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JSC Halyk Bank (HSBK)
JSC Halyk Bank: Consolidated financial results for the six months ended 30 June 2018
20-Aug-2018 / 14:31 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
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20 August 2018
Joint Stock Company 'Halyk Savings Bank of Kazakhstan'
Consolidated financial results
for the six months ended 30 June 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 six months ended 30 June 2018.
Statement of profit or loss review
KZT mln
Change, Q-o-Q
2Q2018 1Q2018 abs %
Interest income 172,73 162,005 10,7 6.6%
4 29
Interest -82,71 -87,617 4,90 -5.6%
expense 3 4
Net interest 90,021 74,388 15,6 21.0%
income before 33
credit loss
expense
Fee and 28,012 26,374 1,63 6.2%
commission 8
income
Fee and -8,293 -9,680 1,38 -14.3%
commission 7
expense
Net fee and 19,719 16,694 3,02 18.1%
commission 5
income
Insurance 1,496 292 1,20 412.3%
income(1) 4
FX -60,48 55,425 -115 -209.1%
operations(2) 7 ,912
Gain/Loss from 74,324 -42,546 116, 274.7%
derivative 870
operations and
securities (3)
Other 8,210 13,961* -5,7 -41.2%
non-interest 51
income
Share of net 705 0 705 100.0%
income of
associates(4)
Credit loss -17,67 -5,197 -12, 240.2%
expense (5) 9 482
Recoveries of 992 1,355 -363 -26.8%
other credit
loss expense(6)
Operating -64,96 -34,281* -30, 89.5%
expenses 4(7) 683
Income tax -47,03 -10,159 -36, 363.0%
expense 8 879
Profit from 7,389 2,585 4,80 185.8%
discontinued 4
operations(8)
Non-controlling -11,43 10,464 -21, -209.3%
interest in net 3 897
income
Net income 24,121 62,053 -37,9 -61.1%
32
Net interest 5.2% 4.3%
margin, p.a.
Return on 11.4% 29.2%
average equity,
p.a.
Return on 1.2% 2.9%
average assets,
p.a.
Cost-to-income 47.2% 28.3%
ratio
Cost of risk on 1.7% 0.2%
loans to
customers, p.a.
* Previously, expenses from sale/disposal of property and intangible assets were
reflected in operating expenses. In its 6m 2018 financial statements the Bank netted
income from sale of property and intangible assets from expenses associated with the
sale and reflected the result in other non-interest income. Other non-interest
income and operating expenses for 1Q 2018 are recalculated in the chart above
accordingly.
(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) the Bank's share in net income of Altyn Bank from 25 April 2018 to 30 June 2018;
(5) 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;
(6) provisions against letters of credit and guarantees issued;
(7) including loss from impairment of non-financial assets of KZT 30.3bn
(8) net income of Altyn Bank from 1 January 2018 to 25 April 2018.
Net income decreased to KZT 24.1bn for 2Q 2018 compared to KZT 62.1bn for 1Q 2018
mainly due to loss from impairment of non-financial assets for KZT 30.3bn, as well
as Kazkommertsbank's (KKB) de-recognition of tax loss carry forward of KZT 43.3bn
due to the merger into Halyk Bank. Previously, KKB recognised deferred tax asset on
its books in connection with tax loss carry forward. As IFRS do not allow any
transfer of the deferred tax asset to another entity, it was derecognised before KKB
was merged into the Bank and reflected as an additional tax expense on P&L.
Compared with 1Q 2018, net interest income increased by 21.0% to KZT 90.0bn, mainly
due to net positive amortisation of a discount/premium on a number of loans written
off or repaid by KKB clients over 2Q 2018 compared to net negative amortisation of a
discount/premium in 1Q 2018, as well as 5.6% decrease in the Bank's interest
expenses. The Bank's interest expenses were lower for 2Q 2018 on the back of
Eurobond repayment by KKB in May, as well as one-off interest expense in 1Q 2018 due
to amortisation of a discount on perpetual bond redeemed by KKB back then. As a
result of net interest income growth, net interest margin increased to 5.2% p.a. for
2Q 2018 compared to 4.3% p.a. for 1Q 2018.
Credit loss expense increased by 3.4x to KZT 17.7bn compared to 5.2bn in 1Q 2018
mainly due to additional provisions created by Moskommertsbank, KKB's Russian
subsidiary, new provisions created by KKB on one of its corporate borrowers and
additional provisions created principally on problem SME loans at KKB's branches. As
a result, the cost of risk on loans to customers increased to 1.7% p.a. over 2Q 2018
compared to 0.2% p.a. over 1Q 2018.
Fee and commission income increased by 6.2% compared to 1Q 2018 mainly as a result
of growing volumes of transactional banking.
Other non-interest income decreased by 3.1% to KZT 40.2bn for 2Q 2018 vs. KZT 43.3bn
for 1Q 2018. Recoveries of credit loss expense that arise from KKB's loan repayments
and which were created before the acquisition of KKB by Halyk Bank are reflected in
the consolidated financial statement as other income. Due to fewer repayments of
such KKB's loans in 2Q 2018 the other income was lower compared with 1Q 2018. The
decrease was partially offset by increase in insurance income and net gain from
financial assets and liabilities at fair value through profit or loss mostly on the
back of positive revaluation of derivative and trading operations as a result of KZT
depreciation in 2Q 2018.
Operating expenses (including loss from impairment of non-financial assets)
increased by 89.5% mainly due to KZT 30.3bn expense related to revaluation of the
Bank's property, investment assets and assets held for sale, higher salaries and
benefits to employees involved in KKB integration process, as well as expenses on
repair and maintenance of KKB's computer and ATM equipment.
The Bank's cost-to-income ratio increased to 47.2% compared to 28.3% for 1Q 2018 on
the back of higher growth of operating expenses vs. operating income. Operating
income increased by 13.4% mainly on the back of the Bank's interest income from
lending activities and income from fee and commission business.
Statement of financial position review
KZT mln
Change, Change,
YTD Q-o-Q
30-Jun-18 31-Mar-18 31-Dec-17 abs % abs %
Total 8,273,906 8,411,931 8,857,781 -583 -6.6% -138 -1.6%
assets ,875 ,025
Cash and 1,851,442 1,386,943 1,891,587 -40, -2.1% 464, 33.5%
reserves 145 499
Amounts due 76,537 86,357 87,736 -11, -12.8% -9,8 -11.4%
from credit 199 20
institution
s
T-bills & 1,883,167 2,051,492 1,878,870 4,29 0.2% - -8.2%
NBK notes 7 168,
325
Other 679,343 722,279 831,531 - -18.3% - -5.9%
securities 152, 42,9
& 188 36
derivatives
Gross loan 3,591,732 3,564,346 3,568,263 23,4 0.7% 27,3 0.8%
portfolio* 69 86
Stock of - 351,758 - 338,381 - 317,161 - 10.9% - 4.0%
provisions* 34,5 13,3
* 97 77
Net loan 3,239,974 3,225,965 3,251,102 -11, -0.3% 14,0 0.4%
portfolio 128 09
Assets held 121,296 574,072 552,405 - -78.0% - -78.9%
for sale 431, 452,
109 776
Other 422,147 364,823 364,550 57,5 15.8% 57,3 15.7%
assets 97 24
Total 7,384,251 7,464,522 7,923,324 -539 -6.8% -80, -1.1%
liabilities ,073 270
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