At noon on 2 May 2013 the country’s 5th largest
bank by assets, ATFBank («АТФБанк» АҚ), held a press conference at the
Rixos Almaty Hotel to announce the completion of the sale of the bank to a
Kazakh financial holding firm.
Under the deal, the
majority owner of the bank, UniCredit Bank Austria AG, sold its 99.75% share in
the bank to KazNitrogenGaz LLP («КазНитрогенГаз» ЖШС), a
limited-liability partnership in Almaty.
UniCredit Bank
Austria AG is owned 99.99% by UniCredit S.p.A., while KazNitrogenGaz is owned
by Galimzhan S. Yesenov (Ғалымжан Шахмарданұлы Есенов), the 31-year-old
son-in-law of the mayor of Almaty, Akhmetzhan Yesimov (Ахметжан Смағұлұлы
Есімов). Born in Almaty in 1983, Yesenov
from 2003 to 2007 served on the board of directors of Alliance Bank («Альянс
Банк» АҚ), and from 2007 to 2011 was on the board of directors of Delta
Bank («Delta Bank » АҚ).
A source close to
the deal was quoted by Reuters as saying that the selling price for the
99.75% stake was roughly USD 500 mln: “The sale went through at ATF's
shareholders' equity of around $500 million.”
Earlier, on 15 March, when the bank announced that a final share
purchase agreement had been signed between the two parties, the bank stated that
the sale of the 99.75% stake would take place for “a total consideration equal
to ca. 1.0x the shareholder’s equity of ATF Group at closing date”, appending
the following note: “Cash based consideration. From an accounting standpoint,
the price will be adjusted for certain upfront payments.”
UniCredit Bank Austria AG was first rumored to be considering a sale of the bank in November 2012. On7 December 2012 a share purchase agreement was signed between
UniCredit and KazNitrogenGaz subject to a
number of preliminary conditions, including approval by the National Bank of
the Republic of Kazakhstan
Reports appear to indicate that the deal will include all four of ATFBank’s subsidiaries:
UniCredit Bank Austria AG was first rumored to be considering a sale of the bank in November 2012. On
Reports appear to indicate that the deal will include all four of ATFBank’s subsidiaries:
News report about the ongoing
negotiations broadcast on 18 March 2013
on Channel 31’s evening
newscast “InformBureau”
At the press
conference at the Rixos Almaty Hotel the bank’s outgoing CEO, Italian banker Romeo
Collina, and its incoming CEO, veteran Hong Kong broker Anthony
Espina, expressed broad satisfaction with the present state of the bank and
with the work done by UniCredit in strengthening ATFBank since its acquisition of
the bank in 2007. Mr. Collina spoke as
follows:
“ATFBank is a stable financial institution reputable among clients. We
are especially proud of assembling a very strong and highly professional team
of managers who are the most valued asset of the Bank. We strongly believe that
the new owner will strengthen the success of ATFBank and will both continue
offering the same range of services as before and develop new products. The
Bank will also continue to invest in new products and the whole team is fully
committed to even improve the quality of customer care that clients have always
enjoyed.”
And Mr. Espina
reflected on the state of the bank as the new management begins to take over:
“The corporate governance, transparency, policies and procedures of
ATFBank are in compliance with best Western practice and the team is composed
of highly-qualified managers and specialists. Today ATFBank is among Top-5
largest commercial banks in the country. We are committed to developing the
Bank and financial services in Kazakhstan ultimately for the benefit of the
country’s economy. ATFBank will keep and improve its strengths including staff,
quality and attractiveness of products and services, network and technologies.”
The satisfaction of
Messrs. Collina and Espina might be considered puzzling. UniCredit acquired a 91.81% share of ATFBank
in November 2007 for USD 2.117 billion, later raising its stake to 99.75% via
capital injections of KZT 40 bln (USD 275 mln) in May 2011 and KZT 15 bln (USD
100 mln) in September 2012. UniCredit has
now sold its 99.75% stake for roughly USD 500 million. This means that in 5¼ years UniCredit lost close
