This year, the bank plans to maintain its loan portfolio with a slight increase in volume of about 8% compared to the balances at the end of 2020.
According to the results of 2020, Nurbank was among the top three second-tier banks that closed the year with significant losses. Eldar Sarsenov, Chairman of the Board of Nurbank JSC, spoke in detail about the bank's results for 2020, plans for 2021, and his view of the country's banking sector.
– According to the results of 2020, Nurbank was among the top three second-tier banks that closed the year with significant losses amounting to 48.4 billion tenge. What caused this situation? What measures does the bank plan to take this year to address it?
– It should be understood that the loss of 48.4 billion tenge by the end of 2020 was anticipated by us. This loss is a natural consequence of creating a significant amount of provisions.
In 2020, the bank created a 'safety cushion' for its loan portfolio and formed additional provisions, which impacted the financial result.
At the beginning of last year, we underwent an asset quality review (AQR), and based on the results, the regulator recommended several measures. As a result, Nurbank issued subordinated bonds amounting to 46.8 billion tenge with a maturity of 15 years. The funds received were directed for lending and supporting the real sector of the economy. Additionally, in the spring of 2020, a major shareholder of the bank increased the bank's capitalization through additional investments totaling 20.038 billion tenge. This enabled the bank to join the 'Financial Stability Enhancement Program'. These measures strengthened the bank's position in the financial market and allowed it to continue developing in line with its chosen strategy.
In the current year, the bank plans to maintain its loan portfolio with a slight increase in volume of about 8% compared to the balances at the end of 2020.
The plans also include consistently improving the bank's competitiveness, maintaining the most comfortable conditions for clients, with a focus on the development of the retail business segment as an integral attribute of a universal bank.
– Recently, we have observed consolidation in the banking sector. Similar processes are happening now in other Central Asian countries, for example, in Uzbekistan. Does Nurbank plan to merge or perhaps consolidate with another financial institution?
– Nurbank has been operating in the market for 29 years, and during this time, we have developed our client and partner base. We know our clients. Our clients know us, our values, attitude, banking products, loyal loan rates, timely meeting of commitments, and service quality.
Moreover, in 2020 we recapitalized the bank and formed additional provisions, which improved our rating forecast from 'negative' to 'stable' by the rating agency Standard and Poor’s. All this allows us to grow and develop without the necessity of merging with anyone else.
– In 2021, foreign banks were allowed to open branches in Kazakhstan. How do you assess the situation: how many more banks will join the sector, and how will this affect the work of Kazakhstani banks? Will competition in the banking sector increase significantly?
– Foreign banks have already entered our market, and they now have this opportunity again. However, we have not yet heard announcements of such intentions.
Out of the 26 second-tier banks operating in the Kazakh market, there are universal banks (the majority) and those specializing primarily in developing a specific segment. Accordingly, certain competition and a struggle for market share and the best clients exist in segments. Here it all depends on the products and conditions offered to clients and partners. Any additional player entering this market, especially if it is a foreign bank with likely advantages, will probably prompt existing players to reconsider their product lines, product conditions, and overall strategy.
I believe that all banks in Kazakhstan, whether large, medium, or small financial institutions, have prospects for further development. There's ample room for both big players and those holding less significant positions, and everyone can find their niche in this market.
– The topic of the active introduction of Islamic finance in Kazakhstan is frequently raised. Will the introduction of Islamic banking products become a real competition for classic second-tier banks in Kazakhstan?
– Yes, Islamic finance shows good dynamics towards increasing their role among various sources of funding for entrepreneurs. This trend is observed not only abroad but also in Kazakhstan's financial services market, where there are two banks operating under the principles of Islamic finance.
However, it's important to note the presence of a 'base effect'. The starting positions of Islamic finance are quite modest, and only against this backdrop does the growth reach 25% or more. It should not be forgotten that, for example, the total assets of the two Islamic banks in Kazakhstan constitute about 0.5% of the aggregate assets of all second-tier banks in our country. At such modest scales, it's unlikely that Islamic institutions can compete with the rest of the market, where 'traditional' banks’ assets make up over 99% of the market.
– Last year, 'green' finance gained significant attention worldwide. In Kazakhstan, there were 2 placements of 'green' bonds. At the AIFC, 'green' bonds were issued by the Damu Fund, while on KASE, the Asian Development Bank issued 2 series. Does Nurbank plan to participate in this trend?
– To date, the bank actively supports the financing of the real sector of the economy. For over 13 years, it has been an active participant in government programs for the support and development of small and medium-sized enterprises.
Since 2017, the bank has been working with the Asian Development Bank in placing the 4th tranche under the project 'Financing micro-, small and medium-sized enterprises through loans from the Asian Development Bank through second-tier banks and microfinance organizations'.
Additionally, the bank has experience financing 'green' projects from its own funds in the areas of hazardous waste processing and disposal, construction of small and medium-sized hydropower plants, water storage and distribution, acquiring oil waste processing equipment, purchasing and installing water-saving technologies and systems, and acquiring and converting vehicles to low-carbon emission modes.
Meanwhile, the bank is ready to increase financing volumes for 'green' projects by an additional amount of up to 5 billion tenge.
Source: Cronos.asia