Financial Performance of Halyk Bank in first six months of 2006

Almaty, August 1, 2006 – Mr. Grigoriy Marchenko, Chairman of Management Board of JSC Halyk Bank, announced results of the Bank’s performance in H1 2006.

Halyk Group Financial Group, led by Halyk Bank, is reaching new heights in its performance. Halyk Bank once again confirms its status of a successful bank, being a stable and reliable financial instution of the country.

On 18 July 2006, Standard & Poor’s upgraded Halyk Bank’s long-term rating from “ВВ” to “BВ+”, affirming at the same time the bank’s short-term rating at “В”, outlook stable. On 1 June 2006, S&P’s issued a report on achievements and performance of biggest banks in Kazakhstan, Russia and Ukraine. Halyk Bank was named best in terms of ROA (Return on Average Assets) and net interest margin.

Euromoney rated Halyk Bank as “The best bank in Kazakhstan in 2006”. The Banker included Halyk Bank into the list of 1,000 biggest banks of the world, where the Bank occupies 658th place in terms of first level capital. Russian “Commersant-Bank” published a ranking by Interfax Center for Economic Analysis (CEA Interfax) of 1,000 biggest banks in CIA on the results of 2005, where Halyk Bank takes 12th place in terms of assets.

In May 2006 Halyk Bank successfully allocated 300 million US dollar 7-year eurobonds. Taking into account 5-year securities issued in 2004, the Bank established yield curve which is stably traded with discount in relation to liabilities of its main competitors: JSC Kazkommertsbank, JSC Bank TuranAlem, JSC ATF Bank and JSC Alliance Bank. Results testify that investors consider both positive financial results and quality of loans, as well as conservative approach of Halyk Bank to external borrowing.

The bank retains leading positions in the domestic market of retail bank services to be confirmed by the following facts.
Profit of Halyk Bank in H1 of the current year made more than 7.5 billion KZT, with a growth of 62.8% as compared to H1 2005. Assets reached 762.7 billion KZT, having increased from the beginning of the year by 36.5 % or by 204.1 billion KZT. The Bank’s Own (balance) capital increased by 12.1% and reached 67.5 billion KZT.
Loans to customers (loan portfolio (gross)) increased by 9% to reach 466.9 billion KZT. Out of which retail customer loans increased by 14.7% to make 184.6 billion KZT.
Deposit base makes 485.4 billion KZT, out of which retail deposits made 171.6 billion KZT, with a gain of 31.1% in January–June 2006. On H1 2006 results, the increase in the volume of Halyk Bank’s deposits was practically equal to aggregate increase of those of Kazkommertsbank and TuranAlem Bank.

Reference Information

During first six months of 2006 all three international rating agencies upgraded Halyk Bank’s ratings:
In 2006 Standard & Poor’s raised twice long-term rating from “ВВ-” to “ВВ+”: on 10th February and on 18th July 2006. In S&P’s opinion “…Halyk Bank’s ratings have been increased taking into consideration that the Bank has a clear strategy aimed at building a group for rendering financial services on the domestic market. Despite the growing competition, Halyk Bank is continuously increasing its profitability and capitalization, which are today the highest among big and medium Kazakhstan banks. Halyk Bank has such advantages before competitors as availability of “cheaper” funding sources in the form of attracted deposits (available through extensive Halyk Bank’s branch network) and the opportunity to work with a higher margin”. On 30 May 2006, Moody’s upgraded the Bank’s Eurobonds rating from “Baa2” to “Baa1”. Earlier this year, on 23 February 2006, Fitch increased long-term foreign currency rating from “BB” to “BB+”. Both agencies note the extensive branch network, improvement of financial results, as well as possibility of state support in case of need due to strategic importance of the Bank to the country.

Since the beginning of the year Halyk Bank has retained leadership on the deposit market, both in terms of volume of the portfolio and absolute gain. During first six months of the year, the deposit portfolio increased by 40.7 billion KZT to make 171.6 billion KZT. The Bank’s share of retail deposits has increased from the beginning of the year from 21.93% to 22.91%. Moreover, Halyk Bank retains leading positions in mortgage lending among second tier banks, owning more than 29% of market share. Currently, the mortgage portfolio of the bank makes approximately 79 billion KZT. Customer loans have increased from the beginning of the year by 19 billion KZT (with balance of principal receivables) to make 70 billion KZT. Loans to companies have increased by 5.6% to make 282.4 billion KZT.

The number of Halyk Bank’s effective charge cards makes 2.5 million. Let us remind that the Bank is the undisputed leader on the domestic market of charge cards.
Charge card service network comprises of more than 800 Automatic Teller Machines and about 3,500 POS-terminals and imprinters.

Halyk Bank’s branch nework includes 549 subdivisions, out of which 19 are oblast and regional branches, 126 district branches and 404 cash settlement divisions.

The number of clients of Internet-banking reached 8,896. During H1 2006, the web-site of the “Internet-Banking” system, www.mybank.kz, was visited 40,981 times. This is 34% more than results of the similar period of 2005. Besides Kazakhstanis (20% of all visitors), the highest percentage of users are from European Union, United States, Russia and other countries. Internet accounts of our clients in H1 2006 were directly accessed from the territory of 11 countries (Kazakhstan, Europian Union, United States, Russia etc.).

As of 1 July 2006 (after 14 months of operation), the Mobile banking system has been used by more than 82,000 clients (growth in H1 2006 made 47,000). In terms of growth rate Halyk Bank is absolutely the best bank among five CIS countries where VISA has launched this project. Moreover, in March, “Mobile banking” became the most popular remote bank service in the Republic of Kazakstan.