The banker shared insights on how Nurbank earns, why bonuses for balances on current accounts were canceled in Kazakhstan, and whether fintech can "displace" traditional banks from the market
Let's start by summarizing the year. How was the year for the bank and the entire banking system?
- The most significant event for Nurbank was our financial stability indicators. In summer, the rating agency S&P confirmed the bank's international rating at B-/B and raised the local rating from "kzB+" to "kzBB-". For three years, we have been strengthening Nurbank's financial position, creating a safety cushion in the form of liquid assets (now totaling 76 billion tenge), increasing capital value to 65 billion tenge, increased the share of the deposit portfolio from individuals and are looking with confidence into 2019.
As for the banking sector, there is a crisis of trust in the banking system as a whole. A lot of instability: an extremely volatile exchange rate, banks whose position leaves much to be desired... Market redistribution is entering the final stage. I think by 2020 our banking system will stabilize.
When they say that the situation will stabilize, they mean that the number of banks will decrease. Don't you think our financial sector is overly regulated? Truly market mechanisms for banks are not so many. It seems to me there is a policy for reducing banks in the country altogether...
- There is no such policy; the regulator already knew each bank in detail. It's a matter of survivability - now an atmosphere is created for the strongest to survive. The year 2008 showed that the economies of those countries where the banking sector is "over-regulated" have weathered the crisis with fewer losses. The first line of defense is to separate commercial banks from investment banks, which was not the case in the USA until 2008. Several EU countries or Canada, which already had this restriction, went through 2008 quite easily.
I don't think people are very willing to deposit money now, given that dollar deposit rates have fallen to 1%. Where do you attract money now?
- Currently, the main source of funding for Nurbank is deposits, followed by the investment portfolio. In our portfolio, 55% are individuals. People vote with their money by choosing a bank. Here's an illustration: we planned a growth of 10.5 billion tenge this year, but we've grown by 52 billion tenge. The year isn't over yet, and we've grown by 500%. Our capital today is 65 billion tenge, twice exceeding the National Bank's normative requirements. We meet all prudential norms.
Will the cancellation of bonuses on money in current accounts in Kazakhstan as of January 1 affect your operation?
- This is money that will flow from current accounts to deposits. The logic is simple, and I agree with it. The interest that was accrued on money in current accounts could exceed KFGD requirements, and contract terms could be changed unilaterally. The consumer was not fully protected. Everyone was just given the same rules of the game.
On what do you earn now?
- On interest income, commission income, and the investment portfolio. Bankers are not businessmen. We are brokers. We take money from one part of the population and give it to another. The lion's share is interest income, the difference between what we sell and buy. In the West, most of banks' income is from brokerage consulting and commission expenses. They have cheap money, and the overall margin is also minimal.
What new technologies are entering the banking sector? Access to money is easier, can fintech push banks out of the market?
- Maybe, in a very long perspective, if it happens at all. Yes, such corporations as Google and Apple, and other non-financial organizations are entering our market. Even mobile operators are starting to offer financial instruments. This is good. Ultimately, the consumer wins. But in the next hundred years, I think banks will exist in their traditional scheme. Maybe fintech will take some of our business. But what can we do? It's evolution.
The full version of the conversation can be listened to on the "Business FM" radio station and viewed on the project's Facebook page.