Kazakhstan’s State-Run ‘Bad Bank’ To Buy Assets From KKB – Cenbank
* KKB to sell half of its assets to Problem Loans Fund
* Asset sale to take place before KKB’s proposed takeover by Halyk (Adds details from the statement, Fitch downgrade, context)
Kazkommertsbank (KKB), Kazakhstan’s biggest lender, will sell half of its assets to a state-run ‘bad bank’ before its proposed takeover by Halyk Bank, the country’s central bank said on Monday.
Halyk – the Central Asian nation’s No.2 bank by assets – and KKB provisionally agreed to the takeover earlier this month. The central bank said at the time that the authorities planned to support the deal by helping KKB resolve bad loans.
Half of KKB’s assets totalling $15.7 billion are tied up in a single loan to BTA, a former bank that is now a distressed asset management company. While BTA has so far missed no repayments on that debt, the outlook is uncertain.
Boosting KKB’s capital is a “basic condition” of the proposed takeover and the central bank will, together with Halyk, examine KKB’s asset quality before the deal goes through, the central bank said in a statement.
But even before the examination, the BTA loan needs to be “separated” from KKB and the state-run ‘bad bank’, the Problem Loans Fund, will act as the operator for that, Kazakhstan’s central bank added.
The former Soviet republic has struggled to recover from the financial crisis of the late 2000s and its banking sector has been beset by bad loans since the sharp slide in the price of oil, Kazakhstan’s main export.
Last month, the Kazakh authorities said they would inject 2 trillion tenge ($6.28 billion) into the Problem Loans Fund (PLF), topping up its current capital of about $1 billion, in order to buy bad loans from local banks.
Rating agency Fitch has downgraded KKB’s viability rating to ‘f’ from ‘ccc’, saying the move “reflects Fitch’s view that the bank has failed and requires external support to address a material capital shortfall”.
“In Fitch’s view, the planned large asset sale to the PLF represents a de-facto recognition by the Kazakh authorities of the scale of KKB’s asset-quality and solvency problems,” the agency said.
Together, KKB and Halyk account for 38 percent of Kazakh banks’ total assets – although that figure may drop after KKB disposes of its bad loans. ($1 = 318.3900 tenge) (Reporting by Mariya Gordeyeva, writing by Olzhas Auyezov; Editing by Himani Sarkar)