25th Mar 2008 08:10
JSC Halyk Savings Bank Kazakhstan25 March 2008 25 March 2008 Joint Stock Company 'Halyk Savings Bank of Kazakhstan' Audited consolidated financial results for the year ended 31 December 2007 Joint Stock Company 'Halyk Savings Bank of Kazakhstan' (Halyk Bank) (LSE: HSBK)today announces its audited consolidated financial results for the year ended 31December 2007. These results have been prepared in accordance withInternational Financial Reporting Standards. Financial Highlights • Net income increased by 49% from KZT 27.2 billion in 2006 to KZT 40.5billion in 2007 • Income before income tax expense increased by 44% from KZT 35.6 billionto KZT 51.2 billion • Net interest income before impairment charges increased by 53% from KZT46.5 billion to KZT 71.0 billion • Net interest margin decreased but remained strong at 6.7% in 2007 • Net fee and commission income increased by 14% from KZT 21.1 billion toKZT 24.2 billion • Other non-interest income increased 3.2 times from KZT 5.3 billion toKZT 17.1 billion • Operating income increased by 37% from KZT 64.5 billion to KZT 88.0billion (operating income comprises net interest income, plus net fees andcommissions, plus other non-interest income, net of insurance claims incurred). • Cost-to-income ratio improved from 39.7% to 34.7% • Total assets increased by 61% from KZT 991.4 billion as YE2006 to KZT1,595.1 billion as at YE2007 • Loans to customers net of allowance for loan impairment increased by74% from KZT 596.2 billion to KZT 1,040.3 billion • Total amounts due to customers increased by 56% from KZT 597.9 billionto KZT 935.4 billion • Customer accounts from individuals increased by 70% from KZT 209.9billion to KZT 357.7 billion • Ratio of loans to customers to amounts due to customers was 1.11 timesas at YE2007 • Debt securities issued increased by 67% from KZT 134.4 billion to KZT224.9 billion • Total equity increased by 33% from KZT 120.6 billion to KZT 161.0billion • Capital adequacy remained strong with the total capital adequacy ratioat 12.9% and the Tier 1 ratio at 10.6% as at YE2007 based on BIS Guidelines • Return on average common shareholders equity as well as return onaverage assets remained strong in 2007 at 31.0% and 3.4%, respectively Grigoriy Marchenko, Chairman of the Management Board of Halyk Bank, commentingon the results: "On behalf of the Management Board, it gives me great pleasure to present to youthe audited accounts for Halyk Bank for the year ended 31 December 2007. 2007 was another record year for Halyk Bank. We continued to deliver value toour shareholders and to strengthen our market-leading position across a range ofproducts which promises to drive sustained, superior performance over the longterm. We are particularly gratified that we could record such strong growth in incomeand assets while still maintaining a robust balance sheet with a total capitalratio of 12.9 percent. The Bank continues to pursue sustained growth both athome in Kazakhstan as well as overseas, as seen with our recent expansion intothe territories of Georgia and Mongolia. The new financial year has started well and we are optimistic that we arewell-placed to deliver our ambitious group strategy for 2008-10." Financial Overview Net income before income tax expense Growth of KZT 15.6 billion (44%) in net income before income tax expense in 2007was primarily attributable to an increase in interest income of KZT 51.9 billion(64%), increases in net fee and commission income of KZT 3.0 billion (14%),increases in other non-interest income of KZT 11.8 billion (223%), which werepartially offset by increases in interest expense of KZT 27.3 billion (80%),increases in impairment charges of KZT 13.9 billion (166%), and increases innon-interest expense of KZT 10.0 billion (35%). Interest income Total interest income increased by KZT 51.9 billion (64%) to KZT 132.6 billionin 2007 from KZT 80.6 billion in 2006, mainly due to an increase in interestincome on loans to customers. The increases in interest income on loans tocustomers in 2007 were primarily due to increases