to USD 2 billion on ATFBank. (As of 31 Dec. 2012 official exchange rates were
1 EUR = 193.33 KZT and 1 USD = 150.74 KZT.)
From the standpoint
of earnings, an examination of quarterly financial figures indicates that the
bank’s performance has been far from satisfactory:
Data: ATFBank’s net profit or loss over the last 5 years (in KZT)
Quarter
|
Retained earnings for year-to-date
|
Retained earnings for quarter
|
1Q 2013
|
-792,572,000
|
-792,572,000
|
4Q 2012
|
-10,993,851,000
|
-7,515,984,000
|
3Q 2012
|
-3,477,867,000
|
-597,272,000
|
2Q 2012
|
-2,880,595,000
|
3,060,504,000
|
1Q 2012
|
-5,941,099,000
|
-5,941,099,000
|
4Q 2011
|
-37,036,997,000
|
-11,553,981,000
|
3Q 2011
|
-25,483,016,000
|
-9,777,162,000
|
2Q 2011
|
-15,705,854,000
|
-694,690,000
|
1Q 2011
|
-15,011,164,000
|
-15,011,164,000
|
4Q 2010
|
-37,674,485,000
|
-11,946,097,000
|
3Q 2010
|
-25,728,388,000
|
-14,102,704,000
|
2Q 2010
|
-11,625,684,000
|
-12,346,865,000
|
1Q 2010
|
721,181,000
|
721,181,000
|
4Q 2009
|
1,135,219,000
|
123,407,000
|
3Q 2009
|
1,011,812,000
|
3,039,298,000
|
2Q 2009
|
-2,027,486,000
|
615,297,000
|
1Q 2009
|
-2,642,783,000
|
-2,642,783,000
|
4Q 2008
|
-28,211,820,000
|
-27,129,787,000
|
3Q 2008
|
-1,082,033,000
|
3,378,846,000
|
2Q 2008
|
-4,460,879,000
|
8,860,663,000
|
1Q 2008
|
-13,321,542,000
|
-13,321,542,000
|
(Data source: ATFBank filings of Form 700-N - Форма 700-Н, код 3599:
нераспределенная чистая прибыль (непокрытый убыток))
From the data it is
clear that over the last three years the bank has run a loss in every single
quarter except 2Q 2012. As for its most
recent performance, in the first quarter of 2013 the bank had a net loss of KZT
792.6 mln (€ 4.10 mln), the second-worst performance among Kazakhstan
In Kazakhstan Russia Belarus Ukraine
Data: ATFBank’s net profit or loss over the most recent 6 months (in
KZT)
Month
|
Retained earnings for year-to-date
|
Retained earnings for month
|
March 2013
|
-792,572,000
|
550,654,000
|
February 2013
|
-1,343,226,000
|
-852,187,000
|
January 2013
|
-491,039,000
|
-491,039,000
|
December 2012
|
-10,993,851,000
|
-7,690,425,000
|
November 2012
|
-3,303,426,000
|
904,352,000
|
October 2012
|
-4,207,778,000
|
-729,911,000
|
From the data it
appears that the satisfaction of Messrs. Collina and Espina may be in response
to the results for March 2013, when the bank did succeed in earning a profit of
KZT 550,654,000 (USD 3,651,000), about
1/500 of the amount that UniCredit lost on ATFBank during the 5¼ years that it
owned the bank.
The main source of
the bank’s problems has been its loan portfolio. As of the most recent date for which data are
available – 31 December 2012 – the share of ATFBank’s
loan portfolio that was more than 90 days overdue was 42.66%, 4th
worst among Kazakhstan
An examination of
the details regarding loan quality contained in the bank’s financial statements
for 2012 indicates that the damage is most severe in the bank’s loans to large
corporate customers:
Data: Quality of loans at
end-2012 for ATFBank (in KZT)
Loan category
|
Total loans
|
Percentage
impaired
|
Year earlier
|
Percentage
overdue > 1 year
|
Year earlier
|
Corporate: Loans to large
corp. cust.
