Bank TuranAlem OJSC (Kazakhstan): brief description

/IRBIS, Feb 20, 01/ - Following is a brief description of Bank TuranAlem 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 managing body of Bank TuranAlem OJSC takes all responsibility for reliability of information submitted to the Listing Commission. HISTORY The bank was founded on Jan.15, 1997 in the form of closed joint-stock company as a result of restructuring of two banks: AB AlemBank Kazakhstan and KAB Turanbank. AB AlemBank Kazakhstan was founded in 1990 as Kazakhstan branch of Vnesheconombank (note: Vnesheconombank conducted international operations in former Soviet Union). The Alembank was an agent of the Government of Kazakhstan (GOK) servicing foreign credits under the government guarantee. KAB Turanbank began its activity in 1925 as a branch of Promstroibank (note: bank for industry and construction). It has been responsible for financing of construction and major industrial enterprises. Bank TuranAlem was actively supported by the GOK and National bank of Kazakhstan. GOK has paid $90 mln to the authorized capital. The rehabilitation bank repurchased liabilities of the predecessors for a total of $62 mln. In March 1998, the GOK held closed auction for sale of 100% of TuranAlem shares. The shares were bought out by consortium of private companies for $72.0 mln. The consortium - Consortium of Kazakhstan Investors consisted of companies included into "Astana Holding" group and other independent entities. Astana Holding group includes: Melkombinat OJSC (Kostanai region), Kustanaiasbest OJSC (Kostanai region), Araltuz OJSC (Kzyl-Orda region), "Shymkentskaya makaronnaya fabrika" OJSC (Shymkent macaroni plant, Southern Kazakhstan). As of oct.01, 2000 members of the Astana holding group held 30.73% of the bank's shares. GENERAL INFORMATION Date of initial government registration - Jan.27, 1997. Legal status - open joint stock company. Ownership - private. Primary activity - banking services. Legal and actual address of the head office - 55 Aiteke bi street, Almaty 480091, Kazakhstan. Number of employees as of Oct. 01, 2000 - 2,712, of which 840 are in head office. Bank TuranAlem OJSC has 24 regional branches, 50 cash desk departments for servicing of legal entities and 186 departments for individuals. At present, the bank has correspondent relations with 230 banks. Most active directions of such relations are Germany (Deutsche Bank AG, Dresden Bank AG, Commertz AG), USA (Bank of New York, Republic National Bank of New York, Citibank, Bankers Trust Company), united Kingdom, Sweden, France (Societe Generale),Austria, the Netherlands, Canada, Belgium and Italy. More than 110 banks of CIS countries opened LORO accounts in TuranAlem. Payments are made using SWIFT and TELEZ international settlements systems. In late 1994, Bank TuranAlem started issuing and servicing of AlemCard. It also became a member of Visa International. At present, the bank issues and services full set of products of Visa International (Electron, Classic, Business, Gold). In January 1997, the bank signed an agreement with Europay International on issue of EuroСard/MasterCard and Cirrus/Maestro. In April 1997, agreements concluded with United Card Service on servicing of DinersClub and with American Express on distribution of American Express cards. As of Jan.01, 2001 Bank TuranAlem OJSC has maintained 46 ATMs. Bank TuranAlem OJSC possesses stakes in: BTA Leasing OJSC - KZT142.8 mln (100% in the authorized capital), BTA Insurance OJSC - KTZ44.0 mln (40%), "Pension Fund Kazakhstan" CJSC - 37.5 mln (25.0%), TuranAlem Securities LLP - KZT28.8 mln (100%), "Pension Fund Kurmet" CJSC - KZT21.3 mln (23.7%), Kazakhstan Stock Exchange (CJSC) - KZT3.3 mln (4.2%), OUL Association of Kazakhstan Financiers - KZT0.7 mln (17.1%), Interbank Financial Chamber JSCOT - KZT0.2 mln (6.3%), Central Depository of Securities - KZT0.2 mln (0.3%). Bank TuranAlem OJSC is a member of KASE, Central Depository of Securities CJSC, Kazakhstan Fund of Individual Deposits Insurance CJSC (certificate 0000001 dated Feb.16, 2000), OUL Association of Kazakhstan Financiers. 