in average balances of loansto customers by about 74%. Total interest expense increased by KZT 27.3 billion (80%) to KZT 61.5 billionin 2007 from KZT 34.2 billion in 2006 mainly due to an increase in averagebalances of interest-bearing liabilities by about 63% as well as an increase inshare of debt securities issued and amounts due to credit institutions typicallybearing higher interest rates than customer deposits in total liabilities. In 2007, interest expense grew at a faster rate than interest income resultingin net interest margin reducing to 6.7% in 2007 from 7.0% in 2006. Provisions for impairment losses Provisions for impairment losses increased by KZT 13.9 billion (166%) to KZT22.2 billion in 2007 from KZT 8.3 billion in 2006. Impairment charges increasedin 2007 compared with 2006 mainly due to an increase in total loans to customersbefore allowance for loan impairment. The effective provisioning rate on thecustomer loan portfolio was 5.2% as at YE2007 compared with 5.3% as at YE2006. Fee and commission income Fee and commission income increased by KZT 3.4 billion (15%) to KZT 25.4 billionin 2007 from KZT 22.1 billion in 2006 primarily as a result of increases in feeand commission income from bank transfers, cash operations and plastic cardmaintenance. Pension fund and asset management fees decreased by 0.5 billion(8%) from KZT 7.0 billion in 2006 to KZT 6.5 billion in 2007 as a result ofgeneral slowdown trend in the financial markets in the second half of 2007.Excluding pension fund and asset management fees, total fee and commissionincome grew by 26% in 2007. Net fee and commission income increased by KZT 3.0 billion (14%) from KZT 21.1billion in 2006 to KZT 24.2 billion in 2007. Other non-interest income Other non-interest income increased by KZT 11.8 billion (223%) to KZT 17.1billion in 2007 from KZT 5.3 billion in 2006, primarily as a result of net gainsfrom financial asset and liabilities at fair value through profit or loss, anincrease in net gains from dealing in foreign currencies and consolidation ofJSC Kazakhinstrakh for full year. Net gains from financial assets and liabilities at fair value through the profitand loss account increased by KZT 3.6 billion (1,844%) to KZT 3.4 billion in2007 from a net loss of KZT 0.2 billion in 2006 and mostly represented gains ontrading portfolio securities. Net gain from available-for-sale securities increased by KZT 0.4 billion (208%)to KZT 0.6 billion in 2007 from KZT 0.2 billion in 2006. The net realized gainfrom available-for-sale securities in 2007 resulted primarily from the disposalof the notes issued by the National Bank of Kazakhstan. Net gains on foreign exchange operations increased by KZT 2.0 billion (58%) toKZT 5.4 billion in 2007 from KZT 3.4 billion in 2006. The increase was mainlydue to an increase in volumes of foreign currency conversion operations withcustomers, and the introduction of higher spreads on certain types of currencyconversion operations. During 2006, Halyk Bank purchased a controlling interest in JSC Kazakhinstrakh.Insurance and underwriting income of JSC Kazakhinstrakh was consolidated withother non-interest income in 2007 and 2006 as a result of the consolidation ofJSC Kazakhinstrakh. Insurance underwriting income increased by KZT 5.3 billion(792%) to KZT 5.9 billion in 2007 from KZT 0.7 billion in 2006 due toconsolidation of JCS Kazakhinstrakh for full year in 2007. Excluding insuranceunderwriting premium, other non-interest income grew by 242% in 2007. Operating expenses Operating expenses increased by KZT 9.7 billion (35%) to KZT 37.8 billion in2007 compared with KZT 28.1 billion in 2006, mainly due to increase in salariesand other employee benefits, depreciation and amortisation expenses, and depositinsurance expenses, driven by increases in number of personnel, furtherexpansion of the branch network and growth in the retail deposit base. However,notwithstanding this growth in operating expenses, the ratio of Halyk Bank'soperating expenses to operating income before provisions for impairment losses(cost-to-income ratio) decreased