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

Good day, ladies and gentlemen. Thank you for joining us on this conference call to discuss Halyk Bank's audited full year financial results for 2024. I'm Viktor Skryl, Strategy Director of Halyk Bank. On the call today are Ms. Umut Shayakhmetova, Chief Executive Officer; Murat Koshenov, CFO, Deputy CEO, Finance, Subsidiaries Compliance & International Activities Mr. Dauren Sartayev, First Deputy CEO, B2B Banking, Marketing and PR Acquiring; Mr. Nariman Mukushev, Deputy CEO, Management, Data Science and Collateral; Ms. Olga Vuros, Deputy CEO, Corporate Banking; Mr. Nariman Mukushev, Deputy CEO, B2C Banking and Digital Government Services; Mr. Andrey Zavarzin, Deputy CEO, IT and Ecosystem; Mr. Almas Makhanov, Financial Director; Ms. Mira Tiyanak, Head of FI and IR; Mr. Nurgul Mukhadi; and Mr. Rustam Telish from IR team. The session will start with the presentation by Halyk team and will be followed by Q&A. Please note that the call is being recorded. We are happy to report that 2024 was a banner year for Halyk. We recorded a record high profit of KZT 921 billion, an increase of 32.8% year-on-year. Our net interest margin was very strong at 7.2% on the back of a record net interest income of KZT 1.1 trillion. Return on average equity, return on average asset set new record as well, while our cost-to-income ratio was the lowest it's ever been. And we hit record highs for total assets, net loans, total deposits and total equity and while keeping our cost of risk in line with the previous year. We will have more details on our financial performance later in the presentation, but I would also like to highlight a continuously growing engagement by Halyk Digital platforms. The volume of payments made via Halyk B2C Super-App rose by 39% year-on-year. Halyk B2B online bank saw 16% growth in payment volume. Here are some key events over the course of last year, which we would like to highlight. In December, S&P upgraded the bank to investment grade, following on Moody's earlier in the year. And with regard to ESG performance, we saw our MSCI rating upgraded to BBB in April, and Halyk became the first Kazakhstani Commercial Bank to issue green bonds last December. Major developments in capital management include dividend policy amendment from single to 2x dividend payment per year in April. We disposed our Kyrgyzstan subsidiary. In September, the bank announced a buyback program of GDRs. In terms of funding base, Halyk fully repaid the outstanding balance of state support received by KKB prior to its acquisition. The funding base was further diversified by successfully signed syndicated term loan in September an issue of local bonds. The approval of LTIP by Extraordinary General Shareholder Meeting was an important strategic decision of the last year. We remain focused on maximizing shareholder returns. Over the past 5 years, including 2024, we have achieved a compound annual growth rate of 22.9% in earnings per share and 20.1% in total shareholder return. We have a strong track record of high profitability, backed by solid capital. We have also seen consistent growth in our core banking operations and increased engagement in our digital banking ecosystem is helping to power that growth. As the largest financial institution in Kazakhstan, Halyk plays a central role in powering the economy. We process transactions equal to 106% of the nation's GDP. We account for 53% of lending to the real economy, and we serve 86% of the country's largest taxpayers. And our reach is not limited to Kazakhstan. We also play an important role in Central Asia's second largest economy. Halyk processed more than KZT 2 trillion worth of payments between Kazakhstan and Uzbekistan last year. Our total loan exposure to Uzbekistan, where we operate a fully owned subsidiary, Tenge Bank, was just shy of KZT 700 billion at the year-end 2024, an increase of 45% year-on-year. I mentioned earlier that we achieved record profitability last year. And here, you can see consistent growth over the past decade despite highly volatile operating environment. The successful execution of our digital strategy allowed us to achieve a compound annual growth rate of 21.2% in net income and 30.7% average return on equity over the past 5 years, while our cost-to-income ratio continues to improve. We strive to maintain a strong capital position, and you can see on this slide how we have accelerated growth in total equity over the past decade. In the total past 5 years, total equity CAGR was 15.5%. At the same time, we have kept our common equity Tier 1 capital ratio steady. This slide shows the acceleration of growth in total gross loans and total deposits over the past decade. As I mentioned earlier, we had a net interest margin of 7.2% in 2024. The average over the past 5 years was 5.7%, so we are seeing very good progress in improving our margins. Next, we will take a look at our digital ecosystem and the progress we continue to see with both the Super-App and online bank. Since 2020, our B2C and B2B digital platforms have experienced strong and consistent growth in user engagement. The volume of payments made through our B2C platform has grown at 5-year CAGR of 58%, while the number of transactions has increased at a CAGR of 46%. On the B2B platform, both the volume and number of payments have expanded at a 5-year CAGR of 22%. In terms of active users, our B2C platform has achieved a 5-year CAGR of 25% in monthly active users, while the B2B platform MAU has grown at a CAGR of 28% over the same period. This slide illustrates our track record in delivering consistent increase in earnings per share despite some turbulence through the cycle, including COVID, January events and geopolitical instability. At 22.9% CAGR in earnings per share over the past 5 years gave at the same period an average annual total shareholder return of 26.9%. On next slide, you can see how our dividend per share has grown consistently over the past 5 years with the exception of the post-pandemic year in 2022, a compound annual growth rate was at 15.4%, while the average dividend yield was 14.1%. Now a few words about macroeconomic environment and specifically about our key market, Kazakhstan. The country accounts for 56% of Central Asia's GDP with a median age of 29.5, Kazakhstan's 20 million population is relatively young and rapidly urbanizing. Both of these factors support our focus on digital services. Kazakhstan achieved real GDP growth of 4.8% and the forecast for 2025 is 5.3%. The production of oil expected to increase in 2025, up to 96 million tonne. The IMF's forecast predict that GDP and GDP per capita will continue to increase over the next few years, together with rising population. I will now pass it over to Mira Tiyanak, please.

