Kazakh bad loans fund sells €1.1bn in bonds, move may be linked to Tsesnabank headache

Kazakh bad loans fund sells €1.1bn in bonds, move may be linked to Tsesnabank headache
Grain fields near Kokshetau in Akmola region, northern Kazakstah. There's not such a pretty picture when it comes toTsesnabank loans made to the agricultural sector.
By bne IntelliNews September 26, 2018

Kazakhstan’s Non-Performing Loans Fund (NLF) has sold KZT450bn (€1.07bn) in domestic bonds, the Kazakh Stock Exchange (KASE) said on September 24.

The move by the state’s NLF, which buys up bad loans from commercial banks, comes after Kazakh officials said last week that they would complete a buyout of agricultural sector bad loans from the country’s second largest lender Tsesnabank within a few days. That buyout was valued at the same amount—the bond sales were likely intended to finance the deal.

The government wants to help Tsesna boost its financial strength by improving the quality of its loan book. Meanwhile, last week, the bank invited shareholders to vote on a new share issuance at an extraordinary general meeting. The vote is scheduled for October 18.

The 10-year bonds sold by the NLF yielded 9% and were sold to a single buyer, KASE said.

The state-run pension fund stands as the main investor on the Kazakh bonds market.

Lingering troubles
Banking analysts have been sizing up the latest announcements in relation to Tsesna to assess whether the Kazakh banking sector is suffering lingering troubles following despite last year’s $7.5bn bailout by the state. The central bank has been insisting that the bank has lately met all mandatory regulatory requirements. It has taken that standpoint despite a September 3 report that revealed a 30% plunge in Tsena’s liquid assets in the second quarter. The report certainly raised a few eyebrows, but Tsesna attributed the drop to mere attempts at getting rid of “excess liquidity”.

However, subsequently, on September 6, the lender contradicted itself in a statement which outlined how it had taken out a short-term KZT150bn (€344.5mn) loan from the central bank to boost its liquidity. Further muddying the picture, the bank added that it had already repaid KZT100bn of the credit and promised to pay back the rest in the very near future given that it had a “sufficient amount of liquid assets”.

Thus, the news outlining the government’s agreement to take the lender’s bad agricultural loans off its hands does not paint a reassuring picture of Tsesnab. The bank is reportedly heavily exposed to the agriculture sector. State holding KazAgro, focused on the agricultural sector, is apparently working with Tsesna on restructuring loans.