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Today, it is often required to be ahead of your clients

29.09.2006 / 29.09.2006 Panorama №38 (705)

Questions answered by Mukhtar Ablyazov, Chairman of the Board of Directors, JSC "Bank TuranAlem"

BTA announced the adoption of new Strategy. What is the essence of it?

Objectives set by the Head of the State in his Annual Message "Strategy of entry to the list of 50 most competitive countries", as you can see, were apprehended by Kazakhstan business community. Ambitious, but achievable goals are set for the nation. Our Bank, as one of the system-making financial institutes of the country, is willing to take an active part in modernization of the economy, as for the moment, there are no alternatives for financing of non-mining industry, except local banks. Evidently, it requires the vision of prospects. That is why we approached Deloitte consultants to assist us in drawing the Plan of strategic development for 2006-2015.

If you noticed, BTA growth dynamics significantly increased in the last few years. In the last year its assets exceeded 10 billion USD. At present, the Bank turns into a core of group of financial companies, actively entering developing markets of CIS, Eastern Europe, and of course Central Asia. At present, BTA Group is already present in most of CIS countries (except Kazakhstan), specifically in Russia, Ukraine, Belarus, Georgia, Armenia, Kyrgyzstan. Though the share of Group's banks in CIS banking sector is not very large on the whole, but it is evident that the CIS banking sector has better potential for development. That is why, our goal – increase of total assets of the Bank up to 50 billion USD - is achievable.

What are the main sources of BTA growth?

First of all, we realized the large market potential of post-soviet area, united not only with common past, but the colossal wish to gain revenge in the future. It is not just a large consumer market, but a new economic space, not less unique than China or India. And it would be unforgivable to fail using your experience and knowledge of this new region. Business is going global. Business cannot be limited by state or national borders. In global world this will lead to unavoidable historical defeat, not only for business, but for the whole state. That is why we do not keep it secret, that we want to become the largest private bank of CIS. We plan to effectively serve dynamically growing external trade flows of Kazakhstan and other CIS countries, in order to expand our presence to countries – CIS largest trade partners. Financial products and technologies, developed by BTA for Kazakhstan market, are advanced and competitive enough for introduction in other countries through the system of subsidiary banks and companies. Today, in rapidly changing world, it is often required to be ahead of your clients to make their money work most effectively. Only this way, one can gain their favor, sympathy and trust.

In view of the new strategy, are you planning to change client structure of the Bank?

We intend to increase the share of retail business in bank portfolio up to 50%, due to improvement of service quality, investments to technological modernization and detachment of retail services into separate business.

Your Strategy reflects optimistic scenario of Kazakhstan economy development. What are the sources of your optimism?

We look into the future optimistically because of the whole complex of factors. Above all, the increasing level of people's real income. Middle class is actively formed in the country. We expect it to grow up to 5 million people. Consumption level is growing. At the same time, the necessary banking infrastructure is created in the country, diversification of risks for banks' credit portfolio is under way, and effectiveness of credit processes and technologies is increasing. And of course, the growth of competition serves its purpose, including foreign players entering the market.

BTA has always been a recognized leader in services to corporate clients. At the same time the competition in retail credits sector is growing due to dynamic growth of smaller banks and active entrance of foreign players, with established technologies, to Kazakhstan market. How do you plan to keep your competitiveness?

Historically large corporate business is the primary business for BTA, with the most income for the Bank. In 2004-2005 the volume of Bank's corporate credit portfolio increased by 44%. Business processes of corporate services, perfected and adapted for many years, together with individual approach to every client, allow BTA to take leading positions in this market. Already 5 years, BTA holds the fifth part of retail credits markets. By 2015 the Bank plans to increase its share in retail, SME and corporate business up to 30% in Kazakhstan, and from 2% to 5% in other countries of its presence.

Which market segments have the best growth potential, in your opinion?

Mortgage lending, credit cards and retail crediting. Judging from EU and Eastern Europe countries' scenario (their conditions are closest to ours), rate of growth for these markets will stay quite high. For example, if in Kazakhstan consumer credit make 4% of GDP, mortgages – 3%, in Central and Eastern Europe these figures are 18% for consumer credits and 22% for mortgages.

How, in this case, branch network will be developing?