to 34.7% in 2007 from 39.7% in 2006. Taxation Halyk Bank's effective tax rate was 20.8% and 23.7% for the years ended 31December 2007 and 2006, respectively. The effective tax rate in 2007 decreasedcompared with 2006 primarily due to increases in tax-exempt interest income fromlong term mortgage loans and state and other qualifying securities. In addition,income from the insurance activities of JSC Kazakhinstrakh is subject to incometax at a rate of 4%. Total assets As at YE2007, Halyk Bank had total assets of KZT 1,595.1 billion, reflecting anincrease of KZT 603.7 billion (61%) from YE2006. The increase was mainlyattributable to increases of KZT 444.1 billion (74%) in loans to customers, KZT127.4 billion (100%) in cash and cash equivalents, and, to a lesser extent, KZT32.2 billion (58%) in obligatory reserves, partially offset by a decrease of KZT15.5 billion (13%) in available-for-sale investment securities. Loan portfolio The net total loan portfolio increased by 74% to KZT 1,040.3 billion or 65% oftotal assets as at YE2007 from KZT 596.2 billion or 60% of total assets atYE2006. Retail loans, comprising consumer loans and mortgage loans, increased by 63%during 2007 and represent the largest share of the loan portfolio as at YE2007.Consumer loans (mostly backed by the salaries of the individual borrowers)increased by KZT 74.7 billion (86%) from KZT 86.9 billion as at YE2006 to KZT161.6 billion as at YE2007. The portfolio of mortgage loans increased by KZT50.4 billion (46%) from KZT 110.3 billion as at YE2006 to KZT 160.7 billion asat YE2007. Loans to the wholesale and retail trade sector increased by KZT 155.6 billion(100%) from KZT 155.6 billion as at YE2006 to 311.2 billion as at YE2007. Shareof such loans in the total loan portfolio increased from 25% to 28% during 2007. As at YE2007 Halyk Bank's ten largest borrowers accounted for 15% of the totalgross loan portfolio, unchanged from YE2006. Cash and cash equivalents and obligatory reserves Cash and cash equivalents and obligatory reserves increased by KZT 159.6 billion(87%) from KZT 182.9 billion as at YE2006 to KZT 342.5 billion as at YE2007 andrepresent 21% of total assets as at YE2007. The increase in cash and cashequivalents was primarily in placements of short-term deposits with OECD-basedbanks. The increase in obligatory reserves was primarily due to an increase intotal liabilities leading to higher amounts allocated to minimum reserverequirements of the National Bank of Kazakhstan. Securities portfolio The portfolio of financial assets at fair value through profit and loss andavailable-for-sale investment securities decreased by KZT 20.6 billion (12%)from KZT 176.5 billion as at YE2006 to KZT 155.9 billion as at YE2007 andrepresented 9.8% of total assets as at YE2007. The decrease in financial assetsat fair value through the profit and loss and available-for-sale securities wasprimarily due to disposal of the notes of the National Bank of Kazakhstan. Funding and liabilities As at YE2007, Halyk Bank had total liabilities of KZT 1,434.1 billion,reflecting an increase of KZT 563.3 billion (65%) as compared with YE2006. Theincrease in total liabilities was primarily attributable to an increase inamounts due to customers, an increase in debt securities issued, and an increasein bank borrowings from credit institutions. Debt securities issued Debt securities issued by Halyk Bank increased by KZT 90.5 billion (67%) fromKZT 134.4 billion as at YE2006 to KZT 224.9 billion as at YE2007. This increaseincludes USD 700 million in senior notes placed with international institutionalinvestors in May 2007 and two KZT-denominated domestic bonds for a total amountof KZT 25 billion due in March and April 2009 issued under the second bondissuance programme in March and April 2007. Amounts due to credit institutions Halyk Bank's borrowings from credit institutions increased by 128.8 billion(109%) from KZT 118.7 billion as at YE2006 to KZT 247.5 billion as at YE2007.The increase was mainly driven by growth in loans and deposits from OECD banks.This increase includes a