Development Bank of Kazakhstan JSC

Transcription

1 Consolidated Interim Condensed Financial Statements for the six-month period ended

2 Contents Independent Auditors Report on Review of Consolidated Interim Condensed Financial Information Consolidated Interim Condensed Statement of Profit or Loss and Other Comprehensive Income 4 Consolidated Interim Condensed Statement of Financial Position 5 Consolidated Interim Condensed Statement of Cash Flows 6-7 Consolidated Interim Condensed Statement of Changes in Equity 8-9 Notes to the Consolidated Interim Condensed Financial Statements 10-41

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5 Consolidated Interim Condensed Statement of Financial Position as at 31 December 2015 Note ASSETS Cash and cash equivalents 9 298,255, ,182,124 Placements with banks and other financial institutions ,333,166 67,964,988 Loans to banks 83,478,246 83,963,817 Loans to customers 11 1,333,327,198 1,368,225,630 Finance lease receivables 12 41,583,408 31,215,491 Available-for-sale financial assets ,763, ,394,444 Held-to-maturity investments 4,839,090 4,671,181 Advances paid under finance lease agreements 14 10,140,169 26,497,654 Assets to be transferred under finance lease agreements 4,463,402 2,888,184 Equipment and intangible assets 372, ,788 Other assets 15 91,042,852 83,641,651 Current tax asset 2,641,593 5,235,061 Derivative financial instruments 64,418,487 58,926,982 Total assets 2,225,659,022 2,128,121,995 LIABILITIES Current accounts and deposits from customers 16 50,253,723 41,829,571 Loans from the Government of the Republic of Kazakhstan and SWF Samruk-Kazyna 36,974,526 36,745,970 Loans from banks and other financial institutions ,677, ,247,848 Government grants 18 46,587,582 44,298,936 Debt securities issued ,125, ,550,797 Subordinated debt 84,227,753 77,548,341 Other liabilities 48,753,196 52,868,186 Deferred tax liabilities 17,910,216 19,298,463 Derivative financial instruments 6,945,872 8,634,027 Total liabilities 1,858,454,940 1,772,022,139 EQUITY Share capital 353,667, ,667,511 Reserve capital 17,712,311 17,712,311 Hedging reserve 3,694,303 3,403,546 Revaluation reserve for financial assets reclassified from available-for-sale financial assets to loans to customers 3,715,061 4,522,580 Revaluation reserve for available-for-sale financial assets (9,367,098) (12,491,441) Additional paid-in capital 28,423,220 28,423,220 Accumulated losses (30,641,226) (39,137,871) Total equity 367,204, ,099,856 Total liabilities and equity 2,225,659,022 2,128,121,995 Commitments and Contingencies 22 The unaudited consolidated interim condensed statement of financial position is to be read in conjunction with the notes to, and forming part of, the unaudited consolidated interim condensed financial statements. 5

6 Consolidated Interim Condensed Statement of Cash Flows for the six-month period ended Six-month period ended Six-month period ended 30 June 2015 CASH FLOWS FROM OPERATING ACTIVITIES Interest received 60,096,896 32,358,824 Interest paid (33,683,758) (18,229,185) Fee and commission received 399, ,820 Fee and commission paid (104,037) (155,457) Net receipts from foreign exchange 186,961 83,235 Net payments from operations with derivative financial instruments (111,110) (123,327) Other receipts, net 4,205,218 41,504 General administrative payments (2,789,618) (2,988,393) 28,199,805 11,432,021 (Increase)/decrease of operating assets: Placements with banks and other financial institutions (54,463,004) (3,853,597) Loans to banks (6,393,979) (65,499,500) Loans to customers 23,465,292 (32,854,136) Finance lease receivables 1,840,569 1,232,184 Advance for finance lease 454,780 (3,323,314) Derivative financial instruments (3,200,959) (1,429,260) Other assets 91,343 (252,680) Increase/(decrease) of operating liabilities Current accounts and deposits from customers 7,900,302 7,930,365 Loans from the Government of the Republic of Kazakhstan and the SWF Samruk-Kazyna JSC (333,333) (1,083,333) Loans from the Parent Company - 120,000,000 Loans from banks and other financial institutions (21,316,961) 27,167,296 Other liabilities 2,612,730 2,960,653 Net cash (used in)/from operating activities before taxes paid (21,143,415) 62,426,699 Income tax paid (57,344) (41,591) Cash flows (used in)/from operating activities (21,200,759) 62,385,108 The unaudited consolidated interim condensed statement of cash flows is to be read in conjunction with the notes to, and forming part of, the unaudited consolidated interim condensed financial statements. 6

7 Consolidated Interim Condensed Statement of Cash Flows for the six-month period ended Six-month period ended Six-month period ended 30 June 2015 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of plant and equipment and intangible assets (112,345) (6,682) Disposal of equipment and intangible assets - 1,921 Acquisition of available-for-sale financial assets (85,775,858) (4,883,913) Disposal and redemption of available-for-sale financial assets 81,942,257 31,344,994 Cash flows (used in)/from investing activity (3,945,946) 26,456,320 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from subordinated debt 15,000,000 - Proceeds from debt securities issued 95,000,000 - Repurchase/repayment of debt securities issued (5,541,427) (96) Cash flows from/(used in) financing activities 104,458,573 (96) Net increase in cash and cash equivalents 79,311,868 88,841,332 Effect of movements in exchange rates on cash and cash equivalents (1,238,552) 1,323,568 Cash and cash equivalents at the beginning of the period 220,182, ,590,612 Cash and cash equivalents as at the end of the period (Note 9) 298,255, ,755,512 The unaudited consolidated interim condensed statement of cash flows is to be read in conjunction with the notes to, and forming part of, the unaudited consolidated interim condensed financial statements. 7

