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JSC Halyk Bank / Miscellaneous 02.12.2014 07:29 Dissemination of a Regulatory Announcement, transmitted byEquityStory.RS, LLC - a company of EQS Group AG.The issuer is solely responsible for the content of this announcement.--------------------------------------------------------------------------- 2 December 2014 Joint Stock Company 'Halyk Savings Bank of Kazakhstan' Consolidated financial resultsfor the nine months ended 30 September 2014 Joint Stock Company 'Halyk Savings Bank of Kazakhstan' and its subsidiaries(together 'the Bank') (LSE: HSBK) releases its interim condensed consolidatedfinancial information for the 9 months ended 30 September 2014. KEY FINANCIAL HIGHLIGHTS 9 months 2014 - Net income is up by 63.8% to KZT 92.0bn, YoY; - Net interest income before impairment charge is up by 26.7%; - Impairment charge is down by 96.9%; - Net interest income is up by 52.2%; - Fees and commissions from transactional banking are up by 11.2%; - Net interest margin is up to 5.6% p.a. (4.8% p.a. for 9m 2013); - Cost-to-income ratio is down to 28.0% p.a. (30.1% p.a. for 9m 2013); - RoAE is up to 30.0% p.a. (22.0% p.a. for 9m 2013); - RoAA is up to 4.5% p.a. (3.0% p.a. for 9m 2013); - Total assets are up by 13.5%, YTD; - Net loans to customers are up by 2.3%; - Amounts due to customers are up by 11.3%; - Total equity is up by 17.9%; - NPLs 90-day+ ratio is down to 14.1% (18.0% as at 31 December 2013); - Cost of risk is down to 0.0% p.a. (1.1% p.a. for 9m 2013). 3 quarter 2014 - Net income is up by 27.1% to KZT 28.0bn, YoY; - Net interest income before impairment charge is up by 17.6%; - Provisions released for KZT 0.9bn; - Net interest income is up by 58.6%; - Fees and commissions from transactional banking are up by 8.6%; - Net interest margin is up to 5.6% p.a. (5.2% p.a. for 3Q 2013); - Cost-to-income ratio is up to 30.4% p.a. (27.2% p.a. for 3Q 2013); - RoAE is up to 26.1% p.a. (25.3% p.a. for 3Q 2013); - RoAA is up to 4.0% p.a. (3.5% p.a. for 3Q 2013); - Total assets are up by 1.2%, QoQ; - Net loans to customers are down by 0.6%; - Amounts due to customers are down by 3.6%; - Total equity is up by 5.6%; - NPLs 90-day+ ratio is down to 14.1% (15.4% as at 30 June 2014); - Cost of risk is down to minus 0.2% p.a. (1.6% p.a. for 3Q 2013); Statement of profit or loss review Interest income increased by 16.5% for 9m 2014 vs. 9m 2013 mainly due toincrease in average balances of net loans to customers by 12.0% and inaverage interest rate on net loans to customers to 12.1% p.a. for 9m 2014from 11.6% p.a. for 9m 2013. Interest expense increased by 2.8% for 9m 2014vs. 9m 2013 mainly due to increase in average balances of FX term depositsThe increase in interest expense was partially offset by decrease inaverage balances of KZT term deposits, 24.5% decrease in average balancesof debt securities issued and their average interest rates to 7.6% p.a. for9m 2014 from 8.1% p.a. for 9m 2013. As a result, net interest income beforeimpairment charge increased by 26.7% to KZT 97.7bn for 9m 2014 vs. 9m 2013. Impairment charge decreased by 96.9% for 9m 2014 vs. 9m 2013, mainly due torepayments of overdue indebtedness of some corporate clients which led torelease of provisions. During 3Q 2014 and 2Q 2014 the Bank wrote-off(transferred off balance sheet) fully provisioned non-performing loans forKZT 14.2bn and KZT 57.8bn, respectively, without legally forgiving claimson the borrowers. As a result, allowances for loan impairment decreased by14.4% vs. 31 December 2013, whereas provisioning level decreased to 15.4%as at 30 September 2014 vs. 17.9% as at 31 December 2013. The Bank willcontinue collection of these written-off loans in accordance with itsnormal business procedures. Provisions against letters of credit and guarantees recovered by KZT 4.2bnas at 30 