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1
HALYK GROUP
FINANCIAL RESULTS PRESENTATION
YE2017 & 4Q 2017(Moody’s – Ba1 / Fitch – BB / S&P – BB)
19 March, 2018
2
Disclaimer
Certain information contained in this presentation may include forward-looking statements. Suchforward-looking statements are not guarantees of future performance. These statements are basedon management’s current expectations or beliefs as of the date of this presentation and are subjectto a number of factors and uncertainties that could cause actual results to differ materially fromthose described in the forward-looking statements. The Bank disclaims any intention or obligationto publicly update or revise any forward-looking statements.
Basis of calculation:
- all figures in this presentation are based on IFRS audited financial statements orfinancial statements reviewed by auditors, unless stated otherwise;
- for comparison purposes, the statement of profit or loss for 12M 2017 & 12M 2016;4Q 2017 & 4Q 2016 are shown in this presentation without Altyn Bank based on IFRS financialstatements.
3
Speakers
Umut Shayakhmetova
CEO, Halyk Bank
Murat Koshenov, CFA
Deputy CEO, Corporate
Banking, International
Activities
Almas Makhanov
Chief Risk Officer and
Compliance Controller
Yertai Salimov
Deputy CEO, Operations
and Treasury
Ulf Wokurka
CEO, KKB
4
Halyk Bank
“The Best Bank in
Kazakhstan”
“Euromoney” Magazine, July
2017
Awards 2017
Halyk Bank
“The leader of the market”
KASE, 2017
Halyk Finance
“The Best Investment Bank in
Kazakhstan 2017”
News-agency CBONDs, March
2017
Halyk Bank
“The best bank which supports
business in the regions”
DAMU, 2017
Halyk Bank
“The Best Foreign Exchange
Provider in Kazakhstan 2018”
Global Finance, December 2017
Kazkommerts Securities
“The Best Underwriter of
Kazakhstan I ”
News-agency CBONDs, March
2017
Halyk Finance
“The Best Sovereign Bond
Issue in Europe, Middle East
and Africa”
EMEA Finance Achievement
Awards, November 2017
Halyk Bank
“The Best Trade Finance
Provider 2018”
Global Finance, January 2018
5
Table of Contents
1. Halyk Group financial results YE2017 & 4Q 2017
2. KKB
3. Business Update
4. Kazakhstan: Economic and Banking Sector Update
5. Q&A
Appendix
6
One
Halyk Group financial results
YE2017 & 4Q 2017
7
YE2017 & 4Q 2017 Performance Highlights
(1) before impairment charge.(2) impairment charge on loans to customers / monthly average balances of gross loans to customers, on consolidated IFRS basis.(3) net interest income / average interest earning assets (monthly average balances of cash and cash equivalents (less cash on hand and correspondent accounts with the NBK), financial
assets at fair value through profit or loss (less derivative financial instruments), amounts due from credit institutions, available-for-sale investment securities, net loans to customers), on
consolidated IFRS basis.(4) financial indicators (ROAE, ROAA, Cost of risk, NIM) for 12M 2016 and 4Q 2016 are calculated taking into account Altyn Bank.
KZT bn
First synergy effect of integration with KKB
On 15 December 2017 the Board of Directors has approved the merger of KKB into Halyk Bank
Full integration on common operating model and single technology platform targeted by 2H 2018
On 7 June 2017 Halyk entered into an agreement with China CITIC Bank and China Shuangwei Investment Co. in relation to the sale of 60%
of the share capital in Altyn Bank. Closing is expected in 1H 2018
Excluding KKB
12M 2017 12M 2016(4) Y-o-Y, % 4Q 2017 4Q 2016(4) Y-o-Y, % 12M 2017 Y-o-Y, % 4Q 2017 Y-o-Y, %
Net income 173.4 131.4 31.9% 38.0 37.4 1.7% 155.0 17.9% 36.9 (1.4%)
Net interest income (1) 248.5 172.0 44.5% 81.7 46.8 74.5% 201.9 17.4% 53.2 13.6%
Fee and commission income 87.6 57.7 51.9% 28.8 15.4 86.7% 62.3 8.0% 16.5 7.1%
RoAE, p.a. 22.7% 22.3% 18.0% 23.1% 20.6% 18.0%
RoAA, p.a. 2.6% 2.8% 1.8% 3.0% 3.0% 2.7%
Cost of risk (2), p.a. 2.2% 1.0% 4.8% 1.1% 1.0% 1.5%
NIM (3), p.a. 4.9% 5.5% 4.9% 5.3% 5.4% 5.7%
8
YE2017 & 4Q 2017 Performance Highlights
(1) cash and cash equivalents (less cash on hand and correspondent accounts with the NBK), financial assets at fair value through profit or loss (less derivative financial instruments),
amounts due from credit institutions, available-for-sale investment securities, net loans to customers, on consolidated IFRS basis.(2) as at 1 October 2017, loans to customers before allowance for impairment losses include net loans of KKB recognised by the Bank at fair value of KZT781 bn + changes in KKB gross
loan portfolio from acquisition date to 30 September 2017 of KZT2 bn.(3) average annual balance of net loans to customers / average annual balance of amounts due to customers, on consolidated IFRS basis.(4) (cash and cash equivalents, the NBK notes, Treasury bills of the Ministry of Finance of Kazakhstan, Treasury bills of governments of other countries, Notes of national banks of other
countries, Bonds of quasi-sovereign banks) / total assets, on consolidated IFRS basis.(5) the aggregate Halyk Bank + KKB NPLs 90 days+ (total principal amount of loans and accrued interest with principal and/or interest overdue by more than 90 days) / gross loan portfolio,
Banks only.
