks that these results are somewhat inconsistent because of a significant increase in the number of retail transactions in the sector and interest rates in the market. (They have followed the base rate regulated by the National Bank).

Analysts believe that the country’s regulator will ease its monetary policy and cut the base rate in the near future. In this case, fee-based income will be the key driver of growth. As Voronenko noted, the vast majority of credit organizations will survive thanks to fees but not everyone. This year, the net fee income, which is the difference between fee revenue and fee costs, is expected at 25% for the entire sector excluding Kaspi Bank.

In turn, further digitalization of the sector is going to be the key driver for fee income, although this process will account for 15% to 17% of all banking expenditures within several years.