September 2014 mainly due to expiry of several large-ticket LCsand guarantees during 1Q 2014. Fee and commission income from transactional banking (i.e. excludingpension fund and asset management) increased by 11.2% for 9m 2014 vs. 9m2013 as a result of growing volumes of transactional banking business. Net pension fund and asset management fees increased 3.4-times for 1Q 2014vs. 1Q 2013 mainly due to revaluation gains on FX-denominated pensionassets as a result of one-off devaluation of KZT in February 2014. On 26 ofMarch 2014 JSC 'APF of Halyk Bank of Kazakhstan' completed transfer ofassets under management to the JSC 'Single Accumulative Pension Fund'.Starting from 26 March the Bank does not earn any income from managingpension assets. Other non-interest income (excluding insurance) increased by 42.8% for 9m2014 vs. 9m 2013 as a result of 2.6-fold increase in net gain fromfinancial assets and liabilities at fair value through profit or loss and2.7-fold increase in other income. Net gain from financial assets andliabilities at fair value through profit and loss was higher for 9m 2014vs. 9m 2013 mainly due to unrealized net losses on trading operationsincurred during 9m 2013. Growth in other income from KZT 1.1bn in 9m 2013to KZT 3.1bn in 9m 2014 was due to an increase in other income fromnon-banking activities mainly as a result of growing volumes of business atone of the Bank's subsidiaries. Insurance underwriting income (net of reinsurance) decreased by 12.4% for9m 2014 vs. 9m 2013 due to lower volumes of pension annuities business tillthe end of 1H 2014 and due to one-off contracts in general insurance madein 3Q 2013 and not extended in 3Q 2014. Lower volumes of pension annuitybusiness in 1H 2014 were due to temporary regulatory restrictions in lightof ongoing pension reform from June 2013 to May 2014. Insurance expense(the sum of insurance payments, insurance reserves and commissions toagents) decreased by 11.0% for 9m 2014 vs. 9m 2013 mainly as a result of58.3% decrease in insurance reserves due to temporary regulatorrestrictions on pension annuity business. As a result, insuranceunderwriting income, less insurance expense, decreased by 17.1% for 9m 2014vs. 9m 2013. Insurance underwriting income (net of reinsurance) increased by 88.1% for3Q 2014 vs. 3Q 2013 mainly as a result of increase in insuranceunderwriting income in life insurance business due to the launch of a newlife insurance product in 2Q 2014. Insurance expense increased by 115.8%for 3Q 2014 vs. 3Q 2013 mainly as a result of increase in agency fees inlife insurance due to growing volumes of business. As a result, insuranceunderwriting income, less insurance expense, increased by 32.6% for 3Q 2014vs. 3Q 2013. Operating expenses increased by 7.9% for 9m 2014 vs. 9m 2013 mainly due toincrease in salaries of the Bank's employees starting from 1 July 2014. Theincrease in operating expenses was partially offset by 16.7% decrease indepreciation and amortisation expenses due to increase of amortisationperiod for some classes of fixed assets. The Bank's cost-to-income ratio decreased to 28.0% for 9m 2014 vs. 30.1%for 9m 2013 and increased to 30.4% for 3Q 2014 from 27.2% for 3Q 2013. Statement of financial position review Total assets increased by 13.5% vs. YE 2013 mainly in cash and cashequivalents (53.2%), amounts due from credit institutions (39.3%),available-for-sale investment securities (7.1%) and loans to customers(2.3%). Loans to customers decreased by 0.7% on a gross basis due to non-performingloan write-offs and increased by 2.3% on a net basis vs. YE 2013. Grossloan portfolio decrease was in corporate loans (-4.5%) and loans to SME(-4.6%) due to write-offs of non-performing loans in these business sectorsduring 3Q 2014 and 2Q 2014, as well as due to loan repayments exceeding newloan issues. The decrease in loans to customers was partially off-set by12.6% increase in retail loans. 