JSC Halyk Bank: Consolidated financial results for the year ended 31 December 2018

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 2018   12m 2017   Y-o-Y, %   4Q 2018   4Q 2017   Y-o-Y, %   3Q 2018   Q-o-Q, % Interest income 682,041   506,328   34.7%   179,435   167,276   7.3%   167,867   6.9% Interest expense -333,772   -257,805   29.5%   -80,398   -85,569   -6.0%   -83,044   -3.2% Net interest income before credit loss expense 348,269   248,523   40.1%   99,037   81,707   21.2%   84,823   16.8% Fee and commission income 113,241   87,640   29.2%   29,505   28,760   2.6%   29,350   0.5% Fee and commission expense -39,006   -26,732   45.9%   -10,834   -10,703   1.2%   -10,199   6.2% Net fee and commission income 74,235   60,908   21.9%   18,671   18,057   3.4%   19,151   -2.5% Insurance income(1) 7,329   6,493   12.9%   4,342   2,933   48.0%   1,199   3.6x FX operations(2) -64,577   -4,949   -13.0x   -27,523   43,216   -1.6x   -31,992   14.0% Income/loss from derivative operations and securities (3) 116,586   32,487   3.6x   28,707   -27,877   2.0x   56,156   -48.9% Other income(4) 24,664   23,618   4.4%   5,845   14,179   -58.8%   1,007   5.8x Credit loss expense (5) -31,995   -67,302   -52.5%   -853   -43,149   -98.0%   -8,266   -89.7% Recoveries of other credit loss expense 15,951   1,737   9.2x   12,906   1,275   10.1x   698   18.5x Operating expenses(4) -164,531   -112,330   46.5%   -36,526   -46,216   21.0%   -33,879   7.8% Income before income tax expense 325,931   189,185   72.3%   104,607   44,125   2.4x   88,896   17.7% Income tax expense -82,474   -25,598   3.2x   -14,330   -8,167   75.5%   -10,947   30.9% Income after income tax expense 243,457   163,587   48.8%   90,277   35,958   2.5x   77,949   15.8% Profit from discontinued operations 9,974   9,876   1.0%   -   2,134   -   -   - Non-controlling Interest 807   -101   -8.0x   -   -51   -   -162   -100.0% Net income 254,238   173,362   46.7%   90,277   38,041   2.4x   77,787   16.1%                                 Net interest margin, p.a. 5.1%   4.9%       5.6%   4.9%       5.1%     Return on average equity, p.a. 27.9%   22.7%       35.5%   18.0%       33.8%     Return on average assets, p.a. 3.0%   2.6%       4.1%   1.8%       3.7%     Cost-to-income ratio 31.7%   29.5%       28.5%   33.5%       24.5%     Cost of risk, p.a. 0.5%   2.2%       -0.6%   4.8%       1.5%         (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 interestincome 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 4Qdue 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 incomeincreased 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.   Othernon?interestincomedecreasedby 42.4%toKZT 24.6bn*for 4Q2018vs.KZT42.8bn*for3Q2018 mainly as a result of lowerpositive 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 to28.5% compared to24.5% for 3Q 2018 on the back of higheroperating expenses and lower operating incomein 4Q 2018 vs. 3Q 2018. Operating incomedecreased by 7.3%mainly due to decrease in other non-interest income.   Statementof financialpositionreview KZT mln     31-Dec-18 30-Sep-18 31-Dec-17   Change YTD, %   Change, Q-o-Q, % Total assets 8,959,024 8,389,875 8,857,781   1.1%   6.8% Cash and reserves 1,870,879      1,803,679   1,891,587   -1.1%   3.7% Amounts due from credit institutions 55,035            71,804        87,736   -37.3%   -23.4% T-bills & NBK notes 2,226,320     2,026,220   1,878,870   18.5%   9.9% Other securities & derivatives 782,356        684,170     831,531   -5.9%   14.4% Gross loan portfolio* 3,890,872     3,614,422   3,568,263   9.0%   7.6% Stock of provisions** -409,793 - 354,341 - 317,161   29.2%   15.6% Net loan portfolio 3,481,079     3,260,081   3,251,102   7.1%   6.8% Assets held for sale 56,129         68,545     552,405   -89.8%   -18.1% Other assets 487,226         475,376     364,550   33.7%   2.5% Total liabilities 7,893,378 7,411,998 7,923,324   -0.4%   6.5% Total deposits, including: 6,526,930 6,068,200 6,131,750   6.4%   7.6% retail deposits 3,395,590   3,247,252   3,104,249   9.4%   4.6%  term deposits 2,918,070 2,848,028 2,691,886   8.4%   2.5%  current accounts 477,520 399,224 412,363   15.8%   19.6% corporate deposits 3,131,340 2,820,948 3,027,501   3.4%   11.0%  term deposits 1,374,592 1,229,160 1,705,971   -19.4%   11.8%  current accounts 1,756,748 1,591,788 1,321,530   32.9%   10.4% Debt securities 900,791 895,042 962,396   -6.4%   0.6% Amounts due to credit institutions 168,379 161,416 255,151   -34.0%   4.3% Liabilities directly associated with assets classified as held for sale 0 0 334,627   -100%   - Other liabilities 297,278 287,340 239,400   24.2%   3.5% 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 customersincreased 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 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 lossesincreased by 15.6% compared to the end of3Q 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 individualsincreased by11.0% and4.6%, 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 31December 2018,the share of corporate KZT deposits in total corporate depositswas 48.3% compared to 49.7% as at 30September 2018 and 48.3% as at YE 2017, whereas the share of retail KZT deposits in total retail depositsremained largely flat at41.0% compared to 41.4% as at 30September 2018 and 40.7% as at YE 2017.   Amounts due to credit institutionsincreased 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 31December 2018 in the ordinary course of business. As at 31December 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 issuedincreased by 0.6% vs. the end of 3Q 2018, mainly due torevaluation 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 withthe interest accrued but unpaid. 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 550 mln 5.5% p.a. December 2022 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 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   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 capital 18.5% 17.8%  17.2% 18.1% 16.9% Tier 2 capital 19.9% 19.9%  19.1% 20.0% 18.9%   * 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 notesattached thereto, are available on Halyk Bank's website:https://halykbank.kz/investoram/ifrs_reports2.   A 12M/4Q 2018 results webcast will be hosted at 1:00 p.m. GMT/9:00 a.m. EST on Friday,15March 2019:  https://webcasts.eqs.com/halyk20190315   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 July2017, 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 31December 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 visithttps://www.halykbank.kz   - ENDS- For further information, please contact: Halyk Bank Viktor Skryl   [phone] [e-mail] MiraKasenova [phone] [e-mail] Karashash Karymsakova [phone] [e-mail]

ISIN:	US46627J3023
Category Code:	MSCM
TIDM:	HSBK
Sequence No.:	7815
EQS News ID:	787633

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