Exhibit 99.02
 
 
 
“Bank Freedom Finance Kazakhstan” JSC
(formerly known as “Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
 
Interim condensed consolidated financial statements
 
30 June 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 
  
CONTENTS
 
 
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Interim condensed consolidated statement of financial position
1
Interim condensed consolidated statement of comprehensive income
2-3
Interim condensed consolidated statement of changes in equity
4
Interim condensed consolidated statement of cash flows
5
 
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
2
Basis of preparation
6
3
Significant accounting judgments and estimates
8
4
Cash and cash equivalents
10
5
Amounts due from banks and other financial institutions
11
6
Loans to customers
11
7
Investment securities
32
8
Other assets
33
9
Taxation
34
10
Amounts due to banks and other financial institutions
34
11
Amounts due to customers
35
12
Subordinated debt
36
13
Other liabilities
36
14
Equity
36
15
Interest income and interest expense
37
16
Credit loss expense
38
17
Net fee and commission income
39
18
Personnel and administrative and other operating expenses
39
19
Earnings per share
40
20
Commitments and contingencies
40
21
Fair value measurement
41
22
Related party disclosures
45
23
Events after the end of the interim period
47
 
 
 
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 
As at 30 June 2020
 
(in thousands of tenge)
 
 
 
 
Notes
 
 
30 June
2020
(unaudited)
 
 
31 December
2019
(unaudited)
 
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
  4 
  36,989,406 
  33,448,522 
Amounts due from banks and other financial institutions
  5 
  839,452 
  776,208 
Loans to customers
  6 
  62,506,360 
  68,124,327 
Investment securities
  7 
  5,627,863 
  3,785,045 
Property and equipment
    
  6,360,170 
  6,457,813 
Intangible assets
    
  1,188,279 
  1,156,968 
Other assets
  8 
  3,661,145 
  2,962,341 
Total assets
    
  117,172,675 
  116,711,224 
 
    
    
    
Liabilities
    
    
    
Financial instruments at fair value through profit or loss
    
  593 
  9,626 
Amounts due to banks and other financial institutions
  10 
  7,286,123 
  9,111,519 
Amounts due to customers
  11 
  87,367,206 
  85,802,298 
Current corporate income tax liabilities
  9 
  11,121 
  209,187 
Deferred corporate income tax liabilities
  9 
  1,361,420 
  1,277,045 
Lease liabilities
    
  173,014 
  226,456 
Subordinated debt
  12 
  3,348,142 
  3,303,255 
Other liabilities
  13 
  386,130 
  614,052 
Total liabilities
    
  99,933,749 
  100,553,438 
 
    
    
    
Equity
    
    
    
Share capital
  14 
  9,356,140 
  9,356,140 
Revaluation reserve for property and equipment
  14 
  755,767 
  761,249 
Fair value reserve
    
  (1,208)
   
Retained earnings
    
  7,128,227 
  6,040,397 
Total equity
    
  17,238,926 
  16,157,786 
Total equity and liabilities
    
  117,172,675 
  116,711,224 
                
The accompanying notes on pages 6 to 47 are an integral part of these interim condensed consolidated financial statements.
1
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 
For the six-month period ended 30 June 2020
 
(in thousands of tenge)
 
 
 
 
 
 
 
For the three-month period ended 30 June
 
 
For the six-month period ended 30 June
 
 
 
Notes
 
 
2020
(unaudited)
 
 
2019*
(unaudited)
 
 
2020
(unaudited)
 
 
2019*
(unaudited)
 
Interest income calculated using effective interest rate
  15 
  2,771,268 
  3,466,905 
  5,899,439 
  7,000,112 
Interest expense
  15 
  (1,338,525)
  (1,912,603)
  (2,900,765)
  (3,942,140)
Net interest income
    
  1,432,743 
  1,554,302 
  2,998,674 
  3,057,972 
 
    
    
    
    
    
Credit loss expense
  16 
  (449,624)
  (398,254)
  (541,096)
  (707,993)
Net interest income after credit loss expense
    
  983,119 
  1,156,048 
  2,457,578 
  2,349,979 
 
    
    
    
    
    
Net fee and commission income
  17 
  206,961 
  401,703 
  405,086 
  734,362 
Net gains from financial instruments at fair value through profit or loss
    
  (294,154)
  24,435 
  (48,881)
  31,784 
Net gains/(losses) from foreign currencies
    
    
    
    
    
- dealing
    
  294,241 
  241,784 
  592,338 
  408,309 
- translation differences
    
  145,647 
  (33,439)
  (87,793)
  (36,400)
Gain from government grant
    
   
  48,598 
   
  62,582 
Other income
    
  7,641 
  28,019 
  21,299 
  63,973 
Non-interest income
    
  360,336 
  711,100 
  882,049 
  1,264,610 
 
    
    
    
    
    
Loss on derecognition of financial assets measured at amortised cost
    
   
  (4,712)
   
  (26,714)
Personnel expenses
  18 
  (456,531)
  (603,798)
  (1,041,337)
  (1,205,580)
Administrative and other operating expenses
  18 
  (420,399)
  (450,801)
  (881,877)
  (912,592)
Other expense
    
  (30,256)
   
  (42,886)
  (60,535)
Non-interest expense
    
  (907,186)
  (1,059,311)
  (1,966,100)
  (2,205,421)
Profit before corporate income tax expense
    
  436,269 
  807,837 
  1,373,527 
  1,409,168 
 
    
    
    
    
    
Corporate income tax expense
  9 
  (107,228)
  (107,076)
  (291,179)
  (292,803)
Profit for the period
    
  329,041 
  700,761 
  1,082,348 
  1,116,365 
 
Certain amounts in these columns do not conform to the amounts in the interim condensed consolidated financial statements for the six-month period ended 30 June 2019, since they reflect performed reclassifications that are detailed in Note 2.
 
The accompanying notes on pages 6 to 47 are an integral part of these interim condensed consolidated financial statements.
2
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (continued)
 
 
 
 
 
 
 
For the three-month period ended 30 June
 
 
For the six-month period ended 30 June
 
 
 
Notes
 
 
2020
(unaudited)
 
 
2019
(unaudited)
 
 
2020
(unaudited)
 
 
2019
(unaudited)
 
Other comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive (loss)/income that may be reclassified to profit or loss in subsequent periods

 
 
 
 
 
 
 
 
 
 
 
 
Net change in fair value of debt instruments at fair value through other comprehensive income

  (587)
  543 
  (1,778)
  1,850 
Changes in allowance for expected credit losses of debt instruments at fair value through other comprehensive income

  (1,200)
   
  570 
  (179)
Other comprehensive (loss)/ income, net of corporate income tax
    
  (1,787)
  543 
  (1,208)
  1,671 
Total comprehensive income for the period
    
  327,254 
  701,304 
  1,081,140 
  1,118,036 
 
    
    
    
    
    
Basic and diluted earnings per share (in tenge)
  19 
  35.17 
  74.90 
  115.68 
  119.32 
 
 
The accompanying notes on pages 6 to 47 are an integral part of these interim condensed consolidated financial statements.
3
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
 
For the six-month period ended 30 June 2020
 
(in thousands of tenge)
 
 
 
 
Notes
 
 
Share capital
 
 
Revaluation reserve for property and equipment
 
 
Fair value reserve
 
 
Retained earnings
 
 
Total equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As at 31 December 2018
 
 
 
  9,356,140 
  772,815 
  (2,382)
  4,026,035 
  14,152,608 
 
 
 
    
    
    
    
    
Profit for the period (unaudited)
 
 
 
   
   
   
  1,116,365 
  1,116,365 
Other comprehensive income for the period (unaudited)

   
   
  1,671 
   
  1,671 
Total comprehensive income for the period (unaudited)

   
   
  1,671 
  1,116,365 
  1,118,036 
 

    
    
    
    
    
Amortisation of revaluation reserve for property and equipment (unaudited)

   
  (6,083)
   
  6,083 
   
At 30 June 2019 (unaudited)

  9,356,140 
  766,732 
  (711)
  5,148,483 
  15,270,644 
 
    
    
    
    
    
    
At 1 January 2019
    
  9,356,140 
  761,249 
   
  6,040,397 
  16,157,786 
 
    
    
    
    
    
    
Profit for the period (unaudited)
    
   
   
   
  1,082,348 
  1,082,348 
Other comprehensive loss for the period (unaudited)
    
   
   
  (1,208)
   
  (1,208)
Total comprehensive income for the period (unaudited)
    
   
   
  (1,208)
  1,082,348 
  1,081,140 
 
    
    
    
    
    
    
Amortisation of revaluation reserve for property and equipment (unaudited)
    
   
  (5,482)
   
  5,482 
   
At 30 June 2020 (unaudited)
    
  9,356,140 
  755,767 
  (1,208)
  7,128,227 
  17,238,926 
 
The accompanying notes on pages 6 to 47 are an integral part of these interim condensed consolidated financial statements.
4
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
 
For the six-month period ended 30 June 2020
 
(in thousands of tenge)
 
 
 
 
 
 
 
For the six-month period ended 30 June
 
 
 
Notes
 
 
2020 (unaudited)
 
 
2019 (unaudited)
 
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
Interest received
 
 
 
  4,395,314 
  6,536,376 
Interest paid
 
 
 
  (2,905,335)
  (3,923,851)
Fees and commissions received
 
 
 
  919,990 
  1,001,018 
Fees and commissions paid
 
 
 
  (482,409)
  (266,809)
Net realised (losses)/gains on transactions with financial instruments at fair value through profit or loss
 
 
 
  (57,914)
  31,784 
Net realised gains from dealing in foreign currencies
 
 
 
  592,338 
  408,309 
Other income received
 
 
 
  21,299 
  63,973 
Personnel expenses paid
 
 
 
  (1,393,710)
  (1,228,847)
Administrative and other operating expenses paid
 
 
 
  (606,832)
  (610,742)
Cash flows from operating activities before changes in operating assets and liabilities

  482,741 
  2,011,211 
 

    
    
Net changes in operating assets and liabilities

    
    
Amounts due from banks and other financial institutions

  (41,527)
  (200,389)
Loans to customers

  5,672,083 
  291,929 
Other assets

  151,548 
  91,308 
Amounts due to banks and other financial institutions

  (1,844,086)
  (692,426)
Amounts due to customers

  344,278 
  2,306,458 
Other liabilities
    
  (6,193)
  58,922 
Net cash from operating activities before corporate income tax
    
  4,758,844 
  3,867,013 
 
    
    
    
Corporate income tax paid
    
  (404,870)
   
Net cash flows from operating activities
    
  4,353,974 
  3,867,013 
 
    
    
    
Cash flows from investing activities
    
    
    
Purchase of property and equipment
    
  (52,577)
  (74,010)
Purchase of intangible assets
    
  (22,950)
  (54,630)
Purchase of investment securities at fair value through other comprehensive income
    
  (1,599,635)
  839,533 
Net cash flows (used in) / from investing activities
    
  (1,675,162)
  710,893 
 
    
    
    
Cash flows from financing activities
    
    
    
Lease payments
    
  (47,507)
  (42,238)
Net cash used in financing activities
    
  (47,507)
  (42,238)
 
    
    
    
Effect of exchange rate changes on cash and cash equivalents
    
  916,096 
  (492,662)
Effect of expected credit losses on cash and cash equivalents
    
  (6,517)
  3,702 
Net increase in cash and cash equivalents
    
  3,540,884 
  4,046,708 
 
    
    
    
Cash and cash equivalents at the beginning of the reporting period
    
  33,448,522 
  43,344,207 
Cash and cash equivalents at the end of the reporting period
    
  36,989,406 
  47,390,915 
 
    
    
    
Non-cash transactions
    
    
    
Repayment of loans to customers by repossession of collateral
  8 
  835,553 
  39,067 
 
The accompanying notes on pages 6 to 47 are an integral part of these interim condensed consolidated financial statements.
5
“Bank Kassa Nova” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
1. Principal activities
 
These interim condensed consolidated financial statements comprise the financial statements of “Bank Freedom Finance Kazakhstan” JSC (formerly known as “Bank Kassa Nova” JSC (SB “ForteBank” JSC)) (the “Bank”) and OUSA Nova Limited Liability Partnership, a subsidiary of the Bank (jointly, the “Group”).
 
The Bank was registered on 31 July 2009 under the laws of the Republic of Kazakhstan. The Bank operates under a general banking license No. 1.1.260 issued by the Agency for Regulation and Supervision of Financial Markets and Financial Organisations of the Republic of Kazakhstan on 10 June 2011. The Bank’s activities are regulated by the National Bank of the Republic of Kazakhstan (“NBRK”).
 
The Bank accepts deposits from the public and extends credit, transfers payments in Kazakhstan and abroad, exchanges currencies and provides other banking services to its commercial and retail customers.
 
As at 30 June 2020 and 31 December 2019, the Bank’s branch network comprises 8 branches in the Republic of Kazakhstan.
 
Registered address of the Bank’s head office: 10 Kunayev Str., Nur-Sultan, Republic of Kazakhstan.
 
The Bank is a member of the Kazakhstan Deposit Insurance Fund (“KDIF”). The primary goal of the KDIF is to protect interests of depositors in the event of forcible liquidation of a member-bank. As at 30 June 2020 and 31 December 2019, depositors can receive limited insurance coverage for deposits up to a maximum of KZT 15 million per deposit, depending on the amount and currency of the deposit.
 
Starting from November 2015 the Bank is a member of Kazakhstan Stock Exchange foreign exchange market (“KASE”).
 
On 31 May 2018, the Bank established a subsidiary OUSA Nova Limited Liability Partnership (“OUSA Nova LLP”) in accordance with the NBRK permission to establish a subsidiary by the Bank No. 17 dated 2 May 2018. The principal activities of OUSA Nova LLP are the acquisition of doubtful and bad assets of the parent bank, sublease of real estate taken onto the books of the Bank.
 
As at 30 June 2020 and 31 December 2019, the sole shareholder of the Group, which owns 100% of outstanding shares is “ForteBank” JSC (the “Parent”).
 
On 29 April 2019, Nova Leasing JSC and “ForteBank” JSC signed and registered with the authorised body an agreement for the purchase and sale of shares of “Bank Freedom Finance Kazakhstan” JSC owned by Nova Leasing JSC in the amount of 100% of the issued share capital of “Bank Freedom Finance Kazakhstan” JSC.
 
As at 30 June 2020 and 31 December 2019, the Group is under the practical control of Mr. B.Zh. Utemuratov, who is the ultimate controlling party and has the power to direct the Group activities at its sole discretion and on its own account.
 
2. Basis of preparation
 
General
 
The interim condensed consolidated financial statements for the six-month period ended 30 June 2020 have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.
 
