The FINANCIAL -- Moody's Investors Service has on September  15 downgraded the long-term local and foreign currency deposit ratings of  Eximbank Kazakhstan (Eximbank) to B3 from B2.

At the same time, the  rating agency affirmed the bank's E+ bank financial strength rating  (BFSR) and Not Prime short-term deposit ratings. All of the bank's ratings carry a stable outlook following the downgrade.

Moody's rating action has been prompted by a weakening of Eximbank's liquidity position and an increased volatility in its highly concentrated funding base. Additionally, the bank's dependence on a limited number of
customer accounts -- the largest of which accounts for about 20% of the  bank's total liabilities -- depresses the bank's liquidity position and  its ability to finance a sustainable business growth.

Currently, Eximbank's funding comes from corporate accounts and deposits,  and local market bonds. According to the bank, it intends to diversify  its funding base through private deposits and increased local bond  issuances. However Moody's believes that any possible positive impact of  the planned measures on the bank's liquidity stance has yet to be seen  and might take a considerable time to materialise.

Moody's notes that currently Eximbank's ratings have little upside  potential; however, in the medium term, an improved liquidity profile  coupled with sound financial fundamentals could have positive rating  implications. Conversely, downward pressure could be exerted on the  bank's ratings as a result of a further material weakening of its  liquidity position. A substantial increase in problem loans would also  weigh negatively on the bank's ratings.

Eximbank is majority owned by Central Asian Power and Energy Company  (CAPEC) which held 68.14% of total shares as at mid-2008. CAPEC is a  holding company with investments in electricity generation and  distribution, chemical production, transport, and other sectors.

With a head office in Almaty, Eximbank Kazakhstan reported total assets  of USD321 million, equity of USD100 million and net income of USD4.8  million at year-end 2007 according to the bank's audited IFRS financial
statements.

Related Stories

• Marcelo Pizzimbono to Join Deutsche Bank as Head of New York Research Sales
• Commerzbank: Joint brand successfully implemented
• Koji Fukaya Joins Credit Suisse as Chief Currency Strategist for Japan