Halyk Bank of Kazakhstan Joint Stock Company ($HSBK)

Good day, ladies and gentlemen. Thank you for joining us. I'm Viktor Skryl, Strategy Director for Halyk Bank. We have our executive team joining us on the call today, including Ms. Umut Shayakhmetova, Chief Executive Officer; Mr. Dauren Sartayev, First Deputy CEO for B2B Banking, Marketing, NPR and Transactional Business; Mr. Murat Koshenov, CFO and Deputy CEO for Finance, Subsidiaries, Compliance and International Activities; Mr. Roman Maszczyk, Deputy CEO for Risk Management, Data Science and Collateral; Ms. Olga Vuros, Deputy CEO for Corporate Banking; Mr. Nariman Mukushev, Deputy CEO for B2C Banking, Digital Government Services and Ecosystem; Mr. Mikhail Khasin, Deputy CEO for IT; Mr. Almas Makhanov, Finance Director; Ms. Mira Tiyanak, Head of IR; and Mr. Rustam Telish, from IR team. Today, we will begin with a short video overview of the group's results and key highlights, followed by a presentation and Q&A. Please note that the call is being recorded. [Presentation]

Thank you. Now let me briefly highlight our operating performance for 2025. We delivered strong results with net income up 14.9% year-on-year, supported by growth in both net interest and noninterest income. Profitability remains best-in-class with return on equity at 32.6% and net interest margin at 7.1%, while we continue to maintain strong cost discipline with cost to income at 17.5%. Our balance sheet expanded with total assets up 12.7% year-to-date, driven by customer balances alongside solid growth in loans and deposits. Finally, our digital platforms continue to show strong momentum with double-digit growth in both volumes and transactions. Now let me briefly highlight some key milestones over the past year. In ECM, we executed a KZT 475 million secondary offering, increasing free float to 37.6%, the largest follow-on transaction in Kazakhstan. On ECG, our Sustainalytics rating improved significantly, moving us from risk to medium risk. We also recognized as best bank in Kazakhstan by the Banker and Asia Money, among other awards. And on funding, we became the first commercial bank in Kazakhstan to sign a landmark bilateral facility with China Exchange Bank, further diversifying our funding base. Now let me start with key highlights of Halyk Group. We remain the leading lender to the real economy in Kazakhstan among commercial banks, reflecting our strong positioning in core banking. Over the past 5 years, we have delivered consistent growth in our core businesses with gross loans up 2.2x and deposits increasing by nearly 70%. At the same time, we maintain a strong track record of profitability, supported by solid capital levels with consistently high returns. We are delivering attractive shareholder returns with total high teens to mid-20s growth in EPS, DPS and total shareholder returns alongside a 5-year average dividend yield of 14.5%. Finally, our digital platform continued to show strong engagement with solid user growth and a vast majority of loans issued digitally across B2C and SME segments. Let me briefly highlight our role in regional economy. We are the largest lender to Kazakhstan's real economy among commercial banks, supporting 47% of the economy and serving 86% of the country's largest taxpayers. We are also expanding regionally with loans exposure to Uzbekistan up 34% year-on-year. At the same time, we remain the leading transactional platform with payment volumes equivalent to 160% of GDP. Our digital platforms continue to scale rapidly with payment volumes growing by over 20% and online banking volumes increasing by nearly 30% year-on-year. Here, you can see a consistent track record of profitability 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 18% in net income and 32% average return on equity over the 5 years, while our cost-to-income ratio continues to improve. We have delivered a consistent track record of equity growth over the past decade, demonstrating resilience across cycles and consistent capital generation. Over the last 5 years, equity has grown at a CAGR of 17%, more than doubling over the period. This slide highlights strong and consistent growth in total gross loans and deposits over the past decade with a CAGR of around 18% for loans and 14% for deposits. 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 2021, 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 a 5-year CAGR of 38%, while the number of transactions has increased at a CAGR of nearly 53%. On the B2B platform, the volume and number of payments have expanded at 5-year CAGR of 24% and 21%, respectively. In terms of active users, our B2C platform has achieved a 5-year CAGR of 15% in the monthly active users, while the B2B platform monthly active users has grown at a CAGR of 17% over the same period. This slide illustrates our track record in delivering consistent increasing return per share deposits despite some turbulence through the cycle. A nearly 20% CAGR in earnings per share over the 5 years gave at the same period an average annual total shareholder return of 20.5%. Here, you can see how our dividend per share has grown consistently over the past 5 years, while the exception of the post-pandemic year in 2021. The compound annual growth rate was at 23%, while the average dividend yield was 14.5%. Now a few words about the macroeconomic environment and specifically about our key market, Kazakhstan. The country accounts for 60% of Central Asia's GDP with a median age of 32, Kazakhstan population of over 20 million is relatively young and rapidly urbanizing. Kazakhstan achieved real GDP growth of 6.5% last year and the forecast for 2026 is 4.25%. The production of oil is expected to remain flat at approximately 96 million tons. The IMF's midterm forecast predicts that GDP and GDP per capita will continue to increase over the next few years together with rising population. Now let me hand over the call to Mira Tiyanak.

