Halyk Bank of Kazakhstan Joint Stock Company (HSBK) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. Welcome to Halyk Bank's conference call and the presentation of results for the first half and second quarter of 2024. Thanks everyone, for joining us today. And this session will start with a presentation by Halyk team and will be followed by the Q&A session. Please note that the call is being recorded. The participants to today's call on Halyk Bank side are Mr. Umut Shayakhmetova, Chief Executive Officer; Mr. Murat Koshenov, Deputy CEO, Finance, subsidiaries, Compliance and International Activities; Ms. Olga Vuros, Deputy CEO, Corporate Banking; Mr. Dauren Sartayev, Deputy CEO, SME Banking, Transaction Banking, PR and marketing; Mr. Nariman Mukushev, Deputy CEO; Digital Government Services, Ecosystem and Customer Experience, Mr. Viktor Skryl, Strategy Director; Nurgul Mukhadi and Rustam Telish from IR team; from IR team; and myself, Mira Kassenova, Head of FI and IR. And we would like to start our presentation with a retail business update. Halyk SuperApp added 35% in monthly active users and 28% in daily active users year-on-year. A significant portion of additional monthly active users was one-off due to a number of promotional campaigns. Our active client base showed a 10% growth year-on-year, and we managed to boost our SuperApp penetration from 63% to 77% year-on-year. The clients' transactional activity continues to demonstrate an impressive growth with volume and number of payments boosted by 43% and 27% year-on-year, respectively. Halyk remains a trusted partner for our salary project clients, 38% of country's employed population choose Halyk salary card. Next slide, please. We continue to develop our retail ecosystem by introducing such new value-adding solution as a tracker of bonuses earned from the bank's partners in collaboration with 1 of the country's biggest appliance store, the largest restaurant chain and family shop. Retail loan portfolio increased by 15.3% year-to-date with a strong market share of 19% and $1.8 million of borrowers. In the first half of 2024, the volume of issued loans increased by 67% year-on-year while maintaining a good portfolio quality. 90% of our loans by account were issued digitally. Next slide, please. Retail deposits increased by 9.4% year-to-date with a strong market share of 28.8%. We're in -- an impressive 90% of our deposits in the first half of 2024, were opened online. Our ecosystem is fully accessible through our Halyk SuperApp and it delivered a solid performance during the second quarter. Auto insurance is continuing to deliver strong GMV and number of client growth, both of which have almost tripled year-on-year. Halyk Travel GMV grew by 17.6%. The Kino.kz entertainment tickets platform showed an impressive growth of 33% in monthly active users, while the number of tickets sold increased by 23%. Next slide, please. As a result of our continuous focus and effort, we see strong year-on-year dynamics in Marketplace GMV and a number of sales pick up, and we are attracting more partners and the improved SKU base to provide a better client experience. In our brokerage services, we are also noticing an impressive growth in our client base and the transactions volume. The assets under management and brokerage assets grew by more than 2x and 11%, respectively. In 2023, Halyk Finance entered the market of Pension Assets Management and by the end of the second quarter of 2024, we have captured an impressive 31% of market share. Moreover, the pension assets under management has surged by almost 14 times. Now we are moving to an update on corporate and semi banking. In the second quarter, we continued our focus to boost the transaction activity of our corporate and semi clients. This led to a 50% year-on-year increase in daily active users and resulted in a notable growth, both in terms of number and volume of payments through online platform for legal entities. Corporate loans increased by 15.6% year-on-year, while maintaining a good portfolio quality. The penetration rate among the largest taxpayers remains solid, standing at 84%. Halyk maintained its position as a leading provider of financing to the economy with market share of 50%. The legal entities and deposits market share reached 32%. Product penetration metrics remained consistently high. Next slide, please. SME loans increased by 18.2% year-on-year, while a volume of loans issuance in the first half of 2024 was up 27%, 95% of our loans by account were issued digitally. In the first half, the digital bonds issuance dynamics continues to demonstrate an impressive growth, and the total volume of digital bonds increased by almost 2x year-on-year. Now let me hand over the call to my colleague, Rustam Telish, for financial results presentation. Thank you for your attention.

