KAZKOMMERTSBANK OJSC (Kazakhstan): brief description

/IRBIS, Jan 09, 01/ - Following is a brief description of KAZKOMMERTSBANK OJSC (Almaty), made on the basis of the conclusion of the Listing commission of the Kazakhstan Stock Exchange (KASE). The characteristics are published due to the admission of the bank's bonds into official list of the KASE securities under category "A". The bank takes all responsibility for reliability of presented information. HISTORY The bank was founded on July 12, 1990 as Medeu Bank JSC. It was conducting various activities in the banking sector. On Oct 21, 1991 Medeu Bank JSC was registered as KAZKOMMERTSBANK OJSC. In April 1994 Astana Holding Bank OJSC was merged with KAZKOMMERTSBANK. GENERAL INFORMATION Date of government registration - October 21, 1991. Legal status - open joint stock company. Ownership - private. Legal and actual address of the head office - 135g Gagarin street, Almaty 480060, Kazakhstan. Primary activity - banking services. Bank possesses stakes in following entities: ABN AMRO Bank Kazakhstan CJSC (share in the authorized capital-29%), Kazkommerts Capital B.V. (100%), Kazkommerts Capital International B.V. (100%) Kazkommerts Finance B.V. (100%), Kazkommerts Securities OJSC (100%), APF UMIT CJSC (20%), PAMC ABN AMRO Asset Management CJSC (28%), Edinaya Raschetnaya Sisteme (100%), OUL Financiers Association of Kazakhstan (16.67%), Central Clearing Organization (6.25%), Central Depository of Securities CJSC (6.9%), KASE (4.9%). KAZKOMMERTSBANK OJSC is a member of OUL Financiers Association of Kazakhstan, KASE, Central Clearing Organization, Kazakhstan Fund of Individual Deposits Insurance CJSC. The bank is a primary dealer of the Finance Ministry of Kazakhstan (MOF) and primary agent of National Bank of Kazakhstan on the primary market of government bonds. The bank is also an financial agent of MOF on the market of national saving bonds (NSB). KAZKOMMERTSBANK issues and services VISA and MasterCard credit cards. It also executes distributive functions of American Express. Credit and debit cards of the bank provides access to CIRRUS/Maestro systems. Banks also provides wide range services on current accounts such as direct debit payments, payments for utility services and consumer credits. The bank created broad network of ATM. As of Dec 31, 1999 there were 56 ATMs and 368 post-terminals in the republic. In January 1997 KAZKOMMERTSBANK OJSC become first bank to receive international credit rating. At present bank has following ratings: - Thomson Financial BankWatch-BREE - long term debt B+; - Fitch IBCA Inc. - long term rating (unsecured debt) B+, short-term rating B, individual rating - D and legal rating - 4T; - Moody's Investors Service, Inc - rating of long-term deposits in foreign exchange B2; - Standard & Poor's Rating Services - long-term partner credit rating (unsecured debt) B-, short-term partner credit rating C. KAZKOMMERTSBANK OJSC is rewarded as "Best Kazakhstan Bank" and "Best Bank in Central Asia" for 1995-2000 by Euromoney Publication international publisher (London), Central European, Euromoney and American finance journal Global Finance. Bank executes functions of credit administrator for Small and Medium Scale business development program organized by European Bank for Reconstruction and Development. Another field of cooperation is participation in agricultural programs of the World bank and Asian Development Bank. As of Dec 31, 2000, bank had 5 settlement offices and 20 branches located in major industrial centers including: Zhezkazgan, Ust-Kamenogorsk, Aktau, Astana, Pavlodar, and Karaganda. At the same date, bank had two representative offices in London (U.K.) and Bishkek (Kyrgyzstan). The number of employees as of Dec 01, 1999 equaled to 1,771 of which 905 were hired outside of Almaty. LICENSES - Of the National Bank of Kazakhstan to conduct banking operations in tenge