Thank you, Viktor. We continue to see strong engagements in our super app with 8.5 million monthly active users and 3.2 million daily active users. Transactional activity remains robust, supported by 6.2 million monthly transaction users. This drives strong growth with payments up 23% and volumes increasing by over 20% year-on-year. Overall, this reflects continued momentum of our digital ecosystem. Next slide, please. Our retail lending business continues to grow with the loan book up around 11% year-to-date. Asset quality remains at a comfortable level with NPL 90-plus ratio at 7.2% and coverage close to 90%. At the same time, loan issuance totaled KZT 2.6 trillion, down 15% year-on-year, primarily reflecting regulatory tightening. We continue to hold solid market position with 17.9% share, serving close to 1.9 million borrowers. Our retail deposit base continues to grow steadily with a 10.8% increase over the period. We maintain a strong market position and an increasing share of local currency deposits. We continue to see strong growth across all ecosystem verticals, including car insurance, e-commerce, travel and entertainment ticket platform. GMV is growing across platforms, supported by an expanding partner base and increasing client activity. Overall, the ecosystem continues to strengthen client engagement and supports growth across the group. We operate two complementary brokerage platforms covering both in-app and full-service clients. And we continue to see strong growth with client numbers up over 30% and transaction volumes increasing by more than 50%. This drives growth in asset under management and brokerage assets while we maintain a leading market position. Now let me turn to our online bank platform. We continue to maintain a leading position in B2B digital banking in Kazakhstan with a large and highly engaged client base. Our monthly active users reached almost 344,000 with daily active users at around 150,000 and nearly 270,000 monthly transacting users. This strong engagement translates into solid transaction growth. The number of payments increased by 22%, while volumes grew by nearly 30% year-on-year. Overall, this reflects the strength of our B2B platform and its key role in driving transactional activity across the group. We continue to see solid growth in corporate lending with the gross loan portfolio increasing by 14% to KZT 6.8 trillion. At the same time, our portfolio remains well diversified across key sectors of the economy with no single concentration dominating the mix. 57% of our corporate loan portfolio are in local currency. Now let me turn to our corporate business performance. We continue to demonstrate strong client engagement with around 3,000 active clients and a high level of product penetration. This is supported by strong transaction activity with a total quarterly transaction number reaching 3 million. At the same time, we maintain a leading market position with a 30% share in corporate deposits. Asset quality remains at a comfortable level with NPL 90-plus days at 2.8% and coverage about 110%. We continue to see strong growth in the SME segment with the loan book up nearly 20% and solid growth in loan issuance. Digital lending is expanding rapidly alongside such innovative products as digital bonds. Overall, this highlights the strength and scalability of our SME franchise. Turning to portfolio quality in the SME segment. Asset quality remains strong with the NPL 90 days plus ratio at 3% and coverage at 137%, reflecting a prudent risk approach. We also continue to see good client engagement with the product penetration at 2.7 products per active client. This is supported by solid transaction activity with monthly transactions reaching KZT 5.4 million and volumes totaling KZT 17.2 trillion. Importantly, our SME lending is highly digitalized with 93% of loans issued digitally. Now let me turn to our insurance business. We maintain a strong market position, ranking #2 in both general and life insurance with market shares of around 25% and 23%, respectively. At the same time, our insurance companies are supported by solid credit ratings, reflecting their financial strength and stability. In terms of key operational and financial metrics, we continue to see steady growth. Gross written premiums increased by 7%, while insurance revenue grew by 13%. Net insurance income showed strong momentum, increasing by 26% year-on-year. Overall, this reflects the strength of our insurance franchise and its growing contribution to the group. Let me now turn to our business in Uzbekistan. We are one of the largest private bank lenders in the market with total loan exposure of KZT 936 billion, up 34% year-to-date. This includes our cross-border lending from Halyk Bank, which grew strongly by 44% year-to-date to KZT 735 billion. At the same time, Tenge Bank continues to develop steadily with its loan portfolio reaching KZT 201 billion, up 8% year-to-date. Tenge Bank continues to scale, supported by ongoing investment and expanding digital capabilities, including digital onboarding and lending solutions. We also continue to explore strategic opportunities in this market, including our discussions related to Click. Overall, Uzbekistan remains a key growth market for the group. Tenge Bank continues to build a balanced platform across both retail and SME segments. We see active usage across digital channels alongside expansion of our SME client base and digital lending offering. Overall, we continue to strengthen our presence in Uzbek market. Now let me hand over the call to Rustam Telish from IR team. Thank you.