Thank you, Mira. Now we would like to switch to the overview of Halyk Group consolidated financial results for the 6 months ended June 30, 2024 and [indiscernible] the consolidated financial information for the year ended on December 31, 2023. The group carried out an inventory of its financial instruments. The inventory processed in the identified financial instruments measured at fair value through profit or loss that were previously restricted in use and were incorrectly measured at cost. The group revalued these financial instruments and recognize prior period adjustments. The consolidated statement of profit or loss for the 6 months ended June 30, 2023 has been reclassified to conform to the presentation for the year ended December 31, 2023. Because the presentation of the current year report provides a clearer picture of the group's financial performance. Although the ratios were also recalculated accordingly. For more detailed information, please refer to Halyk Group interim condensed consolidated financial information for the 6 months ending June 30, 2024 not fully. Net -- next slide. Net income attributable to common shareholders for the first half of 2024 is up by 2.2% year-on-year. It was negatively impacted by one-off effect for KZT 79.3 billion versus first half 2023 for KZT 14.5 billion related to accelerated repayment of Kazakhstan's sustainability fund deposit. It was also affected by the increase in credit loss expense. As a result, in the first half, we demonstrated 29.9% return on average equity and 4.8% return on assets. Total assets of the group increased by 8.1% year-to-date due to increase in amounts due to customers. Customer deposits increased by 6.3% year-to-date. We will discuss this in more details later in this presentation. Interest income for the first half 2024 was up 29.7% year-on-year, mainly due to increase in average rate and balances of loans to customers. Interest expense for the first half of 2024 increased by 27.2% year-on-year mainly as a result of the growth in average rates on amounts due to customers and growth in the share of KZT amounts due to customers. Consequently, net interest income before credit loss expense for the first half of 2024 grew by 32.1% versus first half of 2023. In the first half of 2024, net interest margin was affected by the increase in average rates on both loans to customers and amounts due to customers. Further interest margin Net interest margin was positively impacted by the increase in the share of higher-yielding retail loans in total loan portfolio and share of loan to customers in total interest earning assets. Moreover, there was an increase in the average rate of FX amounts due from credit institutions and fixed interest earning cash and cash equivalents following the increase of U.S. dollar interest rate as well as increase in the share of the tenge interest earning cash and cash equivalents. As a result, net interest margin has grown 7% per annum for the first half 2024 compared to 6% per annum for the first half of 2023. Fee and commission income in the first half of 2024 increased by 1.1%. It was negatively impacted by base effect related to transition, to amortization of tariff packages for legal entities starting from November 2023. Moreover, there was a revision of some retail tariffs in the second half of 2023. On top of that, the amount of balances for the loyalty program almost doubled due to increased transactional activity of retail clients and growing share of QR payments. Fee and commission expense in the first half of 2024 grew by 2.8%, mainly due to increase in service fees on payment cards and deposit insurance fee payable to the Kazakhstan deposit insurance fund following the retail deposit demand growth. As a result, despite the increased number of clients and