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Umut Shayakhmetova: We cannot rule out further recession in certain banks

29 Мая 2017 Almaty. 29 May. KazTAG - Sergey Zelepuhin. Over the past 10 years since the beginning of the global financial crisis, most of the problems of the banking sector in Kazakhstan have remained unresolved, which stemmed from the crisis. Chairwoman of the board of Halyk Bank Umut Shayakhmetova told us about the prospects of the banking sector and possible unpleasant surprises.

- Umut Bolatkhanovna, the situation in the banking sector has been difficult. Some banks defaulted, your bank initiated negotiations on the acquisition of the controlling stake in Kazkom, some second tier banks faced the problem of shortage of capital. Should we expect even worse deterioration in the situation in individual banks? How likely are the new defaults?

- Yes, the situation in some banks may worsen even more. Especially it concerns average and small banks. But default is an extreme measure. First, I think the banks will try to consolidate. And we see that two more banks besides Tsesnabank and Bank CenterCredit, Tengri bank and Capital bank, are going to consolidate.
The trend towards consolidation is conditioned by aspiration of banks to improve their capitalization and financial condition. It is always easier to survive together.

- And how do you assess the measures of the regulator for the banks' rehabilitation, in particular, for capitalization?

- We have not seen anything concrete yet. Discussions are underway. Moreover, various mechanisms are being discussed, including the provision of subordinated loans. You probably heard that the regulator promises to provide two tenge per each tenge invested by shareholders. But so far no concrete decision has been taken. And it is not known which banks will participate (in the rehabilitation programs- KazTAG).

- But it is clear that the state, speaking of the willingness to provide support, is trying to encourage the shareholders to participate more actively in the capitalization of banks. Is it a kind of public-private partnership within the banking sector?

- The proposed tools suggest that now the state will bear greater responsibility. If the National Bank for a stake in the capital decides to prove subordinated loans or buy privileged shares of banks, the regulator will have more responsibility for their management. Probably, officials will be introduced to the board of these banks, which will inevitably lead to difficulties in making commercial decisions and carrying out risky operations.
But if the measures developed by the regulator are directed to help consolidation processes and gradually rehabilitate the banks without any sharp movements today, this will be the right decision. Although in the long term such measures are hardly effective.

- Don’t  you think that many problems of the banking sector had to be solved much earlier? After all, 10 years after the beginning of the global financial crisis most of the current problems of banks are still unresolved?

- Over the years since the crisis began, we have seen several chairmen of the National Bank. Of course, it is always easier to discourse with hindsight, but still, probably, it was necessary to act more quickly.

- Russia and Saudi Arabia have agreed to extend the agreement on the oil production cut. Oil prices immediately responded with growth. It is clear that this creates a macroeconomic basis for further reduction of the base rate by the National Bank. And this, in turn, should contribute to the growth of bank lending. What prospects for lending do you see this year?

- In addition to high oil prices, Kazakhstan needs structural reforms: privatization, reduction of the state's share in the economy, liberalization of the legislative base, etc. Only rising oil prices will not save us- the economy will still be limp.
As for lending, the loan portfolio of banks as a whole across the sector will not grow very much. Perhaps there will be zero growth or even decline. Some banks have a serious liquidity problem. I.e, the problem of  lack of liquidity still exists.
Halyk Bank has excess liquidity, but if you look at the sector, the situation with this indicator is not very bright. Therefore, all this will be a deterrent factor for growth of the loan portfolio of the entire banking system this year.

- In addition to the problems with liquidity and capital deficit at the end of last year a very dangerous trend emerged. It is about the outflow of deposits from banks. What are your expectations, how will the deposit base of the banking sector behave in the future?

- The deposits of individuals continue to grow in absolute terms, especially if you do not take into account the revaluation of deposits, taking into account the strengthening of tenge. And I think that this trend will continue, because not many individuals have the investment tools, with the exception of real estate.
Therefore, I think that people will seek to save money, especially as there has been growth of salaries in the private and public sectors.
The situation is different in the corporate sector. For corporate deposits this year decline is possible, but mainly due to the contributions of the national companies, as they have large amounts of repayment of foreign borrowings. I mean "KazMunayGas", "Kazakhstan Temir Zholy", KEGOC.

- That is, the assets of the banking sector will continue to decrease?

- In case of the Kazkom deal (if Halyk Bank acquires  the controlling shareholding of KKB - KazTAG), then the banking sector will narrow, because bad loans will be written off (KKB - KazTAG). Therefore, the total assets of the banking sector will shrink.

- Thanks for the interview!