REG - JSC Halyk Bank JSC Halyk Bank-37QB - 1H and 2Q 2024 financial results

Halyk Bank AOAnnouncement

19/08/2024 09:00

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RNS Number : 9107A  JSC Halyk Bank  19 August 2024

19 August 2024

 

Joint Stock Company 'Halyk Bank of Kazakhstan'

Interim condensed consolidated financial results

for the six months ended 30 June 2024

 

Joint Stock Company 'Halyk Bank of Kazakhstan' and its subsidiaries (together
"the Bank") (LSE: HSBK; KASE: HSBK, HSBKd; AIX: HSBK, HSBK.Y) releases interim
condensed consolidated financial information for the six months ended 30 June
2024.

 

 Interim Condensed Consolidated Statement of Profit or Loss

KZT mln

 

                                                                                 1H 2024    1H 2023    Y-o-Y,%   2Q 2024    2Q 2023    Y-o-Y,%
 Interest income(()(1)())                                                        1,012,008  780,462     29.7%    515,754    400,193     28.9%
 Interest expense                                                                (500,745)  (393,555)   27.2%    (258,727)  (205,378)   26.0%
 Net interest income before  credit loss expense                                 511,263    386,907     32.1%    257,027    194,815     31.9%
 Fee and commission income                                                       99,730     98,689      1.1%     49,656     51,284     (3.2%)
 Fee and commission expense                                                      (48,277)   (46,970)    2.8%     (23,695)   (24,484)   (3.2%)
 Fees and commissions, net                                                       51,453     51,719     (0.5%)    25,961     26,800     (3.1%)
 Net insurance income (()(2)())                                                  14,802     28,597     (48.2%)   5,126      9,249      (44.6%)
 Net gain on foreign exchange operations, financial assets and liabilities((3))  90,049     59,653      51.0%    44,360     30,727      44.4%
 Other expense/non-interest income ((4))                                         (41,921)   36,862     (213.7%)  8,944      15,668     (42.9%)
 Expected credit loss expense and recovery of other credit loss expense          (65,747)   (31,102)   x2.1      (46,753)   (17,535)    x2.7
 Operating expenses ((5))                                                        (115,858)  (99,578)    16.3%    (59,217)   (53,092)    11.5%
 Income tax expense                                                              (64,948)   (62,243)    4.3%     (34,319)   (28,271)    21.4%
 Net  income                                                                     379,093    370,815     2.2%     201,129    178,361     12.8%
 Non-controlling interest                                                        -          1          -         -          1          -
 Net income attributable to common shareholders                                  379,093    370,814     2.2%     201,129    178,360     12.8%

 Net interest margin, p.a.                                                       7.0%       6.0%                 6.9%       6.0%
 Return on average equity, p.a.                                                  29.9%      35.8%                31.7%      33.8%
 Return on average assets, p.a.                                                  4.8%       5.2%                 5.0%       5.0%
 Cost-to-income ratio                                                            18.5%      17.7%                17.3%      19.1%
 Cost of risk on loans to customers, p.a.                                        1.3%       0.9%                 1.7%       1.0%

 

(1)      Interest income calculated using the effective interest method
and other interest income;

(2)      Insurance revenue less insurance service expense and net
reinsurance expense;

(3)      Net gain on financial assets and liabilities at fair value
through profit or loss, net realised gain/(loss) from financial assets at fair
value through other comprehensive income, net foreign exchange gain;

(4)      Share in profit of associate, income on non-banking activities,
other (expense)/income;

(5)      Including reversal of impairment of non-financial assets;

 

 

In preparing the consolidated financial information for the year ended 31
December 2023, the Group carried out an inventory of its financial
instruments. The inventory process identified financial instruments measured
at fair value through profit or loss that were previously restricted in use
and were incorrectly measured at cost. The Group revaluated these financial
instruments and recognized prior period adjustments.

The consolidated statement of profit or loss for the six months ended 30 June
2023 has been reclassified to conform to the presentation for the year ended
31 December 2023 because the presentation of the current year report provides
a clearer picture of the Group's financial performance. All of the ratios were
also recalculated accordingly. For more detailed information please refer to
Halyk Group's interim condensed consolidated financial information for the six
months ended 30 June 2024, note #4b.

 

Net income attributable to common shareholders for 1H 2024 is up 2.2%
year-on-year. It was negatively impacted by one off effect for KZT 79.3bn
(pre-tax) vs. 1H 2023 for KZT 14.5bn (pre-tax) related to accelerated
repayment of Kazakhstan Sustainability Fund (KSF) deposit. It was also
affected by the increase in credit loss expense.

 

Interest income((1)) for 1H 2024 was up 29.7% vs. 1H 2023 mainly due to
increase in average rate and balances of loans to customers.

 

Interest expense for 1H 2024 increased by 27.2% vs. 1H 2023 mainly as a result
of the growth in average rate on amounts due to customers and growth in the
share of KZT amounts due to customers. Consequently, net interest income
before credit loss expense for 1H 2024 grew by 32.1% vs. 1H 2023.

