Kazakh banking sector clean-up continues with Tsesnabank sale
State-owned brokerage buys number two lender as total bill for bailouts tops $10 billion.
The end of a protracted and pricey restructuring of Kazakhstan’s banking sector came a step closer in February with the sale of troubled lender Tsesnabank to a well-connected local brokerage.
First Heartland Securities (FHS), part of a group controlled by state-owned Nazarbayev University, bought the bank after Kazakh authorities agreed to take a further KZT604 billion ($1.6 billion) of bad debts off its balance sheet.
It was the second purchase of impaired loans from Tsesnabank by Kazakhstan’s problem asset fund in less than six months, following a KZT450 million transfer in September. The state also provided a liquidity injection to the lender and supported a restructuring of its domestic bonds, taking the total bill for the bailout to more than KZT1.1 trillion.
Until last year, Tsesnabank was Kazakhstan’s second-largest lender, with big franchises in the north of the country and in the agricultural sector. The bank ran into trouble in late 2015, however, when large portfolios of foreign currency loans started to turn sour following the devaluation of the tenge.
Lax risk management and high levels of related party lending also played a part in Tsesnabank’s downfall, according to locals.