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at 31 December 2019.
 
The interim condensed consolidated financial statements are presented in thousands of Kazakh tenge (“tenge” or “KZT”), unless otherwise is stated.
 
Effect of COVID-19 pandemic
 
Due to rapid spread of COVID-19 pandemic in the early of 2020 many governments, including the Republic of Kazakhstan, have introduced various measures to combat the outbreak, including travel restrictions, quarantines, closure of business and other venues and lockdown of certain area. These measures have affected the global supply chain, demand for goods and services, as well as scale of business activity. It is expected that pandemic itself as well as measures for its consequences’ minimization may influence the business of the entities in wide range of industries. Since March 2020 significant volatility in stock, currency and commodity markets exists, including decrease in crude prices and decrease in KZT to USD and EUR foreign exchange rates.
 
6
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
2.  Basis of preparation (continued)
 
Effect of COVID-19 pandemic (continued)
 
In 2020, support measures were introduced by the Government and the National Bank of the Republic of Kazakhstan (the “NBRK”) to counter the economic downturn caused by the COVID-19 pandemic. These measures include, among others, subsidized lending to affected industries and individuals, payment holidays and easing of certain regulatory restrictions to help the financial sector maintain its capabilities to provide resources and to help customers avoid liquidity shortages as a result of the COVID-19 containment measures.
 
The Group continues to assess pandemic effect and changing micro- and macroeconomic conditions on its activities, financial position and financial results.
 
Changes in accounting policies
 
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2019.
 
The Group has not adopted standards, interpretations or amendments thereto that have been early issued but are not yet effective.
 
Certain amendments that came into effect on 1 January 2020 have been applied, but they do not have any impact on the Group’s interim condensed consolidated financial statements.
 
Amendments to IFRS 3: Definition of a Business
 
The amendment to IFRS 3 clarifies that to be considered a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. Furthermore, it clarified that a business can exist without including all of the inputs and processes needed to create outputs. These amendments had no impact on the interim condensed consolidated financial statements of the Group, but may impact future periods should the Group enter into any business combinations.
 
Amendments to IFRS 7, IFRS 9 and IAS 39: Interest Rate Benchmark Reform
 
The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide a number of reliefs, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainties about the timing and or amount of benchmark-based cash flows of the hedged item or the hedging instrument. These amendments had no impact on the interim condensed consolidated financial statements of the Group as it does not have any interest rate hedge relationships.
 
Amendments to IAS 1 and IAS 8: Definition of Material
 
The amendments provide a new definition of material that states “information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.”
 
The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no impact on the interim condensed consolidated financial statements of, nor is there expected to be any future impact to the Group.
 
Conceptual Framework for Financial Reporting issued on 29 March 2018
 
The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The purpose of the Conceptual Framework is to assist the IASB in developing standards, to help preparers develop consistent accounting policies where there is no applicable standard in place and to assist all parties to understand and interpret the standards.
 
The revised Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts. These amendments had no impact on the interim condensed consolidated financial statements of the Group.
 
 
7
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
2.  Basis of preparation (continued)
 
Reclassifications
 
The following reclassifications were made in the interim condensed consolidated statement of comprehensive income for the six-month and three-month periods ended 30 June 2019 for the purposes of the presentation for the six-month and three-month periods ended 30 June 2020:
 
Interim condensed statement of comprehensive income for the six-month period ended 30 June 2019
 
As previously reported
 
 
Reclassification
 
 
As adjusted
 
 
 
 
 
 
 
 
 
 
 
Interest income calculated using effective interest rate
  7,048,044 
  (47,932)
  7,000,112 
Net interest income
  3,105,904 
  (47,932)
  3,057,972 
Net interest income after credit loss expense
  2,397,911 
  (47,932)
  2,349,979 
 
    
    
    
Loss from modification of financial assets that does not result in derecognition
  (47,932)
  47,932 
   
Non-interest expense
  (2,253,353)
  47,932 
  (2,205,421)
 
Interim condensed statement of comprehensive income for the three-month period ended 30 June 2019
 
As previously reported
 
 
Reclassification
 
 
As adjusted
 
 
 
 
 
 
 
 
 
 
 
Interest income calculated using effective interest rate
  3,509,358 
  (42,453)
  3,466,905 
Net interest income
  1,596,755 
  (42,453)
  1,554,302 
Net interest income after credit loss expense
  1,198,501 
  (42,453)
  1,156,048 
 
    
    
    
Loss from modification of financial assets that does not result in derecognition
  (42,453)
  42,453 
   
Non-interest expense
  (1,101,764)
  42,453 
  (1,059,311)
 
3. Significant accounting judgments and estimates
 
Estimation uncertainty
 
The preparation of interim condensed consolidated financial statements in conformity with IFRS 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 outcomes can differ from these estimates.
 
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised in the period in which the estimates are revised and in any future periods affected.
 
Fair value of financial instruments
 
Where the fair values of financial assets and financial liabilities recorded in the interim condensed consolidated statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The input to these models is taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values.
 
Assessment of collateral
 
The Group management performs monitoring of collateral on a regular basis. The management of the Group uses experienced judgements or an independent assessment in order to adjust the cost of collateral considering the current market conditions.
 
 
8
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
3.  Significant accounting judgments and estimates (continued)
 
Expected credit losses on financial assets
 
At the end of the first and beginning of the second quarter of 2020, there were significant changes in the economic environment:
 
Reduced industrial production and activities in many sectors of the economy as a result of government restrictions related to the outbreak of the COVID-19 pandemic;
 
Implementation of measures of state support to the population and business related to the outbreak of the COVID-19 pandemic;
 
Significant depreciation of the tenge exchange rate against major foreign currencies, high volatility in the foreign exchange market.
 
The above-mentioned changes in the economic environment have impact on the Group’s activities.
 
To help the Group’s clients, the following main activities are being implemented:
 
Offering changes to certain loan terms, including government support programs;
 
Expansion of the product offerings to clients via remote service channels.
 
Due to the high level of uncertainty, as well as limited up-to-date and consistent information about the actual financial position of the Bank’s counterparties and borrowers, it is not possible to present a comprehensive quantitative assessment of the impact of changes in the economic environment on the Bank’s 2020 financial performance in these interim condensed consolidated financial statements. In accordance with IFRS 9 Financial Instruments, the Group uses forward-looking information, including forecasts of macroeconomic indicators, in its models for assessment of allowance for expected credit losses. To assess the impact of above-mentioned changes in the economic environment on the Group’s operations, the following activities were carried out:
 
Increase in the probability of default based on the updated forecast for macroeconomic indicators;
 
Increase in the probability of default for Credit cards agreements at Stage 1.
 
Forward-looking information
 
The key forward-looking indicators used in assessing the allowance for expected credit losses on loan portfolio as at 30 June 2020 are as follows:
 
Key factors
 
2020
 
 
 
 
 
Price of Brent crude oil (Brent ICE), USD
  20.00 
GDP index, % to the previous year
  99.4 
Volume of production of oil and gas condensate, million tons
  90.00 
Inflation rate, %
  10.40 
USD/KZT exchange rate
  509.0 
 
As a result of the above changes for the six-month period ended 30 June 2020, credit loss expenses increased by KZT 102,374 thousand.
 
Taxation
 
The Republic of Kazakhstan currently has a single Tax Code that regulates main taxation matters. The existing taxes include value added tax, corporate income tax, social and other taxes. Implementing regulations are often unclear or nonexistent and insignificant amount of precedents has been established. Often, differing opinions regarding legal interpretation exist both among and within government ministries and organisations; thus creating uncertainties and areas of conflict. Tax declarations, together with other legal compliance areas (as examples, customs and currency control matters) are subject to review and investigation by a number of authorities, which are enabled by law to impose severe fines, penalties and interest charges. These facts create tax risks in the Republic of Kazakhstan substantially more significant than typically found in countries with more developed tax systems.
 
The management believes that the Group’s tax position as at 30 June 2020 and 31 December 2019 was in compliance with tax laws of the Republic of Kazakhstan regulating its activities. However, the risk remains that relevant authorities could take differing positions with regard to interpretive tax issues. Assessment of recoverability of deferred income tax assets requires to use subjective judgements by the Group’s management around the likely timing and the level of future taxable profit together with the tax planning strategy.
 
 
9
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financial statements
 
 (in thousands of tenge)
 
 
3.  Significant accounting judgments and estimates (continued)
 
Taxation (continued)
 
The management believes that deferred income tax assets as at 30 June 2020 are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences, unused tax losses and credits can be utilised, and deferred income tax assets are reduced to the extent that taxable profit will be available against which the deductible temporary differences can be utilised.
 
4.  Cash and cash equivalents
 
Cash and cash equivalents comprised the following:
 
 
 
30 June
2020
(unaudited)
 
 
31 December
2019
(unaudited)
 
 
 
 
 
 
 
 
Cash on hand
  3,458,854 
  4,198,884 
Cash on current accounts with the NBRK rated at BBB-
  29,921,405 
  17,477,932 
 
    
    
Cash on current bank accounts, other banks:
    
    
- Rated from A- to A+
  156,735 
  88,619 
- Rated from BBB- to BBB+
  92,223 
  6 
- Rated from ВВ- to ВВ+
  318,114 
  362,898 
- Rated below B+
  869,611 
  912,521 
- Not rated
  180,337 
  404,086 
Accounts receivable under reverse repurchase agreements with contractual maturity of 90 days or less
   
  7,501,994 
Time deposits with the NBRK rated at BBB- with contractual maturity of 90 days or less
  2,000,417 
  2,500,573 
Time deposits with other banks rated from BBB- to BBB+ with contractual maturity of 90 days or less
  5,572 
  8,274 
Cash and cash equivalents before ECL allowance
  37,003,268 
  33,455,787 
 
    
    
ECL allowance
  (13,862)
  (7,265)
Cash and cash equivalents
  36,989,406 
  33,448,522 
 
The credit ratings are presented by reference to the credit ratings of Standard & Poor’s credit rating agency or analogues of similar international agencies.
 
As at 30 June 2020 and 31 December 2019, all balances of cash and cash equivalents are allocated to Stage 1 for ECL measurement purposes.
 
Minimum reserve requirements
 
In accordance with regulations issued by the NBRK, minimum reserve requirements are calculated as a percent of specified banks liabilities. Banks are required to comply with these requirements by maintaining average reserve assets (national currency cash and amounts on current accounts with NBRK) equal or in excess of the average minimum requirements. As at 30 June 2020, minimum reserve requirements of the Bank amount to KZT 1,345,216 thousand (31 December 2019: KZT 970,663 thousand).
 
Concentration of cash and cash equivalents
 
As at 30 June 2020 and 31 December 2019, the Group has accounts with one bank which balances exceeded 10% of total cash and cash equivalents. The total balance on the accounts with the above counteragent as at 30 June 2020 and 31 December 2019 amounts to KZT 31,921,822 thousand and KZT 19,978,505 thousand, respectively.
 
 
10
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financial statements
 
 (in thousands of tenge)
 
 
5. Amounts due from banks and other financial institutions
 
Amounts due from banks and other financial institutions comprise:
 
 
 
30 June
2020
(unaudited)
 
 
31 December
2019
(unaudited)
 
Funds provided as collateral
 
 
 
 
 
 
- Rated from AA- to AA+
  139,250 
  131,430 
- Rated from A- to A+
  286,461 
  270,849 
- Not rated
  415,000 
  375,000 
Amounts due from banks and other financial institutions before ECL allowance
  840,711 
  777,279 
 
    
    
ECL allowance
  (1,259)
  (1,071)
Amounts due from banks and other financial institutions
  839,452 
  776,208 
 
The credit ratings are presented by reference to the credit ratings of Standard & Poor’s credit rating agency or analogues of similar international agencies.
 
As at 30 June 2020, funds provided as collateral included a security deposit of a participant of MasterCard system in the amount of KZT 286,461 thousand (31 December 2018: KZT 270,849 thousand) and a security deposit of a participant of Visa International system in the amount of KZT 139,250 thousand (31 December 2019: KZT 131,430 thousand) and deposit placed as collateral of the Bank’s liabilities to the KASE in the amount of KZT 415,000 thousand (as at 31 December 2019: KZT 375,000 thousand).
 
As at 30 June 2020 and 31 December 2019, all balances of amounts due from banks and other financial institutions are allocated to Stage 1 for ECL measurement purposes.
 
Concentration of amounts due from banks and other financial institutions
 
As at 30 June 2020, the Group has amounts due from three financial institutions (31 December 2019: three) which balances individually exceed 10% of total due from financial institutions. The aggregate balances of amounts due from these counterparties as at 30 June 2020 were KZT 839,452 thousand (31 December 2019: KZT 776,208 thousand).
 
