Baku, Azerbaijan, Aug. 17
By Azad Hasanli - Trend:
Banks in Kazakhstan will change their business models, the board chairman of Eurasian Bank JSC Pavel Loginov told Trend.
In recent years it has become obvious that business strategies built on attracting state money and redistributing them into contracts are no longer working, the chairman said.
"Kazakhstan's banking sector will continue consolidation processes started with Kazkommertsbank and Halyk Bank, as well as improving the sector through the Financial Sustainability Program," he added.
"Banks that took part in the "Program to improve the financial stability of the banking sector" are now presenting good results in clearing balances from bad assets. So the sector's recovery has begun and will continue in the coming years. As a result, in the future there will be healthy, well-managed institutions with shareholders who are ready to support their banks," the board chairman of the Eurasian Bank said.
Loginov also commented on the progress of work in the "Eurasian Bank" under the Financial Sustainability Program.
"In 2017, we became the leader in terms of the amount of reserves created, amounting to 105 billion tenges. Halyk Bank follows us on this indicator - creating 67 billion tenges worth of provisions. At the same time, there are banks in the market that do not form provisions. Since October 2017, when we entered the program, "Eurasian Bank" has created 46 percent of the indicators planned for five-year period. We are directing all the profits that our bank earns to the over and above the plan reservation. There are players in the market that show profit, but do not create reserves. Bad debts, accumulated over many years, cast doubt on the prospects of these banks in the future. Bad loans, accumulate on the balance sheets, and ultimately the financial institute may need emergency irrevocable state aid," Loginov said.
According to Loginov, during 2017 and 1H2018 the bank managed to generate reserves about 30 billion tenges more than the planned figure.
"The Eurasian Bank's task to form the reserves within five years, mentioned in the program, will be realized more quickly. In addition to reserving and writing off bad loans from the balance sheet, we are doing a lot of work to recover and improve the problem assets. Presently we are focused on meeting the conditions of the program as soon as possible and returning the state's money," the chairman of the board said.
After five years of participation in the program, "Eurasian Bank" should form the full amount of reserves that are provided for by the program and improve the quality of assets.
"In five years, we have to show a net balance. Supervisory allowance, which was introduced in addition to the minimum capital adequacy in Kazakhstan, should reach zero. At the same time, the return on equity (ROE) should be at least 17 percent by 2022. This is a very ambitious goal, taking into account the fact that expenses for reserves are being formed in full," Loginov said.
The Eurasian Bank, based in Kazakhstan, has been operating since 1994. The bank is one of the largest in the country and as of July 1, 2018, in terms of assets, it is in the ninth place (about $2.69 billion).
($1 = 361.66 tenges, on Aug. 16)
---
Follow the author on Twitter: @AzadHasanli