JSC Halyk Bank: Consolidated financial results for the six month ended 30 June 2020

JSC Halyk Bank (HSBK) JSC Halyk Bank: Consolidated financial results for the six month ended 30 June 2020 17-Aug-2020 / 06:39 CET/CEST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. 17 August 2020   Joint Stock Company 'Halyk Savings Bank of Kazakhstan' Consolidated financial results for the six month ended 30 June 2020 Joint Stock Company 'Halyk Savings Bank of Kazakhstan' and its subsidiaries (together "the Bank")       (LSE: HSBK) releases consolidated financial information for the six months ended 30 June 2020.   Consolidated income statements KZT mln     1H 2020 1H 2019 Y-o-Y,% 2Q 2020 2Q 2019 Y-o-Y,% Interest income 359,848 356,084 1.1% 180,500 179,901 0.3% Interest expense (151,425) (165,824) (8.7%) (76,151) (82,250) (7.4%) Net interest income before  credit loss expense 208,423 190,260 9.5% 104,349 97,651 6.9% Fee and commission income 60,246 57,684 4.4% 29,435 30,711 (4.2%) Fee and commission expense (31,790) (24,756) 28.4% (14,855) (13,236) 12.2% Net fee and commission income 28,456 32,928 (13.6%) 14,580 17,475 (16.6%) Insurance income(1) 7,499 1,262 5.9x 5,758 1,330 4.3x FX operations(2) 11,162 32,479 (65.6%) 52,259 15,281 3.4x (Loss)/gain from derivative operations and securities (3) 5,989 (20,090) (129.8%) (55,156) (6,595) 8.3x Other income and share in profit of associate 21,018 20,781 1.1% 5,908 11,554 (48.9%) Credit loss expense (4) (33,906) (12,686) 167.3% (13,816) (3,615) 3.8x Other credit loss expense (3,116) (2,081) 49.7% (1,205) (1,776) (32.2%) Operating expenses (74,637)(5) (61,385) 21.6% (37,147)(6) (32,160) 15.5% Income tax expense (14,894) (17,239) (13.6%) (605) (9,418) (93.6%)   - - - - - -   - - - - - - Net income 155,994 164,229 (5.0%) 74,925 89,727 (16.5%)               Net interest margin, p.a. 5.2% 5.1%   5.0% 5.1%   Return on average equity, p.a. 22.6% 29.8%   21.2% 32.5%   Return on average assets, p.a. 3.3% 3.7%   3.1% 4.0%   Cost-to-income ratio 25.8% 22.6%   28.2% 21.8%   Cost of risk on loans to customers, p.a.   1.3%   0.5%     1.0%   0.3%           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); Net gain on foreign exchange operations; Net (loss)/gain 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); Total credit loss expense, including credit loss expense on loans to customers, amounts due from credit institutions, financial assets at FVTOCI, cash and cash equivalents and other assets; Including loss from impairment of non-financial assets of KZT 3.6 bn; Including loss from impairment of non-financial assets of KZT 1.7 bn;       Net income decreased by 16.5% to KZT 74.9bn for 2Q 2020 compared to KZT 89.7bn for 2Q 2019 mainly as a result of increase in credit loss expenses.   Interest income slightly increased by 0.3% to KZT 180.5bn for 2Q 2020 compared to KZT 179.9bn for   2Q 2019 mainly as a result of increase in average balances of interest-earning assets. Interest expense decreased by 7.4% compared to 2Q 2019. In comparison with 2Q 2019, net interest margin decreased by 0.1% as a result of decline in interest rates on FX interbank deposits and increase in share of placement in lower yielding FX instruments.   Cost of risk increased to 1.0% compared to 0.3% in 2Q 2019 due to the additional allowances for expected credit losses reflecting the increased risk and uncertainty from COVID-19 outbreak and lockdown restrictions.   Fee and commission income reduction by 4.2% in comparison to 2Q 2019 was caused by decrease in fees derived from cash operations in 2Q 2020 due to the effect of COVID-19 lockdown, and as  a result of some fees on payment card operations became free of charge.   