Pockets of good news on the banking front01 may 2011, 08:40
Kazakhstan has had some good banking-sector news recently.
Unfortunately, it hasn’t applied across the board – it’s involved only selected banks.
Bad loans continue to weigh down many financial institutions. And Kazakhstan banks as a whole still owe billions of dollars to overseas lenders.
But some banks are seeing rosier sunrises. They include Halyk Bank, Eurasian Bank and the Kazakhstan unit of Russia’s Sberbank.
Halyk, one of Kazakhstan’s largest financial institutions, had two pieces of good news. One was a surge in first-quarter earnings. Another was its repurchase of most of the Halyk shares that the government had been holding.
Halyk said its profit between January and March of 2011 was the largest of any bank in Kazakhstan -- 7.4 billion tenge, or $51 million. That was a 25 percent jump over the 5.9 billion tenge, or $38 million, recorded in the first quarter of 2010.
Halyk predicts its earnings for the full year will spurt 24 percent to 45 billion tenge, or $310 million, as it issues more loans and the quality of its loan portfolio improves.
The Samruk Kazyna sovereign wealth fund’s 19.8 percent stake in Halyk was a double-edged sword, bank executives have said.
On the one hand, the government acquisition of almost a fifth of Halyk helped the bank get through shaky times in 2009, when a number of financial institutions were faltering.
On the other hand, Samruk Kazyna’s Halyk holding meant the bank’s management was unable to make major policy decisions without a government sign-off. The share repurchases mean Halyk has regained the management discretion it wanted.
Like Halyk, Eurasian Bank announced excellent results recently – in this case for the full year 2010.
Eurasian said it had a 771-million-tenge profit last year – about $5.3 million – compared with a 13-billion-tenge, or $8.9 million, loss in 2009.
The turnaround came in Eurasian Chairman Michael Eggleton’s first full year on the job. Eggleton, an American who is the only non-Kazakh to head a Kazakh bank, began running Eurasian Bank in October 2009 after the government fired the previous chair and deputy chair a few months earlier.
Prosecutors accused the former chair, Zhomart Yertayev, and his former deputy, Alexey Ageyev, of embezzling $1.2 billion from Alliance Bank before they left Alliance to fill the top two positions at Eurasian. There was no indication the two embezzled any money from Eurasian, but understandably the bank took a public-relations hit from their arrests.
Eurasian Bank’s new management team quickly discovered that Yertayev and Ageyev had gone on a hiring spree in their year at Eurasian that had caused the bank’s expenses to balloon, industry insiders say.
The 1,200 employees whom Yertayev and Ageyev hired – almost all of them unnecessary additions, insiders said – led to Eurasian’s payroll surging 25 percent . In dollar terms, the combined ranks of the newcomers sliced millions off Eurasian’s bottom line.
The new management team has spent considerable time addressing the swollen payroll, insiders say. Team members about why so many unneeded people were added in the first place, the insiders add.
In addition to the cheery news about Halyk Bank’s and Eurasian Bank’s improved performances, Sberbank made two welcome announcements recently.
One is that it expects its Kazakhstan unit’s profit to soar to 3 billion tenge, or $21 million, in 2011. The other is that it’s going to triple its investment in Kazakhstan to $1 billion.
Three billion tenge in earnings would equate to a 15 percent increase in Sberbank’s 2010 profit of 2.6 billion tenge, or $18 million.
The bank has said that it want to more than double its market share in Kazakhstan from 2 percent in 2010 to 5 percent in 2015.
The Kazakh government has been trying for months to convince Sberbank to take over BTA, the largest domestic bank to default in 2009.
Although a takeover would further stabilize the banking system, the possibility makes some Kazakhstan banks nervous.
Financial institutions that have expressed concern about a takeover have said that they will scream if the government gives Sberbank a sweetheart deal to take BTA off its hands.
A bargain-basement deal, coupled with the fact that the Russian government owns Sberbank, would give Sberbank an unfair advantage over other Kazakhstan banks, the hand-wringers contend.