Jsc Halyk Reg S Regulatory News (HSBK)

19 Nov 2007 09:52

JSC Halyk Savings Bank Kazakhstan19 November 2007 19 November 2007 Press Release JSC Halyk Bank of Kazakhstan ("Halyk Bank" or "the Bank") Consolidated financial results for the first nine months of 2007 Almaty, Kazakhstan - Halyk Bank has today released its consolidated financialstatements for the first nine months of 2007. The financial statements have been prepared in accordance with International Financial Reporting Standards. Financial Highlights • Net income increased by 83% from KZT 18.3 billion for the first ninemonths of 2006 to KZT 33.4 billion for the first nine months of 2007 • Operating income increased by 71% from KZT 40.1 billion for the firstnine months of 2006 to KZT 68.4 billion for the first nine months of 2007 • Net interest income increased by 58% from KZT 22.8 billion for thefirst nine months of 2006 to KZT 36.1 billion for the first nine months of 2007 • Net interest margin remained strong at 6.7% for the first nine monthsof 2007 • The ratio of operating expenses to operating income before impairmentcharges (cost-to-income ratio) improved from 36.3% for the first nine months of2006 to 30.1% for the first nine months of 2007 • Net fee and commission income increased by 15% from KZT 14.4 billionfor the first nine months of 2006 to KZT 16.5 billion for the first nine monthsof 2007 • Net loan portfolio increased by 52% from KZT 596.2 billion as at 31December 2006 to KZT 905.1 billion as at 30 September 2007 • Total assets increased by 42% from KZT 991.3 billion as at 31 December2006 to KZT 1,408 billion as at 30 September 2007 • Retail deposits increased by 71% from KZT 209.9 billion as at 31December 2006 to KZT 357.9 billion as at 30 September 2007 • Total equity increased by 27% from KZT 120.6 billion as at 31 December2006 to KZT 152.9 billion as at 30 September 2007 • Capital adequacy remained strong with the total capital adequacy ratioat 13% and the Tier 1 ratio at 11% in accordance with Basel as at 30 September2007 Financial Overview Net Income The Bank's consolidated net income (before dividends on preferred shares)increased by 83% to KZT 33.4 billion for the first nine months of 2007 from KZT18.3 billion for the first nine months of 2006. This increase was mainlyattributable to an increase in net interest income of 58%, an increase in netfee and commission income of 15%, and a 458% increase in other non-interestincome, which were partially offset by increases in non-interest expense of 34%and income tax expense of 202%. Operating Income Operating income after impairment charges, consisting of net interest income,net fee and commission income and other non-interest income, increased by 71% toKZT 68.4 billion for the first nine months of 2007 from KZT 40.1 billion for thefirst nine months of 2006. Interest income Gross interest income increased by 48% from KZT 33.5 billion for the first ninemonths of 2006 to KZT 49.6 billion for the first nine months of 2007. Thisincrease was primarily due to 57% growth in interest income from loans tocustomers from KZT 50.1 billion for the first nine months of 2006 to KZT 78.6billion for the first nine months of 2007 attributable to overall growth of theBank's loan portfolio, and 97% growth in interest income from debt securitiesfrom KZT 3.5 billion for the first nine months of 2006 to KZT 6.8 billion forthe first nine months of 2007 attributable to growth of the Bank's securitiesportfolio. Interest expense increased by 71% from KZT 23.2 billion for the first ninemonths of 2006 to KZT 39.7 billion for the first nine months of 2007. Thisincrease was primarily due to 81% growth in interest expense on customerdeposits from KZT 11.9 billion for the first nine months of 2006 to KZT 21.5billion for the first nine months of 2007 attributable to overall growth of theBank's deposit base, and 77% growth in interest expense on debt securities fromKZT 6.5 billion for the first nine months of 2006 to KZT 11.4 billion for thefirst nine months of 2007 attributable to an increase in debt securities issuedby the Bank. Net interest income before impairment charges increased by 48% to KZT 49.6billion for the first nine months of 2007 from KZT 33.5 billion for the firstnine months of 2006. Interest expense grew at