8 Consolidated Interim Condensed Statement of Changes in Equity for the six-month period ended Revaluation reserve for financial assets reclassified from availablefor-sale financial assets to loans to customers Revaluation reserve for available-for-sale financial assets Share capital Reserve capital Hedging reserve Additional paidin capital Accumulated losses Total equity Balance at 1 January ,667,511 17,712,311 (348,584) 6,386,403 (3,401,426) 28,637,838 (49,686,432) 312,967,621 Profit for the period (unaudited) ,583,998 8,583,998 Other comprehensive income Items that are or may be reclassified subsequently to profit or loss: Net change in the fair value of available-for-sale financial assets (unaudited) (5,944,757) - - (5,944,757) Net change of the fair value of available-for-sale financial assets transferred to profit or loss (unaudited) (514,520) - - (514,520) Amortisation of revaluation reserve for financial assets reclassified from available-for-sale financial assets to loans to customers as a separate item within equity (unaudited) (860,373) (860,373) Net unrealised gain on hedging instruments, net of tax (unaudited) , ,014 Total other comprehensive loss (unaudited) ,014 (860,373) (6,459,277) - - (6,678,636) Total comprehensive income for the period (unaudited) ,014 (860,373) (6,459,277) - 8,583,998 1,905,362 Transactions with owners recorded directly in equity Additional paid-in capital on loans from the Parent Company, net of tax (unaudited) (214,618) - (214,618) Discount on loan issued to other related party of the Parent Company, net of tax (unaudited) (1,174,048) (1,174,048) Dividends declared (unaudited) (3,378,450) (3,378,450) Total transactions with owners recorded directly in equity (unaudited) (214,618) (4,552,498) (4,767,116) Balance as at 30 June 2015 (unaudited) 313,667,511 17,712, ,430 5,526,030 (9,860,703) 28,423,220 (45,654,932) 310,105,867 The unaudited consolidated interim condensed statement of changes in equity is to be read in conjunction with the notes to, and forming part of, the unaudited consolidated interim condensed financial statements. 8

9 Consolidated Interim Condensed Statement of Changes in Equity for the six-month period ended Revaluation reserve for financial assets reclassified from availablefor-sale financial assets to loans to customers Revaluation reserve for available-for-sale financial assets Share capital Reserve capital Hedging reserve Additional paidin capital Accumulated losses Total equity Balance at 1 January ,667,511 17,712,311 3,403,546 4,522,580 (12,491,441) 28,423,220 (39,137,871) 356,099,856 Profit for the period (unaudited) ,880,593 10,880,593 Other comprehensive income Items that are or may be reclassified subsequently to profit or loss: Net change in the fair value of available-for-sale financial assets (unaudited) ,877, ,877,983 Net change in the fair value of available-for-sale financial assets transferred to profit or loss (unaudited) (753,640) - - (753,640) Amortisation of revaluation reserve for financial assets reclassified from available-for-sale financial assets to loans to customers as a separate item within equity (unaudited) (807,519) (807,519) Net unrealised gain on hedging instruments, net of tax (unaudited) , ,757 Total other comprehensive income (unaudited) ,757 (807,519) 3,124, ,607,581 Total comprehensive income for the period (unaudited) ,757 (807,519) 3,124,343-10,880,593 13,488,174 Transactions with owners recorded directly in equity Discount on loan issued to other related party of the Parent Company, net of tax (unaudited) (673,017) (673,017) Dividends declared (unaudited) (1,710,931) (1,710,931) Total transactions with owners recorded directly in equity (unaudited) (2,383,948) (2,383,948) Balance as at (unaudited) 353,667,511 17,712,311 3,694,303 3,715,061 (9,367,098) 28,423,220 (30,641,226) 367,204,082 The unaudited consolidated interim condensed statement of changes in equity is to be read in conjunction with the notes to, and forming part of, the unaudited consolidated interim condensed financial statements. 9

10 Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended 1 Background (a) (b) (c) Principal activities These unaudited consolidated interim condensed financial statements include the financial statements of the (the Bank ) and its subsidiary, DBK Leasing JSC (together referred to as the Group ). was established in the Republic of Kazakhstan as a closed joint-stock company in 2001 in accordance with the Law of the Republic of Kazakhstan On the Development Bank of Kazakhstan 178-II dated 25 April 2001 as amended at the date of preparation of these unaudited consolidated interim condensed financial statements (the Law ). The Group operates according to the Law, the Charter of the and the Memorandum on the crediting policy, approved by the decision of the National Management Holding Baiterek JSC 09/14 dated 4 April The Bank is a national development institution. The main purpose of the Bank is to improve and increase the efficiency of state investment activity, promote the development of production infrastructure and manufacturing industry and assist in attraction of external and internal investments to the national economy. The Bank s registered office is: 10, Orynbor Street, Kazyna Tower Building, Yesil District, Astana, Republic of Kazakhstan. The Bank is the parent company of a wholly owned consolidated subsidiary, DBK Leasing JSC. DBK Leasing JSC (the Subsidiary ) established on 6 September 2005 in accordance with legislation of the Republic of Kazakhstan. The principal activity of the Subsidiary is financial lease operations. Eurobonds issued by the Bank are listed on London Stock Exchange, Luxembourg Stock Exchange and Kazakhstan Stock Exchange (the KASE ). Shareholders As at 31 December 2012 the sole shareholder of the Bank was Sovereign Wealth Fund Samruk Kazyna JSC (SWF Samruk-Kazyna ). In accordance with the Decree of the President of the Republic of Kazakhstan signed on 10 August 2011 the entire amount of ordinary shares of the Bank were transferred into trust management by the Ministry of Industry and New Technologies of the Republic of Kazakhstan. In accordance with the Decree of the President of the Republic of Kazakhstan signed on 22 May 2013, was established Joint Stock Company "National Management Holding "Baiterek" (the "Parent Company" or "Baiterek"), and a 100% state-owned package of shares of the Bank was transferred as payment for Baiterek shares. The ultimate controlling party is the Government of the Republic of Kazakhstan (the Government ). Related party transactions are disclosed in Note 23. Kazakhstan business environment The Group s operations are primarily located in Kazakhstan. Consequently, the Group is exposed to the economic and financial markets of Kazakhstan which display characteristics of an emerging market. The legal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changes which together with other legal and fiscal impediments contribute to the challenges faced by entities operating in Kazakhstan. In addition, the recent significant depreciation of the Kazakhstan tenge, and the reduction in the global price of oil, have increased the level of uncertainty in the business environment. The unaudited consolidated interim condensed financial statements reflect management s assessment of the impact of the Kazakhstan business environment on the operations and the financial position of the Group. The future business environment may differ from management s assessment. 10

