A Giant Alliance. Halyk and Qazkom in One Bank

The Kazakhstan banking circles vividly discuss a possible merger between Halyk Bank and Kazkommertsbank. Supposedly, it will happen before the end of this year.  So far, neither of the banks has released any official information. So, at the moment, we are unable to analyze the details of the transaction and its possible outcomes. Therefore, in this article, we will limit ourselves to investigating the reasons for this merger and the personae behind it.

Should it happen, it would be a merger between the banks together accounting for two fifths of the assets and the loan portfolio of all the banking institutions in Kazakhstan. Who, then, needs this merger and why?

Considering the usual Akorda routine, we may offer two hypotheses. First, one of these institutions may be in a state of financial disaster. Second, one of the groups controlling the banking sphere in Kazakhstan may want to expand their business.

In the first instance, Kazkommertsbank will, undoubtedly, become the “hero of the day”.  Everyone knows about the complicated situation the bank has been in. Kenes Rakishev who joined the bank as a new major stakeholder has somewhat improved the matters. However, he is unable to change the situation significantly, especially in such a short period. Keeping this in mind, it seems logical that Akorda may decide to take a radical step and eliminate Kazkommertsbank from the market.

However, there are many political and economic reasons why this major bank cannot go through the usual bankruptcy procedure. In these circumstances, the merger between Kazkommertsbank and Halyk Bank with the subsequent cleaning of loan portfolio and writing off bad debts is perhaps the only possible way to solve the problem.

Of course, Kenes Rakishev himself may be the driving force behind this scenario. May be, he has realized that the load he has taken on himself is too heavy to lift. On the other hand, the National Bank of Kazakhstan, too, may be an initiator of the merger. Its management probably understands that the state budget will be unable to finance a second too-big-to-fail bank rescue saga. Besides, the regulator may think there are too many of these too-big-to-fail banks in Kazakhstan, considering the current conditions.

In the second instance, only one alternative exists. Dinara and Timur Kulibayevs, the joint owners of Halyk Bank, want to grab Rakishev’s assets taking advantage of the fact that, even after a series of deals with BTA Bank – control transactions, asset swaps, Kazkommertsbank continues to experience certain difficulties.

However, this explanation is the simplest one and may turn out to be false. Even though the fact that the Republic of Kazakhstan has now entered a transition period when the supreme power will eventually be transferred (inherited) argues for it. Two things suggest the transition period has already begun. First, there is a prolonged crisis in the economic, social, political, and other spheres. Second, there is President Nazarbayev’s recent decision to create a team under the leadership of Adilbek Dzhaksybekov whose task is to work on the redistribution of power among different branches of the government.

So, in these circumstances, a conspiratorial explanation of the merger seems a logical one.

The thing is that Kenes Rakishev is related to Imangali Tasmagambetov, a vice president of Kazakhstan and one of the most influential persons in the ruling elite. (Rakishev is Tasmagambetov’s son-in-law). The fact that some of the Kazakh-speaking intelligentsia regularly name the latter as Nazarbayev’s successor is particularly important.

Mr. Tasmagambetov himself always refuses this honor. Moreover, he once called himself a “Nazarbayev’s product”. So, we have no reason to accuse him of the desire to become a second “elbasy” (leader of the nation). However, we acknowledge a possibility that some persons in Nazarbayev’s circle may be concerned and want to change the situation so Rakishev will not be able to take control over the biggest of the too-big-to-fail institutions.

In this light, we see that Kazkommertsbank can only merge with Halyk Bank. A merger with any other financial institution is simply impossible to imagine. The difference in the size of the stock, the assets, the loan portfolio would be tremendous.

Anyway, until there is a confirmation from the banks or the regulator, the talk of this merger that, should it happen, would lead to a formation of a super-bank, remains a speculation.

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