|
501,332,080,000
|
69.2%
|
64.4%
|
46.5%
|
64.4%
|
Corporate: Loans to SMEs
|
192,506,088,000
|
52.6%
|
46.7%
|
32.0%
|
27.6%
|
Retail: Mortgage loans
|
71,837,536,000
|
34.0%
|
36.9%
|
24.6%
|
19.9%
|
Retail: Consumer loans
|
69,538,387,000
|
33.6%
|
36.5%
|
20.0%
|
14.3%
|
Retail: Auto loans
|
2,376,148,000
|
21.5%
|
31.4%
|
15.9%
|
23.5%
|
Total loans
|
837,590,239,000
|
59.2%
|
56.1%
|
39.0%
|
31.0%
|
In fact the total
for loans to large corporate clients that showed no signs of impairment
declined from KZT 205.0 bln at end-2011 to KZT 154.2 bln at end-2012. It is worth noting that the disastrous condition
of ATFBank’s loan portfolio has arisen not in a country mired in recession
since the collapse of Lehman Brothers but in a country that – except for four
quarters in 2008-2009 – has had continuous annual real GDP growth rates in
excess of 5% for more than a decade.
Almost all of ATFBank’s
prudential ratios, and especially its capital adequacy and liquidity ratios, are
far worse than the average among banks in Kazakhstan Kazakhstan Kazakhstan Kazakhstan
Even the boast that
the bank is among the top five commercial banks in Kazakhstan 31
March 2013 the bank was indeed in 5th place by assets
among the country’s 38 commercial banks, having total assets of KZT 848,9 bln
(€ 4.40 bln). But the bank that occupied
6th place, Sberbank («Ресей Жинақ банкі» АҚ ЕБ), was very close
behind, with total assets of KZT 786.6 bln.
Because ATFBank’s assets are continuously declining (due to writeoffs of
NPLs) while Sberbank’s are steadily increasing, it seems likely that within 90
days of the ATFBank buyout Sberbank will have captured the 5th-place
spot from ATFBank. In fact the
satisfaction of the bank’s management at the fact that ATFBank is presently among
the “top five” is even less justified when one considers that the bank was already
ranked 5th in total assets among 34 banks in Kazakhstan when
UniCredit took it over in December 2007, but that in May 2009 it succeeded in
overtaking Alliance Bank to reach 4th place among 37 banks, holding
on to 4th place until November 2009 when it was overtaken by Bank
CenterCredit.
ATFBank commercial from 2012
Company filings
show that as of 1 May 2013 , the day before
the press conference, KazNitrogenGaz was already the owner of 99.75% of ATFBank’s
stock. One day earlier, on 30 April, an
annual general meeting of the bank’s shareholders had been held, at which time UniCredit
was still the holder of 99.76% of the bank’s voting shares. The shareholders present and voting at the general
meeting were UniCredit Bank Austria AG (99.76% of voting shares) and Mr. Yerbolat
S. Yeleshev (0.0063% of voting shares). (The
presence of just two shareholders at the meeting is not to be scoffed at, since
a special general meeting of shareholders scheduled for 29 March had failed to
take place due to lack of a quorum.)
The two shareholders
who were present at the meeting elected – unanimously – the following persons
to the bank’s Board of Directors (Совет Директоров):
1) Galimzhan S. Yesenov, Chairman of the Board,
2) Anthony Espina, Member of the Board, and
3) Adriano Arietti (Адриано Ариетти), independent
director.
On 3 May it was
announced that the new Board of Directors had chosen a new Management Board (Состав
Правления) consisting of the following individuals:
1) Anthony Espina (Russian: Энтони Эспина,
Chinese: 艾秉禮, born 1948 in Hong Kong), appointed to the role of
President of the Management Board (i.e., CEO) for a period of three years
effective from the date that authorities will have issued him a foreigner’s
work permit,
2) Yerbol M. Abdugaliyev (Ербол Муратұлы Абдугалиев,
b. 1974), a member of the Management Board since 31 July 2012 , and
3) Natalya A. Grinkevich (Наталья
Александровна Гринкевич, b. 1976), a member of the Management Board since 17 October 2012 .
On 17 April the South
China Morning Post (SCMP) had published an exclusive interview with
Anthony Espina. Mr. Espina, an experienced
securities broker in Hong Kong who was set to become CEO of
ATFBank at the beginning of May, gave the journalist his assessment of the NPL
problem at ATFBank:
Espina said ATF had written off its bad debts and restructured its
credit control and management team. "It is now a clean bank with a
professional management team and strong corporate governance and high
transparency," he said.
