Halyk Bank Delays Buying Back Government Stake to Save Capital

Oct. 28. Bloomberg

By Nariman Gizitdinov and Hellmuth Tromm

Halyk Bank Delays Buying Back Government Stake to Save CapitalHalyk Savings Bank, Kazakhstan’s second-largest lender by assets, is postponing buying back a stake held by the government of Kazakhstan to preserve capital, Chief Executive Officer Umut Shayakhmetova said.

“Initially we were looking for the end of this year, but now because of the global crisis we had to postpone” it, Shayakhmetova said in an interview in Almaty yesterday. “We want to keep quite a high level of capital to have a cushion” in case a global market slump spreads.

National Wellbeing Fund Samruk-Kazyna, a state-owned fund that controls assets accounting for about half of the country’s output and that was used to bail out Kazakh banks, owns more than 196 million preferred shares of Halyk Bank, according to the Kazakhstan stock exchange’s website. Samruk-Kazyna bought shares in Halyk Bank and Kazkommertsbank and took control of BTA Bank, Kazakhstan’s largest lender at the time, in 2009.

Halyk, the lender controlled by Kazakh President Nursultan Nazarbayev’s daughter and son-in-law, has spent 12.9 billion tenge ($87 million) to buy part of a call option for its ordinary shares from the parent. It also paid 27 billion tenge to buy ordinary shares owned by Samruk-Kazyna.

Halyk is on track to meet a target of raising net income to between 40 billion tenge and 45 billion tenge this year from 36.2 billion tenge in 2010 based on the first-half numbers, Shayakhmetova said. Net income more than doubled last year.

Third-Quarter Report

“Now we need to wait for the third-quarter numbers” to be published next month, she said. “I can already see that the banking numbers are on track, consolidated numbers probably won’t be” as the impact of a global market slump is being felt in business units such as the pension fund where investment income correlates with markets’ performance.

Europe’s banks will need to raise 106 billion euros ($150 billion) in fresh capital under tougher rules adopted by European Union leaders yesterday in response to Europe’s debt crisis. Governments also agreed to boost the firepower of the region’s rescue fund to 1 trillion euros and persuaded bondholders to accept a 50 percent loss on their holdings of Greek government debt.

The economy of Kazakhstan, the second-biggest energy producer among the former Soviet republics after Russia, may expand 6.5 percent this year after growing 7.3 percent in 2010, according to an Oct. 26 forecast from the International Monetary Fund. The economy may grow 5.6 percent next year, the IMF predicts.

‘More Comfortable’

Shayakhmetova said she is “much more comfortable” about the outlook for the Kazakh banking industry compared with the situation in 2008 and 2009. Financial institutions have gained in experience and will be more resilient to any slowdown in growth and Halyk Bank benefitted from the last crisis as it was able to “cherry-pick” clients from rivals, she said.

Halyk is watching the possible entry of new competitors and the future of BTA Bank, Alliance Bank and Temirbank, the banks that defaulted, Shayakhmetova said. Samruk-Kazyna has announced it may sell the lenders and that Russian state-run OAO Sberbank may buy BTA Bank.

Halyk will probably have to be “more creative” in future and develop areas including mobile payment systems, Shayakhmetova said.

The main challenge for Halyk today is to improve the bank’s net interest margin, Shayakhmetova said. Halyk is also working on bringing down excess liquidity and boost the loan portfolio, she said. Loans will grow about 6 percent to 7 percent this year, missing a target for an increase of 10 percent, she added.

The bank’s free liquidity is more than $5 billion, equal to about 38 percent of liquid assets on the balance sheet, and the goal is to shrink this ratio to around 25 percent. Halyk had traditionally about 70 percent of the balance sheet invested in loans and this proportion has fallen to 50 percent, Shayakhmetova said.