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 has participated in floatation of six issues of the national saving bonds (NSB) a financial agent of the MOF. By the decision of NBK dated Oct.30, 1998 #220, Bank TuranAlem OJSC was included into the first group of banks to be shifted to international accounting standards. LICENSES - Of the National Bank of Kazakhstan to conduct banking operations in tenge and foreign currency, dated Dec.17, 1998 #225 (constant validity period). - 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 Aug.19, 1999, #0401100110 (instead of previous license #20030072 dated May 12, 1997), constant validity period. - Of the National Securities Commission of Kazakhstan to engage in custodian activities on the securities market #0407100023 dated Oct 15, 1998. CREDIT RATINGS Thomson Bank Watch: long term unsecured debt B+; short-term (domestic currency) - LC-2; domestic rating of an issuer - IC-C/D. Moody's: rating of long-term deposits in foreign exchange B2, positive outlook, financial stability - E+, stable outlook ; Standard & Poor's: long-term rating - B, stable outlook; short-term and deposits of certificates rating C, stable outlook. CAPITAL, SHARES AND SHAREHOLDERS As of January 01, 01 announced, issued and paid-up authorized capital of Bank TuranAlem OJSC equaled 12,870,230.0 thousands tenge. The bank conducted 5 emissions of shares at 10,000 tenge face value (common registered, NIN KZ1C34920412). Total number of shares - 1,287,023. The shares have non-documentary form. The register is maintained by KAZREGISTER LLP (Almaty). According to the Bank's Regulation amount of dividends per share is defined after corresponding proposal of the Board that should be approved on General meeting of shareholders. According to the General meeting of shareholders dated June 06, 1998 dividends for 1997 were not accrued and paid because of losses. According to the general meetings of shareholders dated July 15, 1998 and Aug.10, 2000 dividends for 1998, 1999 were not accrued and paid. The dividends were used for discharging of previous losses. On Sep. 09, 1999 common inscribed shares (trade code - BTAS) of Bank TuranAlem OJSC were admitted into official list of the KASE securities under category "A". These securities have been most traded at KASE during 2000. Volume of 95 deals in all market sectors reached 573,057 shares for a total of $36.4 mln. Notably, this instrument has been many times used for REPO operations both in special market segment and purchase-and-sale sector of KASE. The bank maintains its leadership in this year too. As of Feb.20 volume of 13 deals reached $4.2 mln. From Jan.01, 2001 to Feb.20, 2001 minimal rate of BTAS in the purchase-and-sale sector equaled $68.80 per share, maximal - $89.62. Last bid was made at $69.10. TuranAlem Securities LLP executes responsibilities of a specialist on the KASE market. As of January 01, 01 total holders of shares reached 19, including two nominal holders (271,302 shares). Following entities possessed over 5% stake in the bank: Semipalatinskii mukomolno-kombikormovii kombinat OJSC (12% stake), Yassy OJSC (Turkestan, Kazakhstan, 11.2%), MaktaAral OJSC (Southern Kazakhstan, 9.0%), Melkombinat LLP (Almaty, Kazakhstan, trustee of Melkombinat OJSC, 8.8%), Araltuz LLP (Almaty, Kazakhstan, trustee of Araltuz OJSC, 6.0%), Kustanaiasbest LLP (Almaty, Kazakhstan, trustee of DAGOK Kustanaiasbest OJSC, 6.0%), Shymkentskaya makaronnaya fabrika" LLP (Almaty, Kazakhstan, trustee of Shymkentskaya makaronnaya fabrika" OJSC, 6.0%). BRIEF DESCRIPTION OF THE ACTIVITIES The bank's shareholders equity (all figures are given in tenge unless otherwise indicated) grew up by 4.8 bln (5.1 times) between 1997-1999, during 9 month 2000 - 2.8 bln (46.5%). In 1998 increase in shareholders' equity (3.2 bln - 3.7 times) was conditioned by increase in capital of the first level - floatation of shares of two emission (1.15 bln) and decrease of last years (3.51 bln). In 1999, 1.6 bln (37.7%) increase of shareholders' equity was caused by increase in first level capital - 676.7 mln (increase paid-up part of the authorized capital) and second level capital - 972.1 mln (growth of the net income by 886.3 mln and accumulations in reserve funds - 85.8 mln). Growth of shareholder's equity for 9 month of 2000 was caused by