Why Should One Not Trust Bankers?

A couple of days ago, Kapital.kz, in their article with a topical title “Kazkom Ex-Management Was Too Optimistic” presented Kazkom Chairman Ulf Vokurka’s standpoint on the current situation in the financial organization. The top-manager’s attempt to inconspicuously shift the responsibility onto his predecessors made us reflect on that and we decided to recreate the course of the events.

 Here is Vakurka’s position according to Kapital.kz (bolding – ours).

“When the thorough examination of Kazkom began, in other words the due diligence on the part of Halyk Bank, the latter examined about 80% of our loan portfolio. Halyk Bank saw a lot during the monitoring but not everything as it turns out. The former management of Kazkom was too optimistic as far as the bank’s state of affairs was concerned, in particularly, we are talking about the small and medium enterprise loan portfolio. Therefore, as of October 1, 2017, the bank had 48.1% problem assets with more than 90 days overdue. So, it turns out that, in respect to the NPL index, our bank did not meet the National Bank prudential requirements”.

After this the de-facto bone-rattling statement, Kazkommertsbank Chairman tried to console the clients and the depositors, “Therefore, we, together with Halyk Bank, have contacted the National Bank and reached and agreement that, before the end of 2018, we will fulfill the NPL requirement and will raise it to no less than 10%. We are working on it”.

At the same time, Vokurka informed the public that the new management of Kazkommertsbank had already achieved certain successes, “But, from July to September, the bank earned about 16 bln tenge. It gives us reason to anticipate that, in the future, we will continue working in this format as an independent full-service bank, as of a member of the Halyk Group.

Further in the article, Kapital.kz presents the opinion of Halyk Bank Chairperson Umut Shayakhmetova as to the future of Kazkom.

Here is a quote (bolding – ours).

For us, the first priority is to decrease the NPL level. There are several ways to do it – through moving the toxic loans to the dubious assets management company and writing them off. I think a very big portion of the loans must be written off the balance. We have managed to create additional provisions for the bad loans. We will improve Kazkom loan portfolio by almost 50%, the old loans will be collectible, too, although the collectability will not be as high. By the way, Kazkom now has a relatively big capital which gives certain possibilities for creating the additional provisions”.

Thus, Umut Shayakhmetova and Ulf Vokurka, on the one hand, had once again informed “the city and the world” that Kazkommertsbank’s state of affairs was still unsatisfactory but, on the other hand, they had done everything not to frighten the financial market and the clients of both Halyk Bank and Kazkom with the size and the depth of the latter’s problems.

We will let ourselves not to believe the top-managers. Earlier, we had already noted that, in accordance with the Kazakhstan practices, the new owners and managers of a business obtained not on arm’s length terms (for instance, due to to the pressure of the authorities) are directly interested in blowing up the size of the problem in order to, first, absolve themselves of the responsibility if something goes not as planned and, second, to prepare the thorns on which their predecessors will fall if the scapegoats are to be found.

Therefore, it does make sense to go back to the question that both the previous Kazkom owners – Kenes Rakishev and Nurzhan Subkhanberdin – and the new ones – Dinara and Timur Kulibayevs and their allies – are desperately trying to avoid. Here it is: was the sale of Kazkom to Halyk Bank a rescue operation or was it simply a present from the head of the Kazakhstan state to his closest relatives, namely his second daughter and her husband?

There is no precise and meaningful answer and, given the current political system and practices in Kazakhstan, we say that such an answer cannot even exist. However, the figures we have found in the Kazkom financial reports indicate, albeit indirectly, that even if it was Kenes Rakishev himself who decided to purchase Kazkommertsbank in addition to BTA Bank, his agreeing to sell Kazkom to Halyk Bank for 1 tenge was not voluntary. Let us try and prove it.

Earlier, the Kazakhstan media had already noted that, just in 10 months, Kazkommertsbank depositors had withdrawn more than 940 bln tenge. For instance, this is what Tengrinews.kz wrote on the subject (bolding – ours).