6. Loans to customers
 
As at 30 June 2020 loans to customers comprise:
 
 
 
30 June 2020
(unaudited)
 
 
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
Individually significant loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans issued to small and medium-sized businesses
  10,831,344 
  1,661,430 
  4,389,963 
  18,322 
  16,901,059 
Mortgages
   
   
  54,032 
   
  54,032 
Consumer loans
   
   
  66,823 
   
  66,823 
Other loans secured by collateral
  813,606 
  238,337 
  1,437,699 
  80,718 
  2,570,360 
Total individually significant loans
  11,644,950 
  1,899,767 
  5,948,517 
  99,040 
  19,592,274 
 
    
    
    
    
    
Individually insignificant loans
    
    
    
    
    
Loans issued to small and medium-sized businesses
  8,430,949 
  615,852 
  1,526,762 
   
  10,573,563 
Mortgages
  1,139,476 
  99,203 
  233,330 
  683,214 
  2,155,223 
Consumer loans
  1,309,875 
  101,271 
  279,881 
   
  1,691,027 
Car loans
  46,090 
   
  1,712 
   
  47,802 
Credit cards
  274,360 
  6,996 
  48,193 
   
  329,549 
Other loans secured by collateral
  24,215,326 
  1,970,292 
  5,097,911 
  654,415 
  31,937,944 
Total individually insignificant loans
  35,416,076 
  2,793,614 
  7,187,789 
  1,337,629 
  46,735,108 
Loans to customers before ECL allowance
  47,061,026 
  4,693,381 
  13,136,306 
  1,436,669 
  66,327,382 
 
    
    
    
    
    
ECL allowance
  (249,113)
  (71,891)
  (3,497,220)
  (2,798)
  (3,821,022)
Loans to customers
  46,811,913 
  4,621,490 
  9,639,086 
  1,433,871 
  62,506,360 
 
 
11
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financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
As at 31 December 2019 loans to customers comprise:
 
 
 
31 December 2019
(unaudited)
 
 
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
Individually significant loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans issued to small and medium-sized businesses
  12,551,517 
  1,589,738 
  3,650,370 
   
  17,791,625 
Mortgages
   
   
  51,304 
   
  51,304 
Consumer loans
   
   
  59,041 
   
  59,041 
Other loans secured by collateral
  1,274,987 
  50,291 
  921,772 
  86,493 
  2,333,543 
Total individually significant loans
  13,826,504 
  1,640,029 
  4,682,487 
  86,493 
  20,235,513 
 
    
    
    
    
    
Individually insignificant loans
    
    
    
    
    
Loans issued to small and medium-sized businesses
  8,735,885 
  482,813 
  1,400,305 
   
  10,619,003 
Mortgages
  1,420,772 
  166,814 
  197,539 
  766,002 
  2,551,127 
Consumer loans
  1,968,343 
  80,727 
  648,223 
   
  2,697,293 
Car loans
  65,209 
  1,840 
   
   
  67,049 
Credit cards
  387,010 
  4,422 
  85,703 
   
  477,135 
Other loans secured by collateral
  29,375,420 
  963,113 
  4,058,274 
  804,756 
  35,201,563 
Total individually insignificant loans
  41,952,639 
  1,699,729 
  6,390,044 
  1,570,758 
  51,613,170 
Loans to customers before ECL allowance
  55,779,143 
  3,339,758 
  11,072,531 
  1,657,251 
  71,848,683 
 
    
    
    
    
    
ECL allowance
  (246,263)
  (50,365)
  (3,427,474)
  (254)
  (3,724,356)
Loans to customers
  55,532,880 
  3,289,393 
  7,645,057 
  1,656,997 
  68,124,327 
 
Quality of individually significant loans
 
Information on the quality of individually significant loans at 30 June 2020 is presented in the table below:
 
 
 
30 June 2020
(unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually significant loans issued to small and medium-sized businesses
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  8,661,028 
  (2,027)
  8,659,001 
  0.0%
- Overdue for less than 30 days
  2,170,316 
   
  2,170,316 
  0.0%
Stage 1 loans
  10,831,344 
  (2,027)
  10,829,317 
  0.0%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
  2,128,170 
  (92,948)
  2,035,222 
  4.4%
- Overdue for less than 30 days
  1,267,429 
   
  1,267,429 
  0.0%
- Overdue for 30 days to 90 days
  272,805 
  (104,217)
  168,588 
  38.2%
- Overdue for 90 days to 180 days
   
   
   
  0.0%
- Overdue for 180 days to 360 days
  171,138 
  (9,426)
  161,712 
  5.5%
- Overdue for more than 360 days
  2,211,851 
  (1,835,451)
  376,400 
  83.0%
Stage 2 and Stage 3 loans
  6,051,393 
  (2,042,042)
  4,009,351 
  33.7%
 
    
    
    
    
POCI
  18,322 
   
  18,322 
  0.0%
Total individually significant loans issued to small and medium-sized businesses
  16,901,059 
  (2,044,069)
  14,856,990 
  12.1%
 
 
12
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financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually significant loans (continued)
 
 
 
30 June 2020
(unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually significant mortgage loans
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
   
   
   
   
- Overdue for less than 30 days
   
   
   
   
Stage 1 loans
   
   
   
   
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
   
   
   
   
- Overdue for less than 30 days
   
   
   
   
- Overdue for 30 days to 90 days
   
   
   
   
- Overdue for 90 days to 180 days
   
   
   
   
- Overdue for 180 days to 360 days
   
   
   
   
- Overdue for more than 360 days
  54,032 
   
  54,032 
  0.0%
Stage 2 and Stage 3 loans
  54,032 
   
  54,032 
  0.0%
Total individually significant mortgage loans
  54,032 
   
  54,032 
  0.0%
 
 
 
30 June 2020
(unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loansless ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually significant consumer loans
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
   
   
   
   
- Overdue for less than 30 days
   
   
   
   
Stage 1 loans
   
   
   
   
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
   
   
   
   
- Overdue for less than 30 days
   
   
   
   
- Overdue for 30 days to 90 days
   
   
   
   
- Overdue for 90 days to 180 days
   
   
   
   
- Overdue for 180 days to 360 days
   
   
   
   
- Overdue for more than 360 days
  66,823 
  (66,823)
   
  100.0%
Stage 2 and Stage 3 loans
  66,823 
  (66,823)
   
  100.0%
Total individually significant consumer loans
  66,823 
  (66,823)
   
  100.0%
 
 
13
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financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually significant loans (continued)
 
 
 
30 June 2020
(unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loansless ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually significant other loans secured by collateral
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  618,016 
   
  618,016 
  0.0%
- Overdue for less than 30 days
  195,590 
   
  195,590 
  0.0%
Stage 1 loans
  813,606 
   
  813,606 
  0.0%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
  404,466 
  (147)
  404,319 
  0.0%
- Overdue for less than 30 days
  639,658 
   
  639,658 
  0.0%
- Overdue for 30 days to 90 days
   
   
   
  0.0%
- Overdue for 90 days to 180 days
   
   
   
  0.0%
- Overdue for 180 days to 360 days
  116,093 
  (16,055)
  100,038 
  13.8%
- Overdue for more than 360 days
  515,819 
  (122,147)
  393,672 
  23.7%
Stage 2 and Stage 3 loans
  1,676,036 
  (138,349)
  1,537,687 
  8.3%
 
    
    
    
    
POCI
  80,718 
  (267)
  80,451 
  0.3%
Total individually significant other loans secured by collateral
  2,570,360 
  (138,616)
  2,431,744 
  5.4%
 
Information on the quality of individually significant loans at 31 December 2019 is presented in the table below:
 
 
 
31 December 2019
(unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually significant loans issued to small and medium-sized businesses
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  12,257,867 
  (2,137)
  12,255,730 
  0.0%
- Overdue for less than 30 days
  293,650 
   
  293,650 
  0.0%
Stage 1 loans
  12,551,517 
  (2,137)
  12,549,380 
  0.0%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
  1,683,901 
  (201,140)
  1,482,761 
  11.9%
- Overdue for less than 30 days
  509,267 
   
  509,267 
  0.0%
- Overdue for 30 days to 90 days
  822,305 
   
  822,305 
  0.0%
- Overdue for 90 days to 180 days
  55,621 
   
  55,621 
  0.0%
- Overdue for 180 days to 360 days
  51,284 
  (51,284)
   
  100.0%
- Overdue for more than 360 days
  2,117,730 
  (1,583,917)
  533,813 
  74.8%
Stage 2 and Stage 3 loans
  5,240,108 
  (1,836,341)
  3,403,767 
  35.0%
Total individually significant loans issued to small and medium-sized businesses
  17,791,625 
  (1,838,478)
  15,953,147 
  10.3%
 
 
14
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Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually significant loans (continued)
 
 
 
31 December 2019
(unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually significant mortgage loans
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
   
   
   
   
- Overdue for less than 30 days
   
   
   
   
Stage 1 loans
   
   
   
   
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
   
   
   
   
- Overdue for less than 30 days
   
   
   
   
- Overdue for 30 days to 90 days
   
   
   
   
- Overdue for 90 days to 180 days
   
   
   
   
- Overdue for 180 days to 360 days
  51,304 
   
  51,304 
  0.0%
- Overdue for more than 360 days
   
   
   
   
Stage 2 and Stage 3 loans
  51,304 
   
  51,304 
  0.0%
Total individually significant mortgage loans
  51,304 
   
  51,304 
  0.0%
 
 
 
 
31 December 2019
(unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loansless ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually significant consumer loans
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
   
   
   
   
- Overdue for less than 30 days
   
   
   
   
Stage 1 loans
   
   
   
   
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
   
   
   
   
- Overdue for less than 30 days
   
   
   
   
- Overdue for 30 days to 90 days
   
   
   
   
- Overdue for 90 days to 180 days
   
   
   
   
- Overdue for 180 days to 360 days
   
   
   
   
- Overdue for more than 360 days
  59,041 
  (59,041)
   
  100.0%
Stage 2 and Stage 3 loans
  59,041 
  (59,041)
   
  100.0%
Total individually significant consumer loans
  59,041 
  (59,041)
   
  100.0%
 
 
 
15
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Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually significant loans (continued)
 
 
 
31 December 2019
(unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loansless ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually significant other loans secured by collateral
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  930,797 
  (423)
  930,374 
  0.0%
- Overdue for less than 30 days
  344,190 
  (1,517)
  342,673 
  0.4%
Stage 1 loans
  1,274,987 
  (1,940)
  1,273,047 
  0.2%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
  375,386 
   
  375,386 
  0.0%
- Overdue for less than 30 days
  140,887 
   
  140,887 
  0.0%
- Overdue for 30 days to 90 days
   
   
   
   
- Overdue for 90 days to 180 days
  57,745 
   
  57,745 
  0.0%
- Overdue for 180 days to 360 days
  398,045 
  (8,908)
  389,137 
  2.2%
- Overdue for more than 360 days
   
   
   
   
Stage 2 and Stage 3 loans
  972,063 
  (8,908)
  963,155 
  0.9%
 
    
    
    
    
POCI
  86,493 
  (241)
  86,252 
  0.3%
Total individually significant other loans secured by collateral
  2,333,543 
  (11,089)
  2,322,454 
  0.5%
 
Analysis of movements in the ECL allowance
 
Analysis of movements in ECL allowance of loans that are individually significant for the six-month period ended 30 June 2020 are as follows:
 
Individually significant loans issued to
 
For the six-month period ended 30 June 2020 (unaudited)
 
small and medium-sized businesses
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2020
  (2,137)
  (1)
  (1,836,340)
   
  (1,838,478)
New assets originated or purchased
  (4,426)
   
   
   
  (4,426)
Assets derecognised or repaid (excluding write-offs)
  170 
   
  15,697 
   
  15,867 
Transfers to Stage 1
  (16,900)
  16,900 
   
   
   
Transfers to Stage 2
  8 
  (201,148)
  201,140 
   
   
Transfers to Stage 3
   
  196,976 
  (196,976)
   
   
Impact on period end ECL of exposures transferred between stages and changes to inputs used for ECL calculations during the period
  21,230 
  (12,920)
  (94,282)
   
  (85,972)
Transfers between the levels as a result of changes in materiality of loans
  28 
   
  (8,900)
   
  (8,872)
Unwinding of discount
   
   
  (134,605)
   
  (134,605)
Amounts written off
   
   
  12,417 
   
  12,417 
ECL at 30 June 2020
  (2,027)
  (193)
  (2,041,849)
   
  (2,044,069)

 
16
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually significant loans (continued)
 
Analysis of movements in the ECL allowance (continued)
 
 
 
For the six-month period ended 30 June 2020 (unaudited)
 
Individually significant consumer loans
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2020
   
   
  (59,041)
   
  (59,041)
Impact on period end ECL of changes to inputs used for ECL calculations
   
   
  343 
   
  343 
Unwinding of discount
   
   
  (4,873)
   
  (4,873)
Foreign exchange adjustments
   
   
  (3,252)
   
  (3,252)
ECL at 30 June 2020
   
   
  (66,823)
   
  (66,823)
 
 
Individually significant other loans
 
For the six-month period ended 30 June 2020 (unaudited)
 
secured by collateral
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2020
  (1,940)
   
  (8,910)
  (240)
  (11,090)
Assets derecognised or repaid (excluding write-offs)
  1,810 
   
   
  10 
  1,820 
Transfers to Stage 3
  138 
   
  (138)
   
   
Impact on period end ECL of exposures transferred between stages and changes to inputs used for ECL calculations during the period
  (8)
   
  (84,370)
  (37)
  (84,415)
Transfers between the levels as a result of changes in materiality of loans
   
   
  (40,862)
   
  (40,862)
Unwinding of discount
   
   
  (8,783)
   
  (8,783)
Amounts written off
   
   
  7,468 
   
  7,468 
Foreign exchange adjustments
   
   
  (2,754)
   
  (2,754)
ECL at 30 June 2020
   
   
  (138,349)
  (267)
  (138,616)
 
Analysis of movements in ECL allowance of loans that are individually significant for the six-month period ended 30 June 2019 are as follows:
 
Individually significant loans issued to
 
For the six-month period ended 30 June 2019 (unaudited)
 
small and medium-sized businesses
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2019
  (9,937)
  (75)
  (893,926)
   
  (903,938)
New assets originated or purchased
  (105)
   
   
   
  (105)
Assets derecognised or repaid (excluding write-offs)
  108 
  42 
  4,103 
   
  4,253 
Transfers to Stage 2
  7,389 
  (7,389)
   
   
   
Transfers to Stage 3
   
  7,389 
  (7,389)
   
   
Impact on period end ECL of exposures transferred between stages and changes to inputs used for ECL calculations during the period
  2,500 
  (2,036)
  (348,662)
   
  (348,198)
Unwinding of discount
   
   
  (71,847)
   
  (71,847)
Foreign exchange adjustments
   
  2,057 
  (38)
   
  2,019 
ECL at 30 June 2019
  (45)
  (12)
  (1,317,759)
   
  (1,317,816)
 
 
17
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually significant loans (continued)
 
Analysis of movements in the ECL allowance (continued)
 
 
 
For the six-month period ended 30 June 2019 (unaudited)
 
Individually significant mortgage loans
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2019
   
   
  (11,350)
   
  (11,350)
Assets derecognised or repaid (excluding write-offs)
   
   
  3,696 
   
  3,696 
Impact on period end ECL of changes to inputs used for ECL calculations during the period
   
   
  7,654 
   
  7,654 
ECL at 30 June 2019
   
   
   
   
   
 
 
 
 
For the six-month period ended 30 June 2019 (unaudited)
 
Individually significant consumer loans
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2019
   
   
  (119,346)
   
  (119,346)
Assets derecognised or repaid (excluding write-offs)
   
   
  25,544 
   
  25,544 
Impact on period end ECL of changes to inputs used for ECL calculations during the period
   
   
  (6,527)
   
  (6,527)
Unwinding of discount
   
   
  (3,749)
   
  (3,749)
Amounts written off
   
   
  49,006 
   
  49,006 
Foreign exchange adjustments
   
   
  140 
   
  140 
ECL at 30 June 2019
   
   
  (54,932)
   
  (54,932)
 
 
 
 
For the six-month period ended 30 June 2019 (unaudited)
 
Individually significant credit cards
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2019
   
   
   
   
   
Impact on period end ECL of changes to inputs used for ECL calculations during the period
   
   
  (2,584)
   