the growth of client transaction activity, the net fee and commission income for the first half of 2024 decreased by 0.5% year-on-year. In the first half of 2024 versus first half 2023, net fee and commission income was up 1.8%, thanks to growth of planned transactional activity and growth of guarantees and letters of credit portfolio. Despite decreased transactional income of individuals due to lower BNPL issuance affected by regulatory tightening of DTI calculations. Operating expenses for the first half 2024 increased by 16.3%, mainly due to indexation of salaries and other employee benefits starting from May 1, 2024 and payments of bonuses for high grades in schools in the frame of strategic partnership with leading educational platform, Kundelik. The cost-to-income ratio equaled 18.5% in the first half 2024, compared with 17.7% in the first half of 2023 due to higher operational expense for the first half 2024, compared with the year end of 2023, loans to customers were up 6.7% on gross and 6.6% on a net basis. The increase in the gross loan portfolio was attributable to a rise of 15.3% in retail loans, while legal entities loan portfolio were up 2.7%. The share of FX loans was at 90.4%. Cost of risk in the first half of 2024 increased to 1.3% versus 0.9% in the first half of the last year as a result of a greater recovery and repayment of corporate problem indebtedness in the first half 2023 and recognition of higher provision related to some loans to legal entities in the first half 2024. Cost of risk in the first quarter of 2024 versus first quarter 2024 has grown to 1.7% when as a result of one-off repayment of impaired loans of legal entities in first quarter 2024 while in the second quarter 2024, there was a recognition of additional provision on some loans to legal entities. At the end of second quarter 2024, Stage 3 loans decreased from the level of 7.5% to 7.2% year-to-date as a result of work-out of problem loans and loan portfolio growth. Compared with the end of first quarter 2024, the deposits of legal entities were down 2.3%, mainly due to one-off negative effect of full prepayment of KZT deposit and partial withdrawal of funds by the bank customers to finance their ongoing needs, including tax payments. The deposit of individuals were up 9% due to fund inflow from the bank's clients. At the end of second quarter 2024, the share of tenge deposits in total corporate deposit was 71.8% compared to 72.9% at the end -- as of 2023 year-end. While the share in total retail deposits was 66.9% versus 63.4%. On consolidated basis, the capital adequacy ratio of the bank decreased in second quarter 2024 as a result of dividends paid by the bank for the financial year of 2023. The RWA grew by 15.7% year-to-date due to the increase of regulatory requirements on the risk weight for SME loans and growth of SME and retail loans. Based on our 6 months financial results, we have updated the outlook for the year -- the full year of 2024. Retail net loan portfolio growth is expected to be in the range of 20% to 25%. Corporate and SME net loan portfolio growth is expected in the range of 10% to 15%. Total net loan portfolio growth is estimated in the area of 17%. Growth of the net and commission income is expected to be in the range of 5% to 10%. Cost of risk is projected to be circa 1.2%. Consolidated net income is expected to be in the area of KZT 800 billion. Return on average equity is expected to be more than 30%. Net interest margin is estimated to be in the area of 7%. Cost-to-income ratio is projected to be in the area of 20%. Dear, ladies and gentlemen, this completes our presentation. Now we would like to open the floor for your questions, please. Just a quick instruction. [Operator Instructions] The first question is -- goes to Mikhail Butkov please?

