Yesterday, Halyk Bank released consolidated 3Q2015 IFRS results. Halyk reported profit of T36.7bn (ROaE 29.8%), better than the consensus of T21.8bn (17.1%). Net income rose by 31.2% YoY and ROaE was up by 3.7ppts YoY, mostly thanks to higher interest income (+18.1% YoY) and non-interest income (+159.9% YoY), which was partly offset by higher provision charges of T6.9bn against provision recovery of T0.9bn in the 3Q2014.
The rise in the net interest income was mostly attributable to higher average interest rate on loans (12.4% in 9M2015 against 12.1% in 9M2014), which was supported by continued growth of higher yielding consumer loans (+7.9% QoQ). Net interest margin widened to 6.3% (1.1ppts above consensus) from 5.6% in 3Q2014.
As a result of tenge devaluation the bank reported a revaluation gain of T107.5bn on trading operations with FX swaps. At the same time the bank realized a loss on translation differences of T94.2bn as a result of short USD position on the balance sheet. Cost-to -income ratio decreased to 23.8% for 3Q2015 from 30.4% a year earlier.
Net loans increased by 11.9% QoQ and were flat excluding the effect of devaluation. Deposits rose by 35% QoQ because of a revaluation of FX deposits after tenge devaluation in August 2015. The loans-to-deposits ratio declined by 16.6pp QoQ to 79%, below consensus estimate of 86.2%. Loans from credit institutions increased by 31% QoQ mostly as a result of higher volumes of repo transactions.
NPLs ratio declined to 12.8% in the 3Q2015 from 13.3% in the 2Q2015, thanks to the loan portfolio growth and bad loan write-offs for T21.3bn during 3Q2015. In the 3Q2015 the bank transferred bad loans for T2bn to its SPV. Cost of risk rose to positive 1.2% from negative 0.3% in 3Q2014. The bank collected in cash 87% of interest accrued in the 9M2015 slightly higher than in 9M2014 (86.1%).
Tier 1 capital and total capital adequacy ratios declined by 0.8ppts and 1.1ppts QoQ to 17.9% and 18.3%, respectively, due to growth in FX denominated risk weighted assets as a result of tenge devaluation.
Results for 3Q2015 came strong, above consensus thanks to lower provision charges, higher interest and non-interest income. Net income amounted to T92.0bn and the guidance for the entire 2015 was raised from T100bn to slightly above T100bn.
Disclosure: Halyk Finance is a fully-owned subsidiary of Halyk Bank.