The Backstory of Dzhaksybekov’s Resignation

Tsesnabank JSC has suddenly and very quickly made it to the list of Kazakhstan’s problem banks. Even though Adilbek Dzhaksybekov and his son Zhaksybek own the controlling interest in the bank via Financial Holding Tsesna JSC.

Here is what happened.

On September 5, 2018, the word leaked out that, in August, the National Bank of the Republic of Kazakhstan gave 150 bln tenge loan to Tsesnabank for the purpose of maintaining the day-to-day liquidity. The whole thing was done sub rosa. The news had immediately attracted the attention of the press and the civil society igniting the social media debates on the serious problems of this financial institute.

On September 6, 2018, Tsesnabank’s press-service published a press-release called «In re: Repaying the National Bank’s Short-Term Loan» in which they tried to convince the Kazakhstanis that the bank’s financial standing was solid, and it was not experiencing any problems.

On September 10, 2018, President Nursultan Nazarbayev released Adilbek Dzhaksybekov from his duties as the Head of the Presidential Administration due to entering the retirement age.

On that same day, September 10, 2018, Adilbek Dzhaksybekov was appointed the Chairman of Corporation Tsesna that has Tsesnabank JSC as one of its affiliated structures.

On September 11, 2018, Tsesnabank published a press-release on the current developments and the company’s short-term plans. The document stated that the bank was «working in a sustained fashion, fulfilling the prudential norms and other Regulator’s requirements as well as fully carrying out the fulfillment of the legal obligations to the clients».

The press-release had also informed that the bank’s shareholders were to increase its capitalization by 40 bln tenge while the bank itself was reviewing the question of «cooperating with the Problem Loans Fund and postponing the deadlines of the loan payments for the participants of the Agrobusiness 2020 program».

On September 14, 2018, Tsesnabank’s Board of Directors released Chairman Erzhan Toleubekov from his duties and replaced him with Ulf Vokurka, the former Chairman of Kazkommertsbank.

On September 14, 2018, the Government and the National Bank published a joint press-release on the new measures for the additional support of the agricultural sector. From the document, it follows that the parties are «developing a mechanism of buying out Tsesnabank’s 450 bln tenge agricultural loan portfolio» which will «ensure the financial recovery of the agricultural enterprises — loans borrowers as well as increase Tsesnabank’s financial stability».

The decisive end to this high-profile story was marked on September 17, 2018, by Standard & Poor’s international rating agency. It decreased Tsesnabank’s long-term credit rating from ‘B+’ to ‘B’, outlook «Negative» and affirmed its ‘B’ short-term credit rating. The bank’s national-scale rating was decreased from ‘kzBBB’ to ‘kzBB+’.

Here is S& P’s verdict (text in bold by

 «The downgrade reflects our view that Tsesnabank is currently facing liquidity pressures, driven by the outflow of clients' funds at the end of August, that it compensated with Kazakhstani tenge (KZT) 150 billion (about 400 $ million) from an emergency funding from National Bank of Kazakhstan (NBK). Although the bank has announced that the loan was partially repaid ahead of the schedule
and will be fully repaid in the near future, we believe that the bank’s
liquidity position has structurally deteriorated and is now weaker than peer
banks' in Kazakhstan.
We are therefore revising our liquidity assessment
downward to moderate from adequate. We have also revised our assessment of the
bank’s stand-alone credit profile (SACP) to 'b-' from 'b'.

We consider the current level of liquidity makes the bank vulnerable to 
negative market sentiments. Over the first seven months of 2018, the bank’s
cash and interbank placements drop to KZT81 billion from KZT135 billion, which
we view as substantial deterioration.
Broad liquid assets covered short-term
wholesale funding by 1,3x as of June 30, 2018.

We also consider that it will be increasingly difficult for Tsesnabank to 
revert negative trends in profitability and asset quality without additional
support from the owners or from the government. We see that the pressure on 
the bank’s asset quality has increased due to the recent tenge depreciation
and the high proportion of foreign-currency denominated loans in its loan book
(around 48%).
At the same, we note that the share of foreign-currency loans
has significantly decreased over the past two years (from 67% at end-2016).

