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JSC Halyk Bank (HSBK)
JSC Halyk Bank: Consolidated financial results for the three months ended 31
March 2018
18-May-2018 / 17:43 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
18 May 2018
Joint Stock Company 'Halyk Savings Bank of Kazakhstan'
Consolidated financial results
for the three months ended 31 March 2018
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 three months ended 31 March 2018.
Statement of profit or loss review
1Q 4Q Change Q-o-Q, %
2018 2017 , abs
Interest income 162,0 167,276 -5,27 -3.2%
05 1
Interest -87,6 - -2,04 2.4%
expense 17 85,569 8
Net interest 74,38 81,707 -7,31 -9.0%
income before 8 9
credit loss
expense
Fee and 26,37 28,760 -2,38 -8.3%
commission 4 6
income
Fee and -9,68 -10,703 1,023 -9.6%
commission 0
expense
Net fee and 16,69 18,057 -1,36 -7.5%
commission 4 3
income
Insurance 292 2,933 -2,64 -90.0%
income(1) 1
FX 55,42 43,216 12,20 28.3%
operations(2) 5 9
Loss from -42,5 -27,877 -14,6 52.6%
derivative 46 69
operations and
securities (3)
Other 15,76 14,179 1,585 11.2%
non-interest 4
income
Credit loss -5,19 -43,149 37,95 -88.0%
expense (4) 7 2
Recoveries of 1,355 1,275 80 6.3%
other credit
loss expense(5)
Operating -36,0 -46,216 10,13 -21.9%
expenses 84 (6) 2
Income tax -10,1 -8,167 -1,99 24.4%
expense 59 2
Profit from 2,585 2,134 451 21.1%
discontinued
operations
Non-controlling -10,4 -51 -10,4 205.2x
interest in net 64 13
income
Net income 62,05 38,041 24,012 63.1%
3
Net interest 4.3% 4.9%
margin, p.a.
Return on 29.2% 18.0%
average equity,
p.a.
Return on 2.9% 1.8%
average assets,
p.a.
Cost-to-income 29.3% 33.5%
ratio
Cost of risk on 0.2% 4.8%
loans to
customers, 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 loss from financial assets and liabilities at fair value through
profit or loss and net realised gain financial assets at fair value through
other comprehensive income;
(4) total credit loss expense, including credit loss expense on loans to
customers, amounts due from credit institutions, available-for-sale
investment securities and other assets;
(5) provisions against letters of credit and guarantees issued
(6) Including impairment loss of assets held for sale
Compared with 4Q 2017, net interest income decreased by 9.0% to KZT 74.4bn,
mainly due to decline in interest rates on loans to customers, amortisation
of a discount on perpetual bond redeemed by Kazkommertsbank in 1Q 2018 and
reclassification of Kazkommertsbank interest income from amortisation of
discount on receivables into other income due to IFRS 9.
Net interest margin decreased to 4.3% p.a. for 1Q 2018 compared to 4.9% p.a.
for 4Q 2017, mainly on the back of lower net interest margin of
Kazkommertsbank.
Credit loss expense decreased by 88.0% mainly due to repayment of problem
indebtedness by some of Kazkommertsbank's clients in 1Q 2018 and one-off
additional provisions on created on impaired loans of Kazkommertsbank and
its Russian subsidiary in 4Q 2017. As a result, the cost of risk on loans to
customers decreased to 0.2% p.a. over the reporting period compared to 4.8%
p.a. for 4Q 2017.
Fee and commission income decreased by 8.3% compared to 4Q 2017 mainly on
the back of seasonal effect.
Other non-interest income decreased by 10.2% to KZT 43.3bn for 1Q 2018 vs.
KZT 48.2bn for 4Q 2017. This decrease was mainly attributable to net loss
from financial assets and liabilities at fair value through profit or loss
mostly on the back of revaluation loss on derivative and trading operations
on the back of KZT appreciation in 1Q 2018. The decrease was partially
offset by a net gain on foreign exchange operations, mainly as a result of a
positive revaluation of a short USD position on the balance sheet due to KZT
appreciation in 1Q 2018.
