As of April 1998, the total number of banks meeting the requirements of the NBK was 76.

The legal and regulatory framework for the second-tier banks includes laws (e.g., the Banking Law), presidential decrees, regulations issued by the National Bank, and international agreements/treaties signed by Kazakhstan.

On January 1, 1997, aggregate capital of second-tier banks of the republic totalled US $178.7 million. As of December 1, 1997, it had already reached US $437.1 million. Along with the falling number of banks, this shows a vivid tendency towards increasing bank capital.

Owing to the falling inflation rate, the inflow of money from corporate clients and individuals to commercial banks increased substantially. Exchange rate stability is one of the key components for public trust of the national currency. This is reflected in the growth of bank deposits and the fact that deposits in national currency increase much faster than those in foreign currency (18% increment of KZT-denominated deposits in 1997, while the total amount of foreign currency denominated deposits went down by almost 10%). The increase of aggregate deposits with commercial banks is not quite as rapid, though, due to declining interest rates on term and demand deposits.

As of January 1, 1998, total deposits with local commercial banks totalled US $1.1 billion. The share of individual customers in the total deposits is 32.4%. Compared to the beginning of the year, the individual clients' deposits increased by 43.3 % to US $256.3 million on December 31, 1997. Within individual clients' deposits, demand accounts make up 70%. Over the last two years, the remaining 30% is taken up by term deposits.

By the end of 1998, assuming continuing growth tendency, the amount of individual clients' deposits could reach 37-40%, approximately US $5 billion.

The clients' base is distributed among three major Kazakhstani banks: Kazkommertsbank, almost 22% of current bank accounts and demand deposits of the population and 15% of total deposits, Halyk Savings Bank (70% and 35% respectively), and a financial group headed by Temir Bank and Center Credit Bank that recently purchased one of the most popular republican banks – TuranAlem (5% and 15% respectively).

As of February 1998, there were 20 banks with foreign participation in Kazakhstan (including non-resident banks' subsidiaries). Their aggregate registered capital totalled US $53 million or 12.9% of the total registered capital of Kazakhstani banking system (in January 1997 their share was 8.5%).

According to current legislation, non-resident banks can be permitted to open an affiliated bank, provided that this bank's representative office has already operated in Kazakhstan for a year. This does not apply to non-resident banks buying 50% of shares in a local Kazakhstani bank.

The NBK is currently considering the abolishment of the existing restriction that foreign banks’ capital can not exceed 25% of the cumulative capital of entire domestic banking system. Most probably, this will happen by the end of the year.

Banks can carry out the following activities on the stock market:

1. brokerage – with government securities;
2. dealer operations – with government securities;
3. custodian business;
4. clearing operations.

Each activity is to be separately licensed by the authorised agency upon the consent of the NBK.

The largest banks in Kazakhstan in terms of assets and capitalisation are Halyk Savings Bank of Kazakhstan - former Sberbank (HSBK), Kazkommertsbank, and TuranAlem Bank. Up till the end of 1997, Halyk Savings Bank and TuranAlem Bank were 100% government-owned. In February 1998 Halyk Savings Bank was partially privatised through closed public offering of 17.6% of the state block of shares. TuranAlem Bank was purchased by the financial group of Kazakhstani investors headed by Center Credit Bank and Temir Bank during the auction held in March 1998.

The largest private bank in Kazakhstan, Kazkommertsbank was the first Kazakhstan company to receive credit ratings from the independent international rating agencies. It also has been the first Kazakhstan corporate entity to raise capital on the international markets through issuance of the GDRs. In May 1998, KKB launched its US $100 million 3 year Eurobonds via the lead manager ING Barings. Kazkommertsbank providing a full range of financial services to its clients, including leasing, custody, investment banking, etc.

1995

1996

1997

Capital, US$ million

2.1

22.6

37.5

Number of Shares

-

-

283,050,000

Total Assets, US$ million

277.7

289.3

463.9

Deposits, US$ million

170.5

165.5

155.7

Loans, US$ million

199.7

167.8

304.6

Net Profit, US$ million

20.6

22.1

28.5

Standard and Poor's rating

-

B+

Moody's rating

-

-

B2

Bank Watch rating

-

-

B1

IBCA rating

-

-

4T

Formerly the monopoly bank for retail banking services, HSBK is now one of the major banks in the republic and the local leader in serving individuals. The bank was assigned the ratings on the level of sovereign ceiling.

Dec.-95

Dec.-96

Dec.-97

Capital, US$ million

12.5

11.3

18.5

Number of Shares

-

-

17,000,000

Total Assets, US$ million

405.8

431.4

500.1

Deposits, US$ million

362.2

346.2

421.8

Loans, US$ million

263.9

214.1

212.2

Net Profit, US$ million

2.9

11.6

7.6

Standard and Poor's rating

-

-

BB-

Moody's rating

-

-

Ba3

In 1996, HSBK introduced the ALTYN national debit card, which has a bank identification number appropriated by the International Standards Organisation. At present, Altyn card is being used all-over the republic. There are approximately 105,000 issued cards (as of mid 1997), over 200 electronic terminals, 80 ATMs and almost 750 locations serving these cards in Almaty and regional centres. The Altyn payment system processing centre software was certified by Visa and Mastercard/Europay.

In February 1998, the HSBK received full certification to issue VISA credit cards. Since January 21, 1998, the bank carries out all the operations with VISA, Elektron, and PLUS credit cards.

Presently, four Kazakhstani banks – Halyk Savings Bank, Kazkommertsbank, TuranAlem Bank, Almaty Merchant Bank – are members of the International VISA Association.

Almaty Merchant Bank (AMB) was established on June 2, 1995 by a group of local and foreign founders (Dutch Mees Pierson N.V bank and HSBK). Its authorised capital is US $3.6 million. AMB is a universal bank, which is actively developing all types of banking services, while giving special attention to financing export and import transactions. AMB is a primary dealer in the government T-bills market. Currently, AMB issues and serves ALTYN plastic cards. AMB is a member of international payment systems VISA International and Europay/MasterCard International. Almaty Merchant Bank is also one of six custodians.

For those interested in more information on Halyk Savings Bank and Kazkommertsbank, we can offer reports on these banks published by the research team of Kazkommerts Securities.