1. finance
2. bank

How to fund Kazakhstan’s corporate sector in support of
fast GDP growth, investment and diversification?
Hans Holzhacker
ATFBank
May 2012
The authorities target high and diversifying GDP growth.
PLANNED GROWTH BY SECTOR
2011
% y oy
Agriculture
5.0
2012
2013
2014
2015
4.5
4.4
5.0
4.9
Idustry
6.0
6.5
6.2
7.8
9.1
Minin g
3.6
3.8
2.2
4.3
10.9
Manuf acturing
9.7
11.5
12.6
13.2
7.5
Electricity , gas, water
6.4
3.0
3.8
4.4
5.6
Canalisation, waste
disposal
4.0
2.7
3.5
4.1
5.3
Construction
2.5
3.1
1.8
1.0
0.7
12.0
10.0
9.0
8.6
8.2
Transportation
7.0
7.5
7.2
8.0
7.7
Telecom
7.0
8.0
8.0
9.0
8.0
GDP
7.0
6.9
6.5
7.1
7.4
Services
Trade
Source: Ministry of Economic Dev elopment and Trade, UniCredit Research
Source: Directions of social-economic development 2011-2015, adopted by the government on 23 June 2011
2
Required investment spending is substantial and not yet
fully identified.
KZTbn
2011
2012
2013
2014
2015
2011-2015
2011-15
EURbn
Required investment outlays
5763
6113
6399
6989
7565
32829
159
5628
5313
5133
5259
5289
26622
129
Own funds of companies (amortization)
2573
2530
2680
2467
2665
12916
62
Budget
1230
1055
853
1258
1280
5675
27
Own new funds of companies
897
796
661
593
399
3346
16
Pivate funds for upgrading housing
29
32
38
42
45
185
1
FDI
900
900
900
900
900
4500
22
136
800
1266
1730
2276
6207
30
Identified, among them
Not yet identified
Source: Directions of social-economic development 2011-2015, adopted by the government on 23 June 2011
3
Foreign funding of the corporate sector has held up well.
Foreign liabilites of companies, USDbn
140
Loans
Trade credits
120
25.7
Debt securities
24.6
Other FDI capital (mother company loans)
100
Equity liabilities to direct investors
8.7
9.7
23.0
Total
80
19.820.8
60
57.3
12.5
49.8
43.0
40
8.0
20
22.2
34.936.2
27.6
Source: NBRK, ATFBank Research
4
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
0
Dec-07
19.3
11.3
37.1
32.6
29.1
24.722.9
Foreign debt is at USD 120bn more than2 times the funding by
loans from domestic banks (USD 54bn).
Diversification has however been little financed from abroad.
Gross External Debt
USD mn
Intercompany lending
% of total
USD mn
% of industry
TOTAL
123,848
100.0%
59,918
48.4%
MINING AND QUARRYING
9,624.0
7.8%
5,094.0
52.9%
extraction of crude petroleum and natural gas
6,706.4
5.4%
3,672.8
54.8%
mining of metal ores
1,846.8
1.5%
1,143.3
61.9%
MANUFACTURING
5,539.9
4.5%
453.0
8.2%
manufacture of basic metals
3,412.5
2.8%
117.4
3.4%
non-metal manufacturing
2,127.4
1.7%
335.6
4.7%
976.9
0.8%
11.7
1.2%
CONSTRUCTION
4,106.6
3.3%
934.3
22.8%
WHOLESALE AND RETAIL TRADE, REPAIR OF MOTOR VEHICLES,
MOTORCYCLES AND PERSONAL AND HOUSEHOLD GOODS
6,585.7
5.3%
1,061.4
16.1%
10,060.3
8.1%
1,124.8
11.2%
7,070.3
5.7%
159.4
2.3%
FINANCIAL INTERMEDIATION
17,483.0
14.1%
166.2
1.0%
REAL ESTATE, RENTING AND BUSINESS ACTIVITIES
63,979.4
51.7%
50,952.7
79.6%
legal, accounting, book-keeping and auditing activities, tax consultancy,
market research, business and management consultancy
11,607.7
9.4%
1,621.9
14.0%
geological exploration and prospecting activities
50,078.0
40.4%
48,625.2
97.1%
Oil and metals
69,114.0
55.8%
53,718.1
77.7%
ELECTRICITY, GAS AND WATER SUPPLY
TRANSPORT, STORAGE AND COMMUNICATION
transport via pipelines
5
Total at 31.12.11
Source: NBRK, ATFBank Research
The debt of Kazakhstani companies is substantial, but lower
than in most of Europe and concentrated in oil and metals.