11 Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended 2 Basis of preparation (а) (b) (c) (d) Statement of compliance The accompanying unaudited consolidated interim condensed financial statements are prepared in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting (the IAS 34 ). They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2015, as these unaudited consolidated interim condensed financial statements provide an update of previously reported financial information. Basis of measurement The unaudited consolidated interim condensed financial statements are prepared on the historical cost basis except for available-for-sale financial assets and derivative financial instruments are stated at fair value. Functional and presentation currency The functional currency of the Bank and its subsidiary is the Kazakhstan tenge ( KZT ) as, being the national currency of the Republic of Kazakhstan, it reflects the economic substance of the majority of underlying events and circumstances relevant to the Group. The KZT is also the presentation currency for the purposes of these unaudited consolidated interim condensed financial statements. All the financial information presented in KZT has been rounded to the nearest thousand. Use of estimates and judgments The preparation of unaudited consolidated interim condensed financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In particular, the information about significant areas of estimation uncertainty and critical judgments in applying accounting policies, that have the most significant impact in unaudited consolidated interim condensed financial statements, is described in the Note 11 Loans to customers, Note 5 Net gain/(loss) on derivative financial instruments. 3 Significant accounting policies The significant assumptions under the accounting policies applied by the Group in these unaudited consolidated interim condensed financial statements are consistent with those applied by the Group in the consolidated financial statements for the year ended 31 December

12 4 Net interest income and expense Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended Six-month period ended Six-month period ended 30 June 2015 Interest income Loans to customers 45,580,652 26,748,091 Available-for-sale financial assets 6,172,684 5,499,157 Cash and cash equivalents 3,911,101 40,216 Loans to banks 3,543,340 3,003,323 Finance lease receivables 2,913,791 1,376,966 Placements with banks and other financial institutions 2,196,319 2,022,564 Held-to-maturity investments 173, ,741 Other assets - 981,404 Investments in other organisations ,491,540 39,833,504 Interest expense Loans and balances from banks and other financial institutions (24,045,485) (12,246,891) Debt securities issued (16,350,612) (9,961,609) Subordinated debt (2,659,074) (161,741) Current accounts and deposits from customers (1,110,917) (426,433) Loans from the Government of the Republic of Kazakhstan and SWF Samruk-Kazyna (617,347) (620,139) Loans from the Parent Company - (1,574,481) 5 Net gain/(loss) on derivative financial instruments (44,783,435) (24,991,294) Six-month period ended Six-month period ended 30 June 2015 Unrealised gain/(loss) from the revaluation of derivative financial instruments 6,661,175 (1,550,441) Net interest expense from transactions with derivative financial instruments (2,178,113) (63,673) Realised gain on derivative financial instruments 15,393 85,215 4,498,455 (1,528,899) Unrealised gain from revaluation of derivative financial instruments during the six months period ended occurred as a result of changes in assumptions applied to cross-currency swaps valuations due to changes in the market conditions. 12

13 Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended 5 Net gain/(loss) on derivative financial instruments, continued In determining the fair value of swaps management made assumptions that the following rates are appropriate for the Group (unaudited): ranging from 10.80% to 14.61% in KZT, ranging from 0.58% to 0.89% in USD and ranging from 2.38% to 4.31% in MYR (2015: 5.28% to 13.18% in KZT, 0.28% to 1.66% in USD and 1.32% to 4.79% in MYR). 6 Other income, net Six-month period ended Six-month period ended 30 June 2015 Gain from assets and liabilities write-off 2,593,627 - Income from utilization of government grants 470,826 4,888,068 Fines and penalties 159,995 46,476 Expenses in the form of negative adjustment of value of the loan granted to customers or other banks (8,914) (163,964) Other expenses (760,397) (54,579) 2,455,137 4,716,001 7 Impairment losses Six-month period ended Six-month period ended 30 June 2015 (Charge for)/recovery of impairment losses Loans to customers (Note 11) (12,477,949) (8,584,552) Amounts receivable under finance lease agreements (Note 12) (912,745) (204,102) Available-for-sale financial assets - (43,336) Asset to be transferred under finance lease agreements Other assets 125,404 11,409 (13,265,290) (8,819,918) 8 Income tax expense Six-month period ended Six-month period ended 30 June 2015 Current income tax expense Current period (2,341,600) (1,116,281) (Underprovided)/overprovided in prior periods (24,061) 323,633 (2,365,661) (792,648) Deferred tax expense Origination and reversal of temporary differences 1,295, ,703 1,295, ,703 Total income tax expense (1,069,875) (272,945) The Bank s applicable tax rate for current and deferred tax is 20% (2014: 20%). 13

