Halyk Bank - KKB Merger Complete

Halyk Bank has completed its merger with Kazkommertsbank (KKB). The process of merging and integrating the two banks took just over a year following the acquisition of KKB in July 2017. Under the terms of the previously approved share swap, Halyk Bank has issued new shares equivalent to just under 7% of existing shares in favor of KKB minorities (predominantly Almex). However, in terms of our EPS forecasts, the net effect is mildly positive given the anticipated decline in minority interest. We remain positive on Halyk Bank given its combination of robust profitability, potential for post-merger synergies, strong capitalization and attractive dividend (almost 9% yield), as well as Kazakhstan's benign economic backdrop, supported by a high oil price. However, the stock has flat-lined over the past quarter. Now that the merger is complete, we would hope to hear more in 2H18 from the management about potential synergies, which could help kick start interest in the name again. We keep our BUY recommendation and $17.00 per GDR target price.