BTA Bank of Kazakhstan to Restructure Client Debts as It Increases Lending

June 21. Bloomberg

By Nariman Gizitdinov

BTA Bank of Kazakhstan to Restructure Client Debts as It Increases LendingBTA Bank, Kazakhstan’s third-largest lender by assets, plans to restructure customer debts and transfer bad loans to a subsidiary as it tries to increase lending after the country’s worst financial crisis in a decade.

While BTA has $350 million available to lend, there are few qualified borrowers, Chairman Arman Dunayev said in a June 17 interview in Almaty, Kazakhstan’s financial capital.

“There are only customers overloaded with loans on the market, and to issue new loans the bank must restructure their debt,” said Dunayev, who is also deputy head of the National Wellbeing Fund Samruk-Kazyna, which manages the state’s 75.1 percent stake in BTA. “One of the main tasks of BTA is to intensify lending.”

BTA Bank was Kazakhstan’s biggest lender before it collapsed last year. Alliance Bank and Temirbank, a BTA unit, also defaulted last year and all three are now controlled by state-owned Samruk-Kazyna. Central Asia’s biggest energy producer tapped $10 billion from its oil fund to support banks and companies after credit markets froze and the nation’s property bubble burst.

BTA isn’t alone in having money to lend, with Kazakh banks having $12 billion of “free liquidity,” Dunayev said.

Restructuring debts may help increase lending because the high cost of borrowing has made some projects unprofitable, said Milena Ivanova-Venturini, head of research for Central Asia at the Almaty unit of Moscow-based Renaissance Capital.

“If interest rates are lowered and maturities extended, then loans will become easier to service,” she said by e-mail. “The move should help increase demand for new loans from the same customers.”

Bad Loans

BTA also plans to sell bad mortgages to its BTA Ipoteka unit, which will seek to “improve” the loans and package them into securities for sale to investors, Denayev said. Other banks may also sell bad loans to Ipoteka, which raised $200 million by pledging home loans as collateral in 2007, he said.

Selling problematic mortgages to Ipoteka “would allow BTA to focus more on its corporate portfolio, leaving the mortgage company to work on the mortgages,” said Jason Hurwitz, director of financial market research at Almaty-based Visor Capital. “I would say that such a transaction could be value-accretive.”

Kazakh banks will face weak asset quality, unreliable funding conditions and low capitalization for at least two more years, Standard & Poor’s said April 19. The government is likely to restrict corporate withdrawals to keep banks liquid and allow them to recover, Ekaterina Trofimova, a Paris-based S&P bank rating director, said in May.

“The period of rehabilitation in the Kazakh banking system has started,” Dunayev said. “How mild it will be depends on Samruk-Kazyna, which is the main source of liquidity for banks.”

Samruk-Kazyna Role

Samruk-Kazyna was created in October 2008 by combining two state holding companies: Samruk, which managed government stakes in companies, and Kazyna, which focused on economic development. The fund and its units employ 260,000 people, or 1.6 percent of the population, and has more than $71 billion in assets, equal to 52 percent of gross domestic product, the fund said June 7.

In addition to controlling BTA, Alliance Bank and Temirbank, Samruk-Kazyna took stakes last year in Kazkommertsbank and Halyk Savings Bank, now the country’s two biggest lenders by assets.

“I hope Samruk-Kazyna won’t play any role in banking system after as much as five years, except being a major depositor,” Dunayev said.