KZT bn
Excluding KKB
01.01.2018 01.01.2017 YTD, % 01.10.2017 Q-o-Q, %
01.01.2017
without
Altyn Bank
01.01.2018 YTD, %
YTD, %
without
Altyn Bank
Interest earning assets (1) 6,900 3,915 76.2% 6,579 4.9% 3,734 3,840 (1.9%) 2.8%
Gross loans 3,568 2,604 37.0% 3,413 (2) 4.5% 2,495 2,764 6.1% 10.8%
Net loans 3,251 2,320 40.2% 3,123 4.1% 2,212 2,487 7.2% 12.4%
Total assets 8,858 5,348 65.6% 8,675 2.1% - 5,514 3.1% -
Total deposits 6,132 3,821 60.5% 6,076 0.9% 3,513 3,649 (4.5%) 3.9%
Total equity 934 666 40.4% 827 13.0% - 836 25.5% -
Provisions / gross loans 8.9% 10.9% 8.5% (2) 10.0%
Loans / deposits ratio (3) 56.1% 69.0% 57.6% 64.1%
Liquid assets / total assets (4) 48.3% 46.8% 47.7% 44.3%
NPLs 90 days+ / gross loans (5) 12.1% 10.2% 13.4% 8.9%
9
Interest Income
Interest Income and Interest Expense
Net Interest Margin (3) and Net Interest Spread (4)
Net Interest Income (2)
(1) net of the reversal of interest income by KKB for KZT 4.2 bn, in 3Q 2017 interest income would be KZT 158.5 bn.(2) before impairment charge.(3) net interest income / average interest earning assets (monthly average balances of cash and cash equivalents (less cash on hand and correspondent accounts with the NBK), financial
assets at fair value through profit or loss (less derivative financial instruments), amounts due from credit institutions, available-for-sale investment securities, net loans to customers), on
consolidated IFRS basis. NIM for the previous periods are calculated taking into account Altyn Bank.(4) average interest rate on interest earning assets, less average interest rate on average interest bearing liabilities, on consolidated IFRS basis. Net Interest Spread for the previous
periods are calculated taking into account Altyn Bank.
Commentary
KZT bn
332.6
506.3
88.5 154.3 158.5 167.3
(160.5)(257.8)
(41.7) (86.3) (86.3) (85.6)
2016 2017 4Q 2016 3Q 2017 3Q 2017pro-forma
4Q 2017
Interest income Interest expense
172.0
248.5
46.8 68.0 81.7
2016 2017 4Q 2016 3Q 2017 4Q 2017
5.5%4.9%
5.3%4.8% 4.9%
6.3%
5.4%5.8%
5.3% 5.4%
2016 2017 4Q 2016 3Q 2017 4Q 2017
Net interest margin Net interest spread
44.5%
Net interest margin decreased to 4.9% p.a. for 12M 2017 compared to 5.5%
p.a. for 12M 2016, mainly on the back of lower net interest margin of
Kazkommertsbank and reclassification of Altyn Bank’s interest earning-
assets into assets held for sale. Net interest margin remained almost flat at
4.9% p.a. for 4Q 2017 compared to 4.8%p.a. for 3Q 2017 due to the
decreasing interest rates on interest-bearing liabilities.
Interest income increased by 8.4% in 4Q 2017 vs 3Q 2017 due to 15.7%
increase in average balances of interest-earning assets. In 3Q 2017 KKB
reversed previously recognised interest income of KZT 4.2 bn accrued at
effective interest rate on the problem loans. Net of this reversal, interest
income increased by 5.6% in 4Q 2017 vs 3Q 2017.
74.5%
5.6%
(1)
8.4%
10
57,697
87,640
15,40528,893 28,760
2016 2017 4Q 2016 3Q 2017 4Q 2017
Fee and Commission Income
Fee and Commission Income
KZT mln
Fee and Commission Expense
Breakdown of Selected Fee and Commission Income
51.9%
11,116
23,332
2,9388,480 8,979
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2016 2017 4Q 2016 3Q 2017 4Q 2017Payment cards maintenance
10,353
18,159
3,0556,400 6,592
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2016 2017 4Q 2016 3Q 2017 4Q 2017
Cash operations
14,43818,943
3,767 5,912 5,327
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2016 2017 4Q 2016 3Q 2017 4Q 2017
Bank transfers – settlements
Commentary
The y-o-y increase in deposit insurance payable to the
Kazakhstan Deposit Insurance Fund in 12M 2017 was mainly due
to higher rates for KKB on the back of its lower credit ratings.
