Expert opinion: Role of banking sector in economy declining against the background of a decline in the loan portfolio
Almaty. December 13. KazTAG - The role of the banking sector in the economy of Kazakhstan has been declining against the background of the decline in the loan portfolio of second-tier banks (STB), said Ramazan Dosov, expert of the Analytical Center of the Association of Financiers of Kazakhstan.
“The negative dynamics of the banks' loan portfolio has been observed over the past three years against the background of events in the banking system - the merger of Kazkommertsbank and Halyk Bank, withdrawal of licenses from a number of banks, repurchase of agricultural loans from Tsesnabank, and negative revaluation of the active part of the balance of other banks, ” he said to KazTAG, commenting on the statement of Timur Suleimenov, Minister of National Economy, that the economy’s lending from the country's financial sector continues declining.
At the same time, the expert said, if the loan portfolio on balances was declining, then the gross issuance of new loans in the country showed growth for the last three years in a row.
“Thus, in 2016, the increase in issuance amounted to 5.2%, in 2017 - 10%, from the beginning of this year - 25.1%,” he said.
He believes that in the time of decline in the loan portfolio, the role of the banking sector in the economy is decreasing.
“While at the beginning of 2016, the ratio of second tier banks' assets to GDP was 58.2%, now it makes 42.8%,” he said.
In his opinion, in such conditions, quasi-state funding has become an even more important source of funds for banks.
“We believe that in spite of the current situation, the role of the banking sector in the economy should gradually increase,” he said.
Commenting on the question of how to assess the overall dynamics of lending of Kazakhstani economy by the second tier banks, he expressed cautious optimism.
“In the structure of issued loans, there is an increase in almost all sectors with the exception of agriculture. Thus, since the beginning of the year, positive dynamics have been observed in transport (+ 8.2%), trade (+ 11.3%), communications (+ 11.4%), construction (+ 28.3%), industry (+38.8 %)," he said.
In his words, the events of the last three years in the banking sector mainly had a negative impact on corporate loans (repurchase of a loan from BTA Bank, agricultural loans).
“Meanwhile, the share of retail loans in the structure of loans to the economy over the past three years increased from 33.1% to 40.6%, while the portfolio has remained almost unchanged (+ 0.9%),” he said.
He marked the fact that real incomes of the population are also rising.
“On the one hand, consumer demand in the economy is supported by lending, on the other hand - it has become somewhat easier for the population to service borrowed loans,” he said.
Commenting on the risks posed by the growth in consumer lending, he said the level of risks in this sector is moderate.
“Overdue debt, according to current data, is only 247.8 billion tenge or 7.6% of the portfolio structure (3.2 trillion tenge), which does not cause serious concerns about the growth of overdue loans of the sector,” he said.
He added that the total level of non-performing loans in the banking system according to the latest data makes 8.2% or 1.1 trln tenge.
“Meanwhile, given the expansion of the supervisory powers of the financial regulator, we should not expect any swift growth in lending, including consumer lending. Along with stricter requirements, competition for quality borrowers and a relatively stable situation in the economy (moderate GDP growth, leveling the balance of payments, positive dynamics of real cash income - KazTAG) should have a positive effect on the quality of the loan portfolio, but growth will most likely be restrained," he said.