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bne June 2019 Companies & Markets I 17
US and the UK, both VTB Capital and its parent have made an aggressive push to secure more business in Africa and Asia with mixed results.
In September last year, VTB agreed to a management buyout of its US unit, citing the “current geopolitical landscape” as a reason for its retreat.
A source close to VTB told bne IntelliNews that the Russian bank has already relocated some key staff to Frankfurt. “It’s literally death by a thousand cuts in London,” said the source. “Most people are headed for the scrap heap but some will find homes in Frankfurt.”
VTB has had the largest international presence of all of
the Russian banks. With the blessing of President Putin, its investment banking unit VTB Capital began its international
expansion a decade ago, opening operations in London, New York, Dubai, Hong Kong, Singapore and Sofia. In 2012 the lender declared its ambitions to build an investment banking empire rival those of Deutsche Bank and UBS. By 2013, 40% of VTB Capital’s profits came from its international business but sanctions have put a dampener on the outlook for future profits.
The bank said it retains operations in Hong Kong, Singapore, Sofia as well as Frankfurt but hasn't said whether Dubai has been shuttered.
“VTB maintains its active position in international capital markets thanks to its professional and experienced team, flexible business model and its readiness to take the initiative when making decisions, depending on the circumstances on the global market,” chairman Philip Mayer, who replaced Herbert Moos last year, said in the filing.
Kazakhstan’s banking sector under pressure, bracing for more M&A or defaults
Gavin Bowring in Almaty
Fears of a fresh banking crisis are mounting in Kazakhstan thanks to a backdrop of rising political
risk in the lead-up to the snap presidential elections in June, a debt-ridden banking sector, a recent wave of currency devaluations and chronic levels of non-performing loans (NPL) that are still plaguing the financial sector. However, analysts say a full-blown crisis is unlikely and the upshot of the current pressure will be another round of mergers and liquidations.
On paper, the macro picture has been stabilising. Since early 2017, the government has already spent close to KZT5.3 trillion ($14bn) taking over bad debts on the banks’ books that cost the country the equivalent of 9% of 2018 GDP, according to Fitch Ratings. A handful of smaller banks have also been allowed to fail, most recently Bank Astana, Exim Bank, and Qazaq Bank, which have all had their licences revoked.
Government-led bailouts – for which the government has largely not been repaid – have helped facilitate a wave of mergers between systemically important banks, including debt-plagued Kazkommertzbank Bank’s sale to Halyk Bank
– combining two of the biggest banks in the country – along with the recent purchase of Tsesna Bank (formerly the second largest lender in Kazakhstan by assets) by First Heartland
Securities, a government-controlled group. Tsesna has since been rebranded as “First Heartland Jysan Bank.”
Partly in response, in mid-April Moody’s ratings agency upgrad- ed its forecast for the Kazakh banking sector from “stable” to “positive”, citing improved capitalisation, asset quality, and better overall liquidity, expecting new lending to be of “better quality”, and overall profitability to improve over the coming 12-18 months. There appears to be a consensus that the size of the recent bailouts alone should be enough to help the sector work out remaining NPLs without triggering a systemic crisis.
Deposit-holders jittery
Yet events in recent weeks have left some deposit-holders jittery. The official banking sector NPL ratio, currently hovering close to 10%, remains heavily understated. In a recent interview, Fitch Ratings director Dmitry Vasilyev estimated that, in addi- tion to the 9% of GDP already spent on bailouts, there are more banks with high volumes of problem loans, which account for a another 7% of GDP. Acting President Kassym-Jormat Tokayev recently announced the need to conduct a “thorough assess- ment” of the quality of all bank assets.
Meanwhile, there has been a flurry of new merger and share sale announcements in the last two weeks, and observers expect more to come. In late April, it was reported that First
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