14 Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended 8 Income tax expense, continued Reconciliation of effective tax rate: Six-month period ended % Six-month period ended 30 June 2015 % Profit before income tax 11,950,468 8,856,943 Income tax at the applicable tax rate (2,390,094) (20) (1,771,389) (20) Other non-deductible expense (193,513) (2) (22,268) (0) Non-taxable income on securities 1,875, ,426, Discount on loans from Banks and other financial institutions 281, Non-deductible impairment losses (972,456) (8) (259,084) (3) Previously unrecognised tax asset 289, Tax effect of excess of realisation gain at transfer of assets to finance leasing (38,627) (0) - - Tax exempt interest on finance lease receivables 343, ,165 1 Change in unrecognised deferred tax assets (240,899) (2) (43,716) (0) (Underprovided)/overprovided in prior periods (24,061) (0) 323,633 4 (1,069,875) (9) (272,945) (3) 9 Cash and cash equivalents 31 December 2015 Demand deposits National Bank of the Republic of Kazakhstan 17,031,719 13,524,020 Total demand deposits 17,031,719 13,524,020 Cash on current bank accounts National Bank of the Republic of Kazakhstan 82,619, ,223,307 Other banks Rated from AA- to AA+ 70,201,336 39,199,081 Rated from A- to A+ 60,145,129 2,519,657 Rated from BBB- to BBB+ 1,426,287 3,473,933 Rated from BB- to BB+ 9,026 3,280,727 Rated from B- to B+ 7 7,877,229 Rated from CCC- to CCC+ 1,054,011 - Not rated 768,758 61,202 Total cash on current bank accounts 216,223, ,635,136 Reverse repo agreements with original maturities of less than three months 65,000,006 6,022,841 Cash on hand ,255, ,182,124 14

15 9 Cash and cash equivalents, continued Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended As at, the Group entered into reverse repurchase agreements at Kazakhstan Stock Exchange. The subject of these agreements were treasury notes of the Ministry of Finance of the Republic of Kazakhstan and notes of the National Bank of the Republic of Kazakhstan. The carrying amount of those agreements and fair value of securities pledged amounted to KZT 65,000,006 thousand and KZT 68,742,554 thousand, respectively (unaudited) (31 December 2015: KZT 6,022,841 thousand and KZT 6,845,797 thousand, respectively). The above table is based on the credit ratings assigned by Standard & Poor s or other agencies converted into Standard & Poor s scale. None of cash and cash equivalents are impaired or past due. Concentration of cash and cash equivalents As at the Group had three bank (31 December 2015: one bank), whose balances exceeded 10% of equity. The gross value of these balances as of and 31 December 2015 was KZT 225,691,677 thousand (unaudited) and KZT 157,747,327 thousand, respectively. 10 Placements with banks and other financial institutions 31 December 2015 Not impaired or past due Deposits Rated from BB- to BB+ 4,457, ,993 Rated from B- to B+ 118,875,543 67,561, ,333,166 67,964,988 As at the Group had two banks (31 December 2015: one bank), whose balances exceeded 10% of equity. The gross value of these balances as of and 31 December 2015 was KZT 83,502,488 thousand (unaudited) and KZT 41,075,248 thousand, respectively. 11 Loans to customers 31 December 2015 Loans to corporate customers 1,319,928,032 1,345,600,538 Mortgage loans 336, ,494 Interest accrued 49,794,690 46,949,040 Gross loans to customers 1,370,059,026 1,392,918,072 Impairment allowance (36,731,828) (24,692,442) Net loans to customers 1,333,327,198 1,368,225,630 15

16 11 Loans to customers, continued Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended Movements in the loan impairment allowance for the six-month periods ended and 30 June 2015 are as follows: Six-month period ended Six-month period ended 30 June 2015 Balance at the beginning of the period (24,692,442) (34,221,008) Net charge for the period (12,477,949) (8,584,552) Effect of changes in foreign exchange rates 438,563 (788,150) Reclassification of impairment allowance into discount as the result of restructuring - 731,322 Balance at the end of the period (36,731,828) (42,862,388) (a) Credit quality of loan portfolio The following table provides information on the credit quality of the loan portfolio at : Gross loans Impairment allowance Net loans Impairment allowance to gross loans % Loans without individual signs of impairment 1,252,507,846 (15,674,548) 1,236,833, Impaired loans: - not past due 94,532,565 (9,792,242) 84,740, overdue less than 90 days 23,018,615 (11,265,038) 11,753, Total impaired loans 117,551,180 (21,057,280) 96,493, Total loans 1,370,059,026 (36,731,828) 1,333,327, The following table provides information on the credit quality of the loan portfolio at 31 December 2015: Impairment Gross loans Impairment allowance Net loans allowance to gross loans KZT 000 % Loans without individual signs of impairment 1,334,455,986 (12,004,002) 1,322,451, Impaired loans: - not past due 37,417,203 (3,691,256) 33,725, overdue less than 90 days 21,044,883 (8,997,184) 12,047, Total impaired loans 58,462,086 (12,688,440) 45,773, Total loans 1,392,918,072 (24,692,442) 1,368,225,

