According to the table we can conclude that in 2008 were decrease in amount of liabilities by 15%. It means that there was decrease in number of deposits opened by ATF to physical faces, deposits from correspondent accounts of other banks. There were decrease in deposits and balances from banks by 43%, in current accounts and deposits from customers by 10%. Other liabilities also were in minus by 12%. Only amount of issued securities increased in 2008 by 17%. The biggest amount in operations of foreign bank belongs to current accounts and deposits from customers, second place take debt securities issued and at the third place deposits and balances from other banks.
In 2009 were changes in all items to the better side. There were decrease in deposits and balances from banks for 79%. It means that ATF bank didn’t use money from other commercial banks and rested for it’s own capital. Current accounts and deposits from customers increased by 46% and 10% increase in other borrowed funds , we can conclude, that work of deposit and credit departments was very high. There also was increase in other liabilities of bank by 46%. Also we can see increase of all items of liabilities: deposits and balances from banks by 3,4%; current accounts and deposits by 50%; other borrowed funds by 45%. Liabilities of ATF bank in 2009 increased by 7%, so we can conclude that trust to ATF bank, their credits and deposits increased.
Table 3 – Equity of ATF bank, million tenge, [7]
| 2009 | 2008 | 2007 | Rate of increase2009 | Rate of increase 2008 | |
| Share capital | 106,878,518 | 89 170 492 | 57 897 607 | 19,86 | 54,01412 |
| Additional –in paid capital | 242,185 | 242 185 | 242 185 | - | - |
| General reserve | 15 181 181 | 15 181 181 | 333 799 | - | 4448,001 |
| Minority interest | - | 434 824 434 824 | 603 000 603 000 | - | (27,8899) |
| R/E | (61 674 996) | (6 899 432) | 15 823 873 | 793,9141 | (56,3986) |
| Total equity | 60 087 712 | 98 129 250 | 74 900 464 | (37,0531) | 31,01287 |
Source: Financial report of ATF bank 2007,2008, 2009
When ATF signed a contract with UniCreditGroup amount of their share capital was 57 897 607 tenge. But in 2008 we can see a shell increase by 54%. So, we can say that enter to this agreement was favorable for bank. Increase in share capital influenced to relative density in 2008, because of it there was increase the total equity of commercial bank by 31%. Also were decrease in returning earnings of bank by 56% and decrease in minority interest by 28%.
In 2009 the amount of share capital increased by 19,86%. It means that the inputs to this bank increased. It is connect with increase of credits, that bank gives, increase in amount of deposits and return of loans by physical and legal entities. There were no changes in additional-in paid capital and general reserve in 2009. Relative density in additional-in paid capital increased by 0,2266%, and general reserve increased by 14,20% in 2009. But we can see that there are also decrease in revaluation reserve and returning earning by 0,85% and 57,7%. According to R/E we can conclude, that the profit of bank increased according to the 2008, because of increase of operations of bank. We can see decrease in important for bank stages for it’s development and it brings the growth of capital of ATF bank. So we can conclude, that in 2009 ATF bank had better financial year than it was in 2008 and perspectives of development of this bank increase.[7]
Rating is the face for every commercial bank with foreign participation.Rating is assigned to an independent credit agency and is an expression of willingness of the banking institutions to fulfill their financial obligations. Ratings of banks have become a major information resource in the banking sector. The importance ratings, suggests not only that customers of banks and bankers are listening to these indicators. Rating agency is still the most important criterion for the reliability of the financial institution or financial and credit system of the whole state. Rating agencies tend to define the degree of riskiness of financial transactions in various markets, and banks are grouped in the rankings on the riskiness of deposits in them. Various rating agencies have different factors that determine the position of a bank in the ranking, as well as different calculate these or other economic indicators for assigning to the bank places in the ranking. Therefore, an experienced investor, lender or investor will never rely on only one rating, using just a few. First rating of ATF bank done by “Fitch Ratings” :
· Long-term issuer default rating in foreign currency: confirmed at level' BBB'; the prognosis is changed from negative to stable.
· Short-term issuer default rating in foreign currency: confirmed at level 'F3'
· Long-term issuer default rating in national currency: confirmed at level 'BBB'; the prognosis is changed from negative to stable.
· National long-term rating: confirmed at level‘ AAA’, The prognosis is stable
· Support rating: confirmed at level'2'
· Individual rating: confirmed at level 'D / E'
· Priority unsecured rating of debt obligations: confirmed at level ‘ BBB’
· National priority unsecured rating of debt obligations: confirmed at level "AAA".
