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Financial Sector

Banking sector

In 2011-2012 the situation in the banking sector as a whole remained stable and, after almost three years of stagnation in the Kazakhstani credit market, loans to the economy by banks had been renewed. The volume of these loans increased by 15.7 percent and made up KZT 8.8 billion ($58.7 million). The volume of loans in the national currency increased by 29.6 percent and in foreign currency reduced by 3.4 percent.

Due to improvements in economic conditions — in particular borrowers’ financial conditions — the most
significant factor of loan portfolio deterioration in 2011 became the absence of the replacement of bad debts by new loans. Meanwhile, the trend of preserving a ‘working’ portfolio volume as a whole across the system at one level was observed – thus banks try to maintain the interest margin at a reasonable level through making a limited volume of loans to the most qualitative borrowers.

In order to increase the populations’ trust in banks and to activate the depositary market, the amount of
individuals’ deposits coverage had been increased to KZT 5 million ($33,367). The National Bank carried out an additional capitalization of the Kazakhstan deposits insurance fund. As a result of these measures, deposits were raised by 19.7 percent in 2009 (9.7 percent without the devaluation effect), by 11.6 percent in 2010 and by 14.3 percent in 2011, to KZT 8.4 trillion ($56.0 billion).

Pension system

As at 1 January 2012, the number of savers’ (beneficiaries’) accounts for compulsory pension contributions amounted to 8.1 million with a total amount of KZT 2.6 trillion ($17.6 billion) in pension savings, up by 17.4 percent over the year 2011. Voluntary pension accounts amounted to 38,318 with a total amount of KZT 1.2 billion ($8.0 million) in pension savings. Total retirement savings in 2011 increased by KZT 393.2 billion ($2.6 billion) or 17.4 percent to KZT 2.6 trillion ($17.7 billion).

Insurance market

Total assets of insurance (reinsurance) organizations increased by 13.0 percent to make up KZT 387.7 billion ($2.6 billion) as of 1 January 2012. The total amount of insurance premiums expanded by 25.4 percent to KZT 175.5 billion ($1.2 billion). A maximum increase in the amounts was registered in voluntary personal insurance by 54.2 percent while compulsory insurance increased by 28.5 percent.
A high level of capitalization (net worth grew by 10.8 percent to KZT 231.2 billion ($1.5 billion)), a
reduction in risks associated with external reinsurance (insurance reserves exceed KZT 127.9 billion ($853.5 million)), and a low portion of defaulted securities in the investment portfolio of insurance organizations show that there is potential for further development in the sector.

Stock Exchange

On 1 January 2012, total trade volume at the Kazakhstan Stock Exchange (KASE) reached $200.1 billion
(108 percent of GDP) — slightly less than $206.5 billion in 2010 (140 percent of GDP). During 2011 the KASE registered 93 issues of equities and 238 issues of bonds. Total capitalization of the equities market as of 1 January 2010 was $43.3 billion, with corporate bonds at $40.1 billion.

People’s IPO

In November 2012 the Government of Kazakhstan started «People’s IPO» aimed at providing hundreds of thousands of ordinary Kazakhstani citizens with the opportunity to own shares in major national companies. On November 6th, Kazakhtstan Postal Service «KazPost» offices across the country began receiving applications for the purchase of shares of KazTransOil, a company that was the first to float its shares as part of the programme. Equities of Kazakhstan’s flagship carrier Air Astana and national grid company KEGOC are among next assets to be distributed nationally.

The population of Kazakhstan was very active from the very beginning of the People’s IPO. During the first day, over 5 thousand Kazakhstan’s residents opened brokerage accounts through KazPost offices and the total amount of applications for the purchase of KazTransOil shares at the Kazakhstan Stock Exchange exceeded 180 million tenge. This activity is the result of the promotion work carried out well by the organizers and issuers of the People’s IPO programme.

Current demand (for state-held shares) from citizens is estimated at between $100 million and $200 million. But this potential demand can significantly grow because national rail monopoly Kazakhstan Temir Zholy is slated for privatization in 2014-2015, whereas national oil and gas company KazMunaiGas KMG and uranium miner Kazatomprom are planning to go public after 2015. The privatization drive will be focused on the Kazakhstan Stock Exchange (KASE), offering the country’s 16.5 million population exposure to a national industrialization plan, which the Government says should help sustain annual economic growth.

For more information about the country’s financial sector development, please follow the link http://www.afn.kz.