ABN AMRO sees home-grown Kazakh banking expansion

/REUTERS, Almaty, Michael Steen, March 1, 04/ - Kazakhstan's banking sector is mature enough already not to need to worry about an overnight invasion of foreign banking predators but is set for strong growth in coming years, said the head of ABN AMRO in Kazakhstan. Douglas Kennedy, the head of Dutch ABN AMRO's Kazakh subsidiary which is the largest foreign bank in the Central Asian state, told Reuters structural reforms and an economy buoyed by high oil prices would drive expansion. "From a risk profile both the country and by definition the counterparties have improved," Kennedy said in an interview. "Most people would say this is the time to be more aggressive." Kazakhstan's total $12 billion banking assets are around 40 percent of gross domestic product, much lower than the 60 to 70 percent in eastern Europe or 300 percent in the European Union, but it already has a sound financial infrastructure. Although the former Soviet state has a population of just 15 million people spread over a country the size of western Europe, rapid GDP growth has been fuelled by discoveries of huge oil reserves which could make it a big player in the next decade. "The Kazakh banks are well managed and my impression is they are quite conservative, both on the risk side and the cost side," said Kennedy. "On the cost side you can see that in how they've approached the retail market, they haven't just gone for a bricks-and-mortar saturation strategy." Kazakhstan's biggest bank, Kazkommertsbank, has assets of about $3 billion, dwarfing the $260 million of ABN AMRO in Kazakhstan, although the latter figure does not include deals done by ABN AMRO from outside Kazakhstan. ABN AMRO only serves a small base of retail customers -- the employees of its corporate customers -- but has sought out wealthy clients for its pension fund business while mainly focusing on wholesale banking, where it competes with HSBC and Citigroup. "The differences in cost of funds between local and foreign banks are decreasing but they are still there to such a degree that there is an advantage to foreign banks," said Kennedy, adding that foreigners also win on global reach. But he said the country did not face the scenario eastern Europe went through where foreigners nearly crowded out locals, because the Kazakh banks had already matured sufficiently. "I cannot imagine a situation where Kazakhstan would replicate the same foreign content in its banking market -- even if it was allowed by law -- as a Poland or a Czech Republic," he said. "There was a window that existed in 2000/2001 and that is now shut I think in many respects." ((Editing by Quentin Bryar; Reuters Messaging rm://michael.steen.reuters.com@reuters.net, +7 3272 508 500)) [2004-03-01]