DJ JSC Halyk Bank: Consolidated financial results for the year ended 31 December 2018
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JSC Halyk Bank (HSBK)
JSC Halyk Bank: Consolidated financial results for the year ended 31
December 2018
14-March-2019 / 13:33 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
14 March 2019
Joint Stock Company 'Halyk Savings Bank of Kazakhstan'
Consolidated financial results
for the year ended 31 December 2018
Joint Stock Company 'Halyk Savings Bank of Kazakhstan' and its subsidiaries
(together "the Bank") (LSE: HSBK) releases its consolidated financial
statements for the year ended 31 December 2018 prepared in accordance with
International Financial Reporting Standards, audited by Deloitte, LLP, and
subject to further approval by the Bank's Board of Directors and Annual
General Shareholders' Meeting.
Consolidated income statements
KZT mln
12m 12m Y-o-Y, 4Q 4Q Y-o-Y, 3Q Q-o-Q,
2018 2017 % 2018 2017 % 2018 %
Interest income 682,0 506,3 34.7% 179,4 167,2 7.3% 167,8 6.9%
41 28 35 76 67
Interest -333, -257, 29.5% -80,3 -85,5 -6.0% -83,0 -3.2%
expense 772 805 98 69 44
Net interest 348,2 248,5 40.1% 99,03 81,70 21.2% 84,82 16.8%
income before 69 23 7 7 3
credit loss
expense
Fee and 113,2 87,64 29.2% 29,50 28,76 2.6% 29,35 0.5%
commission 41 0 5 0 0
income
Fee and -39,0 -26,7 45.9% -10,8 -10,7 1.2% -10,1 6.2%
commission 06 32 34 03 99
expense
Net fee and 74,23 60,90 21.9% 18,67 18,05 3.4% 19,15 -2.5%
commission 5 8 1 7 1
income
Insurance 7,329 6,493 12.9% 4,342 2,933 48.0% 1,199 3.6x
income(1)
FX -64,5 -4,94 -13.0x -27,5 43,21 -1.6x -31,9 14.0%
operations(2) 77 9 23 6 92
Income/loss 116,5 32,48 3.6x 28,70 -27,8 2.0x 56,15 -48.9%
from derivative 86 7 7 77 6
operations and
securities (3)
Other income 24,66 23,61 4.4% 5,845 14,17 -58.8% 1,007 5.8x
(4) 4 8 9
Credit loss -31,9 -67,3 -52.5% -853 -43,1 -98.0% -8,26 -89.7%
expense (5) 95 02 49 6
Recoveries of 15,95 1,737 9.2x 12,90 1,275 10.1x 698 18.5x
other credit 1 6
loss expense
Operating -164, -112, 46.5% -36,5 -46,2 21.0% -33,8 7.8%
expenses(4) 531 330 26 16 79
Income before 325,9 189,1 72.3% 104,6 44,12 2.4x 88,89 17.7%
income tax 31 85 07 5 6
expense
Income tax -82,4 -25,5 3.2x -14,3 -8,16 75.5% -10,9 30.9%
expense 74 98 30 7 47
Income after 243,4 163,5 48.8% 90,27 35,95 2.5x 77,94 15.8%
income tax 57 87 7 8 9
expense
Profit from 9,974 9,876 1.0% - 2,134 - - -
discontinued
operations
Non-controlling 807 -101 -8.0x - -51 - -162 -100.0%
Interest
Net income 254,2 173,3 46.7% 90,27 38,04 2.4x 77,78 16.1%
38 62 7 1 7
Net interest 5.1% 4.9% 5.6% 4.9% 5.1%
margin, p.a.
Return on 27.9% 22.7% 35.5% 18.0% 33.8%
average equity,
p.a.
Return on 3.0% 2.6% 4.1% 1.8% 3.7%
average assets,
p.a.
Cost-to-income 31.7% 29.5% 28.5% 33.5% 24.5%
ratio
Cost of risk, 0.5% 2.2% -0.6% 4.8% 1.5%
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 (FVTOCI);
(4) previously in consolidated reports loss from impairment of non-financial
assets was shown on gross basis and income from revaluation of non-financial
assets was reflected in other income. Due to change in representation policy
loss from impairment of non-financial assets is now netted by income from
revaluation of non-financial assets. Therefore, other income, operating
expenses, cost-to-income ratio and cost-to-average assets ratio for 9M 2018
and 3Q 2018 were recalculated taking into account such change in policy.
(5) 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.
