Kazkom: the cat is out of the bag

Top-Managers of Kazkommetsbank put an end to the practice of National bank of RK on control and surveillance over the financial market and banking sector, in the press release on activity of the financial institution for last year.

On March 20 2018 AO Kazkommertsbank announced the results of its activity, based on the data of consolidated financial accounting in accordance with MSFO for 2017. Corresponding press-release, published on the website of the financial institution, starts with a comment of the chairman of the board of the bank Ulf Vokurka:

“The Y2017 negative financial result of Kazkommertsbank is the technical reflection of the losses, which occurred during the previous reporting periods. As a result of the major shareholder replacement and joining to the largest financial group of the country — Kazkommertsbank experienced the record breaking capital inflows in 2H2017, which enabled it to resume its activities in the bank market. This allowed us to close the period from July 5, 2017 through December 31, 2017 with the revenue of KZT 16,6 bn. In addition, Qazkom is striving to join Halyk Bank its Parent Bank in 2H2018 in order to continue development of its leading products and high-tech banking services, to which our customers got used”.

Further on in the press release of AO Kazkommertsbank, main goal of which is seemingly to stop the further outflow of clients in anticipation of its acquisition by AO People’s Bank of Kazakhstan, there is data that puts an end to the practice of National bank of RK on control and surveillance over the financial market and banking sector. We will confirm out conclusion with facts.

From the aforementioned document it follows that (underlining done by us):

Net loss in the amount of KZT 376,1 bn., which appeared pursuant to 12M2017 results, was caused by impairment of the number of loans and assets for sale. The new Bank management, which has started its work since July 4, 2017, re-estimated the amounts and terms of the expected cash flows on these loans and assets, investment plans on current and incomplete projects, in connection whereof the loss was acknowledged.

The Bank’s 12M2017 assets have decreased from KZT 4 865,8 bn. down to KZT 3 574,4 bn., due to decrease of the loan portfolio and deposits of the financial institutions by KZT 433 bn. and at the cost of cutting the funds of other customers by KZT 433 bn. down to KZT 2 483 bn.

Assets available for sale have increased up to KZT 1 704,5 bn. from KZT 19,7 bn.as of December 31, 2016 due to the acquired securities of the Ministry of Finance of Kazakhstan in the amount of KZT 1 trn., and also re-classifying of the entire portfolio of the securities to be withheld prior to repayment, and including thereof to the portfolio of securities available for sale. The balance value of the securities re-classified as of the re-classification date totaled KZT 219 bn.

The ratio of overdue loans exceeding 90 days, which were estimated according to the policies of the National Bank of Kazakhstan, has increased up to 29,59% as at December 31, 2017 vs. 6,32% as at December 31, 2016. However, thank to activities related to rehabilitation of the Bank’s loan portfolio in 2H2017, the level of NPL90+ has decreased from 40,28% as at October 1, 2017 down to 29,59% as at Dec 31, 2017.

Customer funds have decreased down to KZT 2 482,6 bn. or by 14,8% vs. KZT 2 915,4 bn. as at December 31, 2016, which is also based on acknowledgement of the fair value of the Bank’s new financial liabilities to the Fund, which is attracted at the rate of 0,1% till July 1, 2037. Loans and funds of the banks and other financial institutions have decreased down to KZT 58,5 bn. or by 88,1% vs. KZT 491,5 bn. as at December 31, 2016 of full repayment of the funds attracted under the REPO instruments, and also repayment of the Bank liabilities to the National Bank of Kazakhstan on the loan in the amount up to KZT 401 bn., which was attracted by Bank under the stabilization measures related to maintaining of the Bank’s current liquidity.

Equity capital as at December 31, 2017 totaled KZT 268,1 bn. The Bank’s equity capital has been increased by KZT 250,2 bn. in 2H2017 subject to buyback of the Bank shares by its new shareholders — JSC Halyk Bank of Kazakhstan and JSC ALMEX Holding Group, which collectively owned 99,77% of common shares of JSC Kazkommertsbank as at December 31, 2017.

The conclusion that logically follows from Kazkommertsbank’s press-release: financial institution was de-facto bankrupt, new shareholders and new management that came on July 4th 2017 and saved it from a crash with the help of National Bank, now continue cleaning mess from former shareholders with success.

We don’t see a need to contest this position, but want to bring to your attention the low-quality of previous financial accounting of AO Kazkommertsbank and the fact that the regulator for some reason didn’t take any measures in bringing it up to speed with current state of affairs. In proving this let us bring up the dynamics of three reporting indicators for 2017: profits after taxation, volume and share of liabilities overdue longer than 90 days in the overall amount of given loans. These can be found at the website of the bank and at the website of the National Bank of RK.

Based on results of the 1st quarter of 2017 AO Kazkommertsbank reported of profits after taxation in the amount of 36.5 bn tenge. Based on results of the first half year there was now a loss of 577.1 bn tenge. For the nine months of 2017 the loss was 362.7 bn tenge, for 12 months – 359.9 bn.

Volume of debt, ovedue longer than 90 days, has changed in the following way: as of Jan 1 2017 it was 234.3 bn tenge, as of Apr. 1 – 301 bn tenge, as of Jul 1 – 489.1 bn tenge, and as of Oct 1 – 570.9 bn tenge and as of Jan 1 this year – 473.7 bn tenge. Thus, share of this debt in overall loans was: 6.32%, 8.54%, 13.96%, 40.3 and 29.59%. Thus, the appearance in AO Kazkommertsbank on July 4 2017 of a new shareholder and management lead to a considerable worsening of the situation of this financial institution. At the same time it is obvious that it is useless to blame new administration in this, since they simply acknowledged the realities and put on paper what taken place, even if.

Thus, questions arise for which there are still no answers from the regulator: –

  • Why wasn’t this situation uncovered by the National Bank of RK earlier? And if they were uncovered, why then didn’t regulator react to them, and stayed silent? Thus, it cooperated in the deceit of the market and clients?

Read also:  The End of KazkommertsbankWhy Should One Not Trust Bankers? , How to Eat Up Kazkom without Making a Mess, Kazkom Bank Is Sold but Questions Remain


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