a faster rate than interest incomeresulting in net interest margin reducing to 6.7% for the first nine months of2007 from 7.2% for the first nine months of 2006. Provisions for impairment losses Provisions for impairment losses increased by 26% to KZT 13,481 billion for thefirst nine months of 2007, compared with KZT 10,675 billion for the first ninemonths of 2006. The effective provisioning rate on the customer loan portfoliowas 5.0% as at 30 September 2007 compared with 5.3% as at 31 December 2006. Fee and commission income Net fee and commission income increased by 15% to KZT 16.5 billion for the firstnine months of 2007 from KZT 14.4 billion for the first nine months of 2006,resulting primarily from growing volumes of bank transfers, customer accounts,pension payments and cash operations services provided to the customers. Other non-interest income Other non-interest income increased by 458% to KZT 15.8 billion for the firstnine months of 2007 from KZT 2.8 billion for the first nine months of 2006,primarily as a result of net gains on securities trading operations, increase innet gains from dealing in foreign currencies and full consolidation of JSCKazakhinstrakh. Gains from financial assets at fair value through profit or loss increased toKZT 3.2 billion for the first nine months of 2007 from a net loss of KZT 0.6billion for the first nine months of 2006 mainly due to gains on securities inthe trading portfolio and off-balance sheet items, including foreign currencyrevaluation gains. Gains on foreign exchange operations net of currency translation lossesincreased to KZT 5.6 billion for the first nine months of 2007 from KZT 2.5billion for the first nine months of 2006. This significant increase in gains onforeign exchange operations was due to an increase by KZT 1.5 billion inunrealized gains/ accrued income on foreign currency forward and swap operationsincluded on the balance sheet. These transactions were concluded with the aim ofhedging foreign exchange risks. Excluding this effect, gains on foreign exchange operations net of currencytranslation gains increased to KZT 4.1 billion for the first nine months of 2007from KZT 2.5 billion for the first nine months of 2006 resulting from overallgrowth in foreign exchange operations of the Bank. In November 2006, the Bank acquired 57% stake in JSC Kazakhinstrakh and thusincreased its holding in the company to 98%. Full consolidation of JSCKazakhinstrakh (non-life insurance subsidiary of the Bank) resulted in inclusionof KZT 4.2 billion of insurance underwriting income into other non-interestincome of the Bank for the first nine months of 2007. Operating expenses Operating expenses comprising non-interest expense increased by 34% to KZT 24.7billion for the first nine months of 2007 from KZT 18.4 billion for the firstnine months of 2006, primarily due to higher personnel expenses andadministrative and other operating expenses relating to maintenance of branchnetwork and expansion of the Bank's and its subsidiaries' operations. However,notwithstanding this growth in operating expenses, the ratio of the Bank'soperating expenses to operating income before provisions for impairment losses(cost-to-income ratio) decreased to 30.1% for the first nine months of 2007 from36.3% for the first nine months of 2006. Total assets The Bank's total assets increased by 42% to KZT 1,408.0 billion as at 30September 2007 from KZT 991.4 billion as at 31 December 2006 primarily due toincreases in the net loan portfolio, cash and cash equivalents, obligatoryreserves and the investment securities portfolio. Loan portfolio The net total loan portfolio increased by 52% to KZT 905.1 billion or 64% of theBank's total assets as at 30 September 2007 from KZT 596.2 billion or 60% of theBank's total assets at 31 December 2006. Retail loans, including consumer and mortgage loans, increased by 41% to KZT278.6 billion as at 30 September 2007 from KZT 197.2 billion as at 31 December2006. Consumer loans, mostly backed by the salaries of the individual borrowers,increased by 65% to KZT 143.1 billion as at 30 September 2007 from KZT 86.9billion as at 31 December 2006. Mortgage loans increased by 23% to KZT 135.5billion as at 30 September 2007 from KZT 110.3 billion as at 31 December 2006.Loans to