86.7%
5,968
16,003
1,5655,873 6,663
5,327
10,729
1,303
4,049 4,040
11,295
26,732
2,868 9,922 10,703
2016 2017 4Q 2016 3Q 2017 4Q 2017
Other fees and commissions expense Deposit insurance fees
2.4x 3.7x
2.1x 3.1x 75.4% 2.2x
31.2% 41.4%
11
1.6% 1.7% 1.9%1.4%
2.1%
2016 2017 4Q 2016 3Q 2017 4Q 2017
Operating Costs
KZT mln
Operating Expenses Cost-to-Income (3)
Cost-to-Average Assets (4) (5) Commentary
(1) net of the reversal of bonus reserves previously accrued by KKB, the operating expenses for 3Q 2017 would be KZT35,524 mln, cost to income – 33.7%, cost to average assets – 1.8%.(2) one-off operating expenses (penalties as a result KKB’s tax audit, charity, depreciation and amortization of IT systems, impairment loss of assets held for sale) for 4Q 2017 equaled to KZT
8,581 mln, total operating expenses excluding one-off expenses were KZT 37,635 mln, cost-to-income – 27.3%).(3) operating expense (operating expenses, impairment loss of assets held for sale) / operating income (net interest income before impairment charge, net fees and commissions, other non-
interest income, less insurance claims incurred, net of reinsurance, and expenses for insurance reserves), annualised, on consolidated IFRS basis.(4) operating expense / average monthly assets, annualised, on consolidated IFRS basis.(5) cost-to-average assets for the previous periods (2016 and 4Q 2016) are calculated taking into account Altyn Bank.
244,166
381,236
68,655
105,502137,899
68,559112,330
21,494 27,870 46,216
31.3%
26.4%
33.5%
28.1% 29.5%
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2016 2017 4Q 2016 3Q 2017 4Q 2017
Operating incomeOperating expenseCost-to-income
33.7% (1)
38,55151,124
10,907 10,58018,234 19,400
23,275
46,619
8,440 13,56513,565
22,133
6,169
9,692
1,8902,637
2,637
3,608
564
4,895
257 1,088
1,088
1,075
68,559
112,330
21,494
27,87035,524 46,216
300
20,300
40,300
60,300
80,300
100,300
120,300
140,300
2016 2017 4Q 2016 3Q 2017 3Q 2017pro-forma
4Q 2017
Professional ServicesDepreciation and amortisation expensesOtherSalaries and other employee benefits
65.8%
63.8%
Operating expenses increased by 65.8% in 4Q 2017 vs. 3Q 2017 due to
one-off operating expenses in 4Q 2017 (penalties as a result of KKB’s tax
audit, charity, depreciation and amortization of IT systems, impairment
loss of assets held for sale) amounted to KZT 8,581 mln and reversal of
bonus reserves previously accrued by KKB for KZT 7,654 mln in 3Q
2017. Excluding this one-off effect operating expenses increased by 5.9%
in 4Q 2017 vs. 3Q 2017 (net of the reversal of bonus reserves previously
accrued by KKB) due to incentive bonus payments to employees in 4Q
2017.
(1)
27.3%(2)
37,635
8,581
4Q 2017pro-forma
regularone-off
46,216(2)
12
2,320 2,220 2,292
3,123 3,251
285 280 285
290 317
2,604 2,500 2,577
3,413 3,568
01.01.2017 01.04.2017 01.07.2017 01.10.2017 01.01.2018
Net loans Provisions
Loan Portfolio
KZT bn
Total Gross Loans Total Gross Loans by Sectors
Total Net Loans by Currencies
67.8% 67.4% 68.3% 71.7% 70.3%
32.2% 32.6% 31.7% 28.3% 29.7%
01.01.2017 01.04.2017 01.07.2017 01.10.2017 01.01.2018
KZT FX
Total Gross Loans by Sectors of Halyk cons. excl. KKB and
KKB cons.
1,640 1,567 1,5891,996 2,099
343 325 360
472 524621 608 628
946945
01.01.2017 01.04.2017 01.07.2017 01.10.2017 01.01.2018
Corporate SME Retail
2,6042,500
2,577
3,4133,568
(1) as at 1 October 2017, based on IFRS 3 loans to customers before allowance for impairment losses include net loans of KKB recognised by the Bank at fair value of KZT781 bn +
changes in KKB gross loan portfolio from acquisition date to 30 September 2017 of KZT2 bn.
(1)
1,589 1,677 1,795
360 329 358628 624
611
01.07.2017 01.10.2017 01.01.2018
Corporate SME Retail
59%
15%
26%
1,104 995
196 228
436 418
01.10.2017 01.01.2018
2,577 2,630 2,7641,736 1,641
13
Cost of Risk at Halyk and KKB
(1) impairment charge on loans to customers / monthly average balances of gross loans to customers, annualised.(1) total NPLs 90 days+ (total principal amount of loans and accrued interest with principal and/or interest overdue by more than 90 days) / gross loan portfolio, Bank only, IFRS.