This is Mikhail from Goldman Sachs. I have a couple of questions. First 1 is on the cost of risk. So you mentioned that you increased provisioning for some legal entity in the second quarter. So maybe could you add a bit more color maybe what was the sector? And do you see any other exposures in risk from maybe migration from stage 2 to stage 3 at all at this stage. So that's the first question. The second question is on net fees and commissions. So you have increased the bonus payments for the loyalty program to retail clients in the second quarter, if I understood it correct, do you expect this trend to continue into the third and fourth quarter? And finally, you revised the wording about net income guidance for the full year. So now you expected around KZT 800 million, I guess, from more than KZT 800 million before. Also, what are the key contributors to this revision?

Let me start answering them one by one. So regarding cost of risk, as we stated in the third quarter of this year, actually, we saw some recoveries, repayment of some large loans to legal entities. So that helped to deploy cost of risk below the normalized or below the overall year-end guidance. In the second -- sorry, in the second quarter of this year, actually, we saw that the [ comments ] on largely on retail and small businesses that kept in line with what we have seen in the third quarter, but we have seen some additional provision which we paid at -- on legal entities, mostly to larger corporates, but there are a couple of middle-sized companies. So that's why the cost of risk for the second quarter was somewhat higher than the year-end guidance. But we -- as you've seen in our outlook, we expect that cost of risk for the full year would be in line with previous guidance without any changes. Basically, there was no any sector-specific issues. A couple of loans were related to trade sector, but we are not taking that as, let's say, some larger brand or tendency either sector-wise or portfolio wise. So we likely think that it is as related to company specific issues. So this is regarding cost of risk. Regarding net fees and commissions. As you have seen, there are a few reasons for first half results, which affected the net fees and commission. Reason number one, was the fact that we -- some time ago start providing packages. So basically, companies buying certain big finance packages on -- it might be 3 months, 6 months or 12 months [indiscernible] be the better term for that? And actually, because we start selling some longer-term subscriptions, the accounting-wise, we move from cash-based received to accrual-based. So that made some, let's say, accounting type of effect. But in the long run, we think that it is a positive trend. It provides a longer-term stability to fees and commission income and actually increases clients engagement with us in the longer term. Secondly, we made some division to retail tariffs. Again, that is probably a one-off effect. So we think that in the long run, the base effect would lead to higher fees and commission due to better engagement with our clients. And the loyalty, yes, indeed, we see some high expenses on the loyalty program related to higher transaction activity, specifically on [ probably ] QR. Usually, our transactional activity and loyalty expenses are higher in the second half of this year. But we have possibility to fine-tune the loyalty program depending on the trends, depending how the overall situation with the loyalty program expense of [indiscernible]. So I would not make a bigger [ events ] based on the first half developments on the loyalty program [indiscernible]. In terms of net income guidance, indeed, we in the beginning of this year, provided the guidance higher than KZT 800 billion. Let me remind that at that we made full repayments -- full repayment of the [ state ] support, which had some effect on the second quarter results. So that is probably one of the contributor of the more fine-tuned guidance on net income, I don't think that it's material divestment from which we have stated previously. It's more fine-tuning. And also that probably reflects some lenders on the net fees and commissions. So overall, we expect that in the second half, we will become a co-normalized growth in fees and commission income, but the effect which we had in the third quarter -- in the first half of this year would have still overall effect of the full year results. But we will hope that we'd be able to do at least KZT 800 billion as we stated before, but it's more fine-tuned.

Okay. So just -- it is mostly driven by that one-off repayment of...

It is partly affected because we made the full repayment in the second quarter, as I said. And that it had certain effects on net profit for the second quarter.

Next question from Mr. Simon Nellis.

It's Simon from Citibank. Just following up on risk costs. I was wondering if you could comment on where you think the kind of through-the-cycle average risk cost is? Is it more towards the 120 basis points that you're guiding for this year? Or is it some higher or lower level? My second question would be on the tax outlook. I think in the past, you've warned that the tax regime might change and tax rate will go up. But I think your effective tax rate has stayed pretty much unchanged. So an update on that and any other regulatory issues that you see in the future? And then just on the NIM outlook, I mean, it's been quite healthy. What are the dynamics going into 2025? I mean if you can give us any steer on what would impact the NIM kind of longer term out to '25, '26 especially in light of expected rate cuts in the U.S.

Simon, I think that was somewhat deadline, while you were speaking. So I not sure that I get fully correct. I think your first question is regarding the cost of risk. [indiscernible] one by one. Could you please specify your question please on the cost or risk?

Yes. What is the normalized cost of risk? Is it closer to the 120 basis points you're guiding for this year?

Okay. Okay. Well, in my opinion, normalization is not something constant. It really depends on the way economy standing with the overall macro situation picture, including the rates -- interest rate environment. And also, I think it's dynamic in a sense that it reflects the overall change in the credit portfolio. So the high the proportion, for example, small businesses unsecured, definitely it might be affecting the cost of risk. Overall, I think 1.2, 120 basis points, which we're experiencing during [indiscernible] probably couple of years to 3 years' time, it's somewhat in our opinion, which is normalized, given the overall condition. The economy is growing on 1 hand. At the same time, we had certain stress on the inflation side. We have a certain higher interest rate environment and we have certain dynamic in terms of the changed portfolio. But whether that would be normalized cost of risk, you would say, in 3 years or 5 years' time, I think it's yet to be seen. But in current constitution, we think that it's close to normalized level.

Second question was on tax. If you can give us an update on the tax outlook.

All taxes. We -- as a country still work on the drop of the tax [indiscernible], we expect that it will be presented to the parliaments in autumn. So at this point of time, we have not seen, let's say the final drop. There are still some disruptions and there are different opinions. So it's just probably we would wait for month or 2 until there will be more clarity in some sort of -- in terms of what would be final proposal, which would be brought to the [indiscernible] .