Net income increased to KZT 90.3bn for 4Q 2018 compared to KZT 77.8bn for 3Q
2018 mainly as a result of higher net interest income in 4Q 2018.
Compared with 3Q 2018, net interest income increased by 16.8% to KZT 99.0bn,
due to increase in average balances of interest-earning assets as well as
decrease in interest expenses as a result of repricing of retail term
deposits extended in 4Q 2018 following the decrease of deposit interest rate
cap by Kazakhstan Deposit Insurance Fund. Net interest margin increased to
5.6% p.a. for 4Q 2018 compared to 5.1% p.a. for 3Q 2018 mainly due to
repricing of retail term deposits and, to the lesser extent, due to increase
of share of FX denominated deposits with lower interest rate.
Cost of risk on loans to customers is at (0.6%) for 4Q due to repayment of a
large-ticket impaired corporate loan and transfer of few problem corporate
loans to subsidiary SPVs, which resulted in provision recoveries.
Fee and commission income increased by 0.5% compared to 3Q 2018. Total fee
and commission derived from payment card maintenance and bank transfers -
settlements has decreased by 1.8% in 4Q 2018 vs. 3Q 2018.
Other non-interest income decreased by 42.4% to KZT 24.6bn* for 4Q 2018 vs.
KZT 42.8bn* for 3Q 2018 mainly as a result of lower positive revaluation of
swap with the NBK in 4Q 2018.
*recalculated excluding income from non-financial assets
Operating expenses (including loss from impairment of non-financial assets)
increased by 7.8% to KZT 36.5bn vs. KZT 33.9bn for 3Q 2018. This was mainly
as a result of KZT 2.3bn expense related to impairment of the Bank's
property, investment assets and assets held for sale in 4Q 2018. In 3Q 2018
there was no major impairment of non-financial assets. The increase was
partially offset by decrease in expenses on salaries and other employee
benefits in 4Q 2018 by 8.7% vs. 3Q 2018 mainly due to one-off integration
related payments in July 2018.
The Bank's cost-to-income ratio increased to 28.5% compared to 24.5% for 3Q
2018 on the back of higher operating expenses and lower operating income in
4Q 2018 vs. 3Q 2018. Operating income decreased by 7.3% mainly due to
decrease in other non-interest income.
Statement of financial position review
KZT mln
31-Dec-18 30-Sep-18 31-Dec-17 Change Change,
YTD, % Q-o-Q, %
Total 8,959,024 8,389,875 8,857,781 1.1% 6.8%
assets
Cash and 1,870,879 1,803,679 1,891,587 -1.1% 3.7%
reserves
Amounts due 55,035 71,804 87,736 -37.3% -23.4%
from credit
institution
s
T-bills & 2,226,320 2,026,220 1,878,870 18.5% 9.9%
NBK notes
Other 782,356 684,170 831,531 -5.9% 14.4%
securities
&
derivatives
Gross loan 3,890,872 3,614,422 3,568,263 9.0% 7.6%
portfolio*
Stock of -409,793 - 354,341 - 317,161 29.2% 15.6%
provisions*
*
Net loan 3,481,079 3,260,081 3,251,102 7.1% 6.8%
portfolio
Assets held 56,129 68,545 552,405 -89.8% -18.1%
for sale
Other 487,226 475,376 364,550 33.7% 2.5%
assets
Total 7,893,378 7,411,998 7,923,324 -0.4% 6.5%
liabilities
Total 6,526,930 6,068,200 6,131,750 6.4% 7.6%
deposits,
including:
retail 3,395,590 3,247,252 3,104,249 9.4% 4.6%
deposits
term 2,918,070 2,848,028 2,691,886 8.4% 2.5%
deposits
current 477,520 399,224 412,363 15.8% 19.6%
accounts
corporate 3,131,340 2,820,948 3,027,501 3.4% 11.0%
deposits
term 1,374,592 1,229,160 1,705,971 -19.4% 11.8%
deposits
current 1,756,748 1,591,788 1,321,530 32.9% 10.4%
accounts
Debt 900,791 895,042 962,396 -6.4% 0.6%
securities
Amounts due 168,379 161,416 255,151 -34.0% 4.3%
to credit
institution
s
Liabilities 0 0 334,627 -100% -
directly
associated
with assets
classified
as held for
sale
Other 297,278 287,340 239,400 24.2% 3.5%
liabilities
Equity 1,065,646 977,877 934,457 14.0% 9.0%
Total assets increased by 6.8% vs. the end of 3Q 2018 mainly as a result of
fund inflow from the Bank's clients and increase in retained earnings in 4Q
2018.
