ATF Bank, Kazakhstan’s fifth-largest lender, has received a bailout from the Government and cash injections from the country’s sovereign wealth fund amid allegations of political favouritism.
ATF has struggled since it was acquired by oligarch Galimzhan Yessenov seven years ago. Moody’s, the ratings agency, stating last year that the bank had a “weak solvency position” and that “the quality of the bank’s earnings remains weak”.
Standard & Poor’s, another ratings agency, cut ATF’s credit score to B-/B last year citing concerns about bad debts and weak profitability at the bank. This is one of the lowest ratings that S&P awards and is considered “junk” status.
However, ATF’s financial position has been bolstered by large deposits of cash from Samruk-Kazyna – Kazakhstan’s $67 billion sovereign wealth fund.
According to local media reports, Samruk has cash deposits at ATF of more than 140 billion tenge ($350 million) while some Samruk-owned businesses have also poured hundreds of millions of dollars into ATF.
These deposits were made despite Samruk’s own rules allegedly prohibiting the sovereign wealth fund from putting cash into banks with a low credit rating. This apparent breach of rules has prompted questions from Kazakhstan’s public accounts committee.
Local media has also speculated that this favouritism towards ATF may be due to the bank’s chairman, Galimzhan Yessenov, being the son-in-law of Samruk’s chairman Akhmetzhan Yessimov.
Yessimov, a former mayor of Almaty, is close political ally of Nursultan Nazarbayev, who was president for 29-years until he stood down last year.
Galimzhan Yessenov, the son-in-law, was just 30-years old when he acquired ATF in 2013 for $500 million from UniCredit. The Italian bank had bought ATF for $2.1 billion in 2007 at the height of the credit boom but enormous bad debt provisions forced it to write off most of the purchase price.
Under Yessenov’s management, ATF has reduced some of its bad debts but the bank continues to perform poorly. Its income from interest, fees and commission fell by 44% to 74.8 billion tenge in 2018 from the year before. Pre-tax profits fell 26% to 19.2 billion tenge in the same period.
As a result of ATF’s difficulties, the bank was handed a 100 billion tenge (US$260 million) bailout by the National Bank of Kazakhstan in 2017. Negotiations are underway for another bailout as the country’s banking sector reels from further bad debts due to the current economic difficulties.
According to bankers in Kazakhstan, the bailout process is politically driven with bank owners who are close to the Government being the largest beneficiaries.
Euromoney, the financial magazine, quoted a banker saying: “They have taken a very selective approach, which is hard to explain by market mechanisms and economic motivations. It’s fairly clear though what the guiding principle has been. There are a number of individuals close to the presidential family in the Kazakh banking sector.”
Yessenov acquired ATF through a company called KazNitrogen Gaz, which was subsequently renamed KNG Finance. The origins of Yessenov’s wealth and the financing of the ATF purchase has not been revealed.
ATF owns a number of subsidiaries including Shymkent Brewery, the largest in Kazakhstan, and Optima Bank.