Operating expenses decreased by 21.9% mainly due to higher one-off expenses
on charity, impairment assets held for sale, amortisation and penalties as a
result of KKB tax audit in 4Q 2017, as well as expenses on taxes, other than
income tax.
The Bank's cost-to-income ratio decreased to 29.3% compared to 33.5% for 4Q
2017 on the back of lower operating expenses. Operating income decreased by
10.7% mainly due to negative revaluation of derivative instruments in 1Q
2018 and lower net interest income earned in 1Q 2018 compared to 4Q 2018.
Statement of financial position review
31-Mar-18 31-Dec-17 Change, abs Change YTD,
%
Total assets 8,411,931 8,857,781 -445,850 -5.0%
Cash and 1,386,943 1,891,587 -504,644 -26.7%
reserves
Amounts due from 86,357 87,736 -1,379 -1.6%
credit
institutions
T-bills & NBK 2,051,492 1,878,870 172,622 9.2%
notes
Other securities 722,279 831,531 -109,252 -13.1%
& derivatives
Gross loan 3,564,346 3,568,263 -3,917 -0.1%
portfolio*
Stock of -338,381 -317,161 -21,220 6.7%
provisions **
Net loan 3,225,965 3,251,102 -25,138 -0.8%
portfolio
Assets held for 574,072 552,405 21,667 3.9%
sale
Other assets 364,823 364,550 273 0.1%
Total 7,464,522 7,923,324 -458,803 -5.8%
liabilities
Total deposits, 5,756,556 6,131,750 -375,194 -6.1%
including:
retail deposits 3,059,674 3,104,249 -44,575 -1.4%
term deposits 2,666,681 2,691,886 -25,205 -0.9%
current accounts 392,993 412,363 -19,370 -4.7%
corporate 2,696,882 3,027,501 -330,619 -10.9%
deposits
term deposits 1,435,634 1,705,971 -270,337 -15.8%
current accounts 1,261,248 1,321,530 -60,282 -4.6%
Debt securities 924,693 962,396 -37,703 -3.9%
Amounts due to 158,486 255,151 -96,665 -37.9%
credit
institutions
Liabilities 377,326 334,627 42,699 12.8%
directly
associated with
assets
classified as
held for sale
Other 247,461 239,400 8,060 3.4%
liabilities
Equity 947,409 934,457 12,952 1.4%
*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 31
March 2018.
**Including changes in provisions created on KKB loan portfolio from
acquisition date to 31 March 2018.
In 1Q 2018, total assets decreased by 5.0% vs. YE 2017, mainly due to
partial withdrawal of funds by the Bank's customers, maturity of REPO
transactions and the decrease in balance value of FX denominated assets due
to KZT appreciation versus US dollar during 1Q 2018.
Compared with YE 2017, loans to customers remained almost flat on a gross
basis and decreased by 0.8% on a net basis due to loan repayments exceeding
new loan issues in Kazkommertsbank portfolio, additional provisions created
as a result of IFRS 9 and the decrease in balance value of FX loans due to
KZT appreciation versus US dollar during 1Q 2018.
The aggregate Halyk Bank and KKB's 90-day NPL ratio was 12.7% compared to
12.1% as at YE 2017. The increase was due to indebtedness of some previously
impaired large-ticket corporate borrowers of the Bank and Kazkommertsbank
becoming overdue by more than 90 days.
Allowances for loan impairment increased by 6.7% compared to YE 2017, mainly
as a result of additional provisions created against impaired loans in the
Bank's and Kazkommertsbank's portfolio due to introduction of IFRS 9.
Deposits of legal entities and individuals decreased by 10.9% and 1.4%,
respectively, compared to YE 2017, mainly due to partial withdrawal of funds
by the Bank's customers to finance their ongoing needs. As at 31 March 2018,
the share of corporate KZT deposits in total corporate deposits was 54.2%
compared to 48.3% as at YE 2017, whereas the share of retail KZT deposits in
total retail deposits was 42.7% compared to 40.7% as at YE 2017.
Amounts due to credit institutions decreased by 37.9% vs. YE 2017 mainly due
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