Compared with the end of 3Q 2018, loans to customers increased by 7.6% on a
gross basis and 6.8% on a net basis. Growth of gross loan portfolio in 4Q
2018 was attributable to increase in corporate loans (+ 8.8% on a gross
(MORE TO FOLLOW) Dow Jones Newswires
March 14, 2019 08:34 ET (12:34 GMT)
basis), SME loans (+ 17.8% on a gross basis) and mortgage loans (+ 1.9% on a
gross basis), partially offset by decrease in consumer loans (-1.4% on a
gross basis).
Halyk Bank's 90-day NPL ratio was 8.2% compared 10.9% as at the end of 3Q
2018. The decrease compared to the end of 3Q 2018 was mainly due to
write-off, repayment and restructuring of problem indebtedness.
Allowances for expected credit losses increased by 15.6% compared to the end
of 3Q 2018, mainly due to increase of provisions as a result of
restructuring of KKB loans which previously were consolidated on net basis
(i.e. net of provisions created before 4 July 2017). Following restructuring
such loans were booked as new loans on gross basis, i.e. increasing stock of
provisions. This resulted in higher growth rate of gross loans as of 31
December 2018 vs. 30 September 2018 compared to the growth rate of net
loans.
Deposits of legal entities and individuals increased by 11.0% and 4.6%,
respectively, compared to the end of 3Q 2018, due to fund inflow from the
Bank's clients and positive revaluation of FX-denominated deposits due to
increase in FX/KZT exchange rate over the fourth quarter. As at 31 December
2018, the share of corporate KZT deposits in total corporate deposits was
48.3% compared to 49.7% as at 30 September 2018 and 48.3% as at YE 2017,
whereas the share of retail KZT deposits in total retail deposits remained
largely flat at 41.0% compared to 41.4% as at 30 September 2018 and 40.7% as
at YE 2017.
Amounts due to credit institutions increased by 4.3% vs. the end of 3Q 2018
due to growth in loans and deposit from Kazakhstan banks and increase in
balances on correspondent accounts as at 31 December 2018 in the ordinary
course of business. As at 31 December 2018, 76.0% 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 0.6% vs. the end of 3Q 2018, mainly due
to revaluation of FX-denominated Eurobonds due to increase in FX/KZT
exchange rate over the fourth quarter. On 1 March 2019 the Bank made a
prepayment on its USD 750,000,000 Eurobond issue bearing 5.5% coupon rate
due 2022. The prepayment was made for the amount of USD 200,000,000 together
with the interest accrued but unpaid. 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 550 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 3Q 2018 total equity increased by 9.0% due to net
profit earned by the Bank during 4Q 2018.
The Bank's capital adequacy ratios were as follows*:
01.01.2019 01.10.2018 01.07.2018 01.04.2018 01.01.2018
Capital adequacy ratios, unconsolidated:
Halyk Bank
K1-1 19.7% 19.4% 20.6% 21.7% 21.5%
K1-2 19.7% 19.4% 20.6% 21.7% 21.5%
K2 21.6% 21.6% 20.6% 21.6% 21.4%
KKB, from period of ownership
K1-1 20.8% 21.3% 18.0%
K1-2 20.8% 21.3% 19.9%
K2 28.6% 28.9% 26.9%
Capital adequacy ratios, consolidated:
CET 18.5% 17.8% 17.2% 18.1% 16.9%
Tier 1 18.5% 17.8% 17.2% 18.1% 16.9%
capital
Tier 2 19.9% 19.9% 19.1% 20.0% 18.9%
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 consolidated financial information for the year ended 31 December 2018,
including the notes attached thereto, are available on Halyk Bank's website:
https://halykbank.kz/investoram/ifrs_reports2 [1].
A 12M/4Q 2018 results webcast will be hosted at 1:00 p.m. GMT/9:00 a.m. EST
on Friday, 15 March 2019:
https://webcasts.eqs.com/halyk20190315 [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 8,959.0 billion as at 31 December 2018, Halyk Bank
is Kazakhstan's leading lender. The Bank has the largest customer base and
broadest branch network in Kazakhstan, with 647 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
ViktorSk@halykbank.kz
Mira Kasenova +7 727 259 04 30
MiraK@halykbank.kz
Karashash Karymsakova +7 727 330 01 92
KarashashK@halykbank.kz
ISIN: US46627J3023
Category Code: MSCM
TIDM: HSBK
Sequence No.: 7815
EQS News ID: 787633
End of Announcement EQS News Service
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March 14, 2019 08:34 ET (12:34 GMT)