Fee and commission expense increased by 12.2% compared to 2Q 2019 due to growth of service fees payable to the international payment systems as a result of increase of non-cash transactions.   Other non-interest income(7) decreased by 85.1% to KZT 3.0bn for 2Q 2020 vs. KZT 20.2bn for 2Q 2019 due to net loss from derivative operations and securities mainly related to loss from revaluation of swap with NBRK and as a result of lower income from the sale of property by subsidiary SPVs.   Insurance income(8)for 2Q 2020 increased by 4.3 times vs. 2Q 2019 due to the growth of insurance premium on life insurance of the borrower under the Bank's new unsecured lending program.   Operating expenses (including loss from impairment of non-financial assets) for 2Q 2020 increased by 15.5% vs. 2Q 2019 mainly due to loss from impairment of non-financial assets of KZT 1.7bn in 2Q 2020 and loyalty program bonuses payable to the customers, which are included in operating expenses related to the advertisement starting from 4Q 2019.   The Bank's cost-to-income ratio increased to 28.2% compared to 21.8% for 2Q 2019 due to lower operating income in 2Q 2020.                             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 other income); 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).           Statementof financialpositionreview KZT mln     30-Jun-20   31-Mar-20   Change Q-o-Q, %   31-Dec-19   Change, abs   Change YTD, % Total assets 9,731,200   10,034,323   (3.0%)   9,234,758   496,442   5.4% Cash and reserves 2,304,306   2,237,523   3.0%   1,805,343   498,963   27.6% Amounts due from credit institutions 101,351   72,161   40.5%   53,161   48,190   90.6% T-bills & NBRK notes 2,075,528   2,049,302   1.3%   1,954,066   121,462   6.2% Other securities & derivatives 721,004   1,094,266   (34.1%)   1,074,867   (353,863)   (32.9%) Gross loan portfolio 4,389,064   4,427,427   (0.9%)   4,161,163   227,901   5.5% Stock of provisions (444,585)   (454,166)   (2.1%)   (408,718)   (35,867)   8.8% Net loan portfolio 3,944,479   3,973,261   (0.7%)   3,752,445   192,034   5.1% Assets held for sale 44,539   62,455   (28.7%)   45,766   (1,227)   (2.7%) Other assets 539,993   545,355   (1.0%)   549,110   (9,117)   (1.7%) Total liabilities 8,262,263   8,674,629   (4.8%)   7,927,535   334,728   4.2% Total deposits, including: 6,756,011   6,935,284   (2.6%)   6,406,413   349,598   5.5% retail deposits 3,470,200   3,581,446   (3.1%)   3,251,216   218,984   6.7%    term deposits 2,865,134   3,081,899   (7.0%)   2,743,019   122,115   4.5%    current accounts 605,066   499,547   21.1%   508,197   96,869   19.1% corporate deposits 3,285,811   3,353,838   (2.0%)   3,155,197   130,614   4.1%    term deposits 1,588,246   1,364,196   16.4%   1,441,930   146,316   10.1%    current accounts 1,697,565   1,989,642   (14.7%)   1,713,267   (15,702)   (0.9%) Debt securities 864,453   917,361   (5.8%)   834,446   30,007   3.6% Amounts due to credit institutions 270,393   418,047   (35.3%)   305,965   (35,572)   (11.6%) Other liabilities 371,406   403,937   (8.1%)   380,711   (9,305)   (2.4%) Equity 1,468,937   1,359,694   8.0%   1,307,223   161,714   12.4%                             As at the end of 2Q 2020, total assets increased by 5.4% vs. YE 2019 due to growth in deposits and total equity. Whereas, the decrease by 3.0% vs. the end of the 1Q 2020 was caused by revaluation of FX balance sheet positions due to KZT appreciation versus US dollar during 2Q 2020 and decrease in the volume of funds raised under REPO transactions.   