Kazakhstan’s Banks See First Early-Year Profit Drop Since the Pandemic

According to National Bank data, Kazakhstan’s banks posted a combined profit of 198.6 billion tenge in January, which is down 13,1% year on year. This was the first decline since 2020, Orda.kz reports.

Profits fell by 31,9% in 2020. A year ago, annual growth of 15,5% was recorded. This year’s drop comes as minimum reserve requirements (MRRs) are being tightened — the proportion of funds that banks must keep on deposit with the National Bank. Since September last year, MRRs have been raised in stages, from 1,3% to 3.5–5% for tenge deposits, and from 2,5% to 10–15% for foreign-currency deposits.

The Association of Financiers of Kazakhstan (AFK) has warned that higher MRRs could distort competition among banks and slow lending to the real economy, which is contrary to the government’s stated goal of boosting business lending.

At the same time, the Financial Market Regulation and Development Agency (AFR) is tightening consumer lending rules by introducing additional borrower requirements. In particular, the maximum debt-to-income ratio has been reduced from 0.5 to 0.25 for borrowers more than three months in arrears, while customers with a poor credit history are no longer eligible for unsecured loans.

Last year, the sector’s total profit increased by 6,6% to 2.7 trillion tenge; however, the growth rate slowed sharply compared to 17% the previous year.

Original author: Alexey Afonsky