Exhibit 99.01
 
 
 
 
“Bank Kassa Nova” JSC
(SB of “ForteBank” JSC)
 
Consolidated financial statements
 
31 December 2019

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
 
 
CONTENTS
 
 
 
CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 
 
Consolidated statement of financial position
 
1
Consolidated statement of comprehensive income
 
2
Consolidated statement of changes in equity
 
3
Consolidated statement of cash flows
 
4
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
1
Principal activities
5
2
Basis of preparation
5
3
Summary of accounting policies
6
4
Significant accounting judgments and estimates
21
5
Cash and cash equivalents
22
6
Amounts due from other banks and other financial institutions
23
7
Loans to customers
24
8
Investment securities
56
9
Property and equipment
57
10
Intangible assets
58
11
Other assets
58
12
Taxation
59
13
Amounts due to banks and other financial institutions
60
14
Amounts due to customers
61
15
Subordinated debt
62
16
Other liabilities
62
17
Equity
63
18
Interest income and interest expense
63
19
Credit loss expense
64
20
Net fee and commission income
64
21
Personnel and administrative and other operating expenses
65
22
Earnings per share
65
23
Commitments and contingencies
66
24
Risk management
66
25
Fair value measurement
76
26
Maturity analysis of assets and liabilities
80
27
Related party disclosures
80
28
Changes in liabilities arising from financing activities
83
29
Capital adequacy
83
30
Events after the reporting date
84
 
 
 
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 
as at 31 December 2019
 
(thousands of tenge)
 
 

 
Notes
 
 
2019
(unaudited)
 
 
2018*
(unaudited)
 
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
  5 
  33,448,522 
  43,344,207 
Amounts due from other banks and other financial institutions
  6 
  776,208 
  554,244 
Loans to customers
  7 
  68,124,327 
  74,604,438 
Investment securities
  8 
  3,785,045 
  1,655,460 
Property and equipment
  9 
  6,457,813 
  6,367,860 
Intangible assets
  10 
  1,156,968 
  1,121,630 
Current corporate income tax assets
  12 
   
  133,801 
Other assets
  11 
  2,962,341 
  2,653,440 
Total assets
    
  116,711,224 
  130,435,080 
 
    
    
    
Liabilities
    
    
    
Financial instruments at fair value through profit or loss
    
  9,626 
   
Amounts due to banks and other financial institutions
  13 
  9,111,519 
  10,909,578 
Amounts due to customers
  14 
  85,802,298 
  100,532,184 
Current corporate income tax liabilities
  12 
  209,187 
   
Deferred corporate income tax liabilities
  12 
  1,277,045 
  1,121,248 
Subordinated debt
  15 
  3,303,255 
  3,244,190 
Lease liabilities
  3 
  226,456 
   
Other liabilities
  16 
  614,052 
  475,272 
Total liabilities
    
  100,553,438 
  116,282,472 
 
    
    
    
Equity
    
    
    
Share capital
  17 
  9,356,140 
  9,356,140 
Revaluation reserve for property and equipment
  17 
  761,249 
  772,815 
Fair value reserve
    
   
  (2,382)
Retained earnings
    
  6,040,397 
  4,026,035 
Total equity
    
  16,157,786 
  14,152,608 
Total equity and liabilities
    
  116,711,224 
  130,435,080 
 
Certain amounts in this column do not agree to the consolidated financial statements for the year ended 31 December 2018 as they reflect the reclassifications made disclosed in Note 2.
 
The accompanying notes on pages 5 to 82 are an integral part of these consolidated financial statements.
 
1
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 
for the year ended 31 December 2019
 
(thousands of tenge)
 
 
 
 
Notes
 
 
2019
(unaudited)
 
 
2018
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
Interest income calculated using effective interest rate
  18 
  13,802,072 
  13,087,666 
Interest expense
  18 
  (7,321,798)
  (8,065,434)
Net interest income
    
  6,480,274 
  5,022,232 
 
    
    
    
Credit loss expense
  19 
  (1,629,260)
  (4,263,019)
Net interest income after credit loss expense
    
  4,851,014 
  759,213 
 
    
    
    
Net fee and commission income
  20 
  1,403,868 
  1,359,807 
Net gains from financial instruments at fair value through profit or loss
    
  70,612 
  73,580 
Net gains/(losses) from foreign currencies
    
    
    
- dealing
    
  668,830 
  599,417 
- translation differences
    
  (147,324)
  (120,218)
Gain from government grant
  13 
  84,061 
  2,920,290 
Gain on derecognition of subordinated debt as a result of modification
  15 
   
  1,121,665 
Other income
    
  102,958 
  54,905 
Non-interest income
    
  2,183,005 
  6,009,446 
 
    
    
    
Loss on derecognition of financial assets measured at amortised cost
  7 
  (26,666)
  (732,351)
Personnel expenses
  21 
  (2,477,090)
  (2,430,305)
Administrative and other operating expenses
  21 
  (1,863,329)
  (1,696,505)
Other expenses
    
  (106,196)
  (101,233)
Non-interest expense
    
  (4,473,281)
  (4,960,394)
Profit before corporate income tax expense
    
  2,560,738 
  1,808,265 
 
    
    
    
Corporate income tax expense
  12 
  (557,942)
  (388,579)
Profit for the year
    
  2,002,796 
  1,419,686 
 
    
    
    
Other comprehensive income
    
    
    
Other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods
    
    
    
Net change in fair value of debt instruments at fair value through other comprehensive income
    
  2,561 
  420 
Changes in allowance for expected credit losses of debt instruments at fair value through other comprehensive income
  8 
  (179)
  (744)
Other comprehensive income/(loss) for the year, net of corporate income tax
    
  2,382 
  (324)
Total comprehensive income for the year
    
  2,005,178 
  1,419,362 
 
    
    
    
Basic and diluted earnings per share (in tenge)
  22 
  214.06 
  151.74 
 
 
The accompanying notes on pages 5 to 82 are an integral part of these consolidated financial statements.
2
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
 
for the year ended 31 December 2019
 
(thousands of tenge)
 
 
 
 
Notes
 
 
Share capital
 
 
Revaluation reserve for property and equipment
 
 
Fair value reserve
 
 
Retained earnings
 
 
Total equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At 31 December 2017
 
 
 
  9,356,140 
  783,179 
  (2,981)
  3,666,043 
  13,802,381 
Impact of adopting IFRS 9
 
 
 
   
   
  923 
  (612,918)
  (611,995)
Restated balance as at 1 January 2018 under IFRS 9 (unaudited)
 
 
 