and foreign currency, dated Sep 18, 1998 #48 (instead of license dated Oct 21, 1991). - Of the National Securities Commission of Kazakhstan to engage in broker and dealing activities on the securities market with the right to handle client accounts as a nominal holder, dated Dec 21, 1999, #04011000169 (instead of the first category license #0402100085 dated Aug 19, 1999). - Of the National Securities Commission of Kazakhstan to engage in custodian activities on the securities market #0407100043 dated June 18, 1999 (instead of previous license #2006002 dated June 16, 1997). CAPITAL, SHARES AND SHAREHOLDERS As of October 1, 00 announced, issued and paid-up authorized capital of KAZKOMMERTSBANK OJSC equaled $34,251,453.36. Total number of shares at $0.12 of face value is 285,428,778 (common registered). The shares have non-documentary form. Register is maintained by Reestr- Service LLP (Almaty). According to the Bank's Regulation dividends are paid after corresponding decision of the Board which should be approved on General meeting of shareholders. There have no been decisions on dividend payments so far. All dividend money went to bank development fund. On October 16, 1997 common inscribed shares (KZ1C00400415, trade code - KKGB) of KAZKOMMERTSBANK OJSC were admitted into official list of the KASE securities under category "A". No deals have been made during 1999 and 2000. Current quotations of shares - $0.25 / 0.50 (ask / offer). On July 21, 1997 in cooperation with "Global Securities" Turkish investment bank, KAZKOMMERTSBANK OJSC completed private floatation of 28.27% of shares on the international market in the form of American and Global Depositary Receipts (ADR and GDR). The shares are currently quoted on stock markets of U.K. and Germany. In Germany receipts traded on 6.00- 6.10 euro that is $0.1857-0.1888 per share. As of Oct 01, 2000 following entities possessed over 5% stake in the bank: Central Asian investment company (Astana, Kazakhstan) - 45.74%, The Bank of New York (Тew York, USA) - 32.09% as nominal holder, Mr. Subkhanberdin N.S. (Kazakhstan) - 17.75%. BRIEF DESCRIPTION OF THE ACTIVITIES The bank's shareholders equity made up 13.6% of the gross capital of Kazakhstan banks by the end of September. During 1998 shareholder's capital grew by KZT541.1 mln or 7.7%, during 1999 - KZT1.9 bln or 24.7%, and in 9 months of 2000 - by KZT1.9 bln or 20.5%. In 1998 increase in shareholders' equity was conditioned by increase in net income by results of the year (second level capital). Increase of the authorized paid-up capital in 1999 was caused both by increase in first level capital (authorized capital - KZT87.9 mln and undistributed profit - KZT750.1 mln) and second level capital (net income by results of 1999 - KZT1.2 bln). Growth of shareholder's equity for 9 month of 2000 by KZT2.3 bln (second level capital) was a result of increase in net income. Accumulation of investments in shares of other legal entities led to decrease in first level capital. Volume of investments amounted to: 1997 - KZT1.9 bln, 1998 - KZT2.6 bln, 1999 - KZT2.9 bln, 9 months 2000 - KZT - 3.3 bln. The assets of KAZKOMMERTSBANK OJSC grew by KZT37.5 bln, or 2.1 times for the same period (1999 to 1998 - 46.9% or KZT23.1 bln, 1998 to 1997 - 41.0% or KZT14.3 bln), in 9 months of 2000 by KZT2.8 bln, or 3.9%. The major growth of assets falls on loan portfolio (net): 1999 - KZT10.7 bln, 1998 - KZT11.0 bln, (as of Oct 01, 2000 - by KZT3.7 bln). The portion of loan portfolio in total sum of assets during last three years totaled 62.0% (as of Oct 01, 2000 - 62.2%). By results of 9 months of 2000, portion of the bank's assets in gross assets of banking system equaled 17.2%. The structure of profitable assets of KAZKOMMERTSBANK 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. Assets KZT % KZT % KZT % KZT % ------------- ---------- ---- ---------- ---- ---------- ---- ----------- ---- Securities 