Thank you, Mira, and good day, everyone. Now I will take you through the financial results for the year ended 31st December 2025. During our 9 months and third quarter results call in November last year, we provided our updated financial guidance for 2025. Growth of our net loan portfolio amounted to 14.3% with 10.4% growth in retail segment and 16.4% in corporate and SME. Net fee and commission income grew by 11.9%. Cost of risk was at 1.4%. Our net income amounted KZT 1.058 billion. Return on equity reached 32.6%. NIM is at 7.1% and cost to income equaled to 17.5%. Here, you can see that the composition of the net income growth in 2025. Net income increased by 14.9% year-on-year, reflecting strong overall performance. It was primarily driven by the increase of net interest income, net fee and commission income and net insurance income. Let me briefly highlight key balance sheet trends. Total assets of the group increased by 12.7% year-to-date due to increase in amounts due to customers. Average total interest-earning assets in 2025 grew by 18.5%. At the same time, average total interest-earning liabilities -- liabilities grew by 17.3%. Total deposits to total liabilities ratio was at the level of 82.4%. As at the end of 2025, total equity of the bank increased by 14.1% compared to the 2024 due to net profit earned by the bank during 2025. Loans-to-deposit ratio was up to 91.4% at the year-end 2025 versus 88.3% at the year-end 2024. Interest income for 2025 was up 24.1% versus 2024, mainly due to increase of average balances of loans to customers. Interest expense for 2025 increased by 32.4% versus 2024, mainly as a result of the increase in average rate and balances of amounts due to customers as well as the growth in the share of KZT amounts due to customers. In 2025, net interest margin was affected by the introduction of new minimum reserve requirements, coefficients and faster pricing of average interest-bearing liabilities compared to average interest earning assets following the increase in the base rate. As a result, net interest margin has slightly decreased to 7.1% per annum for 2025 compared to 7.2% per annum for 2024. Net fee and commission income for 12 months 2025 increased by 11.9% versus 12 months 2024 as a result of increased number of clients and the growth of clients transactional activity, both of individuals and legal entities. Here is an overview of operating expenses, which increased by 16.9% versus 12 months 2024, mainly due to the indexation of salaries and other employee benefits, including the cost of the long-term incentive program as well as IT development-related costs. The cost-to-income ratio decreased to 17.5% compared to 17.6% for 12 months 2024 amid higher operating income for 12 months 2025. Compared with the year-end of 2024, loans to customers were up 13.9% on a gross and 14.3% on a net basis. The retail loans growing by 10.8%, while the loan portfolio of legal entities increased by 15.5% on a gross basis. The share of fixed loans in total net loans was 25.2%. Cost of risk in 12 months 2025 was at normalized level in line with our full year guidance and was at the level of 1.4. As of the end of fourth quarter 2025, Stage 3 loans increased to 7.7% as of the end of fourth quarter 2025 year-to-date as a result of the moratorium on the sale of problem retail loans to collection agencies till May 2026 and the migration of corporate clients from Stage 2 to Stage 3. Compared with the year-end 2024, the deposits of legal entities and the deposits of individuals were up 9.9% and 10.8%, respectively, due to fund inflow from the bank's clients. As at the end of 12 months 2025, the share of KZT deposits in total deposits was 71.7% compared to 69.1% as of the end of year 2. corporate deposits, the share was 70.4% versus 70.9% as of the year-end 2024, while the share in total retail deposits was 72.7% versus 67.5% as of the year-end 2024. Capital adequacy ratio of the bank increased in the fourth quarter due to the net profit earned by the bank during fourth quarter 2025. RWA were up by 15.4% following the increase of loan portfolio. As of the end of 12 months 2025, RWA density slightly grew to 88% versus 86% at the year-end 2024. I am pleased to present our outlook for the final financial year of 2026. Retail net loan portfolio growth is expected to be in the area between 8% to 10%. Corporate and SME net loan portfolio growth is expected to be in the area between 10% to 13%. Total net loan portfolio growth is expected to be in the area between 9% to 12%. Growth of net and commission income is expected to be in the area between 5% to 10%. Cost of risk is expected to be in the area of 1.5%. Consolidated net income is to be around KZT 1 trillion. Return on average equity is expected to be in the area of 29%. Net interest margin is expected to be somewhat around 6.8%. Cost-to-income ratio is expected to be in the area between 18% to 20%.