  9,356,140 
  783,179 
  (2,058)
  3,053,125 
  13,190,386 
 
 
 
    
    
    
    
    
Profit for the year
 
 
 
   
   
   
  1,419,686 
  1,419,686 
Other comprehensive loss for the year
 
 
 
   
   
  (324)
   
  (324)
Total comprehensive income for the year (unaudited)
 
 
 
   
   
  (324)
  1,419,686 
  1,419,362 
 
 
 
    
    
    
    
    
Dividends declared
  17 
   
   
   
  (457,140)
  (457,140)
Depreciation of revaluation reserve for property and equipment
    
   
  (10,364)
   
  10,364 
   
At 31 December 2018
    
  9,356,140 
  772,815 
  (2,382)
  4,026,035 
  14,152,608 
 
    
    
    
    
    
    
Profit for the year
    
   
   
   
  2,002,796 
  2,002,796 
Other comprehensive income for the year
    
   
   
  2,382 
   
  2,382 
Total comprehensive income for the year (unaudited)
    
   
   
  2,382 
  2,002,796 
  2,005,178 
 
    
    
    
    
    
    
Depreciation of revaluation reserve for property and equipment
    
   
  (11,566)
   
  11,566 
   
At 31 December 2019 (unaudited)
    
  9,356,140 
  761,249 
   
  6,040,397 
  16,157,786 
 
The accompanying notes on pages 5 to 82 are an integral part of these consolidated financial statements.
3
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
CONSOLIDATED STATEMENT OF CASH FLOWS
 
for the year ended 31 December 2019
 
(thousands of tenge)
 
 
Notes
 
 
2019
(unaudited)
 
 
2018
(unaudited)
 
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
Interest received
   
  12,850,531 
  12,256,586 
Interest paid
   
  (7,352,344)
  (8,015,868)
Fees and commissions received
   
  2,493,399 
  1,765,558 
Fees and commissions paid
   
  (1,093,527)
  (407,659)
Net realised gains on transactions with financial instruments at fair value through profit or loss
   
  80,238 
  73,580 
Net gains from dealing in foreign currencies
   
  668,830 
  609,136 
Other income received
   
  79,711 
  54,905 
Personnel expenses paid
 
 
  
  (2,301,981)
  (2,246,799)
Administrative and other operating expenses paid
   
  (1,469,945)
  (1,359,195)
Cash flows from operating activities before changes in operating assets and liabilities
   
  3,954,912 
  2,730,244 
   
    
    
Net changes in operating assets and liabilities
   
    
    
Amounts due from other banks and other financial institutions
   
  (222,839)
  362,262 
Loans to customers
 
  5,264,216 
  (9,336,353)
Other assets
   
  27,739 
  466,397 
Amounts due to banks and other financial institutions
 
  (1,739,015)
  3,084,048 
Amounts due to customers
   
  (14,499,729)
  10,812,035 
Other liabilities
   
  (40,874)
  23,322 
Net cash flows (used in) / from operating activities before corporate income tax
   
  (7,255,590)
  8,141,955 
 
    
    
Corporate income tax paid
   
  (64,687)
   
Net cash flows (used in) / from operating activities
   
  (7,320,277)
  8,141,955 
  
    
    
Cash flows from investing activities
   
    
    
Purchase of property and equipment
   
  (141,292)
  (65,062)
Purchase of intangible assets
   
  (108,361)
  (139,000)
Proceeds from sale of property and equipment
 
   
  9,197 
Purchase of investment securities at fair value through other comprehensive income
 
  (2,300,000)
  (10,209,611)
Redemption of investment securities at fair value through other comprehensive income
 
  3,987,000 
  11,193,272 
Acquisition of investment securities at amortised cost
   
  (3,780,143)
   
Proceeds from redemption of investment securities at amortised cost
 
   
  300,599 
Net cash used in investing activities
  
  (2,342,796)
  1,089,395 
 
    
    
Cash flows from financing activities
 
    
    
Repayment of lease liabilities 
  3 
  (100,260)
   
Payment of dividends on ordinary shares
  17 
   
  (457,140)
Net cash used in financing activities
    
  (100,260)
  (457,140)
 
    
    
    
Effect of exchange rates changes on cash and cash equivalents
    
  (135,292)
  3,686,329 
Effect of expected credit losses on cash and cash equivalents
    
  2,940 
  (10,220)
Net (decrease)/increase in cash and cash equivalents
    
  (9,895,685)
  12,450,319 
 
    
    
    
Cash and cash equivalents as at 1 January
    
  43,344,207 
  30,893,888 
Cash and cash equivalents as at 31 December
  5 
  33,448,522 
  43,344,207 
 
    
    
    
Non-cash transactions
    
    
    
Repayment of loans to customers by repossession of collateral
  11 
  352,199 
  1,583,356 
 
The accompanying notes on pages 5 to 82 are an integral part of these consolidated financial statements.
4
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
1. Principal activities
 
These consolidated financial statements comprise the financial statements of “Bank Kassa Nova” JSC (SB of “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 31 December 2019, the Bank’s branch network comprises 8 branches located in the Republic of Kazakhstan (31 December 2018: 8 branches).
 
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 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 of the deposit and currency (31 December 2018: KZT 10 million).
 
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 balance of the Bank.
 
As at 31 December 2019, the sole shareholder of the Bank, which owns 100% of outstanding shares is “ForteBank” Joint Stock Company (the “Parent”) (31 December 2018: “Nova Leasing” JSC).
 
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 Kassa Nova” JSC owned by Nova Leasing JSC in the amount of 100% of the issued share capital of “Bank Kassa Nova” JSC.
 
The Bank is under the practical control of Mr. B.Zh. Utemuratov, who owns 100.00% (31 December 2018: 100.00%) of the Bank’s ordinary shares, and who is the ultimate controlling party and has the power to direct the Bank activities at its sole discretion and on its own account.
 
2. Basis of preparation
 
General
 
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”).
 
The consolidated financial statements have been prepared under the cost principle except as disclosed in the accounting policies below. For example, land and buildings within property and equipment, securities at fair value through other comprehensive income were measured at fair value.
 
These consolidated financial statements are presented in thousands of Kazakhstan tenge (“tenge” or “KZT”), unless otherwise is stated.
 
