MARCH 10 2017 (The Conway Bulletin) — Halyk Bank, Kazakhstan’s second largest bank by assets, said its net income in 2016 was 9.2% higher than in 2015 at 131.2b tenge ($412m). Importantly, its Q4 net income was 32% higher in 2016 than the same period in 2015 and the proportion of loans considered to be bad, those more than 90 days overdue, had dropped to 10.2% by Dec. 31, from 11.5 % on Sept. 30. The data suggested that the economic downturn that has hit Kazakhstan is lifting. Last week, Halyk Bank confirmed it would merge with Kazkommertsbank.

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ALMATY, MARCH 10 2017 (The Conway Bulletin)  — The Fitch ratings agency said that it doubted a proposed merger between Kazakhstan’s two largest banks, Halyk Bank and Kazkommertsbank, could be achieved as smoothly and as quickly as the authorities had suggested.

Instead Fitch said that the bad debt inherited by Kazkommertabank when it completed the purchase of BTA Bank in 2015 was likely to linger despite a promise by the Central Bank to buy it up. It said that a Central Bank fund had promised 2 trillion tenge to buy up bad debt but that this was still short of the 2.4 trillion bad debt pile that Kazkommertsbank currently holds.

“Fitch believes there is a material risk that KKB’s problem assets may not be fully removed from the bank’s balance sheet or adequately reserved prior to a transaction,” Fitch said.

“Halyk Bank’s capitalization could weaken significantly as a result of the acquisition of KKB.”

This is important as Fitch is the first major Western institution to speak out against plans revealed earlier this month to merge the two banks.

The merged bank will have a 38% market share of the Kazakh banking sector. It placed Halyk Bank on a negative watch.

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