[Operator Instructions] First question comes from Dan Mikhaylov.

This is Dan from Vergent Asset Management. My question is on the guidance. In Q3 '25, you released preliminary guidance '26, which suggested a flat NIM and think about 10% or high single digit to 10% net income growth. Since then you proceeded to downgrade the guidance on this earnings call. Would you be able to comment on the underlying reasons for that downgrade?

Yes, indeed, in the third quarter, we were providing the preliminary estimations. That was actually before the completion of our standard budget process. We were in the middle of that. And obviously, it's already 5 to 6 months past since we provided around 4 to 5 months, which passed since our preliminary estimations. What we've seen that we expect that rates might be staying somewhat higher a bit for longer than we estimated in the third quarter. That is probably the primary reason for correction of NIM estimations.

Can you just clarify how many rate cuts you expect for 2026?

Yes. What we've seen from -- hearing from Central Bank rhetorics, so they do not expect the base rates to be reduced until the second half of this year. And obviously, the current geopolitical situation might also, I would say, influence the whole situation on the inflation side. So there are a number of uncertainties given the current situation. I mean, not the Kazakhstan specific, but geopolitical related to oil price, how it might affect the prices on import of goods and related issues.

And the next question comes from [indiscernible]? And the next question comes from Simon Nellis.

I also have a question on the revised guidance. I think you've also lowered the fee income growth a bit. Could you just unpack what's driving that? And I guess, generally, to what extent have you assumed that the current environment because of the conflict in the Middle East is kind of persisting? And would you then -- if that conflict did stop and oil prices started to moderate and your inflation and view changed, I mean, do you think you would have to kind of revise your guidance back to what you had before? That would be my first question. And then my second question is really around the trading and other income. So you made -- so basically all the income that's not fees or net interest income. It grew 28% year-on-year in 2025. Can you kind of strip out how much of that is driven by trading and securities and FX gains versus other income from some of your ecosystem investments and the outlook for both in terms of growth going forward?