17 Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended 11 Loans to customers, continued (a) Credit quality of loan portfolio, continued In determining the impairment allowance for loans to corporate customers, management made the following key assumptions: historic annual loss rate of 1.25 % (31 December 2015: 0.90%). a discount of between 20% and 70% to the originally appraised value if the property pledged is sold; a delay of 12 to 36 months in obtaining proceeds from the foreclosure of collateral. Changes in these estimates could affect the loan impairment allowance. For example, to the extent that the net present value of the estimated cash flows differs by plus/minus one percent, the impairment allowance for loans to customers as at would be KZT 13,333,272 thousand (unaudited) lower or higher (31 December 2015: KZT 13,682,256 thousand lower or higher). (b) Significant credit exposures As at, the Group had seven borrowers, including National Company KazMunayGas JSC and Kazakhtelekom JSC whose bonds were reclassified out of financial assets available-forsale category to loans and advances to customers (31 December 2015: six borrowers), whose balances per each borrower exceeded 10% of equity. As at, total gross value of these balances was KZT thousand (unaudited) (31 December 2015: KZT 904,928,266 thousand). 12 Finance lease receivables The components of net investments in finance lease as at and 31 December 2015 are as follows: 31 December 2015 Within one year 16,852,130 13,446,734 More than one year, but less than five years 34,955,456 30,212,816 More than five years 10,628,816 8,543,793 Minimum lease payments 62,436,402 52,203,343 Less unearned finance income Less than one year (2,252,582) (2,302,950) From one to five years (7,882,705) (8,395,204) More than five years (1,646,803) (2,124,725) Less unearned finance income, total (11,782,090) (12,822,879) Less impairment allowance (9,070,904) (8,164,973) Net investment in finance lease 41,583,408 31,215, December 2015 Leases to large corporate 26,456,516 17,921,803 Leases to small and medium-sized companies 24,197,796 21,458,661 Less impairment allowance (9,070,904) (8,164,973) Net investment in finance lease 41,583,408 31,215,491 17

18 12 Finance lease receivables, continued Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended Movements in the lease impairment allowance for the six-month periods ended and 30 June 2015 are as follows: Embedded derivative Six-month period ended Six-month period ended 30 June 2015 Balance at the beginning of the period 8,164,973 6,968,899 Charge for the period, net 912, ,102 Transfer to other assets (6,814) (179,463) Write-offs - (149,358) Balance at the end of the period 9,070,904 6,844,180 The repayment of investment in finance leases with book value of KZT 14,168,641 thousand (unaudited) (31 December 2015: KZT 7,871,934 thousand) is linked to appreciation in the rate of the USD against the KZT. If the rate of the USD appreciate, the amount receivable is increased by the respective index. If the rate of the USD depreciate, the amount receivable is not adjusted below the original outstanding amount in KZT. Base for calculation of embedded derivative includes all future payments under finance lease agreements and contingent liabilities linked to appreciation of USD against the KZT and as at amounts to KZT 16,895,089 thousand (unaudited) (31 December 2015: KZT 17,742,675 thousand). These embedded derivatives recorded at fair value in the consolidated interim condensed financial statements. The estimated amount of the embedded derivative, which is included in finance lease receivables as at is KZT 3,267,199 thousand (unaudited) (31 December 2015: KZT 3,826,180 thousand). Fair value is calculated using a model based on the Black-Scholes option pricing model. The management uses the following assumptions for valuation of the embedded derivative: risk-free rates are estimated using yield curves for respective currencies and ranged from 0.64% to 0.91% for USD, and from 4.60% to 15.39% for KZT (unaudited) (31 December 2015: from 0.75% to 1.71% for USD and from 5.39% to 6.23% for KZT); volatility in the model is defined based on the historical half-year observations of fluctuations in actual foreign exchange rates; no transaction cost is included in the model. If the spreads between KZT and USD risk-free rates narrowed by 0.5% across all the contracts the fair value of derivative would have decreased by KZT 192,684 thousand (unaudited). Decrease of volatility by 50% would result in decrease of the fair value of derivative by KZT 1,107,019 thousand. 18

19 12 Finance lease receivables, continued Credit quality of finance lease portfolio Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended The following table provides information on the credit quality of the finance lease portfolio as at : Gross finance leases Impairment allowance Net finance leases Impairment as a percentage of gross finance lease, % Leases to large corporate Leases for which no impairment has been identified: - not overdue 12,762,362 (644,454) 12,117, overdue more than 1 day and less than 5 days 138,410 (7,140) 131, overdue more than 5 days and less than 90 days 8,307,623 (37,065) 8,270, Impaired leases: - overdue more than 5 days and less than 90 days 1,355,269 (463,756) 891, overdue more than 360 days 3,892,852 (2,991,289) 901, Total leases to large corporate clients 26,456,516 (4,143,704) 22,312, Leases to small and mediumsized companies Leases for which no impairment has been identified: - not overdue 7,765,550 (189,585) 7,575, overdue more than 5 days and less than 90 days 399,080 (20,586) 378, overdue more than 90 days and less than 360 days - overdue more than 360 days 58,459 (3,016) 55, Impaired leases: - not overdue 10,641,863 (1,612,123) 9,029, overdue more than 360 days 5,332,844 (3,101,890) 2,230, Total leases to small and medium-sized companies 24,197,796 (4,927,200) 19,270, Total finance leases 50,654,312 (9,070,904) 41,583,