increase in first level capital - 2.8 bln (increase in paid-up part of the authorized capital - 1.55 bln, additional capital, - 26.0 mln and decrease in past years losses - 802.4 mln) and increase in second level capital by 551.4 mln (growth in net income - 450.8 mln and accumulations in reserve funds - 100.5 mln). The assets of Bank TuranAlem OJSC grew by 34.0 bln, or 3.6 times for the same period (1999 to 1998 - 146.8%, 1998 to 1997 - 47.2%), in 9 months of 2000 by 28.7 bln (61.1%). The major growth of assets (27.9 bln) in 1999 and first six month 2000 (28.7 bln) falls on net loan portfolio (1999 - 59.2% of total growth in assets, 2000 - 63.7%) and securities holdings (1999 - 9.5% of total growth in assets, 2000 - 22.2%). The structure of profitable assets of Bank TuranAlem OJSC (1997-1999 - data of the auditors, as of Jan.01, 00 - data of the issuer) ------------------------------------------------------------------------------- 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 % -------------- ----------- ---- ---------- ---- ---------- ---- ----------- --- LORO accounts in banks 1,037,037 9.4 2,111,939 14.1 4,022,362 10.6 3,796,482 6.1 Interbank credits and deposits 405,300 3.7 269,602 1.8 930,460 2.5 42,998 0.1 Securities 2,940,540 26.9 619,834 4.2 3,276,747 8.7 9,654,049 15.5 Clients' credits 6,568,304 60.0 11,906,626 79.9 29,513,343 78.2 48,598,327 78.3 -------------- ---------- ---- ---------- ---- ---------- ---- ----------- ---- Total 10,951,181 100 14,908,001 100 37,742,912 100 62,091,856 100 ------------------------------------------------------------------------------- The proportion of profitable assets within total assets of the bank has had stable growth trend (1997- 77.7%, 1998 - 81.1%, 1999 - 82.0% as of October 1, 2000 - 82.2%). In 1998, profitable assets of the bank increased by 3.9 bln, or 36.1% against 1997, in 1999 - 22.8 bln or 2.5 times, for 9 months of 2000 - by 24.4 bln, or 64.7% against 1999. One of the primary activities of the bank is trade financing and short-term credits (in tenge and forex) including issue of letter of credits and guaranties. During 1997-1999 net volume of loan portfolio grew from 5.9 bln up to 27.9 (4.7 times). Increase in net volume of the portfolio in 1998 amounted 5.5 bln or 92.2%, 1999 - 16.5 bln or 59.2%, 9 month 2000 - 18.3 bln or 63.7%. In 1999 the financing was mainly funded from issue of fifth emission of shares and borrowing from international financial organizations. In 2000 credits were financed from growth of deposit base, receipts from fifth emission, borrowing from other banks and financial entities (as of Oct. 01, 00 - 14.7 bln). According to the bank's information, its share on the corporate credits market increased from 12.7% (Jan.01,99) to 20.0% (Oct.01,00). As of Oct.01, 2000 the structure of the loan portfolio looked as follow: - sectoral division: trade - 39.8%, industrial production - 22.1%, agriculture and food industry - 18.6%, information technologies and education - 6.5%, other - 13.0%; - types of borrowers: private companies - 89.8% (at the beginning - 57.8%), state companies 1.2% (38.0%); - in foreign exchange: credits in tenge and soft currencies - 34.0%, hjard currency - 53%, credits indexed to USD - 13.0%. Data on the quality of the loan portfolio of Bank TuranAlem 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 5,281,023 78.8 10,625,620 89.2 18,254,481 61.9 42,299,325 87.0 Substandard 471,478 7.0 620,660 5.2 9,176,585 31.1 3,045,436 6.3 Unsatisfactory 158,101 2.4 225,095 1.9 889,726 3.0 598,218 1.2 Doubtful with high risk 169,891 2.5 80,006 0.7 716,993 2.4 1,208,516 2.5 Bad 624,811 9.3 355,245 3.0 475,558 1.6 1,446,832 3.0 ---------------- --------- ---- ---------- ---- ---------- ---- ---------- ---- Total 6,705,304 100 11,906,626 100 29,513,343 100 48,598,327 100 ------------------------------------------------------------------------------- Data on the provisions created by the loans of Bank TuranAlem 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 28,341 3.7 52,584 10.5 575,217 36.1 220,619 9.2 Unsatisfactory 33,551 4.3 53,738 10.7 182,388 11.5 136,339 5.7 Doubtful with high risk 84,947 11.0 40,106 8.0 358,496 22.5 604,258 25.1 Bad 624,811 81.0 355,160 70.8 