 
5
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
 (thousands of tenge)
 
 
2.  Basis of preparation (continued)
 
Reclassifications
 
The following reclassifications were made in the consolidated statement of financial position as at 31 December 2018 to conform with the 2019 presentation:
 
Consolidated statement of financial position
 
As previously reported
 
 
Reclassification
 
 
As reclassified
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Cash and accounts with the National Bank of the Republic of Kazakhstan
  41,633,664 
  (41,633,664)
   
Cash and cash equivalents
   
  43,344,207 
  43,344,207 
Amounts due from other banks and other financial institutions
  2,264,787 
  (1,710,543)
  554,244 
 
3. Summary of accounting policies
 
Changes in accounting policies
 
The Group applied for the first time certain amendments to the standards, which are effective for annual periods beginning on or after 1 January 2019. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. The nature and the impact of each amendment is described below:
 
IFRS 16 Leases
 
IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an Arrangement Contains a Lease, SIC 15 Operating Leases − Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet model.
 
Lessor accounting under IFRS 16 is substantially unchanged from IAS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in IAS 17. Therefore, IFRS 16 did not have an impact for leases where the Group is the lessor.
 
The Group adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of 1 January 2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognised at the date of initial application. The Group elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. The Group also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (‘short-term leases’), and lease contracts for which the underlying asset is of low value (‘low-value assets’).
 
The effect of adoption IFRS 16 as at 1 January 2019 is as follows:
 
 
 
1 January 2019 (unaudited)
 
Assets
 
 
 
Property and equipment
  276,467 
Total assets
  276,467 
 
    
Liabilities
    
Lease liabilities
  276,467 
Total liabilities
  276,467 
 
 
6
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Changes in accounting policies (continued)
 
IFRS 16 Leases (continued)
 
(a)          
Nature of the effect of adoption of IFRS 16
 
The Group has lease contracts for various items of property and equipment. Before the adoption of IFRS 16, the Group classified each of its leases (as lessee) at the inception date as either a finance lease or an operating lease. A lease was classified as a finance lease if it transferred substantially all of the risks and rewards incidental to ownership of the leased asset to the Group; otherwise it was classified as an operating lease. Finance leases were capitalised at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments were apportioned between interest and reduction of the lease liability. In an operating lease, the leased property was not capitalised and the lease payments were recognised as rent expense in profit or loss on a straight-line basis over the lease term. Any prepaid rent and accrued rent were recognised under other assets and other liabilities, respectively.
 
Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The standard provides specific transition requirements and practical expedients, which has been applied by the Group.
 
Leases previously accounted for as operating leases
 
The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-term leases and leases of low-value assets. The right-of-use assets for most leases were recognised based on the carrying amount as if the standard had always been applied, apart from the use of incremental borrowing rate at the date of initial application. In some leases, the right-of-use assets were recognised based on the amount equal to the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognised. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application.
 
The Group also applied the available practical expedients wherein it:
 
Used a single discount rate to a portfolio of leases with reasonably similar characteristics;
 
Relied on its assessment of whether leases are onerous immediately before the date of initial application;
 
Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application;
 
Used hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
 
Based on the foregoing, as at 1 January 2019:
 
Right-of-use assets of KZT 276,467 thousand were recognised and included in Property and equipment;
 
Additional lease liabilities of KZT 276,467 thousand were recognised.
 
Lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments as at 31 December 2018 as follows:
 
 
  (Unaudited) 
Operating lease commitments as at 31 December 2018
  19,924 
Weighted average incremental borrowing rate as at 1 January 2019
  11%
Discounted operating lease commitments at 1 January 2019
  19,751 
 
    
Less:
    
Commitments relating to short-term leases
  (9,336)
Commitments relating to leases of low-value assets
   
 
    
Add:
   
Commitments relating to leases previously classified as finance leases
   
Payments in optional extension periods not recognised as at 31 December 2018
  266,052 
Lease liabilities as at 1 January 2019
  276,467 
 
 
7
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Changes in accounting policies (continued)
 
IFRS 16 Leases (continued)
 
(b)          
Summary of new accounting policies
 
Set out below are the new accounting policies of the Group upon adoption of IFRS 16, which have been applied from the date of initial application:
 
Group as a lessee
 
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
 
Right-of-use assets
 
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.
 
Lease liabilities
 
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.
 
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
 
Short-term leases and leases of low-value assets
 
The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below KZT 1,900 thousand). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
 
Significant judgement in determining the lease term of contracts with renewal options
 
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
 
The Group has the option, under some of its leases to lease the assets for additional terms of three to five years. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy).
 
 
8
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Changes in accounting policies (continued)
 
IFRS 16 Leases (continued)
 
(b)          
Summary of new accounting policies (continued)
 
Group as a lessee (continued)
 
Amounts recognised in the consolidated statement of financial position, consolidated statement of comprehensive income and consolidated statement of cash flows
 
Set out below, are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during the year:
 
 
 
Right-of-use assets (unaudited)
 
 
 
 
 
 
Buildings
 
 
Total
 
 
Lease liabilities (unaudited)
 
 
 
 
 
 
 
 
 
 
 
At 1 January 2019
  276,467 
  276,467 
  276,467 
Additions
  267,357 
  267,357 
  267,357 
Disposals
  (229,916)
  (229,916)
  (251,701)
Depreciation expense
  (91,998)
  (91,998)
   
Interest expense
   
   
  34,593 
Payments
   
   
  (100,260)
At 31 December 2019
  221,910 
  221,910 
  226,456 
 
For the year ended 31 December 2019, the Group recognised rent expense from short-term leases of KZT 62,632 thousand (Note 21).
 
Operating − Group as a lessor
 
Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income.
 
Finance − Group as a lessor
 
The Group recognises lease receivables at value equal to the net investment in the lease, starting from the date of commencement of the lease term. Finance income is based on a pattern reflecting a constant periodic rate of return on the net investment outstanding. Initial direct costs are included in the initial measurement of the lease receivables.
 
IFRIC Interpretation 23 Uncertainty over Income Tax Treatment
 
The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes. It does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following:
 
Whether an entity considers uncertain tax treatments separately;
 
The assumptions an entity makes about the examination of tax treatments by taxation authorities;
 
How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates;
 
How an entity considers changes in facts and circumstances.
 
The Group determines whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty.
 
Upon adoption of the Interpretation, the Group considered whether it has any uncertain tax positions, particularly those relating to transfer pricing. The Bank’s and the subsidiaries’ tax filings in different jurisdictions include deductions related to transfer pricing and the taxation authorities may challenge those tax treatments. The Group determined, based on its tax compliance and transfer pricing study, that it is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities. The Interpretation did not have an impact on the consolidated financial statements of the Group.
 
 
9
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Changes in accounting policies (continued)
 
Amendments to IFRS 9 Prepayment Features with Negative Compensation
 
Under IFRS 9, a debt instrument can be measured at amortised cost or at fair value through other comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless of an event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract. The amendments had no impact on the consolidated financial statements of the Group.
 
