OREANDA-NEWS. April 01, 2014. Joint Stock Company ‘Halyk Savings Bank of Kazakhstan’ and its subsidiaries (together “the Bank”) (LSE: HSBK) releases its consolidated financial statements for the year ended 31 December 2013 prepared in accordance with International Financial Reporting Standards, audited by Deloitte LLP, and are subject to further approval by the Bank’s Annual General Shareholders’ Meeting.

2013 financial highlights

Net income is up by 3.5% to KZT 72.4bn, YoY;

Net interest income before impairment charge is up by 17.1%;

Net interest income is up by 6.5%;

Fees and commissions from transactional banking are up by 19.1%;

RoAE is at 20.8% p.a.;

RoAA is flat at 2.9% p.a.;

Total assets are up by 4.1% YTD;

Net loans to customers are up by 12.4%;

Amounts due to customers are up by 4.0%;

Debt securities issued are down by 37.2%;

Total equity is up by 15.5%.

Consolidated Income Statements
Interest income increased by 13.4% for 12m 2013 vs. 12m 2012 mainly due to increase in average balances of loans to customers by 17.8%, partially offset by decrease in average interest rates on loans to customers to 11.7% p.a. for 12m 2013 vs. 12.1% p.a. for 12m 2012. Interest expense increased by 8.6% for 12m 2013 vs. 12m 2012 mainly due to higher interest rates offered by the Bank to its customers on KZT deposits, as well as increase in average balances of term deposits. As a result, net interest income before impairment charge increased by 17.1% to KZT 106.6bn for 12m 2013 vs. 12m 2012.

Impairment charge increased by 69.4% for 12m 2013 vs. 12m 2012, mainly due to growing loan portfolio during 12m 2013 as well as aging of non-performing loans. Allowances for loan impairment remained flat at 17.9% of the gross loan portfolio as at 31 December 2013 compared to 30 September 2013 and decreased compared to 18.7% of the gross loan portfolio as at YE 2012.

Fee and commission income from transactional banking (i.e. excluding pension fund and asset management) increased by 19.1% for 12m 2013 vs. 12m 2012 as a result of growing volumes of transactional banking business.

Net pension fund and asset management fees decreased by 40.1% for 12m 2013 vs. 12m 2012 due to 67.7% decrease in performance fees, partially offset by 14.7% increase in asset management fees. Performance fees decreased mainly due to decrease in market value of gold and certain Kazakhstan securities, as well as ongoing changes in the pension system, investment restrictions imposed by the National Bank of Kazakhstan and higher share of cash in the investment portfolio of Halyk Pension Fund as a result of such restrictions. Asset management fees increased as a result of growing size of assets under management.

Other non-interest income (excluding insurance) decreased by 4.3% for 12m 2013 vs. 12m 2012 mainly as a result of 39.4% decrease in other income due to one-time dividends received on investment securities in 2012 and was partially off-set by 15.9% increase in net realized gain from available-for-sale investment securities. Income from trading and asset and liability management operations which comprise net gain from financial assets and liabilities through profit or loss and net gain on foreign exchange operations increased to KZT 9.5bn for 12m 2013 vs. KZT 9.2bn for 12m 2012.

Insurance underwriting income less insurance claims incurred, net of reinsurance, increased by 8.9% for 12m 2013 vs. 12m 2012 mainly as a result of 9.3% increase in insurance underwriting income due to growing volume of general and life-insurance business, partially offset by 2.6 times increase in insurance reserves due to larger portion of contract amount retained by life insurance company for future pension payments under pension annuity contracts in 1Q 2013 and 2Q 2013.

Insurance underwriting income less insurance claims incurred, net of reinsurance, increased by 66.7% for 4Q 2013 vs. 4Q 2012 mainly as a result of 42.5% decrease in insurance claims incurred, net of reinsurance, in life insurance business due to decline of pension annuity payments. The decline of pension annuity payments is a result of temporary regulator’s restrictions on underwriting new pension annuity contracts in connection with the ongoing pension system reform.

Operating expenses increased by 5.8% for 12m 2013 vs. 12m 2012 mainly due to 5.7% increase in salaries and other employee benefits. The increase in salaries and other employee benefits was a result of adjustment in salaries of employees of the Bank and its subsidiaries starting from 1 January 2013, as well as bonus payments and extra staff hiring in some of the Bank’s subsidiaries.

Operating expenses decreased by 4.4% for 4Q 2013 vs. 4Q 2012 mainly due to 8.3% decrease in salaries and other employee benefits. The decrease in salaries and other employee benefits was a result of increase in the fixed salary share of certain Bank’s employees followed by one-off decrease in bonus reserves in 2H 2013, as well as decrease in the number of employees in the Bank’s Pension Fund in connection with the ongoing pension system reform.

The Bank’s cost-to-income ratio decreased to 31.4% for 12m 2013 vs. 34.4% for 12m 2012 and to 30.3% for 4Q 2013 vs. 36.5% for 4Q 2012 mainly as a result of income growing faster than operating expenses.