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Kazakhstan 2014 | FINANCE | INTERVIEW

TBY talks to Umut B. Shayakhmetova, Chairperson of the Management Board of Halyk Bank, on growth at home and abroad.

Umut B. Shayakhmetova
BIOGRAPHY
Umut B. Shayakhmetova was appointed as Chairperson of the Management Board in January 2009. Since 2004, she had acted as Deputy Chairman, having previously worked with ABN AMRO in a number of increasingly senior positions. She is a graduate in Economics from the University of People’s Friendship in Moscow, and holds an MBA from Rutgers University, New Jersey.

How far has Halyk Bank progressed toward being Kazakhstan's number one bank?

If we talk about the period since 2011, then we can see that Halyk is continuing to grow as a bank and business. We have, on average, around 5%-9% annual growth in total assets. Net profit is increasing at an even higher rate and, overall, the loan portfolio is increasing by an average of around 10%. In 2012, the major milestones were that we approved the new strategy for the bank for the next three years. We are on target to become the number one bank in Kazakhstan. We are number one in most market segments, including net income, retail deposits, and total deposits, though we are not number one in terms of total assets. This is the main target for us. We will also continue to grow and develop in the other markets in which we're present: Russia, Georgia, and Kyrgyzstan. We are diversified in regard to products and clients. In 2012, we approved and looked at a new strategy on dividend payments, where we said that Halyk Bank will pay dividends on common shares each year amounting to 15%-50% of consolidated net profit. In 2013, we already paid dividends on common shares within the framework of new dividend strategy. Also in 2012, we established a new company, a subsidiary of Halyk Bank, which is to deal with the management of distressed assets. This was allowed under new regulations to oversee the cleaning up of bank balance sheets.

It is expected that the merging of Kazakhstan's pension funds will be completed by the end of 2Q2014. What impact will this have on Halyk Bank?

Halyk Bank was offered BTA Bank shares in exchange for our pension funds. With more than 33% out of overall pension assets under management in the pension system, we have the biggest pension fund in the country—even larger than the state pension fund. It is the best pension fund in the country in terms of quality of assets, branch network, and presence around the country. For us, it is bad news that we are losing part of our commission business, which was profitable for us. We were earning fee and commission income of $100 million per annum on average from the management and administration of pension assets. At the same time, if you look at the total income of the group, the income derived from the pension fund was around 10%, meaning it is not extremely significant, but in terms of commissions it was quite significant. Despite this, we have been growing in accordance with our targets in the retail business, more than 20%, while corporate banking is growing around 10%, SMEs are growing around 15% for medium companies, but in small companies there is no growth.

What were the main drivers for such growth?

We are outperforming our budget, improving net interest income, and generating new commission business. These are the major drivers, and it is because portfolio growth is better than we expected. The rates were conservative, but we achieved a better result in our portfolio in the commission business despite the negative news about our pension funds. They are not performing on the budgeted numbers because pension assets today are not invested properly. The National Bank, in January, brought in an embargo that does not allow the investment of pension assets in corporate securities. Over the year, pension assets were only invested into government securities or deposits, which were mostly current accounts because there was no long-term strategy for the pension funds. Overall, the returns on pension assets on the country this year are much lower than usual. That is why the income from the pension funds is lower than we budgeted. Our net income will be around KZT74 billion.