Although financial regulator has formally completed current stage of banking sector improving through recent “Capital Bank Kazakhstan” license withdrawal and approval of its voluntary transfer to local «subsidiary» of “National Bank of Pakistan” actually everything looks like we are still far from desired stability.
What’s in a name?
As per operational reports data of regulator now its main attention will be probably focused on externally quite prosperous “First Heartland Jusan Bank” with a pretty solid shareholder. Let us remind that the bank has started its activity under the present name from April 2019 when it was rebranded that finally concealed the trademark of bankrupt Tsesnabank. The latter was purchased in February of the same year by JSC «First Heartland Securities an investment division of financial holding company of autonomous educational organizations group “Nazarbayev University”, “Nazarbayev Intellectual Schools” and “Nazarbayev Foundation”. The transaction looked intriguing from its very beginning not only due to such influential new shareholders but also not less authoritative previous owners – first of all Adilbek Dzhaksybekov the head of presidential administration and key owner of the multi-profile “Tsesna “Corporation”.
As a result of rebranding the former “Tsesnabank” received its current name that sounds unusual for home market “First Heartland Jusan Bank” with retail brand “Jusan Bank”. The fact is English word “Heartland” (translated into Russian – “core”, middle land) is the main concept of a long-standing geopolitical concept voiced by British researcher Halford J. Mackinder at the beginning of last century. Classical western geopolitics and geostrategy are based on the present concept. Representing north-eastern part of Eurasia bordered by mountain systems from the south and east “Heartland” includes Kazakhstan too. In this context the concept has some right to be present in bank name but without previous word “First” as there is no other “Heartland”. If we consider that “Jusan” is nothing but wormwood then the name of the bank literally sounds like «The first middle-land wormwood bank» and consequently there is no sense for any inhabitant point of view so do professional participant of market.
At that time “First Heartland Bank” was already existed on the market and was serving mainly corporate clients. Its predecessor was “Expocredit Bank” until January 2018 that inherited its economy from local “subsidiary” of the British giant “Royal Bank of Scotland”. The only shareholder of “First Heartland Bank” was the same JSC “First Heartland Securities”. At the end of June 2019 at an extraordinary meeting of both banks it was decided to join “Jusan Bank” to “First Heartland Bank”. The headquarter of united bank was found in Almaty where “First Heartland Bank” was originally based.
Saved by the whole world
As for “Tsesnabank” fallen into oblivion let us remind you on a huge financial assistance given to it by government and National Bank through various channels. For example in October 2017 “Tsesnabank” as a part of the program for financial stability improvement of banking sector got 100 billion tenge from National Bank through Kazakhstan Stock Exchange by placing 15-years bonds there. Later a short-term loan in amount of 150 billion tenge was taken from National Bank to provide additional reserve of liquidity. Daniyar Akishev was the head of National Bank at that period. Addition 70 billion tenge Tsesnabank got from home market by placing its long-term bonds there, total volume exceeded 70 billion tenge by the end of November as per its data. Its shareholders have performed bank capitalization increase in the amount of about 40 billion tenge.
Another 450 billion tenge “Tsesnabank” received from transaction on the sale of agricultural loans portfolio of JSC “Problem loans Fund”. Government and National Bank organized this rescue operation as new measures of additional support for agricultural sector. Totally by the beginning of 2019 “Tsesnabank” received over than 800 billion tenge as inflow. The result of such kind of support was as follows. While loan portfolio of “Tsesnabank” decreased by 17.4% in 2018 (the last year of operation) to 1 trillion 406.6 billion tenge, volume of problem loans with overdue payments over 90 days increased in 1.7 times to 123.9 billion tenge and its share in loan portfolio increased from 4.43% to 8.81%. The amount of overdue loans including overdue remuneration has also increased rapidly — in 1.9 times to 138.4 billion tenge.
Last time “Tsesnabank” appeared in consolidated financial statements of regulator in early April 2019. Volume of its loan portfolio was amounted to 840.3 billion tenge, problem loans with overdue payments over 90 days – 171.0 billion tenge, its share in loan portfolio was at the level of 20.35% and volume of overdue loans including overdue remuneration was amounted to 141.8 billion tenge. At the same time provisions created under loan portfolio in accordance with requirements of the IFRS were much larger – 853.3 billion tenge that gave quite a decent guarantee for “Tsesnabank” to get out of difficult situation and continue its operation on the market.
