OREANDA-NEWS. On June 24, 2009 Joint Stock Company ‘Halyk Savings Bank of Kazakhstan’ and its subsidiaries (“the Bank”) (LSE: HSBK) released its interim financial information for the three-month period ended 31 March 2009 prepared in accordance with International Accounting Standards 34 “Interim Financial Reporting” and reviewed by Deloitte LLP, Kazakhstan, reported the press-centre of Halyk Savings Bank.

2008 percent as at YE2008 assets increased by 20.1 percent in KZT terms and decreased by 4.0 percent in USD terms during the first three months of 20091

Total amounts due to customers increased by 32.6 percent in KZT terms and increased by  6.0 percent in USD terms during the first three months of 20091

The total net loans to customers increased by 6.3 percent to KZT 1,263.4 billion from KZT 1,188.3 billion as at YE2008

Retail loans increased by 2.1 percent to KZT 353.8 billion from KZT 346.6 billion as at

Total equity increased by 15.6 percent to KZT 220.9 billion from KZT 191.0 billion as at

Net interest income before impairment charge increased by 27.5 percent to KZT 24.4 billion from KZT 19.1 billion for the first three months of 2008

Net fee and commission income increased by 76.0 percent to KZT 10.3 billion from KZT 5.8 billion for the first three months of 2008

Operating expenses decreased by 6.2 percent to KZT 9.5 billion from KZT 10.1 billion for the first three months of 2008

Net income for the first three months of 2009 was KZT 4.1 billion
Net interest margin increased to 6.0 percent from 5.3 percent for the first three months of

The ratio of provisions to gross loans (provisioning rate) increased to 10.9 percent from 8.8


The ratio of operating expenses to operating income before impairment charge (cost-to income ratio) decreased to 23.2 percent from 40.1 percent for the first three months of 2008

The ratio of operating expenses to average assets (cost-to-assets ratio) decreased to 2.1 percent from 2.5 percent for the first three months of 2008

ratio of net loans to amounts due to customers (loan-to-deposit ratio) decreased to 1.10x from 1.37x as at YE2008

Financial Overview
Interest income
Interest income increased by 18.5 percent to KZT 51,236 million from KZT 43,219 million for the first three months of 2008. This increase was primarily due to an increase in average rates on interestearning assets to 12.9 percent p.a. from 12.5 percent p.a. for the first three months of 2008. Average rates on loans to customers increased to 16.6 percent p.a. from 15.2 percent p.a. for the first three months of 2008 and average rates on the securities portfolio increased to 9.2 percent p.a. from 7.7 percent p.a. for the first three months of 2008.

Interest expense increased by 11.5 percent to KZT 26,880 million from KZT 24,115 million for the first three months of 2008. This increase was primarily due to a 13.2 percent increase in average balances of interest-bearing liabilities partially offset by decrease in average rates on interest-bearing liabilities to 6.8 percent from p.a. 6.9 percent p.a. for the first three months of 2008. Average rates on amounts due to customers decreased to 6.3 percent p.a. from 6.9 percent p.a. for the first three months of 2008.

Net interest income before impairment charge increased by 27.5 percent to KZT 24,356 million from KZT 19,104 million for the first three months of 2008. As a result, net interest margin increased to 6.0 percent 5.3 percent for the first three months of 2008.

Impairment charge
The impairment charge increased to KZT 28,288 million from KZT 1,401 million for the first three months of 2008. The effective provisioning rate on loans to customers increased to 10.9 percent from 8.8 percent as at YE2008. The effective provisioning rate under Kazakhstan regulatory standards increased to 14.4 percent from 10.9 percent as at YE2008.

Fee and commission income
Net fee and commission income increased by 76.0 percent to KZT 10,289 million from KZT 5,845 million for the first three months of 2008. This increase was primarily due to a 327 percent increase in pension fund and asset management fees to KZT 5,814 million from KZT 1,362 million for the first three months of 2008, as well as an increase in plastic card maintenance fees by 65.6 percent during the first three months of 2009 as a result of higher tariffs introduced in the first quarter of 2009.

