Bereke Bank: Qatar Entering Kazakhstan's Market

Kazakhstan is taking active steps to attract Qatari investments. A new investor entering the market of Kazakhstan points to how serious the country's intentions are. Investments in Bereke Bank, once under sanctions, serve as further evidence, reports Orda.kz.

On March 31, Qatar Lesha Bank and JSC NUH Baiterek signed an agreement on acquiring the entire share capital of Bereke Bank in Kazakhstan. The price tag was 65 billion tenge, equivalent to 532,382,681 Qatari riyals at the current exchange rate.

The bank, formerly a Sberbank subsidiary, fell under sanctions. This was only the beginning of its troubles. Last year, Bereke had a meager income. When deducting the volatility of reserves from 2023 income, covering expenses was indeed precarious. The bank didn't break even. 

The most profitable loan portfolio was transferred to Halyk Bank in 2022. Customers leaving en masse over card issues and swift transfers also factored in along with the mobile application disappearing from the AppStore and PlayMarket.

Being the most important profit source, the potential for profit growth also raises many questions. The bank, however, cannot increase its loan portfolio due to limited equity. Legislation requires banks' capital to be limited by the size of their equity. This coefficient at Bereke is close to the legislative minimum and is just over 10%, while the average market figure is about 22%.

The inability to increase the loan portfolio leads to low business efficiency or the absence of economies of scale. Kazakhstan's market, meanwhile, is small for international investors, reducing investment attractiveness. Kazakhstan's location in tandem with close economic ties with Russia also makes the country a risky investment. Small low-profit banks from such markets are thereby often sold at a large discount.

This situation may spell trouble for both Bereke's future and the country's entire financial sector. The sector should attract investment via stability and asset security. Observing the transaction between the Qatari Lesha Bank LLC and the state-owned Baiterek holding company for the purchase of the share capital of Bereke Bank piques even more interest. It is nearing a successful resolution.

Economic commentator Yuri Masanov has commented on the transaction amount. Masanov stressed that it was the result of long negotiations.

It should be understood that investors will need to invest a lot of money in maintaining the bank's activities, especially at the initial stage, and then in its development. And this should also have been a factor in evaluating the financial institution, he added.

Predictions on future profits determine the value of a bank in the international arena. The main factors influencing the valuation are the current profitability and growth potential. Two key indicators are crucial in understanding value, i.e. current profitability and growth opportunities. Current profitability demonstrates the bank's ability to generate revenue, whereas growth potential indicates the future possibilities of increasing said revenues.

Yuri Masanov has positively assessed the Qatari investor's involvement. Noting the current geopolitical conditions, Masanov emphasized Kazakhstan's active work to diversify investment sources and Qatar's importance as a partner with significant investment capabilities.

An investor from Qatar is certainly a positive experience. Kazakhstan is actively engaged in diversifying sources of investment, and Qatar has significant funds to invest in our economy. Recently, we have seen an intensification of relations between Kazakhstan and Qatar, including in investments. For example, it was announced that a Qatari business plans to buy a mobile operator in our country, says Masanov.

The expert stressed that securing foreign businesses' participation in Kazakhstan's economy fosters development.

It is a positive trend that foreign business is coming to our economy and investing in its development. The ultimate beneficiaries of this are, first of all, citizens. I expect that thanks to this we will be able to see the development of infrastructure and improvement of the quality of services,
 concluded Masanov.

Attracting Qatari investments is an important step towards economic growth and modernization of Kazakhstan's infrastructure. It will undoubtedly benefit the citizens of the country. The recent Kazakh-Qatari investment round table held in Doha was a key event. Kazakh President Qasym-Jomart Toqayev urged Qatari companies to look towards Kazakhstan's market there.

Toqayev stressed the strategic importance of this step, expressing confidence that Qatar will soon become a top ten investor in Kazakhstan. As an initial measure, the President has proposed increasing exports to Qatar by $250 million. This would be for 60 types of non-primary goods. Expanding mutual trade to $500 million was also a talking point.

the favorable geographical location of Kazakhstan was convincing for Qatari investors. The country provides access to the market of the Eurasian Economic Union (EAEU) and borders with China. This opens up grand opportunities for regional and global trade and investment. Kazakhstan is thereby an attractive platform for international economic initiatives.

Cooperation within The Shanghai Cooperation Organization (SCO) also plays an important role in strengthening economic ties. Qatar acts as an SCO dialogue partner, while Kazakhstan will chair the organization in 2024, thus creating additional platforms for developing bilateral and multilateral projects.

Reports emerged in February that a Qatari investor intended to acquire a 100% stake in Bereke Bank. 

Original Author: Damira Augambayeva

DISCLAIMER: This is a translated piece. The text has been modified, the content is the same. Please refer to the original piece in Russian for accuracy.