ANALYSIS OF FINANCIAL RATIO OF KAZAKHSTAN BANKS WITH FOREIGN PARTICIPATION

ABSTRACT

In modern realities, the guarantee of the stable position of banks is their financial condition. The financial condition can be affected by the monetary policy of the bank, which is why banks regularly assess credit risk to identify vulnerabilities. A comparative analysis of credit risk helps to determine both the strengths and weaknesses of second-tier banks, which in comparison allows you to obtain a large amount of information on the state of the banking sector as a whole. Timely identification of weak links contributes to the most effective introduction of measures to minimize credit risk.

The paper analyzed five main ratios that allow assessing the level of credit risk of second-tier banks in Kazakhstan. The second-tier banks of Kazakhstan with foreign participation were taken as a basis, which also play an important role in the banking structure of the country.

АННОТАЦИЯ

В современных реалиях гарантией устойчивого положения банков является их финансовое состояние. На финансовое состояние может повлиять денежно-кредитная политика банка, именно поэтому на постоянной основе банками осуществляется оценка кредитного риска для выявления уязвимых мест. Сравнительный анализ кредитного риска помогает определить, как слабые, так и сильные стороны банков второго уровня, что в сравнении позволяет получить большое количество информации по состоянию банковского сектора в целом. Своевременное выявление слабых звеньев способствует наиболее эффективному введению мероприятий по минимизации кредитного риска.

В работе были проанализированы пять основных коэффициента, которые позволяют оценить уровень кредитного риска банков второго уровня Казахстана. За основу были взяты банки второго уровня Казахстана с иностранным участием, которые играют также немаловажную роль в банковской структуре страны.

Keywords: second-tier banks, financial ratios, credit risk, banks with foreign participation.

Ключевые слова: банки второго уровня, финансовые коэффициенты, кредитный риск, банки с иностранным участием.

The opening of branches of banks with foreign participation in the country contributed to Kazakhstan's entry into the World Trade Organization. Therefore, it is advisable to assess the level of credit risk in foreign banks and compare the results obtained to identify weaknesses and strengths in the analyzed niche.

Conducting a credit risk assessment implies carrying out a coefficient analysis in order to identify risk limits. This type of analysis is one of the main tools for economic assessment and allows the calculation of financial base ratios using data from the official financial statements of financial institutions.

Table 1.

Estimated coefficients for the loan portfolio of Bank of China in Kazakhstan

The loan coverage ratio, in the case of Bank of China in Kazakhstan JSC, at the end of 2021 was 0.672 or 67.2%, which indicates that the loan coverage ratio is in the acceptable risk zone. For the entire period from 2017 to 2021, this indicator was in the acceptable risk zone and did not exceed it, which tells us about the reliable monetary policy of the bank. In the case of Bank of China in Kazakhstan JSC, the overdue loan ratio for the entire period ranged from 0.004 to 0.006, which shows the high solvency of the bank's customers. The diversification coefficient of credit investments of Bank of China in Kazakhstan JSC is in the range of 0.971 to 0.985, in other words, almost 98.3% of all loans issued were issued in one category, in this case, issued to legal entities, small and medium-sized businesses in the Republic of Kazakhstan. This indicates a low diversification of the bank's loan portfolio, as well as high risks.

Over 5 years, the value of the loan loss coverage ratio increased from 3.1% to 8.2%, which characterizes the decline in the quality of loan administration. However, the indicator is in the acceptable range, which indicates the presence of optimal reserves for possible credit losses.

Table 2.

Estimated coefficients for the loan portfolio of SB Sberbank of Russia JSC

The loan coverage ratio of SB Sberbank of Russia JSC at the end of 2021 was 1.062 or 106.2%, which indicates that the loan coverage ratio is in the critical risk zone. For the entire period from 2017 to 2021, this indicator was in the critical risk zone, but recently there has been a sharp decrease in the indicator and a possible entry into the acceptable risk zone in the near future. In the case of the overdue loan ratio of SB JSC "Sberbank of Russia" for the entire period fluctuated at the level of 0.015 to 0.016, only in 2017 this indicator was equal to 0.009, which shows the high solvency of the bank's customers. The diversification coefficient of credit investments of SB Sberbank of Russia JSC decreased from 0.731 to 0.623 over 5 years, or 62.3% of all loans issued were issued in one category, in this case, issued to legal entities, small and medium-sized businesses in the Republic of Kazakhstan.

The loan loss coverage ratio decreased from 0.689 to 0.163 and moved from the zone of critical risk to the zone of acceptable risk, which also has a positive effect on the work of the bank itself and makes it possible to assume that the bank's credit policy will improve in the future.

Table 3.