Moody ' s rating :
· Rating of financial stability: ”E+”
· Deposit rating in local currency: ”Ba1”
· Rating of priority unsecured debt in foreign currency: ”Bа1”
· Rating of subordinated debt in foreign currency: was changed from Ba3 to B1.
“Negative” prognosis was changed to “stable”.
We can conclude that the presence of foreign subsidiary banks in Kazakhstan is a positive factor in creating the necessary Kazakhstan banks to compete in the market. National Bank of Kazakhstan created equal conditions of work for Kazakhstan banks and foreign subsidiaries on the territory of country. Kazakhstan banks, adopting the experience of foreign banks, must gradually become a transnational, first gaining the trust of its main customers, and then, with their growth beyond the borders of Kazakhstan.[8]
CHAPTER 3. PROSPECTS OF THE DEVELOPMENT OF BANKING SYSTEM OF KAZAKHSTAN
There are 31 banks with non-resident capital contribution were registered in the beginning of the year 2009.
There are 3 main types of strategy which determine positioning of foreign banks on internal market of banking services:
· Universal (multi-product or multi-clients). Bank tries to expand its presence in all promising sectors of banking activities. It may not have any key competitive advantages in any sector but it aims to achieve them in the future.
· Specialized (mono-product or mono-clients). Bank has key competitive advantage in some client or product niche (mortgages, auto credits, plastic cards etc). This market or client niche has promising growth prospects which justify bank’s narrow specialization. Once bank consolidated its position it is trying to save its competitive advantages in the future and this lets him to get maximum benefit from expected extension of the chosen segment;
· Mixed (either multi-product and mono-clients or mono-product and multi-clients). Bank either takes into account its present competitive advantages or focuses on one type of clients giving them wide range of services or it provides wide range of clients with one type of service. This choice is explained by the difficulty of identifying fast-growing narrow niches or by ineffectiveness of trying to embrace the unembraceable.
Universal strategy was the main field for competition among Kazakhstan and foreign banks at pre-crisis period. Approximately ¾ of foreign banks’ aggregate assets were held by banks following this strategy in Kazakhstan. As time went by more and more foreign banks chose the strategy. Among Kazakhstan banks this strategy was most popular as well. As a result presence expanding of foreign banks was accompanied by strengthening of competition with Kazakhstan private banks and mild crowd out of the latter including market of basic banking products and services for mass client. During pre-crisis period foreign banks primarily were sources of capital inflows to Kazakhstan market. For most of them net investment from abroad became important source of active operation funding for internal markets. It made the process of their expansion responsive to instability on foreign financial markets.
During the crisis period universal strategy oriented on standard products and wide range of clients may become inefficient. Mass markets are most inclined to contagion effects.
Banks with foreign capital which took universal strategy probably will have to choose among next decisions.
· «Freezing» expansion to internal markets, using funds accumulated on internal markets for net capital outflow to external markets (including support of the parent companies).
· Return to specialized and combined strategies, e.g. more active positioning as banks working with multinational companies doing business in Kazakhstan and with Kazakhstan business owned by foreigners.
New conditions will give Kazakhstan banks some respite from fight for borrowers with foreigners. At the same time fight for depositors and corporate clients may get tough. [5]
ATF bank, as a foreign bank made a strong strategy on its development. In the main directions of the bank's fixed strategy to achieve general goals, the main directions of its activity the Bank's lending strategy has been implemented in the reporting year, the two main lines of lending: lending to large businesses, and lending to small and medium businesses, focused on the implementation of consumer goods and services.
One of the strategic objectives of ATF Bank in 2007 continued to be a further development of lending to small and medium enterprises of the Republic of Kazakhstan, which was manifested in the facilitation of the review, approval and issuance of loans to create multi-level decision-making, increase efficiency making and improving the quality of loan portfolio management, diversion of the modified on subjects of credit relations, industry sector borrowers, the loan term and type of security provided. This problem was solved by careful pre-screening of credit applications, a comprehensive analysis of borrowers and credit transactions, continuous monitoring of changes in financial position of borrowers throughout the loan period, to identify early signs of problem loans, and work on their maturity, as well as by the existing system of risk control at each stage of the credit. Expanding the resource base has allowed the Bank is increasingly oriented to lending to the real economy. The growth of lending to the real sector of the economy caused by a combination of factors. On the one hand, this increase in demand from enterprises for loans to finance productive activity for the acquisition of fixed assets and working capital. On the other hand, this increase in credit supply due to the competitive environment in the banking market, expanding the scope and urgency of increasing the resource base of the Bank, reducing the systemic risk of lending to real sector enterprises in the relatively stable macroeconomic situation.
