On 11 June 2013 the Frankfurt office of Standard
& Poor’s Ratings Services published a press release announcing that the
ratings firm had downgraded its credit ratings for AsiaCredit Bank. Below is an excerpt from the press release:
Standard & Poor's Ratings Services said today it
had lowered its long- and short-term counterparty credit ratings on
Kazakhstan-based JSC AsiaCredit Bank to 'B-/C' from 'B/B'. The outlook is
stable.
At the same time, we lowered our Kazakhstan national
scale rating on the bank to 'kzBB-' from 'kzBB+'.
The rating actions reflect our view that AsiaCredit
Bank's capital position is weakening. This resulted from rapid loan growth over
the past two years that was not sufficiently supported by shareholder capital
injections, while earnings generation remained low. The postponement of a planned
capital infusion in 2012 caused our risk-adjusted capital (RAC) ratio for
AsiaCredit Bank to decline by more than we had anticipated. Consequently, we
have revised our assessment of the bank's capital and earnings to adequate from
strong.
We now forecast the RAC ratio (before adjustments
for diversification) to decrease to 9.5%-10.0% over the next 12-18 months. This
forecast is based on our assumption of loan growth of about 120% in 2013 and
45% in 2014, and fresh capital of Kazakhstani tenge (KZT) 3 billion (about $20
million) in the first half of 2013, KZT5 billion in October 2013, and KZT5
billion in 2014. However, because the majority shareholder has already
postponed a capital injection, we are uncertain whether the planned injections
would take place in the given time frame. If AsiaCredit Bank does not receive
the planned KZT8 billion in additional capital this year, the RAC ratio could
weaken further.
If the bank's future capital policy, philosophy, and
growth rates were to differ from our current assumptions we could reassess our
view of the bank's solvency.
AsiaCredit Bank's earnings capacity remains
moderate, in our view. We expect the bank's net interest margins to remain
depressed, due to the rising cost of attracting new customers, general market
trends, onerous operating expenses because of high investments in franchise
growth, and increasing provisions for the rapidly expanding credit portfolio.
In our opinion, the bank is underprovisioned. The ratio of loan loss reserves
to total loans was 1.7% at year-end 2012, according to International Financial
Reporting Standards. This is insufficient to cover loans more than 90 days
overdue (5.2% of total loans on Feb. 1, 2013) and restructured loans (about
5%). We consider that the bank would have to create significantly more
provisions in 2013-2014, which would hamper its profitability and capacity to
build up capital.
Furthermore, in our view AsiaCredit Bank's
concentrated corporate depositor base leaves it exposed to potential large
deposit outflows. This is although we acknowledge that AsiaCredit Bank's
funding position differs little from that of other small to midsize Kazakh
banks. We believe attracting retail deposits would entail a significant amount
of investments in the distribution network and an increase in the cost of
funding.
The ratings reflect our 'bb-' anchor for banks
operating primarily in Kazakhstan, as well as AsiaCredit Bank's weak business
position, adequate capital and earnings, moderate risk position, average
funding, and adequate liquidity, as our criteria define these terms. The
stand-alone credit profile is 'b-'.
The stable outlook on AsiaCredit Bank reflects our
expectation that the bank will maintain adequate capitalization and liquidity
during the rapid growth of its franchise over the next 12-24 months, while
continuing to expand and diversify its depositor base. We anticipate an
increase in nonperforming loans over the next two years as the loan portfolio
matures.
[...]
AsiaCredit Bank
(Kaz.: "AsiaCredit Bank" АҚ, Rus.: АО «AsiaCredit Bank»)
as of 1 May 2013 ranked 23rd in total assets among Kazakhstan 1 May 2013 one euro equaled 196.98
Kazakhstani tenge (KZT) and one US dollar equaled 151.36 KZT.)
As of 1 June 2013 he bank was owned 81.58% by Sultan
Nurbol Sarybayuly (Kaz.: Сұлтан Нұрбол Сарыбайұлы, Rus.: Султан Нурбол
Сарыбайулы).
Sources:
Press release by S&P – Russian: S&P понизило рейтинговые оценки
АО "AsiaCredit Bank" (АзияКредит Банк) (Казахстан), прогноз
"Стабильный" (2013-06-12)
Press release by S&P – English: S&P downgrades AsiaCredit
Bank (Kazakhstan) ratings, Outlook "Stable" (2013-06-12)
Press release by AsiaCredit Bank: Изменение рейтингов
Банка (2013-06-12)
Information on total assets, deposits, and loans on 1 May 2013 : ҚР-ның ЖЗҚ-ның меншікті
капиталы, міндеттемелері және активтер туралы
In earlier news, on
29 May the central bank’s committee on bank regulation (Қазақстан
Республикасы Ұлттық Банкінің Қаржы нарығын және қаржы ұйымдарын бақылау мен
қадағалау комитеті) published monthly data for the banking sector for
April.
