Clare Nuttall in Almaty -
On March 19, Bank TuranAlem opened its first rebranded branch under the BTA name at Shu in the Zhambyl region of Kazakhstan, a first step in the Kazakh bank's new strategy to expand overseas.
The rest of BTA's network of 22 branches, 280 cash settlement centers, ATMs and foreign exchange booths in Kazakhstan are due to be rebranded this year, while negotiations to overhaul its international network are in progress. As well as the name change, the bank has replaced its old blue and white insignia with pistachio and red.
According to managing director George Iosifyan, the move is part of BTA's core international expansion strategy. "We have expanded into a number of CIS countries as well as the 'far abroad' such as China, Turkey and Dubai," explains Iosifyan, who joined from Alfa Bank in November 2007, and now heads BTA's international banking and capital markets activities. "The name Bank TuranAlem - the result of the merger between two state-owned banks Turanbank and AlemBank - is not easily pronounced by foreigners, so we decided to abbreviate it to BTA. We have also chosen more vivid, catchy colours for our brand. This is all being done in pursuit of our strategy of international growth."
BTA's history dates back to the launch of a Kazakh branch of the Soviet Promyshlenny Bank - known as Prombank - in October 1925. After several restructurings during the Soviet era, the local network, which at that time had 66 branches, became Turanbank in 1991. AlemBank was originally the Kazakh arm of another Soviet bank, Vnesheconombank. The two banks - then still under state ownership - were merged in 1997 to become Bank TuranAlem and subsequently privatized. The bank's chairman, Roman Solodchenko, joined from ING Bank in 2005, and was promoted to his current position last year.
Today, Almaty-based BTA has a presence in most of the CIS. It is active in Russia, Ukraine, Belarus, Georgia, Armenia and Kyrgyzstan, as well as its home market of Kazakhstan. It has representative offices in both Dubai and China (where it is in the process of obtaining a banking licence), and holds a 33.4% stake in Turkey's Sekerbank. "Our main competitive advantage is our wide geographic reach. Our bank also has the ability to gain experience in the markets where it operates, take the best practices from them into our organisation and pass the benefits of this on to our customers," says Iosifyan.
BTA initially positioned itself as a large corporate lender and, according to Iosifyan, still holds around a third of Kazakhstan's corporate credit market. However, last year's turmoil in the global credit markets sparked a change of direction towards attracting deposits. This is a strategy that was successfully employed by rival Halyk Bank last year.
"As we've developed, we came to realize that a true global bank must be diversified and we started expanding into the retail and SME markets, which eventually will become the backbone of our banking system," says Iosifyan. "Historically, we weren't paying as much attention to retail deposits as we should have, because funds were readily available from international banks at a much cheaper rate than they are today. We may have been a little complacent about attracting retail deposits, but since the credit crunch we realized that we have a very significant untapped resource for our own funding, as we diversify from international capital markets."
Products and services
BTA's change of tack has included the launch of new banking products, including a savings deposit with returns tied to the price of gold, in order to lure new retail customers. Its policy of diversification across the banking sector has also enabled it to package services such as insurance, pensions and mortgages to customers opening a deposit with the bank. It's currently the dominant insurance provider in Kazakhstan, and has a stake in Oranta, one of the Ukraine's largest insurance companies. It also owns a pension fund, a leasing company and mortgage company.
In addition, while the focus within BTA's branches used to be on lending, with credit officers trained to offer new credit lines, it has now retrained staff as deposit officers. Their personal performance evaluations and bonuses will be directly tied to the level of deposits they attract. These efforts appear to be paying off; in 2007, BTA grew deposits by 30% to $5.4bn.
Expansion of the bank's corporate activities is also in progress as it develops new financial products and seeks out new ways of raising finance for itself and its clients. Increasingly, it is paying more attention to products such as project finance, structured finance and acquisition finance. On March 13, it announced it has paid off the first $531m tranche of a $1.1bn syndicated loan facility arranged in 2006 by Bank of Tokyo-Mitsubishi. Iosifyan plays down the significance of this within the bank - "do you celebrate every time you pay your monthly credit card bill?" he asks. However, with the ongoing concerns about Kazakhstan's banking sector, the payment sends out the message that at BTA, which generated profits of $580m in 2007, it's business as usual.
"Banks of course are not going to be growing at the same pace as they used to, but predictions of a doomsday for Kazakh banks is total and utter folly," Iosifyan says. "I hear lots of criticism about the development of the Kazakh banking system, in particular that banks are very leveraged. People who say this forget the importance of this borrowing for the development of the banking sector and the economy as a whole. Government debt is practically nil; it is the banks that have funnelled money into the real sector of the economy, allowing Kazakhstan to grow from a $50bn economy to a $110bn economy within six years."
And Iosifyan expects the country to stay on a strong growth path in the coming years. "Kazakhstan is one of the richest countries in the world in natural resources, and resource rich countries now hold more clout," says Iosifyan. "A decade ago they were seen as an appendage to the developed world, but not any more. Now countries like Russia, Kazakhstan and China are standing on their own, and developed countries have realized that the paradigm is changing."
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