State buyout of Tsesnabank loans might hint at lingering Kazakh banking sector woes

State buyout of Tsesnabank loans might hint at lingering Kazakh banking sector woes
A snow leopard on the reverse side of an old 10,000-tenge note. Analysts are asking whether Tsesnabank is showing anything like as much vigour.
By bne IntelliNews September 17, 2018

Banking analysts are sizing up latest announcements in relation to Kazakhstan’s second biggest lender Tsesnabank to assess whether the Kazakh banking sector is suffering lingering troubles following last year’s $7.5bn bailout.

On September 14, Kazakh officials disclosed plans to buy out KZT450bn (€1.04bn) of agricultural sector loans from Tsesnabank to boost its financial strength.

The central bank has been insisting that the bank has been meeting all mandatory regulatory requirements despite a September 3 report that revealed a 30% plunge in its liquid assets in the second quarter. The report certainly raised a few eyebrows, but Tsesnabank attributed the drop to mere attempts at getting rid of “excess liquidity”.

However, on September 6 the lender contradicted itself in a statement when it stated that t had taken out a short-term KZT150bn (€344.5mn) loan from the central bank to boost its liquidity. Further muddying the picture, the bank added that it had already repaid KZT100bn of the credit and promised to pay back the rest in the very near future given that it had a “sufficient amount of liquid assets”.

Not a reassuring picture
Thus, the latest news outlining the government move to buy out the agricultural loans does not paint a reassuring picture of Tsesnabank., The bank is reportedly heavily exposed to the agriculture sector. State holding KazAgro, focused on the agricultural sector, is apparently working with Tsesnabank on restructuring the loans.

The lender is not the only Kazakh bank sending mixed signals about its current state of health. Eurasian Bank saw its liquidity drop by 26% in the second quarter.

Tsesnabank and Eurasian Bank’s total assets amount to $5.8bn and $2.7bn, respectively. The central bank claims the two banks have not missed any payments.

Despite the uncertainty generated by the recent string of news, the Kazakh government does not at all appear minded to let the two banks sink. Both banks featured in the government’s $7.5bn banking sector bailout. A number of small banks in the country, including Qazaq Banki and Kazakhstan Eximbank, were not so lucky. They received no state support and have been continuously lambasted by top officials for their poor performance. Their licences were recently revoked.

The country’s banking sector—still not fully recovered from the 2008-09 financial crisis—has been hit by a rise in bad loans since the slump in world crude oil prices and the tenge free-float in 2015, which depressed the entire Kazakh economy in 2015 and 2016, until it switched trajectory and headed for recovery in 2017. The bailing out of Kazakhstan's largest banks included a merger deal between KKB and Halyk.

New appointments at Tsesna
Meanwhile, Tsesnabank has been reshuffling its management. The bank appointed Ulf Wokurka, a former Deutsche Bank manager, as chief executive on September 14.

In addition, recently released ex-presidential chief of staff Adilbek Zhaksybekov was announced as the bank’s new chairman on September 10. The 64-year-old Zhaqsybekov’s departure from government was explained as a result of his reaching the retirement age. He served as chief of staff between 2004-2018 and was reappointed in 2016. His family controls a group of enterprises through the Tsesna Corporation holding company, which includes Tsesnabank.