The article reveals
that Mr. Espina was involved in the negotiations between Galimzhan Yesenov’s
KazNitrogenGaz and UniCredit Bank Austria AG for the purchase of ATFBank:
[...] Espina, who handled the sale acquisition for the new owner, will
take a small stake in the lender and will become its chief executive from May.
The bank does not
discuss how Mr. Espina came to know Mr. Yesenov, but it is clear from other
sources that the two have been acquainted for at least a year. On 20
March 2012 the Almaty-based life-insurance firm Insurance
Company “Alliance Policy” JSC (АО "Страховая Компания "Альянс
Полис") elected Mr. Yesenov to be chairman of its board of directors
and at the same time elected Mr. Espina to be a non-executive director on the
board. Subsequently Yesenov’s
KazNitrogenGaz increased its holdings of the insurance firm’s shares until on 21 September 2012 the central bank accepted an
application by KazNitrogenGaz to become an insurance holding company with
respect to “Alliance Policy”. According
to the most recent data available, KazNitrogenGaz currently owns 88.1317% of
the voting shares of Insurance Company “Alliance Policy” JSC. (At an extraordinary general meeting of the
insurance company’s shareholders held on 19 April, the shareholders accepted a
proposal to terminate early – effective 19 April – the term of office of Mr. Espina
as a director of the company.)
In the SCMP
interview Mr. Espina went on to reveal that he will continue to maintain a presence in
Hong Kong, and explained that he will devote particular
attention to introducing ATF customers to Hong Kong and providing finance to
Hong Kong and mainland Chinese companies wishing to trade with Kazakhstan:
His latest move does not mean, however, that he will abandon his local
brokerage business or the city.
"To the contrary, I plan to introduce ATF customers to Hong Kong and to inform Hong Kong businessmen of the
increasing trading relationship between Kazakhstan Hong Kong ," Espina told
the South China Morning Post.
[...]
ATF will set up a representative office in Hong Kong and work with
other Hong Kong lenders to offer financing for companies to trade
with the Central Asian countries.
"Kazakhstan Hong Kong companies can
supply a lot of goods they want, and ATF can act as a middle-man to introduce Hong Kong companies
there."
Mainland enterprises investing in Kazakhstan
Here Mr. Espina has
enumerated two ways that he foresees being able to generate business between
Kazakhstan and Hong Kong: 1) introducing ATF customers to Hong Kong, and 2)
financing Hong Kong and mainland Chinese firms wishing to export manufactured
goods to Kazakhstan.
It is unclear,
though, how either of these two strategies could help ATFBank in its disastrous
core-banking operations. Unless “to
introduce ATF customers to Hong Kong” refers to having ATFBank begin offering
Hong Kong financial products to its retail and corporate customers – not as
deposits but as investments, something which ATFBank has no experience with –
then it would presumably refer to having ATFBank depositors send their money to
Hong Kong in the form of ATFBank loans to Hong Kong businesses. Likewise “financing” for Hong Kong and mainland
companies to trade with Kazakhstan Hong Kong or mainland Chinese
businesses. (Presumably these loans
would be in US dollars, since at present there is little market outside of Kazakhstan
The obvious
difficulty with such a scenario is that at present ATFBank receives all of its
deposits in Kazakhstan
In conclusion, the
last five years have seen the largest Western bank in Central Europe , Italy Kazakhstan Eastern Europe , were unable to
stem the losses in ATFBank’s lending operations, which appear to be continually
worsening.
Why were the
Italian experts unable to turn ATFBank around?
The problem obviously lies in the bank’s lending policies, and to an
outside observer it seems probable that the Italian directors and executives
never learned enough of the Russian or Kazakh languages to be able to read the loan
applications in the original languages.
If these directors and executives had examined the original documents
they might well have found evidence of shoddy lending practices or – something not
at all unlikely when impairment rates above 50% are found in Eastern Europe – lending to insiders
or friends.
Will the new
ownership and new management be able to turn things around? The odds against it are high, for at least the
following reasons:
1. On
the Board of Directors experienced Italian bankers have been replaced by a
Kazakh businessman who has experience on the boards of directors of two Kazakh
banks but who has never underwritten a loan, by a Hong Kong securities broker
who has exemplary experience in securities trading and some experience in
insurance but (apparently) no experience in banking, and by an Italian from
another Italian bank which is active in Eastern Europe – i.e., Mr. Adriano
Arietti of Intesa Sanpaolo S.p.A. – who has extensive experience in mergers and
acquisitions in Southeast Europe and also rich experience in underwriting corporate loans at all levels*, yet who presumably does not yet speak Russian or Kazakh.