Total interest income for the
country’s 38 commercial banks in April was KZT 102,548.6 mln (€ 520.6 mln, $ 677.5
mln), down 2.0% from the total of KZT 104,596.1 mln in March. Total interest expense in April was KZT 50,170.7
mln, down 1.6% from KZT 50,963.6 mln in March.
Pre-tax profit in April was KZT 22,360.2 mln, down 16.5% from total
pre-tax profit of KZT 26,763.9 mln in March, but because the amount of income
tax accrued in April was negative – KZT -5,160.9 mln – net profit in April was
KZT 18,825.4 (€ 95.6 mln, $ 124.4 mln).
This result was lower than the net profit achieved in March (KZT
25,137.8 mln) but higher than the result for February (KZT 16,339.0 mln) – a
month with only 28 days – and roughly equal to result achieved in January (KZT
19,414.2 mln).
The committee’s statistics also
provide separate figures, on a monthly basis, for the excess of current
expenses over income for banks that have recorded a pre-tax profit so far
during the year and for banks that have recorded a pre-tax loss so far in the
year. On the side of unprofitable banks
April was the worst month so far in 2013, as the year-to-date total for
unprofitable banks increased by KZT 4,003.9 mln in April. On the level of individual banks the data
published on a monthly basis do not indicate pre-tax profit but only after-tax
profit. In April the following banks
recorded net, after-tax losses:
Banks in Kazakhstan that recorded
a net loss in April 2013
Bank
|
Result for month
(000 KZT)
|
Alliance Bank
|
-1,469,872
|
Temirbank
|
-1,338,021
|
ATFBank
|
-1,228,183
|
Nurbank
|
-872,844
|
Zaman-Bank
|
-64,970
|
PNB-Kazakhstan
|
-2,859
|
The banks with the largest
cumulative net losses so far in 2013 are Alliance Bank with KZT -2,798.6 mln (€
14.21 mln) and ATFBank with KZT -2,020.7 mln.
These two banks have their headquarters situated very close to each
other on the east side of Furmanov Street Kazakhstan
In 2009, when the financial
crisis began to take its toll on the Kazakh banking sector, Alliance Bank («Альянс
Банк» АҚ) was Kazakhstan 19 March 2009 the bank became the first Kazakh lender to default on
its bonds. Until 4Q 2009 the majority
owner of Alliance Bank continued to be Seimar Alliance Financial Corporation (АО
"Финансовая Корпорация Сеймар Альянс"), but in late 2009 the bank
began to be recapitalized by the state through the Samruk-Kazyna National
Welfare Fund («Самұрық-Қазына» Ұлттық әл-ауқат қоры» АҚ), and in April
2010 the bank exited restructuring with its debts written down from USD 4.5 bln
to roughly USD 1.0 bln. In the table
below are shown the net profit, quarter by quarter, of Alliance Bank along with
ATFBank and – for comparison – Halyk Bank.
Quarterly financial results for
Alliance Bank, ATFBank, and Halyk Bank,
2006-2013 (in 000 KZT)
Quarter
|
Halyk Bank
|
Alliance Bank
|
ATFBank
|
1Q 2013
|
14,926,758
|
-1,327,696
|
-792,553
|
4Q 2012
|
11,821,141
|
8,999,717
|
-7,515,984
|
3Q 2012
|
19,819,230
|
-1,122,887
|
-597,272
|
2Q 2012
|
15,571,689
|
4,985,263
|
3,060,504
|
1Q 2012
|
10,904,748
|
-5,215,097
|
-5,941,099
|
4Q 2011
|
9,150,167
|
-1,446,739
|
-11,553,981
|
3Q 2011
|
9,240,515
|
11,403,055
|
-9,777,162
|
2Q 2011
|
10,647,021
|
2,573,877
|
-694,690
|
1Q 2011
|
7,408,633
|
-1,584,370
|
-15,011,164
|
4Q 2010
|
5,855,591
|
3,067,472
|
-11,946,097
|
3Q 2010
|
4,493,797
|
16,853,886
|
-14,102,704
|
2Q 2010
|
11,159,867
|
-4,360,451
|
-12,346,865
|
1Q 2010
|
5,908,766
|
303,265,088
|
721,181
|
4Q 2009
|
14,836,210
|
122,049,505
|
424,291
|
3Q 2009
|
1,025,136
|
-80,034,479
|
3,039,298
|
2Q 2009
|
666,690
|
-625,953,124
|
615,297
|
1Q 2009
|
-13,936,444
|
-19,383,375
|
-2,642,783
|
4Q 2008
|
-6,925,910
|
-5,649,913
|
-27,129,787
|
3Q 2008
|
6,833,651
|
-3,686,997
|
3,378,846
|
2Q 2008
|
2,848,162
|
3,807,665
|
8,860,663
|
1Q 2008
|
7,047,629
|
7,039,695
|
-13,321,542
|
4Q 2007
|
3,657,026
|
7,084,609
|
-5,114,034
|
3Q 2007
|
11,487,817
|
12,551,160
|
6,520,763
|
2Q 2007
|
9,245,329
|
9,179,855
|
3,879,685
|
1Q 2007
|
8,336,563
|
8,402,037
|
765,692
|
4Q 2006
|
5,167,728
|
8,629,390
|
2,305,059
|
3Q 2006
|
8,004,916
|
2,602,709
|
1,031,284
|
2Q 2006
|
4,144,221
|
1,261,538
|
2,349,530
|
1Q 2006
|
3,381,101
|
842,234
|
826,431
|
As is clear from the table,
Alliance Bank’s profits peaked in 3Q 2007 and quickly began to decline. By 1Q 2009 the bank was so far into the red
that it was forced to suspend repayment of its bonds and accept a
recapitalization plan from the government.