Thank you, Viktor. Good afternoon, everyone. Now let's move on to the B2C and B2B update. We have the most extensive open ecosystem for both B2C and B2B. This slide highlights our B2C ecosystem and lifestyle solutions, offering a full in-app experience that includes daily banking, insurance, brokerage and lifestyle services. As part of our strategic expansion, we are also developing a B2C application in Uzbekistan. Next slide, please. Here, you can see the strong digital engagement of the Halyk Super-App. In 2024, our monthly active users reached 7.9 million, monthly transactional users stood at 5.5 million and daily active users number was 2.2 million. Over the year, we recorded a 29% increase in the number of transactions along with 39% year-on-year growth in the volume of payments and transfers. Our B2C lending operations are now almost entirely digital with 91% of loans process through our Halyk Super-App. Loan issuance by volume increased by 46% year-on-year, showing strong demand and lending activity. Our B2C gross loan book grew by 33% year-to-date, reinforcing our market position. In terms of portfolio quality, we continue to maintain prudent risk management. Our NPL 90-plus days ratio stands at 4.5% reflecting stable asset quality and the NPL 90-plus days coverage is 136%. On the next slide, we present the B2C deposit dynamics over the year. The share of new deposits opened digitally increased by 13 percentage points, reaching 91%. B2C deposits grew by 24% year-to-date further strengthening our leading market position. Next slide, please. Here, we present an update on our ecosystem performance. Car insurance GMV and the number of its clients more than doubled over the year. The GMV of our entertainment tickets platform, Kino.kz grew by 16%, while the number of tickets sold increased by 32%, showcasing strong user engagement. Halyk Travel experienced a slight decline in GMV over the year. On the next slide, we present Halyk marketplace dynamics. The GMV increased by 52% year-on-year while the number of sales grew by 10.6%. The number of partners expanded by 63.5%. The GMV of our in-app segment of the marketplace Halyk Market grew by 57.4% year-on-year. The number of partners more than doubled while the SKU count nearly tripled. Next slide, please. Here, we would like to highlight a strong synergy between our B2C and B2B segments which led to the ramp-up of digital car lending. Launched in September 2023, this product has rapidly gained traction. And now Halyk is the #1 player in the car lending markets. Our market share in issuance nearly doubled over the year, reaching 33.8%. The volume of car loans issued grew by more than 5x. Now let's move on to our digital brokerage platforms where we offer 2 key solutions, Halyk Invest, an in-app solution within our Super-App and Halyk Finance provided by our investment banking subsidiary. We continue to see a strong growth in this segment, reinforcing our market leadership. The number of clients grew by 54.6% year-on-year while number of active clients increased by 48%. Transaction volume expanded by 1.8x over the year, highlighting an increased client engagement. Pension assets under management grew by 3.4x year-on-year, reaching KZT 47 billion, and we now hold a 72% market share. The total assets under management increased by 1.6x, while the brokerage assets grew by almost 40% year-to-date, reaching KZT 2.5 trillion. The next slide focuses on our B2B ecosystem where we provide a comprehensive suite of digital banking and ecosystem solutions available in app, including daily banking and financial services Halyk marketplace for businesses and nonfinancial services to support business operations. Beyond the core banking, our subsidiaries offer a wide range of B2B solutions including investment banking and insurance, cash collection services, leasing and cloud business solutions, Internet acquiring and Info telecom services. As part of our strategic expansion, we are also developing a B2B application in Uzbekistan further strengthening our regional presence. And now let's move on to the B2B platform update. As of the end of 2024, our monthly active users reached 