KZT bn
Halyk, cons., excl. KKB
as at 01.10.2017 as at 01.01.2018
Gross Loan 2,630 2,764
Provisions (293) (277)
Provisioning Rate 11.1% 10.0%
Coverage NPL90+
(IFRS)106.7% 113.5%
275 244
10.5%
8.9%
01.10.2017 01.01.2018
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
Amount Ratio
NPL 90 days+ (2) Dynamics
KKB, consolidated
as at 01.10.2017 as at 01.01.2018
Gross Loan 1,736 1,641
Provisions (950) (876)
Provisioning Rate 54.7% 53.4%
Coverage NPL90+
(IFRS)113.9% 129.8%
Cost of risk (1)
NPL 90 days+ (2) Dynamics
834675
48.1%
41.9%
01.10.2017 01.01.2018
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
0.2
0.22
0.24
0.26
0.28
0.3
0.32
0.34
0.36
0.38
0.4
0.42
0.44
0.46
0.48
0.5
0.52
0.54
0.56
0.58
0.6
Amount Ratio
5.6 9.9
0.9%
1.5%
3Q 2017 4Q 2017
Impairment charge on loans tocustomersImpairment charge , as % ofloan portfolio
Cost of risk(1)
2.5
21.1
0.6%
5.0%
3Q 2017 4Q 2017
Impairment charge on loans tocustomers
Impairment charge , as % ofloan portfolio
14
Cost of Risk on a consolidated basis
256262 252
456430
10.2%10.9%
10.2%
13.4%
12.1%
01.01.2017 01.04.2017 01.07.2017 01.10.2017 01.01.2018
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
Amount Ratio
(1) total NPLs 90 days+ (total principal amount of loans and accrued interest with principal and/or interest overdue by more than 90 days / gross loan portfolio, unconsolidated, (Banks only),
IFRS.(2) IFRS provisions/gross loans without IFRS 9 effect.(3) impairment charge on loans to customers / monthly average balances of gross loans to customers, annualised, on consolidated IFRS basis.(4) recoveries of provisions for KZT 9.8 bn. under KKB’s loans granted before the acquisition date (included into consolidated FS on a net basis as per IRFS 3) were recognised as other
income. Net of this effect, cost of risk for 4Q 2017 would be 3.6%, cost of risk for 12M 2017 would be 1.9%.
KZT bn
Cost of Risk (3)NPL 90 days+ (1) Dynamics Provisioning Rate (2)
Provisions on Loans to Customers
10.9% 11.2% 11.1%
8.5% 8.9%
01.01.2017 01.04.2017 01.07.2017 01.10.2017 01.01.2018
285 5 (5) (5) 280 6 (3) (2) 2 283 13 (9) 3 290
41(20) 6 317
-
50
100
150
200
250
300
350
Provisions31.12.2016
Additionalprovisionsrecognized
Write-offs Foreignexchangedifferences
Provisions31.03.2017
Additionalprovisionsrecognized
Write-offs Disposal ofa subsidary
Foreignexchangedifferences
Provisions30.06.2017
Additionalprovisionsrecognized
Write-offs Foreignexchangedifferences
Provisions30.09.2017
Additionalprovisionsrecognized
Write-offs Foreignexchangedifferences
Provisions31.12.2017
2Q 2017 3Q 20171Q 2017 4Q 2017
25.9
65.2
7.2 13.0
40.8
1.1%
1.7%
4.8%
1.0%
2.2%
2016 2017 4Q 2016 3Q 2017 4Q 2017
Impairment charge on loans to customers
Impairment charge , as % of loan portfolio
+
31.0
3.6%(4)
(4) 55.4
1.9%(4)
(4)
15
32.1% 33.5% 38.9% 37.7% 40.7%
67.9% 66.5% 61.1% 62.3% 59.3%
1,715
01.01.2017 01.04.2017 01.07.2017 01.10.2017 01.01.2018
KZT FX
1,7381,695
Funding Base
Deposits of Legal Entities by Currencies
Retail Deposits by Currencies
36.8%46.7% 45.6% 52.1% 48.3%
63.2%53.3% 54.4% 47.9% 51.7%
01.01.2017 01.04.2017 01.07.2017 01.10.2017 01.01.2018
KZT FX
KZT bn
Retail Deposits
Deposits of Legal Entities
1,268 1,149 1,086
1,578 1,706
838 774 1,057
1,339 1,322
01.01.2017 01.04.2017 01.07.2017 01.10.2017 01.01.2018
Term Deposits Current Accounts
1,471 1,471 1,486
2,772 2,692 245 224 252
387 412
01.01.2017 01.04.2017 01.07.2017 01.10.2017 01.01.2018
Term Deposits Current Accounts
1,9222,105 2,143
3,159
2,917
3,104
3,028
16
Solid Capital Position
Capital Adequacy Ratios, consolidated(1)
Capital Structure, consolidated(2)
Capital Adequacy Ratios of Halyk and KKB, Banks only (1)
Capital Structure, Halyk Bank only (2)
19.4%21.5% 21.6%
15.4% 16.9%
19.4%21.5% 21.6%
15.8%
19.4%21.5% 21.6%
17.8% 18.9%
01.01.2017 01.04.2017 01.07.2017 01.10.2017 01.01.2018
CET Tier 1 Tier 2
641 686 733 815 910
-
107 109
641 686 733
9221,019
01.01.2017 01.04.2017 01.07.2017 01.10.2017 01.01.2018
Tier 1 Tier 2
599 639 689 726 769
599 639 689 726 769
01.01.2017 01.04.2017 01.07.2017 01.10.2017 01.01.2018
Tier 1 Tier 2
(1) starting from 1 January 2016, the Bank calculates its capital (both consolidated and unconsolidated) taking into an account the principals, methods and coefficients employed by Basel III
Committee.(2) almost the entire capital is a high quality core capital as a result of limited use of Tier 2 instruments.