2. On
the Board of Management, experienced Italian bankers are being replaced by the Hong Kong securities broker
who, besides (apparently) not having experience in banking, presumably does not
know Russian or Kazakh. At the same
time, two domestic executives appointed during the time of UniCredit – one an
ethnic Russian and one an ethnic Kazakh – are being kept on the board even
though one of them was in charge of ATFBank’s dealings with large corporate
customers from December 2010 through at least April 2012, and may therefore
share responsibility for the ongoing debacle in the bank’s loan portfolio with
large corporate clients.
3. Among
shareholders, an Italian-based multinational banking corporation owned by
approximately 467,000 different stockholders is being replaced as 99.75% owner
of ATFBank by a Kazakh limited-liability partnership about which very little is
known – it apparently does not even have a website. Readers of this column will
have seen – in the case of Erde
Bank in Ukraine, of TransEnergoBank
in Russia, of BTA
Bank in Kazakhstan, of Ūkio
Bankas in Lithuania, or of Karlovačka
Banka in Croatia – that in Eastern Europe there is an unfortunate tendency
for wealthy individuals or limited-liability firms that become controlling
shareholders of banks to view those banks as their own private ATMs, typically
turning to them for insider loans when their other business ventures begin to
sour, ending in bankruptcy for the bank and prison sentences for all involved.
The record shows
that the experienced professionals at UniCredit were unable to fix the problems
at ATFBank even during a period of sustained growth in Kazakhstan Kazakhstan
*This post has been
revised, an earlier statement that Mr. Arietti “apparently has never
underwritten a loan” having been removed after additional information was received
from Mr. Arietti himself. The writer wishes
to express his apologies to Mr. Arietti for the error.
Principal sources:
ATFBank press release – Kazakh: ТОО
«КазНитрогенГаз» и UniCredit Bank Austria объявляют о завершении сделки по купле-продаже
АО «АТФБанк» (2013-05-02 14:00 )
ATFBank press release – English: KazNitrogenGaz
and UniCredit Bank Austria Complete Transaction on Purchase of ATFBank
(2013-05-02 14:00 )
ATFBank press release – Kazakh: UniCredit
Bank Austria подписал договор купли-продажи акций с ТОО «КазНитрогенГаз» о
продаже 99,75% в казахстанском АО «АТФБанк». (2013-03-15)
ATFBank press release – English: UniCredit
Bank Austria has signed a contract to sell 99.75% of shares of JSC
"ATFBank" Kazakhstan with «KazNitrogenGaz" LLP (2013-03-15)
National Bank resolutions: Архив новостей
Video: "КазНитрогенГаз»
"АТФБанк" үлесінің 99,75% иемденді (2013-03-18)
ATFBank: New management as of 2013-___: АО "АТФБанк"
(Казахстан) сообщило об утверждении нового состава своего Правления
(2013-05-04)
ATFBank general shareholder meeting of 2013-04-30 –
Minutes: KASE
опубликовала протокол годового общего собрания акционеров АО
"АТФБанк" (Казахстан) от 30 апреля 2013 года (2013-05-03)
Video – ATFBank commercial: ATF_BANK_Lider (2012)
Structure of UniCredit group: Banking
Group Chart (2013-04-08)
Monthly financial information for banks, through
2013-04-01: Сведения о
собственном капитале, обязательствах и активах
Monthly information on banks’ loan portfolios, through
2013-01-01: Сведения по
кредитам с учетом удельного веса кредитов с просрочкой платежей и списанных за
баланс займов
ATFBank JSC Separate Financial Statements for 2012: АО