  (2,584)
Amounts written off
   
   
  2,584 
   
  2,584 
ECL at 30 June 2019
   
   
   
   
   
 
 
18
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually significant loans (continued)
 
Analysis of movements in the ECL allowance (continued)
 
Individually significant other loans
 
For the six-month period ended 30 June 2019 (unaudited)
 
secured by collateral
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2019
   
   
   
  (32)
  (32)
New assets originated or purchased
  (457)
   
   
   
  (457)
Assets derecognised or repaid (excluding write-offs)
  13 
   
   
  39 
  52 
Impact on period end ECL of changes to inputs used for ECL calculations during the period
  54 
   
  (4,598)
  (235)
  (4,779)
Amounts written off
   
   
  3,732 
   
  3,732 
Foreign exchange adjustments
   
   
  866 
   
  866 
ECL at 30 June 2019
  (390)
   
   
  (228)
  (618)
 
Quality of individually insignificant loans
 
The following table provides information on the credit quality of individually insignificant loans collectively assessed for impairment as at 30 June 2020:
 
 
 
30 June 2020 (unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually insignificant loans issued to small and medium-sized businesses
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  7,593,642 
  (3,053)
  7,590,589 
  0.0%
- Overdue for less than 30 days
  837,307 
  (4,575)
  832,732 
  0.5%
Stage 1 loans
  8,430,949 
  (7,628)
  8,423,321 
  0.1%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
  591,616 
  (20,700)
  570,916 
  3.5%
- Overdue for less than 30 days
  681,156 
  (14,322)
  666,834 
  2.1%
- Overdue for 30 days to 90 days
  129,104 
  (7,205)
  121,899 
  5.6%
- Overdue for 90 days to 360 days
  79,893 
  (4,068)
  75,825 
  5.1%
- Overdue for 180 days to 360 days
  270,096 
  (18,574)
  251,522 
  6.9%
- Overdue for more than 360 days
  390,749 
  (167,888)
  222,861 
  43.0%
Stage 2 and Stage 3 loans
  2,142,614 
  (232,757)
  1,909,857 
  10.9%
Total individually insignificant loans issued to small and medium-sized businesses
  10,573,563 
  (240,385)
  10,333,178 
  2.3%
 
 
19
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually insignificant loans (continued)
 
 
 
30 June 2020(unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually insignificant mortgage loans
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  1,046,677 
  (1,159)
  1,045,518 
  0.1%
- Overdue for less than 30 days
  92,799 
  (158)
  92,641 
  0.2%
Stage 1 loans
  1,139,476 
  (1,317)
  1,138,159 
  0.1%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
  101,579 
  (240)
  101,339 
  0.2%
- Overdue for less than 30 days
  81,896 
   
  81,896 
  0.0%
- Overdue for 30 days to 90 days
  10,022 
   
  10,022 
  0.0%
- Overdue for 90 days to 360 days
   
   
   
  0.0%
- Overdue for 180 days to 360 days
  46,454 
  (18,148)
  28,306 
  39.1%
- Overdue for more than 360 days
  92,582 
  (31,062)
  61,520 
  33.6%
Stage 2 and Stage 3 loans
  332,533 
  (49,450)
  283,083 
  14.9%
 
    
    
    
    
POCI
  683,214 
  (701)
  682,513 
  0.1%
Total individually insignificant mortgage loans
  2,155,223 
  (51,468)
  2,103,755 
  2.4%
 
 
 
 
30 June 2020(unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually insignificant consumer loans
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  1,146,421 
  (107,105)
  1,039,316 
  9.3%
- Overdue for less than 30 days
  163,454 
  (58,928)
  104,526 
  36.1%
Stage 1 loans
  1,309,875 
  (166,033)
  1,143,842 
  12.7%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
  91,650 
  (70,679)
  20,971 
  77.1%
- Overdue for less than 30 days
  116,103 
  (106,077)
  10,026 
  91.4%
- Overdue for 30 days to 90 days
  53,123 
  (47,628)
  5,495 
  89.7%
- Overdue for 90 days to 360 days
  54,566 
  (54,560)
  6 
  100.0%
- Overdue for 180 days to 360 days
  35,424 
  (35,424)
   
  100.0%
- Overdue for more than 360 days
  30,286 
  (30,286)
   
  100.0%
Stage 2 and Stage 3 loans
  381,152 
  (344,654)
  36,498 
  90.4%
Total individually insignificant consumer loans
  1,691,027 
  (510,687)
  1,180,340 
  30.2%
 
 
20
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually insignificant loans (continued)
 
 
 
30 June 2020(unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually insignificant car loans
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  46,090 
   
  46,090 
  0.0%
- Overdue for less than 30 days
   
   
   
  0.0%
Stage 1 loans
  46,090 
   
  46,090 
  0.0%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
   
   
   
   
- Overdue for less than 30 days
   
   
   
   
- Overdue for 30 days to 90 days
  1,712 
   
  1,712 
   
- Overdue for 90 days to 360 days
    
    
    
    
- Overdue for 180 days to 360 days
   
   
   
   
- Overdue for more than 360 days
   
   
   
   
Stage 2 and Stage 3 loans
  1,712 
   
  1,712 
   
Total individually insignificant car loans
  47,802 
   
  47,802 
  0.0%
 
 
 
 
30 June 2020(unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually insignificant credit cards
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  271,471 
  (68,915)
  202,556 
  25.4%
- Overdue for less than 30 days
  2,889 
  (417)
  2,472 
  14.4%
Stage 1 loans
  274,360 
  (69,332)
  205,028 
  25.3%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
  574 
  (494)
  80 
  86.1%
- Overdue for less than 30 days
   
   
   
  0.0%
- Overdue for 30 days to 90 days
  6,916 
  (1,436)
  5,480 
  20.8%
- Overdue for 90 days to 360 days
  14,278 
  (13,930)
  348 
  97.6%
- Overdue for 180 days to 360 days
  6,505 
  (6,391)
  114 
  98.2%
- Overdue for more than 360 days
  26,916 
  (24,861)
  2,055 
  92.4%
Stage 2 and Stage 3 loans
  55,189 
  (47,112)
  8,077 
  85.4%
Total individually insignificant credit cards
  329,549 
  (116,444)
  213,105 
  35.3%
 
 
21
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually insignificant loans (continued)
 
 
 
30 June 2020(unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually insignificant other loans secured by collateral
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  21,422,389 
  (2,634)
  21,419,755 
  0.0%
- Overdue for less than 30 days
  2,792,937 
  (142)
  2,792,795 
  0.0%
Stage 1 loans
  24,215,326 
  (2,776)
  24,212,550 
  0.0%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
  1,898,540 
  (6,583)
  1,891,957 
  0.3%
- Overdue for less than 30 days
  2,183,092 
  (788)
  2,182,304 
  0.0%
- Overdue for 30 days to 90 days
  685,330 
  (89)
  685,241 
  0.0%
- Overdue for 90 days to 360 days
  243,022 
   
  243,022 
  0.0%
- Overdue for 180 days to 360 days
  430,512 
  (26,330)
  404,182 
  6.1%
- Overdue for more than 360 days
  1,627,707 
  (614,134)
  1,013,573 
  37.7%
Stage 2 and Stage 3 loans
  7,068,203 
  (647,924)
  6,420,279 
  9.2%
 
    
    
    
    
POCI
  654,415 
  (1,830)
  652,585 
  0.3%
Total individually insignificant other loans secured by collateral
  31,937,944 
  (652,530)
  31,285,414 
  2.0%
 
The following table provides information on the credit quality of individually insignificant loans collectively assessed for impairment as at 31 December 2019:
 
 
 
31 December 2019 (unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually insignificant loans issued to small and medium-sized businesses
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  8,258,145 
  (4,042)
  8,254,103 
  0.0%
- Overdue for less than 30 days
  477,740 
  (6,367)
  471,373 
  1.3%
Stage 1 loans
  8,735,885 
  (10,409)
  8,725,476 
  0.1%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
  364,155 
  (1,448)
  362,707 
  0.4%
- Overdue for less than 30 days
  124,942 
  (62)
  124,880 
  0.0%
- Overdue for 30 days to 90 days
  739,329 
  (22,074)
  717,255 
  3.0%
- Overdue more than 90 days
  84,150 
  (228)
  83,922 
  0.3%
- Overdue for 90 days to 360 days
  375,063 
  (41,285)
  333,778 
  11.0%
- Overdue for more than 360 days
  195,479 
  (111,075)
  84,404 
  56.8%
Stage 2 and Stage 3 loans
  1,883,118 
  (176,172)
  1,706,946 
  9.4%
 
    
    
    
    
POCI
   
   
   
   
Total individually insignificant loans issued to small and medium-sized businesses
  10,619,003 
  (186,581)
  10,432,422 
  1.8%
 
 
22
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually insignificant loans (continued)
 
 
 
31 December 2019 (unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually insignificant mortgage loans
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  1,417,344 
  (220)
  1,417,124 
  0.0%
- Overdue for less than 30 days
  3,428 
  (84)
  3,344 
  2.5%
Stage 1 loans
  1,420,772 
  (304)
  1,420,468 
  0.0%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
  154,837 
   
  154,837 
  0.0%
- Overdue for less than 30 days
  581 
   
  581 
  0.0%
- Overdue for 30 days to 90 days
  42,260 
   
  42,260 
  0.0%
- Overdue for 90 days to 180 days
  66,681 
  (15,396)
  51,285 
  23.1%
- Overdue for 180 days to 360 days
  53,797 
  (9,747)
  44,050 
  18.1%
- Overdue for more than 360 days
  46,197 
  (31,897)
  14,300 
  69.0%
Stage 2 and Stage 3 loans
  364,353 
  (57,040)
  307,313 
  15.7%
 
    
    
    
    
POCI
  766,002 
   
  766,002 
  0.0%
Total individually insignificant mortgage loans
  2,551,127 
  (57,344)
  2,493,783 
  2.2%
 
 
 
 
31 December 2019 (unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually insignificant consumer loans
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  1,798,292 
  (145,890)
  1,652,402 
  8.1%
- Overdue for less than 30 days
  170,051 
  (69,279)
  100,772 
  40.7%
Stage 1 loans
  1,968,343 
  (215,169)
  1,753,174 
  10.9%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
  295 
  (295)
   
  100.0%
- Overdue for less than 30 days
  1,879 
  (834)
  1,045 
  44.4%
- Overdue for 30 days to 90 days
  136,782 
  (97,952)
  38,830 
  71.6%
- Overdue for 90 days to 180 days
  170,050 
  (170,050)
   
  100.0%
- Overdue for 180 days to 360 days
  251,667 
  (251,667)
   
  100.0%
- Overdue for more than 360 days
  168,277 
  (168,277)
   
  100.0%
Stage 2 and Stage 3 loans
  728,950 
  (689,075)
  39,875 
  94.5%
Total individually insignificant consumer loans
  2,697,293 
  (904,244)
  1,793,049 
  33.5%
 
 
 
23
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually insignificant loans (continued)
 
 
 
31 December 2019 (unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually insignificant car loans
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  65,209 
   
  65,209 
  0.0%
- Overdue for less than 30 days
   
   
   
   
Stage 1 loans
  65,209 
   
  65,209 
  0.0%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
   
   
   
   
- Overdue for less than 30 days
   
   
   
   
- Overdue for 30 days to 90 days
  1,840 
   
  1,840 
  0.0%
- Overdue for 90 days to 180 days
   
   
   
   
- Overdue for 180 days to 360 days
   
   
   
   
- Overdue for more than 360 days
   
   
   
   
Stage 2 and Stage 3 loans
  1,840 
   
  1,840 
  0.0%
Total individually insignificant car loans
  67,049 
   
  67,049 
  0.0%
 
 
 
 
31 December 2019 (unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loansless ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually insignificant credit cards
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  386,593 
  (9,672)
  376,921 
  2.5%
- Overdue for less than 30 days
  417 
  (11)
  406 
  2.6%
Stage 1 loans
  387,010 
  (9,683)
  377,327 
  2.5%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
  67 
  (67)
   
  100.0%
- Overdue for less than 30 days
   
   
   
   
- Overdue for 30 days to 90 days
  8,594 
  (4,465)
  4,129 
  52.0%
- Overdue for 90 days to 180 days
  8,272 
  (8,272)
   
  100.0%
- Overdue for 180 days to 360 days
  7,651 
  (7,093)
  558 
  92.7%
- Overdue for more than 360 days
  65,541 
  (63,915)
  1,626 
  97.5%
Stage 2 and Stage 3 loans
  90,125 
  (83,812)
  6,313 
  93.0%
Total individually insignificant credit cards
  477,135 
  (93,495)
  383,640 
  19.6%
 
 
 
24
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually insignificant loans (continued)
 
 
 
31 December 2019 (unaudited)
 
 
 
Loans before ECL allowance
 
 
ECL allowance
 
 
Loans less ECL allowance
 
 
ECL allowance to gross loans before ECL allowance, (%)
 
Individually insignificant other loans secured by collateral
 
 
 
 
 
 
 
 
 
 
 
 
- Not overdue
  27,818,295 
  (4,486)
  27,813,809 
  0.0%
- Overdue for less than 30 days
  1,557,125 
  (2,135)
  1,554,990 
  0.1%
Stage 1 loans
  29,375,420 
  (6,621)
  29,368,799 
  0.0%
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- Not overdue
  430,809 
  (5,214)
  425,595 
  1.2%
- Overdue for less than 30 days
  111,046 
   
  111,046 
  0.0%
- Overdue for 30 days to 90 days
  1,809,443 
  (1,333)
  1,808,110 
  0.1%
- Overdue for 90 days to 180 days
  589,157 
  (6,043)
  583,114 
  1.0%
- Overdue for 180 days to 360 days
  708,771 
  (34,037)
  674,734 
  4.8%
- Overdue for more than 360 days
  1,372,161 
  (520,823)
  851,338 
  38.0%
Stage 2 and Stage 3 loans
  5,021,387 
  (567,450)
  4,453,937 
  11.3%
 
    
    
    
    
POCI
  804,756 
  (13)
  804,743 
  0.0%
Total individually insignificant other loans secured by collateral
  35,201,563 
  (574,084)
  34,627,479 
  1.6%
 
Analysis of movements in the ECL allowance
 
Analysis of movements in ECL allowance of loans that are individually insignificant for the six-month period ended 30 June 2020 are as follows:
 
 
Individually insignificant loans issued to
 
For the six-month period ended 30 June 2020 (unaudited)
 
small and medium-sized businesses
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2020
  (10,409)
  (4,495)
  (171,677)
   
  (186,581)
New assets originated or purchased
  (2,302)
   
   
   
