Kazakhstan's two largest lenders Kazkommertsbank (KKB) and Halyk Bank are reportedly discussing a merger, Reuters reported on November 15, citing unnamed sources.

The deal, if agreed, would create a bank with assets of $27bn, four times the size of the country's third largest bank Tsesnabank, and six times as big as the local unit of Russian Sberbank, which currently ranks as the No.4 Kazakh lender.

KKB and Halyk Bank, both with links to President Nursultan Nazarbayev, account for 37% of Kazakhstan's banking system assets. On the other hand, the merger could involve the write-down of bad assets belonging to KKB, which could involve help from the government, the report said.

The potential merger could only take place after May 2017, when Halyk Bank redeems a $638mn Eurobond, as the bond's covenants would stand in the way of the deal. according to Reuters. Halyk Bank declined to comment on the report, while KKB's press office said it was unaware of any merger talks.

Halyk Bank, listed on the London and Almaty stock exchanges, has a market capitalisation of $1.7bn. Domestically-listed KKB has a market capitalisation is about $540mn.

KKB is controlled by Kazakh businessman Kenes Rakishev, a son-in-law of Defence Minister Imangali Tasmagambetov. In April, Rakishev increased his stake in the lender from 28.67% to 43.15%. He now directly and indirectly (through Qazaq Financial Group) controls 71.23% of KKB's common shares.

Nazarbayev’s daughter Dinara together with her husband Timur Kulibayev has a controlling stake in Halyk Bank.