A year of restructuring followed, but from 2Q 2010 onward the bank was
once again operating under normal banking rules. In the three years from 2Q 2010 through 1Q
2013 Alliance Bank has seen six quarters in the black and six in the red, but
with a net result in the black: a profit of KZT 32.8 bln.
Very different is the story of
ATFBank («АТФБанк» АҚ). That bank
enjoyed continuous and fairly steady profits until 4Q 2007, when it suddenly
slid into the red. Since that time the
bank has stayed almost continually in the red, the one notable exception being
a stretch of 4 straight quarters, from early 2009 to early 2010, when the bank
earned very modest profits (a total of KZT 4.8 bln). In the 22 quarters since 4Q 2007 the bank has
had 7 quarters in the black and 15 quarters in the red, with its total result
for these 22 quarters being a loss of KZT 84.6 bln.
ATFBank’s first quarter in the
red was 4Q 2007. This is three full quarters
before the bankruptcy filing of Lehman Brothers Holdings Inc. on 15 September 2008 , but it happens to be the
same quarter in which ATFBank changed ownership, as in November the bank was
bought out by the Austrian subsidiary of Italy
One way to resolve the
question might be to compare the unconsolidated results of ATFBank in Kazakhstan Kyrgyzstan Kyrgyzstan
Records show that although
UniCredit, after its acquisition of ATFBank, immediately began to insert its
own people into the Kazakh parent – first on the Supervisory Board and then on
the Management Board – it largely left the Kyrgyz subsidiary alone. A comparison of the results for the two banks
might therefore be instructive, to see whether they move up and down together.
Quarterly financial results for
ATFBank in Kazakhstan and its subsidiary in Kyrgyzstan (ATF Bank - Kyrgyzstan /
OJSC UniCredit Bank), 2005-2013
Quarter
|
ATFBank
(in 000 KZT)
|
Kyrgyz subsidiary
(in 000 KGS)
|
1Q 2013
|
-792,553
|
156,496
|
4Q 2012
|
-7,515,984
|
176,901
|
3Q 2012
|
-597,272
|
245,959
|
2Q 2012
|
3,060,504
|
166,958
|
1Q 2012
|
-5,941,099
|
144,976
|
4Q 2011
|
-11,553,981
|
141,588
|
3Q 2011
|
-9,777,162
|
156,579
|
2Q 2011
|
-694,690
|
125,253
|
1Q 2011
|
-15,011,164
|
96,583
|
4Q 2010
|
-11,946,097
|
116,185
|
3Q 2010
|
-14,102,704
|
81,751
|
2Q 2010
|
-12,346,865
|
70,577
|
1Q 2010
|
721,181
|
71,487
|
4Q 2009
|
424,291
|
86,645
|
3Q 2009
|
3,039,298
|
87,648
|
2Q 2009
|
615,297
|
57,824
|
1Q 2009
|
-2,642,783
|
54,487
|
4Q 2008
|
-27,129,787
|
70,100
|
3Q 2008
|
3,378,846
|
76,510
|
2Q 2008
|
8,860,663
|
48,674
|
1Q 2008
|
-13,321,542
|
32,370
|
4Q 2007
|
-5,114,034
|
50,174
|
3Q 2007
|
6,520,763
|
35,515
|
2Q 2007
|
3,879,685
|
31,547
|
1Q 2007
|
765,692
|
42,568
|
4Q 2006
|
2,305,059
|
11,952
|
3Q 2006
|
1,031,284
|
22,873
|
2Q 2006
|
2,349,530
|
12,664
|
1Q 2006
|
826,431
|
7,221
|
4Q 2005
|
2,214,964
|
19,303
|
3Q 2005
|
415,868
|
-3,025
|
2Q 2005
|
404,707
|
5,738
|
1Q 2005
|
1,253,838
|
15,231
|
(N.B.: During this entire
period the exchange rate between the Kyrgyzstani som and the Kazakhstani
tenge stayed fairly constant, usually averaging roughly 1 KGS = 3.2 KZT.)
As should be clear from the
table, the subsidiary in Kyrgyzstan Kazakhstan
[Article to be continued in
the near future]
Principal sources:
Banking data for April 2013 and earlier months: Банковский сектор / Статистика / Финансовые
показатели /
Writedown of Alliance Bank debt: Суд
признал реструктуризацию задолженности Альянс Банка завершенной
(2010-04-30)
