International investors clearly still have faith in the growth prospects for banks in Kazakhstan, despite the fact that the global credit crunch has hit the country harder than arguably anywhere else in emerging Europe. In late June, Alnair Capital, a private equity group backed by capital from Abu Dhabi’s Sheikh Tahnoon Bin Zayed Al Nayhan, announced its intention to take a 25% stake in Kazkommertsbank, the country’s second-biggest bank by assets.
Credit Suisse and Renaissance Capital are advising Alnair Capital on the deal. The Alnair transaction, coupled with the purchase in March of a 30% stake in Bank CenterCredit, the sixth-largest bank in Kazakhstan, by Korea’s Kookmin Bank, shows that strategic investors have faith in the long-term future of the banking sector. This is despite its being hit hard by the global credit crunch as much of the recent growth in the sector had been funded by heavy borrowing in the international bond and loan markets.
Other potential sales include that of retail banking specialist Temirbank, whose Kazakh parent, BTA Bank, is seeking to offload it to boost its own balance sheet.
Halyk Bank, meanwhile, which has replaced Kazkommertsbank as the bellwether banking play in the central Asian state, disappointed analysts with its first-quarter results. The bank reported that profits slid by almost 10% in the first three months of the year compared with the same period in 2007 as a result of trading losses and loan-loss provisions.
Grzegorz Zawada, banking analyst at Nomura International in London, says that volume growth, although slower than in 2007, was quite decent, with loans up 6% and deposits up 9%. Core revenues also increased, with net interest income up 21% and net fees up 13%, while operating costs rose by 12%, which Zawada says is pretty impressive given that inflation in Kazakhstan is about 19%. In April, Halyk sold a $500 million, five-year bond – the first international issue by a Kazakh bank since the onset of the global credit crunch in August 2007.
Lead managed by JPMorgan and UBS, the issue attracted strong demand, with investors thought to have taken comfort from the strong likelihood of potential support from the Kazakhstani authorities to Halyk Bank as it is viewed as too important to the country’s financial fortunes to be neglected. Halyk is the biggest bank in Kazakhstan as measured by retail deposits, with a 24.4% market share at year-end 2007.
"Halyk’s strong deposit base provides the bank with an important and major, in the current market conditions, source of growth and a certain liquidity cushion, which we view positively," says Peter Brezinschek, head of financial markets research at RZB in Vienna.