305,000, while monthly transactional users number was 237,000 and daily active users stood at 105,000. Year-on-year, we achieved a 16% rise in the total volume of payments and transfers, alongside a 20% increase in the number of transactions demonstrating a strong transactional business growth. Now let's turn to the corporate business update. Our gross loan portfolio grew by 18.4% year-to-date reflecting strong demand and business activity and further strengthening the bank's role as a powerhouse for lender fueling economy. Additionally, KZT denominated loans accounted for 64% of the total corporate loan portfolio. When it comes to the portfolio quality, we continue to maintain prudent risk management. Our NPL 90-plus days ratio stands at just 1% demonstrating stable asset quality. We maintain a robust NPL 90-plus days coverage ratio of 381% providing a solid buffer against potential risk. Halyk currently holds a 53% share of total B2B lending and 31% of B2B deposits, reinforcing our leading position in the market. SMEs are a key focus of our commercial business, and we continue to see strong growth in this segment. Year-to-date, our SME loan portfolio has expanded by 18%, demonstrating our commitment to supporting small and medium-sized enterprises. Loan issuance has also seen a solid increase of 19% with a digital channel playing a crucial role. In addition to loan growth, we are also seeing a notable growth in issuance of digital performance and bid bonds via our platform. Next slide, please. Over 94% of new loans were issued via online bank, reflecting our strong digital capabilities. As a result, our digital loan portfolio has grown significantly, up 55.7% year-to-date, while we continue to maintain strong portfolio quality. Now let us take a look at our business in Uzbekistan. First, a bit of background. Uzbekistan is the second largest market in Central Asia and one where we see a lot of potential. This country has a population of 37 million with a median age of just 27. So like Kazakhstan, a very young nation. Recent economic reforms have driven a spike in foreign direct investment, which sold by 50% last year to almost USD 12 billion. The economy is estimated to have grown at the pace of 6% in 2025. Economic culture and interpersonal ties between Kazakhstan and Uzbekistan are getting stronger. And here, you see a few key indicators for the last years. All this makes Uzbekistan, a natural fit for Halyk strategic development. Against the backdrop of Uzbekistan rapid economic growth, we're seeing a similar dynamic in our loan portfolio there. Our total loan exposure increased by 45% last year. Almost 3/4 of that is cross-border lending from Halyk, which rose by 61%. Tenge Bank's loan portfolio grew by 14% during the year. And other key figures here are volume of transfers between Kazakhstan and Uzbekistan through Halyk and number of B2B payments through our proprietary systems, which sold by 85% and 63% in 2024 accordingly. Digital banking is flourishing in Uzbekistan, and Tenge Bank is the forefront of that, having been the first bank they are to launch digital onboarding for legal entities and first to launch digital loans to support individual entrepreneurs. A few words about Tenge Bank's consumer-facing business, we saw an 85% increase in monthly active users of B2C app year-on-year. And the volume of payments and transfer for the app declined hold the number of payments and transfer has climbed by 48%. We continue to improve the app's functionality by adding new services and ways to make payments. Monthly transactional users for Tenge business, our B2B digital app in Uzbekistan, more than doubled last year, although from a low base. We see a substantial room for growth for this offering further. As we close this section with a look at where we stand and compared to our peers in Uzbekistan, Halyk Group is the fourth largest privately owned lender in the country with combined loan portfolio of almost KZT 700 billion including both Tenge Bank and cross-border lending from Halyk Bank. And now I would like to hand over the call to my colleague from IR team, Nurgul Mukhadi. Thank you for your attention.

