Tag Archives: banking

Kazakh Pension Fund loans cash

MAY 17 2016 (The Conway Bulletin) – Kazakhstan’s Central Bank said it had given 62b tenge ($186m) in loans from the state’s Pension Fund to around 30 commercial banks, in an effort to boost their liquidity. Kazakhstan’s Pension Fund, previously held at commercial banks, was nationalised between 2013 and 2014. It held up to $20b. Last month, the Central Bank opened a credit line from the Fund for commercial banks.

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(News report from Issue No. 281, published on May 20 2016)

Is Tajikistan preparing to unleash its Nashi?

MAY 20 2016 (The Conway Bulletin) — So, it’s becoming increasingly clear that the authorities in Tajikistan are using students to promote their causes.

Excellent reporting from our ‘Man in Dushanbe’ has exposed this practice. He has spoken to several students who have said their universities and teachers have forced them to either march in favour of government policies or demonstrate outside the embassies of countries which have irritated President Emomali Rakhmon by giving his enemies sanctuary.

This is a well-worn strategy in the former Soviet Union. When I was a correspondent in Moscow between 2006-9 I reported heavily on the growth of a youth group called Nashi and its various offshoots. Nashi was effectively a massive mobilisation of Russian youth, often whipped up into a frenzy to support various policies promoted by Vladimir Putin and Dmitri Medvedev, who was the Russian President at the time.

Their summer camps, set up in the dense forests of northern Russia, were an eye-opener. Pictures of opposition activists dressed up as prostitutes were placed around the site. In Moscow, Nashi rallies were rowdy affairs, nationalistic and with a violent undercurrent.

The movement in Tajikistan hasn’t reached these proportions yet and is less sophisticated but the authorities are still unleashing, while trying to control, the same forces.

It’s a crude, dangerous technique.

BANKING ISSUES

Sticking with Tajikistan, news that the country’s second largest bank has been placed under administration doesn’t come as a surprise. TSB has been listing heavily for a while. The strains on the Tajik economy have just become too great and it was only a matter of time before something gave. The important issue to monitor now is whether this is contagious and other Tajik banks also cave in.

It’s also important to keep the banking failure in context. The Tajik banking system may be weaker than its neighbours but all the Central Asian economies have been under the same pressures. Remittances from Russia have dried up, currencies have halved in value and GDP growth rates are being revised down. These banks were giving out soft loans for years and many of these will have turned bad.

If a bank in Tajikistan effectively says it doesn’t have any more money left, could banks in neighbouring Kyrgyzstan and Kazakhstan be experiencing the same problem?

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(News report from Issue No. 281, published on May 20 2016)

Rakishev dismisses latest KazKom downgrade

ALMATY, MAY 18 2016 (The Conway Bulletin) — Kazkommertsbank, Kazakhstan’s largest lender, said it wants to buy back up to $500m in Eurobonds due this year, a bullish response to a recent double downgrade it received from international ratings agencies.

In a wide-ranging press conference, KazKom’s new chairman Kenes Rakishev said the bank has enough liquidity to pay for its debt, which will reach maturity later in 2016 and in early 2017.

“While our consultants advise us to buy back $300m, we are ready to buy back $500m,” Mr Rakishev told media and investors. “It’s a business decision as it is now cheaper to deal in the domestic market than it was when the bonds were issued.”

Mr Rakishev was appointed chairman of KazKom earlier this month after effectively completing a buyout of the country’s largest bank. He is the son-in-law of Kazakh defence minister, Imangali Tasmagambetov. He owns large stakes in several major

Kazakh companies and is often considered to be working on behalf of more senior members of the Kazakh elite.

Earlier in the week, the ratings agency Standard & Poor’s had cut KazKom’s debt rating to CCC+ because it said that via its merger with BTA Bank, the indebted bank that the government had owned, KazKom had inherited a swathe of bad debt in foreign currencies.

Some analysts have said that the KazKom/BTA merger and Mr Rakishev’s takeover were driven by politics and not business.

