Temir is rated Issuer Default (IDR) 'BB-'(BB minus)/Stable, Short-term 'B', Individual 'D/E' and Support '3'. Temir’s IDR and Support rating are based on a moderate probability of support forthcoming from its parent, Bank TuranAlem (BTA, rated foreign currency IDR 'BB+' with a Positive Outlook), one of the two largest banks in Kazakhstan. BTA acquired a 51% stake in Temir in December 2006 (see separate announcement on www.fitchresearch.com).

Public issuance under the programme will be rated separately. Apart from providing for the issuance of senior unsecured notes, the programme provides for the issuance of subordinated notes, the ratings of which would probably be lower than those of senior unsecured notes.

Proceeds from the issuance of senior unsecured notes by TCB will be deposited with Temir. Temir will unconditionally and irrevocably guarantee the timely and full repayment of such notes in the trust deed between Temir, TCB and the trustee, BNY Corporate Trustee Services Limited. TCB is a Netherlands-domiciled subsidiary of Temir, which is expected to be transferred to BTA. Proceeds from subordinated notes issued by TCB will be on-lent to Temir under subordinated loan agreements.

Senior notes issued by Temir under the programme and Temir's guarantees of senior notes issued by TCB will rank at least equally with all present or future unsecured senior obligations of the bank, save those preferred by relevant provisions of law and of general application. Under Kazakhstani law, the claims of retail depositors rank above those of other senior unsecured creditors. At end-2006, retail deposits accounted for 10% of Temir's total liabilities, according to the bank's audited International Financial Reporting Standards accounts.   

Covenants limit Temir's dividend payments to 50% of net income in any particular year and also specify that all transactions of more than USD2m must be concluded on market terms. Temir also commits to maintaining a total BIS capital adequacy ratio of 10%, and a cross default clause becomes applicable in case of overdue debt in excess of USD10m. Covenants also include restrictions on mergers and consolidations by Temir.

The terms and conditions of the notes contain a negative pledge clause, which allows for a degree of securitisation by Temir. In the event of such securitisation, Fitch notes that the nature and extent of any over-collateralisation would be assessed by the agency for any potential impact on unsecured creditors.

Temir is one of the 10 largest banks in Kazakhstan, but held a modest 2% of the system's assets at end-2006. In 2005, the bank's newly appointed senior management refocused its strategy towards aggressive growth in retail lending, in particular mortgages, home equity and car loans.