Kazakhstan: Banks still feeling the pinch


Guy Norton
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Banks in Kazakhstan continue to be the subject of concern in the wake of the global credit crunch, with Standard & Poor’s the latest organization to turn its spotlight on the sector. In mid-December, the ratings agency revised from stable to negative the outlook on its ratings on eight banks – including the leading quartet of Kazkommertsbank, Bank TuranAlem, Halyk Savings Bank of Kazakhstan and Alliance Bank.

While acknowledging that so far Kazakh banks have coped well with any funding squeeze, S&P expressed its worries over the longer-term impact of reduced access to capital. "The rating actions reflect Standard & Poor’s concerns over the increasing pressure on asset quality and liquidity that Kazakh banks are subject to as the current market turmoil stretches on, despite their having overcome the immediate impact of the global liquidity squeeze through adequate asset-liability management."

Last month rival ratings agency Moody’s Investors Service cut its outlook for six Kazakh banks to negative, citing the sector’s high dependence on foreign funding.

Moody’s analyst Armen Dallakyan says: "This level of dependence on market funding poses a significant refinancing risk for both individual banks and the banking system as a whole. As proven by the current liquidity crunch, the Kazakh banks are highly vulnerable to a decline in international investor sentiment."

Jason Hurwitz, financial sector analyst at Kazakh investment bank Visor Capital in Almaty, says that the S&P move was widely expected by the market and so had no immediate impact on share prices. He adds that valuations are still way down on the first half of the year, however, with bank stocks down as much as 50% in some cases.

Many banks are already having to tighten their belts and rein in ambitious expansion plans. For example, Roman Solodchenko, chief executive of number-two player Bank TuranAlem, has announced that the bank is delaying the opening of a subsidiary in China and the increase of its shareholding in Astanaeximbank in Belarus for the foreseeable future. It has also shelved any new overseas fundraisings until late 2008, hoping to repay the $1.2 billion of debt that falls due in the next 12 months out of internal resources. The bank is also looking to sell its retail banking subsidiary, Temirbank.

In contrast to the gloom afflicting the Kazakh banking sector, there was some joy on the corporate front in December when the initial public offering of Eurasian Natural Resources Corporation (ENRC) met with a strong investor response when the company listed on the London Stock Exchange. The 25.2 million share offering was priced at £5.40 from a range of £4.80 to £6. The shares rose 16.7% on the first day’s trading to value the company at $16.5 billion.