In 2007, the largest proportion of loans accounted for spheres: construction, wholesale trade, real estate and food industries, because of long-term credit policies in terms of portfolio diversification across different sectors of the economy. The basic principle of interaction with the Bank's corporate clients is to create long-term mutually beneficial relationship and full satisfaction of banking services at the highest level.
ATF is positioned on the financial market, retail business, as the largest universal bank offering the widest range of financial products and services throughout the Republic of Kazakhstan. Among them - the traditional deposit accounts, consumer, mortgage and car loans, servicing credit cards and more. This corresponds to the strategy of the Bank's activities in the development of retail business, a key element of which is the creation in all regions of the country's network of retail centers in which to introduce a single standard of service that offers its clients a wide range of high quality financial services. At present, in all branches of the Bank's standardized food bank and introduced a number of common competitive rates. According to the results of changes in the composition of the founders in 2007, ATF Bank has been able to offer its customers the highest quality of service level and is constantly working on improving existing products and services for compliance with European standards of quality.[9]
In 2007, the Bank improved the program of lending to individuals. The Bank currently provides loans to individuals:
· To purchase real estate;
· For consumer purposes, including: the purchase of cars, consumer durables, education, treatment, celebrations, holidays, repairs and other purposes.
It should be noted that in order to make loans more accessible to the public, the Bank is conducting a proactive policy of lowering interest rates and extend credit on loans to the population as a whole was carried out on the market of consumer loans. During 2007 a number of activities to implement the program of lending to individuals: the introduction of new products, implementation of joint programs with the construction companies . We can see some positive and negative factors of work and development of ATF bank.
Positive factors:
• good business opportunities in the domestic market;
• more dynamic and competent than the other Kazakh banks, the management team;
• well-developed system of risk management.
Negative factors:
• rapid growth in outstanding loans against the backdrop of high external risks;
• increased concentration of the resource base and loan portfolio;
• declining profitability;
• minimally adequate level of capitalization.
The ratings of Kazakhstan's ATF Bank is determined by the rapid growth of credit portfolio of the bank against the backdrop of high external risks, increased concentration of its resource base and loan portfolio, declining profitability and minimally sufficient level of capitalization. The negative effect of these factors partially neutralized good commercial position of the ATF in Kazakhstan, as well as the availability of a dynamic and competent management team and well developed risk management systems.
The fact that in the past three years, the volume of loans issued by AMB, has increased by an average of 92% per year, the bank is exposed to risks associated with a possible recession. However, in the medium term, this decline is not expected. ATF bank operates mainly with corporate clients and slower than other domestic banks, developing retail activities, the business has high concentration on the individual contractors. Standard & Poor's believes that the increase in business volumes will contribute to improving the profitability of ATF in the medium term. Regular contributions to the shareholders, as well as the capitalization of retained earnings can support the capital at a level ensuring business growth rates.
ATF strategy involves not only preservation of a strong position in the segment of banking services to corporate clients and the expansion of financial advisory entities, but also the development of services for customers. It is not excluded that the ATF will buy new assets, but in the Kazakh market, he plans to grow primarily by organic growth. According to the strategy of bank after five years the proportion of assets located in other CIS countries, should reach 15-20% of the total value of its assets.
According to Standard & Poor's, the bank is well positioned to implement its expansion strategy in the medium term, as he has the necessary infrastructure, professional and experienced management team and staff, and a well-developed methods and procedures for risk management. Although ATF is able to increase its market share at the expense of crowding out smaller players, it will be difficult to bridge the gap between himself and the three leading banks. To achieve medium-term strategic goal - to become one of the largest banks in Kazakhstan and expand operations in other CIS countries - it requires a significant infusion of capital, additional professional experience and advanced technologies.
Weak point of ATF is very prominent in its profile of risks is credit risk. The reasons for this risk lie in the peculiarities of the Kazakh economy, as well as a weak credit culture and people. Concern is the high concentration of ATF in the loan portfolio of individual borrowers and sectors, as well as a significant percentage of foreign currency loans. On the other hand, asset quality supported by factors such as sustained economic growth and the trend towards facilitation of credit protection and improve the repayment of loans issued.