20 August 2019
   
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 six months ended 30 June 2019.
 
Consolidated income statements

	1H 2019	1H 2018	Y-o-Y, %	2Q 2019	1Q 2019	Q-o-Q, %	2Q 2018		Y-o-Y,%
Interest income	356,084	334,739	6.4%	179,901	176,183	2.1%	171,006		5.2%
Interest expense	(165,824)	(170,330)	(2.6%)	(82,250)	(83,574)	(1.6%)	(82,713)		(0.6%)
Net interest income before  credit loss expense	190,260	164,409	15.7%	97,651	92,609	5.4%	88,293		10.6%
Fee and commission income	57,684	54,386	6.1%	30,711	26,973	13.9%	28,012		9.6%
Fee and commission expense	(24,756)	(17,973)	37.7%	(13,236)	(11,520)	14.9%	(8,293)		59.6%
Net fee and commission income	32,928	36,413	(9.6%)	17,475	15,453	13.1%	19,719		(11.4%)
Insurance income(1)	3,142	1,788	75.7%	2,299	843	172.7%	1,496		53.7%
FX operations(2)	32,479	(5,062)	8.4x	15,281	17,198	(11.1%)	(60,487)		125.3%
Loss from derivative operations and securities (3)	(20,090)	31,723	(163.3%)	(6,595)	(13,495)	51.1%	74,269		(108.9%)
Share in profit of associate and other income	20,781	22,931	(9.4%)	11,554	9,227	25.2%	15,618		(26.0%)
Credit loss expense (4)	(12,686)	(22,876)	(44.5%)	(3,615)	(9,071)	(60.1%)	(24,015)		(84.9%)
Recoveries of other credit loss expense	(2,081)	2,347	(188.7%)	(1,776)	(305)	5.8x	992		(2.8x)
Operating expenses	(63,265)	(99,245)(5)	(36.3%)	(33,129)	(30,136)	9.9%	(63,548)(6)		(47.9%)
Income tax expense	(17,239)	(57,197)	(69.9%)	(9,418)	(7,821)	20.4%	(47,038)		(80.0%)
Profit from discontinued operations	-	9,974	-	-	-		7,389		-
Non-controlling interest in net income	-	(969)	-	-	-		(11,433)		-
Net income	164,229	86,174	90.6%	89,727	74,502	20.4%	24,121		3.7x
Net interest margin, p.a.	5.1%	4.8%		5.1%	5.0%		5.1%
Return on average equity, p.a.	29.8%	20.4%		32.5%	26.8%		11.4%
Return on average assets, p.a.	3.7%	2.1%		4.0%	3.3%		1.2%
Cost-to-income ratio	23.1%	38.3%		22.3%	24.1%		44.6%
Cost of risk on loans to customers, p.a.	0.5%	0.9%		0.3%	0.6%		2.4%

           KZT mln
 
 

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. including loss from impairment of non-financial assets of KZT 28.5bn

 
 
Net income increased to KZT 89.7bn for 2Q 2019 compared to KZT 24.1bn for 2Q 2018 mainly due to loss from impairment of non-financial assets for KZT 28.5bn in 2Q 2018, as well as Kazkommertsbank's (KKB) de-recognition of tax loss carry forward of KZT 43.3bn in 2Q 2018 due to the merger into Halyk Bank.
 
Interest income increased to KZT 179.9bn for 2Q 2019 compared to KZT 171.0bn for 2Q 2018 mainly as a result of increase in average balances of interest-earning assets. Interest expense decreased slightly by 0.6% compared to 2Q 2018. Net interest margin increased to 5.1% p.a. for 2Q 2019 compared to 5.0% in 1Q 2019 mainly due to increase in share of placement of interest-bearing liabilities into interest-earning assets.
 
Cost of risk on loans to customers for 2Q 2019 was at 0.3% due to one-off repayments of large ticket problem loans. 
 
