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DGAP-UK-Regulatory News vom 18.05.2018

JSC Halyk Bank: Consolidated financial results for the three months ended 31 March 2018

JSC Halyk Bank (HSBK)

18-May-2018 / 17:43 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.


18 May 2018

 

Joint Stock Company 'Halyk Savings Bank of Kazakhstan'

 

Consolidated financial results

for the three months ended 31 March 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 three months ended 31 March 2018.

 

Statement of profit or loss review

 

 

1Q 2018

 

4Q 2017

 

Change, abs

 

Q-o-Q, %

 

Interest income

162,005

 

167,276

 

-5,271

 

-3.2%

Interest expense

-87,617

 

- 85,569

 

-2,048

 

2.4%

Net interest income before credit loss expense

74,388

 

81,707

 

-7,319

 

-9.0%

Fee and commission income

26,374

 

28,760

 

-2,386

 

-8.3%

Fee and commission expense

-9,680

 

-10,703

 

1,023

 

-9.6%

Net fee and commission income

16,694

 

18,057

 

-1,363

 

-7.5%

Insurance income(1)

292

 

2,933

 

-2,641

 

-90.0%

FX operations(2)

55,425

 

43,216

 

12,209

 

28.3%

Loss from derivative operations and securities (3)

-42,546

 

-27,877

 

-14,669

 

52.6%

Other non-interest income

15,764

 

14,179

 

1,585

 

11.2%

Credit loss expense (4)

-5,197

 

-43,149

 

37,952

 

-88.0%

Recoveries of other credit loss expense(5)

1,355

 

1,275

 

80

 

6.3%

Operating expenses

-36,084

 

-46,216(6)

 

10,132

 

-21.9%

Income tax expense

-10,159

 

-8,167

 

-1,992

 

24.4%

Profit from discontinued operations

2,585

 

2,134

 

451

 

21.1%

Non-controlling interest in net income

-10,464

 

-51

 

-10,413

 

205.2x

Net income

62,053

 

38,041

 

24,012

 

63.1%

 

 

 

 

 

 

 

 

 

 

Net interest margin, p.a.

4.3%

 

4.9%

 

 

 

 

 

 

Return on average equity, p.a.

29.2%

 

18.0%

 

 

 

 

 

 

Return on average assets, p.a.

2.9%

 

1.8%

 

 

 

 

 

 

Cost-to-income ratio

29.3%

 

33.5%

 

 

 

 

 

 

Cost of risk on loans to customers, p.a.

0.2%

 

4.8%

 

 

 

 

 

 
                             

 

(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 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)    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;

(5)      provisions against letters of credit and guarantees issued

(6)      Including impairment loss of assets held for sale

 

Compared with 4Q 2017, net interest income decreased by 9.0% to KZT 74.4bn, mainly due to decline in interest rates on loans to customers, amortisation of a discount on perpetual bond redeemed by Kazkommertsbank in 1Q 2018 and reclassification of Kazkommertsbank interest income from amortisation of discount on receivables into other income due to IFRS 9.

 

Net interest margin decreased to 4.3% p.a. for 1Q 2018 compared to 4.9% p.a. for 4Q 2017, mainly on the back of lower net interest margin of Kazkommertsbank.

 

Credit loss expense decreased by 88.0% mainly due to repayment of problem indebtedness by some of Kazkommertsbank's clients in 1Q 2018 and one-off additional provisions on created on impaired loans of Kazkommertsbank and its Russian subsidiary in 4Q 2017. As a result, the cost of risk on loans to customers decreased to 0.2% p.a. over the reporting period compared to 4.8% p.a. for 4Q 2017.

 

Fee and commission income decreased by 8.3% compared to 4Q 2017 mainly on the back of seasonal effect.

 

Other non-interest income decreased by 10.2% to KZT 43.3bn for 1Q 2018 vs. KZT 48.2bn for 4Q 2017. This decrease was mainly attributable to net loss from financial assets and liabilities at fair value through profit or loss mostly on the back of revaluation loss on derivative and trading operations on the back of KZT appreciation in 1Q 2018. The decrease was partially offset by a net gain on foreign exchange operations, mainly as a result of a positive revaluation of a short USD position on the balance sheet due to KZT appreciation in 1Q 2018.

