Fitch Ratings said in a note that Kazakhstan's banking sector displayed a robust performance in the first half of 2023, driven by factors including high interest rates due to inflation, strong non-interest gains and healthy net interest margins.
The rating firm noted that the banking sector’s average net interest margin was 7.4% in the first half, marking a 60 bp increase from the previous year. In addition, the sector recorded net income exceeding KZT1tn ($2.3bn) during this period, translating to an annualised net return on average equity (ROAE) of 41%. It was largely attributed to a limited cost of risk, which remained below 2% of average loans.
Despite the strong performance, Fitch expected that Kazakh banking metrics would gradually moderate in the medium term due to factors such as slower inflation and potential additional regulatory charges. Criticism of the banking sector by Kazakhstan's president has raised concerns about potential regulatory changes that could impact the industry, Fitch said.
Despite the expected moderation, Fitch also said it believed that the sector's intrinsic profitability would remain strong.
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