Fee and commission income* for 2Q 2019 increased by 13.9% p.a. vs. 1Q 2019 as a result of growing volumes of transactional banking, mainly in payment card maintenance, as well as cash operations and bank transfers - settlements.
Prior to the merger, the transfers within legal entities' current accounts in Halyk and KKB were treated as external transfers and relevant fees were applied. After the integration, the transfers between those current accounts are being treated as internal and therefore are free of charge. As a result, fees derived from Bank transfers - settlements decreased in 2Q 2019 vs. 2Q 2018.
 
Fee and commission expense increased by 14.9% compared to 1Q 2019 mainly due to increased number of transactions of other banks' cards in the acquiring network of the Bank.
 
Other non‐interest income increased by 70.8% to KZT 48.7bn for 2Q 2019 vs. KZT 28.5bn for 1Q 2019 mainly due to lower loss from revaluation of swap with NBK, and higher insurance underwriting income as a result of increased number of attracted pension annuities by subsidiary company JSC Halyk Life.
 
Operating expenses for 2Q 2019 decreased by 47.9% vs. 2Q 2018 mainly due to loss from impairment of non-financial assets of KZT 28.5bn in 2Q 2018 and cost optimisation on the back of synergy effect from merger of KKB into the Bank. Operating expenses for 2Q 2019 increased by 9.9% vs. 1Q 2019 mainly due to the indexation of salaries and other employee benefits starting from 1 March, 2019.
 
The Bank's cost-to-income ratio decreased to 22.3% compared to 44.6% for 2Q 2018 on the back of lower operating expenses and higher operating income in 2Q 2019 vs. 2Q 2018. Operating income increased by 4.1% vs. 2Q 2018 mainly due to increase in net interest income.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* Starting from 1Q 2019 the portion of fees relating to payment card operations, which was previously accounted within cash operations and bank transfers, are represented as fees derived from payment card operations. Figures for 2Q 2018 were recalculated accordingly.
 
 
Statement of financial position review
KZT mln
 

	30-Jun-19		31-March-19		Change Q-o-Q, %		31-Dec-18		Change, abs		Change YTD, %
Total assets	9,059,149		8,864,688		2.2%		8,959,024		100,125			1.1%
Cash and reserves	2,224,142		1,603,235		38.7%		1,870,879		353,263			18.9%
Amounts due from credit institutions	51,357		49,585		3.6%		55,035		(3,678)			(6.7%)
T-bills & NBK notes	1,817,083		2,388,242		(23.9%)		2,226,320		(409,237)			(18.4%)
Other securities & derivatives	900,282		842,740		6.8%		782,356		117,926			15.1%
Gross loan portfolio	3,909,256		3,834,366		2.0%		3,890,872		18,384			0.5%
Stock of provisions	(416,681)		(413,564)		0.8%		(409,793)		6,888			1.7%
Net loan portfolio	3,492,575		3,420,802		2.1%		3,481,079		11,496			0.3%
Assets held for sale	55,990		56,362		(0.7%)		56,129		(139)			(0.2%)
Other assets	517,720		503,722		2.8%		487,226		30,494			6.3%
Total liabilities	7,931,554		7,714,905		2.8%		7,893,378		38,176			0.5%
Total deposits, including:	6,220,463		6,385,098		(2.6%)		6,526,930		(306,467)			(4.7%)
retail deposits	3,241,082		3,281,658		(1.2%)		3,395,590		(154,508)			(4.6%)
term deposits	2,770,374		2,843,352		(2.6%)		2,918,070		(147,695)			(5.1%)
current accounts	470,707		438,306		7.4%		477,520		(6,813)			(1.4%)
corporate deposits	2,979,381		3,103,440		(4.0%)		3,131,340		(151,959)			(4.9%)
term deposits	1,455,387		1,289,374		12.9%		1,374,592		80,795			5.9%
current accounts	1,523,995		1,814,066		(16.0%)		1,756,748		(232,754)			(13.2%)
Debt securities	903,536		827,804		9.1%		900,791		2,745			0.3%
Amounts due to credit institutions	476,703		167,909		183.9%		168,379		308,324			183.1%
Other liabilities	330,852		334,094		(1.0%)		297,278		33,574			11.3%
Equity	1,127,595		1,149,783		(1.9%)		1,065,646		61,949			5.8%

 
In 2Q 2019, total assets increased by 1.1% vs. YE 2018 and by 2.2% vs. 1Q 2019, mainly as a result of funds inflow from the REPO transactions in 2Q 2019.   
 
