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JSC Halyk Bank (HSBK) JSC Halyk Bank: Consolidated financial results for the nine months and third quarter ended 30 September 2018 19-Nov-2018 / 13:47 CET/CEST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. 19 November 2018 Joint Stock Company 'Halyk Savings Bank of Kazakhstan' Consolidated financial results for the nine months and third quarter ended 30 September 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 nine months and third quarter ended 30 September 2018. Statement of profit or loss review KZT mln 3Q 2018 2Q 2018 Change, abs Y-o-Y, % Interest income 167,867 172,734 -4,867 -2.8% Interest expense -83,044 -82,713 -331 0.4% Net interest income 84,823 90,021 -5,198 -5.8% before impairment charge Fee and commission 29,350 28,012 1,338 4.8% income Fee and commission -10,199 -8,293 -1,906 23.0% expense Net fee and 19,151 19,719 -568 -2.9% commission income Insurance income(1) 1,199 1,496 -297 -19.9% FX operations(2) -31,992 -60,487 28,495 -47.1% Income from 56,156 74,269 -18,113 -24.4% derivative operations and securities (3) Other income 2,398 8,970 -6,572 -73.3% Credit loss expense -8,266 -17,679 9,413 -53.2% (4) Recoveries of other 698 992 -294 -29.6% credit loss expense Operating expenses -35,271 -64,964 29,693 -45.7% (5) Income before income 88,896 52,337 36,559 69.9% tax expense Income tax expense -10,947 -47,038 36,091 -76.7% Income after income 77,949 5,299 72,650 14.7x tax expense Non-controlling 162 -11,433 11,595 -101.4% interest Net income from 77,787 16,732 61,055 4.6x continuing operations Profit from 0 7,389 -7,389 -100.0% discontinued operations (6) Net income 77,787 24,121 53,666 3.2x Net interest margin, p.a. 5.1% 5.2% Return on average equity, p.a. 33.8% 11.4% Return on average assets, p.a. 3.7% 1.2% Cost-to-income ratio 25.3% 47.2% Cost of risk, p.a. (7) 1.5% 1.6% (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 (FVTOCI); (4) total credit loss expense, including credit loss expense on loans to customers, amounts due from credit institutions, debt securities at amortized cost and at FVTOCI and other assets; (5) including loss from impairment of non-financial assets of KZT 30.3bn; (6) net income of Altyn Bank from 1 January 2018 to 25 April 2018; (7) previously in consolidated reports recoveries of provisions on KKB loans created before the acquisition of KKB by Halyk (5 July 2017) were reflected in other non-interest income. As per paragraph 5.5.14 of IFRS 9, starting from 3Q these recoveries of provisions are being reclassified as an impairment gain and recognized as reduction of credit loss expenses. Therefore, cost of risk for Q1 and Q2 2018 were recalculated taking into account such recoveries of provisions. Net income increased to KZT 77.8bn for 3Q 2018 compared to KZT 24.1bn for 2Q 2018 mainly as a result of lower operating and income tax expenses. Compared with 2Q 2018, net interest income decreased by 5.8% to KZT 84.8bn, due to placement of released USD liquidity into interest free correspondent account with the NBK as a result of NBK swap redemption for KZT 300bn in July 2018. Previously, this liquidity was invested in high-yield KZT NBK notes. As a result of decrease in net interest income, net interest margin decreased to 5.1% p.a. for 3Q 2018 compared to 5.2% p.a. for 2Q 2018. Cost of risk on loans to customers is at 0.9% for 9M 2018 being a normalized level in line with the Bank's expectation. Fee and commission income increased by 4.8% compared to 2Q 2018 mainly as a result of growing volumes of transactional banking. Other non-interest income increased by 9.8% to KZT 44.2bn for 3Q 2018 vs. KZT 40.2bn for 2Q 2018 mainly as a result of positive revaluation of swap with the NBK due to increase of KZT forward interest rates in 3Q 2018. The increase was partially offset by decrease of other income from banking activities due to reclassification of the recoveries of provisions on KKB loans created before the acquisition of KKB by Halyk (5 July 2017). Operating expenses (including loss from impairment of non-financial assets) decreased by 45.7% to KZT 35.3bn vs. KZT 65.0bn for 2Q 2018. This was mainly as a result of KZT 30.3bn expense related to impairment of the Bank's property, investment assets and assets held for sale in 2Q 2018. In 3Q 2018 there was no major impairment of non-financial assets. The Bank's cost-to-income ratio decreased to 25.3% compared to 47.2% for 2Q 2018 on the back of lower operating expenses in 3Q 2018 vs. 2Q 2018. Operating income increased by 1.3% mainly on the back of increase in other non-interest income, partially offset by lower net interest income. Statement of financial position review KZT mln Change YTD, % Change, Q-o-Q 30-Sep-18 30-Jun-18 31-Dec-17 abs % abs % Total 8,389,875 8,273,906 8,857,781 -467 -5.3% 115 1.4% assets ,906 ,96 9 Cash and 1,803,679 1,851,442 1,891,587 -87, -4.6% - -2.6% reserves 908 47, 763 Amounts due 71,804 76,537 87,736 -15, -18.2% - -6.2% from credit 932 4,7 institution 33 s T-bills & 2,026,220 1,883,167 1,878,870 147, 7.8% 143 7.6% NBK notes 350 ,05 3 Other 684,170 679,343 831,531 -147 -17.7% 4,8 0.7% securities ,361 27 & derivatives Gross loan 3,614,422 3,591,732 3,568,263 46,1 1.3% 22, 0.6% portfolio* 59 690 Stock of - 354,341 - 351,758 - 317,161 -37, 11.7% - 0.7% provisions* 180 2,5 * 83 Net loan 3,260,081 3,239,974 3,251,102 8,97 0.3% 20, 0.6% portfolio 9 107 Assets held 68,545 121,296 552,405 -483 -87.6% - -43.5% for sale ,860 52, 751 Other 475,376 422,147 364,550 110, 30.4% 53, 12.6% assets 826 229 Total 7,411,998 7,384,251 7,923,324 -511 -6.5% 27, 0.4% liabilities ,326 747 Total 6,068,200 6,088,847 6,131,750 -63, -1.0% -20 -0.3% deposits, 550 ,64 including: 7 retail 3,247,252 3,245,227 3,104,249 143, 4.6% 2,0 0.1% deposits 003 25 term 2,848,028 2,792,407 2,691,886 156, 5.8% 55, 2.0% deposits 142 621 current 399,224 452,820 412,363 -13, -3.2% -53 -11.8% accounts 139 ,59 6 corporate 2,820,948 2,843,620 3,027,501 -206 -6.8% -22 -0.8% deposits ,553 ,67 2 term 1,229,160 1,173,827 1,705,971 -476 -27.9% 55, 4.7% deposits ,811 333 current 1,591,788 1,669,793 1,321,530 270, 20.5% -78 -4.7% accounts 258 ,00 5 Debt 895,042 861,097 962,396 -67, -7.0% 33, 3.9% securities 354 945 Amounts due 161,416 155,978 255,151 -93, -36.7% 5,4 3.5% to credit 735 38 institution s Liabilities 0 0 334,627 -334 -100.0% 0 0 directly ,627 associated with assets classified as held for sale Other 287,340 278,329 239,400 47,9 20.0% 9,0 3.2% liabilities 40 11
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November 19, 2018 07:48 ET (12:48 GMT)