Emerging Markets, Kazakhstan, Money - Fri May 18, 2012

BTA insists bailout will be second time lucky

Top official at Kazakhstan’s ailing bank BTA has promised its second bailout will be its last.

BTA, the troubled lender that once bestrode Kazakhstan’s banking sector, has promised that a second restructuring will be its last. The bank is being bailed out to the tune of $12 billion – much to the anger of local rivals.

“I don’t think it’s appropriate to assume that BTA will need any further restructuring of its debt after we finish the second restructuring,” Askhat Beisenbayev, first deputy chairman of BTA’s management board told Emerging Markets, in the bank’s first major interview in six months.

“What we are trying to achieve is to create a prudent structure, ending up with a level of debt that’s supportable by the bank. Providing we achieve this goal, we believe we can turn BTA into a proper working bank again.”

Once the second bailout is complete, Samruk Kazyna, headed by Umirzak Shukeyev, the Kazakh sovereign wealth fund will seek to sell its 81.5% stake in BTA to a private-sector rival. “That is what we have heard, and it’s genuinely a consideration,” said Beisenbayev.

He added that the second bailout was expected to be finalized by the end of May. That deadline may be extended, as BTA’s board fights to repatriate billions of dollars of assets allegedly appropriated between 2005 and 2009 by former chairman Mukhtar Ablyazov, currently being sued by the bank in London’s High Court.

We originally aimed to complete the current, second round of restructuring by the end of May,” Beisimbayev said. “But there is a certain risk that the beginning of the second round of restructuring may be delayed until, and perhaps beyond, the end of June for half a month or so.

But BTA’s ongoing special treatment by government officials – the lender is, after all, essentially bankrupt – has caused resentment among rival lenders in Kazakhstan.

Umut Shayakhmetova, chief executive of Kazakhstan’s largest lender, Halyk Savings Bank, said the government should scrap a second bailout and simply let BTA fail.

“A horrible end is better than horror without end,” she said. “The question is whether it’s appropriate to spend $12 billion to support BTA, which isn’t now a systemically important bank.”

Guram Andronikashvili, chairman of the management board at Almaty-based Metrocombank, echoed that. “After the first restructuring, it took a long time for foreign investors to come back to the country and work with Kazakh banks again,” he told Emerging Markets.

“Now we have another restructuring, which means more talk about BTA, so the situation is not great. Though many Kazakh banks are fine, this produces a negative story.”

BTA’s debacle has made European lenders, already retrenching back to their core markets, wary of opening new offices, even in a country whose economy is growing by around 5% a year.

Royal Bank of Scotland sold its retail division after the financial crisis, while Unicredit, several market sources say, is desperate to unwind its position in troubled ATF Bank.

In the mid-2000s foreign banks were queuing up to enter Kazakhstan but now, when one retrenches, or leaves entirely, few seem keen to take their place. “There are no foreign banks looking to come into the country,” says the head of a leading Kazakh lender. “Whoever is here will remain here, but don’t expect any newcomers any time soon.”

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