CEO of the Development Bank of Kazakhstan Nurlan KUSAINOV:
"DBK HAS ENOUGH LIQUIDITY TO IMPLEMENT ITS PLANS IN 2012"
This year the Development Bank of Kazakhstan is celebrating
its tenth anniversary. In interview with Interfax-Kazakhstan the CEO of the
bank Nurlan KUSSAINOV told about the DBK achievements and perspectives of future
- There have been reports that your borrowers are experiencing
problemsЕ Is that a mistake of your risk management? Are there any procedural
or other barriers limiting your freedom in choosing clients?
- A lot of your borrowers have recently been reported to have
problems. Can this be considered a mistake of your risk management? Are there
any procedural or other barriers limiting your freedom in choosing clients?
It is no secret that our economy was experiencing very difficult
times from the late 2007 to 2009. The loan portfolio of the DBK, as well as
those of other banks, was badly affected when all risks materialized simultaneously.
The negative macroeconomic situation increased the external risks for projects,
while project managers failed to solve many specific operational tasks. Of course,
the DBK's lending policy is not the most efficient in the market, but I am confident
that our business should bear the responsibility for the implementation of projects
and the use of funds obtained from the DBK and not lay all the blame on the
loan officer who is restricted by regulations and procedures. I am talking not
only about legal aspects, but also about moral responsibility that every borrower
Nonetheless, today we have a carefully balanced approach to troubled
borrowers. For a commercial bank a troubled borrower is a burden to get rid
of. Commercial banks are very practical about such clients and you can't blame
them for that. But in our case, because the DBK projects are so important for
this country's economy we treat problem projects much more delicately. We always
strive to give the client a chance to restructure. The DBK is more interested
in helping the client find a strategic investor than in letting him go bankrupt
and auctioning the collateral. As you know, the government is implementing an
economic recovery program, in which we are actively involved.
- Ex-CEO of the Samruk-Kazyna state fund Kairat Aitekenov has
said earlier that the share of bad loans in the DBK loan portfolio does not
exceed 15%. What is the current situation?
- In 2011 we began a policy of trying to stop the decline. Where
a project is a cause for concern, we use higher loan loss provisions to minimize
the risks for the bank. The figure named by Kairat Aitekenov has not changed
much. Today it stands at 17%. In fact, it would be more correct to consider
the amount of loan loss provisions. We have a method of calculating the ratio
of loss provisions approved by the National Bank. As calculated under the method,
our loss provisions amount to 28% of the loan portfolio.
We know that the DBK's level of loan loss provisions is higher
than the market average, especially when compared to commercial banks working
in higher-margin areas. This is definitely not an achievement. It is a signal
for us to improve our handling of troubled loans and the quality of new deals.
- Who audits the bank's performance? And how often?
- Our today's auditor is KPMG. Throughout all its existence the
DBK has only been audited by the Big Four. As for the state Accounts Committee,
we take all its criticism gratefully and enthusiastically. The auditing methods
used by the Accounts Committee are different from those of our foreign investors
and partners. We understand that the Accounts Committee is a state agency and
we are a state bank; therefore we are constantly working to improve our performance
At one of the meetings of the Accounts Committee we clearly identified
the contradictions present in the bank's strategy. The government wants us to
be super efficient and super profitable. It rates our performance against indicators
used for mineral resource or monopoly companies. Simple logic suggests that
special performance indicators should be applied in our case as we are working
with very complex and low-margin projects. Therefore we propose revising the
bank's strategy. We are in discussion with the Samruk-Kazyna fund and the government
as to the need to change the key performance indicators of the DBK to avoid
controversy in the future.
- What is the status of your work to create the second Islamic
bank in Kazakhstan? It has been proposed that the DBK and the Malaysian AmanahRaya
will become major shareholders of the bank.
- We received the proposal a long time ago. The business plan
for the project is not ready yet. The ball is in AmanahRaya's court and, as
we understand, the Malaysian government is holding consultations to replace
AmanahRaya with a different investor. We have signed a framework agreement to
form an Islamic bank; the attempts continue, but, unfortunately, it is too early
to talk of any results. As for the first Islamic bank, Al Hilal, we are working
with it closely and have already outlined several potential deals.
- Has the DBK given up its plans to issue Islamic bonds - sukuks?
- Sukuks are a very interesting area for us, but today our potential
borrowers do not have projects to comply with all the requirements of this financial
instrument. Before we issue the bonds to the market we should first go through
the stage of consultations with investors and explain to them who we are and
what we are doing. We are beginning this work, but we cannot commit to any deadlines
or amounts yet.
- How much does the DBK intend to borrow in 2012 and from what
sources? How much have you borrowed this year?
- We have no problems with liquidity to meet our current liabilities.
The bank is quite active in the debt capital market. We are cooperating closely
with export credit agencies of both developed and developing countries. We have
enough funds to implement our projects planned for 2012. No increase in borrowing
has taken place. Moreover, we have repaid part of our debt to the Export-Import
Bank of China ahead of schedule.
- How much are you going to lend next year? Please tell us about
the biggest projects?
- This year the bank has financed projects for $903 million. In
2012 we plan to invest about $600 million into the economy of Kazakhstan. The
figure does not include our possible participation in major industrial projects,
such as the third phase of reconstruction of the Atyrau oil refinery or the
petrochemical complex in the Atyrau region. In general, we intend to switch
to bigger and more complex projects. Of course, to ensure a confident growth
of the assets and a wider involvement in the state industrialization program
we need guaranteed capitalization and robust project financing. We are discussing
these issues with our shareholder and have found understanding in the government
ministries and agencies.
- Could you summarize the DBK's achievements in the 10-year period
and outline the long-term development prospects?
- The bank has proven its value for the country. We have tried
to assemble the best practices and put them to use in Kazakhstan bearing in
mind the local specifics. In the ten years of its existence the DBK has funded
over 85 investment projects in the non-resource sectors. 62 of those projects
have been commissioned and most are successfully operating today. I am talking
about high-tech production facilities employing over 17,000 people. In the ten
years the total worth of the projects with our participation has exceeded $10.6
The DBK helps to launch projects, which are not interesting to
commercial banks. If commercial banks mainly lend to businesses that are already
up and running, we and our client build a business from scratch, growing together
and learning from our mistakes.
In our lifetime we have solved a number of serious tasks. We have
established ties with external investors, built an effective corporate governance
system, attained a high credit rating, implemented strategic infrastructure
projects and financed the creation of new production sectors in Kazakhstan.
The bank provides support to national companies included in the
Samruk-Kazyna state fund as well as to private companies.
I am aware of the skeptical opinions that the DBK does not help
Kazakhstani business to develop, but instead wastes public money on unfeasible
projects. In the past we did not pay enough attention to our PR allowing malicious
people to take advantage of the situation and deal a serious blow to the reputation
of the bank founded by order of the president and always supported by him.
I believe the attempts to distort the image of the DBK should
be replaced with constructive discussion on raising the bank's transparency.
This year we are launching a new promotion strategy of the DBK. I hope that
soon the accomplishments of our clients will attest to our success.
On November 9 we will hold a conference, at which we will summarize
the results of the 10 years of our operations. It will be a hands-on conference
where we will discuss a number of projects with our clients and state agencies
to try to find optimum solutions. Our main goal is the qualitative improvement
in the industrialization projects!
- Thank you for the interview!
й 2011 Interfax-Kazakhstan news agency
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© 2018 Interfax-Kazakhstan news agency
Copying and use of these materials without reference to the source is prohibited