Guy Norton in Almaty -
Zhomart Yertayev, one of the leading Wunderkinder of the Kazakh banking sector, can always be relied on for a nice line in corporate philosophies.
When he was chairman of Alliance Bank from 2002-2007, he espoused the writings of Chinese military tactician Sun Tzu, whose sixth-century treatise the "Art of War" has become something of a cult classic among business leaders. He clearly picked up some handy tips on how to fight for market share in the highly competitive Kazakh banking market, having led Alliance bank from 17th to fourth place in the rankings.
After a brief sojourn as head of BTA Bank in Ukraine, he's now returned to Kazakhstan to take up the reins at Eurasian Bank and is looking to engineer a similar transformation. Times have changed in Kazakhstan, though, so Sun Tzu-style Yertayev has updated his tactics to suit. This time around he's preaching the virtues of Bushido, the chivalric code of Japan's Samurai warriors. "We consider all our competitors to be strong and good players, but we think we are stronger and better," says Yertayev, who is building a new management team at the bank staffed principally by former cohorts at Alliance Bank.
Eurasian Bank is currently ranked at a relatively humble number 10 among the country's privately held banks, but Yertayev has a top-five position in his sights despite the current gloomy outlook for the Kazakh banking sector. "We can use the current market conditions to our advantage," he says, adding that Eurasian Bank is looking to boost its share from 2% at present to 6-7% by the end of 2010.
It's an ambitious goal, but then again Eurasian can call upon an ambitious backer who has the financial clout to help the bank achieve those targets. One of Eurasian's principal beneficial shareholders is Alexander Mashkevich, part owner of Kazakh metals and mining giant Eurasian Natural Resources Corporation (ENRC), a member of the FTSE-100 index of leading stocks on the London Stock Exchange with a current market capitalisation of around Â£7bn. "Our major advantage is that we have a strong shareholder who is very committed to supporting Eurasian Bank's development," says Yertayev, adding that Mashkevich has publicly stated that the bank's shareholders have no intention of divesting their stake in the bank in the foreseeable future.
Founded in 1994, Eurasian Bank's business model until recently was primarily geared towards serving corporate clients, but it's now looking to develop into a universal bank, with a much greater focus on retail banking services. The cornerstone of its retail business to date has been ENRC itself. "ENRC has over 67,000 employees plus their families which we can easily reach. It's a profitable company which pays its workers good salaries which means as well as attracting deposits from them we can also sell them products such as mortgages and consumer loans," says Yertayev. He adds that with a blue-chip customer such as ENRC, Eurasian is well placed to attract retail-banking business from other major Kazakh corporates.
As part of the battle to win over retail customers, Eurasian Bank is targeting an aggressive expansion of its network, with an ultimate target of 150 points-of-sale, significantly up on the current number of 40. While acknowledging that such expansion will clearly carry a hefty price tag, Yertayev says that Eurasian Bank will be able to exploit the recent steep fall in property valuations in Kazakhstan. "We can expand our branch network at a much cheaper price than a year ago."
Never afraid to learn from other people's experiences, Yertayev says that Eurasian Bank is looking to cherry pick from the operational track record of another oligarch-owned banking group, Mikhail Fridman's Alfa Bank, which took advantage of the market uncertainty in Russia following the financial crisis of 1998 to expand its franchise and establish itself as Russia's leading privately owned bank.
Yertayev and his team will also draw on the lessons from their time at Alliance Bank, with one of the key experiences being how to manage fast growth. But he cautions against the notion that Eurasian Bank simply intends to cut-and-paste the highly aggressive business strategy from Alliance Bank, which worked well during the economic boom years of 2002-2007, but which has proved less well suited to the more challenging post-credit crunch environment of recent months. "We're not just copying the Alliance Bank model, the market conditions very different," says Yertayev.
Eurasian Bank is targeting expansion in line with the predicted 5-7% GDP levels for the coming years, as against the 10%-plus economic growth numbers seen since the start of the decade. "Before the credit crunch everyone thought banking in Kazakhstan was easy, now they know differently. Now is the time for talented people to show what they can really do." Watch this space.
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