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JSC Halyk Bank (HSBK) JSC Halyk Bank: Consolidated financial results for the year ended 31 December 2017 16-March-2018 / 12:48 CET/CEST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. 16 March 2018 Joint Stock Company 'Halyk Savings Bank of Kazakhstan' Consolidated financial results for the year ended 31 December 2017 Joint Stock Company 'Halyk Savings Bank of Kazakhstan' and its subsidiaries (together "the Bank") (LSE: HSBK) releases its consolidated financial statements for the year ended 31 December 2017 prepared in accordance with International Financial Reporting Standards, audited by Deloitte, LLP, and subject to further approval by the Bank's Board of Directors and Annual General Shareholders' Meeting. Umut Shayakhmetova, the Bank's CEO commented: "2017 had a particular historical significance for the further development of Halyk Group. Having completed the major transaction on acquisition of Kazkommertsbank, we have significantly strengthened our leading positions and now have 34% market share. The main goal for this year is to successfully complete all necessary procedures for the integration of systemically important banks and insurance companies of the group. By combining all the strengths, the most promising product and IT developments and the largest infrastructures of our financial institutions - the Halyk Group companies will be able to provide the best choice of products together with excellent quality of service for our customers." Consolidated income statements 12m 12m Change Y-o-Y 4Q 4Q Change Y-o-Y, 2017 2016 , abs , % 2017 2016 , abs % Interest income 506,3 332,5 173,76 52.3% 167,2 88,51 78,759 89.0% 28 63 5 76 7 -257, -160, -97,25 60.6% -85,5 -41,7 -43,86 2.1x 805 549 6 69 05 4 Interest expense 248,5 172,0 76,509 44.5% 81,70 46,81 34,895 74.5% 23 14 7 2 Net interest income before impairment charge 87,64 57,69 29,943 51.9% 28,76 15,40 13,355 86.7% 0 7 0 5 Fee and commission income -26,7 -11,2 -15,43 2.4x -10,7 -2,86 -7,835 3.7x 32 95 7 03 8 Fee and commission expense 60,90 46,40 14,506 31.3% 18,05 12,53 5,520 44.0% 8 2 7 7 Net fee and commission income 6,493 3,272 3,221 98.4% 2,933 1,373 1,560 2.1x Insurance income(1) FX -4,94 18,50 -23,45 -4.7x 43,21 6,775 36,441 6.4x operations(2) 9 6 5 6 Income/loss 32,48 -10,0 42,574 4.2x -27,8 -3,55 -24,32 7.8x from derivative 7 87 77 4 3 operations and securities (3) Other 23,61 6,486 17,132 3.6x 14,17 2,518 11,661 5.6x non-interest 8 9 income Impairment -67,3 -25,3 -41,99 2.7x -43,1 -6,64 -36,50 6.5x charge and 02 08 4 49 1 8 reserves (4) 1,737 -44 1781 40.5x 1,275 -66 1341 20.3x Provisions against letters of credit and guarantees issued -112, -68,5 -43,77 63.8% -46,2 -21,4 -24,72 2.2x 330 59 1 16 94 2 Operating expenses(5) -25,5 -22,1 -3,415 15.4% -8,16 -5,72 -2,441 42.6% 98 83 7 6 Income tax expense Profit from 9,876 10,91 -1,037 -9.5% 2,134 4,877 -2,743 -56.2% discontinued 3 operations -101 0 -101 100% -51 0 -51 100% Non-controlling Interest 173,3 131,4 41,950 31.9% 38,04 37,41 630 1.7% 62 12 1 1 Net income Net interest 4.9% 5.5% 4.9% 5.3% margin, p.a. Return on 22.7% 22.3% 18.0% 23.1% average equity, p.a. Return on 2.6% 2.8% 1.8% 3.0% average assets, p.a. Cost-to-income 29.5% 28.1% 33.5% 31.3% ratio Cost of risk, 2.2% 1.0% 4.8% 1.1% p.a. (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; (5) Including impairment loss of assets held for sale Compared with 12M 2016, interest income grew by 52.3% due to 51.1% 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. Interest expense grew by 60.6% compared with 12M 2016. This was mostly due to increase in average balances on interesting bearing liabilities by 42.5%, as well as increase in average interest rates on amounts to customers (to 4.1% p.a. from 3.7% p.a.) and debt securities issued (to 8.5% 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 44.5% to KZT 248.5bn compared to 12M 2016. Compared with 3Q 2017, interest income grew by 8.4% due to 15.7% increase in average balances of interest-earning assets. Interest expense decreased by 0.9% compared with 3Q 2017 due to decrease in average interest rates on interest-bearing liabilities to 4.7%p.a. from 5.5%p.a. As a result, net interest income before impairment charge increased by 20.1% to KZT 81.7bn compared to 3Q 2017. Net interest margin decreased to 4.9% p.a. for 12M 2017 compared to 5.5% p.a. for 12M 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. Net interest margin remained almost flat at 4.9% p.a. for 4Q 2017 compared to 4.8% p.a. for 3Q 2017 against the decreasing interest rates on interest-bearing liabilities. Impairment charge increased by 165.9% compared to 12M 2016 mainly due to consolidation of Kazkommertsbank loan portfolio starting from 3Q 2017. The cost of risk increased to 2.2% p.a. compared to 1.0% p.a. for 12m 2016 and to 4.8% p.a. compared to 1.1% p.a. for 4Q 2016. Fee and commission income rose by 51.9% compared to 12M 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 106.3bn for 12M 2017 vs. KZT 43.0bn for 12M 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. Operating expenses grew by 63.8% compared to 12M 2016 mainly due to consolidation of Kazkommertsbank, as well as increase in the Bank's expenses on salaries and other employee benefits, professional services and taxes. Salaries and other employee benefits increased on the back of higher bonus reserves accrued in 12M 2017 compared to 12M 2016 and overall increase in employee salaries from 1 June 2017; the increase was partially offset by the reversal of bonus reserves in 3Q 2017 previously accrued by Kazkommertsbank. 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 29.5% compared to 28.1% for 12M 2016 on the back of faster growth in operating expenses versus operating income. Operating income increased by 56.1% on the back of higher interest income, net fees and commissions, positive revaluation of derivative instruments in 3Q 2017 and realised net gain on trading operations in 4Q 2017. Consolidated statement of financial position 31-Dec-17 30-Sep-17 31-Dec-16 Change Change Change Change , abs YTD, % , abs Q-o-Q, % Total 8,857,781 8,674,584 5,348,483 3,509, 65.6% 183,19 2.1% assets 298 7 Cash and 1,891,587 1,726,932 1,850,641 40,946 2.2% 164,65 9.5% reserves 5 Amounts due 87,736 77,056 35,542 52,194 2.5x 10,680 13.9% from credit institution s T-bills & 1,878,870 1,974,180 586,982 1,291, 3.2x -95,31 -4.8%
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March 16, 2018 07:48 ET (11:48 GMT)