  (2,302)
Assets derecognised or repaid (excluding write-offs)
  1,933 
  1,992 
  5,730 
   
  9,655 
Transfers to Stage 1
  (2,159)
  1,029 
  1,130 
   
   
Transfers to Stage 2
  8,243 
  (10,248)
  2,005 
   
   
Transfers to Stage 3
   
  22,790 
  (22,790)
   
   
Impact on period end ECL of exposures transferred between stages and changes to inputs used for ECL calculations during the period
  (2,906)
  (11,068)
  (64,745)
   
  (78,719)
Transfers between the levels as a result of changes in materiality of loans
  (28)
   
  8,900 
   
  8,872 
Unwinding of discount
   
   
  (19,993)
   
  (19,993)
Amounts written off
   
   
  28,683 
   
  28,683 
Foreign exchange adjustments
   
   
   
   
   
ECL at 30 June 2020
  (7,628)
   
  (232,757)
   
  (240,385)
 
 
 
25
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually insignificant loans (continued)
 
Analysis of movements in the ECL allowance (continued)
 
 
 
For the six-month period ended 30 June 2020 (unaudited)
 
Individually insignificant mortgages
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2020
  (304)
   
  (57,040)
   
  (57,344)
Assets derecognised or repaid (excluding write-offs)
  70 
   
  10,521 
   
  10,591 
Transfers to Stage 2
  63 
  (63)
   
   
   
Transfers to Stage 3
   
  120 
  (120)
   
   
Impact on period end ECL of exposures transferred between stages and changes to inputs used for ECL calculations during the period
  (1,146)
  (58)
  (2,384)
  (701)
  (4,289)
Changes to contractual cash flows due to modifications not resulting in derecognition
   
   
  1 
   
  1 
Unwinding of discount
   
   
  (3,050)
   
  (3,050)
Amounts written off
   
   
  2,757 
   
  2,757 
Foreign exchange adjustments
   
   
  (134)
   
  (134)
ECL at 30 June 2020
  (1,317)
  (1)
  (49,449)
  (701)
  (51,468)
 
 
 
 
For the six-month period ended 30 June 2020 (unaudited)
 
Individually insignificant consumer loans
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2020
  (215,169)
  (40,853)
  (648,222)
   
  (904,244)
New assets originated or purchased
  (577)
   
   
   
  (577)
Assets derecognised or repaid (excluding write-offs)
  47,559 
  6,233 
  42,557 
   
  96,349 
Transfers to Stage 1
  (97,044)
  66,754 
  30,290 
   
   
Transfers to Stage 2
  163,727 
  (167,422)
  3,695 
   
   
Transfers to Stage 3
  782 
  168,047 
  (168,829)
   
   
Impact on period end ECL of exposures transferred between stages and changes to inputs used for ECL calculations during the period
  (65,311)
  (98,004)
  (37,646)
   
  (200,961)
Unwinding of discount
   
   
  (29,600)
   
  (29,600)
Amounts written off
   
   
  528,346 
   
  528,346 
ECL at 30 June 2020
  (166,033)
  (65,245)
  (279,409)
   
  (510,687)
 
 
 
 
For the six-month period ended 30 June 2020 (unaudited)
 
Individually insignificant car loans
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2020
   
   
   
   
   
Impact on period end ECL of changes to models and inputs used for ECL calculations
   
   
   
   
   
ECL at 30 June 2020
   
   
   
   
   
 
 
26
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually insignificant loans (continued)
 
Analysis of movements in the ECL allowance (continued)
 
 
 
For the six-month period ended 30 June 2020 (unaudited)
 
Individually insignificant credit cards
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2020
  (9,683)
  (515)
  (83,297)
   
  (93,495)
New assets originated or purchased
  (462)
   
   
   
  (462)
Assets derecognised or repaid (excluding write-offs)
  3,822 
  147 
  4,988 
   
  8,957 
Transfers to Stage 1
  (7,873)
  3,482 
  4,391 
   
   
Transfers to Stage 2
  5,527 
  (5,957)
  430 
   
   
Transfers to Stage 3
  140 
  6,226 
  (6,366)
   
   
Impact on period end ECL of exposures transferred between stages and changes to inputs used for ECL calculations during the period
  (60,801)
  (4,821)
  (10,425)
   
  (76,047)
Changes to contractual cash flows due to modifications not resulting in derecognition
   
   
  8 
   
  8 
Unwinding of discount
   
   
  (4,823)
   
  (4,823)
Amounts written off
   
   
  49,420 
   
  49,420 
Foreign exchange adjustments
  (2)
   
   
   
  (2)
ECL at 30 June 2020
  (69,332)
  (1,438)
  (45,674)
   
  (116,444)
 
 
Individually insignificant other loans
 
For the six-month period ended 30 June 2020 (unaudited)
 
secured by collateral
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2020
  (6,621)
  (4,502)
  (562,948)
  (13)
  (574,084)
New assets originated or purchased
  (3,850)
   
   
   
  (3,850)
Assets derecognised or repaid (excluding write-offs)
  456 
  92 
  19,914 
   
  20,462 
Transfers to Stage 2
  2,052 
  (9,066)
  7,014 
   
   
Transfers to Stage 3
   
  8,844 
  (8,844)
   
   
Impact on period end ECL of exposures transferred between stages and changes to inputs used for ECL calculations during the period
  5,187 
  (382)
  (170,205)
  (1,857)
  (167,257)
Transfers between the levels as a result of changes in materiality of loans
   
   
  40,862 
   
  40,862 
Changes to contractual cash flows due to modifications not resulting in derecognition
   
   
  40 
  40 
  80 
Unwinding of discount
   
   
  (55,588)
   
  (55,588)
Amounts written off
   
   
  96,671 
   
  96,671 
Foreign exchange adjustments
   
   
  (9,826)
   
  (9,826)
ECL at 30 June 2020
  (2,776)
  (5,014)
  (642,910)
  (1,830)
  (652,530)
 
 
27
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually insignificant loans (continued)
 
Analysis of movements in the ECL allowance (continued)
 
 
Analysis of movements in ECL allowance of loans that are individually insignificant for the six-month period ended 30 June 2019 are as follows:
 
 
 
For the six-month period ended 30 June 2019 (unaudited)
 
Individually insignificant loans issued to small and medium-sized businesses
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2019
  (4,763)
  (307)
  (96,107)
   
  (101,177)
New assets originated or purchased
  (6,232)
   
   
   
  (6,232)
Assets derecognised or repaid (excluding write-offs)
  512 
  553 
  3,842 
   
  4,907 
Transfers to Stage 1
  (1)
  1 
   
   
   
Transfers to Stage 2
  3,711 
  (3,711)
   
   
   
Transfers to Stage 3
   
  3,690 
  (3,690)
   
   
Impact on period end ECL of exposures transferred between stages and changes to inputs used for ECL calculations during the period
  (3,673)
  (5,610)
  (8,621)
   
  (17,904)
Unwinding of discount
   
   
  (8,210)
   
  (8,210)
Amounts written off
   
   
  979 
   
  979 
Foreign exchange adjustments
  30 
   
  (5)
   
  25 
ECL at 30 June 2019
  (10,416)
  (5,384)
  (111,812)
   
  (127,612)
 
 
 
For the six-month period ended 30 June 2019 (unaudited)
 
Individually insignificant mortgage loans
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2019
  (2,154)
  (4,961)
  (74,799)
  (10)
  (81,924)
New assets originated or purchased
   
   
   
  (175)
  (175)
Assets derecognised or repaid (excluding write-offs)
  366 
  21 
  936 
  4 
  1,327 
Transfers to Stage 1
  (550)
  550 
   
   
   
Transfers to Stage 2
  641 
  (1,191)
  550 
   
   
Transfers to Stage 3
   
  5,666 
  (5,666)
   
   
Impact on period end ECL of exposures transferred between stages and changes to inputs used for ECL calculations during the period
  1,142 
  (85)
  (48,668)
  6 
  (47,605)
Unwinding of discount
   
   
  (6,110)
   
  (6,110)
Amounts written off
   
   
  25,058 
   
  25,058 
Foreign exchange adjustments
  9 
   
  240 
   
  249 
ECL at 30 June 2019
  (546)
   
  (108,459)
  (175)
  (109,180)
 
 
28
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually insignificant loans (continued)
 
Analysis of movements in the ECL allowance (continued)
 
 
 
For the six-month period ended 30 June 2019 (unaudited)
 
Individually insignificant consumer loans
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2019
  (339,085)
  (27,885)
  (492,480)
   
  (859,450)
New assets originated or purchased
  (35,973)
   
   
   
  (35,973)
Assets derecognised or repaid (excluding write-offs)
  75,090 
  4,651 
  15,036 
   
  94,777 
Transfers to Stage 1
  (46,599)
  46,599 
   
   
   
Transfers to Stage 2
  82,545 
  (96,763)
  14,218 
   
   
Transfers to Stage 3
   
  101,509 
  (101,509)
   
   
Impact on period end ECL of exposures transferred between stages and changes to inputs used for ECL calculations during the period
  8,843 
  (85,255)
  (130,535)
   
  (206,947)
Unwinding of discount
   
   
  (31,294)
   
  (31,294)
Recoveries
   
   
  (2,135)
   
  (2,135)
Amounts written off
   
   
  364,471 
   
  364,471 
Foreign exchange adjustments
   
   
  3 
   
  3 
ECL at 30 June 2019
  (255,179)
  (57,144)
  (364,225)
   
  (676,548)
 
 
 
For the six-month period ended 30 June 2019 (unaudited)
 
Individually insignificant car loans
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2019
  (2)
   
   
   
  (2)
Impact on period end ECL of exposures transferred between stages and changes to inputs used for ECL calculations during the period
  1 
   
   
   
  1 
ECL at 30 June 2019
  (1)
   
   
   
  (1)
 
 
 
For the six-month period ended 30 June 2019 (unaudited)
 
Individually insignificant credit cards
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2019
  (10,930)
  (4,004)
  (86,754)
   
  (101,688)
New assets originated or purchased
  (5,921)
   
   
   
  (5,921)
Assets derecognised or repaid (excluding write-offs)
  5,602 
  2,044 
  13,118 
   
  20,764 
Transfers to Stage 1
  (3,905)
  3,905 
   
   
   
Transfers to Stage 2
  1,423 
  (4,373)
  2,950 
   
   
Transfers to Stage 3
   
  1,616 
  (1,616)
   
   
Impact on period end ECL of exposures transferred between stages and changes to inputs used for ECL calculations during the period
  (150)
  (148)
  (7,204)
   
  (7,502)
Unwinding of discount
   
   
  (10,399)
   
  (10,399)
Amounts written off
   
   
  10,924 
   
  10,924 
Foreign exchange adjustments
  3 
   
   
   
  3 
ECL at 30 June 2019
  (13,878)
  (960)
  (78,981)
   
  (93,819)
 
 
29
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Quality of individually insignificant loans (continued)
 
Analysis of movements in the ECL allowance (continued)
 
Individually insignificant other loans
 
For the six-month period ended 30 June 2019 (unaudited)
 
secured by collateral
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ECL at 1 January 2019
  (4,150)
  (4,305)
  (210,498)
  (361)
  (219,314)
New assets originated or purchased
  (6,114)
   
   
   
  (6,114)
Assets derecognised or repaid (excluding write-offs)
  628 
  273 
  25,516 
  48 
  26,465 
Transfers to Stage 1
  (689)
  689 
   
   
   
Transfers to Stage 2
  300 
  (861)
  561 
   
   
Transfers to Stage 3
   
  149 
  (149)
   
   
Impact on period end ECL of exposures transferred between stages and changes to inputs used for ECL calculations during the period
  869 
  (5,486)
  (181,671)
  (89)
  (186,377)
Unwinding of discount
   
   
  (15,649)
   
  (15,649)
Amounts written off
   
   
  76,049 
   
  76,049 
Foreign exchange adjustments
  1 
  1 
  778 
   
  780 
ECL at 30 June 2019
  (9,155)
  (9,540)
  (305,063)
  (402)
  (324,160)
 
As at 30 June 2020, the Group introduced certain changes in its process of estimation of expected credit losses in the context of the ongoing COVID-19 pandemic. In particular, it has revised indicators of significant increase in credit risk and does not automatically consider the credit risk to have significantly increased in the case of a loan modification being part of the Government support measures. The Group also updated forward looking information, including forecasts of macroeconomic indicators. The Group applied additional adjustments to the probability of default on credit cards in Stage 1 to appropriately reflect the uncertainty associated with the COVID-19 pandemic outbreak. As a result of the above changes for the six-month period ended 30 June 2020, credit loss expenses increased by KZT 102,374 thousand.
 
Analysis of collateral and other enhancements
 
The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters.
 
The main types of collateral obtained are as follows:
 
For corporate lending – real estate properties, production equipment, inventory and trade receivables;
 
For retail lending – residential properties, transport, cash and cash equivalents and guarantees of third parties. Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequacy of the allowance for expected credit losses.
 
Repossessed collateral
 
It is the Group’s policy to dispose of repossessed properties in an orderly fashion. The proceeds are used to reduce or repay the outstanding claim. In general, the Group does not occupy repossessed properties for business use. The carrying value of the assets repossessed during the period and held as at the reporting date is as follows:
 
 
 
30 June
2020
(unaudited)
 
 
31 December
2019
(unaudited)
 
 
 
 
 
 
 
 
Buildings and land
  2,334,229 
  1,696,831 
Total repossessed collateral
  2,334,229 
  1,696,831 
 
 
30
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Concentration of loans to customers
 
Loans were issued primarily to customers located within the Republic of Kazakhstan operating in the following economic sectors:
 
 
 
30 June
2020
(unaudited)
 
 
31 December
2019
(unaudited)
 
 
 
 
 
 
 
 
Individuals
  38,852,759 
  43,345,908 
Trade of consumer goods
  8,501,550 
  8,952,934 
Services
  6,359,615 
  6,049,526 
Real estate transactions and rent
  4,989,146 
  5,240,497 
Industrial constructions
  1,841,769 
  1,966,673 
Medicine, science and education
  1,232,705 
  1,248,787 
Production and sale of cars, machinery and equipment
  935,437 
  903,853 
Transport and logistics services
  851,288 
  958,895 
Financial services
  772,606 
  1,128,957 
Extraction and processing of mineral resources, metal and chemical industry
  756,465 
  726,254 
Civil engineering
  629,848 
  681,931 
Agriculture
  250,502 
  274,040 
Manufacturing sector
  184,283 
  228,184 
Telecommunication
  158,854 
  130,296 
Other
  10,555 
  11,948 
 
  66,327,382 
  71,848,683 
 
    
    
ECL allowance
  (3,821,022)
  (3,724,356)
 
  62,506,360 
  68,124,327 
 
As at 30 June 2020 and 31 December 2019, the Group has no borrowers or groups of connected borrowers whose loan balances exceed 10% of total loans to customers.
 
