Page 7 - bne_September 2022_20220802

bne September 2022 Companies & Markets I 7
The birth of a Kazakh banking empire:
ATF Bank
Theo Normanton in London
Timur Isataev can still remember when Almaty Trade Finance (ATF) Bank reached a valuation of $500mn. The main accountant came to inform him of the milestone, and they even cracked open a bottle of champagne to celebrate.
ATF was a scrappy eight-year-old bank at the time. It specialised in financing foreign trade, which was relatively unexplored territory among Kazakhstan’s financial institutions. As one of the first non-state financial institutions in Kazakhstan, it was a pioneer in post- Soviet banking too.
The thirty-four-year-old Isataev had been working at the up-and-coming Temirbank, where his hopes of promotion were slim, when he was invited to become the new head
of ATF Bank by its main shareholder Bulat Utemuratov. Isataev concedes that he was not bowled over by ATF Bank’s credentials at the time, describing it as a “small, sleepy but fairly established bank”, but he jumped at the opportunity nonetheless.
Installed at ATF, Isataev set himself and his team the ambitious target of turning it into a systemically significant bank. The accounting firm EY calculated that this would require the bank to own at least 8% of Kazakhstan’s banking assets –
a spectacularly aspirational goal for a bank which was still significantly trailing Kazakhstan’s top 10 financial institutions.
The boom
The banking sector in Kazakhstan was a thriving but ruthless environment in the early 2000s. In 2002, Kazakhstan became one of the first countries in the Commonwealth of Indepen- dent States (CIS) to obtain investment grade ratings from international ratings agencies. Buoyed by a relatively success- ful series of reforms in the financial sector, banking assets were skyrocketing, and banks were touting new products like mortgages, leasing and consumer financing.
ATF Bank started as a minnow in the Kazakh banking sector but has grown into one of the biggest players in the market today. It has since merged with Jusan Bank in 2021. / Image: ATF Bank.
At the same time, the explosive growth of banks after the collapse of the Soviet Union gave birth to a host of poorly managed and undercapitalised banks which could not keep pace with tightening legal requirements and were slowly being acquired by bigger rivals. It was a case of eat or be eaten.
In order to go on the offensive and grow its assets, ATF Bank decided that it needed to expand in areas where it was poorly represented. That included a big push to attract more retail investors and develop a package of non-banking services, including an insurance arm and a leasing and investment company.
To stay ahead of the curve, however, ATF Bank needed to start acquiring other financial institutions. With this in mind, it looked abroad, buying three “daughter” banks in neighbouring countries: Kyrgyzstan’s Energobank, Russia’s Sibir and Tajikistan’s tiny Sokhibkorbank.
By 2006, ATF’s network comprised 150 branches in Kazakhstan and Central Asia, with assets worth over $8bn, their total value having risen by over 178% in just a year. According to the Financial Times, this gave the bank 11.8% of the country’s market share. To the great surprise of many observers, ATF Bank had turned itself into the second largest financial institution in Kazakhstan.
The bust
But the financial landscape changed dramatically after 2006. S&P downgraded Kazakhstan’s rating to a minimum investment grade level of BBB as private debt piled up and banks turned to increasingly risky lending. A financial crisis was looming not only for Kazakhstan but for the global economy too as housing markets teetered, trade declined and businesses collapsed.
On top of this, Kazakh banks were struggling to increase their capitalisation, and competition for new customers was heating up.
www.bne.eu