Forbes Interview on Khussainov's Departure as Chairman of the Management Board of Bank CenterCredit

Galim Khussainov:

The banker and financier spoke about his departure from Bank CenterCredit in an exclusive interview with Forbes.kz

At the end of October 2022 it became known that Galim Khussainov was leaving his post as Chairman of the Management Board of Bank CenterCredit (BCC). He was succeeded by Ruslan Vladimirov, who had headed ECO Center Bank since May this year and previously served as Deputy Chairman of the Management Board of BCC. The bank's press service announced the completion of a scheduled rotation within the management board. Galim Khussainov ran the bank of Bakhytbek Baiseitov and Vladislav Li for five years. During his tenure, South Korea's Kookmin Bank exited the shareholder base, the Tsesnabank stake was sold, BCC took part in the financial stability enhancement program (under which it received KZT 60 billion from the state), and Bank CenterCredit completed one of the two major deals in the sector in 2022: the acquisition of the subsidiary of Alfa-Bank.

Galim, why did you leave BCC? Was it also your decision, or entirely the board of directors'?

– My departure from BCC is the result of a combination of factors. First, we met all the strategic objectives set for us by the board of directors ahead of schedule, two years earlier than the strategic plan envisaged. The bank moved up to third place by assets, profit this year is expected to be around KZT 140 billion, and for next year we were planning KZT 150 billion. By its key indicators the bank ranks third among second-tier banks, and in some segments (mortgages, car loans, secured consumer lending, gold sales, credit and premium cards) it became the leader. Moreover, in September the bank took first place in the growth of retail deposits and in the volume of loans issued to the SME segment.

Second, now that the previous strategy has been fulfilled, the shareholders decided to adjust the bank's development strategy and change the system of managing the bank itself, and that system differs from my vision. Third, I believe that five years is long enough to remain a top manager in one place, and that the further effectiveness of top management depends entirely on proper motivation. So we parted by mutual agreement. The decision was joint.

Did you talk to the shareholders about leaving? What did they say, and how did they take it?

– Since the key shareholders sit on the board of directors, the departure was of course discussed with board members. As it was a mutual decision, they took it well.

You began working with Bakhytbek Baiseitov, and it was Vladislav Li who invited you to the bank. You once said you could not turn down the offer. Why?

– I came to BCC at the request of Mr. Baiseitov, but it was Mr. Li who offered me the post of head of the bank, with the shareholder's consent. I accepted because it was a very interesting project for me; it allowed me to put my ideas about managing a large financial institution into practice.

Your work at the bank began with the exit of Kookmin Bank from its shareholders. How difficult was that process, especially for you, as someone who had just joined the bank?

– Kookmin Bank's exit was not particularly difficult, since at that time BCC clearly needed a reset and a transformation of its business model, as the previous one was not viable (it was unclear).

Dealing with Tsesnabank was more difficult: we had to work out a strategy for further cooperation and a potential merger of the two financial institutions, or a "divorce" (in 2017 Kookmin Bank, which owned 41.93% of the shares, sold its stake to a consortium of shareholders: Bakhytbek Baiseitov, Tsesnabank and the Tsesna financial holding – F). I took an active part in this process and led the project in full. At the time I recommended that the board of directors not merge, because my analysis had revealed difficulties at Tsesna, and these could have led to problems in the combined financial institution. As a result, we began the process of buying out Tsesnabank's stake and completed it in 2018 (the 29.56% of shares held by Tsesnabank were bought by Bakhytbek Baiseitov, Vladislav Li and minority shareholders – F).

Why did the Korean shareholder choose Tsesnabank and the Tsesna financial holding as buyers at the time?

That question should be put to the bank's shareholders. I did not take part in choosing the partner.

At the time, Vladislav Li explained the "divorce" between BCC and Tsesnabank by the fact that both banks had become participants in the banking sector's financial stability enhancement program, which would have been too heavy a burden for the shareholders. (comment)

Following the asset quality review (AQR) conducted by the regulator in 2019, the bank needed recapitalization, and the shareholders injected KZT 4.3 billion. What caused this situation?