20 12 Finance lease receivables, continued Credit quality of finance lease portfolio, continued Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended The following table provides information on the credit quality of the finance lease portfolio as at 31 December 2015: Gross finance leases Impairment Net finance leases Impairment as a percentage of gross finance lease % Leases to large corporates Leases for which no impairment has been identified: - not overdue 12,615,137 (265,445) 12,349, Impaired leases: - overdue more than 90 days and less than 360 days 1,428,842 (446,362) 982, overdue more than 360 days 3,877,824 (2,941,044) 936, Total leases to large corporates 17,921,803 (3,652,851) 14,268, Leases to small and medium-sized companies Leases for which no impairment has been identified: - not overdue 4,790,331 (420,404) 4,369, overdue more than 5 days and less than 90 days 677,968 (152,500) 525, overdue more than 90 days and less than 360 days 57,661 (12,970) 44, Impaired leases: - not overdue 10,630,453 (929,378) 9,701, overdue more than 360 days 5,302,248 (2,996,870) 2,305, Total leases to small and mediumsized companies 21,458,661 (4,512,122) 16,946, Total finance leases 39,380,464 (8,164,973) 31,215, The Group has estimated impairment for finance leases based on an analysis of the future cash flows for impaired lease receivables and based on current economic conditions for portfolios of finance leases for which no indications of impairment has been identified. In determining the collective impairment allowance for finance lease receivables, the management has assumed loss rates from 0.45% to 5.16% and 2.10% to 22.49% for the six-month period ended (unaudited) and for the year ended 31 December 2015, respectively, which are based on historic loss experience of assets categories adjusted for current economic conditions. Changes in these estimates could affect the lease impairment provision. For example, to the extent that the net present value of the estimated cash flows differs by plus/minus one percent, the impairment allowance on finance leases as at would be KZT 415,834 thousand (unaudited) lower/higher (31 December 2015: KZT 312,155 thousand). 20

21 12 Finance lease receivables, continued Analysis of collateral Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended The following tables provides information on collateral, leased assets and other credit enhancements securing finance lease receivables, net of impairment, by types of collateral: Finance lease receivables, carrying amount Fair value of collateral - for collateral assessed as of reporting date Leases for which no impairment has been identified: Real estate 1,128,333 1,128,333 Motor vehicles 20,895,128 20,895,128 Equipment 3,096,973 3,096,973 No collateral or other credit enhancement 3,409,204 - Total leases for which no impairment has been identified 28,529,638 25,120,434 Impaired leases: Real estate 1,284,919 1,284,919 Motor vehicles 185, ,316 Equipment 10,180,443 10,180,443 Other assets 41,653 41,653 No collateral or other credit enhancement 1,361,439 - Total impaired finance lease receivables 13,053,770 11,692,331 Total finance lease receivables 41,583,408 36,812,765 Finance lease receivables, carrying amount Fair value of collateral - for collateral assessed as of reporting date 31 December 2015 Leases for which no impairment has been identified: Real estate 1,171,279 1,171,279 Motor vehicles 12,807,646 12,807,646 Equipment 1,593,617 1,593,617 Other assets 46,136 46,136 No collateral or other credit enhancement 1,671,100 - Total leases for which no impairment has been identified 17,289,778 15,618,678 Impaired leases: Real estate 1,284,919 1,284,919 Motor vehicles 203, ,178 Equipment 10,356,477 10,356,477 Other assets 41,652 41,652 No collateral or other credit enhancement 2,039,487 - Total impaired leases 13,925,713 11,886,226 Total finance leases 31,215,491 27,504,904 The tables above exclude overcollateralisation. 21

22 12 Finance lease receivables, continued Analysis of collateral, continued Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended The Group has no finance lease receivables, for which the fair value of collateral was assessed at the finance lease receivables inception date and it was not updated for further changes, and finance lease receivables for which the fair value of collateral is not determined. Information on the valuation of collateral is based on when this estimate was made, if any. For finance lease receivables secured by multiple types of collateral, collateral that is most relevant for impairment assessment is disclosed. Sureties received from individuals, such as shareholders of small and medium-sized borrowers, are not considered for impairment assessment purposes. Accordingly, such finance lease receivables and unsecured portions of partially secured exposures are presented as finance lease receivables without collateral or other credit enhancement. The recoverability of finance lease receivables which are neither past due nor impaired primarily depends on the creditworthiness of borrowers rather than the value of collateral, and the Company does not necessarily update the valuation of collateral as at each reporting date. Collateral obtained During the six-month period ended the Company did not obtain assets by taking control of collateral securing leases. 13 Available-for-sale financial assets 31 December 2015 Held by the Group Debt instruments Treasury bills of the Ministry of Finance of the Republic of Kazakhstan 50,598,699 8,397,130 Bonds of the SWF Samruk-Kazyna 33,393,178 35,646,370 Corporate bonds 29,784,955 28,529,906 Bonds of CIS based financial institutions 25,605,704 65,542,552 Bonds of Kazakh credit institutions, other than banks 16,818,579 15,290,277 Bonds of Kazakh banks 11,562,685 20,988, ,763, ,394,444 The following table presents information on the credit quality of available-for-sale financial assets: 31 December 2015 Rated from BBB- to BBB+ 135,928,277 92,901,558 Rated from BB- to BB+ 21,735,876 61,860,259 Rated from B- to B+ 9,036,735 7,517,217 Rated from CCC- to CCC+ 17,079 11,086,128 Not rated 1,045,833 1,029, ,763, ,394,444 The above table is based on the credit ratings assigned by Standard & Poor s or other agencies converted into Standard & Poor s scale. None of available-for-sale financial assets are impaired or past due. 22

