Although eager to be accepted back into the global trade finance market, BTA Bank will inevitably have some waiting to do. In the meantime, it’s focusing its efforts on supporting the domestic Kazakh economy, reports Rebecca Spong.

Memories in banking tend to be short. But in the case of BTA, they are not that short. Few are going to forget in a hurry the painful process of restructuring BTA Bank’s US$12.2bn-worth of debt after the bank defaulted in early 2009.

The trade finance market in particular will still vividly recall the panic that ensued when it was thought in mid-2009 that their trade debt might not be paid back in full and would be subject to the same haircuts as the other debt classes such as bonds.
This almost brought an end to the widely-held belief that trade finance is a safe asset class usually paid back in entirety in a country default situation.

Ultimately, and after much lobbying, the Kazakh bank drew up a number of different re-payment options, and bundled together approximately US$700mn-worth of debt that they deemed to be “true” trade finance into a revolving credit facility, and agreed to pay this debt back in full by the end of 2012. The bank did owe a total of US$3.3bn of trade finance and export credit agency debt, and the remaining trade debt will also be paid back, although with some haircuts.

It is not easy for any Kazakh banks to go into foreign markets to offer trade finance services.”

Now eager to repair its reputation, BTA announced in early April that it paid the first instalment of US$175mn of the US$700mn revolving committed trade finance facility. Under its repayment schedule, a further payment will be made in September, and the final two payments made in March and September 2012 respectively.

Speaking to GTR, Timur Sabyrbayev, managing director of BTA Bank, notes that now the first instalment is repaid, the bank is able to conduct new business.

“We can immediately use our renewed credit line in order to attract new customers or provide trade finance services to current customers which will help us regain our position in the trade finance market,” he notes.

New export schemes

BTA also revealed in February that it has supported US$2.5mn of trade finance deals under a new government-backed export finance scheme aimed at supporting the Kazakh manufacturing sector, launched in December 2010.

Under the joint programme between BTA and the government-owned insurance entity KazExportGarant, the bank has closed a number of transactions with Kazakh exporters of manufactured goods.

The programme works whereby BTA confirms and finances letters of credit issued by banks in countries such as Tajikistan and Belarus. The financing is provided by KazExportGarant via BTA. The Kazakh exporter benefits by being able to receive payment for its goods as soon as it presents shipping documents to BTA.

“We have already done several transactions under this programme – for instance providing financing for the export of wheat flour from Kazakhstan to Tajikistan. We are trying to promote this line among our customer base and encourage more companies to export,” explains Sabyrbayev.

The aim of the programme is part of a wider government initiative to support the diversification of the Kazakh economy away from oil and other natural resources.

“One of the strategic goals of this programme is to bring the share of manufacturing industry goods up to 40%,” notes Sabyrbayev.

It is also a means by which BTA can ease itself back into the trade finance market, safe in the knowledge that KazExpoGarant is providing both the insurance and financing needed for the transactions.

The main source of funding for the trade finance programme comes from conditional deposits allocated by KazExpoGrant into BTA. The deals all tend to be relatively small and short-term, with the biggest deals no larger than KZT150mn (US$1mn), and for a tenor of up to 12 months. A total of KZT3bn has been allocated from the Kazakh state budget for this programme.

“This scheme is of great importance to BTA, and via this programme we are trying to return to the trade finance market,” asserts Sabyrbayev.

Staying at home

But BTA is being realistic about the success of any efforts to return to the international trade finance markets.
The bank is set to focus on improving access to trade finance for Kazakh exporters, and will lie relatively low until market conditions in Europe and elsewhere improve, and perhaps memories start to dim.

It has also been stipulated in a four-year government plan that the bank must work to help Kazakh exporters, by providing attractive trade finance deals that encourage foreign importers to buy Kazakh goods.

Sabyrbayev notes to GTR that the balance of the bank’s portfolio will shift in the coming years, and by 2014 the corporate sector will account for 50% of the portfolio with SME business taking 30% and retail taking 20%.

He adds: “Due to the current situation in Kazakhstan, it is not easy for any Kazakh banks to go into foreign markets to offer trade finance services so that’s why we are focusing on the domestic Kazakh economy,” Sabyrbaev explains.

This Kazakh market focus is only in terms of the bank’s trade finance clients, but under the KazExportGarant programme, CIS banks are also within the bank’s target region.

Following Sabyrbayev’s interview with GTR, BTA announced it was to close its Ukraine branch.

International acceptance

In the first quarter of 2011, BTA has made a lot positive noises, issuing statements about debt repayment and renewed efforts to help Kazakh exporters. The bank has reportedly seen strong profits for both the first quarter of 2011 and fourth quarter of last year.

Once the restructuring was completed last year, ratings agencies also looked more positively on the bank, with Fitch Ratings upgrading the bank’s long-term foreign currency issuer default ratings to B– with stable outlook.

However, the bank is perhaps not yet experiencing the same level of optimism that other Kazakh banks might dare to enjoy.
Halyk Bank, for instance, relied on a liquidity injection of KZT60bn from the sovereign wealth fund Samruk-Kazyna, giving the fund a 20% stake in the bank.

The bank then announced in March that it will buy back the common shares from Samruk-Kazyna. The bank has also already paid back money provided by the fund to lend to other businesses, and Halyk forecasts a 10% increase in its loan portfolio.
Not only that, but Halyk issued a 10-year US$500mn Eurobond in February, the first public Eurobond from a commercial Kazakhstan bank since May 2008.

Eurasianbank and Temirbank are two other Kazakh banks that have spoken out optimistically about increasing their loan portfolios in 2011.

The Samruk-Kazyna question

One factor potentially putting off investors from conducting any future business with BTA is the issue of Samruk-Kazyna’s involvement in the bank.

Speaking to GTR in September last year, Kasia Zatorska, economist, Europe, at country risk service at D&B, explained that the government must reduce its level of involvement in the Kazakh banking system.

“If the state continues helping the banks then it is not very good for transparency. Foreign investors will see this as a negative as it opens the possibility for corruption,” she noted.

Sabyrbayev asserts that the sovereign wealth fund’s stake in BTA “will withdraw when the markets fully recover”.
He adds that he understands the foreign market’s reluctance, noting that the banks and investors are inevitably watching and waiting to see how the Kazakh economy and government develop over the coming months.

“I hear that our former investors are seriously considering returning to Kazakhstan but they need to know the strategy of Samruk-Kazyna,” he asserts. GTR


Kazakhstan prepares for bank sales


Kazakhstan’s government is ready to sell its nationalised banks and hopes to attract international investors in the process, its minister of economic development and trade says.

Speaking to EMEA Finance (GTR’s sister publication) at the 4th Astana Economic Forum, Kairat Kelimbetov said the government plans a privatisation programme worth “billions of dollars”, principally undertaken through initial public offerings. As well as state-owned oil and gas and telecoms companies, banks are on the block.

Following bail-outs during the financial crisis, the government now owns three banks – BTA, Alliance Bank and Temirbank – as well as holding stakes in others. But as these institutions have restructured debts and cleaned their balance sheets, state involvement is lessening. In March, local lender Halyk Bank bought back KZT27bn (US$185mn) in common shares held by Samruk-Kazyna, the state’s national welfare fund.

“We are ready to sell all of the shares which belong to the government,” said Kelimbetov regarding the privatisation of the banks. Asked if stakes would be offered on the stock market or touted to private buyers given talk of an impending deal between Alliance and the European Bank for Reconstruction and Development (EBRD), he added: “We are first of all looking for investors like the EBRD in banks like Alliance and Temir.”