Other non-interest income
Other non-interest income increased by 428.4 percent to KZT 7,281 million from KZT 1,378 million for the first three months of 2008 primarily as a result of increased net gain on foreign exchange operations and insurance underwriting income.

Net gain from financial assets and liabilities at fair value through the profit and loss account was KZT 417 million compared with net loss for the first three months of 2008. The net loss of KZT 2,573 million from financial assets and liabilities at fair value through the profit and loss for the first three months of 2008 was mainly due to a realized loss of one-off nature on a foreign currency derivative position which was subsequently closed in March 2008.

Net gain from repurchase of debt securities issued was KZT 439 million as a result of revaluation of USD-denominated Eurobonds bought back previously.

Net gain on foreign exchange operations increased by 175.9 percent to KZT 4,136 million from KZT 1,499 million for the first three months of 2008 primarily as a result of higher volumes of foreign exchange transactions by individuals and corporate clients.

Insurance underwriting income increased by 1.2 percent to KZT 2,044 million from KZT 2,019
million for the first three months of 2008 mainly as a result of the overall increase in insurance volumes of JSC Kazakhinstrakh (a wholly-owned non-life insurance subsidiary of the Bank).

Insurance underwriting income less insurance claims incurred, net of reinsurance, increased by 20.4 percent to KZT 1,159 million from KZT 963 million for the first three months of 2008 mainly as a result of higher premiums received by JSC Kazakhinstrakh in its core insurance business.

Non-interest expenses
Operating expenses decreased by 6.2 percent to KZT 9,501 million from KZT 10,132 million for the first three months of 2008 mainly due to a 24.4 percent decrease in salaries and other employee benefits.

Recoveries of provisions for off-balance sheet assets and liabilities was KZT 1,108 million compared with expense of KZT 1,124 million for the first three months of 2008 primarily due to
improved provisioning policy on the Bank’s loans and off-balance sheet liabilities. The ratio of the Bank's operating expenses to operating income before impairment charge (cost-to-income ratio) decreased to 23.2 percent from 40.1 percent for the first three months of 2008. The ratio of the Bank's operating expenses to average total assets decreased to 2.1 percent from 2.5 percent for the first three months of 2008.

Total assets
The Bank’s total assets increased by 20.1 percent to KZT 1,982,661 million from KZT 1,651,349
million as at YE2008 primarily due to increases in the cash and cash equivalents, insurance assets and foreign exchange differences on loans to customers denominated in foreign currencies partially offset by decrease in financial assets at fair value through profit or loss and available-for-sale investment securities.

Liquid assets
The Bank’s ratio of liquid assets to total assets increased to 29.8 percent from 17.0 percent as at
YE2008 mainly as a result of a 177.9 percent increase in cash and cash equivalents. Increase in liquid assets was mainly funded by a 32.6 percent increase in amounts due to customers. The Bank keeps its liquid assets primarily in short-term deposits with international banks.

Loans to customers
The total net loans to customers increased by 6.3 percent to KZT 1,263,355 million from KZT
1,188,280 million as at YE2008. Retail loans, including consumer and mortgage loans, increased by 2.1 percent to KZT 353,789 million from KZT 346,620 million as at YE2008. Consumer loans, mostly backed by the salaries of the individual borrowers, decreased by 7.6 percent to KZT 174,180 million from KZT 188,542 million as at YE2008. Mortgage loans increased by 13.6 percent to KZT 179,609 million from KZT 158,078 million as at YE2008 mainly as a result of foreign exchange differences on loans denominated in foreign currencies.

