HALYK GROUP FINANCIAL RESULTS PRESENTATION 1H 2011 · on management’scurrent expectations or...

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

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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%

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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%

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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)

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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

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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



Write-offs Disposal ofa subsidary

Foreignexchangedifferences








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

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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

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)




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%





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


Note: excludes Delta Bank and RBK bank


as at 1-Jan-2018


Note: excludes Delta Bank and RBK bank


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%

HALYK GROUP FINANCIAL RESULTS PRESENTATION 1H 2011 · on management’scurrent expectations or...

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