Has sufficient deleveraging /
debt restructuring taken
place in Europe or in
Kazakhstan?
Kazakhstan, large and
medium companies,
3Q 2011 (89%, USD 165bn),
3Q 2007 (81%, USD 84bn)
Source: IMF-GFSR, ASRK,
ATFBank Research
6
Loans (to residents by domestic banks) over GDP
is almost down to 2005 levels. There is room for new lending.
Ratio of loans and deposits to GDP, %
Total loans
Corporate loans
Total Deposits
Corporate deposits
70
60
50
40
30
20
10
0
2004
2005
2006
2007
2008
2009
2010
2011
Source: NBRK, ASRK, ATFBank Research
7
Lending to manufacturing, transportation is up. Loan demand by trade
will recover when the running down of inventories and capacity will
come to an end. Loan demand by construction will rise with investment.
Loans, investment and GDP growth by sectors,
2011, % yoy
60
58.3
Developing
Special case
Deleveraging
50
40.3
40
30
26.7
22.4
20
10
16.9
9.1
6.2
16.1
15.6
14.5
7.5
6.8
6.9
2.4
1.3
2.7
0.2
0.2
0
-6.6
-10
-5.1
-9.7
-20
Manufacturing
Transportation
Loans, % yoy
8
Agriculture
Total economy
real GDP, % yoy
Mining
Trade
Construction
Investment in fixed assets, % yoy
Source: NBRK, ASRK, ATFBank Research
Diversification requires substantial further increase in
lending to manufacturing, transportation and agriculture.
Loans by Kazkahstani banks to main industries,
stocks, eop, KZTbn
5000
4500 277
289
4000 220
3500
222
290
252
476
455
237
336
Telecom
354
Other industry
721
Mining
3000
2500
Agriculture
1554
1377
1306
Transportation
2000
Manufacturing
1500
1000 1840
1824
1827
Construction
500
Trade
9
12.11
10.11
8.11
6.11
4.11
2.11
12.10
10.10
8.10
6.10
4.10
2.10
12.09
0
Source: NBRK, ATFBank Research
Manufacturing companies borrowed USD 4.3bn from domestic banks
+ USD 2.1bn from abroad; this is together 3.6% of corporate borrowing (domestic
+ cross-border) vs. an 11% contribution to GDP.
Where will the funding of the future credit growth come from? The
loan-deposit ratio sharply declined in 2008, 2009. It has remained
stable since the second half of 2010…
Kazakhstan, loans/deposits, %
220
210
200
190
180
170
160
150
140
130
10
Source: NBRK, ATFBank Research
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
120
…but the underlying structure has changed. Now households finance
the corporate sector, which’s net borrowing already exceeds the level of
2007. Banks’ foreign assets are now higher than their liabilities.
Loan-deposit gap, KZT bn
5,000
Retail
Corp
Net external liabilities
Interpolation
Sufficient corporate debt
restructuring?
4,000
3,000
2,000
1,000
0
BTA Foreign debt
Dec-05
Feb-06
Apr-06
Jun-06
Aug-06
Oct-06
Dec-06
Feb-07
Apr-07
Jun-07
Aug-07
Oct-07
Dec-07
Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
-1,000
11
Source: NBRK, ATFBank Research
Deposits account for 68% of liabilities now vs 38% in early
2008, wholesale funding lost in importance.
1.1.08
KZTbn
Interbank deposits
1.1.12
% of total
KZTbn
% of total
Delta,
KZTbn
% yoy
319.9
3.1
106.4
0.9
-50.5
-108.6
1798.2
17.5
491.3
4.3
-10.4
-57.2
7.7
0.1
72.2
0.6
23.6
13.8
85.1
0.8
54.9
0.5
-29.4
-22.9
Deposits received
from legal entities
2447.1
23.9
5033.5
43.7
10.0
459.1
Deposits by natural
persons
1447.9
14.1
2764.1
24.0
22.8
513.2
Deposits by SPVs
2529
24.7
1.5
0.0
-94.1
-23.9
Securities issued
467.6
4.6
1498.1
13.0
-5.0
-79.1
“Repo” operations with
securities
245.4
2.4
497.0
4.3
-13.9
-80.2
Other liabilities
911.6
8.8
997.3
8.7
23.1
186.9
10259.5
100.0
11516.3
100.0
7.5
801.1
Loans, received from
other banks
Loans received from the
government
Loans received from
IFIs
Total liabilities
Source: KFN
12
However, corporate deposits have begun to grow more
slowly.