«АТФ Банк» Отдельная финансовая отчетность за год, закончившийся 31 декабря
2012 года (2013-04-16)
Prudential ratios for banks in Kazakhstan
Yesenov and Espina elected directors of Insurance
Company “Alliance Policy”: 11.10.2012
15:08 Шаблон: 72 - ежеквартальная для
финансовых и нефинансовых организаций (с 16.04.2012); Тип: Не
консолидированный; Год: 2012; Период: Третий квартал (Пояснительная записка к
финансовой отчетности АО "СК "Альянс Полис" по состоянию на 01
октября 2012 года)
Biographical notes on Yesenov and Espina as directors
of Insurance Company “Alliance Policy”: Ғалимжан
Есенов, Директорлар Кеңесінің Төрағасы, Энтони
Эспина (Anthony Espina), Директорлар кеңесінің мүшесі, тәуелсіз директор
National Bank permission for Yesenov to become
(indirect) major shareholder of Insurance Company “Alliance Policy” and for
KazNitrogenGaz to become holding company (2012-09-21): Архив новостей
Shareholders of Insurance Company “Alliance Policy” as
of 2013-04-19, and minutes of extraordinary general meeting of shareholders: KASE опубликовала протокол внеочередного
общего собрания акционеров АО "Страховая компания "Альянс Полис"
(Казахстан) от 19 апреля 2013 года (2013-04-25)
In other news, on 3
May the commercial bank Delta Bank («Delta Bank» АҚ) published its
results for 1Q 2013. The principal
highlights are given below. Unless
otherwise indicated, all currency values are in Kazakhstani tenge
(KZT). (On 31 Mar. 2013 one euro equaled KZT 193.33.)
ASSETS (Активтер)
Total assets (Активтер барлығы):
Loans to customers (Клиенттерге
берілген несиелер):
31 Mar. 2013: 112,259,473,000 (€ 581 mln)
31 Dec. 2012: 101,789,456,000
LIABILITIES (Міндеттемелер)
Current accounts and deposits from customers (Клиенттердін ағымдағы
шоттары мен депозиттері):
INCOME (Кіріс)
Net interest income (Таза пайыздық кірістер):
31 Mar. 2013: 2,696,418,000
(€ 13.94 mln)
31 Mar. 2012: 2,128,929,000
Net fee and commission income (Таза коммисиялық
кірістер):
31 Mar. 2013: 281,685,000
(€ 1.46 mln)
31 Mar. 2012: 192,980,000
Impairment losses (Құнсызданудан болған зиян):
31 Mar. 2013: (1,868,308,000) (€ 9.66 mln)
31 Mar. 2012: (1,453,135,000)
Net profit (Таза пайда):
31 Mar. 2013: 552,687,000
(€ 2.86 mln)
31 Mar. 2012: 482,410,000
As of 1 April 2013 the bank ranked 17th
among Kazakhstan 1 April 2013 the following ten
individuals owned a total of 93.24% of the bank’s common stock (no preferred
shares having been issued):
Name in English
|
Name in Russian
|
%
|
Artykbai Samzaev
|
А.С. Самзаев
|
16.69
|
Kulash Sarkulova
|
К.З. Саркулова
|
9.83
|
Galiya Saktaganova
|
Г.А. Сактаганова
|
9.77
|
Alma Tulebaeva
|
А.М. Тулебаева
|
9.54
|
Zhanar Zholdybaeva
|
Ж.С. Джолдыбаева
|
9.29
|
Zhasulan
Tulepbekov
|
Ж.Ж. Тулепбеков
|
9.11
|
Almagul
Balmagambetova
|
А.М. Балмагамбетова
|
8.66
|
Aigul Kravchenko
|
А.К. Кравченко
|
8.11
|
Ainur Akinzhanova
|
А.С. Акинжанова
|
6.12
|
Gulimzhan
Akhmetzhanova
|
Г. Ахметжанова
|
6.12
|
Sources:
Delta Bank: Balance sheet as of 31 Mar. 2013 : 2013 жылдың 01
сәуіріне қаржылық жағдай туралы есеп (2013-05-03)
Delta Bank: Income statement for 1Q 2013: 2013 жылдың 01
сәуірі жағдайына пайда мен зиян туралы есебі (2013-05-03)
Delta Bank: Shareholders as of 2013-04-01: "Delta Bank" АҚ
(Қазақстан) биржаға өзінің акционерлерінің тізілімі жүйесінің 2013 жылдың 01
сәуірдегі жағдайы бойынша үзінді көшірмесін ұсынды (2013-04-09 15:59 )
Assets, liabilities, and income of banks in Kazakhstan
Mark Pleas
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