02.02.2023

Industrial Development Fund receives rating of Ba2 from Moody's

The Fund was upgraded to Ba2 with Positive Outlook by Moody's.
On February 1, international rating agency Moody's affirmed Industrial Development Fund's strong financial standing with Ba2 rating for long-term corporate and issuer ratings in both national and foreign currencies, inbusiness.kz reported with reference to Interfax-Kazakhstan.
Moody's has confirmed Not Prime short-term issuer ratings in both national and foreign currencies. Additionally, the outlook for the issuer has been upgraded from stable to positive.
Moody's affirmation of the IDF's long-term rating at Ba2 and change in outlook from stable to positive is based on the improvement in the issuer's capital and asset quality, as well as its stable funding and liquidity position. 
The three-notch upgrade of the ratings also reflects Moody's assessment of a very high level of support from the parent company, the Development Bank of Kazakhstan (Baa2, "stable").
According to Moody's, the upward pressure on the IDF's standalone 'b2' rating reflects the current capital and financial support already received and expected from its parent company. The agency notes that the IDF's core capital has nearly doubled since the end of 2020 and an additional 100 billion tenge is expected in 2023, increasing the core capital by 48%. Furthermore, the agency states that the IDF has greatly benefited from a significant increase in parental and government funding, which makes up more than 90% of its funding base as of late 2022.
Moody's has reported that the recent government funding for the IDF underscores its growing significance in achieving the goals of DBK and the government of Kazakhstan. With its substantial capital and government support, the IDF will be able to broaden its business portfolio and offer leasing services to more established and financially sound companies. The availability of low-cost government financing for the medium and long term will further enhance the company's profitability and stability, according to the agency.
Moody's observes that the increased capital base has significantly enhanced the IDF's resilience to absorb losses. NPLs in relation to tangible common shares and loan loss provisions dropped to 10% at the end of Q3 2022, from 14% at the end of 2021 and 21% three years prior. The agency predicts that the situation will continue to improve with the anticipated capital increase.
Moody's can upgrade the ratings if the sole shareholder continues to inject capital, strengthening the company's capacity to manage losses and indicating stabilizing asset quality. Conversely, a downgrade may occur if there are unforeseen losses on the leasing portfolio that significantly deplete capital, or if there is a material decline in the parent company's ability or willingness to provide support.
Industrial Development Fund is a subsidiary of the Development Bank of Kazakhstan and is part of the Baiterek National Managing Holding. The Fund is financing projects aimed at replacing imports and boosting exports in the manufacturing sector and infrastructure, with the goal of enhancing competitiveness and harnessing the industrial potential of the national economy.