Deposits by residents, % yoy
Corporates
Retail
Total Deposits
120
100
Feb 2009: about 10pp devaluation effect
+ 28pp on corporate (14 pp overall)
thanks to Samruk-Kazyna deposits
80
60
40
20
13
Dec-11
Aug-11
Apr-11
Dec-10
Aug-10
Apr-10
Dec-09
Aug-09
Apr-09
Dec-08
Aug-08
Apr-08
Dec-07
Aug-07
Apr-07
Dec-06
0
Source: NBRK, ATFBank Research
Households stepped in in 2011 thanks to decent income growth.
Some companies run down their savings in order to invest.
Deposits, change in stocks, KZTbn
1200
Households
1000
835
800
600
400
200
789
302
529
Private companies
508
State-owned
companies
264
270
0
-249
-200
Total
-400
2010
14
2011
Source: NBRK, ATFBank Research
The Kazakhstani banks have continuously reduced their
foreign liabilities since 2008.
40
10
30
5
20
0
10
-5
0
-10
-10
-15
-20
-30
-40
-50
Jan-02
15
-20
Foreign liabilities (USDbn)
Foreign assets (USDbn)
Net foreign assets (% of GDP, rhs)
Jan-04
Jan-06
Jan-08
-25
-30
Jan-10
Source: NBRK, ATFBank Research
So how to fund Kazakhstan’s (non-resources) corporate sector in
future in support of fast GDP growth, investment and diversification?
 Further encourage household saving and deposit growth.
Households have developed to an important funding base for the
Kazakhstani corporate sector.
Attract again more wholesale funding and also foreign
refinancing of the banking system despite the rather adverse
international environment.
 Both purposes would be helped by
- the fixing of the problems of the banking system
- the repair of companies’ balance sheets
via the Impaired Asset Fund and other initiatives.
 In addition, measures were desirable to make the funding base
of the banking system more long-term and stable and thus
making the long-term financing of investments easier.
16
Disclaimer
The information in this publication is based on carefully selected sources believed to be reliable. However we do not make any representation as to its accuracy or completeness. Any
opinions herein reflect our judgement at the date hereof and are subject to change without notice. Any investments presented in this report may be unsuitable for the investor depending
on his or her specific investment objectives and financial position. Any reports provided herein are provided for general information purposes only and cannot substitute the obtaining of
independent financial advice. Private investors should obtain the advice of their banker/broker about any investments concerned prior to making them. Nothing in this publication is
intended to create contractual obligations. UniCredit Corporate & Investment Banking consists of Bank Name, UniCredit Bank AG, Munich, UniCredit Bank Austria AG, Vienna, UniCredit
CAIB Securities UK Ltd. London, UniCredit S.p.A., Rome and other members of the UniCredit Group. UniCredit Bank AG is regulated by the German Financial Supervisory Authority
(BaFin), UniCredit Bank Austria AG is regulated by the Austrian Financial Market Authority (FMA), UniCredit CAIB Securtities UK Ltd. is regulated by the Financial Services Authority
(FSA), UniCredit Bank AG, Milan Branch, and UniCredit S.p.A. are regulated by both the Banca d'Italia and the Commissione Nazionale per le Società e la Borsa (CONSOB).