corporate borrowers (including SMEs) increased by 56% to KZT 674.1billion as at 30 September 2007 from KZT 432.7 billion as at 31 December 2006.As at 30 September 2007 the Bank's 20 largest borrowers accounted for 24% oftotal gross loans to customers. As at 30 September 2007 wholesale trade andconsumer loans made up the largest shares of the loan portfolio with 18% and 15%of total gross loan portfolio, respectively. Mortgages, construction and realestate sectors accounted for 14%, 14% and 3% of the Bank's total gross loans,respectively. Funding and liabilities The Bank's total liabilities increased by 44% to KZT 1,255.1 billion as at 30September 2007 from KZT 870.7 billion as at 31 December 2006 mainly due toincreases in customer accounts and deposits, debt securities issued and amountsdue to credit institutions. Debt securities issued The Bank's debt securities issued increased by 78% to KZT 239.9 billion or 19%of the Bank's total liabilities as at 30 September 2007 compared with KZT 134.4billion or 15% of the Bank's total liabilities as at 31 December 2006. Thisincrease includes a USD 700 million Eurobond due in May 2017 issued through HSBK(Europe) B.V. in May 2007 and two KZT-denominated domestic bonds for a totalamount of KZT 25 billion due in March and April 2009 issued under the Bank'ssecond bond issuance program in March and April 2007. Amounts due to credit institutions Loans and deposits due to credit institutions increased by 87% to KZT 222.2billion or 18% of the Bank's liabilities as at 30 September 2007 compared withKZT 118.7 billion or 14% of the Bank's liabilities as at 31 December 2006. Thiswas mainly due to a 912% increase in loans and deposits from non-OECD banks fromKZT 5.1 billion as at 31 December 2006 to KZT 51.4 billion as at 30 September2007, and a 45% increase in loans and deposits from OECD banks from KZT 73.1billion as at 31 December 2006 to KZT 105.7 billion as at 30 September 2007.This increase includes a USD 400 million 3-year term loan facility borrowed froma syndicate of international banks, as well as an increase in obligations underbilateral loans, trade finance facilities and securities repurchase agreementsentered into by the Bank with domestic and international financial institutions. Customer deposits Amounts due to customers increased to KZT 767.2 billion or 61% of the Bank'sliabilities as at 30 September 2007 compared with KZT 597.9 billion or 69% ofthe Bank's liabilities as at 31 December 2006. Deposits and current accounts ofindividuals increased by 71% to KZT 357.9 billion as at 30 September 2007 fromKZT 209.9 billion as at 31 December 2006. Shareholders' Equity Total equity increased by 27% to KZT 152.9 billion as at 30 September 2007 fromKZT 120.6 billion as at 31 December 2006 primarily as a result of completion ofpost-IPO offering of common shares for total amount of KZT 4.8 billion and anincrease in retained earnings during the fist nine months of 2007. In May 2007,the Bank effected payment of dividends on preferred shares in the amount of KZT1.6 billion and dividends on common shares in the amount of KZT 2.5 billionapproved by the Annual General Shareholders Meeting for the year ended 31December 2006. About the Bank Halyk Bank is one of Kazakhstan's leading financial services groups and aleading retail bank with the largest customer base and distribution networkamong Kazakh banks. The Bank is developing as a universal financial groupoffering a broad range of services (banking, pensions, insurance, leasing,brokerage and asset management) to its retail, small and medium enterprise ("SME") and corporate customers. It is seeking further expansion of its internationaloperations and credit exposure in the region. The Bank is rated by the threemain rating agencies: Moody's Investor Service (Ba1/Negative/NP), Fitch Ratings(BB+/Stable/B) and Standard&Poor's (BB+/Stable/B). As at 30 September 2007 the total number of the Bank's outlets were 665, ATMswere 982 and POS terminals were 3,254. Key events in the third quarter of 2007 • On 28 September 2007 the Bank registered its third bond programme foran aggregate principal amount of KZT 200 billion with the FMSA, under which inOctober 2007 the Bank issued 10-year subordinated bonds denominated in Tenge inthe aggregate principal