Mr Rakishev, though, brushed the downgrade aside and pointed out that other ratings agencies had already factored this into their calculations and issued earlier downgrades.

“I think we’ve passed the darkest zone and that we will move on to a completely new zone and concentrate on how to eliminate negative things that have occurred,” he said.

And Mr Rakishev also said that he wanted KazKom to shift its emphasis into the SME sector.

“We have an opportunity here to grow,” he said. “And not only in Almaty and Astana but also in the regions.”

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(News report from Issue No. 281, published on May 20 2016)

Azerbaijan’s oil fund avoids VTB offer

MAY 16 2016 (The Conway Bulletin) — SOFAZ, Azerbaijan’s sovereign oil fund, said it has no intention of increasing its 2.95% share in Russia’s VTB Bank, a sign, perhaps, that the economic downturn has bitten into Azerbaijan’s ability to buy assets abroad. SOFAZ has previously been increasing the size of equity stakes it owns in various companies. Earlier in May, the Russian government said it was looking for buyers to reduce its stake in VTB. VTB is the second largest bank in Russia and owns subsidiaries across the South Caucasus and Central Asia.

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(News report from Issue No. 281, published on May 20 2016)

Tajik government steps in to save bank from going bust

DUSHANBE, MAY 18 2016 (The Conway Bulletin) — Tajikistan’s Central Bank placed Tojiksodirotbank (TSB) under its administration after the bank said it was on the brink of going bankrupt, the first major banking casualty of the current economic downturn.

TSB is the second-largest lender in the country and manages around a third of all loans in Tajikistan. Its collapse has shaken policymakers.

A senior official at the Central Bank, Mirzokhayota Yodgorov, replaced the bank’s chairman, Tojid- din Pirzoda. Sources in the banking sector also told local media that the EBRD could step in and inject vital cash into TSB.

“The question as to whether the EBRD will enter TSB’s capital will be resolved in June,” the source, quoted by Asia Plus, said.

According to the latest, unconfirmed, updates, the EBRD plans to buy a majority stake in the bank for $165m. The Tajik government could also step in and buy a 25% stake.

Earlier in May, TSB had said it was in talks to sell half of its shares to the EBRD.

Neither the EBRD nor the Tajik Central Bank commented but Tojiksodirotbank did release a fairly oblique statement confirming it had been placed under administration.

“The National Bank of Tajikistan Board in accordance with Articles 48, 49 and 50 of its Laws, to improve the financial situation of Tojiksodirotbank and protect the rights of its depositors and creditors on 18th May 2016 appointed a temporary administration in the bank for three months,” it said in a statement.

The banking sector in Tajikistan, hit by a deep economic downturn, has accumulated overdue loans and is faced with cash shortages. An IMF delegation earlier this year said that some of Tajikistan’s biggest banks were on the brink of default.

Tajikistan’s financial sector is under stress because the value of remittances from migrant workers has shrunk significantly over the past two years, undermining the economy and, crucially, hitting customers’ ability to pay back their loans.

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(News report from Issue No. 281, published on May 20 2016)

Editorial: Banks in Tajikistan

MAY 20 2016 (The Conway Bulletin) – The past nine months have been tough for Tajikistan. A recession in Russia has smashed into Central Asia and the South Caucasus, heavily denting the larger economies and taking great chunks out of the smaller ones. Tajikistan has suffered a sharp fall in remittances, the weakening of the somoni currency and a liquidity crisis in the banking sector.

This week’s news that TSB, one of the country’s largest commercial banks, needs a caretaker administration to help it navigate through problem loans is a sign of the fragility of the entire sector. After all, TSB holds around 33% of Tajikistan’s total loan portfolio.

But failing banks is not the only consequence of the economic downturn. Politically, Emomali Rakhmon’s regime has retrenched and used old-school Soviet techniques to tighten its grip on power.

The opposition has been outlawed and chased out of town, surveillance of pious Muslims has increased and a referendum that will extend Mr Rakhmon’s stay at the top now looms.