23 14 Advances paid under finance lease agreements 15 Other assets Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended 31 December 2015 Amount receivable from IFK JSC 68,170,469 68,374,682 Trade and other receivables 13,826, ,686 Accrued commission income 3,696,539 7,963,812 Loan arrangement fee prepaid 2,337,431 - Loan commitment fee prepaid 1,279,342 1,348,981 Equity investments 3,733 3,739 Fines and penalties accrued 424 2,597 Impairment allowance (282,612) (425,739) Total financial assets 89,031,534 77,390,758 Foreclosed collateral 1,884,543 1,956,008 Taxes recoverable other than income tax 972, ,172 Prepayments 296,294 93,744 Other receivables 68, ,309 Materials and supplies 27,952 26,841 Loan arrangement fee prepaid - 4,430,883 Impairment allowance (1,238,641) (1,264,064) Total non-financial assets 2,011,318 6,250,893 Total other assets 91,042,852 83,641,651 As at, included in other assets are overdue receivables of KZT 354 thousand, all of which are overdue for less than 90 days (31 December 2015: KZT 941 thousand). As part of the trade and other receivables of KZT 13,715,542 thousand represents principal and accrued interest on certain securities redeemed by issuer that were due from custodian and have been repaid on 7 July Current accounts and deposits from customers 31 December 2015 Cash placed on irrevocable letters of credit 6,505,615 9,611,428 Advances paid to suppliers under finance lease 3,634,554 16,886,226 10,140,169 26,497, December 2015 Deposits from fellow subsidiaries 38,970,524 26,085,537 Accounts pledged as collateral 5,138,373 5,275,534 Current accounts and demand deposits 3,896,769 7,763,929 Deposits served as collateral on loans to customers 2,248,057 2,704,571 50,253,723 41,829,571 23

24 Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended 17 Loans from banks and other financial institutions 31 December 2015 Loans with fixed interest rate Loans from OECD banks 22,978,440 21,801,908 Loans from non-oecd banks 633,080, ,167,526 Total loans with fixed interest rate 656,058, ,969,434 Loans with floating interest rate Loans from OECD banks 15,778,881 5,042,538 Loans from non-oecd banks and other financial institutions 274,945, ,817,568 Total loans with floating interest rate 290,724, ,860,106 Less: unamortised portion of borrowing costs (45,106,020) (50,581,692) 901,677, ,247,848 In May 2016, the Group received a loan for the amount of USD 32,317 thousand from Sumitomo Mitsui Banking Corporation Europe Limited at a floating interest rate maturing in 2022 (unaudited). As at, included in loans from banks and other financial institutions is accrued interest expense of KZT 13,624,317 thousand (unaudited) (31 December 2015: KZT 13,717,198 thousand). 18 Government grants The Group recorded as government grants the benefits obtained by means of low-interest rate loans from the Parent Company, Baiterek Development JSC and SWF Samruk-Kazyna. 30 June 2015 Balance at the beginning of the period 44,298,936 7,234,798 Government grant on loans received from the Government through the Parent Company 10,799,293 84,716,323 Utilisation of government grant upon issuance of low interest loans to commercial banks (7,764,576) (49,577,802) Utilisation of government grant upon issuance of loans to other borrowers (845,088) - Recovery of government grant from unallocated funds returned by banks 150,164 - Amortisation for the period (53,222) (14,876) Net foreign exchange loss 2,075 1,968 Balance at the end of the period 46,587,582 42,360,411 The Group has an obligation to distribute benefits to ultimate borrowers through provision of low interest loans. Subsequent to initial recognition the Group allocates to profit or loss an amount corresponding to the debt relief provided to the borrowers. On 4 February 2016, under Resolution No.271 of the Government of the Republic of Kazakhstan dated 23 April 2015, the Group received from the Parent Company a long-term loan of KZT 15,000,000 thousand at a fixed interest rate of 0.15 % p.a. to be repaid in February The loan was provided to support exporters so that the rate to the ultimate recipients does not exceed 6% p.a. (unaudited). Upon initial recognition, the above loan was recognised at fair value calculated by discounting the contractual cash flows at market interest rate of 6.89% p.a. Since the loan came with conditions attached and the Bank was not an intended ultimate recipient of the subsidised financing, the discount on these loan of KZT 10,799,293 thousand was recognised as a government grant (unaudited). 24

25 19 Debt securities issued Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended In May 2016, the Group issued KZT denominated bonds amounting to KZT 65,000,000 thousand bearing coupon interest rate of 14% (effective interest rate 14.01%) and maturing in May 2026 (unaudited). In June 2016, the Group issued KZT denominated bonds amounting to KZT 30,000,000 thousand bearing coupon interest rate of 14% (effective interest rate 14.02%) and maturing in June 2019 (unaudited). 20 Risk management 31 December 2015 Debt securities with fixed interest rate Eurobonds denominated in USD 549,447, ,637,664 Islamic bonds Sukuk Al-Murabaha in MYR 20,582,485 19,370,042 Bonds denominated in KZT 115,000,000 24,956, ,029, ,964,154 Unamortised discount, net (23,644,799) (25,198,857) 661,385, ,765,297 Accrued interest 3,739,958 2,785, ,125, ,550,797 Management of risk is fundamental to the business of the Group and is an essential element of the Group s operations. The major risks faced by the Group are those related to market risk, which includes price, interest rate and currency risk, credit risk and liquidity risk. As at the most significant changes in relation to price, interest rate, credit and liquidity risks since 31 December 2015 were the change in the credit risk of loans to customers discussed in Note 11. (а) (i) Market risk Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group is exposed to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Interest margins may increase as a result of such changes, but may also reduce or create losses in the event that unexpected movements occur. 25

