Kazakhstan’s third-largest bank gave warning yesterday that it would breach its loan covenants if customers continued with a run that saw 10 per cent of its deposits, or 27 billion tenges (£110 million), withdrawn in July and August.

Alliance Bank, which in July raised $700 million by selling a 20 per cent stake on the London Stock Exchange, said yesterday that it would violate covenants relating to loan-to-deposit ratios on some of its loans as early as next month if customers withdrew a further 10 billion tenges.

Almira Akhmetkarimova, Alliance’s managing director for international capital markets, said that the breaches would hit the bank’s expansion.

“If our deposit base doesn’t grow, we won’t be able to grow our loan portfolio,” she said.

The news is a further blow for investors who bought global depository receipts in the Almaty-based bank.

Since the July sale, which was priced at the bottom of its $14 to $17.30 range, the bank’s shares have halved in value.

Customers began pulling cash from the bank shortly after the listing, after a panic set off by a drop in the Kazakh tenge and the US dollar.

The bank has also been hit by the credit crunch because it uses wholesale borrowing in the international money markets to help to fund its growth.

There has also been a crash in parts of the Kazakh property market, where houses in the low and middle-range price brackets has fallen by up to 20 per cent over the past three months.

But the run on the bank’s deposit accounts has been offset by support from Alliance’s biggest shareholder, Seimar Alliance, which put $220 million into an account in the bank last month.

Alliance said yesterday that it expected to receive a further $200 million in commercial deposits this week.

“We can easily manage our liquidity risk,” Ms Akhmetkarimova said.

She added that Alliance would be able to service its debts using customer loan and interest payments, and that it would also tap the local market for capital and be ready to obtain credit from the National Bank of Kazakhstan if necessary.

Ms Akhmetkarimova said that the bank intended to repay a syndicated loan that is due in November and would seek funding after that.

Alliance bought back a small amount of its own short-dated debt on Friday and is considering further debt buybacks.

She added that the bank’s lenders were being “very supportive” and were unlikely to accuse Alliance of defaulting on its loans, should the covenants be breached.

Alliance had hoped to raise as much as $870 million with its sale in London this year.

But unfortunate timing meant it hit the beginning of the down-turn in global stock markets.

Credit Suisse and UBS were the book runners for the July float.

At the beginning of September, the bank had assets of more than $10 billion.

Ms Akhmetkarimova yesterday forecast net profits for 2007 at between 40 billion tenges and 42 billion tenges.

Bailout in prospect

The Kazakh Government may have to bail out its banks, with the country the hardest hit of the Commonwealth of Independent States (CIS) by the credit crisis, Moody’s, the ratings agency, said yesterday. It said CIS financial institutions would find it difficult to raise new debt or roll over existing foreign loans, as investors reassessed the risks associated with lending in emerging markets. Kazakh banks have borrowed $40bn (£19.6bn) from international lenders, accounting for more than half of their total nonequity funding.

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