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).
Statement of financial position review
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
Mira Kassenova
+7 727 259 04 30
MiraK@halykbank.kz
Margulan Tanirtayev
+7 727 259 04 53
Margulant@halykbank.kz
ISIN: US46627J3023 Category Code: MSCL TIDM: HSBK Sequence No.: 82212 EQS News ID: 1119215
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