26 Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended 20 Risk management, continued (а) (i) Market risk, continued Interest rate risk, continued Interest rate gap analysis Interest rate risk is managed principally through monitoring interest rate gaps. A summary of the interest gap position for major financial instruments is as follows: Non-interest bearing Less than 3 months 3-6 months 6-12 months 1-5 years More than 5 years Past due Carrying amount ASSETS Cash and cash equivalents Placements with banks and other financial 158,748, ,506, ,255,440 institutions - 14,199,280 36,210,386 32,011,340 40,912, ,333,166 Loans to banks ,062,789 56,415,457-83,478,246 Loans to customers - 414,956,781 29,880,711 27,138,170 78,643, ,487,488 1,221,008 1,333,327,198 Finance lease receivables - 2,308,725 1,880,812 3,507,022 23,527,027 8,637,442 1,722,380 41,583,408 Available-for-sale financial assets - 10,122,988 4,585,392 1,045,833 83,996,143 68,013, ,763,800 Held-to-maturity investments ,839,090-4,839,090 Other financial assets 89,031, ,031, ,780, ,094,656 72,557,301 63,702, ,141, ,392,921 2,943,388 2,141,611,882 LIABILITIES Current accounts and deposits from customers 11,283,198-11,776,160 11,164,697 5,683,860 10,345,808-50,253,723 Loans from the Government of the Republic of Kazakhstan and the SWF Samruk-Kazyna ,178,272 17,796,254-36,974,526 Loans from banks and other financial institutions - 233,336,852 51,309, ,130, ,899, ,677,025 Debt securities issued ,435, ,689, ,125,047 Subordinated debt ,227,753-84,227,753 Other financial liabilities 28,661, ,661,966 39,945, ,336,852 63,086,053 11,164, ,427, ,959,407-1,766,920, ,834, ,757,804 9,471,248 52,537,668 (183,286,708) (62,566,486) 2,943, ,691,842 26

27 Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended 20 Risk management, continued (а) (i) Market risk, continued Interest rate risk, continued Interest rate gap analysis, continued A summary of the interest gap position for major financial instruments is as follows: Non-interest bearing Less than 3 months 3-6 months 6-12 months 1-5 years More than 5 years Overdue Carrying amount KZT December 2015 ASSETS Cash and cash equivalents 205,619,299 14,562, ,182,124 Placements with banks and other financial institutions 10,564,756 2,391,505 7,802,248 6,131,230 41,075, ,964,988 Loans to banks ,578,790 52,385,027-83,963,817 Loans to customers - 437,094,009 6,164,664 26,144,083 70,486, ,116,487 1,219,874 1,368,225,630 Finance lease receivables - 925,013 1,495,313 2,793,222 18,440,339 6,232,918 1,328,686 31,215,491 Available-for-sale financial assets - 8,357,343 14,656,570 2,023, ,017,577 25,338, ,394,444 Held-to-maturity investments ,671,181-4,671,181 Other financial assets 77,390, ,390, ,574, ,330,695 30,118,795 37,092, ,598, ,744,580 2,548,560 2,028,008,433 LIABILITIES Current accounts and deposits from customers 15,744, ,718,500 6,698,835 7,668,203-41,829,571 Loans from the Government of the Republic of Kazakhstan and SWF Samruk-Kazyna ,901,359 27,844,611-36,745,970 Loans from banks and other financial institutions - 249,123,231 47,963, ,184, ,976, ,247,848 Debt securities issued - 5,113, ,101, ,335, ,550,797 Subordinated debt ,548,341-77,548,341 Other financial liabilities 24,142, ,142,227 39,886, ,236,898 47,963,349 11,718, ,886, ,373,276-1,671,064, ,688, ,093,797 (17,844,554) 25,374,022 (108,288,003) (7,628,696) 2,548, ,943,679 27

28 20 Risk management, continued (а) (i) Market risk, continued Interest rate risk, continued Notes to the Consolidated Interim Condensed Financial Statements for the six-month period ended Average interest rates The table below displays average effective interest rates for interest bearing assets and liabilities as at and 31 December 2015: Average effective interest rate, % 31 December 2015 Average effective interest rate, % Other Other KZT USD currencies KZT USD currencies Interest bearing assets Cash and cash equivalents Placements with banks and other financial institutions Loans to banks Loans to customers Finance lease receivables Available-for-sale financial assets Held-to-maturity investments Interest bearing liabilities Current accounts and deposits from customers Loans from the Government of the Republic of Kazakhstan and SWF Samruk- Kazyna Loans from banks and other financial institutions Debt securities issued Subordinated debt Interest rate risk arises when the actual or forecasted assets of a given maturity period are either greater or less than the actual or forecasted liabilities in that maturity period. Cash flow interest rate sensitivity analysis An analysis of sensitivity of profit or loss for the year and equity to changes in the market interest rate based on a simplified scenario of a 100 basis point (bp) symmetrical fall or rise in all yield curves and positions of interest-bearing assets and liabilities existing as at and 31 December 2015 is as follows: 31 December 2015 Profit or loss Equity Profit or loss Equity 100 bp parallel increase 2,549,627 2,549,627 1,425,182 1,425, bp parallel decrease (2,549,627) (2,549,627) (1,425,182) (1,425,182) 28