DJ JSC Halyk Bank: Consolidated financial results for the nine months ended 30 September 2017
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JSC Halyk Bank (HSBK)
JSC Halyk Bank: Consolidated financial results for the nine months ended 30 September
2017
17-Nov-2017 / 11:22 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
17 November 2017
Joint Stock Company 'Halyk Savings Bank of Kazakhstan'
Consolidated financial results
for the nine months ended 30 September 2017
Joint Stock Company 'Halyk Savings Bank of Kazakhstan' and its subsidiaries (together
"the Bank") (LSE: HSBK) releases its condensed interim consolidated financial
information for the nine months ended 30 September 2017.
Umut Shayakhmetova, the Bank's CEO commented:
"The third quarter has been marked by the acquisition of Kazkommertsbank. In the past
few months, we have been working intensively on integration of our new subsidiary,
bringing all policies, risk and cost control to Halyk Bank's standard and making
necessary changes in KKB management team. The strategy for the enlarged Halyk Group
is under development and to be announced by the end of the year. However, we believe
our first joint consolidated results with KKB look promising."
Statement of profit or loss review
9m 9m Change Y-o-Y, 3Q 3Q Change Y-o-Y,
2017 2016 , abs % 2017 2016 , abs %
Interest 339, 244,0 95,0 38.9% 154, 86,17 68,1 79.1%
income 052 46 06 347 5 72
Interest -172 -118 -53,39 44.9% -86, -40, -46,22 2.2x
expense ,236 ,844 2 314 092 2
Net 166, 125, 41,614 33.2% 68,0 46,0 21,950 47.6%
interest 816 202 33 83
income
before
impairment
charge
Fee and 58,8 42,2 16,588 39.2% 28,8 14,7 14,193 96.6%
commission 80 92 93 00
income
Fee and -16, -8,4 -7,602 90.2% -9,9 -2,3 -7,598 4.3x
commission 029 27 22 24
expense
Net fee 42,8 33,8 8,986 26.5% 18,9 12,3 6,595 53.3%
and 51 65 71 76
commission
income
Insurance 3,56 1,89 1,661 87.5% 2,35 759 1,599 3.1x
income(1) 0 9 8
FX -48, 11,7 -59,89 -5.1x -61, 6,17 -67,87 -11x
operations 165 31 6 699 4 3
(2)
Income 60,3 -6,5 66,897 10.2x 67,6 -2,3 70,003 29.5x
from 64 33 27 76
derivative
operations
and
securities
(3)
Other 9,43 3,96 5,471 2.4x 7,17 1,21 5,955 5.9x
income 9 8 4 9
Impairment -24, -18, -5,486 29.4% -13, -8,1 -5,206 64.1%
charge and 153 667 322 16
reserves
(4)
Provisions 462 22 440 21x 151 -1 152 152x
against
letters of
credit and
guarantees
issued
Operating -66, -47, -19,04 40.5% -27, -16, -11,82 73.7%
expenses 114 065 9 870 046 4
Income tax -17, -16, -974 5.9% -7,5 -5,3 -2,129 39.5%
expense 431 457 24 95
Profit 7,74 6,03 1,706 28.3% 2,59 2,18 403 18.4%
from 2 6 0 7
discontinu
ed
operations
Net income 135, 94,0 41,370 44.0% 56,4 36,8 19,625 53.2%
371 01 89 64
Net interest margin, 4.8% 5.6% 4.8% 5.6%
p.a.
Return on average 24.4% 22.0% 28.6% 24.1%
equity, p.a.
Return on average 2.9% 2.8% 2.9% 3.1%
assets, p.a.