Restructured and modified loans
 
The Group derecognises a financial asset, such as a loan to a customer, when the terms and conditions have been renegotiated to the extent that, substantially, it becomes a new loan, with the difference recognised as a derecognition gain or loss, to the extent that an impairment loss has not already been recorded. The newly recognised loans are classified as Stage 1 for ECL measurement purposes, unless the new loan is deemed to be POCI. If the modification does not result in cash flows that are substantially different, the modification does not result in derecognition. Based on the change in cash flows discounted at the original EIR, the Group records a modification gain or loss, to the extent that an impairment loss has not already been recorded.
 
As at 30 June 2020 and 31 December 2019, POCI loans to customers of the Bank comprise loans recognised by the Bank as a result of revising the terms of loan agreements as part of the state program to refinance mortgage loans. The loss from derecognition of modified loans recorded in the interim condensed consolidated statement of comprehensive income for the six-month period ended 30 June 2020 amounted to KZT nil (six-month period ended 30 June 2019: KZT 26,714 thousand).
 
The table below includes Stage 2 and 3 assets that were modified during the period, with the related modification loss suffered by the Group.
 
 
 
For the six-month period ended 30 June
 
 
 
2020
(unaudited)
 
 
2019
(unaudited)
 
Loans modified during the period
 
 
 
 
 
 
Amortised cost before modification
  11,395,418 
  2,357,292 
Net loss from modification that does not result in derecognition
  (28,986)
  (47,932)
 
 
31
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
6.  Loans to customers (continued)
 
Restructured and modified loans (continued)
 
Below is the information on loans to customers that were granted deferral of payments due to quarantine announcement in view of the COVID-19 pandemic for up to three months:
 
 
 
For the six-month period ended 30 June
2020
(unaudited)
 
Loans modified during the period
 
 
 
Amortised cost before modification
  39,302,108 
Net loss from modification that does not result in derecognition
  (107,296)
 
7.
Investment securities
 
Investment securities comprise:
 
 
 
30 June
2020
(unaudited)
 
 
31 December
2019
(unaudited)
 
Debt securities at amortised cost
 
 
 
 
 
 
Treasury bills of the Ministry of Finance of the Republic of Kazakhstan rated BBB-
  3,981,863 
  3,793,622 
ECL allowance
  (9,671)
  (8,577)
Investment securities measured at amortised cost
  3,972,192 
  3,785,045 
 
    
    
Debt securities at FVOCI
    
    
Discount notes of the NBRK rated at BBB-
  1,656,241 
   
ECL allowance
  (570)
   
Investment securities measured at FVOCI
  1,655,671 
   
Investment securities
  5,627,863 
  3,785,045 
 
An analysis of changes in the ECL allowance in relation to debt securities at amortised cost for the six-month periods ended 30 June 2020 and 2019 is as follows:
 
 
 
For the six-month period ended 30 June
 
Debt securities at amortised cost
 
2020
(unaudited)
 
 
2019
(unaudited)
 
 
 
 
 
 
 
 
ECL allowance as at 1 January
  (8,577)
   
Net change in the allowance for the year (Note 16)
  (613)
   
Foreign exchange adjustments
  (481)
   
At 30 June
  (9,671)
   
 
An analysis of changes in the ECL allowance in relation to debt securities at FVOCI for the six-month periods ended 30 June 2020 and 2019 is as follows:
 
 
 
For the six-month period ended 30 June
 
Debt securities at FVOCI
 
2020
(unaudited)
 
 
2019
(unaudited)
 
 
 
 
 
 
 
 
ECL allowance as at 1 January
   
  (179)
Net change in the allowance for the year (Note 16)
  (570)
  179 
At 30 June
  (570)
   
 
As at 30 June 2020 and 31 December 2019, investment securities are allocated to Stage 1 for ECL measurement purposes.
 
 
32
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
8. Other assets
 
Other assets comprise:
 
 
 
30 June
2020
(unaudited)
 
 
31 December
2019
(unaudited)
 
 
 
 
 
 
 
 
Other receivables
  659,488 
  641,992 
Accounts receivable from debt recovery firm
  91,408 
   
ECL allowance
  (22,775)
  (34,562)
Other financial assets
  728,121 
  607,430 
 
    
    
Repossessed collateral
  2,334,229 
  1,696,831 
Prepaid expenses
  470,145 
  485,264 
Taxes prepaid other than corporate income tax
  79,297 
  44,777 
Prepayment for property and equipment and intangible assets
  2,278 
  77,950 
Other
  47,075 
  50,089 
Total other non-financial assets
  2,933,024 
  2,354,911 
Other assets
  3,661,145 
  2,962,341 
 
Other receivables represent claims to buyers of property, previously received to repay loans to customers sold, which were on an instalment payment terms in the amount of KZT 600,565 thousand as at 30 June 2020 (31 December 2019: KZT 525,772 thousand).
 
Accounts receivable from debt recovery firm represent receivables on sold loans to customers in the amount of KZT 91,408 thousand as at 30 June 2020 and due by the end of 2020.
 
During the six-month period ended 30 June 2020, the Group repossessed pledged collateral against repayment of borrowers’ debts in the amount of KZT 835,553 thousand (the six-month period ended 30 June 2019: KZT 39,067 thousand) and sold the repossessed collateral with a total carrying amount of KZT 198,155 thousand (the six-month period ended 30 June 2019: KZT 327,956 thousand), including those sold without installment payment in the amount of KZT 13,644 thousand (the six-month period ended 30 June 2019: KZT 6,793 thousand), property with a carrying amount of KZT 184,511 thousand sold on installment payment terms (the six-month period ended 30 June 2019: KZT 287,723 thousand), and returned the repossessed collateral to borrowers with a carrying amount of KZT nil as part of the program to refinance mortgage loans to customers (the six-month period ended 30 June 2019: KZT 33,440 thousand).
 
An analysis of changes in the unaudited ECLs for other financial assets for the six-month period ended 30 June 2020 is as follows:
 
 
 
Stage 1
 
 
Stage 3
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
ECL allowance as at 1 January 2020
  (1,812)
  (32,750)
  (34,562)
Net change in the allowance for the period (Note 16)
  (3,427)
  15,351 
  11,924 
Foreign exchange adjustments
  (137)
   
  (137)
ECL allowance as at 30 June 2020
  (5,376)
  (17,399)
  (22,775)
 
An analysis of changes in the unaudited ECLs for other financial assets for the six-month period ended 30 June 2019 is as follows:
 
 
 
Stage 1
 
 
Stage 3
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
ECL allowance as at 1 January 2019
  (12,578)
   
  (12,578)
Net change in the allowance for the period (Note 16)
  7,914 
  (25,913)
  (17,999)
Foreign exchange adjustments
  17 
   
  17 
ECL allowance as at 30 June 2019
  (4,647)
  (25,913)
  (30,560)
 
 
33
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
9. Taxation
 
The corporate income tax expense comprises:
 
 
 
For the three-month period ended
 
 
For the six-month period ended
 
 
 
30 June 2020
(unaudited)
 
 
30 June 2019
(unaudited)
 
 
30 June 2020
(unaudited)
 
 
30 June 2019
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current corporate income tax expense
  35,326 
  82,562 
  206,804 
  165,123 
Deferred corporate income tax expense − origination and reversal of temporary differences
  71,902 
  24,514 
  84,375 
  127,680 
Corporate income tax expense
  107,228 
  107,076 
  291,179 
  292,803 
 
As at 30 June 2020, current corporate income tax liabilities amounted to KZT 11,121 thousand (31 December 2019: KZT 209,187 thousand).
 
As at 30 June 2020, deferred corporate income tax liabilities amounted to KZT 1,361,420 thousand (31 December 2019: KZT 1,277,045 thousand).
 
10. Amounts due to banks and other financial institutions
 
Amounts due from banks and other credit institutions comprise:
 
 
 
30 June2020
(unaudited)
 
 
31 December
2019 (unaudited)
 
 
 
 
 
 
 
 
Loans and deposits from governmental organisations
  6,888,308 
  7,933,858 
Loans from international financial institutions
  397,815 
  1,177,661 
Amounts due to banks and other credit institutions
  7,286,123 
  9,111,519 
 
As at 30 June 2020, loans from public institutions included loans from Entrepreneurship Development Fund “Damu” JSC in the amount of KZT 4,593,479 thousand (31 December 2019: KZT 5,721,225 thousand) as part of the state program for supporting small and medium-sized businesses by the banking sector, as well as deposits in the amount of KZT 310,882 thousand received from Kazakhstan Sustainability Fund JSC as part of the state program to refinance mortgage loans to customers (31 December 2019: KZT 292,258 thousand). Deposits attracted by the Group from Kazakhstan Sustainability Fund JSC are expressed in tenge, have a nominal interest rate of 0.1% per annum and are repayable in 2038. The funds were received in 2018-2019 at below-market interest rates to recover losses from refinancing mortgage loans to customers on non-market terms. The loans attracted from Entrepreneurship Development Fund “Damu” JSC are denominated in tenge, bear interest rates of 3.00% to 9.58% per annum and mature in 2022-2023.
 
As at 30 June 2020, loans from international financial organisations comprise loans received from the European Bank for Reconstruction and Development in the amount of KZT 397,815 thousand (31 December 2019: KZT 1,177,661 thousand). The loans are denominated in tenge, bear interest rate of 9.25% per annum and mature in 2020.
 
 
34
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
11. Amounts due to customers
 
The amounts due to customers include the following:
 
 
 
30 June2020
(unaudited)
 
 
31 December
2019 (unaudited)
 
Current accounts and demand deposits
 
 
 
 
 
 
- Retail customers
  1,604,775 
  2,435,282 
- Corporate customers
  21,577,882 
  16,458,064 
 
    
    
Time deposits
    
    
- Retail customers
  29,734,837 
  33,629,202 
- Corporate customers
  31,901,661 
  30,225,503 
 
    
    
Guarantee deposits
    
    
- Retail customers
  1,075,280 
  1,659,251 
- Corporate customers
  1,472,771 
  1,394,996 
 
  87,367,206 
  85,802,298 
 
    
    
Held as security against loans to customers
  1,154,438 
  1,441,500 
Held as security against guarantees (Note 20)
  1,393,613 
  1,612,747 
 
Below is the breakdown of due to customers by industry sectors:
 
 
 
30 June 2020
(unaudited)
 
 
31 December
2019 (unaudited)
 
 
 
Amount
 
 
%
 
 
Amount
 
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individuals
  32,414,892 
  37,10%
  37,723,735 
  44,00%
Production
  10,600,427 
  12,10%
  2,853,421 
  3,30%
Financial services
  6,393,591 
  7,30%
  3,261,913 
  3,80%
Lease
  5,511,651 
  6,30%
  6,361,162 
  7,40%
Construction
  4,206,907 
  4,80%
  4,401,961 
  5,10%
Mining industry
  3,356,742 
  3,80%
  6,144,578 
  7,20%
Asset management
  3,233,077 
  3,70%
  2,293,143 
  2,70%
Trade
  2,947,727 
  3,40%
  2,897,089 
  3,40%
Professional services
  2,742,837 
  3,10%
  2,757,236 
  3,20%
Transportation
  2,427,520 
  2,80%
  2,811,617 
  3,30%
Insurance
  1,569,232 
  1,80%
  3,655,804 
  4,30%
Real Estate
  1,393,106 
  1,60%
  1,260,626 
  1,50%
Communication and information
  976,292 
  1,10%
  1,119,107 
  1,30%
Education
  852,527 
  1,00%
  1,772,274 
  2,10%
Non-profit entities
  784,901 
  0,90%
  915,066 
  1,10%
Medical services
  492,621 
  0,60%
  172,904 
  0,20%
Electrical power
  401,944 
  0,50%
  919,085 
  1,10%
Agriculture
  368,346 
  0,40%
  310,290 
  0,40%
Other
  6,692,866 
  7,70%
  4,171,287 
  4,60%
Amounts due to customers
  87,367,206 
  100,00%
  85,802,298 
  100,00%
 
As at 30 June 2020, the Group had ten major clients, which accounted for 35% of the gross balance of current accounts and deposits of clients (31 December 2019: 26%). The total aggregate amount due to such customers as at 30 June 2020 was KZT 30,441,471 thousand (31 December 2019: KZT 22,395,695 thousand).
 
In accordance with the Kazakh Civil Code of the Republic of Kazakhstan, the Group is obliged to repay such deposits upon demand of a depositor. According to the current conditions for accepting deposits, in cases where the term deposit is returned to the depositor upon request before the expiration of the term, the deposit interest is paid for the actual period of placing the deposit.
 
 
35
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
12. Subordinated debt
 
Subordinated debt consisted of the following:
 
 
 
30 June
2020
(unaudited)
 
 
31 December
2019
(unaudited)
 
 
 
 
 
 
 
 
Long-term loans
  2,308,142 
  2,263,255 
Debt component of preferred shares
  1,040,000 
  1,040,000 
Subordinated debt
  3,348,142 
  3,303,255 
 
Details on long-term subordinated debt received are provided below:
 
Creditor
 
Borrowing currency
 
The nominal interest rate
 
 
Date
of issue
 
Maturity
 
30 June
2020
(unaudited)
 
 
31 December
2019
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Development LLP
 
Tenge
  7,00%
 
20 June 2011
 
24 July 2033
  844,626 
  837,009 
Maglink Limited
 
US dollar
  3,00%
 
28 June 2011
 
20 June 2033
  392,001 
  364,364 
Global Development LLP
 
Tenge
  7,00%
 
23 June 2011
 
24 July 2033
  29,716 
  29,448 
Global Development LLP
 
Tenge
  7,00%
 
29 August 2016
 
24 July 2033
  1,041,799 
  1,032,434 
 
 
    
 
 
 
 
  2,308,142 
  2,263,255 
 
In December 2010 the Group placed 1,000,000 preferred shares at the placement value of KZT 1,000 per share. These preferred shares do not have any voting rights unless payment of preferred dividends has been delayed for three months and carry a cumulative dividend of a minimum of 8% per annum, but not less than dividends on ordinary shares.
 
In accordance with IAS 32, if the non-redeemable preferred share establishes a contractual right to a dividend, it contains a financial liability in respect of the dividends, whereby the net present value of the obligation to distribute dividends is shown as a liability and the balance of the issue proceeds as equity. During the six-month periods ended 30 June 2020 and 2019, the dividend expense on preferred shares amounted to KZT 40,000 thousand and was classified as interest expense in accordance with IAS 32.
 