Okay. And just on the NIM outlook, the margin outlook going into next year. Is there anything -- color you can provide?

I think it's a bit premature. You've seen that we somewhat improved NIM guidance for the whole year, it's a collection of what we had experienced in the top half of this year. Probably to help you with some [ views ] on NIM, it's a factor of, let's say, separate threat on USD part of the balance sheet on Tenge part of the balance sheet. Because rates in U.S. remains at a higher level than we initially anticipated or continuing to stay at high level. So that is helping NIMs at the higher range of our previous expectations. So it really will depend not only what is happening with rates on Tenge, [ slightly ] above what would happen -- happening to the U.S. dollar rates.

net interest income to, I don't know, a 25 basis point move in U.S. rates?

I think we had presented that figure in our full year results. So probably I can refer you to the -- to our financial year results. But that, in any case, would be static 1 as we commented a number of times previously, we think that it's better to look in more in dynamic situation because if you historically look at our dynamics on the NIM, typically, irrespective of the fact whether the rates are going up or down. Normally, we see that within 2 to 3 quarters NIM start normalizing. So the static, let's say, sensitivity might not be the proper collection of how our balance [indiscernible] is developing in, I would say, half year time.

Tom Jakobi, please go ahead.

This is Tom Jakobi for [indiscernible]. I have 3 of them as all. First 1 is a follow-up about the tax question. I do understand, of course, that there is no final draft. But can you tell us what direction the changes is going to be? How big will be the insurance round about.

Yes. I think it's still -- my colleagues are suggesting that the question is still on the tax rate, what reportable changes might be?

Yes.

Again, I think it's a bit premature to discuss them in a more proper way, but there were different areas which initially we will put on the discussion, one of them is introducing higher corporate interim tax for the banking sector from 20% to 25%. But we saw that the regulators in the [ case ] of Agency for Financial Supervision as well as National Bank is opposing that banking sector would be having different corporate tax rate compared to other sectors. So we hope that eventually, the tax code drop, which could be presented to the parliament would have say, unified corporate income tax. There were some smaller discussions, but I think that probably was the largest. Again, I suggest for everyone to wait until the final draft enters the parliament, and we will see what really -- what real suggestions -- the real proposal would be brought to the parliament.

Yes. The numbers of 20% and 25% to see like the room of discussions was very helpful. Second question is about the Tenge currency, which was developing quite weak since May round about. What cost do you see for that development and more important, what relevant has the weakness of Tenge for Halyk.

On the effects, yes, there were some weakening in recent months. But if you take that into the context for the year, I think it's still is moderate because we started the year at around [ 4.55 ]. So we are standing something like 5.5 percentage change since beginning this year. So I think it's still considered not that high, probably close to moderate. Given the interest rate differential between tenge and U.S. dollars and given the inflation level. Well, it's a bit difficult to give the exact reasons why tenge behaved that recently, but some of the factors might be, let's say, seasonality, some of the factors might be timing in terms of [indiscernible] coming from the national funds into the budget. There might be some export dynamics and there might be some reaction to weakening in Russian Ruble. So typically, this is the normal range of potential influences on tenge, let's say, oil price, there was no big changes globally. So probably 1 of the reasons we can mention, but I probably struggle at this point of time to say what was the exact reason we [indiscernible].

And are there any meaningful consequences for Halyk.

No, no. As you see, typically, the impact on the banks might be from asset quality on the credit portfolio, the share of USD loans in our portfolio reduced substantially. So currently standing, I think, at the level of below 20%. So we do not expect any material impact. And again, the weakening is in the context of, let's say, annual change is not that high.

Okay. Last question is about the dividend policy. You told us there's plans to pay a second dividend in 2024, over the first half year. So we have the results here. When and how much can we expect anything.

