VALUT-TRANZIT BANK OJSC (Kazakhstan): brief description

/IRBIS, Oct.23, 00/ - Following are brief description of VALUT-TRANZIT BANK OJSC (Karagandy), made on the basis of the conclusion of the Listing commission of the Kazakhstan Stock Exchange (KASE). The characteristics are published due to the transfer of the bank's shares into official list of the KASE securities under category "A". Previously, the shares were in official list under category "B". GENERAL INFORMATION Date of initial state registration - October 10, 1991. Legal status - open joint stock company. Ownership - private. Legal and actual address of the head office - 103a, Jambyl St. Karagandy, 470061, Kazakhstan. Activities - banking services. The bank is a member of the Association of the banks of Kazakhstan, and financial-industrial association "Valut-Tranzit". The bank has the license #43 issued by the National Bank of Kazakhstan to conduct banking activities in tenge and hard currency, dated February 29, 2000. CAPITAL, SHARES AND SHAREHOLDERS As of October 1, 00 announced authorized capital of VALUT-TRANZIT BANK OJSC equaled KZT1,000.0 mln, issued - KZT1,300.0 mln, paid - KZT1,000.0 mln. Total of seven issues of VALUT-TRANZIT BANK OJSC securities have been registered. Face value of one share is KZT200.00 irrespective of the issue, type of issue - non-documentary, placement - private. 1st issue was registered on April 6, 94 for an amount of KZT2.0 mln and consisted of 10,000 inscribed shares, including: 9,000 common shares and 1,000 preferred shares. The placement ended on September 27, 94. The report was approved on December 9, 94. 2nd (additional) issue was registered on April 8, 94 for an amount of KZT34.0 mln and consisted of 170,000 common inscribed shares. The placement ended on November 7, 96. The report was approved on January 6, 97. 3rd (additional) issue was registered on February 25, 97 for an amount of KZT84.0 mln and consisted of 400,000 common inscribed shares. The placement ended on June 4, 95. The report was approved on June 9, 97. 4th (additional) issue was registered on December 11, 97 for an amount of KZT80.0 mln and consisted of 400,000 common inscribed shares. The placement ended on December 24, 97. The report was approved on March 2, 98. 5th (additional) issue was registered on December 31, 97 for an amount of KZT300.0 mln and consisted of 1,500,000 common inscribed shares. The placement ended on August 31, 98. The report was approved on November 6, 98. 6th (additional) issue was registered on June 10, 99 for an amount of KZT500.0 mln and consisted of 2,500,000 inscribed shares, including: 1,251,000 common shares and 1,249,000 preferred shares. The placement ended on September 22, 99. The report was approved on January 3, 00. 7th (additional) issue was registered on September 20, 00 for an amount of KZT300.0 mln and consisted of 1,500,000 inscribed shares, including: 1,125,000 common shares and 375,000 preferred shares. Constitutive documents of the issuer do not contain the norms that discriminate or limit the rights of the people, who own its securities, to transfer (alienate) them. The register of the bank's shareholders is maintained by Registratorskaya sistema tsennykh bumag CJSC (Securities registration system, Almaty, the license #20050017, issued by the National Securities Commission of Kazakhstan on April 8, 97). The decision on making dividend payments on the shares of VALUT- TRANZIT BANK OJSC by the results of the year is made by the Board of the bank and approved by the shareholders general meeting. The payment order and the minimum dividend amount on preferred shares are set by the issue prospectus, whish sets it equal to refinancing rate of the National Bank, effective on dividends declaration date. Beginning from 1994 the bank pays out dividends each year. In 1994: KZT652,680 was paid to common shares (KZT75.52 per share); to preferred shares - KZT200,000 (KZT200 per share). In 1995: no dividends were paid to common shares; to preferred shares - KZT200,000 (KZT200 per share). In 1996: KZT2,264,350 was paid to common shares (KZT12.65 per share); to preferred shares - KZT200,000 (KZT200 per share). In 1997: KZT13,684,360 was paid to common shares (KZT23.06 per share in I quarter, KZT5.64 per share in II-IV quarters); to preferred shares - KZT207,000 (KZT170 per share in I quarter, KZT37 per share in II-IV quarters). In 1998: no dividends were paid to common shares (KZT20,131,379.67 profit was allocated to increase the authorized capital); to preferred shares - KZT50,000 (KZT50 per share). In 1999: no dividends were paid to common shares (due to the need to create a reserve fund); to preferred shares - KZT20,695,236 (KZT16.56 per share). As of October 10,00 the bank had 857 shareholders. The following entities each own more than 5% of the bank's authorized capital: partnership "Lylia and Co" (Karagandy) - 17.3%; partnership "Irina and Co" (Karagandy) - 16.0%; partnership "TRADE Yelena and Co" (Karagandy) - 11.3%; Central Depository of securities CJSC (Almaty) - 14.0% (nominal