Yelge Qaitaru Foundation: Jusan Bank must be investigated

An open state­ment from Yelge Qaitaru Foundation

The Public Fund “Elge Qaitaru” appeals to you in con­nec­tion with the offens­es com­mit­ted dur­ing the res­cue of “Tsesnabank” and “ATF Bank” (the cur­rent “Jusan Bank”), and the dam­age caused to the state. “Jusan Bank” posi­tions itself as the suc­ces­sor of “Tsesnabank”, which has exist­ed since 1992. In 2018, “Tsesnabank” start­ed hav­ing prob­lems and the state spent 1.5 tril­lion tenge (!) on improv­ing the bank, as a result of which the most prob­lem­at­ic loans and oth­er assets were bought by the state, and the bank itself received very pref­er­en­tial financ­ing from the state.

In February 2019, the share­hold­ers of the trou­bled “Tsesnabank” sold 99.5% of their shares to JSC “First Heartland Securities”. As fol­lows from the state­ments of “Jusan Bank”, JSC “First Heartland Securities” at that time was an invest­ment divi­sion of a finan­cial hold­ing com­pa­ny owned by the pri­vate fund named “Nazarbayev Foundation” and a group of autonomous edu­ca­tion­al orga­ni­za­tions “Nazarbayev University” and “Nazarbayev Intellectual Schools”. In April 2019, the new share­hold­ers of the bank decid­ed to rename the bank from “Tsesnabank” to “First Heartland Jusan Bank”.

In September 2019, the merg­er of JSC “First Heartland Jusan Bank” (for­mer “Tsesnabank”) and a small bank JSC “First Heartland Bank” (for­mer “Bank Expocredit”), which belonged to the same group, was car­ried out. As stat­ed in the state­ments of “Jusan Bank”, the merg­er was for­mal­ized in such a way that a small bank became the buy­er of the for­mer “Tsesnabank” and the name of the merged bank became JSC “First Heartland Jusan Bank” (“Jusan Bank”).

At the moment when this small bank acquired “Tsesnabank” which was cleared of prob­lems, the state made the first gra­tu­itous “gift” to the share­hold­ers of “Jusan Bank”.

Thus, the audit­ed state­ments of “Jusan Bank” for 2019 show the income from the acqui­si­tion of the for­mer “Tsesnabank” in the amount of 241.4 bil­lion tenge. According to the state­ments of the English com­pa­ny “JTL” (a hold­ing com­pa­ny that includes “Jusan Bank”), this income is reflect­ed in US dol­lars and accord­ing to the exchange rate of tenge in that peri­od it amount­ed to $636.5 mil­lion (the “gain on busi­ness com­bi­na­tion” line in the “JTL” income statement).

It means the state spent a huge amount of mon­ey on finan­cial recov­ery of “Tsesnabank” (1.5 tril­lion tenge), after which the net assets (cap­i­tal) of the for­mer “Tsesnabank” amount­ed to the same 241.4 bil­lion tenge ($636.5 mil­lion). Then the audit­ed state­ments of “Jusan Bank” and the hold­ing par­ent com­pa­ny “JTL” show that “Tsesnabank” was trans­ferred free of charge to the share­hold­ers of “Jusan Bank”.

In December 2020, “Jusan Bank” acquired “ATF Bank”. On this pur­chase, “Jusan bank” rec­og­nized a prof­it of 170.6 bil­lion tenge (or $412.7 mil­lion, accord­ing to the state­ment of the par­ent hold­ing “JTL” hold­ing). According to the audit­ed state­ments of “Jusan Bank”, at the time of pur­chase, the fair val­ue of net assets (cost of cap­i­tal) of “ATF bank” amount­ed to 205.1 bil­lion tenge, and in return, the for­mer own­ers of the “ATF bank” received com­pen­sa­tion in the amount of 34.5 bil­lion tenge (the com­pen­sa­tion was made in the form of shares of “Jusan Bank”). The dif­fer­ence between the val­ue of the bank and the com­pen­sa­tion received was exact­ly equal to the prof­it of “Jusan Bank” in 170.6 bil­lion tenge.

If you look at the audit­ed state­ments of the gov­ern­men­t’s Problem Loans Fund (FPC) for 2020, you can find that at the end of 2020 (before the acqui­si­tion of “ATF Bank” by “Jusan Bank”), the FPC bought the prob­lem assets from ATF Bank, pay­ing with live mon­ey in the amount of 174.0 bil­lion tenge. At the same time, accord­ing to the FPC reports, the mar­ket val­ue of the repur­chased dis­tressed assets was only 35.3 bil­lion tenge.