Compared with the end of 1Q 2020, loans to customers decreased by 0.9% on a gross basis and 0.7% on a net basis. Decrease of gross loan portfolio in 2Q 2020 was attributable to decrease in corporate loans (5.1% on a gross basis) mainly due to revaluation of FX loans, whereas SME and retail loans increased by 8.3% and 3.9% on a gross basis, respectively.   As at the end of 2Q 2020, Stage 3 ratio increased to 15.7% from 15.5% as at the end of 1Q 2020 mainly due to impairment of a corporate borrower previously considered as the borrower with increased credit risk.   Deposits of legal entities and individuals increased by 4.1% and 6.7%, respectively, compared to YE 2019 mainly due to fund inflow from the Bank's clients and positive revaluation of FX-denominated deposits due to KZT depreciation in 1H 2020.As at the end of 2Q 2020, the share of corporate KZT deposits in total corporate deposits was 56.7% compared to 50.8% as at the end of 1Q 2020, whereas the share of retail KZT deposits in total retail deposits was 43.6% compared to 37.6% as at the end of 1Q 2020.   Amounts due to credit institutions decreased by 35.3% vs. the end of 1Q 2020 mainly due to decrease in loans under REPO agreements attracted in 1Q to provide current cash flows in KZT within the Bank's operating activities. As at 30 June 2020, 77.3% 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 programs supporting certain sectors of economy.   Debt securities issued decreased by 5.8% compared to the end of 1Q 2020 as a result of revaluation of FX denominated debt securities due to KZT appreciation versus US dollar during 2Q 2020. 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 Subordinated coupon bonds KZT 101.1 bn 9.5% p.a. October 2025 Local bonds listed at Astana International Exchange USD 181.5 mln 3.0% p.a. April 2022     As at the end of 2Q 2020, total equity increased by 8.0% compared with the end of 1Q 2020 as a result of net profit earned by the Bank during 2Q 2020.   The Bank's capital adequacy ratios were as follows*:     30-Jun-20 31-Mar-20 31-Dec-19 30-Sep-19 30-Jun-19             Capital adequacy ratios, unconsolidated: Halyk Bank k1-1 25.9% 22.5% 21.3% 21.4% 19.7% k1-2 25.9% 22.5% 21.3% 21.4% 19.7% k2 27.9% 24.4% 23.1% 23.4% 21.5%             Capital adequacy ratios, consolidated: CET 1 25.2% 20.6% 20.6% 20.0% 18.3% Tier 1 capital 25.2% 20.6% 20.6% 20.0% 18.3% Total capital 26.7% 21.9% 21.9% 21.2% 19.6%   * minimum capital regulatory adequacy requirements: k1 ­- 9.72%, k1-2 - 10.72% and k2 - 12.22%, including conservation buffer of 3% and systemic buffer of 1% for each of these ratios.                 The consolidated financial information for six months ended 30 June 2020, including the notes attached thereto, are available on Halyk Bank's website: http://halykbank.com/financial-results   A 2Q 2020 results webcast will be hosted at 2:00 p.m. London time/9:00 a.m. EST on Monday, 17 August 2020:https://webcasts.eqs.com/halykbank20200817                    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, on the London Stock Exchange since 2006 and Astana International Exchange since October 2019.   With total assets of KZT 9,731.2 bn as at 30 June 2020, Halyk Bank is Kazakhstan's leading lender. The Bank has the largest customer base and broadest branch network in Kazakhstan, with 621 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.com   - ENDS- For further information, please contact: Halyk Bank           MiraKassenova   [phone] [e-mail]   Margulan Tanirtayev   [phone] [e-mail]

ISIN:	US46627J3023
Category Code:	MSCL
TIDM:	HSBK
Sequence No.:	82212
EQS News ID:	1119215

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