Amendments to IAS 19 Plan Amendment, Curtailment or Settlement
 
The amendments to IAS 19 address the accounting when a plan amendment, curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or settlement occurs during the annual reporting period, an entity is required to determine the current service cost for the remainder of the period after the plan amendment, curtailment or settlement, using the actuarial assumptions used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event. An entity is also required to determine the net interest for the remainder of the period after the plan amendment, curtailment or settlement using the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event, and the discount rate used to remeasure that net defined benefit liability (asset).
 
The amendments had no impact on the consolidated financial statements of the Group.
 
Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures
 
The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss model in IFRS 9 applies to such long-term interests.
 
The amendments also clarified that, in applying IFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognised as adjustments to the net investment in the associate or joint venture that arise from applying IAS 28 Investments in Associates and Joint Ventures. These amendments had no impact on the consolidated financial statements as the Group does not have long term interests in associates and joint ventures.
 
Annual improvements 2015-2017 cycle
 
IFRS 3 Business Combinations
 
The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation.
 
An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early application permitted.
 
These amendments had no impact on the consolidated financial statements of the Group as there is no transaction where joint control is obtained.
 
IFRS 11 Joint Arrangements
 
An entity that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined in IFRS 3. The amendments clarify that the previously held interests in that joint operation are not remeasured.
 
An entity applies those amendments to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early application permitted.
 
These amendments had no impact on the consolidated financial statements of the Group as there is no transaction where joint control is obtained.
 
 
10
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Changes in accounting policies (continued)
 
Annual improvements 2015-2017 cycle (continued)
 
IAS 12 Income Taxes
 
The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognises the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where it originally recognised those past transactions or events.
 
An entity applies the amendments for annual reporting periods beginning on or after 1 January 2019, with early application permitted. When the entity first applies those amendments, it applies them to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period.
 
Since the Group’s current practice is in line with these amendments, they had no impact on the consolidated financial statements of the Group.
 
IAS 23 Borrowing Costs
 
The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete.
 
The entity applies the amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An entity applies the amendments for annual reporting periods beginning on or after 1 January 2019, with early application permitted.
 
Since the Group’s current practice is in line with these amendments, they had no impact on the consolidated financial statements of the Group.
 
Basis of consolidation
 
Subsidiaries, which are those entities which are controlled by the Group, are consolidated. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:
 
Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);
 
Exposure, or rights, to variable returns from its involvement with the investee;
 
The ability to use its power over the investee to affect its returns.
 
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
 
The contractual arrangement(s) with the other vote holders of the investee;
 
Rights arising from other contractual arrangements;
 
The Group’s voting rights and potential voting rights.
 
Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated in full; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group.
 
A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction. Losses are attributed to the non-controlling interests even if that results in a deficit balance.
 
If the Group loses control over a subsidiary, it derecognises the assets (including goodwill) and liabilities of the subsidiary, the carrying amount of any non-controlling interests, the cumulative translation differences, recorded in equity; recognises the fair value of the consideration received, the fair value of any investment retained and any surplus or deficit in profit or loss and reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss.
 
 
11
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Business combinations
 
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the acquirer measures the non-controlling interests in the acquiree that are present ownership interests either at fair value or at the proportionate share of the acquiree’s identifiable net assets and other components of non-controlling interests at their acquisition date fair value. Acquisition costs incurred are expensed.
 
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
 
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value as at the acquisition date through profit or loss.
 
Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with IFRS 9 either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it shall not be remeasured until it is finally settled within equity.
 
Goodwill is initially measured at cost being the excess of the consideration transferred over the Group’s net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.
 
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.
 
Fair value measurement
 
The Group measures financial instruments carried at fair value through profit or loss (FVPL) and fair value through other comprehensive income (FVOCI) and non-financial assets such as investment property, at fair value at each reporting date.
 
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
 
In the principal market for the asset or liability; or
 
In the absence of a principal market, in the most advantageous market for the asset or liability.
 
The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
 
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
 
Level 1 − quoted (unadjusted) market prices in active markets for identical assets or liabilities;
 
Level 2 − valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;
 
Level 3 − valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
 
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
 
 
12
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Financial assets and liabilities
 
Initial recognition
 
Date of recognition
 
All regular way purchases and sales of financial assets and liabilities are recognised on the trade date i.e. the date that the Group commits to purchase the asset or liability. Regular way purchases or sales are purchases or sales of financial assets and liabilities that require delivery of assets and liabilities within the period generally established by regulation or convention in the marketplace.
 
Initial measurement
 
The classification of financial instruments at initial recognition depends on their contractual terms and the business model for managing the instruments. Financial instruments are initially measured at their fair value and, except in the case of financial assets and financial liabilities recorded at FVPL, transaction costs are added to, or subtracted from, this amount.
 
Measurement categories of financial assets and liabilities
 
The Group classifies all of its financial assets based on the business model for managing the assets and the asset’s contractual terms, measured at either:
 
Amortised cost;
 
FVOCI;
 
FVPL.
 
The Group classifies and measures its derivative and trading portfolio at FVPL. The Group may designate financial instruments at FVPL, if so doing eliminates or significantly reduces measurement or recognition inconsistencies.
 
Financial liabilities, other than loan commitments and financial guarantees, are measured at amortised cost or at FVPL when they are held for trading, are derivative instruments or the fair value designation is applied.
 
Amounts due from banks and other financial institutions, loans to customers, investments securities at amortised cost
 
The Group only measures amounts due from banks and other financial institutions, loans to customers and other financial investments at amortised cost if both of the following conditions are met:
 
The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows;
 
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (SPPI).
 
The details of these conditions are outlined below.
 
Business model assessment
 
The Group determines its business model at the level that best reflects how it manages groups of financial assets to achieve its business objective.
 
The Group’s business model is not assessed on an instrument-by-instrument basis, but at a higher level of aggregated portfolios and is based on observable factors such as:
 
How the performance of the business model and the financial assets held within that business model are evaluated and reported to the entity’s key management personnel;
 
The risks that affect the performance of the business model (and the financial assets held within that business model) and, in particular, the way those risks are managed;
 
How managers of the business are compensated (for example, whether the compensation is based on the fair value of the assets managed or on the contractual cash flows collected);
 
The expected frequency, value and timing of sales are also important aspects of the Group’s assessment.
 
