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Eurasia
May 10, 2019 www.intellinews.com I Page 21
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 politi- cal 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 govern- ment has largely not been repaid – have helped facilitate a wave of mergers between systemi- cally 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 Kazakh- stan 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 rat- ings agency upgraded 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 “bet- ter 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 re- maining NPLs without triggering a systemic crisis.
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 addition 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 assessment” 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 Heartland Bank, the 19th largest bank of 28 by assets, would be added to the recently merged Tsesna Bank- First Heartland Securities tie-up. Local media also confirmed that discussions are currently under way for a merger of Asia Credit Bank
and Capital Bank Kazakhstan with Tengri Bank, expected to be finalised by the end of May.
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