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BTA Bank’s Loss Aggravated by $423 Million

Monday 30 July 2012

(Bloomberg) – For the second time in as many years, BTA Bank increased its year-to-date loss last month in the course of debt restructuration plans.

The net loss widened by 63.5 billion tenge (US $423 million) from May to 1.371 trillion tenge in the year through June, the central bank’s financial oversight committee said in a monthly report on its website. Liabilities of 2.66 trillion tenge exceeded assets by 1.21 trillion tenge, according to the Almaty- based regulator.

Kazakhstan’s largest lender before defaulting on $12 billion of debt in 2009, BTA declared talks began last month on its proposed debt overhaul with the creditors’ steering committee after the state-owned lender failed to make an interest payment on its July 2018 dollar bonds in January. Now Kazakhstan’s third-largest lender by assets on July 16, BTA filed for creditor protection under Chapter 15 of the U.S. bankruptcy code for the second time in about two and a half years. At the time, the default enraged creditors who said BTA, backed by the oil-rich country’s $80 billion wealth fund Samruk-Kazyna, is unwilling rather than unable to pay.

The banking industry of the Republic of Kazakhstan (S&P rating: BBB+/Stable/A-2) has experienced a pronounced boom and bust cycle over the past decade. After several years of rapid expansion in the mid-2000s, the banking industry collapsed in 2008. Several large banking groups, including BTA Bank J.S.C. and Alliance Bank, defaulted soon after. Since then, the industry has shrunk and been restructured, with system-wide loans dropping to 39% of GDP in 2011 from 59% in 2007.

S&P believes that the Kazakhstan government has the capacity and willingness to support domestic banks with high and moderate systemic importance. It remains committed to BTA’s restoration and has publically stated that it would recapitalize BTA after agreeing the terms of debt restructuring. In the opinion of S&P, the government has decided to seek a second restructuring of BTA because the bank’s financial standing had materially deteriorated in 2011 and the level of its problem assets and operating expenses had been underestimated at the time of the first restructuring.

Six-month performance of Kazakhstan’s five largest lenders by assets

Bank

Assets

Loans

Provisions Outstanding

Profit/Loss

Halyk Bank

2,513.2

1,391.4

328.4

26.48

Kazkommertsbank

2,457.1

2,368.8

873.1

0.69

BTA Bank

1,443.8

2,069.9

1,775.0

-1,371.3

Bank Centercredit

1,057.7

832.4

134.6

1.04

ATF Bank

929.6

815.2

175.7

-2.88

Alliance Bank

546.5

554.5

248.5

-0.23

Temirbank

257.0

232.3

118.0

0.14

All 38 Banks

13,474.5

10,957.6

3,945.6

-1,310.58

This table shows the six-month performance of Kazakhstan’s five largest lenders by assets, along with seventh- ranked Alliance Bank and 13th-ranked Temirbank, and their position as of July 1. The data from the oversight committee are in billions of tenge.

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