METHOS
Forumer storico
2. Kazakh bankers feel state's whip
( Kazakhstan , April 16, 2009-issue 560)
By Charles van der Leeuw
TCA contributor
ALMATY (TCA) -- Could Kazakhstan 's current banking and finance deadlock turn into a Shakespearian royal drama? If so, it started some time ago when the sky looked a lot clearer than it does today. And as with Shakespeare, it is far from clear who are the heroes and who the villains. It looks like a Kazakh-style New Millennium version of the historic struggle between Fouquet and Colbert. The real game, however, is much more than theatre: without state intervention, capital could still be flowing out of Kazakhstan in astronomical amounts.
It started with what looked like a "clean", technical operation. The Kazakh state took over a three-quarter-plus stake in Bank Turan Alem (BTA), the country's biggest bank by gross revenue and there was bound to be a change of the guard, brought about by the new majority shareholders. But the operation was already out of the ordinary. Instead of just taking a share of 25 percent plus one vote, which according to both Russian and Kazakh legislation means a blocking share through which the interested party can overrule a majority decision by veto, the state virtually overnight took an overwhelming majority.
Kazakh ‘new capitalists’
It started after last year's summer, when the Kazakh government decided to follow the US example and bail out the country's most troubled banks by injecting extra capital in exchange for blocking shares. This included the Halyk Savings Bank of Kazakhstan , the now fully private former Kazakh branch of the All-Union People's Savings Bank in Soviet times. It also included Kazkommertsbank and BTA. Alliance Bank, Kazakhstan 's fourth-ranking bank in terms of revenue, was on the brink of the abyss and saw a hundred percent takeover for a symbolic 100 tenge in exchange for a deposit of up to $200 million.
Shares in Alliance Bank are quoted and traded on the London Stock Exchange. The bank used to be controlled by a group of Kazakh "new capitalists" united in Seimar Holding. Its new head, pending the completion of the takeover, is Maksat Kabashev, a top official of the Samruk Kazyna holding, which acts on behalf of the state in managing state-owned assets.
Fears of asset-stripping
But while the effective takeover of Alliance and the state entry into Kazkommertsbank and Halyk Bank was still hanging in the air, in late January the country's financial plush was more than perturbed by the announcement that the state would increase its share in BTA to 78.14 percent - which it did on February 2 through a capital injection of 251 billion Kazakh tenge; Government officials for a while argued that claiming the state's share proportion was justified by the bank's need for cash. Fears of asset-stripping, however, now appear to have been the main motive for the drastic move by the Kazakh authorities.
Another motive may have been the interest displayed by Russia's Sberbank, which took over mid-size Texaco Bank two years ago and thereby obtained a niche market in Kazakhstan. A similar takeover of BTA would turn Sberbank into by far the biggest bank in Kazakhstan . Along with BTA, it would also inherit Temir Bank, bought out by BTA earlier with the aim of re-selling it to an Israeli banking consortium - a deal which appears to have fallen through.
Momentary asset-strengthening
BTA could still be considered a healthy enterprise - at least at a glance. The bank posted 12.7 billion tenge ($103 million) in net income over the past year, down 74 percent from the previous year. It held 2.9 trillion tenge in asset value as of December 31, 2008, up from 2.6 trillion at the end of the previous year, Bloomberg reported on February 3, quoting company statements. It suggests that profits have been used for the purpose of momentary asset-strengthening against liabilities, time for which is running out.
By comparison, Halyk Bank posted 9.7 billion tenge in net profit, down 70 percent from 2007, with its assets increasing from 1.57 trillion tenge to 1.62 trillion. As for the Alliance Bank, its profit dropped by 92 percent on-year to 2.6 billion tenge – but, in contrast to its peers, assets also fell from 1.2 trillion to around 1 trillion tenge. Second-ranking Kazkommertsbank posted a 99.5 percent drop in profit to a mere 229 million tenge over 2008, with assets declining by 14 percent on-year to 2.3 trillion tenge. According to Bloomberg, Kazkommertsbank, which is also traded on the LSE, wants 36 billion tenge for a state-held share of 25 pecent plus one vote.
It looks indeed as though Kazakh banks and their management teams have been frantically digging through their assets in order to mobilize cash in the face of bad loans, a substantial part of which will have to be written off.
"Profit across all of Kazakhstan 's 37 banks plunged 93 percent to 15.4 billion tenge in 2008 from a year earlier as they boosted reserves to protect against delinquent loans, while increasing assets 1.8 percent to 11.9 trillion tenge," Bloomberg's report quoted above read, citing numbers given by Samruk Kazyna. Looking at the banks' figures, the numbers fail to add up, but the mechanism seems clear.
