Are Kazakh banks back to the brink?

Seven years after the first default of Kazakhstan’s largest bank, its lenders are once again under pressure. Can the sector survive an economic slowdown and dramatic devaluation?

"We haven’t really seen an adjustment of prices to match the scale of currency devaluation yet" 
- Magzhan Auezov,  KKB

Kazakhstan’s banks are in trouble – again. That was the message from Fitch Ratings, which in late January downgraded the country’s largest lender, Kazkommertsbank (KKB), to triple-C and warned of severe capital pressures across the rest of the sector.

Among Kazakh bank watchers, the news inspired a sense of déjà vu. Seven years after the global financial crisis, the sector is still struggling to deal with the legacy. Bad debts from that era continue to weigh on bank balance sheets, nowhere more so than at KKB, which two years ago took over twice-defaulted BTA Bank and its massive portfolios of pre-2009 non-performing loans. 

These issues have once again been thrown into sharp relief by the recent dramatic decline in Kazakhstan’s economy. The fall in the price...