UPDATE 1-Kazakh Alliance Bank may breach loan covenants

(Wraps stories from conference call)

By Douglas Busvine

MOSCOW, Oct 8 (Reuters) - Alliance Bank (ALLBq.L), the No.3 Kazakh bank by assets, warned on Monday that it could breach loan covenants if it suffers a further withdrawal of customer deposits.

Alliance, a fast-growing retail lender, said it could violate covenants as early as next month on some bank loans -- but not its bonds -- if depositors pull out a further 10 billion tenge ($83 million).

Almira Akhmetkarimova, managing director for international capital markets, said Alliance's lenders were "very supportive" and unlikely to declare a default in such an event.

But breaching loan-to-deposit ratios specified in the covenants could hit the bank's growth: "If our deposit base doesn't grow we will not be able to grow our loan portfolio," she told a conference call with analysts.

Alliance, which raised $700 million when it floated in London in July, has seen its share price halve and suffered a selloff in its Eurobonds as foreign investors dumped risky Kazakh assets.

Like other banks hit by the global credit crunch, such as British mortgage lender Northern Rock, Kazakh banks are highly geared to foreign wholesale borrowing and exposed to a bubble on the domestic property market.

Akhmetkarimova told a conference call that customers had pulled out 27 billion tenge ($225 million) -- or over a tenth of deposits -- in July and August during a "panic" triggered by a drop by the Kazakh currency, the tenge, against the U.S. dollar.