ESSAY - Kazakhstan banks went to people

/REUTERS, Almaty, Oljas Auezov, February 12, 03/ - Sandwiches fall with butter on the ground. If your butter is corporate banking, natural air bag while falling will be bread - consumer crediting. Till recently Kazakhstan banks could afford putting butter right on sausage, however the increased competition on account of decrease of yield of operations with large corporate clients at open market made them remember about bread start developing the rather undeveloped consumer crediting market. Assets of Kazakhstan banking system, which is often called "the best in CIS", were growing during last two years very quickly having reached by today $7.4 bn or about 30% of GDP. Growth of the largest economics of Central Asia, which is stirred up by increase of the world prices for oil and metals, is calculated with double figures, and within 10 years by 2010 Kazakhstan GDP is to increase two times. At that, major engine of the growth will be mineral resource industry, where key players are state and foreign companies, which less and less need borrowed resources as the world prices for raw stuff grow and estimation of their credit risks improve. The significant part of 15-million Kazakhstan population is busy in oil industry, and in some country's oblasts average salary still does not exceed $30 a month though average salary in the country as the whole - $130 - remains on this level for several years already that prevents growth of consumer expenses and makes banks work only with a small group of well- provided Kazakhstan people in big cities and oil centers. UNDER THE PRESSURE OF CIRCUMSTANCES "Yield of large corporate clients crediting will fall, - says managing director of the largest in Kazakhstan Kazkommertsbank Magzhan Auezov. - The reason is growth of competition from outside of western banks, which was caused by increasing of sovereign credit rating and markets of capital". Moody's agency in September of 2002 upgraded credit rating of Kazakhstan to investment level "Ваа3", and stable growth of assets of largest domestic investors - pension funds - makes more significantly cheaper the cost of borrowed funds for large domestic companies and allows them to attract "long" money. For example, yield of five-year eurobonds of oil-transportation state company Kaztransoil with maturity in 2006 is now equal to about 7.0% APR, whereas yield of eurobonds of Kazkommertsbank and the second largest bank TuranAlem with maturity in 2007 - approximately 7.5-7.6%. Population's deposits, to the share of which about a quarter of banking system's liabilities fall, also require more profitable investing: according to the National Bank's data, weighted average interest rate on deposits in tenge by the end of 2002 was 11.0%, on deposits in foreign currency - 6.9%. Besides, exceptional orienting on corporate crediting makes any bank vulnerable for possible leaving of one or several large clients. "The high concentration of risks on in individual clients, which is typical for this country's banks, causes anxiety", - says the analytical review of Kazakhstan banking system, which was published in January by rating agency Standard and Poor's. In search of new ways of profitable assets floatation Kazakhstan bankers turned to retail market. "This is like bread and butter - stable income from consumer crediting subjected to cycles corporate and investment banking, where it's possible to earn great profits and have great losses", - said Auezov from Kazkommertsbank. HIGH RISKS, EXPENSIVE CREDITS Foreign bankers also agree with it being based on their own experience. "Incomes from retail business equaled to 50% of total revenues of our bank in 2002 ", - said chief of the department on consumer crediting risks management of Holland bank ABN AMRO Chirstopher Norris to Reuters. The stake of consumer credits in credit portfolio of ABN AMRO equals to about one third, and in the opinion of Norris, Kazakhstan banks can achieve similar level during about five years. Now the stake of credits for physical persons (which also comprises loans for private enterpreneurs) in banks' total loan portfolio, which exceeds $4.3 bn, equals to less than 9%. "By the end of 2002 volume of credits (Kazakhstan banks) for physical persons was $378 m, having increased within the year by 84.4%, and the sum of credits giving for the year equaled to about $680 m", - said the director of marketing department of Kazkommertsbank Kunsulu Kapbasarova to Reuters. Now, according to Kapbasarova's words, about 200,000 credits fall to the share of 4.5 m of Kazakhstan working population, main part of which is within $1,000 - $10,000. "The past year was very active. Probably, this dynamics will be preserved in this year as well, and the increase will be 80% or $680 m, - she believes. - Volumes of credits giving are to increase two times to $1.2 bn". However Kazakhstan banks still do not receive significant profit from physical persons crediting, despite rather high interest rates - approximately one time and a half higher than for companies. "those 20% (APR), which bank takes from borrower, most probably, do not cover his expenses", - Auezov belives. According to his words, the significant part of means is spent for individual examination of credit application of each borrower. Besides, the rate comprises existing at the market high risks. BUREAU - A BOON FOR BANKER The way out from this situation, as banks consider, is foundation of loan office, which will collect and present information about borrowers. Sources of such the information, in their opinion, are to be both banks and other creditors of population: telecommunication companies, public utilities suppliers. "It's doubtless, the loan office will promote to quicker growth of consumer crediting, - Norris from ABN AMRO believes. - He removes uncertainty". "Presence of the loan office will allow to estimate more correctly the risk of default using probabilistic models, - Auezov agreed with him. - The result will be simple - it's greater availability of consumer crediting for population". National Bank of Kazakhstan has already developed project of bill about loan office, which is now coordinated with influential Association of financiers, which unites almost all domestic banks. The problem of the office in the end of January collected a rather impressive conference in Kazakhstan financial center - Alma-Ata. "In the second quarter the National bank is to resent the bill to the Parliament ", - said at the conference deputy chairman of the National bank Anvar Saidenov, having added that the office might be founded in the next year already. Main question, which caused disagreements between central bank and commercial structures is ownership form of founded again organization. Kazakhstan bankers want the office to be private, whereas it is said in the bill that the only shareholder of the founded organization will be the National Bank. Foreign partners also support bankers. "The best loan offices in the whole world are private organizations", - believes Jim Azis, co-owner of Canadian loan office Baja Group Consulting Services. Saidenov is sure the sides will find compromise and offer, as a variant, to found office as state-owned but set definite terms within which it may be privatized. Foreign experts, in their turn, note that within several years the loan office will require significant investments giving no profit. "This is a long process of funds spending, - Jim Azis shared his experience. - It requires no less than there years in order to found normal loan office". Besides, organizers of the office have to persuade banks in expediency of information exchange, and borrowers - that agreement to present of their own data to the office will be profitable for them. "Kazakhstan is the society, where cash dominate, - Jim Azis believes. - Population needs studying, education". [2003-02-12]