Our branch network is one of our serious advantages. The Bank realizes the strategy of "selling all products through all channels", designed to significantly increase the load on present sales channels and to increase their effectiveness. Already few we are developing the network of People Service Centers and Banking Services Centers, large branch offices, working with retail and corporate clients. The main working principle of these centers – cross-sales, e.g. sales of full complexes of banking and financial services, including services from BTA subsidiary companies – credits, mortgages, insurances, leasing and etc.

How do you plan to compete with other banks in the field of SME services?

As you know, there is a process of inventory taking of non-profile functions from national companies and mega-holdings for their transaction to the field of small and medium businesses. Although the order of realization of the program is still unclear today, nevertheless, with due regulation and control, the program should result in the increase of SME's share in GDP of Kazakhstan. That is why this segment is in our priority. BTA's SME credit portfolio for the end of 2005 equaled approximately 660 million USD, having almost doubled in comparison with the previous year. Because BTA's SME credit portfolio rates of growth forestalled market rates of growth, its share in the market grew to 10%. However, Bank's goal is 30% of SME market. Realization of credit program together with EBRD allowed the Bank to form the product line, to set the processes and standards, to adopt technologies of small business crediting. As a result of successful work, in the end of 2005, EBRD delegated responsibility for crediting as a part of the program. Except EBRD, in the field of SME crediting BTA cooperates with KfW, Asia Bank of Development and Islamic Bank of Development. Moreover, till 2006, the Bank will complete the introduction of "cross-sales" project, which supposes the increase of clients' loyalty due to realization of complex services in the form of satisfaction of all clients' financial needs, including banking services and subsidiary companies services.

For several years, BTA associates with expansion. What is more in that - outflow of capital, diversification of risks or conquest of new markets?

It is hard to tell where one ends and another starts. I think here we should follow the classical meaning of expansion, in other words, when the development of business demands the presence in one or another country to close the technological chain or to get extra profit. Let's assume that we enter Western or South-East Asian markets only to be there. However, we have to be ready for return movement. For example, in Moscow already operate largest foreign banks – leaders of retail banking, of world as well as European level, - Societe General East, Raiffeisenbank, Citibank – for which, the retail sector has become an important part of the business in the last two years. At present, the share of foreign banks in Russian market is approximately 10%. Experience of Eastern Europe shows the potential for 3-4 times increase of foreign banks' presence. Naturally, Russian banks will start internal consolidation in response. Similar scenario should be expected in Kazakhstan as well: British bank Standard Chartered seeks for an opportunity to enter Kazakhstan market, Raiffeisen International and Vneshtorgbank consider the same possibilities. That is why it is natural for BTA to start the consolidation of its assets.

It is understandable that the Bank conducts active expansion in such republics as Ukraine, Kyrgyzstan, Belarus, Georgia and Armenia. These are relatively unexplored markets. But how do you plan to squeeze into already filled up Russian market, especially Moscow?

Russia is still the largest player and the vastest market in post-soviet area. Russia and Kazakhstan are, in all senses, two complementary economic systems. It is particularly obvious in energy sector. Banking systems can also complement each other in many cases. Till the end of 2007, the deals on Slavinvestbank, Omskbank BTAKazan and Agroinkombank will be completed. When strong western companies show their interest in Russian market, we have to be even more active.

Corporate social responsibility is one of the key aspects mentioned in the Message of President Nazarbayev. What is its place in your new Strategy?

The Bank attaches great importance to equal opportunities and makes great efforts in assisting representatives of all levels of social responsibility in achievement of the goals set. Moreover, the most important level of social responsibility is the employees and their families, whose well-being depends directly on well-being of the Bank. The second level of responsibility is our clients and shareholders, who entrusted us with their assets. And, of course, in a more comprehensive sense, the Bank is responsible to communities and countries of its presence. We se our mission as to save the integrity of the of cultural and historical values of CISAnd to propagate Kazakhstan culture outside the country. BTA did a great job on restoration of Kazakhstan film archive, it finances Marat Bisengaliyev orchestra, and has recently started to work on release of the first Kazakhstan musical, which will become its visiting card, ethnic embodiment of latest cultural tendencies of the world. Shortly, Yerzhan Tatishev Charity Fund will launch a unique educational project, the Bank plans to open its own training center. Believe me, the history has not seen examples of global success, with only capital as a goal. BTA realizes that it is a conductor of its country's and its clients' interests in other states.