Thank you your question. The current dividend policy, which was amended at the beginning of this year stage that we shipped to the possibility of make payments not more than twice. Previously, it was exactly in single payments per year. To remind, we make payments -- cash payments during our normal timing with payments, this is on May -- till May and payments starting from June, and that was in the level at 40% of the net profit of last year. And we stated that in the second half of this year, the bank might consider the second payment, [indiscernible] has not been done yet. So we still have in time into the second half of this year to consider the second payments. But as we speak now, there is no decision done at this point in time.

And is there a time when the decision will be made?

Again, I cannot probably give you the exact timing, but I can refer to what also was stated that if -- if that decision will be taken, the total payment for the year would not would not be more than 50% for the year. If we take the reference for the payment, the result of 2023. But please call us. So whenever -- if that decision will be taken definitely would make announcements.

The next question from Sergey [indiscernible]

I have a question regarding sanctions and the Russian Ukraine conflict and that how that could potentially affect you. So basically, there were recently news that the U.S. seems to be not very happy about the sanction enforcement in Kazakhstan. So if they were to get strict on that point, could that -- how could that affect your business and the country as a whole? And then secondly, if the Russia Ukraine conflict finally get resolved, how could that affect your business in the country as a whole.

I'll start from the second one. I think if the conflict is resolved the whole world -- I think, would be relieved. I'm not saying the neighbors of conflicting countries. I think it's -- it's true, I think, for any conflict, which is running globally.

Let me be perhaps more specific. Kazakhstan has surely benefited from over the last 2 years as a potential alternative, right? and banks, in particular, or is my understanding incorrect there?

I don't think that you are correct. I think the country is not benefiting from the conflict in the region. There might be some short-term effect if you see historically probably in 2022, but this is due to market inefficiency, which normally happens. But unfortunately, we are coming to [ news ], let's say, normally, if you can call the current situation as a normal. Again, I think that if the contract is finalized and the regions coming to peace. Again, anywhere globally, I think it will be positive also to us as a neighbours. In terms of your third question, I think the country is trying to act responsibly, meaning that on 1 hands, the country is not in [indiscernible] is not doing any other sanctions, but we -- I'm not in position to be an instrument to avoid sanctions which is produced by other countries. The countries open itself. There are a lot of expert, import preparations, the banks are normal parts of global financial community. So -- and no bank would be risking itself to fall under secondary section. And we see that it's not true for Kazakhstan only. We see that the country is -- the banks in other countries in the region is also acting in the same manner.

So if there were strict assumptions imposed do you think the banking sector in Kazakhstan would suffer tremendously -- or would that not affect.

Think again, Sergey, we are talking about theoretical things. I think no 1 bank or any banking sector globally would be benefiting if sanction is introduced. In that sense, any financial sector bets in Kazakhstan or in any country in any country in the region or globally would be suffering from any sanctions? That's why I think banks in Kazakhstan are acting responsibly in my opinion. And if you see press reports, you might also look wider into the press, and you might see cases where there were reports that banks in Kazakhstan, banks in other countries are rejecting or slowing down payments. So it really depends on who is writing this press report. I'm talking to you from the perspective of being participants in the Kazakhstan banking sector.

Next question from Olga Naidenova.

Yes. If I may follow up on the dividend policy. I understand the split you -- we offered this year was heavily affected by the need to repay based on the decision to repay state support [ fund ]. In following years, what is your vision on how you will split your dividend and to payments or how you will follow for next year's payments.

Olga. As I mentioned during this call, we from this year moved from, let's say, dividend policy which states that we are making payments maximum once a year to the policy which allows its payment up to 2 years per year. At the same time, we cannot give you, let's say, the exact figures or exact percentage. Because we as a bank looking at the -- our business prospects, the possibilities to invest capital profitably internally, we look at the level of capitalization. We look at the market picture, there are a number of [indiscernible] or a number of aspects we are looking into when we, as a bank, make a decision in terms of making the exact dividend payments. So I can probably state only like that. So we have make -- we're capable to make the once or twice payment if that decision is taken or probably not to pay all together, if the situation warrants, but hopefully, a situation would allow to make the payments going forward as well. But probably I cannot give you more specific in terms of exact percentage or exact amount of payment because it really depends on many factors when that decision is taken.