New faces and brands but problems seem to be the same
The reason why with such an impressive volume of provisions the Republic decided to stop torment of “Tsesnabank” who had the status of system-forming financial institution is still unclear. By the beginning of May it was replaced in statistical reports of regulator by “Jusan Bank” that started to promote its brand actively. Bank positioned itself on the market as a member of powerful financial group with serious support from influential “final” owners and young, ambitious top management. However membership of his “tops” changed quite often. “First Heartland Bank” was headed by Evgeny Pan and Tolganay Botakanova before joining “Jusan Bank”. By the moment of new Managers arrival Ulf Vokurka was the head of “Tsesnabank” jokingly referred to as “Doctor Death” in financial circles since he was the last chairman of the board of “Kazkommertsbank” prior its takeover by “Narodniy Bank of Kazakhstan”. Mr. Vokurka managed “Tsesnabank” for several months and after handed over obligaetions to Bekzhan Pirmatov in February 2019. The latter took position of chairman of bank’s board not for a long time too – he was replaced by Aibek Kayip in November of the same year, who has got so responsible position for the first time.
However personnel shuffling in new bank is an ordinary thing. Besides that, frame of its strategic management body – the Board of Directors is still stable. It is headed by Shigeo Katsu a former vice-president of the World Ban, and the deputy chairman is Yerbol Orynbayev who held influential government posts. Board of Directors also includes Evgeny Pan who is entrusted with management of JSC “First Heartland Securities”. By the way as per Kazakhstan Stock Exchange (KASE) the present company is not the “ultimate” owner of “Jusan Bank”, it belongs to UK-registered “Jysan Technologies Ltd.”. From the point of view of “final” ownership” “Jusan Bank”, “First Heartland Securities”, “Pioneer Capital Invest” LLP, “Jysan Technologies Ltd”, corporate funds “Development Fund” and “Social Development Fund”, autonomous educational organization “Nazarbayev Intellectual Schools”, autonomous educational organization “Nazarbayev University” and private fund “Nazarbayev Fund” form one group of persons.
Anyway the first appearance of “Jusan Bank” in consolidated statistics of regulator in a month after disappearance of “Tsesnabank” in it presented a surprise in the form of significant increase of problem loans with overdue payments over 90 days. It’s volume in April 2019 increased by 27.2% to 217.6 billion tenge and in absolute terms – to 46.6 billion tenge. At the same time loan portfolio of new bank decreased by 2.2% to 822.2 billion tenge and as its result share of problem loans in it increased from 20.35% to 26.46%. However as volume of formed provisions was pretty solid – 834.6 billion tenge, bank’s credit profile deterioration did not cause much concerns.
By the beginning of last year it was clear that situation became more complicated. Volume of provisions decreased obviously by 27.7% to 603.2 billion tenge while problem loans with overdue payments over 90 days increased by one and a half times to 325.9 billion tenge. Share of such loans in bank’s loan portfolio increased to frightening 38.54% with level set by regulator at 10%. Volume of overdue debt on loans including overdue remuneration also increased rapidly in comparison with May 1 — by 1.9 times to 267.9 billion tenge.
No doubts such expressive negative could be attributed to the first months of new bank’s operation when its top management has to go deep into extensive and thoroughly neglected “Tsesnabank” economy. However the results of last year showed that “Jusan Bank” continued moving the same dangerous course. For the year volume of provisions formed under the loan portfolio decreased by 36.1% to 385.3 billion tenge while volume of problem loans increased by 4.2% to 339.7 billion tenge and their share in loan portfolio increased to 47.73%. Volume of overdue debt on loans including overdue remuneration increased in 1.6 times last year to 420.0 billion tenge.
This year regulator published the latest summary data as of June 1. It shows that volume of formed provisions decreased to 372.4 billion tenge and volume of problem loans with overdue payments over 90 days reached 537.2 billion tenge. Increasing and share of such loans in loan portfolio of “Jusan Bank” continued to grow and by the beginning of summer it increased to 57.83%. Volume of overdue debt on loans including overdue remuneration increased to 537.2 billion tenge within 5 months of current year. It is clear that such persistent build-up of credit negativity by bank’s top management may indicate on its desire to follow not quite orthodox model of banking business.
To be continued…