Hit by home-runs
There may though be more to the results presented by the banks, including BTA. Though the gross value of assets at the time of the latest operation stood in the order of $31 billion, the quality of those assets left much to be desired. The bank's board in its reports was thought to have overstated the assets posted on its balance sheet while understating its liabilities. This could explain the paradox surrounding its reserves and its shortage of liquidity in the face of its obligation to pay back its loans to international banking syndicates of up to $12 billion dollars, about one-third of which has to be returned before the end of the current calendar year. It could also be the key to prosecutors' suspicions that the owners through their positions on the board have been filling their own pockets by taking money out of the tube supposed to turn capital assets into liability coverage.
Understating liabilities and overstating assets does not make BTA particularly exceptional and fails to explain the action taken by the government to seize practically all of it. According to state officials, voicing their views in Bloomberg's report, BTA much more than other banks has been a key station for capital flight out of the country as domestic assets were hit by home-runs which left them with little more than historic value, while depriving them of more than half of their market value.
"BTA continues to lend money to non-resident borrowers registered in tax havens abroad without requiring them to reveal the loans' real beneficiaries," Bloomberg's February 3 report read. "About 47 per cent of BTA's loans are to non-residents, and most are for real estate projects in Russia ." If this is true, it not only clarifies why BTA was singled out but also the reason for the government's flirtation with Russia 's Sberbank.
Trumpeting protests
The state in which BTA was found by its new owner was enough not only to sack the President of the bank, Mr. Mukhtar Ablyazov, and his Deputy Roman Solodchenko, but also for prosecutors to open investigations against both men and over a dozen other top officials for alleged forgery, embezzlement and other abuses. The list of accusations bore a remarkable resemblance to those against Russia 's tycoon Mikhail Khodorkovsky, the one-time head of the country's largest oil company Yukos, now worth "only" a few hundred million US dollars and serving a long prison term in southern Siberia .
Khodorkovsky’s protestations that he had done nothing wrong and was the victim of plots forged by the state and loyalist business circles in Russia must have inspired Ablyazov and his associates to sing a similar tune in Kazakhstan . On February 1, Ablyazov was sacked and the board replaced by people on behalf of the Government. The former banker left the country the same day, but not without decrying the "abuse of power" and "corporate raiding" by the state.
‘A shift of power’
Ablyazov's opinion was echoed by that of Solodchenko who also escaped with his family some weeks later, and stated on leaving that he believed the takeover of BTA was meant to "destroy" it.
“It is clear that if negative tendencies continue, the search for culprits will begin,” Solodchenko was quoted by local media on March 25, following a wave of arrests among other former BTA executives including another Deputy President of the board Zhaksylyk Zharimbetov. Reuters had already stated in a comment dated February 2 that: "Ablyazov's departure heralds a shift of power in Kazakh business, a worrying trend for investors relying on continuity of policy and balance of power in the Kazakh economy."
To local observers in Kazakhstan , yet another comparison comes to mind. Two years ago, the head of Nurbank fled his home country with the law at his heels. His name was Rakhat Aliyev, and he was not only among the upper ranks of Kazakh business tycoons but also happened to be married to President Nazarbayev's eldest daughter Dariga. Now he is divorced and living in exile in Austria , and his claims resemble those of BTA's fallen angels, though in contrast to the latter, he is on the wanted list in Kazakhstan mainly for his Chicago-style way of doing business, including alleged kidnapping and murder.
‘A little rebranding’
But the story does not end here. Witchhunting or scapegoating has always been part of the game whenever it would come to dealing with dramatic deadlocks. But the tragic end of Shakespeare’s Richard II and his equally hapless successor Richard III did not put an end to England 's national political crisis, even though it opened the door to the House of Tudor whose scions eventually did stabilize the country. A change of the guard is never a purpose in itself, if it does not bring along a change of vision: looking for culprits can be a relief, but is never a solution.
In a recent column in the Financial Times, Britain 's advertising tycoon Martin Sorell described the ongoing process as follows: "A fresh consensus emerges from the debris of the last great party. That new orthodoxy says that Anglo-Saxon liberal market economics is dead and globalization discredited. Even capitalism itself, it seems, is on life support under the watchful eye of the prison hospital staff. The former giants of finance are pariahs. Right now it would probably be more acceptable to confess at a dinner party to having stolen Christmas presents, than admit you dabble in investment banking." But the seller of illusions remains upbeat and probably sniffing opportunities for his own business, he concludes: "It is possible to imagine that one day investment bankers may again be welcome at dinner parties. It might take a little rebranding, though."