Estimated coefficients for the loan portfolio of Subsidiary JSC VTB Bank

The loan coverage ratio of Subsidiary VTB Bank JSC decreased from 1.232 to 0.765 and moved from the catastrophic risk zone to the acceptable risk zone. The NPL ratio for the entire period increased from 0.01 to 0.042, while maintaining high solvency of the bank's customers. The coefficient of diversification of credit investments of Subsidiary JSC "VTB Bank" over the course of 5 years increased from 0.383 to 0.666, in this case, issued to legal entities, small and medium-sized businesses in the Republic of Kazakhstan. The loan loss coverage ratio increased from 0.085 to 0.364 and moved from the zone of acceptable risk to the zone of critical risk, which indicates the need to study this section on the part of the bank.

Table 4.

Estimated coefficients for the loan portfolio of JSC “Islamic Bank “Al Hilal”

The loan security ratio of JSC "Islamic Bank" Al Hilal "for the entire period was in the zone of acceptable risk and was at the level of 70%. The overdue loan ratio decreased from 0.118 to 0.068, showing an improvement in the solvency of the bank's customers. The coefficient of diversification of credit investments of JSC “Islamic Bank “Al Hilal” for 5 years remained at the level of 0.8 or 80%, in this case, issued to legal entities, small and medium-sized businesses in the Republic of Kazakhstan. The loan loss coverage ratio decreased from 0.167 to 0.08, although the decrease did not have much effect, since this indicator remained within the acceptable risk zone for the entire period.

Comparison of the results obtained makes it possible to identify the strengths and weaknesses of the risk management of second-tier banks, as well as contribute to the tightening of ongoing measures. The results of the analysis performed are shown in Figure 1.

Figure 1. Consolidated risk assessment of the loan portfolio of STBs of the Republic of Kazakhstan with foreign participation

Note: compiled by the author based on the source [4, 5, 6, 7]

The loan coverage ratio, in the case of Bank of China in Kazakhstan JSC, at the end of 2021 was 0.672 or 67.2%. The loan coverage ratio of SB Sberbank of Russia JSC at the end of 2021 was 1.062 or 106.2%, which indicates that the loan coverage ratio is in the critical risk zone. The loan coverage ratio of Subsidiary VTB Bank JSC decreased from 1.232 to 0.765 and moved from the catastrophic risk zone to the acceptable risk zone. The loan security ratio of JSC "Islamic Bank" Al Hilal "for the entire period was in the zone of acceptable risk and was at the level of 70%.

According to this indicator, preference is given to “Bank of China in Kazakhstan” JSC and “Al Hilal Islamic Bank” JSC, since for a period of 5 years this indicator remained at the same level and was always in the zone of acceptable risk, in second place is JSC “Bank VTB" due to a sharp decrease in this indicator, and for SB JSC "Sberbank of Russia" it is necessary to carry out additional work to improve the security of loans.

In terms of the overdue loan ratio for all banks, the indicator is at an acceptable level and below 2% of all loans issued, it is worth highlighting Bank of China in Kazakhstan JSC, in which this ratio for the entire period ranged from 0.004 to 0.006 and showed the highest solvency of bank customers.

According to the value of the coefficient of diversification of credit investments of all 4 banks, predominant lending to legal entities is noticeable. At the same time, Bank of China in Kazakhstan JSC has this indicator in the range of 0.971 to 0.985, or almost 98.3%, which is the highest share. And only SB JSC "Sberbank of Russia" 62.3% and subsidiaries JSC "Bank VTB" 66.6% of all loans were issued to legal entities, which is slightly more than half of all loans, and describe a more diverse flow of bank customers. Subsidiary JSC "VTB Bank" and SB JSC "Sberbank of Russia" are the most client-oriented banks with foreign participation in the Republic of Kazakhstan.

The loss coverage ratio was the best for JSC "Islamic Bank" Al Hilal", as the entire period was in the zone of acceptable risk and decreased to 8%, then JSC "Bank of China in Kazakhstan" this indicator is also in the zone of acceptable risk and at the level of 8 .2%, but at the same time it grew from 3.1%, an increase of more than 2 times. The loan loss coverage ratio of SB JSC Sberbank of Russia moved from the zone of critical risk to the zone of acceptable risk and began to be 16.3%, but for SC VTB Bank, on the contrary, this ratio moved to the zone of critical risk and amounted to 36.4 %. According to this indicator, Subsidiary JSC VTB Bank needs to take measures not to move into the zone of catastrophic risk in the future.

Based on the results obtained, it can be concluded that the monetary policy of Al Hilal Islamic Bank JSC and Bank of China in Kazakhstan JSC is similar, since the calculated indicators were almost at the same level and their coefficients indicate higher reliability, than that of SB Sberbank of Russia JSC and subsidiaries of VTB Bank JSC.

Russian subsidiary banks have identified some problems that they should pay the most attention to, and given the current geopolitical situation, it is worth paying attention to the possibility of reducing the reliability of STB data in the territory of the Republic of Kazakhstan and losing customers, although they are more client-oriented banks from this four. It is also worth considering that with a decrease in deposits in these banks, the loan coverage ratio and the loss coverage ratio can abruptly turn into a catastrophic zone, which is fraught with financial losses for Russian banks.

References:

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4. Financial statements of VTB Bank www.kase.kz
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