13. Other liabilities
 
Other liabilities comprise:
 
 
 
30 June
2020
(unaudited)
 
 
31 December
2019
(unaudited)
 
 
 
 
 
 
 
 
Payables to suppliers
  102,121 
  74,332 
Other financial liabilities
  114,779 
  55,655 
Other financial liabilities
  216,900 
  129,987 
 
    
    
Accrued expenses on bonuses
  89,216 
  443,279 
Fees and commissions on issued guarantees
  37,469 
  13,255 
Other taxes payable other than corporate income tax
  20,920 
  7,343 
Accrued unused vacations reserves
  20,868 
  19,964 
Other non-financial liabilities
  757 
  224 
Total other non-financial liabilities
  169,230 
  484,065 
Total other liabilities
  386,130 
  614,052 
 
14. Equity
 
As at 30 June 2020 and 31 December 2019, the Bank has 13,500,000 authorised ordinary shares. As at 30 June 2020 and 31 December 2019, outstanding ordinary shares in the amount of 9,356,140 pieces were fully paid by the shareholders at the price of placement of KZT 1 thousand per one ordinary share.
 
There were no dividends declared or paid on ordinary shares during the six-month periods ended 30 June 2020 and 2019.
 
 
36
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
14.  Equity (continued)
 
The carrying value of one common share calculated in accordance with the methodology indicated in the Listing Rules of Kazakhstan Stock Exchange as at 30 June 2020 and 31 December 2019 is presented below:
 
 
 
30 June 2020
(unaudited)
 
 
31 December 2019
(unaudited)
 
Type of shares
 
Number of outstanding shares
 
 
Net assets (thousands of tenge)
 
 
Book value per share (tenge)
 
 
Number of outstanding shares
 
 
Net assets (thousands of tenge)
 
 
Book value per share (tenge)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ordinary
  9,356,140 
  16,050,647 
  1,715,52 
  9,356,140 
  15,000,818 
  1,603,31 
 
Revaluation reserve for property and equipment
 
The revaluation reserve for property and equipment is used to record increases in the fair value of land and buildings and decreases to the extent that such decrease relates to an increase on the same asset previously recognised in equity.
 
As at 30 June 2020, the Group’s property and equipment revaluation reserve is KZT 755,767 thousand (31 December 2019: KZT 761,249 thousand).
 
15. Interest income and interest expense
 
Interest income and interest expense comprise:
 
 
 
For the three-month period ended
 
 
For the six-month period ended
 
 
 
30 June 2020 (unaudited)
 
 
30 June 2019 (unaudited)
 
 
30 June 2020 (unaudited)
 
 
30 June 2019 (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income calculated using effective interest rate
 
 
 
 
 
 
 
 
 
 
 
 
Loans to customers
  2,678,349 
  3,341,171 
  5,638,257 
  6,739,401 
Cash and cash equivalents
  4,935 
  75,919 
  111,021 
  153,584 
Amounts due from banks and other financial institutions
  1,157 
  715 
  1,732 
  1,894 
Investment securities
    
    
    
    
- Measured at amortised cost
  25,347 
   
  49,381 
   
- Measured at FVOCI
  40,161 
  32,022 
  57,814 
  72,954 
Other assets
  21,319 
  17,078 
  41,234 
  32,279 
Interest income
  2,771,268 
  3,466,905 
  5,899,439 
  7,000,112 
 
    
    
    
    
Interest expense calculated using effective interest rate
    
    
    
    
Amounts due to customers
  (1,091,904)
  (1,599,483)
  (2,385,764)
  (3,317,342)
Amounts due to banks and other financial institutions
  (147,550)
  (203,893)
  (317,606)
  (420,749)
Subordinated debt
  (94,568)
  (97,804)
  (187,275)
  (181,991)
Other interest expense
  (74)
   
  (247)
   
 
  (1,334,096)
  (1,901,180)
  (2,890,892)
  (3,920,082)
 
    
    
    
    
Lease liability
  (4,429)
  (11,423)
  (9,873)
  (22,058)
Interest expense
  (1,338,525)
  (1,912,603)
  (2,900,765)
  (3,942,140)
Net interest income
  1,432,743 
  1,554,302 
  2,998,674 
  3,057,972 
 
During the six-month period ended 30 June 2020, interest income on loans to customer comprises a loss from modification that does not result in derecognition in the amount of KZT 120,912 thousand (six-month period ended 30 June 2020: KZT 47,932 thousand) (Note 6).
 
 
37
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
16. Credit loss expense
 
Unuadited credit loss expense on financial instruments for the six-month period ended 30 June 2020 comprise the following:
 
 
 
 
 
 
For the six-month period ended 30 June 2020(unaudited)
 
 
 
Notes
 
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
  (6,517)
   
   
   
  (6,517)
Amounts due from banks and other financial institutions
 
 
 
  (176)
   
   
   
  (176)
Loans to customers
  6 
  (59,552)
  (118,789)
  (364,258)
  (2,545)
  (545,144)
Debt securities at amortised cost
  7 
  (613)
   
   
   
  (613)
Debt securities at FVOCI
  7 
  (570)
   
   
   
  (570)
Other financial assets
  8 
  (3,427)
   
  15,351 
   
  11,924 
Total credit loss expense
    
  (70,855)
  (118,789)
  (348,907)
  (2,545)
  (541,096)
 
Unuadited credit loss expense on financial instruments for the six-month period ended 30 June 2019 comprise the following:
 
 
 
 
 
 
For the six-month period ended 30 June 2019(unaudited)
 
 
 
Notes
 
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
  3,702 
   
   
   
  3,702 
Amounts due from banks and other financial institutions
 
 
 
  85 
   
   
   
  85 
Loans to customers
  6 
  37,103 
  (91,036)
  (639,625)
  (402)
  (693,960)
Debt securities at FVOCI
  7 
  179 
   
   
   
  179 
Other financial assets
  8 
  7,914 
   
  (25,913)
   
  (17,999)
Total credit loss expense
    
  48,983 
  (91,036)
  (665,538)
  (402)
  (707,993)
 
Unuadited credit loss expense on financial instruments for the three-month period ended 30 June 2020 comprise the following:
 
 
 
 
 
 
For the three-month period ended 30 June 2020(unaudited)
 
 
 
Notes
 
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
  (6,855)
   
   
   
  (6,855)
Amounts due from banks and other financial institutions

  1,692 
   
   
   
  1,692 
Loans to customers

  (56,558)
  (87,560)
  (296,262)
  (804)
  (441,184)
Debt securities at amortised cost

  (485)
   
   
   
  (485)
Debt securities at FVOCI

  1,200 
   
   
   
  1,200 
Other financial assets
    
  (2,431)
   
  (1,561)
   
  (3,992)
Total credit loss expense
    
  (63,437)
  (87,560)
  (297,823)
  (804)
  (449,624)
 
Unuadited credit loss expense on financial instruments for the three-month period ended 30 June 2019 comprise the following:
 
 
 
 
 
 
For the three-month period ended 30 June 2019(unaudited)
 
 
 
Notes
 
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents

  1,438 
   
   
   
  1,438 
Amounts due from banks and other financial institutions

  (309)
   
   
   
  (309)
Loans to customers

  97,692 
  (26,017)
  (472,007)
  (233)
  (400,565)
Debt securities at FVOCI

  850 
   
   
   
  850 
Other financial assets
    
  332 
   
   
   
  332 
Total credit loss expense
    
  100,003 
  (26,017)
  (472,007)
  (233)
  (398,254)
 
 
38
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
17. Net fee and commission income
 
Net fee and commission income comprises:
 
 
 
For the three-month period ended
 
 
For the six-month period ended
 
 
 
30 June 2020
(unaudited)
 
 
30 June 2019
(unaudited)
 
 
30 June 2020
(unaudited)
 
 
30 June 2019
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payment cards
  95,406 
  99,099 
  334,969 
  156,960 
Cash operations
  72,914 
  202,482 
  190,560 
  367,041 
Settlements operations
  78,043 
  108,268 
  160,544 
  200,674 
Guarantees issued
  66,501 
  88,722 
  125,869 
  154,872 
Opening and maintenance of customer accounts
  20,575 
  21,842 
  42,590 
  43,190 
Foreign currency transactions
  16,911 
  19,933 
  29,758 
  38,771 
Other
  13,583 
  22,163 
  27,329 
  39,663 
Fee and commission income
  363,933 
  562,509 
  911,619 
  1,001,171 
 
    
    
    
    
Transactions on customers card accounts
  (134,357)
  (130,932)
  (461,740)
  (208,792)
Settlements operations
  (13,970)
  (19,241)
  (29,473)
  (36,588)
Foreign currency transactions
  (4,918)
   
  (4,918)
   
Securities operations
  (813)
  (264)
  (1,447)
  (370)
Other
  (2,914)
  (10,369)
  (8,955)
  (21,059)
Fee and commission expense
  (156,972)
  (160,806)
  (506,533)
  (266,809)
Net fee and commission income
  206,961 
  401,703 
  405,086 
  734,362 
 
18. Personnel and administrative and other operating expenses
 
Personnel and administrative and other operating expenses comprise:
 
 
 
For the three-month period ended
 
 
For the six-month period ended
 
 
 
30 June 2020
(unaudited)
 
 
30 June 2019
(unaudited)
 
 
30 June 2020
(unaudited)
 
 
30 June 2019
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Salaries and bonuses
  415,080 
  557,046 
  951,669 
  1,111,565 
Social security contributions
  41,451 
  46,752 
  89,668 
  94,015 
Personnel expenses
  456,531 
  603,798 
  1,041,337 
  1,205,580 
 
    
    
    
    
Depreciation and amortisation
  101,215 
  99,587 
  201,723 
  197,189 
Technical support and software
  76,282 
  56,394 
  150,606 
  111,480 
Taxes other than corporate income tax
  57,097 
  49,832 
  122,062 
  107,881 
Membership fees
  51,651 
  41,834 
  84,907 
  83,110 
Professional services
  32,501 
  15,432 
  74,250 
  40,253 
Security
  24,242 
  24,622 
  51,976 
  46,844 
Communication and information services
  17,125 
  18,241 
  34,124 
  34,370 
Advertising and marketing
  5,502 
  29,852 
  31,778 
  57,948 
Utilities
  7,372 
  8,826 
  26,629 
  27,031 
Rent
  8,019 
  14,425 
  24,288 
  28,569 
Repair and maintenance
  9,061 
  28,734 
  19,809 
  40,638 
Office supplies
  2,148 
  3,894 
  6,063 
  7,560 
Plastic cards issuance
  1,839 
  2,170 
  5,013 
  15,431 
Business trips
  269 
  3,498 
  2,876 
  5,708 
Transportation
  889 
  1,065 
  1,971 
  2,190 
Representation expenses
  194 
  834 
  675 
  1,475 
Fines and penalties
  40 
   
  40 
  505 
Charity
   
  150 
   
  150 
Loss on disposal of property and equipment
  59 
   
  59 
   
Other
  24,894 
  51,411 
  43,028 
  104,260 
Administrative and other operating expenses
  420,399 
  450,801 
  881,877 
  912,592 
 
 
39
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
19. Earnings per share
 
Basic earnings per share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of participating shares outstanding during the period.
 
The following reflects the income and share data used in the basic and diluted earnings per share computations:
 
 
 
For the three-month period ended
 
 
For the six-month period ended
 
 
 
30 June 2020
(unaudited)
 
 
30 June 2019
(unaudited)
 
 
30 June 2020
(unaudited)
 
 
30 June 2019
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net profit for the period attributable to the shareholder of the Group
  329,041 
  700,761 
  1,082,348 
  1,116,365 
Weighted average number of ordinary shares for basic and diluted earnings per share computation
  9,356,140 
  9,356,140 
  9,356,140 
  9,356,140 
Basic and diluted earnings per share (in tenge)
  35,17 
  74,90 
  115,68 
  119,32 
 
As at 30 June 2020 and 31 December 2019, the Group did not have any financial instruments diluting earnings per share.
 
20. Commitments and contingencies
 
Operating environment
 
The Republic of Kazakhstan continues economic reforms and development of its legal, tax and regulatory frameworks as required by a market economy. The future stability of the Kazakhstani economy is largely dependent upon these reforms and developments and the effectiveness of economic, financial and monetary measures undertaken by the government.
 
The economy of the Republic of Kazakhstan is negatively affected by the decline in oil prices and the depreciation of the tenge against the US dollar and euro. The tenge interest rates remain high. These factors result in a reduced access to capital, a higher cost of capital, and increase in uncertainty regarding economic growth, which could negatively affect the Group’s future financial position, results of operations and business prospects. Management believes it is taking appropriate measures to support the sustainability of the Group’s business in the current circumstances.
 
As the COVID-19 outbreak continues there remains uncertainty about further developments of pandemic duration and the extent of the possible economic recovery in the nearest future. Government responses, their corresponding effects are still evolving, and the Group’s management continues its estimation of increased risks and effects of the pandemic and the measures taken by the government.
 
Legal
 
The Group is subject to various potential legal proceedings related to business operations. The Group believes that the ultimate liability, if any, arising from such actions or complaints will not have a material adverse effect on the financial position or results of operations of the Group.
 
The Group assesses the likelihood of material liabilities arising from individual circumstances and makes provision in its interim condensed consolidated financial statements only where it is probable that events giving rise to the liability will occur and the amount of the liability can be reasonably estimated. No provision has been made in these interim condensed consolidated financial statements for any of the contingent liabilities.
 
Taxation
 
The tax environment in the Republic of Kazakhstan is subject to change and inconsistent application and interpretations. Discrepancies in the interpretation of Kazakhstan laws and regulations of the Group and Kazakhstan authorised bodies may result in additional charge of taxes, fines and penalties.
 
Kazakhstan legislation and tax practices are continually evolving and are therefore subject to varying interpretations and frequent changes that may be retroactive. In certain cases, in order to determine the tax base, tax legislation refers to the provisions of IFRS, whereas the interpretation of the respective provisions of IFRS by the Kazakh tax authorities may differ from accounting policies, judgements and estimates applied by the management in preparation of these interim condensed consolidated financial statements, which may result in additional tax liabilities for the Group. The tax authorities may perform a retrospective tax audit during five years after the ending of the tax year.
 
The Group’s management believes that its interpretations of the relevant legislation are acceptable and the Group’s tax position is justified.
 