“More than 900 bln tenge had been transferred out of Qazkom by the depositors for the period of 10 months. This data is presented on the National Bank website. As of December 1, 2016, the volume of the deposits of the judicial bodies in the bank amounted to 2.083 trillion tenge. By January 1, there had been a dramatic decrease – to 1.47 trillion tenge. Starting from April, 2017, when the deposits of the judicial bodies amounted to 1.41 trillion tenge, the measure of the indicator has been declining. In July, it amounted to 1.37 trillion tenge, in August – 1.299 trillion tenge, in September – 1.295 trillion tenge, in October – 1.237 trillion tenge. Therefore, from December, 2016 to October 1, 2017, the volume of the judicial bodies’ deposits in the bank had decreased by 845 bln tenge. The volume of the physical bodies’ deposits, for the given period, also decreased from 1.474 trillion tenge to 1.376 trillion temge – by 94.3 blm tenge. Overall, for the period from December 1, 2016 to October 1, 2017, the Qazkom depositors had withdrawn about 940 bln tenge”.

This quote demonstrates clearly that the main part of the withrdawal happened in December, 2016 (613 bln tenge). However, in the materials published in the Kazakhstan press, there is no mention of the agencies that would withdraw such large amounts from the bank. In our opinion, it is unlikely that the reason for such a catastrophic exodus of the judicial bodies’ deposits lies in some talks on the market – such behavior is more characteristic of the physical bodies and the small judicial bodies.

We suspect that a larger portion of the 613 bln tenge that left Kazkom in December 2016, belonged to the state and the quasi-state agencies. And the decision on the withdrawal was made on the direct order of the authorities, and of the highest level, at that.

The bank’s financial report’s chapter “Clients’ Assets” confirms our suspicion. According to the official data, as of September 30, 2016, the total volume of the clients’ funds amounted to 3472 bln tenge including the funds of the “Social Organizations and Unions” – 417 bln. And as of December 31, 2016, the amount had already declined to 2915 bln and 7 bln, respectively. Therefore, for the period of the fourth quarter of 2016, the total volume of money withdrawal of the Kazkom clients amounted to 557 bln of which 410 bln belonged to the “Social Organizations and Unions”.

We cannot say exactly which Kazakhstan “Social Organizations and Unions” have such gigantic sums at their disposal, the Unified Accumulative Pension Fund seems to be the only possibility. Therefore, it looks like it was the UAPF that, at the end of 2016, took its billions away from Kazkom. Why? That is the question. Perhaps to pressurize the then Kazkom majority shareholder Kenes Rakishev?

Obviously, neither Kenes Rakishev nor the Kazkom top-managers controlled by him could compensate for the withdrawal of 613 bln tenge that had taken place in just a month. Something like that would only be possible via attracting a big strategic investor, and only a foreign one, at that, since the private agencies in Kazakhstan (that are, in some ways, independent from Akorda) have no such funds at their disposal.

And even though the National Bank did give 401 bln tenge to Kazkom, these funds had to be returned in March 2017. Thus, Rakishev fell into the trap from which there was no other escape except throwing himself on the mercy of the conqueror.

Then, the events proceeded as follows: the NBK, either reacting to the 613 bln withdrawal and the rapid decline of the financial situation in the bank to the catastrophic level or trying to pressurize Rakishev even more, informs the market about the bank’s problems. To do so, on December 20, it issues a statement (bolding – ours).

” The NBK Board of Directors has earlier decided to provide Kazkommertsbank a short-term financing in the amount of 400.8 bln tenge taking into consideration the systemic importance of the bank. The loan is given to ensure the additional liquidity cushion to satisfy the bank’s obligations to the clients”.

By the looks of it, it was this information that triggered the further outflow of the funds from Kazkom the dynamics of which is described by Tengrinews.kz. However, by then, it already did not matter since, having found himself caught in a dilemma (or rather the total absence of it), Rakishev acceded to the proposal made to him. We will not say who made the proposal since we have no proof of it, but it looks like Imangali Tasmagambetov’s son-in-law was in no position to refuse the offer.

As a result, already on January 24, 2017, the NBK issued a new statement in which it confirmed the start of the negotiations between Halyk Bank and Kazkommertsbank. In the end, to rescue Kazkom, the state allocated 2.4 trillion tenge through BTA Bank. Kazkom was given to Nursultan Nazarbayev’s second daughter and her husband – Dinara and Timur Kulibayevs.


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