Kazakhstan’s BTA Bank Loss Narrows 41% in First Half From 2010
Thursday 18 August 2011
(Blommberg, by Nariman Gizitdinov) – BTA Bank, Kazakhstan’s biggest lender before it defaulted in 2009, said its first-half net loss narrowed by 41% from a year earlier.
The bank had a loss of 48.4 billion tenge (US $331 million) compared with a loss of 85.5 billion tenge in the year-earlier period, the Almaty-based lender said in a statement published on the Kazakhstan Stock Exchange’s website today.
The figures are based on unaudited consolidated data calculated in accordance with international financial reporting standards, according to the statement.
Mukhtar Ablyazov was Chairman of the Board of directors of BTA Bank from 2005 to 2009, and was responsible for leading BTA Bank’s strategy during this time. BTA Bank pursued an ambitious expansionist strategy during the crisis, which was achieved through exceptionally high loan growth, unaccompanied by an equivalent growth in deposits that resulted in a massive funding gap and latent credit risks. The rapid growth warranted a warning from Kazakhstan’s financial regulatory agency for BTA Bank to increase its reserves.
The bank’s lending policies under Ablyazov destabilized BTA Bank’s balance sheet and necessitated an effective takeover in 2009 by Kazakhstan’s National Welfare Fund, Samruk-Kazyna. Shortly after, Ablyazov and other former members of management fled Kazakhstan.
In 2009 BTA Bank commenced civil proceedings against Ablyazov and the High Court in London has found sufficient cause to freeze Ablyazov’s assets. A report from Kazakhstan’s financial regulatory agency indicated Ablyazov established regional committees to approve loans while at the same time chairing these committees, a process which breached corporate management principles.
As a result of its aggressive lending and non-transparent practices, BTA Bank had the highest percentage of bad loans of any other Kazakh bank in July 2009, accounting for 53.94% of all non-performing loans in Kazakhstan.
BTA Bank reached a compromise with its bondholders to issue cash and new securities equal to approximately half of the $12.2 billion owed as part of its restructuring package. The package was equal to $7.8 billion, or 63% of the outstanding principal and interest. Creditors also received recovery notes, allowing them to profit from the sale of assets, and 15% of BTA’s equity. BTA set out to pay about $1 billion in cash to the creditors and issue $2.3 billion of senior debt and $797 million of subordinated debt under the restructuring agreement.
BTA Bank has lodged court proceedings against Ablyazov in the UK as part of its effort to recover assets. Reports now suggest British taxpayers could benefit from legal action being taken against Ablyazov over the alleged embezzlement of more than £1 billion. Royal Bank of Scotland, which is now 83%-owned by the UK Government after a succession of bailouts, is among the creditors which had to write off a total of $6.8 billion (£4.4 billion) lent to the Kazakh bank. If the legal action is successful, RBS and BTA’s other creditors will recoup part of their losses, according to the British expert leading the Kazakh bank’s asset recovery process.
BTA has been reported to be considering an asset sale to strategic investors after facing pressure from the Chairman of the National Bank of Kazakhstan, Grigory Marchenko. Marchenko has pushed for Kazakhstan’s state welfare fund, Samruk-Kazyna, to expedite the sale of majority stakes in banks that it acquired during the course of debt restructuring programs. Anvar Saidenov, who was appointed chief executive of BTA after the Kazakh National Welfare Fund agency Samruk-Kazyna took over, spoke of a possible sale back in 2009 as soon as liquidity increased to more acceptable levels.