Tag Archives: banking

IBA creditors criticise debt restructure deal in Azerbijan

LONDON, MAY 23 2017 (The Conway Bulletin) — Azerbaijan’s reputation for economic competence was dealt another blow after creditors of the International Bank of Azerbaijan lined up to criticise a debt restructuring plan.

Senior officials unveiled the plan at a tense meeting with creditors in London, nearly two weeks after IBA failed to pay a scheduled repayment on a $100m loan. IBA now says that it has to restructure $3.3b of debt. This includes forcing creditors to take a 20% writedown.

In a statement after the meetings, Fitch the ratings agency said that the restructuring plan would effectively nationalise IBA’s debt without offering any essential structural reforms.

“The Negative Outlook reflects continued risks and uncertainty around the macroeconomic and financial sector adjustment under way,” it said.

IBA also said that it would sell off its subsidiaries in Russia and Georgia, IBA-Moscow and IBA-Georgia, as part of its restructuring plan.

IBA controls around 60% of Azerbaijan’s banking sector. The sector has been hit hard by the collapse in the price of oil which Azerbaijan relies on for income. This knocked around 50% off the value of the Azerbaijani manat in 2015/16 and forced the economy into a sharp recession.

Azerbaijani banks’ bad loans portfolios have grown forcing several to declare bankruptcy or merge.

The government has ploughed money into IBA to prevent it from defaulting, increasing its stake to 80% from 55%, and bought its bad debt.

Despite this state support, IBA still failed, embarrassing the government and its senior management.

Now, though, creditors have to decide whether to back the restructuring plan with a two-thirds majority needed to proceed. At its core the restructuring deal means that creditors will swap IBA debt for sovereign bonds, most at a 20% discount.

Many creditors were unimpressed.

Lutz Roehmeyer bonds at Landesbank Berlin Investment, including IBA debt, told Bloomberg News that he planned to vote against the deal.

Kazakhstan’s state pension fund is among the major creditors of IBA. Last week it emerged that it had bought $250m of IBA debt in 2014, shortly after the oil price had started to fall, drawing allegations of incompetence from MPs. The Kazakh Central Bank has opened an investigation into the purchase.

ENDS

(News report from Issue No. 330, published on May 28 2017)

Kazakh CB bans Delta Bank

Leave a Reply

MAY 22 2017 (The Conway Bulletin) — Kazakhstan Central Bank banned Delta Bank, the 14th biggest bank in the country, from opening up any new customer accounts until mid- June because it had missed a series of payment deadlines. Kazakhstan’s banking sector has been under increased pressure because of an economic downturn linked to a drop in oil prices and a recession in Russia.

ENDS

(News report from Issue No. 330, published on May 28 2017)

Bank of Georgia issues first ever lari denominated debt

Leave a Reply

TBILISI, MAY 23 2017 (The Conway Bulletin) — London-listed Bank of Georgia issued 500m lari of debt ($200m), the first corporate bond denominated in Georgia’s national currency.

Georgian PM Giorgi Kvirikashvili said that the issue was a major victory for Georgia and showed that investors had confidence in the national economy and the national currency.

“International investors trust our country and our national currency. It is a momentous event, and I would like to congratulate everyone,” he said.

The Bank of Georgia debt is due to mature in 2020 and has a coupon of 11%.

Fitch the ratings agency gave the Bank of Georgia debt issue a BB- rating and said that this “reflects the bank’s adequate asset quality, reasonable capitalisation, sound profitability metrics and stable funding profile.”

Bank of Georgia has been listed on the London stock exchange since 2012. Its stock is now trading at 3,744p, an all-time high, against a price of around 3,000p in January.

For investors in the West, the Bank of Georgia debt issue not only gives them exposure to the Georgian financial sector but also to the lari. It has performed well this year, currently trading at 2.41/$1 compared to 2.76/$1 at the start of the year.

Much of this strengthening has been linked to a general uplift for Emerging Market stock and currencies as oil prices have stabilised, but some of it is specific to Georgia. Western analysts rate Georgia’s economy as the most diversified in the region and best equipped to cope with shocks.

Bank of Georgia and local rival TBC are the only banks in Central Asia and the South Caucasus to be listed on the LSE.

ENDS

(News report from Issue No. 330, published on May 28 2017)

Stock market: Georgia’s TBC, Kaz Minerals

Leave a Reply

MAY 28 2017 (The Conway Bulletin) — Profit at Georgia’s London-listed TBC Bank rose by two-thirds to nearly 100m lari ($40m) highlighting the increasingly upbeat assessment of the Georgian banking sector.

The bumper results also pushed up TBC’s share price to an all-time high of 1,695p. This is nearly an 18% increase from the start of the year and is an increase of roughly 65% from when TBC listed in August.