Thank you, Mira, and good day, everyone. Now I will take you through a financial results for the year ended 31st December 2024. During our semi-annual results call in August last year, we provided our updated financial guidance for 2024. Despite the quiet EBIT outlook, we met and most metrics exceeded our targets. Growth of our net loan portfolio amounted to 23.5% with 34% growth in hotel segment and 18.7% in corporate and SME. Net fee and commission income grew by 10.2%. Cost of risk was at 1.2%. Our net income amounted to KZT 921 billion. Return on equity reached 34%. NIM is 7.2% and cost-to-income equals 17.6%. As we mentioned earlier, Halyk had a strong year with new record highs. Here, you can see the decomposition of net income growth in 2024. It was primarily driven by the increase of net interest income by 39% and net gain on foreign exchange operations, financial assets and liabilities by 36.7% year-on-year. Here is a quick look at the balance sheet. Total assets of the group increased by 19.7% year-to-date due to increase in amounts due to customers. Total interest-earning assets at the same period grew by 23.1%, which led to increase in its share in total from 90.7% to 93.3%. The share of loans to customers in total interest-earning assets increased from [ 36.4% ] to 64.2%. Total deposits to total liabilities ratio was at the level of 83.9%. At the end of 2024, total equity of the bank increased by 23.9% compared to the 2023, mainly due to the net profit earned by the bank during 2024. That led to respect to growth of the book value for per common share by 24.1% at the end of 2024. Loan-to-deposit ratio was up to 88.3% at the year-end 2024 versus 85% as at 2023. Interest income for 2024 was up 30% versus 2023, mainly due to increase in average rate and balances of loans to customers. Interest expense for 2024 increased by 21.8% versus 2023, mainly as a result of the increase in average rate on amounts due to customers as well as the growth in the share of tenge amount to customers and share of deposits in total liabilities. In 2024, net interest margin was affected by the increase in average rate on both loans to customers and amounts due to customers. Furthermore, net interest margin was positively impacted by the increase in the share of high-yielding retail loans in total loan portfolio and share of loans to customers in total interest-earning assets, as well as the increase in the share of Tenge interest earning cash and cash equivalents. As a result, net interest margin has grown to 7.2% per annum for 2024 compared to 6.1% per annum for 2023. As mentioned on the previous slide, NIM was supported by growth of average rate on loans to customers, which increased to 16.9% in 2024 versus 16.3% in 2023. The significant growth of rate of amounts due to -- from credit institutions and interest-earning cash and cash equivalents from 4.7% in 2023 to 12.6% in 2024 was due to increase in short-term tenge deposits, [indiscernible]. You can also see that average rate of total interest earning assets has grown by 1.2 percentage point from 12.8% in 2023 to 14% in 2024. Average rate of total interest-bearing liabilities has increased by 0.5 percentage points from 7.5% in 2023 to 8% in 2024. The outpacing growth of average rate of total interest-earning assets supported the increase of net interest margin. Despite the negative effect from transition to amortization of tariff packages for legal entities starting from November 2023 and revision of some tariffs in the second half of 2023, fee and commission income in 2024 versus 2023, up by 5.8% as a result of increased number of clients and ramp-up of clients' transactional activity as well as a growth in fees on letters of credit and guaranties issued. Fee and commission expense in 2024 versus 2023 stayed almost flat. The group's management decided to reclassify positive insurance expenses from fee and commission expenses for 2023 in amount of KZT 13.4 billion to interest expenses, and these expenses are related to deposit expenses. The increase in services fee and payment costs was offset by partial reimbursement of expenses on loyalty program by international payment system. As a result, the net fee and commission income for 2024 increased by 10.2% versus 2023. Here is an area of operating expenses, which increased by 21.7% versus 2023, mainly due to the indexation of salaries and other employee benefits, including the cost of the long-term incentive program. The cost-to-income ratio decreased to 17.6% compared to 19.2% for 2023 and meet high operation income for 2024. Compared with the end of 2023, loans to customers were up 23.2% on gross and 22.5% on a net basis. The increase in the gross loan portfolio was driven by the growth across all business segments, with retail loan growing by 33.3%, and the loan portfolio of legal entities increasing by 18.4%. The share of FX loss in total net loans was 21.2%. Cost of risk in 2024 was at normalized level as per our guidance at the level of 1.2%. At the end of fourth quarter 2024, Stage 3 loans decreased from the level of 7.5% to 6.3% year-to-date as a lot of workout of problem loans and loan portfolio growth. Compared with the end of 2023, the deposits of B2B and the deposits of B2C were up 13.5% and 23.5%, respectively, due to fund inflow from the bank's clients. At the end of fourth quarter 2024, the share of tenge deposits in total deposits was 69.1% compared to 67.8% at end of 2023. In Corporate deposits share of -- the share was 70.9% versus 72.9% at the end of 2023, while the share in total retail deposits was 67.5% versus 63.4% as of the year-end of 2023. On consolidated basis, capital adequacy ratios of the bank slightly decreased in fourth quarter 2024 due to dividend payments. RWA were up by 23.4% following the increase of loan portfolio. At the end of 2024, RWA density grew to 86% versus 82% as end of 2023 due to increase in share of retail loans in total loan portfolio. I'm pleased to present our outlook for the financial year of 2025. The outlook is based on the approved budget for 2025 and doesn't take into account potential regulatory changes that may impact financial performance. Retail net loan portfolio growth is expected to be in the area between 20% to 25%. Corporate and SME net loan portfolio growth is expected to be in the area between 15% to 20%. Total net loan portfolio growth is expected to be in the area between 17% to 22%. Growth of net fee and commission income is expected to be in the area between 10% to 15%. Cost of risk is expected to be circa 1.3%. Consolidated net income is to be around KZT 1.1 trillion. Return on average equity is expected to be in the area between 30% to 33%. Net interest margin is expected to be somewhat around 7.5%. Cost income ratio is expected to be in the area between 17% to 19%. Dear ladies and gentlemen, that's a look through the financials. We will now open to the floor of your questions.