The need for additional capital in 2017 was common to many banks and was a consequence of unresolved problem loans issued before 2009. Of all the second-tier banks that took part in the first round of state support, we asked for the least money. And in 2019, following the AQR, banks were assessed on asset quality, and many banks at that time carried out recapitalization to improve their capital positions, including us. Incidentally, by the time I left we had met all the conditions of the state program and, out of net profit, had increased the bank's capital to KZT 270 billion. The K1 ratio stood at 13.5% against a requirement of 8.5%. At the time of my departure the bank had no provisioning gaps whatsoever.

Was it easy to work with Bakhytbek Baiseitov and Vladislav Li? Did they give you freedom of action? How independent were you in your decisions as Chairman of the Management Board?

– I had complete freedom of action; all decisions were made strictly in the spirit of corporate governance, within the authority I had. I believe this was the key to our team's success. Everyone did their own job. In a bank it is very important to have proper corporate governance. The history of the Kazakhstani banking system shows that second-tier banks whose shareholders took a direct part in operational management did not end well. In a financial institution it is important to carry out a comprehensive assessment of risks and, at the same time, to have a good team working on technological improvement, so as not to be left on the sidelines of global banking development.

You have always spoken openly and at length about the bank and the banking sector. Could that have influenced the decision to change the Chairman of the Management Board of BCC?

– No, it had no influence on the decision, because what I say is my personal position, and I always make constructive proposals on various problems. I believe that the foundation of a healthy civil society is the active stance of every citizen, but only if he proposes ways of solving the problem in question.

Why was Ruslan Vladimirov appointed Chairman of the Management Board of BCC? Who approved his candidacy? Were there other candidates? What factors worked in Mr. Vladimirov's favor?

– These questions fall within the competence of the nominations committee. It recommended only one candidate. Most members of the board of directors voted for Ruslan, so I did not discuss other candidates at the board. Ruslan has worked at BCC for 20 years, knows the bank from the inside and has held every position; I think that was the key factor in choosing him. I consider Ruslan a professional and wish him success in his new role.

When Mr. Vladimirov was appointed Chairman of the Management Board of ECO Center Bank, was it already known that he would head BCC after the reorganization? It would have been logical and expected for you to head the combined bank.

– No, that was not known.

Five years ago KPMG recommended that the bank focus more on SMEs, retail and organic growth of the corporate business. Do you think the bank under its new management will continue to pursue this strategy now that you have gone?

– That was the strategy within which we developed. The share of SMEs and retail in BCC's portfolio has already exceeded 75%, and over the nine months the retail and SME segment generated the bulk of the profit. In September monthly profit before provisions and taxes came to KZT 14 billion, and the trend was upward. Where BCC goes next will be decided by the board of directors, which now has to define a new strategy.

Why did you not stay at BCC in another role, for example on the board of directors?

– I am young enough and full of ideas, so I decided to leave the group and move on independently.

Have you already handed over your duties, or is the process still under way?

– Of course, everything has been handed over, and we are in constant contact with the new chairman in case he needs advice on any matter.

Why did Timur Ishmuratov, who was Deputy Chairman of the Management Board, and Pavel Kravchenko, who worked as Managing Director and was in charge of retail business, leave the bank? Did anyone else from your team leave with you?

– That was entirely the decision of Timur and Pavel, and it would be right to ask them directly about their reasons. Of course, when a team's leader leaves, some team members leave too, and that is normal, since many people join a particular project and the leader's ideas. Any new management always has its own vision of development, which may differ from that of the previous management and its team. So the replacement of certain people is part of the normal process of a change in leadership. Besides, the bank's organizational structure is changing, and that may also not have suited some people.

What are you planning to do?

– For now I plan to rest, and then I will take up my own projects in fintech. (in which field).

There is a rumor that you will head Bereke Bank. Is it true? If not, would you be interested in heading Bereke or another bank?

– That information is completely untrue. I could head another bank if it were an interesting project in which I had the chance to put my ideas into practice.

Do you regret leaving BCC? On what terms did you part with Vladislav Li and Bakhytbek Baiseitov?

– I have no regrets at all; I am on normal business terms with the bank's shareholders.

Will you remain head of the Chess Federation?

– Yes, for now I remain head of the Chess Federation.

Elena Tumashova