Another indication of portfolio quality deterioration is the reduction in 
interest income received in cash. The figure dropped to 67% for the first half
of 2018 from 68% in 2017 and 83% the year before. We believe that the bank
will need to create additional provisions that will put pressure on its

Thus, in just ten days, Tsesnabank had turned from a sold and reliable financial institute that enjoys the evident governmental support (recall the 100 bln tenge of the state aid given to the bank in 2017) to a problem bank that must urgently borrow money from the Regulator in order to fulfill its obligations to the clients and fated to fight for its honor.

Judging by the bank’s official press-releases and the publications in the Kazakhstan press, it was the withdrawal of the state companies’ deposits that triggered Tsesnabank’s financial decline. New bank’s Chairman Ulf Volurka confirms this fact in his interview.

Here are some quotes (text in bold by

«Let me explain the situation as clearly as I can. As you probably know, the issue of reducing the state companies’ deposit volume in regulated banks has now been discussed for quite some time. In July-August 2018, some of the bank’s major clients from the quasi-governmental sector requested to withdraw a significant part of their deposits. To fulfill its obligations, Tsesnabank borrowed a short-term loan from the National Bank on commercial terms. Our bank has already paid the main part of this loan with its own funds. It is the usual practice in such situations used by commercial banks to obtain additional liquidity in a timely fashion. It is important to underscore that only those banks that fulfill the Regulator’s prudential norms can receive such loans from the National Bank.

However, this story raises one question that concerns us. How did the confidential business information about the loan leak from an anonymous source and then was released to the public presenting a clearly incorrect interpretation of what happened? And then, there were some provocative mailouts, commentaries on the social media that clearly aimed to ignite panic among the bank’s clients».

«As I have already pointed out, the bank had been under a serious information pressure which ignited artificial frenzy in certain regions and cities. The number of early deposit withdrawal requests increased dramatically. As you know, such actions can destabilize operations of any bank. Unfortunately, such situations are not uncommon on the Kazakhstan market. Other financial organizations have encountered such situations, too. As I recall, there had been the same find of attacks in Kazkom, the bank where I served as the Chairman».

We believe Adilbek Dzhaksybekov’s sudden retirement (a year ago, Nursultan Nazarbayev allowed him to remain in state service for another five years, till 2022) and the problems of Tsesnabank are tightly connected with one another. The only question is which came first — the President’s decision to release the Head of his Administration from his duties or the problems of Tsesnabank that had started after the large-scale withdrawal of the governmental and the quasi-governmental companies’ deposits.

If what came first was Nazarbayev’s decision, then it looks like the inevitable in such cases leak of the information from Akorda let the heads of the governmental and quasi-governmental structures that, previously, had to operate with their eye to one of the most influential people in the country and keep their deposits in the bank he controlled use the shift in the power balance and move their funds from Tsesnabank to other financial institutes that were more convenient for them.

If it was Tsesnabank’s problems with the deposits withdrawals, then it is possible that they had been instigated by somebody in order to either force Nazarbayev to fire Dzhaksybekov or to force Dzhaksybekov to ask for retirement. Note that the role of the «somebody» may have been performed by both Dzgaksybekov’s opponents as well as by his allies. Nothing personal, just business. 

We even allow for the possibility that a certain deal had been made. As a result of this deal, Dzhaksybekov, Sr. agreed to an early retirement or asked for it himself in exchange for Akorda’s support of Tsesnabank. The fact that something like this is possible can indirectly be confirmed by the Government’s and the National Bank’s immediate announcement of the intentions to refinance the NBK’s gigantic 450 bln tenge loans albeit under the specious pretext of aiding Kazakhstan’s agricultural sector.

Whatever the backstory of the events inside and around Tsesnabank, their political outcome is evident — yet another President’s closest ally is out of the picture and, therefore, without chances of becoming Nazarbayev’s successor as the Head of the state.


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