[Operator Instructions]. The first questions come from Mikhail.

I have a number of questions. So in the last quarter, there was quite solid improvement on the number of metrics, and I wanted to clarify each of them? Do you think a more sustainable and which of them are more one-offs? So starting from NII, we can see that for the 2 quarters, you had quite strong income from interbank interest income. So I wonder where does this interest income come from? Where the demand comes from on the interbanking lending side? And do you see this line and contribution sustainable? So that's the first question. Then on your trading income and other noncore income line, we could see some improvement on the like FX and the gains on securities. So where -- what was driving that? And were there any one-offs also on net insurance side? Or do you see this performance as sustainable? So that's the first block of questions. And then I also have a question what are your latest views and outlook on the dividend for this -- for 2024? And what will be the split between the first and second as you, I think, now paid twice a year?

Thank very much for your very detailed questions. So first of all, regarding the normalization or one-off items. I think overall, net interest income when we talk -- for the net interest income from loans, we do not see as a one-off. In fact, it's reflection of continuation of growth of our credit portfolio. And if you see from our outlook, we see that the trend overall should continue. When it comes to the interest income from nonloan type of assets, yes, you indeed noticed that we have some pickup in that lines, primarily because of more active approach to ALM. We had some strengthening of our ALM team during the year. So that was the result of more active approach. When it comes to other lines like net gains from foreign exchange operations, financial assets and liabilities. Probably there was one line, which is related to net gains or trading operations, which might be considered as a one-off, we had certain positions in equities, which we realized in the fourth quarter and probably with accepting of that particular item, overall, we see that overall results, the reflection of continuation of our work in activity of our clients, better management of our balance sheet. And I think your question was also related to dividends. Would you please repeat if possible?

Yes. So what's your latest outlook on the proposed dividend -- proposal for the dividend for 2024? And previously, you approved the new guidance for dividends to be paid twice a year. So what split do you expect this year?

Understood. Last year, we changed our dividend policy. So we move from onetime payments up to 2-time payments. And last year, we already realized that open. So last year, we paid -- on a combined basis, 55% of the net profit for 2023 in 12 months, the first one 40%; and the second one, 15%. This year, so far, the Board of Directors is proposing to the General Shareholders' Meeting the dividend per share of [ KZT 29.64 ] which roughly represents 35% of the net profit for last year. And there is a possibility that Board might be recommending the second payment in the second half of this year. But decision would be taken in the second half. So at this point of time, I cannot provide probably more clarity, but I probably can refer to our general dividend policy, which says that within certain conditions, the dividend payout ratio is within the range of 50% to 100% of the net profit.

Okay. And if I may clarify on interest income from nonloans and more active ALM approach. So what -- maybe could you give a bit more details what particular changes have been taken into consideration. So do you for example, allocate cash now more into some more yield in high-yielding assets. And by the way, this interbank interest income, which you received visit Interbank from -- with the Central Bank of Kazakhstan or with the other banks, if I may ask?

I'll give the floor to my colleague.

Mikhail, thank you for your question. First of all, the main base of our operations was the switch of our focus to -- from overnight activities with National Bank to 1 week deposits, which allowed us to gain extra 1% in profit. So that was the main shift.

Okay. But it is mainly with the Central Bank of Kazakhstan?

Yes, yes, yes.

Okay. And on -- also one last follow-up on FX, secured on the trade and income from FX and gains on securities. Was it supported by volatility. To what extent it was supported by volatility of Tenge in the first quarter or it was more supported by other factors?

Mikhail, thank you for your question. So it was a mix of all activities. As you may know, the last year was quite volatile for the local currency. So we somehow managed to gain our fortune there as well.

Didn't produce themselves. So that was a response from our Managing Director, who is covering treasury operations and ALM [indiscernible].

And the next question is from Milosz.

Milosz, could you please speak up? We cannot hear you.

So as Milosz, he's experiencing -- Okay. Go ahead, please.

Apologies for that. Yes, Milosz Papst, Edison Group here. Firstly, I've noticed that the share of local currency deposits in total retail deposits stabilized in the fourth quarter compared to the previous quarter after growing for a couple of years and also in recent quarters. So can you shed some light on this in terms of what you expect in the coming quarters? And what would be the associated impact of the interest expense? And then secondly, I've noticed that the average number of monthly users in our retail segment in Super-App was broadly stable in 2024 compared to last year. The daily active users went down slightly. So I just wonder if you see further potential to grow from here. Or you expect the syndicated to stabilize and maybe we'll focus more on the marketing transaction on user number which we've disclosed as well? And if so, can you give us some idea of what you expect here?