( Kazakhstan , April 16, 2009-issue 560)
By Charles van der Leeuw
TCA contributor
ALMATY (TCA) -- Could Kazakhstan 's current banking and finance deadlock turn into a Shakespearian royal drama? If so, it started some time ago when the sky looked a lot clearer than it does today. And as with Shakespeare, it is far from clear who are the heroes and who the villains. It looks like a Kazakh-style New Millennium version of the historic struggle between Fouquet and Colbert. The real game, however, is much more than theatre: without state intervention, capital could still be flowing out of Kazakhstan in astronomical amounts.
It started with what looked like a "clean", technical operation. The Kazakh state took over a three-quarter-plus stake in Bank Turan Alem (BTA), the country's biggest bank by gross revenue and there was bound to be a change of the guard, brought about by the new majority shareholders. But the operation was already out of the ordinary. Instead of just taking a share of 25 percent plus one vote, which according to both Russian and Kazakh legislation means a blocking share through which the interested party can overrule a majority decision by veto, the state virtually overnight took an overwhelming majority.
Kazakh ‘new capitalists’
It started after last year's summer, when the Kazakh government decided to follow the US example and bail out the country's most troubled banks by injecting extra capital in exchange for blocking shares. This included the Halyk Savings Bank of Kazakhstan , the now fully private former Kazakh branch of the All-Union People's Savings Bank in Soviet times. It also included Kazkommertsbank and BTA. Alliance Bank, Kazakhstan 's fourth-ranking bank in terms of revenue, was on the brink of the abyss and saw a hundred percent takeover for a symbolic 100 tenge in exchange for a deposit of up to $200 million.
Shares in Alliance Bank are quoted and traded on the London Stock Exchange. The bank used to be controlled by a group of Kazakh "new capitalists" united in Seimar Holding. Its new head, pending the completion of the takeover, is Maksat Kabashev, a top official of the Samruk Kazyna holding, which acts on behalf of the state in managing state-owned assets.
Fears of asset-stripping
But while the effective takeover of Alliance and the state entry into Kazkommertsbank and Halyk Bank was still hanging in the air, in late January the country's financial plush was more than perturbed by the announcement that the state would increase its share in BTA to 78.14 percent - which it did on February 2 through a capital injection of 251 billion Kazakh tenge; Government officials for a while argued that claiming the state's share proportion was justified by the bank's need for cash. Fears of asset-stripping, however, now appear to have been the main motive for the drastic move by the Kazakh authorities.
Another motive may have been the interest displayed by Russia's Sberbank, which took over mid-size Texaco Bank two years ago and thereby obtained a niche market in Kazakhstan. A similar takeover of BTA would turn Sberbank into by far the biggest bank in Kazakhstan . Along with BTA, it would also inherit Temir Bank, bought out by BTA earlier with the aim of re-selling it to an Israeli banking consortium - a deal which appears to have fallen through.
Momentary asset-strengthening
BTA could still be considered a healthy enterprise - at least at a glance. The bank posted 12.7 billion tenge ($103 million) in net income over the past year, down 74 percent from the previous year. It held 2.9 trillion tenge in asset value as of December 31, 2008, up from 2.6 trillion at the end of the previous year, Bloomberg reported on February 3, quoting company statements. It suggests that profits have been used for the purpose of momentary asset-strengthening against liabilities, time for which is running out.
By comparison, Halyk Bank posted 9.7 billion tenge in net profit, down 70 percent from 2007, with its assets increasing from 1.57 trillion tenge to 1.62 trillion. As for the Alliance Bank, its profit dropped by 92 percent on-year to 2.6 billion tenge – but, in contrast to its peers, assets also fell from 1.2 trillion to around 1 trillion tenge. Second-ranking Kazkommertsbank posted a 99.5 percent drop in profit to a mere 229 million tenge over 2008, with assets declining by 14 percent on-year to 2.3 trillion tenge. According to Bloomberg, Kazkommertsbank, which is also traded on the LSE, wants 36 billion tenge for a state-held share of 25 pecent plus one vote.
It looks indeed as though Kazakh banks and their management teams have been frantically digging through their assets in order to mobilize cash in the face of bad loans, a substantial part of which will have to be written off.
"Profit across all of Kazakhstan 's 37 banks plunged 93 percent to 15.4 billion tenge in 2008 from a year earlier as they boosted reserves to protect against delinquent loans, while increasing assets 1.8 percent to 11.9 trillion tenge," Bloomberg's report quoted above read, citing numbers given by Samruk Kazyna. Looking at the banks' figures, the numbers fail to add up, but the mechanism seems clear.