 
13
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Financial assets and liabilities (continued)
 
Initial measurement (continued)
 
Amounts due from banks and other financial institutions, loans to customers, investments securities at amortised cost (continued)
 
Business model assessment (continued)
 
The business model assessment is based on reasonably expected scenarios without taking ‘worst case’ or ‘stress case’ scenarios into account. If cash flows after initial recognition are realised in a way that is different from the Group’s original expectations, the Group does not change the classification of the remaining financial assets held in that business model, but incorporates such information when assessing newly originated or newly purchased financial assets going forward.
 
The SPPI test
 
As a second step of its classification process the Group assesses the contractual terms of financial asset to identify whether they meet the SPPI test.
 
‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the life of the financial asset (for example, if there are repayments of principal or amortisation of the premium/discount).
 
The most significant elements of interest within a lending arrangement are typically the consideration for the time value of money and credit risk. To make the SPPI assessment, the Group applies judgement and considers relevant factors such as the currency in which the financial asset is denominated, and the period for which the interest rate is set.
 
In contrast, contractual terms that introduce a more than de minimis exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely payments of principal and interest on the amount outstanding. In such cases, the financial asset is required to be measured at FVPL.
 
Debt instruments at FVOCI
 
The Group measures debt instruments at FVOCI when both of the following conditions are met:
 
The instrument is held within a business model, the objective of which is achieved by both collecting contractual cash flows and selling financial assets;
 
The contractual terms of the financial asset meet the SPPI test.
 
FVOCI debt instruments are subsequently measured at fair value with gains and losses arising due to changes in fair value recognised in other comprehensive income. Interest revenue and foreign exchange gains and losses are recognised in profit or loss in the same manner as for financial assets measured at amortised cost. On derecognition, cumulative gains or losses previously recognised in other comprehensive income are reclassified from other comprehensive income to profit or loss.
 
Expected credit losses (ECL) for debt instruments measured at FVOCI do not reduce the carrying amount of these financial assets in the statement of financial position, which remains at fair value. Instead, an amount equal to the allowance that would arise if the assets were measured at amortised cost is recognised in other comprehensive income as an accumulated impairment amount, with a corresponding charge to profit or loss. The accumulated loss recognised in other comprehensive income is recycled to the profit and loss upon derecognition of the asset.
 
Financial guarantees, letters of credit and undrawn loan commitments
 
The Group issues financial guarantees, letters of credit and loan commitments.
 
Financial guarantees are initially recognised in the financial statements at fair value, being the premium received. Subsequent to initial recognition, the Group’s liability under each guarantee is measured at the higher of the amount initially recognised less cumulative amortisation recognised in the consolidated statement of profit or loss, and an ECL provision.
 
Undrawn loan commitments and letters of credits are commitments under which, over the duration of the commitment, the Group is required to provide a loan with pre-specified terms to the customer. Similar to financial guarantee contracts, these contracts are in the scope of the ECL requirements.
 
The Group occasionally issues loan commitments at below market interest rates drawdown. Such commitments are initially recognised at fair value and subsequently measured at the higher of the amount of the ECL allowance and the amount initially recognised less, when appropriate, the cumulative amount of income recognised.
 
 
14
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Financial assets and liabilities (continued)
 
Initial measurement (continued)
 
Performance guarantees
 
Performance guarantees are contracts that provide compensation if another party fails to perform a contractual obligation. Performance guarantees do not transfer credit risk. The risk under performance guarantee contracts is the possibility that the failure to perform the contractual obligation by another party occurs. Therefore, performance guarantees are not considered financial instruments and thus do not fall in scope of IFRS 9.
 
Reclassification of financial assets and liabilities
 
The Group does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances in which the Group changes the business model for managing financial assets. Financial liabilities are never reclassified.
 
Cash and cash equivalents
 
Cash and cash equivalents consist of cash on hand, amounts due from the NBRK and amounts due from credit institutions that mature within ninety days of the date of origination and are free from contractual encumbrances.
 
Repurchase and reverse repurchase agreements and securities lending
 
Sale and repurchase agreements (“repos”) are treated as secured financing transactions. Securities sold under sale and repurchase agreements are retained in the consolidated statement of financial position and, in case the transferee has the right by contract or custom to sell or repledge them, reclassified as securities pledged under sale and repurchase agreements. The corresponding liability is presented within amounts due to credit institutions or customers. Securities purchased under agreements to resell (“reverse repo”) are recorded as amounts due from credit institutions or loans to customers as appropriate. The difference between sale and repurchase price is treated as interest revenue and accrued over the life of repo agreements using the effective interest method.
 
Securities lent to counterparties are retained in the consolidated statement of financial position. Securities borrowed are not recorded in the consolidated statement of financial position, unless these are sold to third parties, in which case the purchase and sale are recorded within gains less losses from trading securities in the consolidated statement of profit or loss. The obligation to return them is recorded at fair value as a trading liability.
 
Derivative financial instruments
 
In the normal course of business, the Group enters into various derivative financial instruments including forwards and swaps in the foreign exchange markets. Such financial instruments are held for trading and are recorded at fair value. The fair values are estimated based on quoted market prices or pricing models that take into account the current market and contractual prices of the underlying instruments and other factors. Derivatives are carried as assets when their fair value is positive and as liabilities when it is negative. Gains and losses resulting from these instruments are included in the consolidated statement of comprehensive income as net gains/(losses) from financial instruments at fair value through profit or loss or net gains/(losses) from foreign currencies, depending on the nature of the instrument.
 
Financial assets are classified based on the business model and SPPI assessments.
 
Borrowings
 
Borrowings are classified as liabilities, where the substance of the contractual arrangement results in the Group having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity instruments. Such instruments include amounts due to the NBRK, amounts due to banks and other financial institutions, amounts due to customers, other borrowed funds and subordinated loans. After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the borrowings are derecognised as well as through the amortisation process.
 
 
15
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Offsetting of financial instruments
 
Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. The right of set-off must not be contingent on a future event and must be legally enforceable in all of the following circumstances:
 
The normal course of business;
 
The event of default; and
 
The event of insolvency or bankruptcy of the entity and all of the counterparties.
 
These conditions are not generally met in master netting agreements, and the related assets and liabilities are presented gross in the consolidated statement of financial position.
 
Renegotiated loans
 
Where possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions.
 
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 purchased or originated credit impaired (POCI). When assessing whether or not to derecognise a loan to a customer, amongst others, the Group considers the following factors:
 
Change in currency of the loan;
 
Change in counterparty;
 
If the modification is such that the instrument would no longer meet the SPPI criterion.
 
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 that is presented in a separate line item in the consolidated statement of profit or loss, to the extent that an impairment loss has not already been recorded.
 
