[Kazakhstan’s Banking Sector] #3 Astana Finance

Astana Finance (AF), which was established by the government to promote development in the capital city, was an active player in Kazakhstan’s mortgage and leasing sectors. Starting off as a residential mortgage lender, it gradually took a leading position in the agricultural leasing market as well. Initially this year things were going rather well in spite of the crisis, and earlier AF was even rumored to be interested in acquiring RBS Kazakhstan, the local subsidiary of the global banking giant.

Although AF lacks the international profile of its larger peers, it has recently been thrust into the spotlight in Kazakhstan, as in May the banking crisis hit home for bank. It was not part of the Kazakh government’s big bank bailout program earlier in 2009 - which was directed at BTA, Alliance Bank, Halyk Bank and Kazkommertsbank, the country’s four largest banks - but it became the third Kazakh lender after BTA and Alliance to default on its debt.  In total, AF has $1.2 billion in foreign debt that now needs to be restructured. Predictably, the default led Fitch Ratings to downgrade AF’s long term Issuer Default Rating (IDR) from ‘CCC’ to ‘RD’ (Restricted Default).

Astana Finance is now planning a lengthier restructuring process than either Alliance Bank or BTA, a luxury it can afford due to its less significant international exposure. Unlike Alliance and BTA, its network is reasonably small, and its historic government backing and focused remit left it less reliant than its peers on international markets. AF has initiated a financial and legal audit that it expects to take up to a year, with the results forming the basis for a restructuring plan to be presented to the Kazakh authorities as well as the bank’s creditors and investors.

However, AF, which bills itself as a “small, hardworking bank,” is going to have to work pretty hard to get itself out of the woods. In June, on the heels of its default, Kazakhstan’s Financial Supervision Agency (FSA) suspended AF’s brokerage license, its portfolio management license and its lending license, on the basis of the bank having insufficient funds. The suspension will be removed once the bank is back in compliance with funding requirements, but it is a source of concern that Samruk-Kazyna, the Kazakh sovereign wealth fund that owns the government’s AF stake, has not given assurances of additional financial support.  So where exactly the money will come from remains unclear.

Possibly related posts:

1. [Kazakhstan’s Banking Sector] #1 Alliance Bank
2. [Kazakhstan’s Banking Sector] #4 Kazkommertsbank
3. [Kazakhstan’s Banking Sector] #2 BTA Bank
4. [Kazakhstan’s Banking Sector] #5 Halyk Bank
5. [Quote of the Week] “Titanic of Kazakhstan’s banking sector…”