NOV. 22 (The Bulletin) — The Almaty-based Eurasian Development Bank (EDB), which is focused on the region covered by the Russia-led Eurasian Economic Union (EEU), wants to increase its operations in Armenia, one of its directors, Dmitry Ladikov-Roev, said on a visit to Yerevan. The EEU is seen as a Kremlin political project.
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— This story was first published in issue 430 of the weekly Bulletin.
TBILISI/Nov. 7 (The Bulletin) — London-listed Bank of Georgia said that its Q3 profit was 30% higher this year than in 2018, pushing its shares up by nearly 8%.
The bank, one of the two biggest banks in Georgia, generally performs well if Georgia’s economy is performing well and it has boomed over the past couple of years, helped by a surge in tourism and renewed business confidence after a slump in 2014-16.
In what it described as an “outstanding” quarter, Bank of Georgia said that its income from interest was 1.8% higher than Q3 2018 at 188.7m lari and that there had been a 22% rise in net fee and commission income to 48m lari.
Bank of Georgia CEO, Archil Gachechiladze, said that the bank had shifted from a high yield, high risk loan portfolio to a lower risk and lower yield portfolio.
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— This story was first published in issue 428 of the weekly Bulletin.
NOV. 7 (The Bulletin) — Banks in Kazakhstan are still giving out risky retail loans, Moody’s the ratings agency said. Bank lending in Kazakhstan is a contentious issue as it has been highlighted as one of the biggest contributors to weakness of the Kazakh economy. Moody’s said that the ratio of retail loans to overall household income will be 2.4 times by mid-2020, the level reached in 2013 just before a recession. Kazakhstan’s Central Bank is the country’s financial supervisor and has tried to impose rules that were supposed to improve lending rules to limit exposure to bed debt.
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— This story was first published in issue 428 of the weekly Bulletin.
TBILISI/July 24 (The Bulletin) — Prosecutors in Georgia charged the chairman and deputy chairman of TBC Bank, the country’s biggest bank, with money laundering.
Mamuka Khazaradze, founder of TBC Bank and chairman of the corporation that owns the bank, and deputy chairman Badri Japaridze denied the charges and said that they were politically motivated.
Prosecutors have been investigating the two men since August last year over payments made through TBC Bank in 2007 and 2008.
They said that there was now enough evidence to charge them with laundering $16.6m “followed by a gain of particular large amounts of income”.
On the London Stock Exchange, TBC’s shares fell more than 11% to a five-month low.
In response, TBC Bank said that Mr Khazaradze and Mr Japaridze had resigned from TBC Bank Group PLC, the company that owns TBC Bank.
Mr Khazaradze had also quit as chairman of the banking unit earlier this year, when news of the investigation became public.
“The Board has full confidence in the integrity of Mr Khazaradze and Mr Japaridze and looks forward to the gentlemen quickly and fully clearing their names of any claims, including alleged money laundering,” TBC said in a statement.
The outspoken Mr Khazaradze, one of Georgia’s most recognisable businessmen, is known to have clashed with Bidzina Ivanishvili, the richest man in Georgia and the power behind the Georgian Dream Coalition government. He has also threatened to go into politics against Mr Ivanishvili and his supporters have said that the money laundering charges are a form of punishment.
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— This story was first published in issue 417 of the weekly Central Asia & South Caucasus Bulletin on July 25 2019
ALMATY/July 17 (The Bulletin) — In its annual assessment of Kazakhstan’s economy and business, the IMF said that the Kazakh banking sector is still vulnerable.
The fragility of Kazakhstan’s financial sector has undermined economic growth over the past decade, despite intervention by regulators, who have tried to legislate against bad debt, government bailouts and forced mergers.
“Despite state support, the banking sector remains weak, with high levels of bad loans,” the IMF said in a statement.
Bad loans grew rapidly after the 2015 devaluation of the tenge. It halved in value, because of a recession in Russia and a collapse in oil prices, which made dollar-denominated loans expensive to pay off.
The Kazakh Central Bank has bailed out larger banks, and overseen the merger of the country’s two biggest banks, Halyk Bank and Kazkommertsbank, but also allowed smaller banks to go bankrupt.
Kazakhstan plans to conduct what the IMF called an “asset quality review (AQR)” of large and medium banks but the IMF said that the Kazakh Central Bank needed to be careful how it reacted to the results of the review.
“The AQR may reveal the need for additional capital; any public support should be provided only to systemically-important and viable banks, subject to contributions from existing shareholders, and in the view of the IMF staff, from the budget and not the National Bank of Kazakhstan,” the IMF said.
Construction worker dies in Tbilisi Campaigners have said that safety measures on Georgian construction sites are notoriously slack. At least six construction workers in Tbilisi have already died this year on sites and in January, seven men were killed in their sleep at the apartment they shared in central Tbilisi by a carbon monoxide leak.
The authorities have said that they will also investigate how the company managing the site where Beshkenadze died was able to hire a teenager.
The law doesn’t ban companies from hiring 16-year-olds, but they are not allowed to do hard manual job until they are 18.
It said also that there was a risk that Kazakh policymakers were trying to do too much too quickly. They want to move the Central Bank from Almaty to Nur-Sultan, a plan delayed by the 2014-17 economic downturn, and set up a new financial regulator.