 
40
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
20.  Commitments and contingencies (continued)
 
Commitments and contingencies
 
The Group’s commitments and contingencies comprised the following:
 
 
30 June 2020
(unaudited)
 
 
31 December
2019 (unaudited)
 
Credit related commitments
 
 
 
 
 
 
Guarantees issued
  5,129,314 
  6,084,259 
Undrawn credit lines
  2,438,318 
  2,705,380 
 
  7,567,632 
  8,789,639 
 
    
    
Capital expenditure commitments
  2,311 
  16,711 
Commitments and contingencies before deducting collateral
  7,569,943 
  8,806,350 
 
    
    
Less amounts due to customers held as security against guarantees (Note 11)
  (1,393,613)
  (1,612,747)
Commitments and contingencies
  6,176,330 
  7,193,603 
 
The total amount of contractual commitments on undrawn credit lines and guarantees does not necessarily represent future cash requirements, as these financial instruments may expire or terminate without being funded. The loan commitment agreements stipulate the right of the Group to unilaterally withdraw from the agreement should any conditions unfavourable to the Group arise, including deterioration of the borrower’s financial condition.
 
21. Fair value measurement
 
Fair value measurement procedures
 
For the purpose of significant assets evaluation, such as real estate, external appraisers are engaged. The Group’s Managing Board decides is external appraisers should be engaged. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.
 
At each reporting date, the Group analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Group’s accounting policies. For this analysis, the Group verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents. The Group, in conjunction with the Group’s external valuers, also compares each the changes in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.
 
Fair value hierarchy
 
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
 
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
 
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
 
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
 
 
41
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
21.  Fair value measurement (continued)
 
Fair value hierarchy (continued)
 
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
 
 
 
 
 
Fair value measurement using
 
30 June 2020
(unaudited)
 
Date of valuation
 
Quoted prices in active markets
(Level 1)
 
 
Significant observable inputs
(Level 2)
 
 
Significant non-observable inputs
(Level 3)
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets measured at fair value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment – land and buildings
 
12 October 2016
   
  5,474,444 
   
  5,474,444 
Investment securities measured at FVOCI
 
30 June 2020
  1,655,671 
   
   
  1,655,671 
 
 
    
    
    
    
Liabilities measured at fair value
 
 
    
    
    
    
Financial instruments at fair value through profit or loss
 
30 June 2020
  593 
   
   
  593 
 
 
    
    
    
    
Assets for which fair value is disclosed
 
 
    
    
    
    
Cash and cash equivalents
 
30 June 2020
  36,989,406 
   
   
  36,989,406 
Amounts due from banks and other financial institutions
 
30 June 2020
   
  839,452 
   
  839,452 
Investment securities measured at amortised cost
 
30 June 2020
  3,995,157 
   
   
  3,995,157 
Loans to customers
 
30 June 2020
   
   
  68,904,240 
  68,904,240 
Other financial assets
 
30 June 2020
   
   
  711,966 
  711,966 
 
 
    
    
    
    
Liabilities whose fair value is disclosed
 
 
    
    
    
    
Amounts due to banks and other financial institutions
 
30 June 2020
   
  6,913,984 
   
  6,913,984 
Amounts due to customers
 
30 June
2020
   
  87,486,840 
   
  87,486,840 
Subordinated debt
 
30 June 2020
   
  3,762,967 
   
  3,762,967 
Lease liabilities
 
30 June 2020
   
  173,014 
   
  173,014 
Other financial liabilities
 
30 June 2020
   
   
  216,900 
  216,900 
 
 
42
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
21.  Fair value measurement (continued)
 
Fair value hierarchy (continued)
 
 
 
 
 
Fair value measurement using
 
31 December 2019
(unaudited)
 
Date of valuation
 
Quoted prices in active markets
(Level 1)
 
 
Significant observable inputs
(Level 2)
 
 
Significant non-observable inputs
(Level 3)
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets measured at fair value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment – land and buildings
 
12 October 2016
   
  5,517,342 
   
  5,517,342 
 
 
    
    
    
    
Liabilities measured at fair value
 
 
    
    
    
    
Financial instruments at fair value through profit or loss
 
31 December 2019
  9,626 
   
   
  9,626 
 
 
    
    
    
    
Assets for which fair value is disclosed
 
 
    
    
    
    
Cash and cash equivalents
 
31 December 2019
  33,448,522 
   
   
  33,448,522 
Amounts due from banks and other financial institutions
 
31 December 2019
   
  776,208 
   
  776,208 
Loans to customers
 
31 December 2019
   
   
  76,825,946 
  76,825,946 
Investment securities measured at amortised cost
 
31 December 2019
  3,837,476 
   
   
  3,837,476 
Other financial assets
 
31 December 2019
   
   
  581,815 
  581,815 
 
 
    
    
    
    
Liabilities whose fair value is disclosed
 
 
    
    
    
    
Amounts due to banks and other financial institutions
 
31 December 2019
   
  9,028,965 
   
  9,028,965 
Amounts due to customers
 
31 December 2019
   
  86,220,104 
   
  86,220,104 
Subordinated debt
 
31 December 2019
   
  3,660,095 
   
  3,660,095 
Lease liabilities
 
31 December 2019
   
  226,456 
   
  226,456 
Other financial liabilities
 
31 December 2019
   
   
  129,987 
  129,987 
 
During the six-month periods ended 30 June 2020 and 2019, there was no movement between levels of the hierarchy model of the fair value for financial assets and liabilities shown at fair value.
 
 
43
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
21.  Fair value measurement (continued)
 
Fair value of financial assets and liabilities not carried at fair value
 
Set out below is a comparison by class of the carrying amounts and fair values of the Group’s financial instruments that are not carried at fair value in the interim condensed consolidated statement of financial position. The table does not include the fair values of non-financial assets and non-financial liabilities.
 
 
 
30 June 2020
(unaudited)
 
 
31 December 2019
(unaudited)
 
 
 
Carrying amount
 
 
Fair value
 
 
Unrecog-nised gain/(loss)
 
 
Carrying amount
 
 
Fair value
 
 
Unrecog-nised gain/(loss)
 
Financial assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
  36,989,406 
  36,989,406 
   
  33,448,522 
  33,448,522 
   
Amounts due from banks and other financial institutions
  839,452 
  839,452 
   
  776,208 
  776,208 
   
Loans to customers
  62,506,360 
  68,904,240 
  6,397,880 
  68,124,327 
  76,825,946 
  8,701,619 
Investment securities measured at amortised cost
  3,972,192 
  3,995,157 
  22,965 
  3,785,045 
  3,837,476 
  52,431 
Other financial assets
  728,121 
  711,966 
  (16,155)
  607,430 
  581,815 
  (25,615)
 
    
    
    
    
    
    
Financial liabilities
    
    
    
    
    
    
Amounts due to banks and other financial institutions
  7,286,123 
  6,913,984 
  372,139 
  9,111,519 
  9,028,965 
  82,554 
Amounts due to customers
  87,367,206 
  87,486,840 
  (119,634)
  85,802,298 
  86,220,104 
  (417,806)
Subordinated debt
  3,348,142 
  3,762,967 
  (414,825)
  3,303,255 
  3,660,095 
  (356,840)
Lease liabilities
  173,014 
  173,014 
   
  226,456 
  226,456 
   
Other financial liabilities
  216,900 
  216,900 
   
  129,987 
  129,987 
   
Total unrecognised change in unrealised fair value
    
    
  6,242,370 
    
    
  8,036,343 
 
Valuation techniques and assumptions
 
The following describes the methodologies and assumptions used to determine fair values for those assets and liabilities recorded at fair value in the interim condensed consolidated financial statements, and items, which are not assessed at fair value in the interim condensed consolidated statement of financial position, but the fair value of which is disclosed.
 
Assets for which fair value approximates carrying value
 
For financial assets and financial liabilities that are liquid or having a short-term maturity (less than three months) it is assumed that the carrying amounts approximate to their fair value. This assumption is also applied to demand deposits and savings accounts without a specific maturity.
 
Financial assets and financial liabilities carried at amortised cost
 
Fair value of the quoted notes and bonds is based on price quotations at the reporting date. The fair value of unquoted instruments, loans to customers, customer funds, amounts due from banks and other financial institutions, amounts due to banks and other financial institutions, subordinated debt, other financial assets and liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.
 
Property and equipment – land and buildings
 
The fair value of land and buildings owned by the Group is based on valuations performed by an accredited independent valuer. The fair value of the Group’s land and buildings was determined by using market approach. This means that valuations performed by the valuer are based on market transaction prices, adjusted for difference in the nature, location or condition of the specific property.
 
 
44
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
22. Related party disclosures
 
In accordance with IAS 24 Related Party Disclosures, parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.
 
The Group’s related parties comprise counterparties that are the Group’s shareholders, and members of the Board of Directors and Managing Board. Other related parties comprise: companies with which the Group has significant shareholders in common; companies in which a substantial interest in the voting power is owned, directly or indirectly, by shareholders of the Group or by individuals which have significant influence over the Group, or anyone expected to influence, or be influenced by, that person in their dealings with the Group.
 
Related parties may enter into transactions which unrelated parties might not. Prices and terms of such transactions may differ from prices and terms of transactions between unrelated parties.
 
The outstanding balances of related party transactions are as follows:
 
 
 
30 June 2020
(unaudited)
 
 
 
Parent
 
 
Key management
personnel
 
 
Other related parties
 
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
  835,753 
   
   
ECL allowance
  (1,617)
   
   
Cash and cash equivalents
  834,136 
   
   
 
    
    
    
Loans to customers before ECL allowance
   
  2,364 
  47,692 
ECL allowance
   
  (89)
  (543)
Loans to customers
   
  2,275 
  47,149 
 
    
    
    
Liabilities
    
    
    
Amounts due to customers
   
  138,068 
  3,008,140 
Subordinated debt
   
   
  1,040,000 
 
 
 
31 December 2019
(unaudited)
 
 
 
Parent
 
 
Key management
personnel
 
 
Other related parties
 
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
  849,567 
   
   
ECL allowance
  (1,059)
   
   
Loans to customers
  848,508 
   
   
 
    
    
    
Loans to customers before ECL allowance
   
  5,180 
  57,733 
ECL allowance
   
  (105)
  (71)
Loans to customers
   
  5,075 
  57,662 
 
    
    
    
Liabilities
    
    
    
Amounts due to customers
   
  223,497 
  1,983,912 
Subordinated debt
   
   
  1,040,000 
 
 
45
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
22.  Related party disclosures (continued)
 
The income and expense items on transactions with related parties are as follows:
 
 
 
For the six-month period ended 30 June
 
 
 
2020
(unaudited)
 
 
2019
(unaudited)
 
 
 
Parent
 
 
Key manage-ment personnel
 
 
Other related parties
 
 
Parent
 
 
Key manage-ment personnel
 
 
Other related parties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income on loans to customers
   
  167 
  3,589 
   
  178 
  4,939 
Charge of ECL allowance on loans to customers
   
  (89)
  (543)
   
   
  (15)
Interest expense on amounts due to customers
   
  (1,641)
  (18,081)
   
  (1,808)
  (39,890)
Interest expense on subordinated debt
   
   
  (40,000)
   
   
  (40,000)
Net fee and commission (expense)/ income
  (18,492)
  313 
  3,375 
  (21,496)
  188 
  (8,179)
Net gains from transactions in foreign currencies
   
  1,468 
  19,383 
   
  157 
  99,893 
Other income/(expense)
  487 
   
  (4,601)
  305 
   
  (1,383)
 
 
 
For the three-month period ended 30 June
 
 
 
2020
(unaudited)
 
 
2019
(unaudited)
 
 
 
Parent
 
 
Key manage-ment personnel
 
 
Other related parties
 
 
Parent
 
 
Key manage-ment personnel
 
 
Other related parties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income on loans to customers
   
  65 
  1,693 
   
  83 
  2,977 
Charge of ECL allowance on loans to customers
   
  3 
  (493)
   
   
  (9)
Interest expense on amounts due to customers
   
  (774)
  (12,349)
   
  (621)
  (26,844)
Interest expense on subordinated debt
   
   
  (20,000)
   
   
  (20,000)
Net fee and commission (expense)/ income
  (8,375)
  175 
  2,759 
  (21,513)
  106 
  (16,782)
Net gains from transactions in foreign currencies
   
  1,361 
  17,086 
   
  81 
  96,022 
Other income/(expense)
  722 
   
  (2,096)
  269 
   
  (4,462)
 
 
46
“Bank Freedom Finance Kazakhstan” JSC
Interim condensed consolidated

financial statements
 
 (in thousands of tenge)
 
 
22.  Related party disclosures (continued)
 
Interest rates and maturity dates on transactions with related parties are as follows:
 
 
 
30 June 2020
(unaudited)
 
 
31 December 2019
(unaudited)
 
 
 
Parent
 
 
Key manage-ment personnel
 
 
Other related parties
 
 
Parent
 
 
Key manage-ment personnel
 
 
Other related parties
 
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maturity
   
   
   
   
   
   
Annual interest rate in tenge
  0.00%
   
   
  0.00%
   
   
 
    
    
    
    
    
    
Loans to customers
    
    
    
    
    
    
Maturity
   
  2022 
  2020-2028 
   
  2022 
  2020-2028 
Annual interest rate in tenge
   
  12.86%
  13.31%
   
  13.80%
  13.90%
Amounts due to customers
    
    
    
    
    
    
Maturity
   
  2020-2023 
  2020-2023 
   
  2020-2022 
  2020-2021 
Annual interest rate in tenge
   
  9.22%
  5.22%
   
  7.10%
  6.00%
Annual interest rate in USD/EUR
   
  0.80%
  0.37%
   
  1.80%
  0.40%
 
    
    
    
    
    
    
Subordinated debt
    
    
    
    
    
    
Maturity
   
   
  2033 
   
   
  2033 
Annual interest rate in tenge
   
   
  8.00%
   
   
  8.00%
 
Below is information on compensation to 6 (six) members of key management personnel for the three-month and six-month periods ended 30 June 2020 and 2019:
 
 
 
For the three-month period ended
 
 
For the six-month period ended
 
 
 
30 June 2020
(unaudited)
 
 
30 June 2019
(unaudited)
 
 
30 June 2020
(unaudited)
 
 
30 June 2019
(unaudited)
 
Salaries and other short-term benefits
  32,776 
  169,325 
  105,535 
  239,081 
Social security contributions
  3,042 
  11,990 
  6,251 
  14,719 
Total
  35,818 
  181,315 
  111,786 
  253,800 
 
23. Events after the end of the interim period
 
On 3 August 2020, “ForteBank” JSC and “Freedom Finance” JSC signed a sale agreement of 100% of the Bank’s ordinary shares by the Parent company. The transaction is expected to be completed approximately in December 2020.
 
 
47