On March 15, 2017, JSC "Tengri Bank" and JSC "Capital Bank Kazakhstan" announced the signing of a memorandum of intensions of merger. Both banks currently occupy a small market share. In terms of assets, JSC "Capital Bank Kazakhstan" holds the 24th position (0.4% of the total assets volume), JSC "Tengri Bank" – 26th (0.3%).

As a result of the merger, the aggregate assets of the enlarged financial institution will amount to KZT153 bn, which will not have a significant impact on its market position among all second-tier banks (the united bank will reach only the 22nd place). Based on the assets, the market share of the bank will reach 0.8% and only 0.2% of all deposits in the banking sector will belong to the institution. The branch network will grow marginally. Given the structure and volume of business, the combined banks will not be able to complement each other in the form of separate competencies. The only positive side of the association, most likely, will be a reduction in operating expenses.

Our view: In the proposed merger of banks, the role of the Indian investor (Punjab National Bank) remains unclear. The recent loss of a controlling stake and the renaming PNB Kazakhstan to Tengri Bank suggests that this Indian state bank has most likely changed its strategy in the region and wants to quit from this investment. In our opinion, perhaps, merger could be originated from a desire of Punjab National Bank to leave the Kazakh market and to sell its stake below the market price.

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