Simon, thank you for your question. Regarding fees and commission -- net fees and commission guidance revision, we think that there are probably two areas which is impacting our current estimations, which might be a bit of conservative side. First of all, we are looking from the first 2 month dynamics. And what we see the economy-wise, there is a bit slower start to the year. If you look from the external trade, internal trades, investments and overall the short-term economic indicator perspective. So they are somewhat lower if you take a year-over-year basis. Second impact probably to a slight, let's say, minor impact, but still, there has been introduction of value-added tax to certain banking services. And we are still in the process of fully incorporating that. So on some fees and commission, we had to allocate a certain portion of that for the payment of value-added tax. And indeed, as we typically do, once we go further into the year, by the midyear, we might be revising the guidance. But this is what we see from a current point of view. With regards to current situation, I think it is important to mention that we, as Halyk Bank have no exposure to Middle East. We had certain positions on certain bonds, including sovereign bonds, which we closed in the end of February without any loss. It was even some small mark-to-market gain. So any, let's say, potential exposure might be coming through, as I mentioned, through increase in oil price, which might have a dual impact. The positive one is through increased export proceeds to the country. On the contrary side, we know that energy components might be feeding different parts of goods and services, which Kazakhstan imports. So it is, in our opinion, might be impacting both export, which probably is a quicker influence and a bit longer term is import component? And with regards to your question to trading income. Actually, higher trading income is driven by activity with international investment banks primarily. Halyk is probably the largest bank in the region, one of the major liquidity providers in the region. And it is acting as a market maker for hedging carry trade instruments on NDF curve because not many international banks might have limits on the regional banks, and we are well placed to carry that position within Central Asia and Caucus.

But for the portion of that income -- other income line would be income from your ecosystem activities, right? Your nonbanking?

No, it's primarily trading, but also includes effects on our clients, but there are other components of other income, and there are quite a few. So it's quite diversified. It also among others, includes, for example, positive gains on foreclosed assets, which we realized for our SPVs. So there are quite a number of positions.

But you think basically that the -- it's a sustainable revenue stream that it should continue to grow?

Well, different lines might change, let's say, in terms of dynamic, but because, as I said, it's quite diverse. So you should not consider that as having, let's say, big one-off component.

Okay. And actually just one last question, if I could. I saw that the Stage 3 loans went up quite significantly quarter-on-quarter. Actually, there was a large drop in Stage 2. If you could just kind of unpack what's going on and how worried we should be by the jump in the Stage 3 loan number.

First of all, we do not think that the situation is, I would say, creating any issues. We remain to be well covered. And altogether, the situation with credit portfolio remains stable. There was some migration from some wholesale names from Stage 2 to Stage 3. But to a large extent, they have been covered by provisions ahead of the, let's say, transition to stage 3. So we are looking at different restructuring measures, but the exposure is quite well covered. And second component is transition of retail loans. And this is as a result of regulatory restrictions to sell portfolios to collection agencies. So this is the comment which we have been providing during last few calls because the bank is restricted. So the NPLs staying on our balance sheet somewhat longer than previously. But we have all the necessary infrastructure in terms of soft and hard collection. So we -- and we have quite good coverage as well.

And the next question comes from Milosz Papst.

Some of them have already been answered. Milosz Papst, Edison group here. Maybe you can shed some light on the reduced loan growth outlook for 2026 compared to your indicative guidance you've shared during the Q3 results, especially on the corporate and SME segment. Is it due to less favorable pricing in the market or just broader macroeconomic, let's say, slowdown? Or maybe is it related to some of the clients, which were transition from Stage 2 to 3? And is there any impact of the disruptions to these on other clients? So let's maybe start with these questions.

No direct any impact by CPC situation or oil expert stations, which impacted, so let's say, first couple of months. . First of all, on the retail side, we see that regulator is going ahead with further let's say, regulatory tightening to limit the retail especially unsecured growth. Secondly, we see that the situation with inflation higher rates is probably taking a bit more time in terms of normalization. Third, we take into account, as I mentioned, a bit slower starts on the client activity in the first couple of months of this year. And one of the impact is related to FX. In some aspects, the strong Tenge is actually good if you, let's say, look from a return from, for example, GDR perspective, but when it comes to reporting of credit growth in Tenge because we have a certain position in U.S. dollars. Current strengthening of tenge is actually is impacting the growth of loan portfolio in tenge terms.

Excellent. And my second question will be regarding your digital ecosystem. I mean we've seen, especially in the fourth quarter, there was a quite significant increase in your monthly active users, daily active users and MTU, both for the Halyk Super-App and for online bank. So we are there any particular reasons for that? Maybe you can give us some background to that.