USD 400 million 3-year syndicated loan facility raisedin May 2007, a USD 300 million 3-year syndicated loan facility raised in October2007, as well as an increase in obligations under bilateral loans, trade financefacilities and securities repurchase agreements entered into by Halyk Bank withdomestic and international financial institutions. Customer deposits Amounts due to customers increased to KZT 935.4 billion or 65% of Halyk Bank'sliabilities as at YE2007 compared with KZT 597.9 billion or 69% of totalliabilities as at YE2006. Deposits and current accounts of individuals increasedby 70% to KZT 357.7 billion as at YE2007 from KZT 209.9 billion as at YE2006. Shareholders' Equity Halyk Bank's total equity amounted to KZT 161.0 billion or 10% of Halyk Bank'stotal assets, reflecting an increase of KZT 40.4 billion (34%) over the totalequity as at 31 December 2006. Total equity increased as a result of thecompletion between January and March 2007 of a post-IPO offering of commonshares for total consideration of KZT 4.8 billion as well as an increase in theretained earnings and other reserves from KZT 56.7 billion as at YE2006 to KZT92.3 billion as at YE2007. In 2007 Halyk Bank effected payment of dividends on preferred shares in theamount of KZT 1.6 billion and dividends on common shares in the amount of KZT2.5 billion, approved at the Annual General Shareholders' Meeting for the yearended 31 December 2006. Distribution of Halyk Bank's net income for the year 2007 and dividend paymenton Halyk Bank's shares is included in the agenda of the Annual GeneralShareholders' meeting to be held on 25 April 2008. The full consolidated financial statements, including the notes attachedthereto, are available on Halyk Bank's website at: http://eng.halykbank.kz/financials/reports and http://eng.halykbank.kz/info/news About Halyk 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. Halyk Bank is developing as a universal financial servicesgroup offering a broad range of services (banking, pensions, insurance, leasing,brokerage and asset management) to its retail, small and medium enterprise andcorporate customers. It is seeking further expansion of its internationaloperations and credit exposure in the region. Halyk Bank is rated by the threemain rating agencies: Moody's Investor Service (Ba1), Fitch Ratings (BB+) andStandard&Poor's (BB+). As at 31 December 2007 Halyk Bank's branch network consisted of 670 outlets (53new outlets opened in 2007), comprising 22 regional branches, 125 districtbranches, 473 limited service branches, 46 personal service centres, 4 VIPcentres). Furthermore, Halyk Bank had 13 service centres dedicated solely toSME. As at YE2007 the number of ATMs was 1,119 (422 new ATMs installed in 2007)and point-of-sale terminals was 3,375 (524 new POS-terminals installed in 2007). As at YE2007 Halyk Bank has more than 5.9mln individual (including more than1.7mln clients of payroll-banking, more than 9,800 clients of mobile banking,more than 215,000 clients of internet banking services, and 2.0mln clients ofHalyk Pension Fund), 70,700 SME, and 333 large corporate clients as at YE2007. Events occurring after YE2007 On 29 January 2008 Joint Stock Company "Halyk Bank Georgia", a subsidiaryorganisation of Halyk Bank in Georgia, received a licence to carry out bankingoperations in the territory of Georgia. On 28 February 2008, 'Halyk Astana Dornod LLC', a subsidiary organisation ofHalyk Bank in Mongolia, obtained a certificate from the Financial RegulatoryCommission of Mongolia authorising 'Halyk Astana Dornod LLC' to carry outnon-banking financial operations in the territory of Mongolia. - END- For further information please contact: Assel Atinova [email protected] +7 727 259 04 30 Zhanar Kairbayeva [email protected] +7 727 244 77 65 Financial Dynamics London:Paul Marriott [email protected] +44 (0)20 7269 7252David Cranmer [email protected] +44 (0)20 7269 7217 Moscow:Leonid Solovyev [email protected] +7 495 795 06 23 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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