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Kazakh banks experiencing tenge shortages 04 февраля 2015, 20:37

Experts talk about the deficit of tenge experienced by commercial banks in Kazakhstan.
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Kazakhstani banks are experiencing a deficit of the tenge, a Tengrinews correspondent reports citing several interviewed experts.

Head of Asyl Invest Analytics Department Aivar Baikenov was one of them. He said that there was not enough tenge in Kazakhstani banks. "After February 2014 (that saw a nearly 20% devaluation of the tenge) customers of many Kazakh banks have been transferring their tenge deposits into dollars. The banks funding mainly comes from customer deposits nowadays. And when most of the deposits are in dollars, there are not enough tenge deposits to do any lending," Baikenov said.

Speaking about the causes of the tenge deficit in Kazakhstani banks Talgat Kamarov, Chairman of the Board of Centras Securities said:

“The deposit portfolio of the banks consists of tenge-demoninated deposits, but mostly short-term ones - from one year to three years. As the deposit periods end the people are transferring their money into dollar deposits and gradually the banks' deposit portfolios are shifting toward dollars. The loan portfolio of the banks is made of long term loans denominated in tenge - from 3 to 10-15 years - that take a longer time to repay. So most of the loan portfolio is still in tenge. And the tenge deficit has emerged because the issued tenge loans have not been repaid (yet) and the banks are having difficulty servicing the current demand of the population," Kamarov said.

He stressed that the problem was a temporary one, and as the tenge-denominated loans were repaid the situation at the market would straighten out.

According to Aivar Baikenov, a significant increase in the index of KazPrime that the financial market has seen lately is yet another sign of Kazakh banks being short of tenge. This index reflects the average interbank deposit rate in Kazakhstan. The tenge rate used to be at six percent per annum last year, whereas now it is at nine percent.

Head of the Analytics Department of Golden Hills-Kapital AM Natalia Samoilova also pointed out that domestic banks were experiencing a deficit of tenge.

Just like Baikenov, Samoilova referred to the high KazPrime index that is currently at around nine percent. But she said that it was still far from the highs that had been recorded during the crisis in March 2009 when the rate reached 15.04 percent. It happened after a 25% devaluation of the tenge in February 2009.

Talgat Kamarov suggested that the increase of KazPrime index against last year was relevant to the current situation and made the rate more realistic. According to him, the market liquidity is quite thin and the moment, and there is not enough money, which is why the operators of the index have pulled it to a more or less realistic level.

Most of the commercial banks in Kazakhstan have been reluctant to issue loans denominated in tenge lately. At the plenary meeting of the Majilis, the lower chamber of the Kazakh parliament, on January 28 one of the MPs - Svetlana Kadraliyeva from Ak Zhol political party - summed up the situation in the following way:

"Ak Zhol party has been receiving multiple reports from businessmen about second tier banks virtually stopping the lending in tenge. They offer loans in US Dollars, or peg tenge denominated loans to tenge per dollar exchange rate. And in the rare cases when loans are issued in tenge the interest rate is so high that it makes no sense using them for business."

Late last year President Nazarbayev tasked the Kazakh government with tackling the inflation rate and reducing the dollarisation of the Kazakhstan economy. "The latter means abandoning the use of US Dollars and other foreign currencies in the official and internal settlements or in financial planning in Kazakhstan. Whereas the current situation in bank with lending to businesses takes the trends in the opposite direction: it leads the market away from the national currency (tenge) and towards an even greater dependence on the foreign currency. It is quite clear that by doing this (issuing loans in dollars) banks are shifting the currency risks onto the businessmen and households," the Kazakh MP said.

Banking analyst Aivar Baykenov explained the situation by saying that banks simply "have nothing to lend" because of the tenge shortages.

"The banks are now trying to make some profit on consumer loans that have higher yield and interest rates. They are also trying to hedge their risks where possible. But overall, the lending is stalled," he said.

The analyst added that the National Bank of Kazakhstan that provided the commercial banks with tenge liquidity kept its rates high. "The National Bank provides (tenge) to the banks at the rate of about 15 percent. The banks take this money for urgent expenses, when they need some tenge. Otherwise, they do not want to take it because with the lending interest rate at 15 percent, their profit margin is too small," he said.

Baikenov said that evolution of the situation with the tenge deficit would greatly depend on the political will and economic decisions. "Right now they are pursuing a policy of de-dollarization of the economy. If it is indeed implemented, by the end of the year, perhaps, the situation will gradually improve," the analyst said.

Reporting by Azhar Ashirova, writing by Dinara Urazova, editing by Tatyana Kuzmina

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