For modifications not resulting in derecognition, the Group also reassesses whether here has been a significant increase in credit risk or whether the assets should be classified as credit-impaired. Once an asset has been classified as credit-impaired as the result of modification, it will remain in Stage 3 for a minimum 6-month probation period. In order for the restructured loan to be reclassified out of Stage 3, regular payments of more than an insignificant amount of principal or interest have been made during at least half of the probation period in accordance with the modified payment schedule.
 
Derecognition of financial assets and liabilities
 
Financial assets
 
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where:
 
The rights to receive cash flows from the asset have expired;
 
The Group has transferred its rights to receive cash flows from the asset, or retained the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; and
 
The Group either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
 
 
16
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Derecognition of financial assets and liabilities (continued)
 
Financial assets (continued)
 
Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
 
Where continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.
 
Write-off
 
Financial assets are written off either partially or in their entirety only when the Group has stopped pursuing the recovery. If the amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit loss expense. A write-off constitutes a derecognition event.
 
Financial liabilities
 
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
 
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.
 
Taxation
 
The current income tax expense is calculated in accordance with the regulations of the Republic of Kazakhstan.
 
Deferred tax assets and liabilities are calculated in respect of temporary differences using the liability method. Deferred income taxes are provided for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes, except where the deferred income tax arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
 
A deferred tax asset is recorded only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the reporting date.
 
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
 
Republic of Kazakhstan also has various operating taxes, that are assessed on the Group’s activities. These taxes are included as a component of other operating expenses.
 
Property and equipment
 
Property and equipment are carried at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and any accumulated impairment. Such cost includes the cost of replacing part of equipment when that cost is incurred if the recognition criteria are met.
 
The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
 
 
17
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Property and equipment (continued)
 
Following initial recognition at cost, buildings are carried at a revalued amount, which is the fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Valuations are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.
 
Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Any revaluation surplus is credited to the revaluation reserve for property and equipment included in other comprehensive income, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except that a deficit directly offsetting a previous surplus on the same asset is directly offset against the surplus in the revaluation reserve for property and equipment.
 
An annual transfer from the revaluation reserve for property and equipment to retained earnings is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets original cost. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.
 
Depreciation of an asset begins when it is available for use. Depreciation is calculated on a straight-line basis over the following estimated useful lives:
 
 
 
Years
 
 
 
 
 
Buildings and constructions
  25-65 
Furniture and office equipment
  5-12.5 
Computer hardware
  5-9 
Motor vehicles
  10 
Leasehold improvements
  1-5 
 
The asset’s residual values, useful lives and methods are reviewed, and adjusted as appropriate, at each financial year-end.
 
Costs related to repairs and renewals are charged when incurred and included in other operating expenses, unless they qualify for capitalisation.
 
Intangible assets
 
Intangible assets include computer software and licenses.
 
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic lives of 1 to 45 years and assessed for impairment whenever there is an indication that the intangible asset may be impaired. Amortisation periods and methods for intangible assets with indefinite useful lives are reviewed at least at each financial year-end.
 
Provisions
 
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of obligation can be made.
 
Retirement and other employee benefit obligations
 
The Group does not have any pension arrangements separate from the State pension system of the Republic of Kazakhstan, which requires current contributions by the employer calculated as a percentage of current gross salary payments; such expense is charged in the period the related salaries are earned. In addition, the Group has no significant post-employment benefits.
 
Share capital
 
Share capital
 
Ordinary shares and non-redeemable preference shares with discretionary dividends are both classified as equity. External costs directly attributable to the issue of new shares, other than on a business combination, are shown as a deduction from the proceeds in equity. Any excess of the fair value of consideration received over the par value of shares issued is recognised as additional paid-in capital.
 
 
18
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Share capital (continued)
 
Dividends
 
Dividends are recognised as a liability and deducted from equity at the reporting date only if they are declared before or on the reporting date. Dividends are disclosed when they are proposed before the reporting date or proposed or declared after the reporting date but before the consolidated financial statements are authorised for issue.
 
Contingencies
 
Contingent liabilities are not recognised in the consolidated statement of financial position but are disclosed unless the possibility of any outflow in settlement is remote. A contingent asset is not recognised in the consolidated statement of financial position but disclosed when an inflow of economic benefits is probable.
 
Recognition of income and expenses
 
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
 
Interest and similar revenue and expense
 
The Group calculates interest revenue on debt financial assets measured at amortised cost or at FVOCI by applying the effective interest rate (EIR) to the gross carrying amount of financial assets other than credit-impaired assets. EIR is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses. The carrying amount of the financial asset or financial liability is adjusted if the Group revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original effective interest rate and the change in carrying amount is recorded as interest revenue or expense.
 
When a financial asset becomes credit-impaired, the Group calculates interest revenue by applying the effective interest rate to the net amortised cost of the financial asset. If the financial assets cures and is no longer credit-impaired, the Group reverts to calculating interest revenue on a gross basis.
 
For POCI financial assets, the Group calculates interest revenue by calculating the credit-adjusted EIR and applying that rate to the amortised cost of the asset. The credit-adjusted EIR is the interest rate that, at original recognition, discounts the estimated future cash flows (including credit losses) to the amortised cost of the POCI assets.
 
Interest revenue on all financial assets at FVPL is recognised using the contractual interest rate in “Other interest revenue” in the consolidated statement of comprehensive income.
 
Fee and commission income
 
The Group earns fee and commission income from a diverse range of services it provides to its customers. Fee income can be divided into the following two categories:
 
Fee income earned from services that are provided over a certain period of time
 
Fees earned for the provision of services over a period of time are accrued over that period as respective performance obligations are satisfied. These fees include commission income and asset management, custody and other management and advisory fees. Loan commitment fees for loans that are likely to be drawn down and other credit related fees are deferred (together with any incremental costs) and recognised as an adjustment to the effective interest rate on the loan.
 
Fee income from providing transaction services
 
Fees arising from negotiating or participating in the negotiation of a transaction for a third party − such as where the Group’s performance obligation is the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses − are recognised on completion of the underlying transaction. Fees or components of fees that are linked to certain performance obligations are recognised after fulfilling the corresponding criteria. When the contract provides for a variable consideration, fee and commission income is only recognised to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognised will not occur until the uncertainty associated with the variable consideration is subsequently resolved.
 