Yes. We substantially invested in upgrading our UX and the bringing more features to our setups like specifically on Halyk Super-App. We introduced new layout, so it's truly looking as not only financial but also nonfinancial services, we see the increased engagement of the clients on different services, including, for example, gold tier on some elements of our ecosystem. We upgraded our loyalty program, Halyk+, which also increasing, which is left by our clients and also increasing our engagement with our clients. Our Kino.kz is also driving in terms of bringing more clients to the platform. We introduced a few new services. Some of them are with our partners, not being part of the Halyk, let's say, legal perimeter like [indiscernible], which is the digital purchases of pharmacy goods, cooperation with HerbaFresh, which is the grocery. We are bringing, for example, the cooperation with Indrive, which is one of the leading mobility platform. So -- and we do similar exercises with our B2B online bank, like our cooperation with re:Kassa, bringing more business-centric services. So actually, we see that both B2B and B2C ecosystem starts feeding each other. One of the good examples which we mentioned in our today's call and presentation is online [indiscernible], so which is a center between bringing our retail clients through the activity with small businesses in terms of the store in merchants, which in itself are driving the connections and the activity from distributors, which is represented by our large and medium-sized clients. So this is just one example that our investment in the ecosystem is bringing more engagements, bringing more cross-sell opportunities. and we continue to look into more opportunities in that space. One of the solution, which we also quickly mentioned is Halyk restaurants, which we rolling out starting from 2026.

Do you have any expectations in terms of the positive impact on transactional activity, income from transaction activity in 2026 versus 2025 from these developments? Or is it difficult to quantify? .

Yes, we start looking into these quantifications internally, but probably we will do that externally at some point of time. But not at this point of time. But we're already seeing some uplift.

And the next question comes from Ronak Gadhia.

Mine, maybe if the first one is a bit of a follow-up. On the NIM question you mentioned, NIM is slightly lower because you're expecting rates to remain higher for longer. I'm a bit confused by that because in the past, I thought the higher rates were good for you. I mean, certainly, if we look at the numbers since 2020, when interest rates have gone up in the short term, we've seen a bit of an impact because funding costs increased faster, but eventually asset yields catch up and we end up with higher NIM. So if you just maybe could help us understand why we're seeing maybe a bit of a reversal now with higher rates for longer being a bit negative for NIMs? That's the first question. And the second question is on dividends. On the AGM notice this morning, we saw that the bank is planning to transition to maybe quarterly dividends. Could you help -- could you maybe just discuss that a bit more? What does that mean in terms of dividend payments? Will the sort of the payment system remains similar to what it is now, whereby the banks will be paying dividends in the current year based on profits from the last year or with the transition to quarterly dividends, we start seeing the bank paying dividends from earnings earned in the current year as we see for some of the peer banks in the region.

When talking about the impact of the rates. Actually, when the rates are going up, we see that the liability is repriced somewhat quicker than the asset side. And when the rates start going down, so the country is happening, so you -- I would say, liabilities, also repricing downwards weaker than the asset side? And secondly, when you have the portfolio of assets, which results let's say, mark-to-market through P&L, then the reducing in rates is actually leading to positive revaluation of that assets. So we're expecting a bit quicker probably by a quarter or so the cycle of reduction of rates starting probably in the mid of second quarter. Now we're hearing that probably the rates will stay flat until the midyear. And we -- a bit conservatively looking at the start of a downward repricing of the rates, which might be impacting on one hand, a bit slower repricing downwards of liabilities. And secondly, a bit lower positive mark-to-market of our portfolios because as the bank, we have certain portfolio of fixed income instruments, but also our largest subsidiaries, including insurance companies and brokerage. They also have their respective fixed income portfolios. But anyways, I'd like to mention that the revision of NIM is not drastic. So we're talking about a very small revision of 20 basis points or so. In terms of the dividends, we think gradually moving into more frequent payments. We started that process back, I guess, 2, 3 years ago when we start signaling that we are considering moving to more frequent payments. And we did that a couple of years ago when we introduced two-time payments. We see a positive reaction from the less community and also from our growing retail investor base. The more frequent payments is also better from a liquidity management perspective. So that's why we think that we might be looking into bringing dividend payments up to4x. So first of all, that proposal would be considered at the Annual General Shareholders Meeting. And if it is approved, then we'll proceed with revising our dividend policy. So it might take somewhat time before we might actually move into that, but direction is coming into quarter payments at some point of time.

