UniCredit takes huge hit to offload Kazakh unit

By bne IntelliNews May 3, 2013

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UniCredit has completed the sale of Kazakh unit ATF Bank to KazNitrogenGaz. Speculation says the Italian banking group recouped less than 25% of the price it paid to buy the bank in 2007.

UniCredit announced on May 2 that the sale of 99.75% of Kazakhstan's fifth-largest bank to KazNitrogenGaz - owned by local businessman Galimzhan Yesenov - has been completed. The terms of the deal were agreed in March, and it was approved by Kazakhstan's central bank on March 29. The price of the acquisition has not been officially disclosed, but is believed to be around $500m - less than a quarter of the $2.1bn UniCredit paid for ATF pre-crisis.

UniCredit acquired ATF at the peak of the credit boom. However, by late 2007, the subprime crisis in the US had already started to affect Kazakhstan's over-leveraged real estate sector. By the start of 2009, that triggered the near-collapse of several of the country's largest banks. Just a year after buying it, UniCredit was forced into a $500m write down of ATF's value.

Romeo Collin, now former chairman of the ATF board, said in a statement that the sale is part of a plan to optimize UniCredit's business in the CEE region. "ATF is a stable financial institution and enjoys a good reputation among customers. We are especially proud to have built a very strong and highly professional team of managers and employees of the bank," Collin said.

"We are confident that with the new shareholder ATF will strengthen its success, not only continuing to provide a wide range of services, but also developing new products and services. The bank team is determined to maintain the quality of service at a high level and even improve it," he added.

However, the new owner has bought a bank that - like other Kazakh lenders - is firmly stuck in recovery mode. Based in the financial capital Almaty, ATF has assets of around $5bn. It has branches across the country, and three subsidiaries including UniCreditbank in neighbouring Kyrgyzstan. At home, it is struggling to rein in the credit handed out during the boom, and non-performing loans constituted over 40% of its total portfolio at the start of the year.

The sale of the Kazakh bank is part of UniCredit's strategy to refocus on its core assets. Within the CEE region, the bank is also rationalising its presence in the Baltics, and merging banks in the Czech Republic and Slovakia and subsidiaries in Ukraine.

KazNitrogenGaz looks to have some advantages over the foreign bank that could help it get things back in shape. It certainly won't hurt that Galimzhan Yesenov is the son-in-law of Almaty mayor Akhmetzhan Yesimov. He is one of several local businessmen to have shown interest in ATF, with other potential suitors believed to have included former owner Bolat Utemuratov.

"Even though ATF will no longer be able to benefit from its parental rating, we believe the new shareholder can provide support for ATF and help the Bank to recover its bad loans," Visor Capital writes in a note. "We believe any negative rating impact from the transaction is mostly priced in. We also believe that an influential local investor with solid local knowledge should be able to recover ATF's bad loans more speedily."

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