OREANDA-NEWS. February 07, 2011. Nurzhan Subkhanberdin, Chairman of the Board of Directors of Kazkommerstsbank.

2010 – An important year for Kazkom
I would like to thank the employees of the Bank for their great work in 2010. Last year was an important year for KKB with the results of our intensive work since the beginning of the crisis becoming apparent, reported the press-centre of Kazkommertsbank.

Since the end of 2007 we have focused on seven key objectives:
 
Reduce the foreign debt of the Bank;

Replace the foreign debt via internal deposits;

Maintain operational efficiency;

Improve asset quality;

Active participation in governmental programmes;

Retaining employees and improving their skills;

Maintaining our position as one of the leading and most innovative banks offering the latest and most consumer friendly products.

At the end of November 2010 we released our 3Q financial results which are summarized below.

The international liabilities of Kazkom amounted to USD 12 billion in 2007 and represented 54% of the Bank’s total liabilities. As at 30 September 2010, the debt decreased by almost two thirds and reached  USD 4.7 billion, representing 30% of the liabilities. In other words, despite limited acces to international capital markets, difficulties that our clients faced in servicing their debts and other challenges imposed by the financial crisis, KKB has been able to repay more than US\\$7 billion in principal.

During the same period, the share of deposits in total liabilities increased from 33% to 64%, and as a result, the loans-to-deposits ratio went down from 264% to 147%. Furthermore, during the first three quarters of last year there were positive changes in the structure of the deposit base with the concentration of the oil and gas sector decreasing from 28% to 20.7% predominantly as a result of growth in deposits from other sectors. It is important to note that according to preliminary data retail deposits have grown by more than one-third in 2010 on an unconsolidated basis.

The cost-to-income ratio of 23% remains one of the best in the sector. This important indicator shows our ability to manage and control costs during the financial crisis and demonstrates the long-term competitiveness of the business.

The Bank continued to maintain the adequate provisioning rate on loans in 2010, which reached 29.7% according to Kazakh accounting standards. We plan to concentrate our efforts on bad or potentially bad loans in 2011. The Bank is prepared to enter into negotiations with its clients to find mutually agreeable solutions. It will consider allowing troubled clients a loan restructuring option if we think the shareholders and management are able to take responsibility for their business and get it out of  difficulty. In general, the Bank has been lending and providing financing to customers throughout 2010 and has been able to increase its client base in the Western region of the country, which is considered to be an important driver of the economy.

The Bank actively participated in a number of the government programmes in 2010. We commenced the repayment of deposits to Samruk-Kazyna NWF. These deposits were provided under government stabilisation programms in 2008-2009 and in 2010 the Bank repaid more than KZT64.5 billion, of which KZT46.5 billion were prepaid ahead of schedule.

The most socially significant and complex programme that the Bank has actively been involved in was completion of residential construction projects of Kuat corporation. At the end of May 2009, the Government, Samruk-Kazyna NWF, Municipalities of Almaty and Astana, and Kazkom jointly developed steps to resolve the situation. In late 2009 and mid-2010 we have received the first and the second tranches of the Samruk-Kazyna deposit. These funds allowed the GBC project company to complete the construction of four large residential complexes in 2010 with KKB financing them. Thirteen houses with a total area of 170,000 square meters were built and the 898 owners who prepaid for the apartments received their apartments.  Upon receipt of the final third tranche of the Samruk-Kazyna deposit in 2011, the plan is to complete the construction of houses with a total area of 240,000 square meters, including 1,000 apartments for those people who prepaid for them.

We believe that this is a unique precedent involving the state represented by Samruk-Kazyna, municipalities and a commercial bank joining forces to solve a complicated and sensitive issue of unfinished residential construction.

We think that through its active participation in the government anti-crisis programmes during the last three years KKB has been able to prove that systemic banks can and should be seen as reliable partners of the government in solving macroeconomic issues.

We see signs of recovery in the real estate sector. According to the official statistics, the number of transactions in the real estate market increased by 17% in 2010. Prices for apartments have stabilized in 2010 and there was some growth. In the 2nd half of 2010 our construction clients sold twice as many apartments as in the 1st half of 2010.

It is clear that for non-commodity sectors of the economy to grow the banks should increase lending. One of our important objectives for 2011 is to secure longer-term funding to be able to finance long-term projects of our corporate customers as well as residential mortgages. We will continue working with the government and the capital markets to manage the maturities of our foreign debt.

Throughout the crisis Kazkom has maintained and strengthened its management team. The majority of all key mid-level and top managers have now been working with the Bank for more than five years. In the financial sector, the experience gained in solving issues during the financial crisis and the improved knowledge of our clients and their needs will define our competitiveness in the years to come. In this regard, we are actively updating our internal policies and procedures to ensure key lessons from the crisis are learnt and knowledge is shared within the Bank.

Innovation remains one of our key priorities. Investments in information technologies allow us to optimize business-processes and provide a higher quality service to our clients. In 2010 we increased access to our services via the Internet. Seven thousand companies are connected and actively use our Onlinebank platform and we continue updating and developing it. Our Homebank brand became popular with our retail clients and the number of users of the service is now close to 300,000 and we expect to increase it further. We expect to see increased popularity of the various mobile banking services we provide access to. In this regard, we signed an agreement with Misys last year to provide the ClairMail product, which, according to many independent experts, is a global leader in mobile banking. This year we plan to start providing this service to our clients.
  
Other notable achievements during the year:
In 2010 the Bank continued its charitable activity. The Kus Zholy Charitable Foundation remained active in a number of social and humanitarian fields: health care, education, culture and support to social initiatives. As a result, it provided grants for more than KZT71.5 million and successfully completed seven nationwide programmes. I would like to take this opportunity to express our gratitude to our clients, partners and employees, who participated in the initiatives of Kus Zholy, as we would not be able to achieve these results without you.

The Bank remains a general sponsor of the Abay State Opera and Ballet Theater and the Kurmangazy National Conservatory. With the Bank’s sponsorship, young performers of opera and ballet showed their skills at the “New Names” concert, while a senior troupe of the theater made a tour to Russia.
 
Since early 2010 we have started cooperating with the Kasteyev State Arts Museum, which for the first time in its history brought an exhibition of high quality art to Astana as a result of the Bank’s support.

2010 has been a tough but successful year for the Bank. We think 2011 will be an important year for our country and for our Bank, which will celebrate its 20th anniversary. We started this year with confidence, an experienced team and with a plan to meet the challenges that lie ahead of us.