We have estimated that the direct losses suffered by the Kazakh TTBs due to the realization of the foreign currency risk in March 2020 constituted 494 bln tenge. This is what their net losses amounted to as a result of converting the foreign currency deposits and providing the loans based on the new exchange rate. Is it a lot? Or not?
In the article How Much the People Lost On the March Tenge Devaluation, we have estimated the losses suffered by the banks’ clients as a result of the March national currency weakening. By our crude estimates, as of March 30, 2020, these losses constituted almost US4 $ bln. Of this sum, about 2.1 bln are the losses suffered by physical bodies and 1.9 bln are the losses suffered by legal bodies.
Currently, the situation on Kazakhstan’s currency market remains unstable and not only because it is unclear how the events on the world oil market are going to develop and how the coronavirus pandemics will proceed in the Republic, but also due to the unpredictability of the bank depositors’ behaviour since they very well may rush to rescue their tenge deposits thus crushing both the tenge exchange rate and the banking system as well.
In view of this, we believe it’s important to assess (albeit in a first approximation) how the latest devaluation of the national currency has affected local banks.
Since this subject is too complex for a casual observer, we are not going to try and assess the unavoidable worsening of the loan portfolio quality (especially in retail), the reduction of the current earnings as a result of the freezing of the interest accrual and (or) the delay of their payments as well as the funding of all kinds of client support programs. Let us focus on how the devaluation has affected the banks’ balances only.
As of February 1, 2020, the Kazakh TTBs deposits constituted 11472 bln tenge of which 3494 bln are accounted for by legal bodies, 7978 bln are accounted for by physical bodies.
Below, there is a table prepared on the basis of the official data of the National Bank of the Republic of Kazakhstan. Let us stipulate at once that since, as of this writing, the data on the deposits existed for the beginning of February 2020 only and the data on the loans existed for the end of February only, we had to use only the first data for the sake of comparability. As for March 30, we have chosen it at random.
As a result of the uncomplicated calculations, we have assessed that the direct losses suffered by the TTBs due to the realization of the currency risk in March 2020 constitute 494 bln tenge. This is what their net losses amounted to as a result of converting the foreign currency deposits and providing the loans based on the new exchange rate.
In our opinion, it is very little. In view of which one should congratulate Akorda, the Library, the National Bank of Kazakhstan and its Chairmen, current one — Yerbolat Dossayev, and former one — Daniyar Akishev on how well their scheme had worked.
It was that same scheme with whose help the National Bank of Kazakhstan had ensured the reduction of the share of foreign currency deposits of physical bodies from 80,4% as of end of January 2016 to 42,4% as of end of February 2020 via temporary taking off the market the free funds at the abnormally high interest rate. And that is the scheme which, as it is now becoming clear, has softened the blow inflicted by the March devaluation.
Of course, all the depositors that lost about 4 $ bln (by our estimates) of which 2.1 is accounted for by physical bodies did suffer from the devaluation.
But this is the Kazakh way — when a crisis comes, first, it is the common man who suffers; and then come the state and the quasi-governmental sector, then the business tightly connected to the top of the power pyramid and, finally, the top of the pyramid itself.
Alas, such is the logic of any authoritarian political system and particularly the «super-presidential» republic: the earnings and welfare are distributed from top to bottom; the losses and problems — from bottom to top.
