Kazakhstan's banking sector: a forced transformation

KAZAKHSTAN - Report 11 Oct 2022 by Evgeny Gavrilenkov and Alexander Kudrin

Over the course of 2022, the banking system of Kazakhstan has gone through a period of transformation initiated by sanctions against Russian banks by Western countries. As a result, major Russian players have left the Kazakh market, having sold their assets to locals. This may enable the latter to significantly expand their business due to the acquisition of high-quality assets. In general, risks for the system remain acceptable.

The forced withdrawal of Russian banks from the Kazakh market will inevitably change the latter's landscape. One of the problems may be the lack of capital for further development. Russian parent companies were much more sizeable than their Kazakh subsidiaries and were ready to support them with capital injections if necessary. The new shareholders (except for Home Credit and Finance Bank) represent Kazakhstani businesses with more modest financial capabilities. However, despite rising interest rates, the political turbulence at the beginning of the year, as well as the high economic uncertainty, the situation with NPLs remains acceptable, and there is no urgent need to attract capital into the system yet.

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