Published: February 17, 2009
The banking system in Kazakhstan has been hit hard in the first quarter of 2009. The Kazakh government has nationalised two of the top four banks, BTA Bank and Alliance Bank; part-nationalised Kazkommerzbank and Halyk Bank; and devalued the tenge by 18%, which will put further pressure on the heavily-indebted banking sector.
On February 2, the Kazakh government, as represented by the Samruk-Kazyna National Welfare Fund, acquired a controlling interest in BTA Bank for US$1.7bn. Arman Dunayev, former deputy chairman of the Samruk-Kazyna management board was elected chairman of the board of directors of BTA Bank, while former central bank governor Anvar Saidenov was made CEO.
Samruk-Kazyna also bought the total voting shares of Alliance Bank which amounted to 76% of the company’s market capitalisation. In the same week, the board of directors appointed Mahat Kabashev, former chairman of the board of Distressed Assets Fund, as chairman of the board.
Samruk-Kazyna has also recapitalised two banks, both listed in London: Halyk Bank and Kazkommerzbank have both announced receiving from the National Wealth Fund term deposits for a total amount of KT120bn (US$806mn) each. In exchange, the government will get a stake of up to 25% in the two banks’ equity.
Some foreign investors complain that the BTA nationalisation diluted their equity investment in the bank. East Capital, the Scandinavian CEE asset management company, owned 19.4%, though that stake has now been diluted to 3%. East Capital says the bail-out was carried out “without seeking the approval of existing shareholders”.
Saidenov of BTA says the bank has begun negotiations with creditors to restructure the bank’s US$12bn of external debt, of which US$3bn is due this year. Negotiations “will be tense and will require a lot of work, but I hope they will be successful”, he told local reports.
Currency devaluation
On February 4, the devaluation of the tenge allowed the currency to drop by 18% against the dollar. Subsequently, the sovereign’s credit default swap spreads were driven higher by a further 65 basis points to 1,083 basis points, signalling a greater risk of sovereign debt default.
Moody’s rating agency considers that this devaluation would substantially increase the risk profile of most Kazakh financial institutions as well as the debt burden of non-export oriented corporates.
“Although many Kazakh banks hedge their open FX positions with currency derivatives, Moody’s believes that the tenge devaluation has led to a substantial rise in the banks’ vulnerability to credit risk as approximately 54% of loans by Kazakh banks rated by Moody’s and nearly 65% of the liabilities of these banks are denominated in foreign currencies, mainly in US dollars”, reports Moody’s. At the time emeafinance goes to press, most Kazakh financial institutions ratings from Moody’s are under review for possible downgrade.
Milena Ivanova-Venturini, Central Asia equities strategist at Renaissance Capital comments: “The government is trying to avoid running out of reserves. In Russia, the central bank has been letting the rouble devalue over a more extensive period of time, and in the process spending quite a large sum of money. Kazakhstan’s reserves [US$46bn] are much smaller in absolute terms than Russia’s US$600bn at the beginning of this crisis, so Kazakh officials need to let the currency depreciate.”
At the beginning of February, Russia stepped in to help its neighbour with a major credit facility. On February 5, Russian state-controlled bank Vnesheconombank agreed to open a US$3bn credit line for up to 10 years to Samruk-Kazyna, in order to replenish the Kazakh central bank’s reserves.
New central bank governor
In the middle of January, the chairman of Halyk Bank, Grigoriy Marchenko, was made governor of the National Bank of Kazakhstan. Having been chairman of the bank from 1999-2004, Marchenko has had to deal with difficult times before.
“He has experience going through the painful re-adjustment 10 years ago when Kazakhstan faced the problems first of the Asian crisis and then the Russian crisis,” comments Alisher Djumanov, managing partner at Eurasia Capital. “He is experienced in going through this re-adjustment and I think it’s a good choice, provided that he has to go through some unpopular measures. He has the capacity to execute them.”
This year, Kazakh banks have to repay over US$10bn of foreign debt and as the liquidity situation in the world has not improved, Kazakhstan is facing a second year in which the country has to deal with a banking sector struggling to support the economy. It is instead likely going to be drawing down on funds in order to repay external obligations.
Djumanov says: “The question becomes whether the government has the capacity to bail out all the banks. I think not As a result, there might be some that may need to find other solutions such as sell to strategic investors,” asserts Djumanov. However, he says there are likely to be few buyers in the present market.