DJ JSC Halyk Bank: Consolidated financial results for the nine month ended 30 September 2020
JSC Halyk Bank (HSBK)
JSC Halyk Bank: Consolidated financial results for the nine month ended 30
September 2020
16-Nov-2020 / 14:05 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
16 November 2020
Joint Stock Company 'Halyk Savings Bank of Kazakhstan'
Consolidated financial results
for the nine month and third quarter ended 30 September 2020
Joint Stock Company 'Halyk Savings Bank of Kazakhstan' and its subsidiaries
(together "the Bank") (LSE: HSBK) releases consolidated financial
information for the nine months and third quarter ended 30 September 2020.
Consolidated income statements
KZT mln
9M 9M 2019 Y-o-Y,% 3Q 3Q 2019 Y-o-Y,%
2020 2020
Interest income 540,38 531,389 1.7% 180,53 175,305 3.0%
7 9
Interest expense (239,3 (239,022 0.1% (87,94 (73,198) 20.1%
68) ) 3)
Net interest 301,01 292,367 3.0% 92,596 102,107 (9.3%)
income before 9
credit loss
expense
Fee and 94,579 89,796 5.3% 34,333 32,112 6.9%
commission
income
Fee and (48,23 (39,335) 22.6% (16,44 (14,579) 12.8%
commission 5) 5)
expense
Net fee and 46,344 50,461 (8.2%) 17,888 17,533 2.0%
commission
income
Net insurance 14,260 745 19.1x 6,761 (517) (13.1x)
income/(expense)
(1)
FX operations(2) 20,966 30,403 (31.0%) 9,804 (2,076) (4.7x)
Gain/(loss) from 8,199 (6,878) 1.2x 2,210 13,212 (83.3%)
derivative
operations and
securities (3)
Other income, 29,981 26,344 13.8% 8,963 5,563 61.1%
share in profit
of associate,
and income from
non-banking
activities
Credit loss (35,90 (21,140) 69.8% (1,996 (8,454) (76.4%)
expense (4) 2) )
Other credit (3,105 (687) 4.5x 11 1,394 (99.2%)
loss expense )
Operating (112,5 (94,475) 19.2% (37,95 (33,090) 14.7%
expenses 92) 5)(6)
(5)
Income tax (24,52 (25,752) (4.8%) (9,629 (8,513) 13.1%
expense 3) )
Non-controlling 1 - 100% 1 - 100%
interest
Net profit 244,64 251,388 (2.7%) 88,652 87,159 1.7%
attributable to 6
common
shareholders
Net interest 4.8% 5.2% 4.2% 5.4%
margin, p.a.
Return on 23.8% 29.7% 25.9% 29.6%
average equity,
p.a.
Return on 3.4% 3.8% 3.6% 3.9%
average assets,
p.a.
Cost-to-income 26% 22.6% 26.3% 22.7%
ratio
Cost of risk on
loans to
customers, p.a.
0.9% 0.6% 0.2% 0.8%
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/(loss) on foreign exchange operations;
3) Net gain/(loss) from financial assets and liabilities at fair value
through profit or loss and net realised gain from financial assets at fair
value through other comprehensive income (FVOCI);
4) Total credit loss expense, including credit loss expense on loans to
customers, amounts due from credit institutions, financial assets at
FVTOCI, debt securities at amortised cost, net of allowance, cash and cash
equivalents and other assets;
5) Including loss from impairment of non-financial assets of KZT 4.2 bn;
6) Including loss from impairment of non-financial assets of KZT 0.6 bn;
Net profit attributable to common shareholders increased by 1.7% to KZT
88.7bn for 3Q 2020 compared to KZT 87.2bn for 3Q 2019 mainly due to increase
in other non-interest income and decrease in credit loss expense.