 

In 1H 2024 net interest margin was affected by the increase in average rates
on both loans to customers and amounts due to customers. Furthermore, net
interest margin was positively impacted by the increase in the share of higher
yielding retail loans in total loan portfolio and share of loans to customers
in total interest earning assets. Moreover, there was an increase in the
average rate of FX amounts due from credit institutions and FX
interest-earning cash and cash equivalents following the increase of USD
interest rates, as well as increase in the share of KZT interest-earning cash
and cash equivalents. As a result, net interest margin has grown to 7.0% p.a.
for 1H 2024 compared to 6.0% p.a. for 1H 2023.

 

Fee and commission income in 1H 2024 vs. 1H 2023 increased by 1.1%. It was
negatively impacted by base effect related to transition to amortization of
tariff packages for legal entities starting from November 2023. Moreover,
there was a revision of some retail tariffs in 2H of 2023. On top of that, the
amount of bonuses for the loyalty program almost doubled due to increased
transactional activity of retail clients and growing share of QR payments.

 

Fee and commission expense in 1H 2024 vs. 1H 2023 grew by 2.8% mainly due to
increase in service fees on payment cards and in deposit insurance fees
payable to the Kazakhstan Deposit Insurance Fund following the retail deposits
amount growth.  As a result, despite the increased number of clients and the
growth of clients' transactional activity, the net fee and commission income
for 1H 2024 decreased by 0.5% vs. 1H 2023.

 

Other expense/non-interest income ((4)) in 1H 2024 was negatively impacted by
one off recognized loss for KZT 66.1bn in view of expected early repayment of
the deposit of KSF in accordance with the IFRS.

 

Operating expenses((5)) for 1H 2024 increased by 16.3% vs. 1H 2023 mainly due
to the indexation of salaries and other employee benefits starting from 1 May
2024, and payment of bonuses for high grades in schools in the frame of
strategic partnership with leading educational platform 'Kundelik'.

 

The cost-to-income ratio equalled 18.5% in 1H 2024, compared with 17.7% in 1H
2023 due to higher operating expense for 1H 2024.

 

Cost of risk in 1H 2024 increased to 1.3% vs. 0.9% in 1H 2023, as a result of
a greater recovery and repayment of corporate problem indebtedness in 1H 2023
and recognition of higher provisions related to some loans to legal entities
in 1H 2024.

 

 

Interim Condensed Consolidated Statement of Financial Position

KZT mln

 

                                            30-Jun-24       31-Mar-24       Change         31-Dec-23       Change, abs      Change YTD, %

                                                                            Q-o-Q, %
 Total assets                               16,749,875      15,910,944       5.3%          15,494,368      1,255,507         8.1%
 Cash and reserves((6))                     1,683,725       1,873,511       (10.1%)        1,622,181       61,544            3.8%
 Amounts due from credit institutions       146,054         154,033         (5.2%)         171,754         (25,700)         (15.0%)
  T-bills of MinFin & NBRK notes((7))       2,626,122       2,264,214        16.0%         2,125,941       500,181           23.5%
 Other securities & derivatives((8))        1,802,581       1,595,270        13.0%         1,614,666       187,915           11.6%
 Gross loan portfolio                       10,433,521      9,811,644        6.3%          9,774,798       658,723           6.7%
 Stock of provisions((9))                   (535,784)       (512,352)        4.6%          (489,926)       (45,858)          9.4%
 Net loan portfolio                         9,897,737       9,299,292        6.4%          9,284,872       612,865           6.6%
 Assets classified as held for sale         21,396          125,807         (83.0%)        111,542         (90,146)         (80.8%)
 Other assets                               572,260         598,817         (4.4%)         563,412         8,848             1.6%
 Total liabilities                          14,173,325      13,246,474      7.0%           13,017,414      1,155,911         8.9%
 Amounts due to customers, including:       11,615,902      11,211,283       3.6%          10,929,504      686,398           6.3%
 retail deposits                            6,376,470       5,850,404        9.0%          5,828,645       547,825           9.4%
    term deposits                           5,304,080       4,962,819        6.9%          4,808,592       495,488           10.3%
    current accounts                        1,072,390       887,585          20.8%         1,020,053       52,337            5.1%
 legal entities deposits                    5,239,432       5,360,879       (2.3%)         5,100,859       138,572           2.7%
    term deposits                           3,634,420       3,809,577       (4.6%)         3,338,099       296,321           8.9%
    current accounts                        1,605,012       1,551,302        3.5%          1,762,760       (157,749)        (8.9%)
 Debt securities issued                     657,236         655,735          0.2%          653,393         3,843             0.6%
 Amounts due to credit institutions         1,012,134       669,815          51.1%         778,311         233,823           30.0%
 Other liabilities                          888,053         709,641          25.1%         656,206         231,847           35.3%
 Total equity                               2,576,550       2,664,470       (3.3%)         2,476,954       99,596            4.0%

(6)      Cash and cash equivalents and obligatory reserves ;

(7)      Treasury bills of the Ministry of Finance of the Republic of
Kazakhstan and NBRK notes;

(8)      Financial assets at fair value through profit or loss, financial
assets at fair value through other comprehensive income and debt securities at
amortized cost, net of allowance for expected credit losses less Treasury
bills of the Ministry of Finance of the Republic of Kazakhstan and NBRK notes;

(9)      Allowance for expected credit losses;

 

As at end of 2Q 2024, total assets were up 8.1% year-to-date due to increase
in amounts due to customers.