As a result of this very unfair oper­a­tion for the state, the state-owned Problem Loans Fund (FPC rec­og­nized a “loss on the acqui­si­tion of dis­tressed assets at non-mar­ket val­ue” in the amount of KZT 138.7 bil­lion (tak­en from the fund’s state­ments). Similarly, “ATF Bank” should have rec­og­nized a sim­i­lar prof­it in its finan­cial state­ments, which rep­re­sents a gra­tu­itous con­tri­bu­tion of the state to the cap­i­tal of “ATF Bank”. Taking into account the fact that the state had pre­vi­ous­ly pro­vid­ed large con­ces­sion­al financ­ing to “ATF Bank” at a loss to itself, it can be said with great con­fi­dence that the prof­it of “Jusan Bank” in the amount of 170.6 bil­lion tenge (or $412.7 mil­lion) earned on the pur­chase of ATF Bank is entire­ly a “gift” from the state to the own­ers of “Jusan Bank”.

The audit­ed finan­cial state­ments of “Jusan Bank” for 2020 show “Income from mod­i­fi­ca­tion of finan­cial oblig­a­tions to state insti­tu­tions” in the amount of 124.6 bil­lion tenge (or $301.4 mil­lion accord­ing to “JTL” reports). This means that in 2020, state insti­tu­tions restruc­tured their financ­ing of “Jusan Bank” (mean­ing reduced the finan­cial bur­den on the bank) in such a way that it rec­og­nized a prof­it on this in the amount of $301.4 million!

As part of the acqui­si­tion of “Tsesnabank” and “ATF Bank”, “Jusan Bank” received a huge port­fo­lio of con­ces­sion­al financ­ing from the state equal to sev­er­al hun­dred bil­lion tenge. Then, in 2020, the gov­ern­ment sud­den­ly decid­ed to make such pref­er­en­tial financ­ing for “Jusan Bank” even more pref­er­en­tial by low­er­ing inter­est rates and great­ly length­en­ing the matu­ri­ty dates. According to the state­ments of “Jusan Bank”, such bene­fac­tors (who reduced the finan­cial bur­den on the bank) were the Kazakhstan Sustainability Fund, which belongs to the National Bank, and the “Samruk-Kazyna” National Welfare Fund, which belongs to the gov­ern­ment. At the same time, mir­ror image, these state-owned com­pa­nies have mir­ror-reflect­ed a sim­i­lar loss ($301.4 million).

Thus, if we add up the amount of income that “Jusan Bank” received from the state dur­ing the acqui­si­tion of “Tsesnabank” and “ATF Bank”, as well as reduc­ing the finan­cial bur­den, it just turns out that the own­ers of the bank dur­ing 2019–2020 received a gift from the state in the amount of $ 1.3 bil­lion. According to the audit­ed state­ments of “Jusan Bank”, at the begin­ning of 2019, the bank’s share cap­i­tal was only 13.6 bil­lion tenge. Then the own­ers of the bank addi­tion­al­ly invest­ed 70.3 bil­lion tenge in 2019 and 41.7 bil­lion tenge in 2020 (a total of 111.9 bil­lion addi­tion­al cap­i­tal from share­hold­ers was invest­ed in 2019–2020). At the same time, in the same year 2020, the own­ers of the bank took all the addi­tion­al invest­ed cap­i­tal (and even a lit­tle more) in the form of div­i­dends in the amount of 113.4 bil­lion tenge (all tak­en from the bank’s state­ments). That is, the net invest­ments of the own­ers of “Jusan Bank” in the bank’s cap­i­tal at the end of 2020 amount­ed to a mea­ger 12.1 bil­lion tenge.

At the same time, in 2019–2020, the state invest­ed 536.6 bil­lion tenge in the cap­i­tal of “Jusan Bank” (241.4 bil­lion for oper­a­tions with “Tsesnabank”, 170.6 bil­lion for oper­a­tions with “ATF Bank”, and 124.6 bil­lion tenge to reduce the finan­cial bur­den of state-owned com­pa­nies on the bank). That is, if you look at the invest­ed funds, “Juasan Bank” should almost 100% belong to the state! With such huge invest­ments of the state in the cap­i­tal of “Jusan Bank”, last year the pri­vate own­ers of this bank amazed the pub­lic by the fact that the bank in 2021 paid them 114 bil­lion tenge in the form of div­i­dends (45 bil­lion in December and 69 bil­lion in May). That is, based on the analy­sis of finan­cial state­ments, we can say that until 2021, the own­ers of “Jusan Bank” with­drew all their invest­ments from the bank’s cap­i­tal, and in 2021 they began to cash out state invest­ments pre­vi­ous­ly made in the cap­i­tal of “Jusan Bank”.

The con­clu­sions con­tained in this state­ment are based on an analy­sis of the audit­ed finan­cial state­ments of “First Heartland Jusan Bank” JSC (here­inafter referred to as “Jusan Bank”) and the English com­pa­ny “Jusan Technology Limited” that owns “Jusan Bank” through a local com­pa­ny “First Heartland Securities” JSC and were obtained from the pub­lished arti­cle by the famous econ­o­mist Murat Temirkhanov at www.exclusive.kz on March 21, 2022.

We ask you to ver­i­fy the facts stat­ed, bring the per­pe­tra­tors to jus­tice and take mea­sures to com­pen­sate for the dam­age caused to the state.

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