Note to UK Residents: In the United Kingdom, this publication is being communicated on a confidential basis only to clients of UniCredit Corporate & Investment Banking Division
(acting through UniCredit Bank AG, London Branch ("HVB London") and/or UniCredit CAIB Securities UK Ltd. who (i) have professional experience in matters relating to investments
being investment professionals as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 ("FPO"); and/or (ii) are falling within Article
49(2) (a) – (d) ("high net worth companies, unincorporated associations etc.") of the FPO (or, to the extent that this publication relates to an unregulated collective scheme, to
professional investors as defined in Article 14(5) of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 and/or (iii) to
whom it may be lawful to communicate it, other than private investors (all such persons being referred to as "Relevant Persons"). This publication is only directed at Relevant Persons
and any investment or investment activity to which this publication relates is only available to Relevant Persons or will be engaged in only with Relevant Persons. Solicitations resulting
from this publication will only be responded to if the person concerned is a Relevant Person. Other persons should not rely or act upon this publication or any of its contents. The
information provided herein (including any report set out herein) does not constitute a solicitation to buy or an offer to sell any securities. The information in this publication is based on
carefully selected sources believed to be reliable but we do not make any representation as to its accuracy or completeness. Any opinions herein reflect our judgement at the date hereof
and are subject to change without notice. 9 We and/or any other entity of UniCredit Corporate & Investment Banking may from time to time with respect to securities mentioned in this
publication (i) take a long or short position and buy or sell such securities; (ii) act as investment bankers and/or commercial bankers for issuers of such securities; (iii) be represented on
the board of any issuers of such securities; (iv) engage in "market making" of such securities; (v) have a consulting relationship with any issuer. Any investments discussed or
recommended in any report provided herein may be unsuitable for investors depending on their specific investment objectives and financial position. Any information provided herein is
provided for general information purposes only and cannot substitute the obtaining of independent financial advice. HVB London is regulated by the Financial Services Authority for the
conduct of business in the UK as well as by BaFIN, Germany. UniCredit CAIB Securities UK Ltd., London, a subsidiary of UniCredit Bank Austria AG, is authorised and regulated by the
Financial Services Authority. Notwithstanding the above, if this publication relates to securities subject to the Prospectus Directive (2005) it is sent to you on the basis that you are a
Qualified Investor for the purposes of the directive or any relevant implementing legislation of a European Economic Area ("EEA") Member State which has implemented the Prospectus
Directive and it must not be given to any person who is not a Qualified Investor. By being in receipt of this publication you undertake that you will only offer or sell the securities described
in this publication in circumstances which do not require the production of a prospectus under Article 3 of the Prospectus Directive or any relevant implementing legislation of an EEA
Member State which has implemented the Prospectus Directive.
Note to US Residents: The information provided herein or contained in any report provided herein is intended solely for institutional clients of UniCredit Corporate & Investment Banking
acting through UniCredit Bank AG, New York Branch and UniCredit Capital Markets, Inc. (together "HVB") in the United States, and may not be used or relied upon by any other person
for any purpose. It does not constitute a solicitation to buy or an offer to sell any securities under the Securities Act of 1933, as amended, or under any other US federal or state
securities laws, rules or regulations. Investments in securities discussed herein may be unsuitable for investors, depending on their specific investment objectives, risk tolerance and
financial position. In jurisdictions where HVB is not registered or licensed to trade in securities, commodities or other financial products, any transaction may be effected only in
accordance with applicable laws and legislation, which may vary from jurisdiction to jurisdiction and may require that a transaction be made in accordance with applicable exemptions
from registration or licensing requirements. All information contained herein is based on carefully selected sources believed to be reliable, but HVB makes no representations as to its
accuracy or completeness. Any opinions contained herein reflect HVB's judgement as of the original date of publication, without regard to the date on which you may receive such
information, and are subject to change without notice. HVB may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in
any report provided herein. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them. Past performance should not be taken as
an indication or guarantee of further performance, and no representation or warranty, express or implied, is made regarding future performance. HVB and/or any other entity of UniCredit
Corporate & Investment Banking may from time to time, with respect to any securities discussed herein: (i) take a long or short position and buy or sell such securities; (ii) act as
investment and/or commercial bankers for issuers of such securities; (iii) be represented on the board of such issuers; (iv) engage in "market-making" of such securities; and (v) act as a
paid consultant or adviser to any issuer. The information contained in any report provided herein may include forward-looking statements within the meaning of US federal securities laws
that are subject to risks and uncertainties. Factors that could cause a company's actual results and financial condition to differ from its expectations include, without limitation: Political
uncertainty, changes in economic conditions that adversely affect the level of demand for the company‘s products or services, changes in foreign exchange markets, changes in
international and domestic financial markets, competitive environments and other factors relating to the foregoing. All forward-looking statements contained in this report are qualified in
their entirety by this cautionary statement.
17
Thank you for your attention!
I can be reached at [email protected]