Operating expenses decreased by 21.9% mainly due to higher one-off expenses on charity, impairment assets held for sale, amortisation and penalties as a result of KKB tax audit in 4Q 2017, as well as expenses on taxes, other than income tax.

 

The Bank's cost-to-income ratio decreased to 29.3% compared to 33.5% for 4Q 2017 on the back of lower operating expenses. Operating income decreased by 10.7% mainly due to negative revaluation of derivative instruments in 1Q 2018 and lower net interest income earned in 1Q 2018 compared to 4Q 2018.

 

Statement of financial position review

 

31-Mar-18

31-Dec-17

 

Change, abs

 

Change YTD, %

Total assets

8,411,931

8,857,781

 

-445,850

 

-5.0%

Cash and reserves

1,386,943

1,891,587

 

-504,644

 

-26.7%

Amounts due from credit institutions

86,357

87,736

 

-1,379

 

-1.6%

T-bills & NBK notes

2,051,492

1,878,870

 

172,622

 

9.2%

Other securities & derivatives

722,279

831,531

 

-109,252

 

-13.1%

  Gross loan portfolio*

3,564,346

3,568,263

 

-3,917

 

-0.1%

  Stock of provisions **

-338,381

-317,161

 

-21,220

 

6.7%

Net loan portfolio

3,225,965

3,251,102

 

-25,138

 

-0.8%

Assets held for sale

574,072

552,405

 

21,667

 

3.9%

Other assets

364,823

364,550

 

273

 

0.1%

Total liabilities

7,464,522

7,923,324

 

-458,803

 

-5.8%

Total deposits, including:

5,756,556

6,131,750

 

-375,194

 

-6.1%

  retail deposits

3,059,674

3,104,249

 

-44,575

 

-1.4%

           term deposits

2,666,681

2,691,886

 

-25,205

 

-0.9%

           current accounts

392,993

412,363

 

-19,370

 

-4.7%

  corporate deposits

2,696,882

3,027,501

 

-330,619

 

-10.9%

           term deposits

1,435,634

1,705,971

 

-270,337

 

-15.8%

           current accounts

1,261,248

1,321,530

 

-60,282

 

-4.6%

Debt securities

924,693

962,396

 

-37,703

 

-3.9%

Amounts due to credit institutions

158,486

255,151

 

-96,665

 

-37.9%

Liabilities directly associated with assets classified as held for sale

377,326

334,627

 

42,699

 

12.8%

Other liabilities

247,461

239,400

 

8,060

 

3.4%

Equity

947,409

934,457

 

12,952

 

1.4%

 

 

 *Including KKB net loans of KZT 780,866 million recognised by the Bank at fair value + changes in KKB gross loan portfolio from acquisition date to 31 March 2018.

**Including changes in provisions created on KKB loan portfolio from acquisition date to 31 March 2018.

 

In 1Q 2018, total assets decreased by 5.0% vs. YE 2017, mainly due to partial withdrawal of funds by the Bank's customers, maturity of REPO transactions and the decrease in balance value of FX denominated assets due to KZT appreciation versus US dollar during 1Q 2018.

 

Compared with YE 2017, loans to customers remained almost flat on a gross basis and decreased by 0.8% on a net basis due to loan repayments exceeding new loan issues in Kazkommertsbank portfolio, additional provisions created as a result of IFRS 9 and the decrease in balance value of FX loans due to KZT appreciation versus US dollar during 1Q 2018.

 

The aggregate Halyk Bank and KKB's 90-day NPL ratio was 12.7% compared to 12.1% as at YE 2017. The increase was due to indebtedness of some previously impaired large-ticket corporate borrowers of the Bank and Kazkommertsbank becoming overdue by more than 90 days.

 

Allowances for loan impairment increased by 6.7% compared to YE 2017, mainly as a result of additional provisions created against impaired loans in the Bank's and Kazkommertsbank's portfolio due to introduction of IFRS 9.