 
19
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Foreign currency translation
 
The consolidated financial statements are presented in thousands of tenge, which is the Group’s functional and presentation currency. Transactions in foreign currencies are initially recorded in the functional currency, converted at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. Gains and losses resulting from the translation of foreign currency transactions are recognised in the consolidated statement of profit or loss as “Net gains/(losses) from foreign currencies”. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
 
Differences between the contractual exchange rate of a transaction in a foreign currency and the NBRK exchange rate on the date of the transaction are included in gains less losses from dealing in foreign currencies. The official NBRK exchange rates at 31 December 2019 and 31 December 2018, were 382.59 tenge and 384.20 tenge to 1 US Dollar, respectively.
 
Standards issued but not yet effective
 
The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective.
 
IFRS 17 Insurance Contracts
 
In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4 Insurance Contracts (IFRS 4) that was issued in 2005. IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features.
 
A few scope exceptions will apply. The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects. The core of IFRS 17 is the general model, supplemented by:
 
A specific adaptation for contracts with direct participation features (the variable fee approach);
 
A simplified approach (the premium allocation approach) mainly for short-duration contracts.
 
IFRS 17 is effective for reporting periods beginning on or after 1 January 2021, with comparative figures required. Early application is permitted, provided the entity also applies IFRS 9 and IFRS 15 on or before the date it first applies IFRS 17. In 2019, the Group will continue to assess the potential effect of IFRS 17 on its consolidated financial statements.
 
Amendments to IFRS 3: Definition of a Business
 
In October 2018, the IASB issued amendments to the definition of a business in IFRS 3 Business Combinations to help entities determine whether an acquired set of activities and assets is a business or not. They clarify the minimum requirements for a business, remove the assessment of whether market participants are capable of replacing any missing elements, add guidance to help entities assess whether an acquired process is substantive, narrow the definitions of a business and of outputs, and introduce an optional fair value concentration test. New illustrative examples were provided along with the amendments.
 
Since the amendments apply prospectively to transactions or other events that occur on or after the date of first application, the Group will not be affected by these amendments on the date of transition.
 
Amendments to IAS 1 and IAS 8: Definition of Material
 
In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’ across the standards and to clarify certain aspects of the definition. The new definition states that, ‘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 to the definition of material are not expected to have a significant impact on the Group’s consolidated financial statements.
 
 
20
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
3.  Summary of accounting policies (continued)
 
Standards issued but not yet effective (continued)
 
Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7
 
Interest Rate Benchmark Reform Amendments to IFRS 9, IAS 39 and IFRS 7 includes 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. As a result of interest rate benchmark reform, there may be uncertainties about the timing and or amount of benchmark-based cash flows of the hedged item or the hedging instrument during the period before the replacement of an existing interest rate benchmark with an alternative nearly risk-free interest rate (an RFR). This may lead to uncertainty whether a forecast transaction is highly probable and whether prospectively the hedging relationship is expected to be highly effective.
 
The amendments come into effect from 1 January 2020, but entities may choose to apply them earlier. The amendments are not expected to have a significant impact on the Group’s consolidated financial statements.
 
4. Significant accounting judgments and estimates
 
Estimation uncertainty
 
In the process of applying the Group’s accounting policies, management has used its judgments and made estimates in determining the amounts recognised in the consolidated financial statements. The most significant use of judgments and estimates are as follows:
 
Fair values of financial instruments
 
Where the fair values of financial assets and financial liabilities recorded in the 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. Additional details are provided in Note 25.
 
Expected credit losses on financial assets
 
The measurement of impairment losses under IFRS 9 across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining ECL and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances. The Group’s ECL calculations are outputs of complex models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies. Elements of the ECL models that are considered accounting judgements and estimates include:
 
The Group’s internal credit grading model, which assigns PDs to the individual grades;
 
The Group’s criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets should be measured on a LTECL basis and the qualitative assessment;
 
The segmentation of financial assets when their ECL is assessed on a collective basis;
 
Development of ECL models, including the various formulae and the choice of inputs;
 
Determination of associations between macroeconomic scenarios and, economic inputs, such as unemployment levels and collateral values, and the effect on PDs, EADs and LGDs;
 
Selection of forecast macroeconomic scenarios.
 
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 non-existent 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.
 
 
21
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
4.  Significant accounting judgments and estimates (continued)
 
Estimation uncertainty (continued)
 
Taxation (continued)
 
Management believes that the Group is in compliance with the tax laws of the Republic of Kazakhstan regulating its operations. However, the risk remains that relevant authorities could take differing positions with regard to interpretive tax issues.
 
Assessment of recoverability of deferred corporate 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.
 
The management believes that deferred corporate income tax assets as at 31 December 2019 are recorded to the extent that it is probable that future taxable profits will be available to cover temporary differences, unused tax losses and unused tax benefits , and deferred corporate income tax assets are reduced to the extent that it is not probable that taxable profit will be available against which the deductible temporary differences can be utilised.
 
5. Cash and cash equivalents
 
Cash and cash equivalents comprise:
 
 
 
31 December
2019
(unaudited)
 
 
31 December
2018
(unaudited)
 
 
 
 
 
 
 
 
Cash on hand
  4,198,884 
  6,248,186 
Cash on current accounts with the NBRK rated at BBB-
  17,477,932 
  30,385,765 
Cash on current bank accounts, other banks:
    
    
- rated from A− to A+
  88,619 
  105,236 
- rated from BBB− to BBB+
  6 
   
- rated from BB− to BB+
  362,898 
  548,776 
- rated below B+
  912,521 
  762,690 
- not rated
  404,086 
  293,206 
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
  2,500,573 
  5,003,438 
Time deposits with other banks rated from BBB− to BBB+ with contractual maturity of 90 days or less
  8,274 
  7,130 
Cash and cash equivalents before ECL allowance
  33,455,787 
  43,354,427 
 
    
    
ECL allowance
  (7,265)
  (10,220)
Cash and cash equivalents
  33,448,522 
  43,344,207 
 
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 31 December 2019, the Group entered into reverse repurchase agreements at the Kazakhstan Stock Exchange. The subject of these agreements are the government bonds with the fair value of KZT 7,731,958 thousand as at 31 December 2019.
 
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 31 December 2019, minimum reserve requirements of the Bank amount to KZT 970,663 thousand (31 December 2018: KZT 1,570,380 thousand).
 
Concentration of cash and cash equivalents
 
As at 31 December 2019 and 31 December 2018, the Group has accounts with one bank which balances exceeded 10% of total cash and cash equivalents. The aggregate balances of amounts due from this counterparty as at 31 December 2019 and 31 December 2018 were KZT 19,978,505 thousand and KZT 35,389,203 thousand, respectively.
 
