Kazakhstan's two largest banks agree merger, state offers aid

    Kazakhstan's two biggest lenders have provisionally agreed a deal whereby Halyk Bank HSBK.KZ (HSBKq.L) will take over its bigger rival Kazkommertsbank (KKB) KKGB.KZ, they said on Thursday.
    The central bank said the authorities planned to support the deal by helping Kazkommertsbank resolve its bad loan issues.
    The takeover is part of efforts to clean up Kazakhstan's banking system, which has struggled to recover from the 2008-9 financial crisis and has been beset by bad loans following the sharp slide in the price of oil, the former Soviet republic's main export.
    Halyk, which is controlled by Kazakh President Nursultan Nazarbayev's daughter Dinara and her husband Timur Kulibayev, said in January that a deal to take over Kazkommertsbank would be dependent on its rival agreeing to get rid of bad assets.
    Half of KKB's assets totaling $15.7 billion are tied up in a single loan to BTA, a former bank that is now a distressed asset management company. BTA has so far missed no repayments on that debt, but the outlook is uncertain.
    The two banks said in separate statements that they had signed a non-binding memorandum on a potential acquisition of a controlling interest in KKB by Halyk. They did not disclose the size of the stake acquired or the purchase price.
    The central bank said that the state-owned 'bad bank', the Problem Loans Fund, planned to purchase bad assets from Kazkommertsbank, majority-owned by local businessman Kenges Rakishev, but provided no details.
    The Kazakh authorities said last month they would inject 2 trillion tenge ($6.4 billion) into the Problem Loans Fund, topping up its current capital of about $1 billion, in order to buy bad loans from local banks, Reuters reported.
    SC Kazkommertsbank ("KKB") announces that it has on March 2, 2017 entered into a non-binding Memorandum of Understanding ("MoU") with respect to a potential acquisition by JSC Halyk Savings Bank of Kazakhstan ("Halyk Bank") of a controlling interest in KKB (the "Transaction"). The parties to the MoU include, amongst others, the Government of the Republic of Kazakhstan, the National Bank of the Republic of Kazakhstan, KKB, Halyk Bank, JSC BTA Bank and Mr. Kenges Rakishev (being a major shareholder in KKB).
    The MoU sets forth the framework and conditions under which the Transaction may be completed as well as outlines the steps that need to be undertaken by each of the parties in order to achieve this. The terms and conditions of the potential Transaction envisage, inter alia, the coverage of possible risks connected with the loan owed to KKB by JSC BTA Bank.
    KKB highlights the non-binding nature of the MoU and notes that the execution of the MoU does not imply the completion of the Transaction, which is subject to further actions by the parties and satisfaction of certain conditions precedent as set out in the MoU, according to a Kazkommertsbank press release.
    Halyk Bank hereby declares that it has signed a non-binding Memorandum of Understanding (“MoU”) with respect to a potential acquisition of a controlling interest in Kazkommertsbank (“KKB”). The parties to the MoU include, amongst others, the Government of the Republic of Kazakhstan, the National Bank of the Republic of Kazakhstan, Halyk Bank, KKB, JSC “BTA Bank” and Mr. Kenges Rakishev (being a major shareholder in KKB).
    The MoU specifies key principles of the potential transaction, including the actions required for its implementation and the participation of the state.
    The MoU is non-binding and any potential transaction is subject to customary due diligence by Halyk Bank and the National Bank of the Republic of Kazakhstan, final agreement of its terms between the parties, as well as appropriate internal, corporate and regulatory approvals and other conditions precedent.
    Halyk Bank evaluates the potential transaction from the standpoint of the interests of its shareholders and other stakeholders.
    As such, any possible decision to acquire a stake in KKB will only be taken in accordance with international standards, international rules relevant to Halyk Bank’s London listing of GDRs and the legislation of the Republic of Kazakhstan, following satisfactory completion of necessary due diligence and other procedures, and any subsequent transaction will be entered into on arm’s length terms and based upon the principle of fair market value, in the words of a Halyk Bank press release.