 

Deposits of legal entities and individuals decreased by 10.9% and 1.4%, respectively, compared to YE 2017, mainly due to partial withdrawal of funds by the Bank's customers to finance their ongoing needs. As at 31 March 2018, the share of corporate KZT deposits in total corporate deposits was 54.2% compared to 48.3% as at YE 2017, whereas the share of retail KZT deposits in total retail deposits was 42.7% compared to 40.7% as at YE 2017.

 

Amounts due to credit institutions decreased by 37.9% vs. YE 2017 mainly due to maturity of the Bank's REPO transactions with the Kazakhstan Stock Exchange in 1Q 2018. As at 31 March 2018, 77.6% of the Bank's obligations to financial institutions was 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 decreased by 3.9% vs. YE 2017, mainly due to redemption of USD 100 million perpetual subordinated international bond bearing a coupon rate of USD Libor + 6.1905% by Kazkommertsbank on 9 February 2018. On 11 May 2018, Kazkommertsbank repaid at maturity its USD 300mln Eurobond bearing a coupon rate of 8.5%p.a. Both the redemption of perpetual bond and the repayment of Eurobond were made in full out of Kazkommertsbank's own funds. As at the date of this press-release, the Bank's debt securities portfolio was as follows:

 

Description of the security

Nominal amount outstanding

Interest rate

Maturity Date

Issued by Halyk Bank

 

 

 

Eurobond

USD 500 mln

7.25% p.a.

January 2021

Local bonds placed with the Unified Accumulative Pension Fund

KZT 100 bn

7.5% p.a.

November 2024

Local bonds placed with the Unified Accumulative Pension Fund

KZT 131.7 bn

7.5% p.a.

February 2025

 

 

 

 

Issued by Kazkommertsbank*

 

 

 

Eurobond

USD 750 mln

5.5% p.a.

December 2022

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 bonds

KZT 101.1 bn

9.5% p.a.

October 2025

Subordinated coupon bonds

KZT 3.5 bn

Inflation indexed (currently 7.8% p.a.)

April 2019

Subordinated coupon bonds

KZT 10 bn

Inflation indexed (currently 8.0 %p.a.)

November 2018

 

*Excluding debt securities of Kazkommertsbank's Russian subsidiary for RUB 52.6million.

 

Compared with YE 2017 total equity increased by 1.4% mainly due to net profit earned by the Bank during 1Q 2018. The increase in capital was partially offset by additional reserves created by the Bank in connection with IFRS 9 introduced starting from 1 January 2018 and redemption of Kazkommertsbank's own shares during the reporting period.

 

The Bank's capital adequacy ratios were as follows*:

 

 

01.04.2018

01.01.2018

01.10.2017

01.07.2017

 

 

 

 

 

Capital adequacy ratios, unconsolidated:

Halyk Bank

K1-1

21.7%

21.5%

20.2%

22.1%

K1-2

21.7%

21.5%

20.2%

22.1%

K2

21.6%

21.4%

20.1%

22.1%

 

 

 

 

 

Kazkommertsbank

K1-1

21.3%

18.0%

13.1%

 

K1-2

21.3%

19.9%

15.0%

 

K2

28.9%

26.9%

10.3%

 

 

 

 

 

 

Capital adequacy ratios, consolidated:

CET

18.1%

16.9%

15.4%

21.6%

Tier 1 capital

18.1%

16.9%

15.8%

21.6%

Tier 2 capital

20.0%

18.9%

17.8%

21.6%

 

*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 three months ended 31 March 2018, including the notes attached thereto, are available on Halyk Bank's website: https://halykbank.kz/investoram/ifrs_reports2.

 

A 1Q 2018 results webcast will be hosted at 2:00 p.m. GMT/9:00 a.m. EST on Monday, 21 May 2018: http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=5615

 

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.

 

With total assets of KZT 8,411.9 billion as at 31 March 2018, Halyk Bank is Kazakhstan's leading lender. The Bank has the largest customer base and broadest branch network in Kazakhstan, with 688 branches and outlets (including 206 branches and outlets of Kazkommertsbank) 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

 

- ENDS-

For further information, please contact:

Halyk Bank

Murat Koshenov

 

+7 727 259 07 95

Mira Kasenova

+7 727 259 04 30

Yelena Perekhoda

+7 727 330 17 19

 




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