Thank you very much. The dynamics in terms of currency split on deposits is primarily linked to 2 factors. First one is anticipation of movement in currency and second, the interest rate differential, because we already for a number of years, leaving inflation when the National Bank is not managing the currency rate, but managing the rates. So we see that exactly in the situation when tenge in the end of last year start weakening. And also, there was a increase in the inflation expectations, the Central Bank stepped in and increased rates, so we think that, that might -- that is a good stabilization factor in terms of the currency split of the deposits. And on top of that, we'll see that during last couple of months tenge starts strengthening. So we expect that, that should lead not to big actions in terms of the currency split on deposits. Regarding your second question, we, in some previous years, experienced a very strong increase, both in monthly active users and daily active users. And we used a different combination to drive that, but we understand that the most focus should be not only increasing the audience per share, but increasing the transactional activity. So during 2024, we were particularly let's say, focusing on increasing the transaction activity so-called mostly transactional users, and that probably was the main factor. Saying that we overall expect that we will continue to increase both the active users on monthly and daily basis as well as the transactional portion of that client base.

And the next question come from Simon Nellis.

Yes, I'd have -- my first question would be really around your macro assumptions behind your guidance for this year. So it would be useful if you could run through what you're expecting in terms of GDP growth, inflation, rate trajectory and exchange rate, that would be useful. I have a question on fees. I see that fee income grew by 19% in the fourth quarter. Sorry if I missed some of the color, but if you could just elaborate on what was driving that? And why do you expect it to slow down to 10% to 15% growth for the year? And then last is just on the tax outlook. I think there were talks in the past to increase taxation rates on banks. I'm not sure if that's still the case, if you could give us an update on any new regulatory actions, particularly around tax?

Simon, probably I didn't probably record all your questions, but let me start one by one, and we might probably come back to some questions which I didn't cover yet. So first of all, on the macro assumptions. Obviously, the recent movements in inflation and subsequent reaction from the National Bank in terms of increasing the base rates to a level of 16.5% also triggering the revision of the macro parameters. At this point of time, the National Bank is anticipating GDP growth in the range of 4.2% to 5.2%. Our finance economy is currently projecting the GDP growth at the level of 4.8% primarily driven by increased production at the Tenge to ROYAL, which potentially may be limited by the OPEC Plus commitments from the Kazakhstan. Also the continuation of fiscal imposes to the economy by the government to finance some larger infrastructure projects. Inflation, we see that it's probably would be increasing this year. Again, Central Bank is projecting inflation rates in the range of 10% to 12%, primarily driven again by this fiscal impose, which I mentioned, but also the readjustment of pricing or utilities and on the petrol market. Well, based on the inflation, we also expect that the base rate probably would continue to stay higher. It might reduce somewhat from the current levels, but we don't expect a big movements from the current level. Overall, we do not expect the -- some [indiscernible] in economy. I think economy continues to grow, but obviously fueled by the aspects which I mentioned. On the fees and commission income, one of the aspects was actually that we were revising certain fees in 2023, and that probably were impacting the fees and commission growth for second half of 2023 and beginning of 2024. That effect is fading out in the second half of this year, which triggered the increase in fees and commission income. Secondly, we saw a very strong traction in our [indiscernible] business. And that's why you see that there is a strong increase in fees and commission income from letter of credits and guarantees. The other element was that in fees and commission expenses, previously, we were incorporating expenses related to deposit insurance funds contribution. We believe that is more directly linked to deposits. That's why it should be accounted in the interest expenses line. And that also reduced the base has also contributed somewhat to the better net fees and commission income. So that was a combination of, let's say, junior activity on the clients, but also some changes we think better reflects overall the fees and commission business for the bank. And would you please repeat your question on the tax?

Yes. The last one was just whether the tax rate is likely to increase. I think there were discussions to increase tax on banks at one point, where are we on that debate in the government?

Well, we're probably in the middle of discussions yet. So there are different views in terms of what the overall tax system in Kazakhstan should look like. It's not only about the banks but also about the corporate side, SME side, it relates to VAT, related to corporate income tax. So probably at this point of time, there is not too much clarity from our previous discussions. That's why in our outlook, we have not incorporated any change yet because of the unclarity. So our outlook is based on the current state of tax regime.

Okay. And maybe just one last one on margins. So you're looking for margin to increase by another 30 basis points. Is that largely driven by rates? Or is there something else behind that?

It is primarily driven by the growth of our interest-earning assets in terms of composition because you'll see that our retail portfolio was growing quicker than the corporates. That's why it's contributing to -- it has more contribution to the interest income line driving the net interest margin expansion.

And sorry, maybe just on your confidence with the cost of risk guidance, given that you are -- I guess, these are higher-margin loans, but probably riskier as well. So what's the downside risk to your -- well, what's the sort of risk, the cost of risk actually ends up being higher given high rates and your [indiscernible]?