Cost-to-income ratio 27.2% 26.8% 26.4% 24.0%
Cost of risk, p.a. 1.2% 1.0% 1.7% 1.4%
(1) insurance underwriting income (gross insurance premiums written, net change in
unearned insurance premiums, ceded reinsurance share) less insurance claims incurred,
net of reinsurance (insurance payments, insurance reserves expenses, commissions to
agents);
(2) net gain on foreign exchange operations;
(3) net gain from financial assets and liabilities at fair value through profit or
loss and net realised gain/(loss) from available-for-sale investment securities;
(4) total impairment charge, including impairment charge on loans to customers,
amounts due from credit institutions, available-for-sale investment securities and
other assets;
Compared with 9M 2016, interest income grew by 38.9% mostly due to 43.0% increase in
average balances of interest-earning assets. The increase in average balances of
interest-earning assets was mainly on the back of consolidation of Kazkommertsbank
assets in 3Q 2017, as well as NBK Notes purchased by the Bank starting from 2Q 2016
and excess liquid funds placed with commercial financial institutions following the
change in local regulation starting from 1 May 2016. Interest expense grew by 44.9%
compared with 9M 2016. This was mostly due to increase in average balances on
interesting bearing liabilities by 33.9%, as well as increase in average interest
rates on amounts to customers (to 4.0%p.a. from 3.7% p.a.) and debt securities issued
(to 8.2% p.a. from 7.7% p.a.) as a result of consolidation of Kazkommertsbank assets
in 3Q 2017. As a result, net interest income before impairment charge increased by
33.2% to KZT 166.8bn compared to 9M 2016.
Net interest margin decreased to 4.8% p.a. for 9M 2017 compared to 5.6% p.a. for 9M
2016, mainly on the back of lower net interest margin of Kazkommertsbank and
reclassification of Altyn Bank's interest earning-assets into assets held for sale.
Impairment charge increased by 29.4% compared to 9M 2016 and by 64.1% compared to 3Q
2016 mainly due to additional provisions created on Kazkommertsbank's impaired loans
in 3Q 2017. The cost of risk increased to 1.2% p.a. compared to 1.0% p.a. for 9m 2016
and to 1.7% p.a. compared to 1.4% p.a. for 3Q 2016.
Fee and commission income rose by 39.2% compared to 9M 2016, mainly as a result of
consolidation of Kazkommertsbank, as well as, growing volumes of transactional
banking, mainly in payment card maintenance, cash operations, and bank transfers -
settlements.
Other non-interest income increased to KZT 58.1bn for 9M 2017 vs. KZT 29.1bn for 9M
2016. This increase was largely attributable to consolidation with insurance
subsidiaries of Kazkommertsbank, as well as, growing volumes of insurance business of
the Bank. In addition, other non-interest income grew due to net gain from financial
assets and liabilities at fair value through profit or loss mainly on the back of
consolidation of Kazkommertsbank and also due to positive revaluation on derivative
and trading operations as a result of KZT depreciation in 3Q 2017.
Operating expenses grew by 40.5% compared to 9M 2016 mainly due to consolidation of
Kazkommertsbank, as well as increase in the Bank's expenses on salaries and other
employee benefits, professional services, taxes and disposal of property by the
Bank's leasing subsidiary. Salaries and other employee benefits increased on the back
of higher bonus reserves accrued in 9M 2017 compared to 9M 2016 and overall increase
in employee salaries from 1 June 2017; the increase was partially offset by the
reversal of bonus reserves previously accrued by Kazkommertsank. The increase in
professional services and taxes was due to expenses on external consultants in
connection with the purchase of Kazkommertsbank and sale of 60% stake in Altyn Bank.
The Bank's cost-to-income ratio increased to 27.2% compared to 26.8% for 9M 2016 on
the back of faster growth in operating expenses versus operating income. Operating
income increased by 38.6% on the back of higher interest income, net fees and
commissions and positive revaluation of derivative instruments in 3Q 2017.