The main driver of this improvement has been an overall strengthening of Georgia’s economy. The region has been hit hard by a downturn in economic conditions, linked to a collapse in oil prices and also a recession in Russia.

TBC’s main rival, the London- listed Bank of Georgia, has also been hitting similar all-time highs. As well as boosting its stock price, Bank of Georgia also gain a PR boost when it issued 500m lari debt, the first corporate issue in lari.

Elsewhere, KAZ Minerals has been performing well. It’s been yoyo-ing around and has regained much of the ground lost in March. KAZ Minerals is a major copper producer and its share price follows copper prices to a large extent.

It is now trading at 506p, up from 430p at the beginning of the month but down from highs of 589p hit in mid-February.

KAZ Minerals used to by known as Kazakmys, which was linked by transparency campaigners to Kazakh Pres. Nursultan Nazarbayev.Stock market: Georgia’s TBC, Kaz minerals

Azerbaijan spends to prop up banking sector

Leave a Reply

MAY 25 2017 (The Conway Bulletin) — Azerbaijan has spent the equivalent of 18% of its GDP propping up its banking sector in 2015/16, Peter Paklin, assistant vice president at Moody’s Investors Service, told a press conference. Despite the state support, Azerbaijan’s banking sector has been faltering, with its biggest bank — the International Bank of Azerbaijan — restructuring its debt and smaller banks going bankrupt.

ENDS

(News report from Issue No. 330, published on May 28 2017)

Azerbaijani banking crisis drags in neighbours

Leave a Reply

MAY 16 2017 (The Conway Bulletin) — Ratings agencies downgraded debt issued by the International Bank of Azerbaijan, as the country’s biggest bank appeared to teeter towards a collapse.

There were fears too that the bad debt piling up at the IBA may damage finance systems across Central Asia and South Caucasus after it emerged that Kazakhstan’s Single Pension Fund had bought $250m of IBA debt over the past few years.

Kazakh MPs accused the Pension Fund of incompetence for investing in IBA in October 2014 shortly after the price of oil started to fall. At the time analysts warned that IBA was at risk of accumulating mountains of bad debt that could sink it.

Moody’s said it had downgraded IBA’s rating to Caa3 from B1, effectively shifting IBA debt from risky to extremely risky.

“Moody’s expects the announced foreign debt restructuring plan to result in credit losses for creditors in excess of 20%,” it said. Media reported that Cargill and Citibank are two of IBA’s biggest creditors.

Last week, IBA filed for Chapter 15 protection in the United States after it failed to make a $100m debt repayment to Netherlands-based Rubrika Finance on May 10. Chapter 15 prevents creditors going after IBA while it restructures its $3.33b debt. The Azerbaijani government is the bank’s biggest shareholder, now holding an 80% stake, and its fall is a major embarrassment to it. Not only has it bought equity in the bank, it increased its stake from 55% earlier this year, but it has also spent nearly $6b buying up its toxic debt.

Media quoted IBA chairman, Khalid Ahadov, as saying that its restructuring plan will be presented in London on May 23.

“Upon completion of these measures, the Bank’s capital position will return to regulatory frameworks,” he was quoted as saying. “As a result of all those measures long-term financial sustainability of IBA will be ensured that will increase its market value on the threshold of privatisation.”

But the reputational damage inflicted by the near-collapse of IBA will undermine Azerbaijan’s status in the financial markets. Last year several smaller banks collapsed or had their license withdrawn by the Central Bank. In 2015, the Azerbaijani manat was devalued twice, halving its worth. With many mortgages and personal loans given out in US dol- lars, consumers found it near-impossible to service their debt.

Azerbaijan has been particularly hard hit by the fall in oil prices. Its economy is reliant on oil exports. Despite repeated warnings, it has failed to diversify.

ENDS

(News report from Issue No. 329, published on May 20 2017)

IDB to fund Uzbek SMEs

Leave a Reply

MAY 18 2017 (The Conway Bulletin) — A unit of the Jeddah-based Islamic Development Bank (IDB) signed deals to boost financing of small and medium-sized businesses in Uzbekistan with two Tashkent-based banks, Ipak Yuli and Asia Alli- ance. The deals continue the sense of openness and development that President Shavkat Mirziyoyev has ushered into Uzbekistan since taking over as president in September 2016. Earlier this year, he welcomed the head of the European Bank for Reconstruction and Development (EBRD) back to Tashkent for the first time since 2003. This month the UN High Commissioner for Human Rights visited Uzbekistan for the first time.

