Kazakh Banking Consolidation Continues With Halyk And Qazkom In Merger Talks
The ongoing consolidation of Kazakhstan’s banking sector could be about to undergo a major step change after it emerged that two of the country’s largest financial institutions, Halyk Bank and Qazkon were in merger talks. If successful, the new bank would command 38% of the country’s total bank assets (around $30bn) and have a combined loan base of approximately $20bn.
A rationalisation of the sector has been under way since 2015 when, with almost all of Kazakhstan’s banks still coming to grips with the fallout from the financial crisis of 2008/9 which left them grappling with weak balance sheets and a large number of non-performing loans (NPLs), the sector began coming under added pressure from the slowdown in the Chinese and Russian economies and plunging oil prices. Real GDP growth dropped from 4.3% to 1% and in August 2015 the authorities in Astana decided to float the tenge, causing its value to drop by 30% overnight.
The devaluation impacted on all the country’s banks with Qazkom’s woes compounded by its acquisition of the nationalised BTA Bank (whose NPL rate stood as high as 89%) earlier in the same year.
Following government intervention, principally through the launch of a $2.8bn fund to help its banks tackle the problem of their ever-present NPLs, the National Bank of Kazakhstan (NBK) last year introduced new rules forcing them to raise their equity-deposit ratio and to increase the maximum permissible tenge deposit rate from 10% to 14%. Having also signed up to the Basel III regulatory framework accord (the global voluntary regulatory framework that calls for participating countries to strengthen their banks’ capital requirements by increasing liquidity and decreasing leverage) it then demanded that they raise their minimum equity levels to $300m – a 1000% increase – by 2021.
With only a handful of banks (including Halyk and Qazkom) currently meeting those requirements, the NBK’s policy was bound to trigger a wave of mergers and acquisitions. In the same year that Kazkommertzbank bought BTA, Forte Bank executed a reverse merger the Alliance and Temir banks, while the Eurasian Bank took over BankPozitiv.
Following news of the possible merger shares in Halyk Bank fell by 11.4% percent and those Qazkom increased by 6%.