Hit by home-runs
There may though be more to the results presented by the banks, including BTA. Though the gross value of assets at the time of the latest operation stood in the order of $31 billion, the quality of those assets left much to be desired. The bank's board in its reports was thought to have overstated the assets posted on its balance sheet while understating its liabilities. This could explain the paradox surrounding its reserves and its shortage of liquidity in the face of its obligation to pay back its loans to international banking syndicates of up to $12 billion dollars, about one-third of which has to be returned before the end of the current calendar year. It could also be the key to prosecutors' suspicions that the owners through their positions on the board have been filling their own pockets by taking money out of the tube supposed to turn capital assets into liability coverage.
Understating liabilities and overstating assets does not make BTA particularly exceptional and fails to explain the action taken by the government to seize practically all of it. According to state officials, voicing their views in Bloomberg's report, BTA much more than other banks has been a key station for capital flight out of the country as domestic assets were hit by home-runs which left them with little more than historic value, while depriving them of more than half of their market value.
"BTA continues to lend money to non-resident borrowers registered in tax havens abroad without requiring them to reveal the loans' real beneficiaries," Bloomberg's February 3 report read. "About 47 per cent of BTA's loans are to non-residents, and most are for real estate projects in Russia ." If this is true, it not only clarifies why BTA was singled out but also the reason for the government's flirtation with Russia 's Sberbank.
Trumpeting protests
The state in which BTA was found by its new owner was enough not only to sack the President of the bank, Mr. Mukhtar Ablyazov, and his Deputy Roman Solodchenko, but also for prosecutors to open investigations against both men and over a dozen other top officials for alleged forgery, embezzlement and other abuses. The list of accusations bore a remarkable resemblance to those against Russia 's tycoon Mikhail Khodorkovsky, the one-time head of the country's largest oil company Yukos, now worth "only" a few hundred million US dollars and serving a long prison term in southern Siberia .
Khodorkovsky’s protestations that he had done nothing wrong and was the victim of plots forged by the state and loyalist business circles in Russia must have inspired Ablyazov and his associates to sing a similar tune in Kazakhstan . On February 1, Ablyazov was sacked and the board replaced by people on behalf of the Government. The former banker left the country the same day, but not without decrying the "abuse of power" and "corporate raiding" by the state.
‘A shift of power’
Ablyazov's opinion was echoed by that of Solodchenko who also escaped with his family some weeks later, and stated on leaving that he believed the takeover of BTA was meant to "destroy" it.
“It is clear that if negative tendencies continue, the search for culprits will begin,” Solodchenko was quoted by local media on March 25, following a wave of arrests among other former BTA executives including another Deputy President of the board Zhaksylyk Zharimbetov. Reuters had already stated in a comment dated February 2 that: "Ablyazov's departure heralds a shift of power in Kazakh business, a worrying trend for investors relying on continuity of policy and balance of power in the Kazakh economy."
To local observers in Kazakhstan , yet another comparison comes to mind. Two years ago, the head of Nurbank fled his home country with the law at his heels. His name was Rakhat Aliyev, and he was not only among the upper ranks of Kazakh business tycoons but also happened to be married to President Nazarbayev's eldest daughter Dariga. Now he is divorced and living in exile in Austria , and his claims resemble those of BTA's fallen angels, though in contrast to the latter, he is on the wanted list in Kazakhstan mainly for his Chicago-style way of doing business, including alleged kidnapping and murder.
‘A little rebranding’
But the story does not end here. Witchhunting or scapegoating has always been part of the game whenever it would come to dealing with dramatic deadlocks. But the tragic end of Shakespeare’s Richard II and his equally hapless successor Richard III did not put an end to England 's national political crisis, even though it opened the door to the House of Tudor whose scions eventually did stabilize the country. A change of the guard is never a purpose in itself, if it does not bring along a change of vision: looking for culprits can be a relief, but is never a solution.
In a recent column in the Financial Times, Britain 's advertising tycoon Martin Sorell described the ongoing process as follows: "A fresh consensus emerges from the debris of the last great party. That new orthodoxy says that Anglo-Saxon liberal market economics is dead and globalization discredited. Even capitalism itself, it seems, is on life support under the watchful eye of the prison hospital staff. The former giants of finance are pariahs. Right now it would probably be more acceptable to confess at a dinner party to having stolen Christmas presents, than admit you dabble in investment banking." But the seller of illusions remains upbeat and probably sniffing opportunities for his own business, he concludes: "It is possible to imagine that one day investment bankers may again be welcome at dinner parties. It might take a little rebranding, though."
(l'ultima frase è monca, manca della parte iniziale)