Kazakh banking sector reaches bottom; BTA and Alliance restructuring to impact further growth

Kazakhstan's banking sector reached the bottom this fall and is now on its way to recovery, according to a research report authored by Russian investment bank VTB Capital.

The bank attributes this view to three main factors: the favorable forecasts for commodity prices, the influx of Chinese capital into Kazakhstan's economy, and relatively small foreign debt payments next year.

"In 2010, Kazakh banks need to pay a total of $3.8 billion which, in our opinion, is fully feasible," according to VTB Capital research report.

As such, Kazakh banks are beginning to look increasingly attractive from an investment point of view. Successful restructuring BTA Bank and Alliance Bank debt should have additional positive impact, since the banking sector suffers from uncertainty surrounding the process.

"Banks are experiencing problems with funding because of the lack of clarity over the restructuring process of BTA and Alliance," ATF Bank head Alexander Picker told Kazakh business weekly Expert Kazakhstan.

According to VTB Capital, bank lending will grow on average by 16 percent per year in 2009 to 2012. Reducing payments on provisions should also boost profits in 2010 and beyond.

VTB Capital analysts say that the Kazakh economy is increasingly refocusing itself on the Chinese market. The influx of Chinese capital into Kazakh economy in the form of foreign direct investment and long-term loans will total up to $13 billion.

The state, meanwhile, which has already provided significant resources to bolster the country's banks, will continue to play an increasingly active role in the banking system.

SRI