 

Compared with the YE of 2023, loans to customers were up 6.7% on a gross and
6.6% on a net basis. The increase in the gross loan portfolio was attributable
to a rise of 15.3% in retail loans, while legal entities loan portfolio were
up 2.7%.

 

As at the end of 2Q 2024, Stage 3 loans decreased from the level of 7.5% to
7.2% year-to-date as a result of workout of problem loans and loan portfolio
growth.

 

Compared with the end of 1Q 2024, the deposits of legal entities  were down
2.3% mainly due to one off negative effect of full prepayment of the KSF
deposit and partial withdrawal of funds by the Bank's customers to finance
their ongoing needs (including tax payments). The deposits of individuals were
up 9.0% due to fund inflow from the Bank's clients.

 

As at the-end of 2Q 2024, the share of KZT deposits in total corporate
deposits was 71.8% compared to 72.9% as at the YE 2023, while the share in
total retail deposits was 66.9% vs. 63.4% as at YE 2023.

 

As at the end of 2Q 2024, debt securities issued were slightly up 0.6%
year-to-date and the Bank's debt securities portfolio was as follows:

 

 Description of the security   Nominal amount outstanding  Interest rate  Maturity Date

 Local bonds                   KZT 100bn                   7.5% p.a.      November 2024
 Local bonds                   KZT 131.7bn                 7.5% p.a.      February 2025
 Subordinated coupon bonds     KZT 101.1bn                 9.5% p.a.      October 2025
 Local bonds listed at Astana  USD  191mln                 3.5% p.a.      May 2025

 International Exchange
 Local bonds listed at Astana  USD  298mln                 3.5% p.a.      May 2025

 International Exchange
 Local bonds listed at Astana  USD  184.8mln               3.5% p.a.      July 2025

 International Exchange

 

As at the end of 2Q 2024, total equity of the Bank increased by 4.0% compared
to the YE 2023, mainly due to net profit earned by the Bank during 1H 2024,
which was partially offset by the payment of dividends.

 

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

 

                 30-Jun-24  31-Mar-24  31-Dec-23  30-Sep-23  30-Jun-23
 Capital adequacy ratios, unconsolidated:
 Halyk Bank
 k1-1            17.6%      19.0%      19.6%      18.6%      18.1%
 k1-2            17.6%      19.0%      19.6%      18.6%      18.1%
 k2              17.7%      19.2%      19.9%      19.0%      18.4%
 Capital adequacy ratios, consolidated:
 CET 1           17.4%      19.5%      19.3%      18.2%      17.9%
 Tier 1 capital  17.4%      19.5%      19.3%      18.2%      17.9%
 Total capital   17.5%      19.7%      19.6%      18.5%      18.3%

 

* The minimum regulatory capital adequacy requirements are 9.5%, for k1, 10.5%
for k1-2 and 12% for k2, including a conservation buffer of 3% and systemic
buffer of 1% for each.

 

The interim condensed consolidated financial information for the six months
ended 30 June 2024, including the notes attached thereto, are available on
Halyk Bank's website: http://halykbank.com/financial-results
(http://halykbank.com/financial-results) .

 

A 1H and 2Q 2024 results webcast will be hosted at 3:00pm London time/7:00pm
Almaty time (UTC +05:00) on Tuesday, 20 August 2024. A live webcast of the
presentation can be accessed via Zoom link after the registration. The
registration is open until 20 August 2024 (including), for the registration
please click here.
(https://halykbank-kz.zoom.us/webinar/register/WN_55OUFa7rQn2piA_E297Mzw)

 

 

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, asset management and lifestyle services. 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 16,749.9bn as at 30 June 2024, Halyk Bank is
Kazakhstan's leading lender. The Bank has the largest customer base and
broadest branch network in Kazakhstan, with 568 branches and outlets across
the country. The Bank also operates in Georgia and Uzbekistan.

 

For more information on Halyk Bank, please visit https://www.halykbank.com

 

- ENDS-

 

For further information, please contact:

 Halyk Bank

 Mira Tiyanak     +7 727 259 04 30

                  MiraK@halykbank.kz

 Rustam Telish    +7 727 330 15 66 RustamT3@halykbank.kz

 Nurgul Mukhadi   +7 727 330 16 77

                  NyrgylMy@halykbank.kz

 

 

 

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