amount of KZT 10 billion bearing a coupon of 11%. Themajor holders of the bonds are domestic pension funds and asset managementcompanies. • On 1 October 2007 the Bank raised a syndicated loan facility for aprincipal amount of USD 300 million with a 3-year tenor from a syndicate ofinternational banks. The benchmark loan bears a margin of 40 bps over LIBOR. • On 1 November 2007 Moody's downgraded six Kazakh banks, including HalykBank. Notwithstanding the fact that the foreign currency senior unsecured debtof the Bank was changed to Baa3, it is now the only investment grade rating forcommercial banks in Kazakhstan after respective rating actions. The full consolidated financial statements, including the notes attachedthereto, are available on Halyk Bank's website (http://eng.halykbank.kz/financials/reports and http://eng.halykbank.kz/info/news). Contact details: Dauren Karabayev daurenk@halykbank.kz +7 727 259 88 66 Assel Atinova asela@halykbank.kz +7 727 259 04 30 Financial Dynamics London: Paul Marriott paul.marriott@fd.com +44 (0)20 7269 7252 David Cranmer david.cranmer@fd.com +44 (0)20 7269 7217 Moscow: Leonid Solovyev leonid.solovyev@fd.com +7 495 795 06 23 APPENDIX CONSOLIDATED SUMMARY BALANCE SHEET KZT millions As at 30 September 2007 31 December 2006Assets Cash and cash equivalents 172,744 127,799 Obligatory reserves 80,814 55,106 Financial assets at fair value through profit or loss 48,033 53,016 Amounts due from credit institutions 4,974 2,049 Available-for-sale investment securities 144,518 123,339 Loans to customers, net 905,102 596,216 Property and equipment 24,918 21,215 Insurance assets 5,666 5,626 Other assets 21,229 6,993Total assets 1,407,998 991,359 Liabilities Amounts due to credit institutions 222,167 118,719 Amounts due to customers: 767,169 597,935- Retail 357,852 209,877- Corporate 409,317 388,058 Debt securities issued 239,853 134,413 Provisions 1,284 3,021 Deferred tax liability 2,645 2,530 Insurance liabilities 8,827 7,535 Other liabilities 13,112 6,579Total liabilities 1,255,057 870,732 Shareholders' equity: Share capital 65,483 60,684 Share premium reserve 2,001 2,183 Treasury shares (42) (38) Retained earnings and other reserves 84,498 56,736 151,940 119,565 Minority interest 1,001 1,062Total shareholders' equity 152,941 120,627 Total liabilities and shareholders' equity 1,407,998 991,359 CONSOLIDATED SUMMARY STATEMENT OF INCOME KZT millions For the nine-month period ended 30 September 2007 30 September 2006 Interest income 89,331 56,679Interest expense (39,706) (23,164)Net interest income before impairment 49,625 33,515Impairment charge (13,481) (10,675)Net interest income 36,144 22,840Fees and commissions, net 16,504 14,403Non interest income 15,798 2,830Non interest expense (24,689) (18,398)Income before income tax expense 43,757 21,675Income tax expense (10,313) (3,411)Net income after income tax expense 33,444 18,264Minority interest in net income 239 448Net income after minority interest 33,205 17,816 KEY FINANCIAL AND OPERATING FIGURES As at 30 September 2007 31 December 2006Customer deposits / total liabilities 61.1% 68.7%Loans / deposits 118.0% 99.7%Provisions / gross loans 5.0% 5.3%Provisions / NPLs(1) 579.6% 467.8%NPLs / gross loans 0.9% 1.1%Tier 1 capital adequacy ratio (in accordance with FMSA(2)) 7.9% 9.5%Total capital adequacy ratio (in accordance with FMSA) 12.9% 16.6%Tier 1 capital adequacy ratio (in accordance with Basel) 11.5% 14.0%Total capital adequacy ratio (in accordance with Basel) 13.3% 17.1%Share of collateralized loans in total loan portfolio 99.7% 99.8% Number of branches 665 617Number of ATMs 982 697Number of POS-terminals 3,254 2,851 For the nine-month period ended 30 September 2007 30 September 2006Cost-to-income 30.1% 36.3%Return on average common shareholders' equity (ROAE) (3) 38.6% 43.9%Return on average assets (ROAA) (3) 3.9% 3.3%Net interest margin (3) 6.7% 7.2%Net interest spread (3) 6.5% 7.1%Basic earnings per share, KZT 33.92 18.24 (1) Non-performing loans comprise the portion of principal or interest which isoverdue by more than 30 days. (2) Agency of Kazakhstan on Regulation and Supervision of Financial Markets andFinancial Organisations. (3) Annualised. This information is provided by RNS The company news service from the London Stock Exchange