Non-bank financial organizations (NBFIs) play a crucial role in Kazakhstan’s financial ecosystem, filling niches that traditional banks may not always be able to serve effectively.
According to Q2 2024 data, this sector shows steady asset growth but faces several challenges, such as deteriorating loan portfolio quality and pressure on capital.
In this article, we will analyze the current dynamics, risks, and growth opportunities for this segment in detail.
Dynamics of Assets and Loan Portfolio:
As of July 1, 2024 the total assets of NBFIs increased by 10.9%or 236.4 billion tenge, reaching 2.412 trillion tenge. The primary driver of this growth was the loan portfolio, which grew by 9.2%, reaching 2.207 trillion tenge. The largest share in the loan portfolio is occupied by loans issued to clients, which increased by 10.8% and reached 1.585 trillion tenge.
An important factor behind this growth is the expansion of financial leasing operations, the volume of which increased by 5.6%, reaching 508.8 billion tenge. This indicates high business demand for long-term financing to acquire equipment and assets.
Problematic Aspects:
Despite overall growth, asset quality remains a concern. Although the share of overdue loans decreased by 5.8%, their total volume still stands at 264.3 billion tenge, which is a significant figure for this segment. This may signal potential problems with the solvency of some borrowers, especially in the context of global economic instability and domestic inflation.
Liabilities and Capital: Increased Burden and Risks
During the second quarter of 2024, the liabilities of these organizations increased by 15.8%, amounting to 1.7408 trillion tenge. This growth was driven by the active attraction of new deposits and the issuance of bonds, which became the key tool for raising funds. Loans account for 34.0% of the liabilities, while the issuance of securities makes up 38.2%.
However, despite the significant growth in liabilities, the balance sheet equity of NBFIs decreased by 0.1%, amounting to 671.6 billion tenge. The decline in equity amid rising assets and liabilities may indicate increasing pressure on these organizations’ financial stability. This is especially dangerous in the context of rising costs associated with corporate income tax, which has increased significantly.
Threats and Risks:
One of the main threats for the sector remains the quality of the loan portfolio. Although the volume of problematic loans has decreased, they still account for 12.0% of the total loan portfolio. This indicates a significant share of borrowers experiencing difficulties in repaying loans, which could negatively impact the stability of NBFIs in the future.
Additionally, the coverage level of overdue loans by reserves has decreased to 12.2% (compared to 13.6% in the previous period), indicating insufficient provisioning for potential losses. This trend could put additional pressure on organizations in case of further economic deterioration or rising default rates.
The increase in liabilities, coupled with declining equity and rising expenses, also creates additional risks for the sector’s financial stability. This could lead to an increase in the debt burden and limit the ability to meet obligations to depositors and investors, especially in the event of macroeconomic turbulence.
Growth Opportunities:
Despite these risks, the sector still has growth opportunities. The increase in client operations and financial leasing indicates that demand for long-term financing remains high. This opens up opportunities for further development of lending and leasing services, particularly in the small and medium-sized business sectors, which continue to expand.
Particular attention should be paid to reverse REPO operations, which grew by 1.1% to 546.7 billion tenge. This indicates increasing activity in the securities market, allowing these organizations to effectively manage liquidity and mitigate short-term market fluctuations.
Prospects and Strategies:
To capitalize on these opportunities, NBFIs need to continue developing their risk management capabilities, especially as pressure on the quality of their loan portfolios increases. Strengthening control mechanisms for problematic loans and improving the provisioning system will be important steps.
A promising direction could also be to increase activity in capital markets, particularly through further bond issuance and attracting investor funds. This would not only provide additional financing for expanding lending but also reduce dependence on short-term borrowed funds.
Conclusion:
In 2024 non-bank financial organizations continue to demonstrate active growth and development, despite facing several challenges. The increase in assets and loan portfolios opens up opportunities for further growth, but risks related to loan quality and declining capital require close attention from market participants. In the face of growing economic uncertainty, NBFIs must focus on risk management and strengthening stability to maintain their position in Kazakhstan’s financial market.
Prepared by: Sultan Valikhanov
expert at Economy.kz portal