475,558 29.9 1,446,832 60.0 ---------------- --------- ----- --------- ----- ---------- ---- --------- ---- Total 771,651 100 501,588 100 1,591,659 100 2,408,049 100 ------------------------------------------------------------------------------- Increase in volume of provisions in 1999 3.2 times reflects growth of the loan portfolio 2.5 times and increase of problematic credits from 5.6% to 7.1% as a result of devaluation that led worsening of economic situation for some borrowers. Increase in provisions for 9 month 200 was caused by significant growth of the loan portfolio. It was informed that bank had been forced to lend money on short-term to avoid interest rate and default risks. As of Oct.01, 2000 share of short-term credits amounted 79.4% (including up to three month -30.6%), more than year - 17.9%, more than three years - 2.7%. The banks has strict requirements to collateral to avoid interest rate risks. The bank accepts cash (without discount), guarantee of financial entities, real estate, consumer goods and fixed assets (discount 50-70%). As of Oct.01, 2000 unsecured credits amounted 3.3% of the loan portfolio. Deposit of clients are the main source of financing for the bank. As of Oct.01, 2000 attracted deposits equaled 68.2% (45.7 bln) of total liabilities, of which time deposits - 20.4 bln - 44.5% of total deposits, (late 1999 - 46.8%, 1998 - 34.7%), demand deposits - 55.5% (late 1999 - 53.2%, 1998 - 65.3%, 1997- 30.4%). For 1998 volume of attracted deposits amounted 12.2 bln, 1999- 121.4% growth against 1998 or 27.0 bln, 9 month 2000 - by 18.8 bln - 69.4% amounted to 45.7 bln. As of Oct. 2000, 59% of total deposits fall on legal entities (15% market share for corporate deposits), 41% deposits of population (25%). The bank's share on the time deposits of individuals is constantly growing. At late 1998 it equaled 16%, 1999 - 22%, as of Oct.01, 2000 - 25%. As of Sep.30, 2000 deposit rates for legal entities fluctuated between 8-14%, rates for dollar deposits - 6-11%. For individuals, the bank offers nine types of time deposits in tenge and foreign exchange. Placement period varies from one month to three years. Interest rates on deposits of individuals depend on type of deposit., placement period and currency (interest rate for tenge deposits 4- 21%, forex - 4-10%). Main share of income of the bank consists of income from interest payments for loans (As of Sep.30, 2000 rate for tenge credits equaled 20-35%, in US dollar - 9-25%) and commissions. Income from loans increased three times (1.8 bln in 1997 to 5.2 bln in October 2000) as a result of loan portfolio growth. As of Oct.01, 2000 number of accounts reached 469 th., of which 29.0 th - legal entities, 440.0 th. - individuals. In 1999 commissions from servicing of the plastic cards amounted 24.4 mln. Bank TuranAlem considers debits and credit card business as one of the perspective on the retail market. beginning from 1994 the bank issued 90.0 th debit cards including 60.0 th. - international cards - VISA and 30.0 th. - Alem. It is expected that number of cards would reach 150 th by the end of 2000. This could result in 42 mln income from commissions. Decline in total amount of expenses in 1998 by 7.1 bln or 3.2 times firstly relates to decrease in total amount of provisions on classified assets and conditional liabilities from 6.45 bln (1997) to 0.5 bln (1998). Growth of expenses in 1999-2000 (1999 - 4.1 bln or 2.3 times, 9 month 2000 - 1.7 bln or 23.2% against 1999) was caused by increase in interest payments. Much of this growth attributed to increase in borrowed funds, increase in provisions (growth of credits) and realization of regional development programs. Losses in 1997 (6.3 bln) were conditioned by the need to create reserves related to activity of AB AlemBank, KAB Turanbank including: 2.1 bln - credits granted in 1997, 2.0 bln - doubtful and bad debts, 1.6 bln - conditional liabilities (letters of a credit and guarantees). In 1999 net income declined from 1,867 mln down to 886.3 mln against 1998 as a result of increase in expenses on regional branches and cash desk departments (from 147 to 253), and decline in single revenues (on un-paid suits). By results of 9 month 2000, net income