KZT bn
19.2%21.3% 22.1%
20.2% 21.5%19.2%21.3% 22.1%
20.1%21.4%
10.0%
15.0%
19.9%12.5%
10.3%
26.9%
01.01.2017 01.04.2017 01.07.2017 01.10.2017 01.01.2018
k1 - Halyk k1-2 - Halyk k2 - Halyk
k1-2 - KKB k2 - KKB
k2 minimum = 12%
k1-2 minimum = 10.5%
k1 minimum = 9.5%
KKB’s perpetual bonds for USD 100 mln were fully redeemed on 9 February 2018 out of KKB’s own funds
In order to improve the quality of capital, on 16 February 2018 the Extraordinary General Meeting of Shareholders of KKB has approved the conversion of
preferred shares into common shares
17
Date April 20, 2018
Time & Venue 11.00 a.m. Almaty time, “Conference Hall”, 40, Al Farabi Ave., Almaty, Kazakhstan
Record Date March 20, 2018
Voting for GDR Holders Via Depositary Bank procedures
Annual General Shareholders’ Meeting (1)
(1) please see the agenda of the Annual General Shareholders’ Meeting of JSC Halyk Bank on the corporate website of the Bank:
https://halykbank.kz/presscenter/novosti/o_provedenii_godovogo_sobraniya
18
Outlook for 2018
Actual 2016(1) Actual 2017Guidance for 2018 incl.
KKB, area of
Net loan portfolio growth 6.6% 40.2% ≈ 10%
Consolidated net income (KZT bn) 131.4 173.4 ≈ 200
Cost of risk (2), p.a. 1.0% 2.2% 1.2%
Cost-to-income ratio 28.5% 29.5% ≈ 32%
NIM, p.a. 5.5% 4.9% ≈ 5%
RoAE, p.a. 22.3% 22.7% ≈ 21%
(1) financial indicators for 12M 2016 are calculated taking into account Altyn Bank.(2) impairment charge on loans to customers / monthly average balances of gross loans to customers, on consolidated IFRS basis.
19
Two
KKB
20
KKB: Merger with Halyk
Overview Integration
Strategic
review
Advisers were hired to help develop business
and IT strategy for the enlarged Halyk Group
Strategy review was finalised in December 2017
On 15 December 2017 Board of Directors has
approved the merger of KKB into Halyk Bank
Timeline
H1 2018 – EGM approval, other corporate and
regulatory procedures
H2 2018 – closing of legal merger
IT Full integration on common operating model
and single technology platform targeted by 2H
2018
Products
and
services
ATM networks unification
A number of joint projects in card business
Product and service standards unification
21
KKB: Merger Synergies
Strengthened market
position in Kazakhstan and
in the region
One of the top banks in CIS better positioned to compete in the context of the Eurasian economic integration
Extended regional presence (subsidiaries of Halyk in Georgia, Kyrgyzstan and Russia, and subsidiaries of KKB in
Russia and Tajikistan)
More convenient solutions
and affordable services
for customers with leading
digital proposition
Access to wider network of branches, ATMs and POS terminals
KKB’s attractive franchise in retail, SME, payments and acquiring
KKB’s retail technologies and know-how, including homebank.kz, a leading internet bank in Kazakhstan with 1.8m
users
Commercial benefits
Enlarged corporate client and retail customer base
Strong fee and commission business of KKB
Expanded products and services in banking, insurance, brokerage and asset management
Cost and funding synergies
Removal of duplicate functions and IT systems
Optimisation in marketing, procurement operations
Branch rationalisaton
Funding synergies
Effective internal control
and risk management
systems Proven credit underwriting and risk management practiced by Halyk to be applied to KKB’s operations
22
Three
BUSINESS UPDATE
23
Group Structure
Structure (1)
(1) Majority-owned subsidiariesAs at 01.01.2018
% share of ownership of Halyk
Halyk Bank
JSC
Kazkommerts Life
(Kazakhstan)
100%
NBK-Bank
(Russia)
100.0%
CJSC
Kazkommertsbank Tajikistan
(Tajikistan)
100%
CB
Moskommertsbank
(Russia)
100%
JSC
Kazkommerts-Polis
(Kazakhstan)
99.97%
LLP KUSA KKB-1/2/3
(Management of doubtful
and bad assets)
100%
JSC
Kazkommerts Securities
(Kazakhstan)
100%
JSC
Kazkommertsbank
(Kazakhstan)
74.7%
Halyk-leasing
(leasing)
100.0%
Kazteleport
(telecommunications)
100.0%
Halyk Bank
(Kyrgyzstan)
100.0%
Halyk-Life
(life insurance)
100.0%
Halyk Collection
(cash collection services)
100.0%
Halyk Bank
(Georgia)
100.0%
Halyk Project
(distressed asset management)
100.0%
Altyn Bank
(SB of Halyk Bank)
100.0%
Halyk Finance
(brokerage and asset
management)
100.0%
24
Banking Business and Asset Management Subsidiaries
Commercial banking Strategic presence in neighboring countries
Investment banking and asset management
Altyn Bank
Acquired HSBC Bank Kazakhstan in 2014
Rebranded into Altyn Bank
Strong partnership with private companies and
individuals
Profitable and innovative bank with digital
platform
Pending acquisition by China CITIC Bank
Ba2/stable (Moody’s)
BB/watch positive (Fitch)
Halyk
Finance
Provides full range of investment banking and
asset management services
#2 by assets
BB/stable (Fitch)
Kazkommerts
Securities
Provides full range of investment banking and
asset management services
#3 by assets
Moskommertsbank
+
NBK-Bank
Russia
#147 (Moskommertsbank) and #263 (NBK-
Bank) by assets out of 561 banks in Russia
BoD of Halyk approved voluntary reorganisation
of NBK-Bank in the form of its merger into
Moskommertsbank
Merger is pending subject to customary
regulatory approvals
Merged bank is expected to become #130 in
Russia
Halyk Bank Georgia
Georgia
#10 bank by assets out of 16 banks in Georgia
BB-/stable (Fitch)
Halyk Bank
Kyrgyzstan
Kyrgyzstan
#12 bank by assets out of 21 banks in
Kyrgyzstan
Kazkommertsbank
Tajikistan
Tajikistan
#6 bank by assets out of 18 banks in Tajikistan
as at 01.01.2018
25
Insurance Business
Structure of the business
Gross written premiums
Market position (1) Market share (1)
#1 50.3%
#2 21.2%(2)
(KZT bn)
39 47 59
76
01.01.2015 01.01.2016 01.01.2017 01.01.2018
(KZT bn)
21 26 28
55
01.01.2015 01.01.2016 01.01.2017 01.01.2018
+
+
Underwriting result
(1) based on FY 2017 insurance premiums received.(2) including Halyk Life and KKB Life of 5.1%.
