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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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May 18, 2018 11:43 ET (15:43 GMT)