Clare Nuttall in Almaty -

UniCredit Group entered the Kazakh banking sector in 2007 through the acquisition of Kazakhstan's sixth-largest lender ATF Bank. Since then, the country's banking sector and the economy as a whole have undergone dramatic changes. ATF CEO Alexander Picker explains why, despite all the bad news at present, he remains upbeat about the future.

Regarding Kazakhstan's development in 2009, Picker says he is optimistic but cautious. "In general, we see things positively. At ATF we want to grow, even if it's at a limited pace. And we will be expanding - cautiously," he says.

However, Picker admits there is a lot of bad news about, citing the steep falls in prices for oil, wheat and other commodities since mid-2008. "The good news is that relative to other countries, Kazakhstan is better off because even though the prices are going down, these commodities are still needed. I do not see that we will do without oil, without wheat, without copper, without steel. The prices may be a bit depressed now, but I do think the prices will come back."

Kazakhstan is also one of the few countries where, according to forecasts by the International Monetary Fund (IMF), the current account will swing from negative to positive in the next five years. GDP growth for the period 2007-13 is projected at 133%. "This big increase shows the potential of this country. Basically, it proves that we were right to buy a bank here, even if 2009 is a rough year. The fundamental situation in Kazakhstan is extremely positive."

Picker considers that the Kazakh government has been an important factor in getting Kazakhstan into the position it is today. He points out that while during the Soviet era Uzbekistan was the "top country" in Central Asia, Kazakhstan was neither well known nor very well regarded. Now Kazakhstan's GDP per capita is several times that of Uzbekistan. "Kazakhstan has oil, but then so do other countries such as Turkmenistan," notes Picker. "Turning Kazakhstan into the tiger of Central Asia is the work of the government, not just the oil."

Despite its slow reaction when the first wave of the crisis struck back in 2007, the government has since taken bold steps to support the economy. "Sub-prime put Kazakhstan's banking system and real estate sector into a deep crisis in the third quarter of 2007. The government was initially slow to react. However, everyone had time to adjust before the breakdown of Lehman, which led to a deepening of the financial crisis worldwide."

By this time, Picker says, the Kazakh government had the situation in hand. The five points drawn up by the government in late 2008 have, he says, made an extremely positive impression. "Taking the whole programme, I think this could manage to turn the economy back on. If the government is really committed, I think we could weather the crisis quite well."

One consequence of the government programme is a fundamental change in the ownership structure of the banking sector. "The competitive landscape has been changed dramatically. The six largest banks make up more than 86% of the market. Until recently, they were all privately owned. Now, all of a sudden, we have four banks with a strong state participation. I have received clear indications from the government that there would be no discrimination, but even without that, the landscape changed, to an extent that has to be seen."

Foreign agents of change

Foreign banks such as UniCredit are also proving to be agents of change in Kazakhstan's banking sector. According to Picker, they are bringing about a transition from a personal to an institutional style of banking, as well increasing the range of products and services on the market.

Since UniCredit's acquisition of ATF, the process of integration has been almost completed. The $3.2bn deal was first announced in mid-2007; 2009 will see the finalisation of the integration process, together with the import of various new products and services. The overhaul of ATF's IT systems allows the bank to pick from retail banking products already tried and tested in UniCredit's other markets. Picker anticipates fewer new products on the corporate side of the business, where he says the priority is to improve service standards.

Picker, an Austrian banker who has been with Laenderbank (later Creditanstalt and now UniCredit) since 1989, has worked in Central and Eastern Europe since 1994 and was appointed to head ATF after the acquisition by UniCredit was finalised in 2007.

In a market where personal relationships are still key, and bankers tend to come and go in teams, Picker says he is a strong believer in structure. "We are trying to move away from the so-called 'old Kazakhstani banking', where everything is very personal," he says. "Of course, banking is a personal business, but I still strongly believe in the value of an organisation. A client should not bank with Mr X, but with the bank. And when Mr X changes his position or moves on, the relationship between the client company and the bank should remain. Taking a more institutional approach gives a certain continuity."

While Picker acknowledges that many of the big international banks have based entire advertising campaigns around presenting themselves as personal, he stresses the need for a balance between the personal and the institutional. "I have a feeling that the balance between the personal and the institutional is very much towards the personal here, which has its positives - but also its negatives, especially in a crisis situation."

The entrance of more international banks into the Kazakh banking system is, Picker believes, gradually making the system more institutionalised. "I think the institutional approach should spread within the banking sector, because I do see this as a sign of a civilized democratic society, where organizations are less depend on personal relationships than on institutions. In the West, this process began in the early years of the 20th century. Other societies such as Kazakhstan jumped that train in the early 1990s, so they are having to take some quick steps in that direction. I think its something we really need in Kazakhstan, and I think it will come. It's already happening at a national level, where institutions are being built."

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