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(Editorial from Issue No. 281, published on May 20 2016)

Tajik bank asks EBRD for emergency loan

DUSHANBE, MAY 9 2016 (The Conway Bulletin) — In the most serious indication so far that Tajikistan’s banking system is beginning to buckle under the pressure of this prolonged economic downturn, Tojiksodirotbank admitted it was on the brink of a liquidity crisis and that it had applied to the EBRD for a loan to save it.

Representatives of TSB, as Tojik- sodirotbank is commonly known, flew to London to meet with EBRD officials on the sidelines of its Annual General Meeting.

“Tojiksodirotbank, one of the country’s systemically important banks, needs financial assistance in the current situation,” TSB said in a statement.

Neither TSB, nor the EBRD commented on the size or the timing of the loan.

In March, Tajikistan’s Central Bank invited EBRD representatives to propose solutions to a worsening financial situation. The Tajik som has fallen heavily in value against the US dollar and all-important remittances are down by around 50% because a recession in Russia has wiped jobs for migrants.

This year nervous savers have been withdrawing money from banks they fear are on the edge of bankruptcy.

Also, the proportion of so-called non-performing loans (NPLs) in the system has skyrocketed. The proportion of loans that were 60 days or more overdue grew from 9.9% at the end of 2013 to 24% at the end of 2014, according to official data. Media has also said that this figure may be nearer 33% now.

Earlier this year the IMF said that TSB and its largest competitor, Agroinvestbank, were exposed to increased credit risk and could become insolvent.

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(News report from Issue No. 280, published on May 13 2016)

Uzbekistan plans to sell bank stake

MAY 6 2016 (The Conway Bulletin) – Uzbekistan’s government plans to sell a 15% stake in Asaka Bank to foreign investors for $58m, in a drive to privatise state assets.The bank says it has $2.6b in assets, making it one of the largest banks in the country. Last month, the Uzbek government said it wants to raise $72m from the sale of its stakes in two other banks.

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(News report from Issue No. 280, published on May 13 2016)

Kazakh kommertsbank’s chairman wants all KKB

MAY 6 2016 (The Conway Bulletin) – Kazkommertsbank’s chairman, Kenes Rakishev, said he is ready to buy out minority shareholders offering 211 tenge ($0.63) per share. The deal, which is expected to be concluded by the end of the year, will cost $145m and will give Mr Rakishev full ownership of the bank. Directly and indirectly, Mr Rakishev now owns 71% of Kazkommertsbank.

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(News report from Issue No. 280, published on May 13 2016)

Non-performing loans in Azerbaijan rise

APRIL 29 2016 (The Conway Bulletin) – International ratings agency Moody’s said that the proportion of loans deemed non-performing in Azerbaijan had reached 20%, a sign of the country’s poor economic health.

Moody’s said that data clearly shows the growth of non-performing loans in Azerbaijan. At the end of 2014, the proportion of non-performing loans in Azerbaijan had been 4.5%. This rose to 9.1% by the end of the third quarter of 2015 and has doubled, again, in the past six months.

Non-performing loans are credits that banks have been unable to collect for over 90 days. Analysts deem this timeframe a problem because when a loan is not repaid within three months it is likely that it will not be repaid at all.

Moody’s downgraded Azerbaijan’s economy, giving it a negative outlook and predicting problems collecting outstanding loans.

“The manat devaluation triggered a flight out of local currency deposits, led to a rise in banks’ problem loans, and eroded capital buffers,” it said in a statement.

Azerbaijan’s economy is heavily dependent on oil and gas which has collapsed in value since August 2014. The Central Bank devalued the manat currency twice last year. It ended the year at half the value it had started 2015 at.

Moody’s said this has had a negative impact on both economic activity and the banking sector.

“Azerbaijan’s economic growth outlook remains weak,” Moody’s said. “Moody’s recently revised its 2016 growth forecast for Azerbaijan, expecting real GDP to shrink by 3.3%, compared to a previous forecast contraction of 0.7%, reflecting its expectation of a contraction in both the oil/gas and non-oil/gas GDP sectors.”

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(News report from Issue No. 279, published on May 6 2016)