Non-performing loans on the rise in Kazakhstan

Regular asset quality review confirms stability of Kazakhstan’s banking sector / Photo: Collectors.kz, photo editor: Milosh Muratovskiy

As of Jan. 1, 2024, the volume of Stage 3 loans (non-performing loans or NPLs, as classified by International Financial Reporting Standards) in 11 Kazakhstani banks increased by over $700 million, reaching more than $5 billion, up by 9.8%. This finding was highlighted in the 2024 Asset Quality Review (AQR 2024) report by the Agency for Regulation and Development of the Financial Market (ARDFM).

The scope of the AQR 2024 assessment expanded by 31.3%, totaling approximately $60 billion. Approximately one-third of all debt is attributed to unsecured consumer loans (roughly $19 billion). Other significant contributors include loan portfolios for large businesses (over $9 billion), small businesses (over $7 billion) and investment projects (over $6 billion).

According to the ARDFM, the loan portfolios of all banks included in the review increased. The volume of Stage 2 loans (loans with a significant decline in credit quality) grew by roughly $1 billion, reaching approximately $1.9 billion, up by 3.3%.

However, reserve coverage declined across all banks except ForteBank, Freedom Bank and Nurbank. Freedom Bank’s press office informed Kursiv.media that the share of NPLs over 90 days past due (NPL90+) rose from 0.9% to 1.5%. Despite the increase, this share remains one of the smallest among second-tier banks in the market.

The difference between the banks’ estimates of required reserves and the AQR findings amounted to over $900 billion. Compared to the previous report, adjustments to reserves decreased by approximately $80 million.

«Compared to AQR 2023, the largest decrease in additional provisions was observed in the portfolio of loans to large businesses (-69.7 billion tenge or approximately $150 million). This is primarily due to a reduction in additional provisions for large, individually significant borrowers,» the ARDFM explained.

The AQR 2024 report included 11 banks out of 21, representing 85% of the sector’s assets and 86% of the total loan portfolio. Their assets grew 15.4% year-on-year to approximately $112 billion. The equity capital adequacy ratio for the 11 banks included in the AQR stood at 16.3%, well above the minimum regulatory requirement of 8%. Additionally, the share of total banking sector assets relative to GDP was 45.2%.