Samruk-Kazyna plans to acquire up to 25% in Alliance Bank, BTA Bank, Narodny Bank and Kazkommertsbank, advisor to Kazakhstan prime minister says

Samruk-Kazyna, a Kazakhstan state-owned fund, is planning to acquire up to 25% of the ordinary voting shares in the four largest banks in Kazakhstan, said Alexander Mirtchev, one of the directors of Kazyna Fund and advisor to the prime minister of Kazakhstan.

In an interview with this news service, Mirtchev said these banks include Alliance Bank, BTA Bank, Narodny Bank and Kazkommertsbank.

The Kazakhstan government is planning to invest USD 4bn for the above-mentioned stakes in order to guarantee the banks' liquidity. Mirtchev noted that it is not the nationalization of the banks, because the government is only offering to buy stakes in banks and it is up to the banks to accept or decline the investment in return for stakes. Mirtchev noted that this financial package should ensure the stability of the Kazakhstan financial system by propping up the banks for the duration of the crisis. After the situation stabilizes, the government will go back to market measures on market terms, Mirtchev added.

In return, the government will require the banks' shareholders to make parallel investments in the banks, either by using their own funds or disposing of assets. The banks will also be required to redirect part of the funds received from Samruk-Kazyna towards reducing the rates on loans and mortgages they have already provided, so that the rates are between 10.5% and 12.5%. This reduction will apply to owners of a single property where they live that does not exceed 120 square metres. The average rate on mortgages now stands at around 18%.

In order to ensure that the funds are spent exactly for the purposes required by the government, it is establishing a special enforcement and monitoring body to supervise the use of the funding by the banks.

The government, together with the National Bank of Kazakhstan [NBK], will also inject an additional USD 5bn from national pension funds as liquidity support in the financial sector.

Mirtchev added that the financial sector’s malaise cannot be realistically resolved just on the basis of government funding, and that the market and private investors would need to be involved.

He said he expects a raft of mergers in the banking sector, adding the government would welcome foreign players wanting to invest in the country’s banking system. He noted that the support package to the banking system should make it more attractive for external investors and foreign capital, which will provide the conditions to support the reallocation of funds according to the needs of the market.

8 December 2008