Credit crisis shakes Kazakh banks
ByIsabel Gorst in Moscow
Published: March 9 2008 17:50 | Last updated: March 9 2008 17:50
Kazakh banks, which over the last few years have lapped up cheap foreign loans to finance a consumer boom driven by the country’s soaring oil revenues, have been hit hard by the global credit squeeze.
In the wake of the US subprime crisis, the country’s banks were abandoned holding more than $40bn of foreign debt, some $12bn of which falls due this year.
Standard & Poor’s, which earlier shifted to “negative” its outlook for eight Kazakh banks, warned last month that, with credit and liquidity likely to remain tight throughout 2008 and possibly into 2009, the crisis had not yet run its course.
“Asset quality, liquidity, profitability and business dynamism are areas particularly vulnerable to banking sector turbulence,” S&P noted.
Nursultan Nazarbayev, Kazakhstan’s authoritarian president, has accused ratings agencies of being “non-objective”.
His pledge that no big bank will be allowed to fail is credible given the country’s strong financial position. Some $40bn is accumulated in central bank reserves and the national fund, a growing stash of windfall oil profits.
But analysts say the financial squeeze may persuade more Kazakh banks to sell equity to foreign investors.
Oksana Reinhardt, a financial analyst at ING, says that while she does not expect any of the Kazakh banks to default, “there may be some reshuffling in the ranks of the top banks”.
The timing of the crisis was unlucky for Kazkommertsbank, Kazakhstan’s biggest bank, which faces larger, more immediate debt repayment obligations than its peers, according to Ms Reinhardt.
BTA, another Kazakh lender, is better positioned because it is diversified geographically. While Halyk, the former state savings bank, is expected to gain ground at the expense of others thanks to its low debts and loyal depositors.
However, the credit squeeze could hit Kazakhstan’s smaller banks. Analysts expect to see them either disappear altogether or be forced into tie-ups to survive.
Several foreign banks, earlier denied access to the Kazakh market, are poised to swoop on troubled assets. Analysts think that strategic foreign partnerships would be beneficial for Kazakh banks – bringing money, risk mitigation and know-how. Unicredit of Italy, which bought ATF for $2.2bn last year, is the only foreign bank to have taken over a Kazakh bank so far.
Meanwhile, Kazakhstan’s top banks are against selling strategic stakes while valuations are low. But smaller players are thought to be more open to a takeover.
South Korea’s Kookmin Bank is in talks with CenterCredit, Kazakhstan’s sixth-largest bank, about a possible acquisition. CenterCredit has said its strategy for several years had been to find a strategic partner to support its business in Kazakhstan where it accounts for 11 per cent of retail lending.
There has also been speculation that Kazakh subsidiaries of foreign banks may grasp market share from indebted local competitors. Sberbank and VTB, Russia’s two state banks, have both recently opened subsidiaries in Kazakhstan. South Korean banks, including Woori and Shinhan also plan to enter the country.
In the meantime, most Kazakh banks accept that borrowing terms will be tough for some time and are concentrating on collecting loans and attracting deposits. George Iosifyan, a managing director at BTA, one of Kazakhstan’s top three banks, said: “We are not borrowing at 13 per cent. Forget it.”
The government is providing banks with short term liquidity, but longer term support is only available if shareholders first inject their own capital and sell foreign assets. Prevention of moral hazard, a term unheard during the years of giddy bank borrowing, is now a cornerstone of financial policy.
One of the biggest risks for Kazakh banks is their exposure to construction and real estate, the sectors worst hit by the credit crunch.
After several years of runaway growth, real estate prices are falling in some segments.
Banks have cut lending to construction projects and are offloading mortgages on the state Kazakhstan Mortgage Company.
The government is expected to exert stricter control over the banks in future. Andre Kuusvek, the director of the EBRD in Kazakhstan, claims that “the worst is over”, adding that the government’s response has been “adequate”. |