holding). HISTORY AND BRIEF DESCRIPTION OF THE ACTIVITIES VALUT-TRANZIT BANK OJSC is a successor of Joint stock bank Prima- bank registered with the National Bank of Kazakhstan in October 1991 and re-registered with the Justice department of Karagandy region due to changing of its title into Open joint stock company VALUT-TRANZIT BANK. In January 1999 a contract was signed to merger Akmola-bank OJSC with VALUT-TRANZIT BANK OJSC based on the decisions of both banks' shareholders general meetings. On April 16, 1999 the Board of the National Bank of Kazakhstan adopted a resolution #71 to reorganize two banks by merging Akmola-bank OJSC with VALUT-TRANZIT BANK OJSC. The merger ended in October 1999. After the bank has issued its 6th issue of shares for an amount of KZT500.0 mln on June 10, 2000, common inscribed shares of Akmola-bank OJSC with KZT1,000 face value were exchanged into common inscribed shares of VALUT-TRANZIT BANK OJSC with KZT200 face value each in a proportion of 1:5. By the resolution of the National Bank of Kazakhstan, dated April 21, 2000, the bank has developed individual plan to switching to international standards approved by the National Bank. Each quarter the bank reports to the National Bank on the progress of the switch into international standards based on the individual plan. Based on the data, in order to complete the process the bank needs to create a General ledger book including its subdivisions, put it into work and make sure the transactions are monitored. These activities are to be completed by November 1, 2000. The bank has 5 branches, 30 settlement-cash register offices and 91 currency exchange offices in different cities of Kazakhstan. The number of employees as of October 1, 2000 is 1,230. The bank's shareholders equity, calculated on the basis of the National Bank's instructions, grew by KZT863.0 mln, or 5.2 times from 1997 to 1999, and in 9 months of 2000 - by 45.6% (by KZT488.3 mln). In 1999 increase in shareholders' equity by 51.6% was due to the merger with Akmola-bank OJSC. In 9 months of 2000 major growth in shareholders' equity came from the first level capital - by KZT412.7 mln (premiums on the shares or additional capital). Growth in additional capital was due to the fact that in 2000 the bank was regularly buying back its own shares and selling them both on organized market, and out of it (in 8 months of this year total turnover of common shares equaled KZT730.1 mln, for preferred shares - KZT287.8 mln). The assets of VALUT-TRANZIT BANK OJSC grew by KZT2.4 bln, or 6.8 times in the same period (1998 to 1997 - 4 times, 1999 to 1998 - 1.7 times), in 9 months of 2000 by KZT2.6 bln, or 1.9 times. The major growth that took place in 1999 and in the first half of 2000 was due to a loan portfolio (1999 - 84.6% of the assets, in 2000 - 78.2%). The structure of income assets of VALUT-TRANZIT BANK OJSC ----------------------------------------------------------------------------- As of Jan.1.99 As of Jan.1.00 As of Oct.1.00 ------------------------------------------------ Th. Th. Th. Assets KZT % KZT % KZT % ----------------------------------------------------------------------------- Cash 97,298 7.5 92,880 3.5 136,173 2.8 Correspondent accounts 23,572 1.8 97,588 3.7 340,637 7.1 Securities - 0 - 0 44,950 0.9 Requirements to the clients 1,182,497 9.7 2,455,737 92.8 4,295,837 89.2 ----------------------------------------------------------------------------- Total of income assets 1,303,367 100 2,646,205 100 4,817,597 100 ----------------------------------------------------------------------------- The proportion of profitable assets within total assets of the bank equaled 78% in late 1997 and 1998, and 93% in late 1999, as of October 1, 2000 - 89%. In 1999 profitable assets of the bank increased by KZT1.3 bln, or 2 times against 1998, in 9 months of current year - by KZT2.2 bln, or 1.8 times. The major increase (3.5 times in 1999, and 1.7 times in 9 months of 2000) came from the loan portfolio. The increase of profitable assets is explained by the bank's management as the expansion of regional networks, growth in the number of clients (the number of legal entities grew from 4,000 to 5,000 in 9 months of 2000, that of individuals - from 35,000 to 55,000), shareholders' equity, as well as expansion of correspondent network (in early 2000 - 9 correspondent banks, as of October 1, 2000 - 16). The loan portfolio of VALUT-TRANZIT BANK OJSC was at about KZT2.5 bln as of January 1, 2000, 2.1 times growth relative to 1999. In 9 months of 2000 the loan portfolio grew by KZT1.8 bln, or 74.9%, at KZT4.3 bln. The bank's loan portfolio is made of call deposits of its clients and the bank's own funds. As of October 2000 the deposits accounted for 68.9% (KZT2.7 bln) of VALUT-TRANZIT BANK OJSC liabilities, of which KZT1.4 bln, or 44.7% are the deposits of individuals. In 1999 the volume of deposits increased 2 times relative to previous year, at KZT1.3 bln, in the first half of 2000 - 2.3 times, at KZT3.0 bln. The proportion of call deposits equals 75.8% of