Statement of financial position review
30-Sep-17 30-Jun-17 31-Dec-16 Change Change Change Change
, abs YTD, % , abs Q-o-Q,
%
Total 8,674,584 5,275,683 5,348,483 3,326, 62.2% 3,398, 64.4%
assets 101 901
Cash and 1,726,932 1,268,554 1,850,641 - -6.7% 458,37 36.1%
reserves 123,70 8
9
Amounts due 77,056 35,154 35,542 41,514 2.2x 41,902 2.2x
from credit
institution
s
T-bills & 1,974,180 739,395 586,982 1,387, 3.4x 1,234, 2.7x
NBK notes 198 785
Other 799,117 359,937 341,379 457,73 2.3x 439,18 2.2x
securities 8 0
&
derivatives
Gross loan 3,413,180 2,477,717 2,604,335 808,84 31.1% 935,46 37.8%
portfolio * 5 3
Stock of -290,110* -282,693 -284,752 - 1.9% -7,417 2.6%
provisions * 5,358
Net loan 3,123,070 2,195,024 2,319,583 803,48 34.6% 928,04 42.3%
portfolio 7 6
Assets held 581,208 476,932 10,297 570,91 56.4x 104,27 21.9%
for sale 1 6
Other 393,021 200,687 204,059 188,96 92.6% 192,33 95.8%
assets 2 4
(MORE TO FOLLOW) Dow Jones Newswires
November 17, 2017 05:22 ET (10:22 GMT)
Total 7,847,901 4,520,902 4,682,890 3,165, 67.6% 3,326, 73.6%
liabilities 011 999
Total 6,076,281 3,481,523 3,820,662 2,255, 59.0% 2,594, 74.5%
deposits, 619 758
including:
retail 3,159,493 1,161,591 1,715,448 1,444, 84.2% 1,997, 2.7x
deposits 045 902
term 2,772,441 928,166 1,470,536 1,301, 88.5% 1,844, 3.0x
deposits 905 275
current 387,052 233,425 244,912 142,14 58.0% 153,62 65.8%
accounts 0 7
corporate 2,916,788 2,319,932 2,105,214 811,57 38.6% 596,85 25.7%
deposits 4 6
term 1,578,268 1,425,255 1,267,589 310,67 24.5% 153,01 10.7%
deposits 9 3
current 1,338,520 894,677 837,625 500,89 59.8% 443,84 49.6%
accounts 5 3
Debt 988,774 383,602 584,933 403,84 69.0% 605,17 2.6x
securities 1 2
Amounts due 154,892 132,015 162,134 -7,242 -4.5% 22,877 17.3%
to credit
institution
s
Liabilities 372,899 410,091 0 372,89 100.0% -37,19 -9.1%
directly 9 2
associated
with assets
classified
as held for
sale
Other 255,055 113,671 115,161 139,89 2.2x 141,38 2.2x
liabilities 4 4
Equity 826,683 754,781 665,593 161,09 24.2% 71,902 9.5%
0
*Including KKB net loans of KZT 780,866 million recognised by the Bank at fair value
+ changes in KKB gross loan portfolio from acquisition date to 30 September 2017.
**Including changes in provisions created on KKB loan portfolio from acquisition date
to 30 September 2017.
In 9M 2017, total assets increased by 62.2% vs. YE 2016, mainly due to consolidation
of KKB. Compared to YE 2016, the Bank's assets, excluding those of KKB, remained
almost flat.
Compared with YE 2016, loans to customers increased by 31.1% on a gross basis and
34.6% on a net basis, as a result of consolidation of Kazkommertsbank loan portfolio.
The increase was across all types of business: corporate - by 28.4%, SME - by 0.2%
and retail - by 55.1%.
The Bank's 90-day NPL ratio increased to 13.4% compared to 10.2% as at 30 June 2017
and 31 December 2016. The increase was mainly because of consolidation of
Kazkommertsbank loan portfolio, as well as indebtedness from two previously impaired
large-ticket corporate borrowers, operating in the agricultural sector, becoming
overdue by more than 90 days. The increase in 90-day NPLs was partially offset by
repayment of overdue indebtedness by a number of corporate borrowers, write-off of
problem retail loans and an overall increase in the loan portfolio.
Allowances for loan impairment increased by 1.9% compared to YE 2016, mainly as a
result of additional provisions created against impaired loans in the Bank's
portfolio.
Deposits of legal entities and individuals increased by 38.6% and 84.2%,
respectively, compared to YE 2016, mainly due to consolidation of Kazkommertsbank
assets and liabilities, as well as due to organic growth of the Bank's deposit base.
As at 30 September 2017, the share of corporate KZT deposits in total corporate
deposits was 52.1% compared to 42.6% as at 30 June 2017 and 36.8% as at YE 2016,
whereas the share of retail KZT deposits in total retail deposits was 37.7% compared
to 39.8% as at 30 June 2017 and 32.1% as at YE 2016.
Amounts due to credit institutions decreased by 4.5% vs. YE 2016 mainly due to the
Bank's partial repayment of a loan to KazAgro national management holding in 3Q 2017.
The repayment was made out of the Bank's own funds. Compared to 30 June 2017 amounts
due to credit institutions increased by 17.3% due to consolidation of
Kazkommertsbank. As of 30 September 2017, over one half of the Bank's obligations to
financial institutions was represented by loans from KazAgro national management
holding, DAMU development fund, Development Bank of Kazakhstan drawn in FY2014 and
FY2015 within the framework of government programmes supporting certain sectors of
economy.
