S&P downgrades Eurasian Bank, debt

Standard & Poor's said it lowered the long-term counterparty credit rating on JSC Eurasian Bank to B from B+.

The outlook is stable.

The short-term counterparty credit rating was affirmed at B.

At the same time, the agency lowered the national scale rating on the bank to kzBB from kzBBB-. It also lowered the global scale ratings on Eurasian Bank's nondefferable subordinated debt to CCC+ from B- and the national scale ratings on this debt to kzB+ from kzBB.

S&P said the downgrade stems from its reassessment of Eurasian Bank's risk position to moderate from adequate. Despite significant tightening of its credit approval rates since mid-2014 and enhancement of collection procedures, the bank's loan portfolio quality, in both corporate and retail segments, has markedly deteriorated over 2015.

The level of nonperforming loans (NPLs; loans overdue more than 90 days) increased to 11.1% of total loans on Nov. 1 (under local standards), from 7½% on Jan. 1, 2015.

In addition, NPL coverage by loan loss provisions decreased to a very low 52% from 73% on the same dates. This compares unfavorably with the sector average of 114% as of Nov. 1.

As a result, S&P said it thinks that Eurasian Bank will likely counter this by raising its provisioning expenses going forward, which will hinder its financial performance.

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