Loans to corporate borrowers (including SMEs) increased by 11.3 percent to KZT 1,064,694 million from KZT 956,712 million as at YE2008 primarily as a result of foreign exchange differences on loans denominated in foreign currencies. As at 31 March 2009, the Bank’s 10 largest borrowers accounted for 19.1 percent of total gross loans to customers compared to 16.4 percent as at YE2008. As at 31 March 2009, wholesale trade, construction, mortgage loans, consumer loans and services sectors accounted for 19.2 percent, 13.2 percent, 12.7 percent, 12.3 percent and 10.7 percent of the Bank’s total gross loans to customers, respectively.

Liabilities
The Bank’s total liabilities increased by 20.6 percent to KZT 1,761,727 million from KZT 1,460,294 million as at YE2008 mainly as a result of increase in amounts due to customers, insurance liabilities, issuance of KZT 5 billion local subordinated bond and foreign exchange differences on foreign currency denominated debt securities issued previously.

Amounts due to credit institutions
Amounts due to credit institutions decreased by 11.1 percent to KZT 257,460 million from KZT 289,608 million as at YE2008. This decrease was mainly due to a 64.1 percent decrease in loans and deposits from Kazakhstan banks to KZT 34,584 million from KZT 96,391 million as at YE2008. The overall decrease in loans and deposits from Kazakhstan banks was partially offset by foreign exchange differences on loans and deposits from OECD-based banks denominated in foreign currencies, a 422.2 percent increase in loans and deposits from non-OECD based banks and long-term loan facility for KZT 11,785 million provided by the Fund for Small Entrepreneurship Development “DAMU”.

Debt securities issued
Debt securities issued increased by 20.8 percent to KZT 317,818 million from KZT 262,991 million as at YE2008 primarily as a result of foreign exchange differences on Eurobonds issued previously. In January 2009, the Bank issued fixed-rate KZT-denominated domestic subordinated bond for principal amount of KZT 5 billion.

Foreign debt repayment schedule
The Bank has the following foreign debt repayment schedule:
September 2009 USD 300 million syndicated loan
October 2009 USD 200 million Eurobond
April 2010 USD 400 million syndicated loan
September 2010 USD 300 million syndicated loan
May 2013 USD 300 million Eurobond
October 2013 USD 500 million Eurobond
May 2017 USD 700 million Eurobond

Amounts due to customers
Amounts due to customers increased by 32.6 percent to KZT 1,149,803 million from KZT 867,392 million as at YE2008. This increase was primarily attributable to a 45.7 percent increase in deposits of legal entities to KZT 781,729 million from KZT 536,545 million as at YE2008 as well as a 11.3 percent increase in deposits of individuals to KZT 368,074 million from KZT 330,847 million as at YE2008.

As a result of higher-than-industry average growth in individuals’ and legal entities’ deposits, the Bank`s market share in individuals’ and legal entities’ deposits in Kazakhstan increased to 22.9 percent as at 1 June 2009 from 21.8 percent as at YE2008 and to 20.3 percent as at 1 June 2009 from 17.0 percent as at YE2008, respectively.

During the first three months of 2009, the Bank`s foreign currency denominated deposits of individuals increased by 35.2 percent (in USD terms)3 while KZT-denominated deposits of individuals decreased by 21.9 percent (in KZT terms). As a result, the share of foreign currency denominated deposits of individuals in total deposits of individuals increased to 55.7 percent from 36.9 percent as at YE2008.

Equity
Total equity increased by 15.6 percent to KZT 220,934 million from KZT 191,055 million as at YE2008 primarily as a result of capital injection from Joint Stock Company “Sovereign Wealth Fund “Samruk-Kazyna” ("SWF S-K") for KZT 26,958 million.

In May 2009, the Bank additionally sold approximately 196 million preferred shares to SWF S-K at KZT 168.4 per share for KZT 33 billion. As a result, regulatory Tier 1 and Total Capital Adequacy ratios increased to 10.4 percent and 16.1 percent as at 1 June 2009, respectively.

The full consolidated financial statements, including the notes attached thereto, are available on Halyk Bank’s website (http://eng.halykbank.kz/financials/reports and http://eng.halykbank.kz/info/news).