of the bank totaled 1,337.1 mln that is 584.7 mln or 77.1% higher compared to same period of 1999. CREDIT LINES OF THE BANK Beginning from 1997 Bank TuranAlem OJSC borrows the funds on international capital markets. In August 1997 the bank received $8 mln for 2 years from Export Import Bank of Korea, and another $8 mln from the European Bank for Reconstruction and Development (EBRD) in October 1998 to finance trade operations (both loans were initially granted at $5 mln with further $3 mln increase). In July 1999 the bank has signed an agreement, and in August it received $13.5 mln syndicated loan from a group of foreign banks: (ABN Amro Bank, American Express Bank Ltd., ING Barings, Dresdner Bank AG, Commerzbank AG, Rabo bank International) to finance pre-export supplies of cotton. ING Barings was the agent of the deal. The loan has been repaid on February 29, 2000. In August 1999 Bank TuranAlem OJSC provided a bank guarantee for the EBRD $9.8 mln loan granted to Samal Properties. Today the bank has following existing credit lines. Borrowing under the insurance coverage of EGAP (Czech republic). In April 1999 $4.25 mln loan was received under the insurance coverage of EGAP from Commercni Bank (Prague) for 3 years to finance the imports of Czech equipment, and another $2.58 mln was received from Cescoslovenska Obchodni Bank to finance importing contract. Insurance coverage limit from Hermes (Germany). In August 1999 Bank TuranAlem OJSC signed a number of framework contracts with the major German banks - Сommerzbank AG, Deutsche Bank AG and Dresdner Bank AG. The funds were meant to finance the supplies of the newest technological equipment from Germany under an insurance coverage provided by the German insurance exporting-financing agency Hermes for a total of 50 mln Deutsche marks (increase from initial 25 mln). Credit line of International Financial Corporation (IFC). On September 17, 1999 Bank TuranAlem OJSC and IFC, a part of the World Bank Group, signed $15 mln loan agreement for 7 years for general purposes. Credit line of the Asian Development Bank (ADB). Under the agriculture support program Bank TuranAlem OJSC received $15 mln loan for 6 years in 1999. Syndicate loan of commercial correspondent banks. On August 4, 2000 Bank TuranAlem OJSC received $30 mln loan from a syndicate of foreign banks based on loan agreement signed on July 26, 2000. The syndicate consisted of 12 foreign banks. The loan was granted till January 31, 2001 with the option of partial prolongation for six months. The loan has been extended for 180 days for $27 mln. From commercial Taib Bank Kazakhstan. On August 11, 2000 a loan was received for $1.0 mln for 6 months to finance the trade. Line of the Islamic Development Bank. The agreement under the financial leas between Bank TuranAlem OJSC and Islamic Development Bank was signed on November 6, 2000 in Beirut under the Global Financing Line Agreement signed between the government of Kazakhstan, three major Kazakhstani banks, and the Islamic Development Bank. Under this line Bank TuranAlem OJSC will receive 1.83 mln dinars to finance the equipment and machinery procurement programs in 10 years. Moreover, 5.5 mln dinars is under the pull, which will be available after the first part of the amount will be used successfully. Subordinated loan of DEG investment fund (Germany). In December 2000 a subordinated loan agreement was singed to grant 10 mln euro with the German investment fund DEG to finance the projects of small and mid-sized business. The funds were received in February 2001. Also, the bank is a member of small and mid-sized businesses support program initiated under the intergovernmental financial cooperation between Kazakhstan and Germany signed in 2000. The agreement between Kreditanstalt Fuer Wiederaufbau (KfW, Germany) and the Ministry of Finance of Kazakhstan was signed in 1998. Total limit amount reaches $27 mln for 10 years on a favorable term of 3 years at 5% APR distributed among three second tier banks. Besides, the talks are conducted with BHF-Bank (Germany) to open a credit line to finance under insurance coverage of credit agencies, so called "multi- source financing". The amount of suggested line is 20 mln euros.