Kazakh bank Alliance sees assets shrinking in 2008

By Mariya Gordeyeva

ALMATY, March 6 (Reuters) - Alliance (ALLBq.L) ASBN.KZ, Kazakhstan's No.4 bank, expects its assets to shrink this year in the aftermath of the global liquidity squeeze, the bank's chief executive said late on Wednesday.

Retail-focused Alliance has, like other Kazakh banks, has suffered due to its aggressive foreign borrowing. It announced a new consumer lending model last month, introducing tighter credit rules to maintain portfolio quality.

"Our most conservative business plan foresees assets declining by up to five percent by year-end," the newly appointed Alliance Chief Executive Erik Sultankulov told reporters at a dinner on Wednesday night.

"We'd better be conservative."

The decline could reach 10 percent by the middle of the year when Alliance will need to redeem a $500 million Eurobond, Sultankulov said.

"We are now building up cash reserves to make that payment," he said.

In line with the new lending model Alliance has stopped issuing cash credit to new retail customers and will instead offer credit cards to those with good credit history.

"We are moving from quantity to quality," Sultankulov said. "We need a different strategy and different tactics."

Alliance will also seek fresh funds through securitisation.

"We are betting on securitisation. It is cheaper than issuing bonds and on par with syndicated loans," Sultankulov said.

He also said Alliance would continue talks with potential strategic investors.

"We understand that global players have digested Eastern Europe and are now digesting Russia and Ukraine and this wave will reach Kazakhstan," Sultankulov said.

"We understand it will be difficult to compete with global players in the long run." (Writing by Olzhas Auyezov; Editing by David Cowell)