90-day NPL ratio decreased to 14.1% as at 30 September 2014 vs. 15.4% as at30 June 2014. The decrease in 90-day NPL ratio was mainly due to repaymentof some delinquencies in July and September 2014, as well as refinancing ofseveral delinquent loans under state subsidy program for agriculturalsector and write-offs of non-performing loans in corporate and SME sectorsafter changes to tax legislation in April 2014. Delinquencies repaid inSeptember 2014 included two large ticket loans to Russian borrowers withwhom the Bank came to amicable settlement after several years of courtdisputes. The Bank's IFRS provisions covered 90-day NPLs by 107.4% as at 30September 2014. Deposits of legal entities and individuals increased by 9.7% and 13.3%,respectively, vs.YE 2013 mainly as a result of turbulence on financialmarkets and flight to quality. Amounts due to credit institutions increased by 21.1% mainly due to KZT51.5bn loan from JSC National management holding 'KazAgro' drawn in 3Q 2014to improve loan quality of the borrowers operating in agricultural sectorand KZT 20bn loan from JSC Entrepreneurship Development Fund 'Damu' drawnin 2Q 2014 to support small and medium businesses operating in processingindustries. Debt securities issued increased by 16.3% vs. YE 2013 mainly due torecalculation of USD-denominated Eurobond issues at new KZT exchange rateafter KZT devaluation in February 2014.As at 30 September 2014, the Bank's debt securities issued mainly consistof two outstanding Eurobond issues for USD 700mln and USD 500mln withbullet maturity in May 2017 and January 2021, respectively, each bearing acoupon rate of 7.25%. On 18 November 2014, the Bank placed with JSC Single Accumulated PensionFund KZT 100bn 7.5% coupon rate local bonds maturing in November 2024. Total equity increased by 17.9% vs.YE 2013 mainly on the back of net profitearned during 9m 2014, partially offset by payment of dividends in amountof KZT 18,547mln to common shareholders (or KZT 1.70 per common share) anddividends in amount of KZT 1,757mln to preferred shareholders (or KZT 9.28per preferred share). Regulatory Tier 1 capital adequacy ratios k1-1 and k1-2 and total capitaladequacy ratio k2 were at 11.8%, 15.0% and 20.3%, respectively, as at 30September 2014 vs. 12.0%, 14.9% and 18.9%, respectively, as at 30 June 2014and vs. 9.5%, 11.2% and 18.2%, respectively, as at 31 December 2013. BaselTier 1 capital adequacy ratio and total capital adequacy ratio were at19.8% and 21.0%, respectively, as at 30 September 2014 vs. 18.4% and 19.8%,respectively, as at 30 June 2014 and 17.2% and 18.5%, respectively, as at31 December 2013. The condensed interim consolidated financial information for the ninemonths ended 30 September 2014, including notes attached thereto, areavailable on Halyk Bank's websitehttp://www.halykbank.kz/en/financial-reports andhttp://www.halykbank.kz/en/news ). For further information please contact: Halyk Bank Dauren Karabayev +7 727 259 68 10Viktor Skryl +7 727 259 04 27Mira Kasenova +7 727 259 04 30 02.12.2014 The EquityStory.RS, LLC Distribution Services include RegulatoryAnnouncements, Financial/Corporate News and Press Releases.Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------------- Language: EnglishCompany: JSC Halyk Bank 109V, Abay ave 050008 Almaty KazakhstanPhone: +7 727 259 04 27Fax: +7 727 259 04 64E-mail: halykteam@halykbank.kzInternet: http://halykbank.kzISIN: US46627J3023Category Code: MSCTIDM: Sequence Number: 2426Time of Receipt: Dec 02, 2014 07:29:04 End of Announcement EquityStory.RS, LLC News-Service ---------------------------------------------------------------------------UK-Regulatory-announcement transmitted by DGAP - a service of EQS Group AG.The issuer is solely responsible for the content of this announcement.