Crossroads Asia | Economy | Central Asia

Kazakhstan’s Fintech Group Lists in the London Stock Exchange

The group that owns Kazakhstan’s third-largest bank sold around $1 billion in shares in the London Stock Exchange. 

Paolo Sorbello
Kazakhstan’s Fintech Group Lists in the London Stock Exchange
Credit: Pixabay

Kazakhstan’s Kaspi Group floated around 13 percent of its shares in the London Stock Exchange (LSE) on October 14, marking the entry of the fintech company into the global financial markets, after abandoning plans for an IPO in 2019.

Kaspi sold short of $1 billion in the IPO, giving the company a market capitalization of around $6.5 billion. The global depositary receipts (GDRs), initially priced at $38 per share, traded as high as $46.90 in the first day, according to Forbes. It was the U.K.’s second-largest IPO of the year, according to Reuters.

The group owns Kaspi Bank, the third-largest bank in Kazakhstan, which holds a market share of two-thirds of all digital payments in the country. CEO Mikhail Lomtadze (25 percent), Russian investment firm Baring Vostok (28 percent), and Vyacheslav Kim, one of the country’s richest retailers (37 percent), own the group. U.S. banking giant Goldman Sachs owns 4 percent.

According to Bloomberg, Kim and Lomtadze now entered the “club of billionaires.”

Founded in 2002, the bank was a niche medium-sized lender that mostly served as a financial vehicle for its owners. When Baring Vostok and Lomtadze entered the picture in 2006-2007, the scenario changed, as they aimed to service a different kind of client base.

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In February 2013, Lomtadze and Kim bought Kolesa LLP, which operates the websites kolesa.kz and krisha.kz, among the most popular marketplaces in Kazakhstan to purchase automobiles and homes, respectively.

Discounting other massive banks that cannibalized the sector, chiefly Halyk Bank, which acquired its most direct competitor Kazkommertsbank in 2017, Kaspi is among the few that could boast growth despite the global financial crisis of 2007-2008 and the successive instability of the whole banking industry.

In 2014, after rumors spread that the bank was going bankrupt due to the devaluation of the tenge currency against the U.S. dollar, crowds lined up outside the bank offices. The crisis of reputation, spread by rumors online, was later reversed via flashy advertising campaigns.

Now, most urban dwellers in Kazakhstan have a Kaspi account and shop on its e-commerce marketplace, and its mobile application was used as a messaging alternative at times when the government strongly controlled and censored other apps.

Importantly, for a brief period between 2015 and 2018, Kairat Satybaldy, the son of Nursultan Nazarbayev’s younger brother, controlled between 9 and 30 percent of the group. The reason for his exit from the company remains unclear, but perhaps the presence of a relative of the first president and an ex-secretary of the ruling party would have raised eyebrows for international investors as the company planned an IPO.

In 2019, Kaspi announced plans to hold an IPO at the LSE by the end of the year. The objective was to raise funds to expand its operations into Azerbaijan. At the time, however, “unfavorable and uncertain market conditions” led the group to pull the plug.

Kaspi now joins a small number of companies from Kazakhstan that have listed their shares in LSE, including Halyk Bank. Curiously, Halyk’s main investor, ALMEX, decided to place an additional 10 percent of the company’s shares in the LSE in October 2019, in spite of the unpredictability of the market. Timur Kulibayev, one of the most successful businessmen in Kazakhstan, and his wife Dinara, Nazarbayev’s middle daughter, jointly own ALMEX.

At the time of a global pandemic, however, the market conditions for the fintech changed: “Kaspi has benefited from a shift online as people got stuck at home to fight the coronavirus spread,” according to Bloomberg, “Kaspi’s net income jumped 50% in the first half of 2020.”

Besides the LSE, Kaspi will also target the newly-born Astana International Financial Center, which has shown sluggish activity since its start-up in mid 2018.

The hectic activity around Kaspi, however, should not be misread as a sign of good health for Kazakhstan’s banking sector. Kaspi’s own niche as a fintech renders it more dynamic and diversified. Traditional banks in Kazakhstan are instead still battling with the long wave of oil, financial, and health crises that have caught the economic structure of the country unprepared.