Not today: We are keeping our Hold recommendations on the Halyk Bank (HSBKKZ) 2021 and 2022 US$-denominated bonds. In our view, the key message from Halyk’s recent Capital Markets Day was that there may be more opportunities for equity investors than creditors in Kazakhstan’s best bank.
Almex, Halyk Bank’s largest shareholder, is seeking to reduce its stake to improve the liquidity of the shares. In addition, management has ruled out paying a special dividend, but is considering a revision to the bank’s annual payout ratio, which was 50% in 2018.
The amount of CET1 capital at Halyk Bank is almost 2x the required level (KZT1029mn versus KZT527mn required at end-2018). In contrast to what we see as increasing equity market engagement, no new bonds are planned in the near term, and management has suggested that the 2022 bond may be redeemed ‘in stages’ prior to the final maturity.
With liquid assets of more than 5x the total amount of LC and FC bonds outstanding and cheaper FC-denominated term funding available elsewhere, the already-limited importance of the eurobond market to Halyk seems set to diminish further.