The results of the regular AQR confirmed the resilience of the banking sector at the systemic level
The Agency of the Republic of Kazakhstan for Regulation and Development of Financial Market (hereinafter, the Agency) has published the results of the regular asset quality reviews (AQR) of the banking sector for 2024. The report provides a detailed analysis of the current level of credit risk based on the regular AQR results.
Regular AQR is part of the Agency's supervisory cycle, alongside the SREP assessment and supervisory stress testing. It serves as a key tool for evaluating credit risk and the adequacy of banks' reserves according to international standards. Regular AQR includes an analysis of credit portfolios, borrowers' financial indicators, and risk metrics, applying an individual approach to large borrowers and a group analysis of smaller loans. The results of this analysis adjust banks' reserves and capital, serving as the starting point for annual supervisory stress testing.
In 2024, the Agency conducted the regular AQR as of January 1 of the year 2024 on 11 leading banks, whose assets account for 85% of the banking system. The analyzed debt reached ₸27.4 trillion, increasing by 31.3% year-on-year basis. The main part of the debt is represented by unsecured consumer loans (₸9 trillion), as well as portfolios of loans for large business (₸4.4 trillion), small business (₸3.4 trillion), and investment projects (₸3.1 trillion).
1,583 major borrowers, as well as 856 co-borrowers and guarantors with a total debt of ₸9.6 trillion, were assessed on an individual basis. 29.9 million loans totaling ₸17.8 trillion were analyzed on a collective basis.
The results of the regular AQR confirmed the sector's resilience at the systemic level: the capital adequacy ratio for 11 banks was 16.3%, which is significantly higher than the regulatory minimum requirement of 5.5%.
The difference in reserve estimates between banks and the regular AQR amounted to ₸415.1 billion. The share of Stage 2 increased by ₸492.7 billion, from 1.5% to 3.3%, while the share of Stage 3 rose by ₸327.8 billion, from 8.6% to 9.8%.
Moreover, compared to the regular AQR of 2023, the assessment results have improved: reserve adjustments decreased by ₸36.1 billion, despite the growth in banks' loan portfolios. There is also a decrease in the share of Stage 3 by 3.7 p.p. and the share of Stage 2 by 0.5 p.p.
In general, there is an improvement in the quality of the loan portfolio due to the overall growth of the portfolio, an improvement in the financial condition of borrowers in certain portfolios, as well as the banks' efforts in write-offs, repayments, and the formation of provisions for problematic borrowers.
Detailed results of the regular AQR 2024 are presented in the report by portfolio, valuation method, industry, and risk metrics and compared to the results of the last year's AQR.
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