the total amount. As of October 1, 2000, the most proportion of the bank's loan portfolio belonged to the companies in recreation, tourism and sports industry - 45.7%, retail trade - 17.2%, hotels and restaurants - 15.1%, financial intermediaries - 12.2%. The structure of the loan portfolio of VALUT-TRANZIT BANK OJSC -------------------------------------------------------------------------------- As of Jan.1.98 As of Jan.1.99 As of Jan.1.00 As of Oct.1.00 --------------------------------------------------------------- Th. Th. Th. Th. Type of the loan KZT % KZT % KZT % KZT % -------------------------------------------------------------------------------- Short-term loans 35,571 13.6 65,317 5.5 1,431,384 58.3 1,319,448 30.7 Mid-term loans 2,550 1.0 637 0.1 200 0.0 3,899 0.1 Long-term loans 222,618 85.4 1,063,712 90.0 407 0.0 - 0 Leasing - 0 36,980 3.1 1,023,746 41.7 2,972,396 69.2 Factoring - 0 15,851 1.3 - 0 94 -------------------------------------------------------------------------------- Total 260,739 100.0 1,182,497 100.0 2,455,737 100.0 4,295,837 100.0 -------------------------------------------------------------------------------- From 1998 the bank is actively engaged in financial leasing, whose proportion is tend to grow. In 9 months of 2000 the volume of leasing operations increased by KZT1.95 bln relative to 1999. The management explains this active use of financial leasing by the fact that based on current legislature lease payments are exempt from income tax and not included in overall year income. At initial stage of the program favorable interest is provided. Upon signing a leas agreement, the bank and the lessee develop a repayment schedule of the principal amount and increase of interest rates up to the level of market rates. VALUT-TRANZIT BANK, as the owner and the manager of the collateral, controls is security and proper use, which eliminates the risk of bad debts in the future. Individuals and legal entities engaged in entrepreneurship are the lessees. Data on the quality of the loan portfolio of VALUT-TRANZIT BANK OJSC ---------------------------------------------------------------------------------- As of Jan.1.98 As of Jan.1.99 As of Jan.1.00 As of Oct.1.00 -------------------------------------------------------------- Th. Th. Th. Th. Type of the loan KZT % KZT % KZT % KZT % ---------------------------------------------------------------------------------- Standard 260,129 99.8 916,324 77.5 1,520,784 61.9 3,572,090 83.2 Substandard - - 256,320 21.7 934,879 38.1 723,747 16.8 Unsatisfactory 610 0.2 610 0 - - - - Doubtful with high risk - - 386 0 - - - - Bad - - 8,857 0.8 74 - - - ---------------------------------------------------------------------------------- Total 260,739 100.0 1,182,497 100.0 2,455,737 100.0 4,295,837 100 ---------------------------------------------------------------------------------- Data on the provisions create by the loans of VALUT-TRANZIT BANK OJSC -------------------------------------------------------------------------------- As of As As As Jan.1.98 of Jan.1.99 of Jan.1.00 of Oct.1.00 ------------------------------------------------------- Th. Th. Th. Th. Type of the loan KZT % KZT % KZT % KZT % -------------------------------------------------------------------------------- Standard - - - - - - - 0 Substandard - - 12,816 58.3 46,744 99.8 36,187 100 Unsatisfactory 122 100 122 0.6 - - - - Doubtful with high risk - - 193 0.03 - - - - Bad - - 8,857 40.3 74 0.2 - - -------------------------------------------------------------------------------- Total 122 100.0 21,988 100.0 46,818 100.0 36,187 100.0 -------------------------------------------------------------------------------- The income earned from dealing operations, loans granted and settlement- cashier transactions constitute the most part of the bank's income. Income from settlement-cashier transactions increased 6.6 times (from KZT20.2 mln in December 1997 to KZT133.6 mln in September 2000) due to an increase in the number of accounts opened in the bank. As of December 31, 1997 the bank was servicing 2,000 legal entities, as of October 1, 2000 - about 5,000 legal entities and more than 50 th. individuals. The residual amounts in the accounts of the clients grew 6.7 times (in late 1997 total residual amounts equaled KZT117.7 mln, in September 2000 - KZT790.3 mln). Moreover, the amounts of monthly utility bills increased from KZT19.3 mln in January 1999 to KZT300 mln in September 2000. The reduction of tariffs in mid 1999 helped to increase the number of accounts noticeably, which caused the volume of transactions on the accounts of the clients to increase more than 30 times and income from settlement-cashier operations by 280%. As of October 1, 2000 weighted average interest rate on the funds raised by the bank equaled 11.4% (14.2% on deposits), and 29.6% on the funds placed by the bank. Increase in total expenses by 324.1% in 1999 relative to 1998 was due to re- evaluation of deposits in hard currency because of the devaluation of the national currency in April 1999.