 
22
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
5.  Cash and cash equivalents (continued)
 
Concentration of cash and cash equivalents (continued)
 
 
All balances of cash and cash equivalents are allocated to Stage 1 for ECL measurement purpose. An analysis of changes in the ECL allowances during the year is as follows:
 
 
  (Unaudited) 
ECL allowance as at 1 January 2019
  (10,220)
Net change in the allowance for the year (Note 19)
  2,941 
Foreign exchange adjustments
  14 
ECL allowance as at 31 December 2019
  (7,265)
 
ECL allowance as at 1 January 2018
  (5,708)
Net change in the allowance for the year (Note 19)
  (3,855)
Foreign exchange adjustments
  (657)
ECL allowance as at 31 December 2018
  (10,220)
 
6. Amounts due from other banks and other financial institutions
 
Amounts due from other banks and other financial institutions comprise:
 
 
 
31 December
2019
(unaudited)
 
 
31 December
2018
(unaudited)
 
 
 
 
 
 
 
 
Funds provided as collateral with other banks:
 
 
 
 
 
 
- rated from AA- to AA+
  131,430 
  83,250 
- rated from A- to A+
  270,849 
  271,134 
- not rated
  375,000 
  200,000 
Amounts due from other banks and other financial institutions before ECL allowance
  777,279 
  554,384 
 
    
    
ECL allowance
  (1,071)
  (140)
Amounts due from other banks and other financial institutions
  776,208 
  554,244 
 
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 31 December 2019, funds provided as collateral included a security deposit of a participant of MasterCard system in the amount of KZT 270,849 thousand (31 December 2018: KZT 271,134 thousand) and a security deposit of a participant of Visa International system in the amount of KZT 131,430 thousand (31 December 2018: KZT 83,250 thousand) and deposit placed as collateral of the Group’s liabilities to the KASE in the amount of KZT 375,000 thousand (31 December 2018: KZT 200,000 thousand).
 
Concentration of amounts due from other banks and other financial institutions
 
As at 31 December 2019 and 31 December 2018, the Group has amounts due from three financial institutions which balances exceed 10% of total due from financial institutions. The aggregate balances of amounts due from these counterparties as at 31 December 2019 were KZT 776,208 thousand (31 December 2018: KZT 554,244 thousand).
 
All balances of amounts due from other banks and other financial institutions are allocated to Stage 1 for ECL measurement purposes. An analysis of changes in the ECL allowances during the year is as follows:
 
 
 
Stage 1
(unaudited)
 
 
Total
(unaudited)
 
 
 
 
 
 
 
 
ECL allowance as at 1 January 2019
  (140)
  (140)
Net change in the allowance for the year (Note 19)
  (933)
  (933)
Foreign exchange adjustments
  2 
  2 
ECL allowance as at 31 December 2019
  (1,071)
  (1,071)
 
 
23
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
 
 
 
Stage 1
(unaudited)
 
 
Total
(unaudited)
 
 
 
 
 
 
 
 
ECL allowance as at 1 January 2018
  (107)
  (107)
Net change in the allowance for the year (Note 19)
  (9)
  (9)
Foreign exchange adjustments
  (24)
  (24)
ECL allowance as at 31 December 2018
  (140)
  (140)
 
7. Loans to customers
 
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 businesses
  12,551,517 
  1,589,738 
  3,650,370 
   
  17,791,625 
Mortgages
   
   
  51,304 
   
  51,304 
Consumer loans
   
   
  59,041 
   
  59,041 
Credit cards
   
   
   
   
   
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 issued to small and medium 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 
 
 
24
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
 
As at 31 December 2018, loans to customers comprise:
 
 
 
31 December 2018
(unaudited)
 
 
 
Stage 1
 
 
Stage 2
 
 
Stage 3
 
 
POCI
 
 
Total
 
Individually significant loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans issued to small and medium businesses
  16,391,246 
  2,121,067 
  4,479,168 
   
  22,991,481 
Mortgages
  56,203 
   
  57,372 
   
  113,575 
Consumer loans
   
   
  119,366 
   
  119,366 
Credit cards
   
   
  411 
   
  411 
Other loans secured by collateral
  1,886,124 
  115,716 
  807,299 
  150,846 
  2,959,985 
Total individually significant loans
  18,333,573 
  2,236,783 
  5,463,616 
  150,846 
  26,184,818 
 
    
    
    
    
    
Individually insignificant
    
    
    
    
    
Loans issued to small and medium businesses
  9,516,962 
  179,011 
  1,128,604 
   
  10,824,577 
Mortgages
  2,008,466 
  160,687 
  444,733 
  842,617 
  3,456,503 
Consumer loans
  3,412,668 
  52,058 
  607,182 
   
  4,071,908 
Car loans
  24,528 
   
   
   
  24,528 
Credit cards
  529,505 
  12,796 
  93,253 
   
  635,554 
Other loans secured by collateral
  26,870,609 
  648,461 
  3,298,844 
  986,857 
  31,804,771 
Total individually insignificant loans
  42,362,738 
  1,053,013 
  5,572,616 
  1,829,474 
  50,817,841 
Loans to customers before ECL allowance
  60,696,311 
  3,289,796 
  11,036,232 
  1,980,320 
  77,002,659 
 
    
    
    
    
    
ECL allowance
  (368,014)
  (42,735)
  (1,987,069)
  (403)
  (2,398,221)
Loans to customers
  60,328,297 
  3,247,061 
  9,049,163 
  1,979,917 
  74,604,438 
 
The Group changed the classification of loans to customers as at 31 December 2018 in the consolidated financial statements to agree with the requirements of the Parent.
 
 
25
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
7.  Loans to customers (continued)
 
Quality of individually significant loans
 
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 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 less than 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%
 
    
    
    
    
POCI
   
   
   
   
Total individually significant loans issued to small and medium businesses
  17,791,625 
  (1,838,478)
  15,953,147 
  10.3%
 
 
 
31 December 2019
(unaudited)
 
 
 
Loansbefore 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 less than 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%
 
    
    
    
    
POCI
   
   
   
   
Total individually significant mortgage loans
  51,304 
   
  51,304 
  0.0%
 
 
26
“Bank Kassa Nova” JSC (SB of “ForteBank” JSC)
2019 consolidated financial statements
 
(thousands of tenge)
 
 
7.  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 consumer loans
 
 
 
 
 
 
 
 
 
 
 
 
- not overdue
   
   
   
   
- overdue for less than 30 days
   
   
   
   
Stage 1 loans
   
   
   
   
 
    
    
    
    
Stage 2 and Stage 3 loans
    
    
    
    
- not overdue