The banking system of Kazakhstan

Face value of the issue $0.12 at the registration time was at KZT10.188.

 

On July 30, 2001 on the shareholders' meeting, decision on increasing the authorized capital up to KZT5 bln. has been made by shareholders of the bank. According to the decision the authorized capital of the bank is divided into 375 mln. common shares and 125 mln. preferred shares with no voting rights. And corresponding changes have been made to the charter of the bank. Bank's common shares were admitted to the official list of Kazakhstan Stock Exchange (KASE) on category "A" on October 16, 1997 (KKGB). The first trades took place on Oct 28, 1997. Preferred shares of the bank were admitted to the official list of KASE on category "A" on December 28, 2001. The first trades took place on January 8, 2002 (KKGBp). Ordinary shares ADR/GDR programs for the Bank's ordinary shares has been launched in 1997. Under the programs Bank distributed about 27% of its voting shares among international investors in the form of ADRs/GDRs, which allowed to raise Bank's equity over USD 50 million. Global Depository Receipts (GDR) of the bank are listed on London Stock Exchange and on the Market of international sales of Istanbul Stock Exchange and traded on over-the-counter (OTC) markets of Frankfurt and Berlin Stock Exchanges. GDR program for the Bank's preferred shares has been launched on 27 February 2002. The Bank of New York serves as the depository bank for the program. The program has been launched in the interests of the Bank's shareholders, who may exercise operations with the preferred shares on a global capital markets. The issue of 125,000,000 preferred non-voting shares with KZT10 face value was officially registered on 20 December 2001. The guaranteed dividend is set at USD 0.04. Kazakhstan Stock Exchange approved Preferred Shares for its official listing in "A" category on 27 December 2001. Here we can see the stake in authorized capital in percentage.

Shareholder, or nominal holder, location	Stake in authorized capital, %
Central Asian Investment Company (Almaty, Kazakhstan)	36.27
Nominal holders:
The Bank of New York (New York, USA)	26.99
Kazkommerts Securities OJSC (Almaty, Kazakhstan)	17.13
Central Depository of Securities CJSC (Almaty, Kazakhstan)	8.50
Halyk Bank of Kazakhstan OJSC (Almaty, Kazakhstan)	7.39
Others	3.72
TOTAL	100.00

 

In general the Bank pursues the policy of capitalizing most of its profit. Over the past few years, having the largest capital base in the sector, Kazkommertsbank was in the best position to benefit from the rapid growth of the Kazakh economy. However in the year 2000 shareholders decided to pay dividends in the amount of USD 10 mln. and in the form of international subordinated 5.5% notes due 2007.

Analysis of banks

In the last part we will give the comparative analyze of the three major banks of Kazakhstan (KKB, HSBK, BTA).

The assets’ dynamics of the KKB, HSBK, BTA.(in the mln of tenge) 

	KKB	HSBK	BTA
1/1/99	49.221	39.040	19.003
1/1/00	72.427	57.160	46.891
4/1/00	67.263	54.337	51.071
7/1/00	72.066	70.559	56.937
10/1/00	75.220	76.330	75.555
1/1/01	109.841	103.492	79.518
4/1/01	116.026	99.319	100.158
7/1/01	158.328	104.374	110.491
10/1/01	158.146	116.320	135.970

As we can see from the table above there is a rapid increase in the assets of all three banks. For example, in 01/01/99 KKB had assets equal to KZT49.221 mln but in the 10/01/01 it was KZT158.146 mln. First of all it happened because of increase in confidence of people to the bank. As the result there was increase in depository base of the bank from KZT27.936 mln in 01/01/99 to KZT96.608 in the 10/01/01. Also assets of BTA increased form KZT19.003 mln to KZT135.970 mln and deposits – from KZT9.618 mln to KZT95.191 mln during this period.

The deposits’ dynamics of the KKB, HSBK, BTA.(in the mln of tenge) 

	KKB	HSBK	BTA
1/1/99	27.936	29.684	9.618
1/1/00	24.507	45.597	25.520
4/1/00	24.014	41.816	28.767
7/1/00	31.350	53.806	34.977
10/1/00	35.160	59.950	45.498
1/1/01	52.290	77.929	45.926
4/1/01	58.095	78.578	60.747
7/1/01	84.945	76.254	60.291
10/1/01	96.608	90.974	95.191

Second reason is because of rise in credits of these banks. In the case of KKB credits grew from KZT36.877 mln in 01/01/99 to KZT110.957 mln in 10/01/01. And for BTA this growth was from KZT11.907 mln to KZT88.151 mln during this time. 

The credits’ dynamics of the KKB, HSBK, BTA.(in the mln of tenge) 

	KKB	HSBK	BTA
1/1/99	36.877	18.372	11.907
1/1/00	52.515	22.247	29.513
4/1/00	49.127	20.550	32.123
7/1/00	46.018	28.525	35.456
10/1/00	48.010	35.384	46.547
1/1/01	69.755	50.965	55.516
4/1/01	80.096	52.578	68.560
7/1/01	108.643	67.050	76.143
10/1/01	110.957	77.570	88.151

 

Thirdly it is because of increase in equity. During 1999 and 2001 there were three issues of shares in KKB. As the result equity rose from KZT8.488 mln in 01/01/99 to KZT17.426 mln in 10/01/01. In the case of BTA it was the growth from KZT4.363 mln to KZT12.848 mln.   

From all these tables we can see that there is a rapid growth in activities among all these banks and in all banking sector of Kazakhstan.

 

Conclusion

In our essay we took a brief review through the milestones of the history of development of banking sector and analyzed the main trends in improving it. Two laws were approved and a lot of amendments were inserted to approach the practice of banking and banking regulation to the international standards. Today we can see that banks are more and more involved in all financial sector products, including securities trading, insurance, and pension funds. From the experience of global financial crises in Southeast Asia and Russia the National Bank has recognized the main importance to exercise effective consolidation supervision. The National Bank of Kazakhstan now is responsible for “on-site” and “off-site” supervision with its Banking Supervision Department and a deposit insurance fund was created with the National Bank as the founder of the fund. As a result, there is a positive trend of the growth deposits showing the growth of confidence to banking sector. This regulation was adopted in November 1999. Then deposits of the individuals have grown on 66,7 %, including time deposits growth of 91,2 % and demand deposits growth of 27,4% and the market share of deposits by banks that are participants of deposit insurance system now relates to 92,7 %. Despite this fact, the level of trust remains insufficient. The large amount of financial resources still has not been attracted to the financial system. So banks need to borrow from international financial markets as a primary source of funding. As a result total banking assets, as a percentage of GDP remains at a low level of 20%. The rating of the Republic of Kazakhstan has also improved (long-term rating of BB-, short-term rating of A-). There are the affiliated banks of such worldwide known financial institutions as ABN AMRO Bank, Citibank and HSBC in the domestic market of bank services.  After all this changes, it is now possible to speak about sufficient stability of bank sector and wide prospects of its development.

 

Literature

1. The Financial Market Place by Cooper/Fraser, 3rd edition, 1990 – denoted as F&C (library)
2. “OECD 5 th conference on financial sector reform in the central asian countries, Azerbaijan and Mongolia”, Paris, 8-9 March 2001
3. web side www.kkb.kz
4. web side www.bta.kz
5. lecture notes “KZ banking system. History of development”, “General Information on the National Bank of Kazakhstan”