28.8% 96.4%
*
Source: Halyk Group on a consolidated basis, NBK
* BoD of Halyk approved voluntary reorganisation of Kazakhinstrakh in the form of
merger of Kazkommerts-Policy into Kazakhinstrakh. The merger is expected to complete
in 3Q 2018
26
Halyk Bank + KKB’s Market Position
15.4%
28.2%31.3%
9.0%
14.0%
19.0%
24.0%
29.0%
34.0%
39.0%
44.0%
49.0%
01.07.2017 01.10.2017 01.01.2018
15.3%
23.1%27.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
01.07.2017 01.10.2017 01.01.2018
18.7%
33.7% 35.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
01.07.2017 01.10.2017 01.01.2018
23.5%
33.3% 35.3%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
01.07.2017 01.10.2017 01.01.2018
#1#2 #2 #2#2#2 #1#1#1
20.5%
35.3% 37.3%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
01.07.2017 01.10.2017 01.01.2018
#1
20.3%
33.4%37.7%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
01.07.2017 01.10.2017 01.01.2018
#1 #1
20.8%
37.4% 36.9%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
01.07.2017 01.10.2017 01.01.2018
#1#1
Total Assets Gross Loans Net Loans
Equity (3)
Total Deposits (4)
Total Corporate Deposits (4) Total Retail Deposits (5) Corporate Current Accounts Retail Current Accounts
Net Income (1) Net Interest Income (2) Net F&C Income
49.0%52.9%
48.7%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
12М 2015 12М 2016 12М 2017
#1
#1 #1
23.5%
34.4%39.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
01.07.2017 01.10.2017 01.01.2018
#1 #1#2
30.9%
47.8% 47.3%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
01.07.2017 01.10.2017 01.01.2018
#1
#1
#1
#1 #1#1
28.3%30.0%
26.3%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
12М 2015 12М 2016 12М 2017
#2#2
#1#2 #1
#1
#1 #2#2 #1 #2 #2 #1 #2 #1 #2
#2
36.9%
56.8%
32.2%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
12M 2015 12M 2016 12M 2017
#1 #1 #1
(1) excl. banks with negative income.(2) after impairment charge, excl. negative net interest income.(3) excl. banks with negative equity.(4) excl. term deposits of SAPF; consists of term deposits and current accounts.(5) consists of term deposits and current accounts.
Source: NBK (unconsolidated, KAS), Halyk Bank, SAPF.
27
Four
Kazakhstan: Economic and
Banking Sector Update
28
Macro Update: Strong Pickup in Activity in 2017
Macro recovery in 2017
Stable low unemployment
Investment grade sovereign ratings
Pick up in industrial production and investments
Source: The National Bank of Kazakhstan (NBK)
Source: The National Bank of Kazakhstan (NBK)
Source: The National Bank of Kazakhstan (NBK)
Source: The National Bank of Kazakhstan (NBK)
6.7% 6.5%
14.6%
7.4%
5.0% 5.0% 5.2% 5.0%
2014 2015 2016 2017
Inflation (average)Unemployment Rate (average)
Agency Rating Outlook Date
Moody's Baa3 stable 26.07.2017
S&P BBB- stable 18.01.2018
Fitch BBB stable 20.10.2017
3.9% 3.7%
5.1% 5.5%
0.2%
(1.6)% (1.1)%
7.1%
01.01.2015 01.01.2016 01.01.2017 01.01.2018
Capital Investments (Y-o-Y growth)
Industrial production (Y-o-Y growth)
221.4
184.4
137.3
159.5
39.7 40.9 47.0 52.0
4.2%
1.2%
1.1%
4.0%
2014 2015 2016 2017
Nominal GDP (US$bn) Nominal GDP (KZTtrn)
Real GDP Growth
29
Macro update: Improving Financial Conditions
Kazakh Tenge stabilised after oil price shock
Interest rate normalisation
Government debt
Stable FX reserves
17.0%15.0%
13.0% 12.5% 12.0% 11.0%
02.0
2.2
01
6
06.0
5.2
01
6
12.0
7.2
01
6
04.1
0.2
01
6
15.1
1.2
01
6
21.0
2.2
01
7
06.0
6.2
01
7
22.0
8.2
01
7
10.1
0.2
01
72
8.1
1.2
01
7
16.0
1.2
01
8
06.0
3.2
01
8*
Base rate
10.5% 10.25% 9.75%
Source: The National Bank of Kazakhstan (NBK)
Source: The National Bank of Kazakhstan (NBK)
Source: The National Bank of Kazakhstan (NBK)
Source: The National Bank of Kazakhstan (NBK)
333
314 322 341 331 332
59 54 49
57
64 67
01.01.2017 01.04.2017 01.07.2017 01.10.2017 01.12.2017 01.01.2018
USD/KZT Exchange rate Brent Oil Price
73.2 63.5 61.2 58.3
28.327.0 29.5 30.7
101.590.5 90.7 89.0
2014 2015 2016 2017
Oil Fund FX Reserves (US$bn) NBK FX Reserves (US$bn) Total
28.8 26.6
34.3