ENDS

(News report from Issue No. 329, published on May 20 2017)

Azerbaijan’s IBA misses debt interest payments

Leave a Reply

MAY 11 2017 (The Conway Bulletin) — International Bank of Azerbaijan (IBA), the biggest bank in the country and vital to its economy, said it had missed interest payments on loans, another sign it is struggling to stay solvent under the weight of mounting bad debt.

Azerbaijani finance minister Samir Sharifov also appealed to creditors to be patient while IBA restructured its debt. He said the bank would not pay interest on liabilities until this process was complete.

In the US, IBA applied for protection under Chapter 15 of the Bankruptcy Code. This protects the bank from being pursued by creditors while it restructures its debt.

Analysts have said all year that IBA is in serious danger of collapsing. In January, the government increased its stake in the bank to 76.7% from 55% in an admission that without state support the bank would fail.

Azerbaijan’s economy has been hit hard by a collapse in oil prices since 2014.

ENDS

(News report from Issue No. 328, published on May 12 2017)

Georgia raises minimum capital requirements for banks

Leave a Reply

TBILISI, MAY 5 2017 (The Conway Bulletin) — Georgia’s Central Bank will quadruple the minimum capital requirement that commercial banks have to hold to 50m lari ($20.5m), part of drive to reduce the number of small, weak banks in its financial system.

Acting on a recommendation from the IMF, the Georgian Central Bank said that commercial banks would need to hold capital of 30m lari by the end of the year, 40m lari by mid-2018 and 50m lari by the end of 2018. Currently the minimum capital requirement for a bank in Georgia is just $12.5m lari.

“It should be noted that in terms of minimum capital requirement Georgia has one of the lowest in the world, not in line with the financial sector’s development,” it said in a statement.

“The change was supported by the International Monetary Fund’s mission.”

Georgia and the rest of the Central Asia and South Caucasus region have been battling an economic downturn over the past three years that has eaten into the value of their currencies, undermined mortgage holders and companies holding large debt and bankrupted, or nearly bankrupted, a number of banks.

In Tajikistan only a government bail-out prevented a banking collapse; in Azerbaijan several small banks have been forced to close and the government has bought a majority stake in International Bank of Azerbaijan, the country’s biggest bank; in Kazakhstan the government has set up a bad loan fund for banks to dip into for support.

Georgia’s economy has survived the downturn in better shape than its neighbours – the lari proved more robust than the manat, which halved in value, but it still shook the banking sector. There are 17 banks operating in Georgia, the Central Bank said, roughly the same as 10 years ago. In 1995, there were 102 banks.

The two biggest, TBC and Bank of Georgia, are listed on the London Stock Exchange but many of the others are small, a legacy of the post- Soviet banking boom in the 1990s.

Last month the IMF approved a $285.3m loan on the understanding that Georgia would continue a series of economic reforms, including strengthening its banking sector.

ENDS

(News report from Issue No. 327, published on May 5 2017)

Kookmin sells 42% stake in Kazakhstan’s CenterCredit

Leave a Reply

ALMATY, APRIL 20 2017 (The Conway Bulletin) — South Korea’s Kookmin Bank sold its remaining 41.93% stake in Bank CenterCredit to Bakhytbek Baiseitov’s Tsenabank, bringing to an end its unhappy nine year foray into the Kazakh banking sector.

Kookmin’s retreat from Kazakhstan also highlights just how foreign banks have struggled in the Kazakh banking sector. The 2008/9 Global Financial Crisis inflated Kazakh banks’ bad debt portfolios turning what had looked like an attractive market to foreign investors into a headache virtually overnight.

A short note released on the Kazakh Stock Exchange by Center- Credit didn’t give much way accept to confirm the sale. Earlier this year, Tsenabank said it would buy up all of Kookmin Bank’s stake. In March it also confirmed that Mr Baiseitov, one of Kazakhstan’s richest people, had bought a 10% stake from the IFC, part of the World Bank. The IFC had always intended to sell its stake, bought in 2010, by 2017.

There was no statement from Kookmin which has been looking to sell its stake in CenterCredit almost as soon as it bought it.

Kookmin’s timing was initially poor. It bought a 30% stake in CenterCredit from Mr Baiseitov, who set up the bank, in March 2008 for $500m. By August 2008 the Global Financial Crisis had virtually wiped out its investment. The devaluation of the Kazakh tenge in 2015 also hit the bank, forcing Kookmin to write- down its value again. The 2008 deal to buy into CenterCredit had been part of a now globalisation push by Kookmin. It forced the resignation in 2010 of then-CEO Kang Chung-won.

Other foreign banks which have invested in Kazakhstan only to pull out a few years later include Britain’s HSBC and Italy’s Unicredit.

ENDS

(News report from Issue No. 325, published on April 17 2017)