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Kazakhstan cleans up after the bubble bursts

Investing in a Kazakh bank would be a risky, high-yield bet on a sustained global macroeconomic recovery. But some banks are already hoping to benefit from the country’s financial disasters. Dominic O’Neill reports from Almaty and Astana.

FROM ONE ANGLE Kazakhstan’s banking sector looks as blighted as the old atom bomb testing sites in the north of the country. In real estate, which makes up the collateral for most of the loans of virtually all Kazakh banks, prices have fallen by around 56% since 2007. But property sales are still as scarce as trees in the steppe.

Non-performing loans make up at least a third of the sector’s balance sheet, and there could be much worse to come.

Politician and businessman Mukhtar Ablyazov faces accusations of fraud from BTA, which in 2008, under his chairmanship, became the biggest bank in Kazakhstan. Provisioning ratios for bad assets amount to more than 70% of BTA’s loan portfolios, implying an unrealized loss of an equivalent of just over $11 billion. BTA, which is now owned by Kazakhstan’s sovereign wealth fund Samruk-Kazyna, is pursuing a hunt to recover what it claims are missing assets, many of which it says are outside Kazakhstan, and ultimately in real estate.

Ablyazov, who now lives in London, denies the allegations and has accused the new owners of mismanaging the bank. He says the charges are politically motivated. But in November a court in London ruled that BTA had a sufficiently strong case against Ablyazov to justify a continuation of an asset freeze against him.

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