“(This) carries risks that should be carefully managed, including possible gaps during the transition and insufficient bank oversight and coordination with the National Bank of Kazakhstan and government,” the IMF said.
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— This story was first published in issue 417 of the weekly Central Asia & South Caucasus Bulletin
FEB. 4 (The Conway Bulletin) — The Uzbek Central Bank gave Kazakhstan’s Halyk Bank permission to open its first branch in Uzbekistan. The move is important as it signals the Uzbek authorities willingness to further open up the country since Shavkat Mirziyoyev took over as president. Halyk Bank is the biggest bank in Kazakhstan. Georgia’s TBC Bank has also said that it is interested in entering the Uzbek banking sector.
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>This story was first published in issue 399 of The Conway Bulletin on Feb. 8 2019
Copyright The Conway Bulletin 2019
ALMATY/Feb. 7 (The Conway Bulletin) — — An obscure brokerage ultimately controlled by the Kazakh government bought a 99.5% stake in Tsesnabank, part of a deal that saved Kazakhstan’s second-biggest bank from bankruptcy.
The actual amount that Almaty-based First Heartland Securities paid for Tsesnabank has not been disclosed but it follows directly on from a 604b tenge ($1.6b) bailout agreed by the government this month. Tsesnabank had already been bailed out in September last year when the government’s bad debt fund bought $1.8b of debt linked to the agricultural sector.
First Heartland Securities is controlled by state-owned Nazarbayev University. This gives the government, and President Nursultan Nazarbayev and his family, total dominance over the Kazakh banking sector. His son-in-law, Timur Kulibayev, and daughter, Dinara Nazarbayeva, own Kazakhstan’s largest bank — Halyk Bank.
In a statement, First Heartland Securities said that under the terms of the deal it will inject 70b tenge ($185.8m) into Tsesnabank. Erke Nurkenov, First Heartland Securities’ chairman, said that Tsesnabank’s operations would not be impacted by the change in ownership.
“First Heartland Securities will continue to develop Tsesnabank and strengthen its position in the SME segment and work with individuals, primarily focusing on improving the quality and availability of service,” he said in a statement.
Pres. Nazarbayev’s ally Adilbek Zhaksybekov had owned Tsesnabank. He had been head of the Presidential Administration before resigning in September with a promise to sort out his ailing bank. He was replaced as Tsesnabank’s chairman by Shigeo Katsu, president of Nazarbayev University, and Bekzhan Pirmatov, formerly deputy CEO at First Heartland Bank, was appointed the Tsesnabank CEO.
Tsesnabank had been heavily exposed to the agriculture sector. Since a 2015 devaluation of the tenge, its debtors have struggled and the proportion of bad debt in its portfolio expanded rapidly.
Although analysts had warned of Tsesnabank’s collapse for months, it will still shake investor confidence.
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>This story was first published in issue 399 of The Conway Bulletin on Feb. 8 2019
Copyright The Conway Bulletin 2019
ALMATY/Jan. 29 (The Conway Bulletin) — — The Kazakh government will bail out Tsesnabank, the country’s second-largest bank, for the second time in six months, once again highlighting the fragility of Kazakhstan’s financial system.
The $1.6b bailout prompted an outburst from President Nursultan Nazarbayev that finance officials and the Central Bank were “cowards” and were not doing enough to protect the system from conflicts of interests and poor bank owners.
“You are just cowards, not cabinet ministers!” Reuters quoted Mr Nazarbayev telling cabinet ministers and Central Bank officials at a meeting. “Are your hands and knees shaking too much to make a decision? What are you doing here then?”
Mr Nazarbayev is particularly sensitive about the strength of Kazakhstan’s banks. He ordered the Central Bank to tighten up its regulations of the banks after the 2008/9 Global Financial Crisis, when the Kazakh government had to buy a handful of bankrupt banks, but an economic downturn in 2014/17 showed up the sector’s continued weakness.
Some banks did prove resilient in the downturn, but the government was still forced to bail out some the more heavily-indebted larger banks and also allow a handful of smaller banks to go bankrupt.
This has hit the government’s resources, dented its wider image for financial competence and worried ordinary people who have drawn down their bank deposits.
Tsesnabank, which is owned by Adilbek Zhaksybekov, received a $1.2b bailout in September. Mr Zhaksybekov is a close confidant of Mr Nazarbayev and his former Chief-of-Staff.
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>This story was first published in issue 398 of The Conway Bulletin on Jan. 31 2019
Copyright The Conway Bulletin 2019
JAN. 29 (The Conway Bulletin) — Armenia’s Ardshinbank signed a $35m loan facility deal with the Asian Development Bank (ADB), arranged through Citi. This is the second similar deal organised between the three banks. Adrshinbank is one of the biggest banks in Armenia and, like its rivals has increased funding to small and medium-sized businesses.
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>This story was first published in issue 398 of The Conway Bulletin on Jan. 31 2019
Copyright The Conway Bulletin 2019
JAN. 17 (The Conway Bulletin) — Azerbaijan’s Pasha Bank doubled its share of the corporate lending market in 2018, the ratings agency Standard & Poor’s said. It said that Pasha’s share had increased to 17% of the market from 9%. Pasha has been looking to expand its loan portfolio in both Azerbaijan and also in Georgia and Turkey, markets that now make up a quarter of its loans.
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>>This story was first published in issue 397 of The Conway Bulletin on Jan. 20 2019