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Halyk, Kazkommertsbank ink framework agreement on upcoming merger

JSC Halyk Savings Bank of Kazakhstan and JSC Kazkommertsbank signed a framework agreement outlining further steps regarding their merger.

The banks, Kazakhstan's two largest lenders, signed a nonbinding memorandum in March. The new framework agreement was also signed by Kazkommertsbank's shareholders Kenges Rakishev and sovereign wealth fund Samruk-Kazyna, BTA Bank JSC, the National Bank of the Republic of Kazakhstan, the country's Problem Loans Fund and the Kazakh government represented by the finance ministry.

Under the agreed terms and subject to certain conditions, Halyk Bank will acquire stakes in Kazkommertsbank owned by Rakishev and Samruk-Kazyna for a price of 1 Kazakh tenge per stake, and will potentially provide additional capital for the lender to ensure sufficient capital adequacy as required. The amount of this potential capital injection will be determined following a due diligence process by Halyk Bank and the Kazakh central bank.

Bloomberg News reported in April that Halyk, controlled by the daughter and son-in-law of Kazakh President Nursultan Nazarbayev, may have to provide Kazkommertsbank with a capital boost of at least 230 billion tenge to keep the lender operating.

The framework agreement also stipulates that the Problem Loans Fund will acquire certain assets and claims from BTA Bank, a lender transformed into a distressed-debt management company and sold by Kazkommertsbank to its shareholders, and the repayment of debt owed by BTA to Kazkommertsbank.

The government and the central bank will stand ready to provide support for the merger as needed. The central bank said on its website the same day that the main aim of the merger is to ensure the stability of the Kazakh banking sector.

Given the size of both banks, the government and the regulator decided to offer certain support tools to the parties of the transaction, but the sale deal between Kazkommertsbank, Halyk, Samruk-Kazyna and Rakishev is based on market principles and reflects the fair value of assets included in the transaction, the central bank noted.

Immediately after the transaction, both banks will continue to operate as independent financial institutions, fulfilling their obligations to deposit holders, creditors and investors, the regulator said.

As of June 2, US$1 was equivalent to 314.13 Kazakh tenge.