Compared with the 1Q 2019, loans to customers increased by 2.0% on a gross basis and 2.1% on a net basis. Increase of gross loan portfolio in 2Q 2019 was attributable to increase in corporate loans (1.1% on a gross basis), increase in SME loans (3.2% on a gross basis), and increase in retail loans (3.2% on a gross basis).
 
As at the end of 2Q 2019, Stage 3 ratio decreased to 18.6% from 20.4% as at the end of 1Q 2019 as a result of repayments and write offs of previously impaired indebtedness of corporate and retail borrowers.
 
Deposits of legal entities and individuals decreased by 4.9% and 4.6%, respectively, compared to YE 2018 mainly due to partial withdrawal of funds by the Bank's customers to finance their ongoing needs. As at 30 June 2019, the share of corporate KZT deposits in total corporate deposits was 55.8% compared to 50.3% as at 31 March 2019, whereas the share of retail KZT deposits in total retail deposits was 41.8% compared to 42.6% as at the end of 1Q 2019.
 
Amounts due to credit institutions increased by 183.9% vs. 1Q 2019 mainly due to increase in loans from Kazakhstan banks under REPO agreement. As at 30 June 2019, 93.0% of the Bank's obligations to financial institutions were represented by loans from Kazakhstan banks (incl. loans under REPO agreements), KazAgro national managing 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 9.1% compared to 1Q 2019. 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
Eurobond	USD 500 mln	7.25% p.a.	January 2021
Eurobond	USD 548 mln	5.5% p.a.	December 2022
Local bonds	KZT 100.0 bn	7.5% p.a.	November 2024
Local bonds	KZT 131.7 bn	7.5% p.a.	February 2025
Local bonds	KZT 93.6 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
Local bonds listed at Astana International Exchange	USD 183 mln	3.0% p.a.	April 2022

 
Compared with the 1Q 2019 total equity decreased by 1.9% due to payout of dividends to its shareholders in 2Q 2019.
 
The Bank's capital adequacy ratios were as follows*:
 

	01.07.2019	01.04.2019	01.01.2019	01.10.2018	01.07.2018
Capital adequacy ratios, unconsolidated:
Halyk Bank
k1-1	19.7%	20.4%	19.7%	19.4%	20.6%
k1-2	19.7%	20.4%	19.7%	19.4%	20.6%
k2	21.5%	22.3%	21.6%	21.6%	20.6%
Capital adequacy ratios, consolidated:
CET	18.3%	19.5%	18.5%	17.8%	17.2%
Tier 1 capital	18.3%	19.5%	18.5%	17.8%	17.2%
Tier 2 capital	19.6%	20.9%	19.9%	19.9%	19.1%

 
* 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 six months ended 30 June
2019, including the notes attached thereto, are available on Halyk Bank's website: https://halykbank.kz/en/investors/ifrs-reports.
 
A 1H & 2Q 2019 results webcast will be hosted at 2:00 p.m. London time/9:00 a.m. EST on Wednesday, 21 August 2019:  
https://webcasts.eqs.com/halyk20190821
 
 
 
 
 
 
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 9,059.1 billion as at 30 June 2019, Halyk Bank is Kazakhstan's leading lender. The Bank has the largest customer base and broadest branch network in Kazakhstan, with 641 branches and outlets across the country. The Bank operates in Georgia, Kyrgyzstan, Russia, Tajikistan and Uzbekistan.
 
For more information on Halyk Bank, please visit https://www.halykbank.kz
 
- 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
Margulan Tanirtayev	+7 727 259 04 53 Margulant@halykbank.kz