4,781,992 16.7 5,724,431 14.7 7,588,277 13.1 7,370,119 12.1 Bank deposits 2,617,945 9.1 921,306 2.4 7,158,215 12.4 6,792,040 11.1 Clients' credits (net) 21,324,534 74.2 32,308,166 82.9 43,055,354 74.5 46,783,277 76.8 ------------- ---------- ---- ---------- ---- ---------- ---- ----------- ---- Total 28,724,471 100 38,953,903 100 57,801,846 100 60,945,436 100 ------------------------------------------------------------------------------ The proportion of profitable assets within total assets of the bank equaled 82.2% in late 1997, 79.0% in late 1998, 79.8% in late 1999 and 81.0% as of October 1, 2000. In 1998, profitable assets of the bank increased by KZT18.8 bln, or 46.9% against 1997, in 1999 - KZT10.2 bln or 35.6%, for 9 months of 2000 - by KZT3.1 bln, or 3.9%. Operational income of KAZKOMMERTSBANK OJSC grew by 60.2% in 1998, 84.6% in 1999, and 25.4% in 9 months of 2000. The growth was caused by decrease of interest rates for credits and revaluation profits in respect to exchange rate. Income from loan operations, traditional major source of flows, fell by 26.6% by October 2000. Bank intends to broaden its client base introducing new products and current account services for individuals. The extension of ATM network would attract new clients and increase bank's ability to broaden services. Expenses of KAZKOMMERTSBANK OJSC increased by 81.8% in 1999. This was caused by increase in reserves for possible loan losses by 146.7%. the increase occurred due to deterioration of financial capacity of domestic borrowers to service loans in foreign exchange. Income growth in 1998 totaled 65.8%. For 9 months of 2000 expenses decreased by 48.2% during the period and by 35.9% in comparison to the same period of 1999, including reserves on possible loans - 6.9 times. At present bank introduces new banking information system Equation DBA, developed by Midas Kapiti International Ltd. The system would allow connect all branches in real time mode. Expected cost of the project by late 2001 would amount to $4.0 mln including equipment and software. Growth of net income in 1998 totaled 21.5%, in 1999 - 110.2%, net income by results of 9 months 2000 amounted KZT2.3 bln that is higher by 88.3% than in comparable period of 1999. In 1997 share of expenses in operational income amounted for 87.2%, in 1998 - 90.3%, in 1999 - 89.0%, as of Oct 01, 1999 - 78.7%. Data on the quality of the loan portfolio of KAZKOMMERTSBANK OJSC ------------------------------------------------------------------------------ As of Jan.1,98 As of Jan.1,99 As of Jan.1,00 As of Oct.1, 00 --------------- --------------- --------------- --------------- Type of the Th. Th. Th. Th. loan KZT % KZT % KZT % KZT % -------------- ---------- ---- ---------- ---- ---------- ---- ---------- ---- Standard 14,500,404 62.1 15,681,257 41.9 13,869,662 26.4 33,432,052 49.4 Substandard 5,576,399 23.9 16,005,573 42.8 28,161,350 53.6 22,878,478 33.8 Unsatisfactory 2,117,924 9.1 811,458 2.2 1,848,835 3.5 1,251,015 1.8 Doubtful with high risk 28,560 0.1 1,813,806 4.8 2,469,082 4.7 6,868,072 10.1 Bad 1,124,028 4.8 3,127,144 8.4 6,165,946 11.7 3,301,186 4.9 -------------- ---------- ---- ---------- ---- ---------- ---- ---------- ---- Total 23,347,315 100 37,439,238 100 52,514,875 100 67,730,803 100 ------------------------------------------------------------------------------ Data on the provisions create by the loans of KAZKOMMERTSBANK 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 - - - - - - - - Substandard 397,556 19.7 903,494 17.6 1,623,235 17.2 1,157,473 13.0 Unsatisfactory 486,914 24.1 193,531 3.8 435,798 4.6 256,801 2.9 Doubtful with high risk 14,280 0.7 906,903 17.7 1,234,542 13.1 4,164,036 46.9 Bad 1,124,028 55.6 3,127,144 60.9 6,165,946 65.2 3,301,186 37.2 ---------------- ---------- ---- ---------- ---- ---------- ---- --------- ---- Total 2,022,778 100 5,131,072 100 