Increase in interest income by 3.0% to KZT 180.5bn for 3Q 2020 compared to
KZT 175.3bn for 3Q 2019 was due to increase in interest income on loans to
customers by 12.7%, which was partially offset by the decrease in interest
income on securities due to transfers in placement from high-yielding NBRK
notes into low-yielding FX deposit with NBRK following the repayment of SWAP
agreement with NBRK for the amount of USD 912mln. Interest expense increased
by 20.1% vs. 3Q 2019 due to the increase of average balance and share of KZT
deposits in the amounts due to customers and due to recognition of discount
on receivables on sale of assets in installments. Net interest margin
decreased to 4.2% p.a. for 3Q 2020 compared to 5.4% p.a. in 3Q 2019 as a
result of transfers in placement from high-yielding NBRK notes into
low-yielding FX deposit with NBRK following the repayment of SWAP agreement
for the amount of USD 912mln. and due to one off negative effect from
recognition of discount on receivables on sale of assets in installments in
3Q 2020 vs. income from amortization of discount on receivables on sale of
assets in installments in 3Q 2019. NIM was also negatively affected by
decrease in the average effective interest rate on retail loans due to
increase in issued unsecured loans with a borrower's life insurance bundle,
income on which is reflected in insurance income, and increase in online
installment loans, which includes fees from merchants recognized in fee and
commission income.
Also, in financial information for the nine months ended 30 September 2020,
the note "20. Net interest income" now includes detailed disclosure of
interest income on loans to customers and interest expense from customers
accounts. The Note discloses detailed breakdown of interest income on loans
to customers by business segments - corporate, SME and retail and interest
expense from customers accounts by types of customers - individuals and
legal entities.
Cost of risk decreased to 0.2% compared to 0.8% in 3Q 2019 due to repayments
of large ticket problem loans of corporate borrowers and due to recovery of
retail loans. The decrease of cost of risk was also affected by changes in
macroeconomic assumptions when calculating provisioning rates for collective
loans in accordance with IFRS 9.
Fee and commission income increased by 6.9% in comparison to 3Q 2019 mainly
due to launch of online instalment loans, which are issued through ecosystem
partners - the largest appliances retailers in the country and as a result
of growing volumes of transactional banking, mainly in payment cards
operations.
Fee and commission expense increased by 12.8% compared to 3Q 2019 due to
increased number of transactions of other banks' cards in the acquiring
network of the Bank and growth of service fees payable to the international
payment systems as a result of increase of non-cash transactions.
Other non-interest income (7) increased by 25.6% to KZT 21.0bn for 3Q 2020
vs. KZT 16.7bn for 3Q 2019 mainly as a result of higher income from the sale
of property by subsidiary SPVs.
The new Note "26. Income on non-banking activities" was added to the
financial information for the nine months ended 30 September 2020. This note
discloses information about gain/ loss from the sale of commercial property,
assets held for sale and investment property.
Net insurance income/ (expense)(8) for 3Q 2020 significantly increased vs.
3Q 2019 as a result of new unsecured lending program with a borrower's life
insurance bundle.
Operating expenses (including loss from impairment of non-financial assets)
for 3Q 2020 increased by 14.7% vs. 3Q 2019 due to the increase in salaries &
other employee benefits, and loyalty program bonuses payable to the
customers, which are included in operating expenses related to the
advertisement and loyalty program expense starting from 4Q 2019.
The Bank's cost-to-income ratio increased to 26.3% compared to 22.7% for 3Q
2019 on the back of higher operating expense in 3Q 2020 vs. 3Q 2019.
7) Other non-interest income (net gain on foreign exchange operations, net
loss from financial assets and liabilities at fair value through profit or
loss, net realised gain from financial assets at fair value through other
comprehensive income, share in profit of associate and income on non -
banking activities and other income);
8) 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).
Statement of financial position review
KZT mln
30-Sep-20 30-Jun-20 Change 31-Dec-19 Change Change
Q-o-Q, , abs YTD, %
%
Total 9,999,141 9,731,200 2.8% 9,234,758 764,38 8.3%
assets 3
Cash and 2,372,908 2,304,306 3.0% 1,805,343 567,56 31.4%
reserves 5
Amounts 211,883 101,351 109.1% 53,161 158,72 4.0x
due from 2
credit
instituti
ons
T-bills & 1,815,799 2,075,528 (12.5%) 1,954,066 (138,2 (7.1%)
NBRK 67)
notes
Other 814,472 721,004 13.0% 1,074,867 (260,3 (24.2%)
securitie 95)
s &
derivativ
es
Gross 4,656,733 4,389,064 6.1% 4,161,153 495,58 11.9%
loan 0
portfolio
Stock of (450,712) (444,585) 1.4% (408,718) (41,99 10.3%
provision 4)
s
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