OREANDA-NEWS. April 23, 2010. Full Year 2009 highlights

Net profit of KZT 19 billion (USD 129 mn)

Net interest margin before provisions for impairment losses at 7.8%

Net non-interest income increased to KZT 58.9 billion

Cost-to-income ratio decreased to 12.2%

Total Bank assets declined by 1%

Deposits increased 30.3% year-on-year

Retail deposits increased by 24.2%

Core Tier 1 ratio increased to 15.9%

Total capital ratio increased to 20.1%

Provisioning rate increased to 19% of gross loans

Nina Zhussupova, Chairperson of the Management Board, said:
“2009 was a difficult and an immensely important year for the bank. Although the market environment continued to be extremely challenging Kazkommertsbank met all of its external obligations for the year, provided support to its customers and finished the year in profit.”

Net interest income
Net interest income before provisions for impairment losses decreased by 3.2% to KZT 193.2 billion for the year ended 31 December 2009, compared to KZT 199.5 billion for the year ended 31 December 2008. This was caused by the decrease in the average yield on interest-earning assets from 15.2% in 2008 to 15.09%, in 2009, compared to the smaller decrease in average cost of interest-bearing liabilities from 7.58% in 2008 to 7.53% in 2009.

Net interest margin before provisions for impairment losses as a percentage of average interest-earning assets for the year ended 31 December 2009 decreased to 7.8% compared to 8.0% in 2008.

Non-interest income
Net non-interest income increased to KZT 58.9 billion in 2009 from KZT 2.2 billion in 2008. This increase was primarily caused by an income from the purchase of own debt securities of KZT 30.7 billion and a gain from operations with financial assets of KZT 22.8 billion.
Net fee and commission income did not change in 2009 and amounted to KZT 17.4 billion in 2009. However there was a slight change in the structure of net fee and commission income. The share of income from banking cards services increased from 16.9% to 20.3% and the share of pension asset management fees increased from 9.5% to 12.8%.  There was also a change in the structure of fees and commissions expense. The share of banking cards services expenses increased from 30.1% to 44.5% and insurance services expenses from 21.2% to 33.6%.

Operating expenses
As a result of measures taken by the Bank to reduce costs, almost all types of expenses declined during 2009. Personnel expenses decreased by KZT 2.1 billion to KZT 14.4 billion in 2009, down from KZT 16.5 billion in 2008 and rental expenses decreased by KZT 1.1 billion. This resulted in a decline of operating expenses by 9.9% to KZT 30.7 billion during the year ended 31 December 2009 compared to KZT 34.0 billion in the year ended 31 December 2008.
Personnel expenses, which constitute a major part of operating expenses (46.9% in 2009), declined by 13%. The number of employees decreased by 7%. As a result of optimization of our branch network  during 2009, 3 branches were opened and 32 were closed. As a result, the number of branches decreased to 157 by the end of financial year 2009.

Impairment losses
Provision for credit impairment losses almost doubled and amounted to KZT 505.5 billion in 2009, compared with KZT 289.3 billion in 2008.

Non-performing loans (NPLs) reached 22.8% by the end of 2009. KKB defines NPLs as total exposure to clients with overdue payments (30 days and more for corporates, and 60 days and more for retail customers). By comparison, NPLs were 8.1% at the end of 2008, 12.2% at 1Q09, 15.0% at 2Q09 and 20.6% at 3Q09. The highest growth in NPLs was seen in 3Q09, although this slowed down in 4Q09. The same trend was evident in corporate client NPLs which stood at 22.6% of gross loans and advances (7.3% at year-end 2008, 10.9% at 1Q09, 13.8% at 2Q09 and 19.9% at 3Q09). The level of NPLs for retail customers increased from 13% to 24.4%, but declined in 4th quarter 2009 by 110 b.p.

The provisions for credit impairment losses represented 19.0% of gross loans and advances in 2009 compared with 11.9% in 2008.

Taxation
The tax rate used for the Bank’s 2009 financial statements is the corporate tax rate of 20%.
An amendment to the Tax Code introduced in 2009 allows a reduction in the corporate income tax rate to 17.5% after 1 January 2012, then a further decrease to 15% effective from 1 January 2013.

Profit
Profit before tax and minority interests for the year ended 31 December 2009 increased 2.8 times to KZT 31.8 billion compared to KZT 11.5 billion for the year ended 31 December 2008.
Net profit after tax and minority interests for 2009 decreased 5.7% to KZT 19.0 billion compared to KZT 20.2 billion for 2008.

The decrease in net profit during 2009 resulted from increased corporate tax expense as a result of the revaluation of deferred tax liabilities. In 2009, corporate income tax expense was KZT 12.8 billion, compared to the recovery on income tax of KZT 8.7 billion in 2008.

Capital ratios
Risk-weighted assets increased to KZT 2,482 billion at 31 December 2009, or by 1.5% compared to the end of 2008.

On a consolidated basis, the Bank’s Core Tier 1 ratio at 31 December 2009 was 15.9%, compared with 13.5% at 1 January 2009, and the total capital ratio was 20.1% (17.7% at 1 January 2009).

Business line performance
Corporate and SME banking
The share of corporate loans in the Bank’s total net portfolio increased from 83.6% in 2008 to 87.3% in 2009.

As of 31 December 2009, corporate deposits (excluding Government programmes) had increased by KZT 92.7 billion to KZT 773.3 billion from KZT 680.6 billion at 31 December 2008.

Retail banking

The share of retail loans in the total net portfolio was 12.7% in 2009, with mortgages constituting 66.8% of the retail loan portfolio.

As of 31 December 2009, the Bank had 23 branches and 134 outlets in Kazakhstan. In addition, it has an extensive alternative distribution network consisting of 1020 ATMs, more than 11,000 point of sale terminals and offers customers internet and mobile banking services and a call centre.

Retail deposits increased by 24.2% to KZT 327.6 billion at 31 December 2009 from KZT 263.8 billion as at 31 December 2008.

A conference call on the full year 2009 results is planned for 26 April 2010.