Debt securities issued increased by 69.0% vs. YE 2016, mainly due to consolidation of
Kazkommertsbank's securities portfolio in 3Q 2017. As at the date of this
press-release, the Bank's debt securities portfolio was as follows:
Description of the Nominal Interest rate Maturity
security amount Date
outstanding
Issued by Halyk
Bank
Eurobond USD 500 mln 7.25% p.a. January 2021
Local bonds placed KZT 100 bn 7.5% p.a. November
with the Unified 2024
Accumulative
Pension Fund
Local bonds placed KZT 131.7 bn 7.5% p.a. February
with the Unified 2025
Accumulative
Pension Fund
Issued by
Kazkommertsbank*
Eurobond USD 300 mln 8.5% p.a. May 2018
Eurobond USD 750 mln 5.5% p.a. December
2022
Subordinated coupon USD 100 mln USD Libor + Perpetual
international bonds 6.1905%
Local bonds KZT 94.2 bn 8.75% p.a. January 2022
Local bonds KZT 59.9 bn 8.4% p.a. November
2019
Subordinated coupon KZT 101.1 bn 9.5% p.a. October 2025
bonds
Subordinated coupon KZT 3.5 bn Inflation April 2019
bonds indexed
(currently 8.9%
p.a.)
Subordinated coupon KZT 10 bn Inflation November
bonds indexed 2018
(currently
10.5%p.a.)
*Excluding debt securities of Kazkommertsbank's Russian subsidiary for USD 6.7
million and RUB 68.6 million.
Compared with YE 2016 total equity increased by 23.7% mainly due to net profit earned
by the Bank during 9M 2017, as well as consolidation of Kazkommertsbank in 3Q 2017.
The Bank's capital adequacy ratios were as follows:
01.10.2017* 01.07.2017* 01.04.2017* 01.01.2017
Capital adequacy ratios, unconsolidated:
Halyk Bank
K1-1 20.2% 22.1% 21.3% 19.2%
K1-2 20.2% 22.1% 21.3% 19.2%
K2 20.1% 22.1% 21.3% 19.2%
Kazkommertsbank
K1-1 13.1%
K1-2 15.0%
K2 10.3%
Capital adequacy ratios, consolidated:
CET 15.4% 21.6% 21.5% 19.4%
Tier 1 capital 15.8% 21.6% 21.5% 19.4%
Tier 2 capital 17.8% 21.6% 21.5% 19.4%
* The regulator increased minimum capital adequacy requirements starting from 1
January 2017: k1 - 9.5%, k1-2 - 10.5% and k2 - 12.0%, including conservation buffer
of 3% and systemic buffer of 1% for each of these ratios.
The condensed interim consolidated financial information for the nine months ended 30
September 2017, including notes attached thereto, are available on Halyk Bank's
website https://halykbank.kz/ifrs_reports2 [1].
A 9M 2017 results webcast will be hosted at 1:00 p.m. GMT/8:00 a.m. EST on Monday, 20
November 2017: http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=5175
[2]
About Halyk Bank
Halyk Bank is Kazakhstan's leading financial services group, operating across a
variety of segments, including retail, SME & corporate banking, insurance, leasing,
brokerage and asset management. Halyk Bank has been listed on the Kazakhstan Stock
Exchange since 1998 and on the London Stock Exchange since 2006.
In July 2017, the Bank purchased majority stake in Kazkommertsbank JSC - the second
largest Bank in Kazakhstan by total assets.
With total assets of KZT 8,674.6 billion as at 30 September 2017, Halyk Bank is
Kazakhstan's leading lender. The Bank has the largest customer base and broadest
branch network in Kazakhstan, with 719 branches and outlets (including 220 branches
and outlets of Kazkommertsbank) across the country. The Bank also operates in
Georgia, Kyrgyzstan, Russia and Tajikistan.
For more information on Halyk Bank, please visit https://www.halykbank.kz [3]
- ENDS-
For further information, please contact:
Halyk Bank
Murat Koshenov +7 727 259 07 95
Mira Kasenova +7 727 259 04 30
Yelena Perekhoda +7 727 330 17 19
ISIN: US46627J3023
Category Code: MSCM
TIDM: HSBK
Sequence No.: 4885
End of Announcement EQS News Service
630405 17-Nov-2017
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(END) Dow Jones Newswires
November 17, 2017 05:22 ET (10:22 GMT)