And if I may also ask about the Kazakhs National Bank policy with regards to macro prudential regulation, do you expect further increases in risk weights. Do you expect any additional pressure on your capital adequacy ratio, apart from straight growth -- your great growth outlook?

Yes. At this point of time, there is no, let's say, regulatory proposals, which might be affecting material or risk weighting, [ that formally ] take portfolio. I will have a couple of questions which we received online. I just will talk on result which is not addressed during this call. So 1 question is regarding Stage 3 coverage, which is 71% according to this question, do you rely on collateral, could you talk about the level of collateral coverage as a percentage of gross loans portfolio. Typically, the provision coverage depends not only of the collateral, but also on the cash flow from the business, which we expect on the impaired loans, and it's really based on the IFRS requirement. And based on that, we calculate what the provision coverage is required for impaired in that case, take fee loans. In terms of the overall coverage, we partnered that on an annual basis. So I would refer for annual results where we provide the loans, which is covered by different type of collateral. Overall, I think the coverage is probably around 70% the uncovered total might be a large corporate loans to largest companies in Kazakhstan, which warrants getting -- providing loans on a secured basis and also retail portfolio typical unsecured [indiscernible] portfolio. Yes. I also referred to the question probably which Olga mentioned in terms of regulation change. I'll probably, probably a bit expense what is recently been amended. I think it will be put into cost in coming weeks or days is a reduction of the maximum rate on the loans. Currently, it's 56%. But I guess from end of August to beginning of September, it will be change to the level of 46%. We do not expect any material impact on Halyk Bank because our average rate is below that threshold. There is -- and another question, coming online. Regarding the 1 more [indiscernible] related to repayment of state support deposit, weight is reported in P&L. Well, if you look in the P&L, it is reported in other income expenses plan. The question is regarding the retail loans in terms of improved I guess, the questions regarding the trends. What are the trends driving the growth. We think that there are a few drivers of growth -- 1 of them is that we Obviously, inflation has side effect so one is affecting that the total [ employed ] population is also -- is triggering increase of nominal salaries. So this is what might be 1 of the reasons. Secondly, we see that there is increase in the employed population due to demographic pace. So this might be a couple of reasons behind the recent trends in gross loans portfolio. And if you look on the inflation -- increase in adjusted growth and the growth is probably somewhat slower than -- you can see in the nominal terms. Yes. And I think I missed some question regarding the market share in the corporate lending and how [indiscernible] deals developed in the last 5 years. I think the overall, if you take what corporate and semi is probably somewhat closed to 40%. It is probably about 40%, probably closed to 50%. We think it's more or less stable or stay at the same level. That, however, is not including the loans, which is provided to the corporate segment from state institutions from development institutions and from the debt capital markets. So this is the percentage if you take purely the banking sector -- the commercial banking sector.

Next question from Ramzi Sidani.

Just on the risk-weighted asset density, we've been seeing an increase in the ratio -- so do you expect a further increase going forward from change in mix or possible change in currencies? Or can it stabilize around this percentage of assets? And then just on the capital. In the past, we used to say you want to maintain a capital adequacy of around 17%. Does this still hold?

Well, the risk weighted asset is really --has no change in the structural balance sheet, largely would be correlated with the growth in corporate and the retail portfolio, probably the higher growth in retail might trigger a somewhat higher growth in risk-weighted assets because according to regulatory policy has higher risk weighting compared probably, for example, compared with, for example, SME loans. But typically, we are not expecting some, I would say, big one off changes, to certain extent, it will be correlated with loan portfolio growth with some variation depending which part of the portfolio is growing quicker compared to another one. Regarding your question on the capital adequacy, yes, we stated that typically we would like to see our capital adequacy strong, we mentioned a few times previously that we see that it should not be below 17%. And I think currently, we are standing at a quite comfortable level in terms of capital adequacy.

Dear, ladies and gentlemen, it seems that there is no questions remaining. So this completes our presentation. Thank you very much for participation. As usual, our IR team remains open for any of your further questions. Take care, and goodbye.