Yes. Obviously, inflation situation is -- inflation is somewhat increasing. That's why we carefully review our model, especially models for our retail products and that's why we purposely somewhat adjusted our cost of risk expectations. So this is our base case and based on the market assumptions which we just discussed.

And the next questions come from Ronak Gadhia.

Congratulations on the results. And just one quick follow-up on the dividends. Murat, you mentioned that the banks policy is to pay out 50% to 100%, depending on certain conditions. If I remember correctly, one of those conditions is capital adequacy ratio remaining above 18%. Is there a risk that the capital adequacy ratio could drop below that level towards the -- earlier this year, the Central Bank increased the risk weighting for retail loans, and that is the fastest growing portfolio for you. So what's the risk weighted -- what's the capital adequacy ratio under the new regulations? And could your capital adequacy ratio dropped below 18% as a result of that?

Ronak, thank you for the questions. Currently, the Central Bank or the -- I should say, the agency or financial supervision are not looking to revising the risk-weighted assets. In fact, the regulators introducing the countercyclical buffer. But because -- which exactly aiming to let's say, can be considered as an instrument to optimalize the credit to retail, it will be 2% of risk-weighted assets. But because we have substantial capital buffer above the regulatory requirements, we do not expect that it might impact our dividend policy at this point of time.

And the next questions come from Dan [indiscernible].

This is Dan from [indiscernible]. First of all, congratulations on the sublime set of results. I just had one question on asset quality. On the NPL breakdown, do you have an NPL breakdown between corporate and SME and retail? And where are you seeing the most NPL formation year-to-date? And what the outlook for 2025 across the different segments?

Thank you for the question. Rom Maszczyk speaking. I'd like to address this question. First of all, obviously, we have the breakdown of our NPL business lines. And Nurgul, I suppose, provided some details, but if you want a clearer picture, I can give you an overview, and send you to more detailed information in our financial statements. So let's start with the corporate sector. NPL there is at around 1%, is the lowest NPL for the whole portfolio in our bank. Then we have slightly higher NPL in SME segment. And when we go down to smaller and medium enterprises, NPL is rising slightly, and is the highest for small businesses, individual entrepreneurs in the portfolio, but they do not contribute much to the overall SME portfolio. For Retail segment, we have NPL ratio around 3% -- 4.5% is for 90-plus but we would like to note that in 2024, we had a moratorium on cleaning the credit portfolio by selling NPL to external parties. So this moratorium will last until April '26. So we already have addressed this issue, and we take that into account forming our credit strategies for 2025 and 2026.

Dan, please go ahead.

Sorry, I don't have any more questions.

And the next question comes from on Tom Jakobi.

Tom Jakobi, wikifolio Doppelanalyse. Can you hear me?

Yes Tom, please go ahead.

First of all, congratulations for the very good business numbers. I've got 3 questions. The first is related to the buybacks of GDRs. We can read every week how many transactions there have been. And I wonder what happens to the collected GDRs and when is it going to happen? Can you give us any outlook there?

Yes, we have a dividend buyback, which was launched in September last year for the duration of 1 year and which is limited to 1% of the share count. As of now -- and we are reporting our progress on buyback regularly on our website. So at this point of time, the bought back amounted to roughly USD 16.5 million. They are transferred to the treasury stock. And the only way they can be used at this point of time or long term employee incentive program, which was approved last year. Otherwise, they would not be able to come to the floating again.

Okay. So it's not the plan to withdraw or delete them, right?

Legally, they cannot be canceled according to Kazakh legislation. That's why they are kept on our treasury stock. But in order to let's say, bringing them back to circulation, there are decisions to be done by the General Shareholders meeting, that's why to launch that program, we have to go to the General Shareholders meeting.

That's very clear. Second question is about Halyk Travel and e-com. There was a decrease quarter-on-quarter, while mainly all the rest of business numbers really rose very well, but there was a decrease. So I wonder, is there any special explanation for that? Or is this going to be a onetime effect? Or are there other stronger platforms in this part of business?

Yes. Overall, on ecosystem, I think we have a good traction. If we take some verticals like car insurance or [indiscernible] and overall ecosystem, because ecosystem, we can look from, let's say, the -- our general approach includes the m-com and e-com. On the Halyk markets, there was some decrease quarter-on-quarter basis. But if you look from a year-over-year basis, I think we had some prong increase in terms of the Halyk markets. So the increase was 57%. And we continue to increase the number of partners, increase invest in SKUs. We continue to strengthen our team. So we expect that Halyk will continue its traction. When it comes to Halyk Travel, we were, let's say, trying to rebuild that business. We were present on one platform, and we last year, devoted to move into another platform that was affected probably last year results, but we still think that -- we still think that Halyk Travel is integral part of ecosystem product suite, and we expect that situation would turn around for Halyk Travel as well.

All right. And last question block is regarding the dividends again. I had a problem acoustically to understand the planned dividend proposal. Can you repeat that, please?