9,459,521 100 8,879,496 100 ------------------------------------------------------------------------------- Footnote: Date on Oct 01, 2000 include guarantee and letters of credit for KZT12,269,260 th., and provision for KZT201,230 th. Net volume of loan portfolio of KAZKOMMERTSBANK OJSC in late 1999 reached KZT43.1 bln and grew by 33.3% (in 1998 by 51.5%). For 9 months 2000, loan portfolio increased by KZT3.7 bln or 8.7% and amounted KZT46.8 bln (without guarantee and letters of credit). Liabilities of the bank increased by 69.9% in 1999. The growth was caused by clients account - 128.5%, loan and banks funds - 31.2% and other attracted funds - 105.8%. In comparison to 1998 average liabilities in 1999 increased by 52.7%, average interest liabilities - 51.1% including as a result in client base growth - 33.5% (time deposits - 97.9%, loans and bank funds - 40.5%). Deposit base of the bank consist mainly from corporate deposits. Bank tries to attract demand deposits with low interest rate, which are the source of credits in tenge. This improves liquidity of the bank. Bank would try to increase time deposits to increase funding resources and receive alternative source for middle-term financing. In 1999 time deposits increased by 150.9% reaching 28% of total deposit volume (corporate and individuals). Bank tries to attract more individuals by extending its regional branches, improving services and broadening their range (credit and debit cards, Internet banking, wage services, utility services, trust operations and insurance). Considering demand for long-term services the bank intends to use mid-term instruments of capital market and cooperation with international institutions. CREDIT LINES OF THE BANK The bank has more than three years history of borrowing on international capital markets - since June 1997 when bank signed agreement with International Financial Corporation (IFC, the World Bank group) for the first credit of $10 mln on $30,0 mln credit line. In 1998 bank received 5 year credit line of Netherlands Financial Corporation ($10.0 mln) and 5 year credit of Deutsche Investment Development Company (DM20.0 mln). Also in 1998 bank received credit for $20 mln from EBRD. Bank cooperated with agencies on insurance of export credits and organized financing for a total of $26 mln with official support of Hermes (Germany), CESCE (Spain), NCM (Nethelands) and Eximbank (USA). Syndicated loans. In November 1998 bank received syndicated loan of $20 mln with participation of ABN AMRO Bank N.V., American Express Bank 6 Ltd., Citibank N.A., Commerzbank AG and ING Barings for 6 months with 6 month prolongation option. In March 1999, the bank signed credit agreement on the same terms ($20 mln, 6 month option) with syndicated of banks that included ABN AMRO Bank N.V., American Express Bank Ltd., Citibank N.A., Commerzbank AG, Dresdner Bank AG, ING Barings и Vereins-und Westbank AG. This loan was sixth since bank's entrance to syndicated loan market in June 1997. In March 2000 bank signed bill of exchange agreement with CITIBANK N.A. ($10 mln). The bank also signed credit contract with Landesbank Schleswig-Holstein Girozentrale and Hamburgische Landesbank Girozentrale for six month and same period of prolongation option ($20 mln). All of above mentioned loans were paid back in time. On Dec 08, 2000 bank with support of ABN AMRO N.V. and American Express Bank organized syndicated loan of $41 mln (six month, same period of prolongation period). Participants included: ABN AMRO Bank Kazakhstan, Citibank Kazakhstan, Nurbank, Standard Bank, Raiffeizen Zentral Bank, Nashrek Bank and others. As of Oct 1, 2000 the sum of outstanding loans totaled 9,426,915 th. including loans from: DEG (Deutsche investition) - 1,285,197; FMO (the Netherlands), 1,070,625; IFC - 1,384,675; American Fund of Entrepreneurship Support 428,250; EBRD - 1,427,500; syndicated loan - 3,830,668.