Catch Afire

Can you tell us about the recent evolution of ATFBank?

When we acquired ATFBank we were somewhat concerned about the bank’s levels of non performing loans (NPLs) because it has one of the highest levels in Kazakhstan. However, when we looked further we found that there were several saving graces as it is a universal bank, including retail, SMEs, and corporate. Furthermore, the majority of the NPLs were corporate, which makes them considerably easier to collect. UniCredit acquired the bank back in 2008 and then they got hit by the financial crisis and by the first de-evaluation of the tenge. The customers were not in the position to repay. A lot of the loans were made in US dollars but because the customers did not have US dollar incomes, they were not able to service the loans after the de-evaluations. One thing that we were quite thankful to UniCredit for is that the bank is owned by Bank Austria, and they in turn are supervised by Austria’s Financial Market Authority (FMA). Bank Austria is owned by UniCredit Group, which is supervised by the Bank of Italy. That meant that ATFBank had three supervisors sitting on top of us—three national banks. UniCredit applied the most stringent policies in regards to recognizing and making provisions for NPLs. In the six years that UniCredit owned the bank, they made approximately $1.24 billion, which was set aside as provisions against bad loans. Today, on our NPL books, we have 70% provisions on NPLs and 60% collateral coverage on top of that. In other words, we are well covered. Now that the economy has recovered, our collateral value has also recovered. The challenge now is to actually recover the debts because these debts originated before 2008. So far we have been successful in recovering debts. In the first four months of 2013 the bank actually lost close to $30 million. We managed to turn that around and by the end of 2013 we had made a small profit, of about $9.7 million. We think we can make a larger profit this year. In 2015, we will be able to make a proper profit, and from 2016 onward we will be reporting substantial profits because everything will be in place.

What measures are you putting in place to boost your performance and improve your processes and procedures?

We have a bank accounting system that has been tweaked to do other things; we call it loan origination. Basically, it acts as a document flow control, which it really was not meant to do. We have started looking at what solutions are available to us to improve this. We have decided to take a big-bang approach and to change everything at once, which is extremely risky. We have prioritized our needs and prepared a three-year business plan, with a five-year projection. In order to achieve this business plan we are going to have to grow our portfolio, our retail, our SME business, and our corporate by certain amounts. Therefore, we are looking at what we need to support this growth in terms of capital, people, processes, procedures, and platforms. It is now called the three Ps: people, process, and platform. This will be our road map. We will also be focusing our attention on other things: we are introducing a concept called lean banking. This is about the basic procedures that we need to follow. For example, does the client really need to sign five documents that are twenty pages long? Can we make it simpler? If we make it simpler for the client, we make it simpler for ourselves.