Now the dividend proposal is to pay 25 -- sorry, KZT 29.64 per share. And this is, I would say, a decision which we presenting to the General Shareholders meeting to be held on the 30th of April. And according to the dividend policy, we might consider the second dividend payments in the second half of this year.

Yes. And that is what my question is going for. Is it correct -- I tried to understand the GDR pricing structure and the fees. Is it correct that a second dividend would mean like a second fee of USD 0.02 because they earn the dividend fee every time a dividend is going to be paid? And if this is the case, I would say it's way better to do only one dividend a year. But is it true?

Yes, we have dividend fee, which is related to each dividend payment, but also there is a cap for the year.

Okay. I see. Can you name the amount of the cap?

It's KZT 0.03 per GDR for the year. So this is the cap.

And the next questions come from Mikhail Butkov.

I just had some follow-up questions. One, you mentioned a change in structure of interest-earning assets and its growing contribution. So I wonder what level of loan-to-deposit ratio you see as comfortable or sustainable? It has increased quite significantly over the last 3 to 4 years from, I think, around 70% to 90%. Can you see that at the level of 100%? Or how do you think about that from ALM also perspective?

From ALM perspective, we are not focusing on dividend loan to dividends that are -- loan to deposit, we are targeting different ratios, which better reflects the overall asset liability and capital perspective. But also, I want to highlight that currently, our liabilities is, to a large extent, represented by deposits. And so we, I think, have substantial capacity to go and to borrow without any -- do not consider that as a guidance, but simply consider that as a potential capacity to expand and further to diversify our liability basis.

Okay. Okay. And just one other follow-up on the interest income from interbank operations. You mentioned that you changed the structure from overnight placements to 1-week deposit placements. But I wonder why it brings that much difference compared maybe to the previous year as the interest rate did not fluctuate maybe that much. So I mean -- and the difference in cumulative return on overnight placements versus 1 week, are they really different to drive -- to step up?

It is not only this, which is influencing. You also have to look for the currency composition. So in previous years, there might be different currency composition. And like in dollar terms, it's much lower rates compared to tenge, and last year, we placed more tenge in these instruments, which probably might be additional explanation for the difference.

And the next question come from Simon Nellis.

Just a quick follow-up for me on asset quality. So you mentioned that there's a moratorium on, I think, selling retail loans to third parties. And that only expires in April of next year. Is that right? And what impact is this having on NPLs? Would you expect accelerated NPL workout when you are able to when this moratorium ends?

Yes. The moratorium is for 2 years. It was implemented on the 1st of April of 2024. So according to plan, it will last until April 2026. As regards its impact, it affects our cleaning opportunities of our portfolio or possibilities. But we think that we can manage this challenge, and we do not expect an exceptional increase in NPL ratios this year and next year.

Do you think you've actually saved money by doing this internally rather than outsourcing?

Well, by selling NPLs, we could realize the cash flow almost immediately. Right now, we have to wait longer for realizing the collections. So it's a balanced picture. We are taking that cash flow perspective into account when we assess the quality of the portfolio and the targets, our internal targets for the quality of the portfolio over the next year.

And actually, one more for me on the workout of problem loans that are collateralized by SPVs. I think you have a slide, Slide 54. I was surprised that this is actually stable. I think it's been going down in the in the past. So why are you seeing inflows of these type of assets? I thought this was a legacy.

These are legacy assets.

So what is -- okay, but why aren't they going down faster?

Sure. Okay. Go ahead.

Let me step in, Simon. It really it depends on particular problem assets which are on our balance sheet. So we have possibility to make -- work our procedures out of our balance sheet or through our SPVs. It's really depending on the type. Sometimes it's more appropriate and quick to do it from the bank's balance sheet. Sometimes it's better from a practical point of view to do that through SPVs. So that's not necessarily be considered as linked to what the size of the problems, but the composition of loans which are inside the portfolio.

Okay. But over time, you still expect this number to go down? And would you be realizing these assets at a profit? Is that fair to say?

Yes. Actually, we see good progress on the SPV side. So we're quite happy with their performance. And they're really contributing to overall workout process of our problem loans.

And the next -- the last question come from the Q&A chat from [indiscernible]. Could you tell please how in your opinion is expected to tightening on regulatory capital requirements, the second tier banks will impact Halyk Bank's consumer lending segment?

Thank you for your question. I think I already answered that earlier, but let me repeat. So basically, we are talking about the potential introduction of countercyclical buffer, which would be 2% of risk-weighted assets related to retail loans. And because we have substantial buffer in our capital far above the minimum regulatory requirements. We do not expect it might be impacting the bank in terms of our business plans or in terms of our dividend policy.

Dear ladies and gentlemen, it seems 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.