40.6
13.0% 14.4%
25.0% 25.5%
01.01.2015 01.01.2016 01.01.2017 01.10.2017
Government debt (US$bn) Government debt/GDP
* the next base rate committee – 16.04.2018
9.5%
30
26.9%
16.5%
29.1%
27.6%
Retail – FX Retail – KZT Corporate – KZT Corporate – FX
24%
22%30%
23%
De-dollarisation and Return to Growth Driven by Retail Lending
KZT73.7%
FX26.3%
Loan growth restarted in 2017
FX lending ~1/4 of total
Deposit growth remains subdued
Declining share of FX deposits in the banking system
as at 1-Jan-2018
Source: The National Bank of Kazakhstan (NBK)
Note: excludes Delta Bank and RBK bank
Source: The National Bank of Kazakhstan (NBK)
as at 1-Jan-2018
Source: The National Bank of Kazakhstan (NBK)
Note: excludes Delta Bank and RBK bank
Source: The National Bank of Kazakhstan (NBK)
4.5%
12.9%
0.2%
01.01.2015 01.01.2016 01.01.2017 01.01.2018
Total loans Retail loans Corporate loans
1.0%
7.2%
(3.8)%
01.01.2015 01.01.2016 01.01.2017 01.01.2018
Deposits Retail deposits Corporate deposits
By currency By sector
Other14.8%
Communication services
0.8%
Transport4.5%
Agriculture5.5%
Construction7.2%
Industry15.6%
Trading15.9%
Retail loans35.7%
2016 2017
FX 54.5%
KZT 45.5%
FX 47.7%
KZT 52.3%
Total: KZT 12.7 tn
Total: KZT 18.0 tn Total: KZT 17.5 tn
31
2,6233,063 3,229
3,825
11.0% 12.5%
13.7%
17.2%
2014 2015 2016 2017
Regulatory Capital ( KZTbn)(1)
Improving Sector Funding Structure and Capital Adequacy
Improving funding structure
Steady capital build-up
NPL levels dynamics
RoE
(1) core capital adequacy ratio, local standardsSource: NBK statistical bulletin
Source: NBK statistical bulletin Source: NBK statistical bulletin
(1) ROE ratio based on aggregated financials for banking sector, post tax(2) adjusted for KKB result in 2017Source: NBK statistical bulletin
14.7 13.911.5
15.6 17.3 16.7
94.3%
80.3%
68.9%
2015 2016 2017Net Loans (KZTtrn) Customer Deposits (KZTtrn)
Loans/Deposits
3,340
1,237 1,042 1,265
23.5%
8.0% 6.7%9.3%
2014 2015 2016 2017
NPLs (90 days+), KZTbn NPL Ratio (90 days+)
13.2%
9.6%
15.2% 16.8%
2014 2015 2016 2017
RoE Banking Sector(1)
(2)
32
Five
Q & A session
33
APPENDIX
34
Dynamics
KZT mln
P&L Summary
(1) 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).(2) other non-interest income, net gain on foreign exchange operations, net gain from financial assets and liabilities at fair value through profit or loss and net realised gain/(loss) from
available-for-sale investment securities.(3) total impairment charge, including impairment charge on loans to customers, amounts due from credit institutions, available-for-sale investment securities and other assets, as well as
provisions against letters of credit and guarantees issued.
12M 2017 12M 2016 Y-o-Y, % 4Q 2017 3Q 2017 Q-o-Q, % 4Q 2016 Y-o-Y, %
Interest income 506,328 332,563 52.3% 167,276 154,347 8.4% 88,517 89.0%
Interest expense (257,805) (160,549) 60.6% (85,569) (86,314) (0.9%) (41,705) 2.1x
Net interest income before impairment charge 248,523 172,014 44.5% 81,707 68,033 20.1% 46,812 74.5%
Fee and commission income 87,640 57,697 51.9% 28,760 28,893 (0.5%) 15,405 86.7%
Fee and commission expense (26,732) (11,295) 2.4x (10,703) (9,922) 7.9% (2,868) 3.7x
Net fee and commission income 60,908 46,402 31.3% 18,057 18,971 (4.8%) 12,537 44.0%
Insurance income (1)
6,493 3,272 98.4% 2,933 2,358 24.4% 1,373 2.1x
Other non-interest income(2)
51,156 14,905 3.4x 29,518 13,102 2.3x 5,739 5.1x
Impairment charge and reserves (3)
(65,565) (25,352) 2.6x (41,874) (13,171) 3.2x (6,707) 6.2x
Operating expenses (112,330) (68,559) 63.8% (46,216) (27,870) 65.8% (21,494) 2.2x
Income tax expense (25,598) (22,183) 15.4% (8,167) (7,524) 8.5% (5,726) 42.6%
Net Profit from continuing operations 163,587 120,499 35.8% 35,958 53,899 (33.3%) 32,534 10.5%
Minority interest in net income (101) - 100% (51) (50) 2.0% - 100%
Profit for the period from discontinued operations 9,876 10,913 (9.5%) 2,134 2,590 (17.6%) 4,877 (56.2%)
Net Profit 173,362 131,412 31.9% 38,041 56,439 (32.6%) 37,411 1.7%
35
Balance Sheet Summary KZT mln
