DJ JSC Halyk Bank: Consolidated financial results for the nine months and third quarter ended 30 September 2018
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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
(MORE TO FOLLOW) Dow Jones Newswires
November 19, 2018 07:48 ET (12:48 GMT)
Equity 977,877 889,655 934,457 43,4 4.6% 88, 9.9%
20 222
As of 30 September 2018, total assets decreased by 5.3% vs. YE 2017 mainly due to
the sale of 60% in Altyn Bank on 24 April 2018, followed by deconsolidation of
its assets and liabilities from the Bank's balance sheet. Total assets increased
by 1.4% vs. the end of 2Q 2018 mainly as a result of positive revaluation of debt
securities issued and increase in retained earnings in 3Q 2018.
Compared with end of 2Q 2018, loans to customers increased by 0.6% on a gross
basis and 0.6% on a net basis. The increase in loan growth was offset by major
loan repayments by corporate clients in 3Q 2018.
Halyk Bank's 90-day NPL ratio was 10.9% compared to aggregate Halyk Bank and
KKB's 90-day NPL ratio of 12.3% as at the end of 2Q 2018. The decrease compared
to the end of 2Q 2018 was mainly due to write-off and repayment of problem
indebtedness.
Allowances for loan impairment increased by 0.7% compared to the end of 2Q 2018,
mainly as a result of additional provisions created against impaired loans and
revaluation of provisions created on FX-denominated part of a loan portfolio.
Deposits of legal entities and individuals decreased by 0.8% and increased by
0.1%, respectively, compared to the end of 2Q 2018, mainly due to partial
withdrawal of funds by the Bank's corporate customers to finance their ongoing
needs. As at 30 September 2018, the share of corporate KZT deposits in total
corporate deposits was 49.7% compared to 53.3% as at 30 June 2018 and 48.3% as at
YE 2017, whereas the share of retail KZT deposits in total retail deposits was
41.4% compared to 44.5% as at 30 June 2018 and 40.7% as at YE 2017.
Amounts due to credit institutions increased by 3.5% vs. the end of 2Q 2018 due
to growth in loans from DAMU within its programmes and increase in balances on
correspondent accounts as at 30 September 2018 in the ordinary course of
business. As at 30 September 2018, 78.2% of the Bank's obligations to financial
institutions were represented by loans from KazAgro national management holding,
DAMU development fund, Development Bank of Kazakhstan drawn in 2014-2017 within
the framework of government programmes supporting certain sectors of economy.
Debt securities issued increased by 3.9% vs. the end of 2Q 2018, mainly due to
revaluation of FX-denominated Eurobonds due to increase in FX/KZT exchange rate
over the third quarter. As at the date of this press-release, the Bank's debt
securities portfolio was as follows:
Description of the Nominal Interest rate Maturity
security amount Date
outstanding
Eurobond USD 500 mln 7.25% p.a. January 2021
Eurobond USD 750 mln 5.5% p.a. December
2022
Local bonds placed KZT 100 bn 7.5% p.a. November
with the Unified 2024
Accumulative
Pension Fund
Local bonds placed KZT 131.7 bn 7.5% p.a. February
with the Unified 2025
Accumulative
Pension Fund
Local bonds KZT 94.2 bn 8.75% p.a. January 2022
Local bonds KZT 59.9 bn 8.4% p.a. November
2019
Subordinated coupon KZT 101.1 bn 9.5% p.a. October 2025
bonds
Subordinated coupon KZT 3.5 bn Inflation April 2019
bonds indexed
(currently 7.8%
p.a.)
Compared with the end of 2Q 2018 total equity increased by 9.9% due to net profit
earned by the Bank during 3Q 2018.
The Bank's capital adequacy ratios were as follows*:
01.10.2018 01.07.2018 01.04.2018 01.01.2018 01.10.2017
Capital adequacy ratios, unconsolidated:
Halyk Bank
K1-1 19.4% 20.6% 21.7% 21.5% 20.2%
K1-2 19.4% 20.6% 21.7% 21.5% 20.2%
K2 21.6% 20.6% 21.6% 21.4% 20.1%
KKB, from period of ownership
K1-1 20.8% 21.3% 18.0% 13.1%
K1-2 20.8% 21.3% 19.9% 15.0%
K2 28.6% 28.9% 26.9% 10.3%
Capital adequacy ratios, consolidated:
CET 17.8% 17.2% 18.1% 16.9% 15.4%
Tier 1 17.8% 17.2% 18.1% 16.9% 15.8%
capital
Tier 2 19.9% 19.1% 20.0% 18.9% 17.8%
capital
* minimum capital adequacy requirements: k1 - 9.5%, k1-2 - 10.5% and k2 - 12.0%,
including conservation buffer of 3% and systemic buffer of 1% for each of these
ratios.
The condensed interim consolidated financial information for the nine months
ended 30 September 2018, including the notes attached thereto, are available on
Halyk Bank's website: https://halykbank.kz/investoram/ifrs_reports2 [1].
A 9M/3Q 2018 results webcast will be hosted at 1:00 p.m. GMT/8:00 a.m. EST on
Tuesday, 20 November 2018: http://halyk201118-live.audio-webcast.com [2].
About Halyk Bank
Halyk Bank is Kazakhstan's leading financial services group, operating across a
variety of segments, including retail, SME & corporate banking, insurance,
leasing, brokerage and asset management. Halyk Bank has been listed on the
Kazakhstan Stock Exchange since 1998 and on the London Stock Exchange since 2006.
In July 2017, the Bank purchased majority stake in Kazkommertsbank JSC - the
second largest Bank in Kazakhstan by total assets - and merged it fully in July
2018.
With total assets of KZT 8,389.9 billion as at 30 September 2018, Halyk Bank is
Kazakhstan's leading lender. The Bank has the largest customer base and broadest
branch network in Kazakhstan, with 656 branches and outlets across the country.
The Bank also operates in Georgia, Kyrgyzstan, Russia and Tajikistan.
For more information on Halyk Bank, please visit https://www.halykbank.kz [3]
- ENDS-
For further information, please contact:
Halyk Bank
Viktor Skryl +7 727 259 04 27
Mira Kasenova +7 727 259 04 30
Karashash Karymsakova +7 727 330 01 92
ISIN: US46627J3023
Category Code: MSCM
TIDM: HSBK
Sequence No.: 6589
EQS News ID: 748049
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November 19, 2018 07:48 ET (12:48 GMT)
