Ben Aris in Berlin -
BTA was the star bank in the CIS. The seventh largest in the region and easily the biggest in its home country of Kazakhstan, the bank had been pushing into one country after the other and harbored ambitions to the first post-Soviet bank to claim the title of international player.
But all its plans have gone up in the most spectacular fireworks display in the last few months. The Kazakh state stepped in to take over the bank in February, buying a 75% stake, and senior management are under investigation by the general prosecutor on fraud charges. The bank's former CEO (and probably the owner) Mukhtar Ablyazov, deputy CEO Zhaksylyk Zharimbetov, and former chairman Roman Solodchenko have all skipped the country in the last two months and will be arrested on embezzlement charges if they return.
Problems like these would be enough to destabilize any bank, but they come in the midst of the worst crisis the world has seen in eight decades. Remarkably, Anvar Saidenov, who was appointed CEO of BTA after the state investment agency Samruk-Kazyna took over, remains sanguine over the bank's health and future. "The bank is stable and since the entry of Samruk-Kazyna and the new management there is a lot of change, but we following the best banking practises and a sign that confidence is returning is the fact that household deposits are increasing again," says Saidenov.
BTA saw an outflow of deposits in February when the state had to step in and buy out just over 75% of the bank to keep it on its feet, but Saidenov is probably one of the most qualified bankers in the country to take on the challenge. Saidenov is a former chairman of the national bank, did a stint at the European Bank of Reconstruction and Development (EBRD), was a deputy finance minister and also knows the bank well as a former advisor to Solodchenko. Since then, the bank has benefited from its closer ties to the government and is included as a major agent in four of the biggest anti-crisis programmes.
The state has given the bank KZT22bn ($146m) to distribute to small businesses. The bank has also got KZT43bn ($286m) to refinance mortgages and so prop up the collapsing real estate sector. And the bank has taken over the completion of three major construction projects - two in Almaty and one in the capital Astana - worth about KZT20bn ($133m), says Saidenov.
But the bank is still under a great deal of pressure. Non-performing loans (NPLs) have soared and Kazakhstan has had it worse than other countries in the CIS, as borrowing in dollars was widespread. "NPLs [at BTA] are 16% or even a little more, but this is linked to the general macroeconomic conditions and the effect of the devaluation on borrowers, many of whom had borrowed in dollars," says Saidenov.
After the government decided to make a one-off devaluation of the tenge against the dollar on Saidenov more people in Kazakhstan were suddenly unable to make their repayments.
"However, this will not be a big problem, as BTA is the best provisioned bank in Kazakhstan, with over 20% of the loan book as provisions," says Saidenov. "If the restructuring of loans [that banks are carrying out now] is successful, then the level of NPLs will stabilize, or even decrease this year."
But the change of management will bring a big change in the way the bank is run. For most of the last 10 years, BTA has been positioning itself as a pan-regional player, expanding aggressively into big markets like Ukraine and new markets like Belarus. However, now the bank is scaling back and will concentrate on the domestic market for the foreseeable future, says Saidenov.
Part of the reason is that the government has already put a lot of money into the bank and the government wants these resources to help the Kazak economy. "The bank's growth was a transnational operation, but this brought lots of risks - risks that materialized in this crisis and has hurt the bank. The fast expansion in the CIS looked attractive in the past, but there were real hidden risks," says Saidenov.
Just under half of BTA's loan book is credits extended to non-residents of Kazakhstan; amongst other things the bank has a large exposure to Moscow's real estate market, which has taken a pounding of late.
Saidenov says that although the state now controls BTA, it has no intention of staying in the banking business. A deal to sell the bank off to Russia's Sberbank is already in the works and a team from Russia's state-owned retail giant is due in Almaty in April for their third visit. However, according to bne sources both in Moscow and Almaty, the deal will be difficult to close due to BTA's messy ownership structure. "The previous management had the idea to move the bank's headquarters to Moscow and then even on to London," says Saidenov. "They wanted to create a global bank like HSBC. Now all these plans are on hold."
But the result of this restructuring, plus the opaque shareholder structure of the bank, means combining all the BTA banks into a package that can be sold off is difficult. Saidenov admits that the ownership of each of the foreign BTA banks is different. The most recent acquisition was in Belarus, a 100% owned subsidiary, but the BTA bank in Ukraine is only 49% owned by the parent and in other cases only has a minority share. According to bne sources, Sberbank has baulked at this mess, but Saidenov says that one solution would be to sell off some of the subsidiaries. "We could sell some, but the price must be right so that we can recoup our investment," says Saidenov.
The shareholder structure also highlights a question mark over who owns the stakes. Analysts in Almaty have long assumed that the former CEO Ablyazov was the ultimate beneficial owner, but Saidenov won't be drawn on the issue of ownership. "If Ablyazov was the owner, the regulator needs to be informed, but documents [confirming he was the owner] have never been produced," says Saidenov.
Despite these problems Saidenov is confident that the Sberbank deal has a good chance of coming off, as there is no doubt over the ownership of the main asset, where the Kazakh state owns a 75% stake.
All in all, the future of the bank doesn't look too bad at this point, but that hasn't stopped the bank's creditors from being worried. The closure of the global capital markets has put all of Kazakhstan's banks under pressure, as they must repay a collective $11bn this year and BTA is the biggest debtor with $3bn to pay this year.
Since the state took over, the bank has been meeting payments without problems, paying off a $193m syndicated loan in February and redeeming a €250m Eurobond in March. However, the bank is obviously under pressure, as everyone is short of money at the moment. Saidenov felt it necessary to warn creditors in a press conference on at the end of March that Samruk-Kazyna would withdraw its support from the bank if creditors asked for their money back early. "I should qualify this statement," says Saidenov. "The comments only referred to external payments, if there were requests for accelerate repayments. But Samruk-Kazyna has no intention of abandoning the bank."
Still, the rating agencies are expecting the debts to be restructured and marked BTA down to 'D' or default in anticipation at the end of March. Saidenov says the bank is in constant contact with creditors (the ratings agencies were unable to confirm if negotiations were going on) and has hired Goldman Sachs to advise it, which is currently studying the obligations. "Only after Goldman Sachs has finished its work and presented its plan will we make a decision on what to do. We are not going to allow preferential treatment [of creditors] or individual negotiations. I think this is a reasonable position," say Saidenov. "It is too early to say what will come out of this."
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