Halyk Savings Bank of Kazakhstan OJSC :HALYY-US: Earnings Analysis: Q2, 2017 By the Numbers : September 19, 2017

Halyk Savings Bank of Kazakhstan OJSC reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of Halyk Savings Bank of Kazakhstan OJSC – Heartland Financial USA, Inc. and CenterState Bank Corporation (HTLF-US and CSFL-US) that have also reported for this period.

Highlights

  • Net interest income margins narrowed from 70.67% to 58.93% compared to the same period last year.
  • Year-on-year change in operating cash flow of -222.28% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • One-time items pull down operating performance.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 278.46 211.99 240.88 217.5 197.5
Revenue Growth (%YOY) 40.99 29.49 -50.14 -70.68 -41.01
Earnings (mil) 119.29 121.6 111.11 107.64 102.3
Earnings Growth (%YOY) 16.61 134.92 20.65 -33.18 -32.7
Net Margin (%) 42.84 57.36 46.13 49.49 51.79
EPS N/A N/A N/A N/A N/A
Return on Equity (%) 5.17 5.71 5.73 5.95 6.19
Return on Assets (%) 2.89 2.98 2.96 3.02 3.01

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Earnings Growth Analysis

HALYY-US’s earnings rose year-on-year. But this growth has not come as a result of improvement in net interest income margins or any loan loss improvement activities in its operations. Net interest income margins were 58.93% compared to 74.40% in the immediate last period. Net interest income after provisions margins were 51.89% this period compared to 66.78% in the previous period. In addition, loan loss provisions as a percentage of net interest income were 11.95% this period and 13.12% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

HALYY-US’s change in operating cash flow of -222.28% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The improvement in operating margins from 51.15% to 53.70% has impacted the company’s earnings growth. However, one-time items have challenged the operating performance. As a result, the company’s pretax margin fell from 60.63% to 48.59%.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for Halyk Savings Bank of Kazakhstan OJSC

Company Profile

Halyk Savings Bank of Kazakhstan OJSC engages in the retail and corporate banking, leasing services, as well assets management, insurance and brokerage services. Its primary business includes originating loans and guarantees, attracting deposits, trading in securities and foreign currencies, executing transfers, cash and credit card operations, and rendering other banking services to its customers. It operates through the following business segments: Retail Banking, Corporate Banking, Small and Medium Enterprises (SME), and Others. The Retail Banking segment comprises of private banking services, private customer current accounts, savings, deposits, investment savings products, custody, credit and debit cards, consumer loans and mortgages to individuals, and cash and foreign currency related services. The Corporate Banking segment represents direct debit facilities, current accounts, deposits, overdrafts, loan and other credit facilities, foreign currency, and trade finance products to legal entities. The SME Banking segment offers bank services to SME clients including current accounts, deposits, overdrafts, loans and other credit facilities, documentary operations and guarantees, foreign exchange transactions and trade finance products. The company was founded in 1923 and is headquartered in Almaty, Kazakhstan.

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