31-Dec-17 31-Dec-16 Change YTD, %
Total assets 8,857,781 5,348,483 65.6%
Cash and reserves 1,891,587 1,850,641 2.2%
Amounts due from credit institutions 87,736 35,542 2.5x
T-bills & NBK Notes 1,878,870 586,982 3.2x
Other securities & derivatives 831,531 341,379 2.4x
Gross loan portfolio 3,568,263 2,604,335 37.0%
Stock of provisions (317,161) (284,752) 11.4%
Net loan portfolio 3,251,102 2,319,583 40.2%
Other assets 364,550 204,059 78.6%
Assets classified as held-for-sale 552,405 10,297 53.6x
Total liabilities 7,923,324 4,682,890 69.2%
Total deposits, including: 6,131,750 3,820,662 60.5%
retail deposits 3,104,249 1,715,448 81.0%
term deposits 2,691,886 1,470,536 83.1%
current accounts 412,363 244,912 68.4%
corporate deposits 3,027,501 2,105,214 43.8%
term deposits 1,705,971 1,267,589 34.6%
current accounts 1,321,530 837,625 57.8%
Debt securities 962,396 584,933 64.5%
Amounts due to credit institutions 255,151 162,134 57.4%
Other liabilities 239,400 115,161 2.1x
Liabilities directly associated with assets classified as held for sale 334,627 - 100%
Equity 934,457 665,593 40.4%
36
Key Financial Indicators
(1) net loans to customers / amounts due to customers, on consolidated IFRS basis.(2) (cash and cash equivalents, the NBK notes, Treasury bills of the Ministry of Finance of Kazakhstan, Treasury bills of governments of other countries, Notes of national banks of other
countries, Bonds of quasi-sovereign banks) / total assets, on consolidated IFRS basis.(3) allowance for loan impairment / gross loan portfolio, on consolidated IFRS basis.(4) as at 01.01.2018, coverage ratio of KKB – 129.8%(5) consolidated.(6) Bank only.(7) financial indicators are calculated taking into account Altyn Bank.
31-Dec-17 30-Sep-17 30-Jun-17(7) 31-Mar-17(7)
Amounts due to customers / total liabilities 77.4% 77.4% 85.8% 80.5%
Loans / deposits ratio (1) 53.0% 51.4% 59.1% 61.4%
Liquid assets / total assets (2) 48.3% 47.7% 46.6% 47.5%
IFRS Provisioning rate (3) 8.9% 8.5% 11.1% 11.2%
Coverage NPL90+ (IFRS) (4) 73.7% 63.7% 108.5% 102.6%
Common Equity Tier 1 capital adequacy ratio (5) 16.9% 15.4% 21.6% 21.5%
Tier 1 capital adequacy ratio (5) 16.9% 15.8% 21.6% 21.5%
Tier 2 capital adequacy ratio (5) 18.9% 17.8% 21.6% 21.5%
k1 capital adequacy ratio (6) 21.5% 20.2% 22.1% 21.3%
k1-2 capital adequacy ratio (6) 21.5% 20.2% 22.1% 21.3%
k2 capital adequacy ratio (6) 21.4% 20.1% 22.1% 21.3%
37
Key Financial Indicators (continued)
(1) operating expense / operating income (net interest income before impairment charge, net fees and commissions, other non-interest income, less insurance claims incurred, net of
reinsurance, and expenses for insurance reserves), on consolidated IFRS basis.(2) financial indicators (cost-to-income, RoAE, RoAA, NIM, Cost / Average Assets Ratio) are calculated taking into account Altyn Bank.
Halyk Bank + KKB Halyk Bank only
31-Dec-2017 30-Sep-17 30-Jun-17 31-Mar-17 31-Dec-16
Number of branches and outlets 699 719 504 506 509
Number of ATMs 4,594 4,599 2,367 2,368 2,364
Number of POS-terminals 74,602 72,747 23,455 23,657 23,937
Information and transaction terminals (multiservice kiosks) 360 397 408 431 461
Payment terminals 1,151 1,082 576 577 577
Clients of internet banking, individuals 2,960,989 2,688,324 1,045,138 980,854 918,210
Clients of internet banking, legal entities 93,384 81,603 16,170 15,824 15,065
SMS banking clients 2,895,291 2,861,603 1,912,326 1,811,636 1,746,655
Telebanking clients 196,756 179,613 163,018 155,510 147,487
Payment card holders 8,734,594 8,590,537 5,619,107 5,508,576 5,461,886
Payroll project clients (legal entities) 43,873 44,631 22,996 23,165 23,001
4Q 2017 3Q 2017 2Q 2017(2) 1Q 2017(2) 4Q 2016(2)
Cost-to-income (1) 33.5% 26.4% 29.4% 27.1% 30.5%
Return on average common shareholders’ equity (RoAE) 18.0% 28.6% 22.1% 22.4% 23.1%
Return on average assets (RoAA) 1.8% 2.9% 3.1% 3.0% 3.0%
Net interest margin 4.9% 4.8% 5.7% 5.2% 5.3%
Operating expenses / average total assets 2.1% 1.4% 1.7% 1.5% 1.9%