/REUTERS, Almaty, Olzhas Auezov, July 3, 06/ - Announced by Central bank increase of minimum reserves requirements will reduce aggregate profit of local banks by dozens of million of dollars and slow down their growth, bankers and analysts say, acknowledging necessity of rigid measures.

Economy of the country is going through boom due to incomes from export of key wares - oil and metals. However, inflow of "petrodollars" is untwisting inflation spiral, and the loan growth causes anxiety regarding risks connected with them.

Government and monetary authorities undertook a range of measures after recent criticism from the president's part, Nursultan Nazarbaev, dissatisfied by consumer prices raise.

In particular, the National bank of Kazakhstan at the end of May informed that in July it will increase minimum reserves requirements to the banks within the frameworks of inflation control and risks of financial sector. According to these plans the banks should increase the volume of reserves more than three times - funds on special accounts in the National bank, non-interest bearing.

"Banking sector of Kazakhstan will not get dozens of million of dollar", - the chairman of Board of investment company KIB Asset Management, Asan Buranbaev.

Aggregate profit of Kazakhstan banks in the first six months this year made about $412 m.

"Banks will lose till one percentage item out of its spread (differences between interest rates on borrowed and offered funds), it might be even one and a half", - he said.

According to data of KIB Asset Management, medium spread of 9 the largest banks of Kazakhstan makes nowadays about 3.8 percentage items.

At that, bankers can hardly raise interest rates on credits for clients owing to anxiety to lose share in the market.

"This dilemma will be solved in favor of growth, but for profitability", - the chairman of Board of ATFBank, Timur Isataev said in the investment conference in June.

Analyst of Standard & Poor's rating agency, Magar Kuyumjayn approved actions of Central bank of Kazakhstan, which would slow down high growth of the banks, bearing dependence on foreign loans and threat of aggravating of credit portfolio quality.

"We consider this (reserves requirements toughening) to be a good measure", - he said.

MONEY FOR GROWTH

Meanwhile, the banks are expected to increase capital proportionally to assets in order to keep high development rates.

Profit, to which analysts promise decreasing was always one of core capital for Kazakhstan banks, whose owners do not hurry yet to be apart with control through attraction of new investors.

Instead of it, along with capitalization of profit, the banks borrow special loans, which are included into shareholders' equity.

But attraction of strategic or institutional investors is inevitable, the analysts think. Thus, Standard & Poor's considers the level of capitalization of three largest banks of Kazakhstan to be minimum, such as: Kazkommerts, TuranAlem and Halyk bank.

Owing to opinion of analyst of S&P, it becomes more difficult to finance their growth independently for local shareholders of the banks.

"They need foreign capital since the banks have become very large", - Kuyumjayn said.

Decrease in profitability of the banks, which was called by analyst "very high", may become "secondary" stimulation to attraction of extra investments to his mind.

Kazkommerts and Halyk have already announced of IPO plans or sale of large packets to strategic investors, though they did not take concrete steps in this direction. The banks of Austria, Great Britain, Russia and Ukraine spoke of an interest in purchasing in Kazakhstan. Baring Vostok Russian investment fund bought about 50% in Almaty BANK CASPIAN in May.

[2006-07-04]