AMB OJSC (Kazakhstan): Characteristics of activities

/IRBIS, June 13, 01/ - Below is general information of Almaty Merchant Bank open joint-stock company (AMB OJSC). It compiled using reports of the Kazakhstan Stock Exchange (KASE) Listing Commission. Information is published in connection with admission of the bank's sixth issue shares (KZ1P35970618) into official list of KASE securities, category "A" (trade code ATFBp), as well as due to the auction for public offering of its shares. DYNAMICS OF INDICATORS From 1998 through 2000 shareholders' equity of the bank increased by KZT1.5bn, or 2.4 times, in first quarter of 2001 - by KZT199.9m (8.0%). In 1998 a 2.3 time increase in shareholders' equity was attributable to the growth of first level capital as a result of a KZT581.4m increase in paid authorized capital of the bank. In 1999 a 85.1% increase is explained by a growth of first level capital (increase in funds and reserves, created from net income of previous years, by KZT329.2m) and second level capital due to attraction of subordinated debt at KZT483.3m. In 2000 a 30.0% increase was mainly achieved by increasing paid authorized capital of the bank by KZT354.8m, in first quarter of 2001 - as a result of an increase in funds and reserves created from net income of previous years. In 1998-2000 the assets of AMB CJSC grew up by KZT14.1bn, or 4.1 times (1998 to 1997 - by 1.1%, 1999 to 1998 - by 154.5%, 2000 to 1999 - by 57.6%), and by KZT6.6bn, or 35.5% in the first quarter of 2001. The main source of growth in 1999 and 2000 fell on loan portfolio (44.1% of total growth of assets in 1999 and 58.4% in 2000) and securities portfolio (20.9% of total growth of assets in 1999 and 45.2% in 2000). In the first quarter of 2001 main growth in the assets of AMB OJSC was due to an increase in the securities portfolio (42.2% of total growth of assets) and amounts in correspondent accounts (31.1% of total growth of assets). Loan portfolio was formed completely using stable funds (shareholders' equity and time deposits of the clients), which significantly reduces the risk of liquidity deterioration of the bank. In 1998 - 2000 and in first quarter of 2001 the bank's deposit base was firming. Significant amount of work was done with individuals and legal entities, new types of deposits were developed and introduced. During this period the number of existing accounts of legal entities increased 1.8 times, at 3,935 accounts as of January 1, 2001. The number of accounts of individuals increased 2.4 times, to 3,374. In 1999 volume of deposits increased 3 times relative to previous year, at KZT8.9bn, in 2000 - by 36.5%, at KZT12.2bn, in first quarter of 2001 - by 66.1%, at KZT20.2bn. Further on, the bank intends to keep working on attracting the funds of the individuals as the main source of funds. From the establishment and till now the bank adheres to a conservative credit policy. The main core of the bank's business - trade financing of the companies engaged in exports and imports. In 1999 and 2000 due to unstable economy the bank conducted short-term financing policy to reduce the risk of unpaid loans due to the deterioration of the borrowers' financial situation in long-term period. Loan portfolio of AMB OJSC was steady growing due to increase in clients base and, as a result, growth in number of borrowers, activation of the bank's activities in financing of major companies in real sector of the economy, as well as small and mid-sized business. As of Jan 01, 2001 volume of loan portfolio reached about KZT8.6bn and increased 5.8 times compared to 1998. In first quarter of 2001 the loan portfolio increased by KZT875.5m, or 10.1% to 2000, at KZT9.6bn. As of Dec 31, 1998 and 1999 the loans granted to 10 major clients accounted for about 60% of the loan portfolio. In 2000 the concentration level of the loan portfolio significantly decreased, at 37%. Quality of loan portfolios of AMB CJSC and AMB OJSC ------------------------------------------------------------------------------ as of Jan 1.99 as of Jan 1.00 as of Jan 1.01 as of Apr 1.01 --------------- --------------- --------------- --------------- th., th., th., th., Loan KZT % KZT % KZT % KZT % -------------- --------- ----- --------- ----- --------- ----- --------- ----- Standard 1,021,452 63.3 3,237,137 67.5 6,756,185 75.4 6,580,597 66.3 Substandard 420,306 26.1 1,432,445 29.8 2,018,563 22.5 2,906,510 29.3 Unsatisfactory 57,702 3.6 115,550 2.4 20,656 0.2 315,744 3.2 Doubtful with high risk 96,796 6.0 10,572 0.2 13,867 0.2 384 0 Bad debt 17,067 1.0 3,486 0.1 148,379 1.7 115,963 1.0 -------------- --------- ----- --------- ----- --------- ----- --------- ----- Total 1,613,323 100.0 4,799,190 100.0 8,957,650 100.0 9,919,198 100.0 ------------------------------------------------------------------------------ Loan provisions created by AMB CJSC and AMB OJSC -------------------------------------------------------------------------- as of Jan 1.99 as of Jan 1.00 as of Jan 1.01 as of Apr 1.01 -------------- -------------- -------------- -------------- th., th., th., th., Loan KZT % KZT % KZT % KZT % -------------- -------- ----- -------- ----- -------- ----- -------- ----- Standard 0 0 0 0 0 0 0 0 Substandard 23,478 22.9 73,342 69.0 103,828 39.4 162,240 46.4 Unsatisfactory 13,551 13.2 24,120 22.7 4,131 1.6 70,917 20.3 Doubtful with high risk 48,398 47.2 5,286 5.0 6,934 2.6 192 0.1 Bad debt 17,067 16.7 3,486 3.3 148,379 56.4 115,963 33.2 -------------- -------- ----- -------- ----- -------- ----- -------- ----- Total 102,494 100.0 106,234 100.0 263,272 100.0 349,312 100.0 -------------------------------------------------------------------------- INCOME Operating income of the bank in 1999 increased by 60.1% relative to 1998, in 2000 - by 62.4% to 1999, and in three months of 2001 - by 32.1% to similar period of 2000. Significant proportion of income is derived from interests (growth from 42% in 1998 to 63% as of Apr 1, 01) and commissions, with account for 20% of the bank's income on average. By the information of AMB OJSC growth of interest income is due to the increase in loan portfolio. Weighted average rate on attracted funds was at 3.2% in 1998, in 1999 - 3.7%, in 2000 - 4.3%. Interest rate on the loans granted to clients equaled: as of Dec 31, 98 on USD loans - from 16% to 23%, on KZT loans - from 10% to 30%; As of Dec 31, 99 on USD loans - from 10% to 28%, on KZT loans - from 10% to 30%; As of Dec 31, 00 on USD loans - from 12% to 23%, on KZT loans - from 13% to 25%. EXPENSES The most of the expenses were incurred on interest expenses of the bank (15% of total expenses in 1998, in 1999 - 12%, in 2000 - 22%, as of Apr 1, 01 - 33%). Administrative and personnel expenses take the significant share. Based on the bank's financial statements, this type of expenses are tend to decrease (in 1998 - 33%, in 1999 - 35%, in 2000 - 25%, as of Apr 1, 01 - 21%). NET INCOME Growth of the bank's net income in 1998 to 1997 reached 145.5%, in 1999 to 1998 - 34.3%, in 2000 to 1999 - 3.0%. Net income of the bank reached KZT161.6m in 3 months of 2001, or 96.6% more than in similar period of 2000. Return on assets (ROA) and return on equity (ROE) are tend to decrease as assets and equity grow faster than the net income. As of Jan 1, 99 ROA = 7.60%, as of Jan 1, 00 - 4.01%, As of Jan 1, 01 - 2.62%. ROE figures for the same periods - 34.98%, 31.96% and 24.77%, respectively. However, ROA and ROE figures of AMB OJSC are one of the highest among Kazakhstani banks. CREDIT LINES The bank is a participant of small-scale business development program under the EBRD and Small Scale Business Development Fund (SSBDF). Under this program $72.5m credit line was opened at 9% APR for 10 years. This program also included an agreement between AMB OJSC and SSBDF on additional supplementary credit of $3.2m in total for 3.5 year each with semiannual payment of the interest: - $750.0 th., at 9.38% APR (from March 18, 98 through Oct.13, 01); - $950.0 th., at 8.63% APR (from Oct.26, 98 through Apr.29, 02); - $800.0 th., at 10.19% APR (from March 6, 00 through March 6, 04); - $700.0 th., at 8.53% APR. Actual volume of loans as of June 1, 01, granted by the bank under this credit line is $3.4m, the number of borrowers - 317. The borrowers are private entrepreneurs and small companies with foreign participation of up to 50%. Under the Kreditanstalt Fuer Wiederaufbau (KFW) credit line based on two inter government agreements dated May 22, 95 and Nov 26, 97 between the Germany and Kazakhstan, the bank received DM27.0m for 10 years, with preference period of 3 years, and interest rate of 5% APR. The first receipt of DM2m has been already utilized and used in financing of agricultural projects. As of June 1, 01, under the KFW credit line 6 projects have been financed for a total of DM3.1bn. Under the World Bank credit line, the funds were received through the Ministry of Finance of Kazakhstan, three agreements have been signed for a total of $230.0 th.: - first agreement - for $140.0 th. at 7.16% APR for Oct.26, 00 through Dec.1, 01; - second agreement - for $70.0 th. at 12.0% APR for Feb.21, 01 through Nov.25, 02; - third agreement - for $20.0 th. at 12.0% APR for Feb.21, 01 through Dec.25, 02;