Halyk Bank AO : Consolidated financial results for the six months ended 30 June 2015

Joint Stock Company 'Halyk Savings Bank of Kazakhstan' and its subsidiaries (together "the Bank") (LSE: HSBK) releases its condensed interim consolidated financial information for the six months ended 30 June 2015.

6 months 2015 financial highlights

• Net income is down 13.7% YoY to KZT 55.3bn;

• Net interest income before impairment charge is up by 16.5%;

• Impairment charge is up by 19.5%;

• Net interest income is up by 16.4%;

• Fees and commissions from transactional banking are up by 16.0%;

• Net interest margin is up to 6.7% p.a. (5.6% p.a. for 1H 2014);

• Cost-to-income ratio is at 30.3% (26.8% for 1H 2014);

• RoAE is at 23.3% p.a. (32.1% p.a. for 1H 2014);

• RoAA is at 3.9% p.a. (4.7% p.a. for 1H 2014);

• Total assets are up by 5.2%, YTD;

• Net loans to customers are up by 6.7%;

• Total equity is flat;

• NPLs 90-day+ ratio is up to 13.3% (12.9% as at 31 December 2014);

• Cost of risk1 is at 0.0% p.a. (0.1% p.a. for 1H 2014).

2Q 201 5 financial highlights

• Net income is up 8.4% YoY to KZT 28.3bn;

• Net interest income before impairment charge is up by 18.6%;

• Net interest income is up by 11.4%;

• Fees and commissions from transactional banking are up by 13.4%;

• Net interest margin is up to 6.7% p.a. (5.6% p.a. for 2Q 2014);

• Cost-to-income ratio is at 28.1% (29.9% for 2Q 2014);

• RoAE is at 23.7% p.a. (25.5% p.a. for 2Q 2014);

• RoAA is at 4.0% p.a. (3.7% p.a. for 2Q 2014);

• Total assets are up by 6.0%, q-o-q;

• Net loans to customers are up by 5.2%;

• NPLs 90-day+ ratio is down to 13.3% (13.6% as at 31 March 2015);

• Cost of risk1 is at 0.2% p.a. (0.2% p.a. for 2Q 2014).

S t a t e m e n t of profit or loss review

Interest income increased by 14.2% for 1H 2015 vs. 1H 2014 mainly due to increase in average balances of net loans to customers by 12.2% and in average interest rate on net loans to customers to

12.5% p.a. for 1H 2015 from 12.0% p.a. for 1H 2014. Interest expense increased by 10.4% for 1H

2015 vs. 1H 2014 mainly due to local bond issues in 1H 2015 and loans drawn from JSC Entrepreneurship Development Fund "Damu" ("DAMU") and JSC "Development Bank of Kazakhstan" ("DBK"). The increase in interest expense was partially offset by decrease in average balances of term deposits. As a result, net interest income before impairment charge increased by

16.5% to KZT 75.5bn for 1H 2015 vs. 1H 2014.

Impairment charge increased by 19.5% mainly on the back of provisions created by the Bank's brokerage company JSC Halyk Finance on certain of its investment securities and, to lesser extent, due to increase in the Bank's consumer loans. Impairment charge increase was partially offset by KZT

1.7bn provision recoveries during 1Q 2015 due to the transfer of several problem loans to the SPV Halyk-Project LLP and the repayment of one large-ticket impaired corporate loan. Provisioning level decreased to 13.8% as at 30 June 2015 vs. 14.4% as at 31 March 2015 and vs. 14.8% as at 31 December 2014 mainly on the back of loan portfolio growth.

Fee and commission income from transactional banking (i.e. excluding pension fund and asset management) increased by 16.0% for 1H 2015 vs. 1H 2014 as a result of growing volumes of transactional banking business, mainly in bank transfers and payment cards maintenance and, to a lesser extent, increase in tariffs.

Other non-interest income (excluding insurance) decreased by 41.3% for 1H 2015 vs. 1H 2014 mainly as a result of 36.0% decrease in net gain on foreign exchange operations due to translation losses on FX balance sheet items partially offset by higher income from FX dealing operations as well as loss on sale of securities from available-for-sale portfolio in 1Q 2015. Other non-interest (excluding insurance) income grew by 3.4% for 2Q 2015 vs. 2Q 2014 mainly due to increase in net gain on foreign exchange operations as a result of increased volumes of FX dealing operations.

Operating expenses increased by 11.5% for 1H 2015 vs.1H 2014 mainly due to increase in salaries of the Bank's employees starting from 1 July 2014.

The Bank's cost-to-income ratio increased to 30.3% for 1H 2015 from 26.8% for 1H 2014 mainly as a result of deconsolidation of pension fund business and, to a lesser extent, due to consolidation of JSC Altyn Bank. The Bank's cost-to-income ratio decreased to 28.1% for 2Q 2015 vs. 29.9% for 2Q

2014 due to higher operating income in 2Q 2015 driven by interest income growth.

S t atement of financial position review

Total assets increased by 5.2% vs. YE 2014 mainly in amounts due from credit institutions (70.7%), cash and cash equivalents (14.8%), property and equipment (14.2%) and loans to customers (6.7%), partially offset by decrease in available-for-sale investment securities (-20.4%).

Loans to customers increased by 5.5% on a gross basis and by 6.7% on a net basis vs. YE2014. Gross loan portfolio growth was attributable to increase in loans across all types of businesses: corporate loans by 2.2%, SME loans by 7.4% and retail loans by 12.4%.

90-day NPL ratio decreased to 13.3% as at 30 June 2015 vs. 13.6% as at 31 March 2015. The decrease in 90-day NPL ratio was mainly due to the Bank's loan portfolio growth during 2Q 2015. As at 30 June 2015, the Bank's IFRS provisions covered 90-day NPLs by 102.7%.

Term deposits of legal entities decreased by 3.1% and current accounts of legal entities increased by 14.4% vs. YE 2014. The decrease in term deposits was due to partial withdrawal of funds by some corporate clients in 1Q 2015 to finance their on-going business needs. Term deposits and current accounts of legal entities increased by 20.6% and 10.6%, respectively, vs. 31 March 2015 as a result of new fund inflow from corporate clients in 2Q 2015.