Yes. But just on that, I mean like if you move to quarterly, does that mean like you'll be paying dividends from profits for this year? Or like we've seen under the current setup where dividends -- the biannual dividends were paid in the current year, but based on profits from the previous year?

Yes. Probably it's a bit premature for me to provide, let's say, more clear guidance at this point of time because as I said, we're first looking into updating our -- or changing our charter from that perspective. And once -- and if and once the Annual General Shareholder Meeting would approve that, we might proceed into further steps.

Understood. If you don't mind, I just have one more question, which is the impact of the regulatory increase in cash reserve ratio. We saw obviously the cash to deposit ratio increased quite significantly last year because of the initial increase in reserves. And the second phase, I guess, comes from April. At the same time, when I look at the balance sheet, the loan-to-deposit ratio is now quite high. So it doesn't seem like there's much spare liquidity on the balance sheet. So with the increased cash reserve requirement coming through, does that mean you might have to aggressively chase some deposits to try and meet that requirement?

First of all, sector-wise, obviously, the -- let's say, the clearance of liquidity is quite high. I've recently seen comments from the Central Bank, which I think estimated that after the all cycles of minimum reserve requirement increase would be completed. The estimation is that sector-wise, the excess liquidity as they call it -- would be removed in the amount of close to KZT 4 trillion. When it comes to Halyk Bank, we think that from the funding and liquidity perspective, we have traditional fortress position. While the minimum reserve requirement is definitely impacting us from reduction in net interest margin, from funding liquidity perspective, we remain quite sufficient. And we have capabilities to further diversify our liability base if there will be needs for that. But at the moment, we think that we sufficiently funded through deposits, but we occasionally look into diversification capabilities. One of them is tapping the UN market through our bilateral loan agreements with China Exchange Bank. So this is just one of the examples that we have -- we are capable to extend our capabilities in diversifying funding base.

And the next question comes from Brad Virbitsky.

I wanted to ask about the asset quality? In the corporate loan book, could you describe a bit more about sort of what drove the increase in the NPL ratio in sort of the broader, I guess, slight deterioration in that book? And was that you sort of concurrent with that, your market share in corporate decreased in the quarter. And is -- are those two things related? Did sort of for some bad loans cause you to lend a bit more conservatively? Or were those two things not related. And then just one more question, somewhat related to that. The cost of credit forecast for this year of 1.5%. Is that related to the -- more to the corporate side or more to the retail side? And what would you see as your sort of mid-cycle cost of credit number?

When it comes to our, let's say, position of Halyk Bank as a main lend that to real economy from the commercial bank's perspective. I think that position retains. There might be some fluctuations quarter of the year, but we I think, remain the corporate bank in terms of the scale of -- and our capabilities because we have the largest balance sheets from a capital perspective or funding perspective. And we have the largest penetration and coverage of the large corporates in Kazakhstan. When it comes to calculation, then they should be looked from a position that in that funding, there might be also included the small and micro businesses, where some of the banks might be somewhat, let's say, higher growth during recent few quarters. And secondly, we also have within our loan book exposure to Uzbekistan, as we mentioned on the relevant slides. And in the context of financing of case economists, obviously, this exposure is being excluded. But altogether, we remain by far the dominant player on the large corporate space. With regards to dynamics of NPL, that was isolated situation with a few wholesale names, as I mentioned. They are not sector specific. We are controlling the situation. We have sufficient coverage. And so we do not expect that it might be impacting the, let's say, other borrowers or might impact the bigger picture from our asset quality perspective. When it comes to cost of risk, increase of cost of risk to 1.5%. Well, it partially might be impacted by a bit lower growth within our portfolio. So might be considered as an impact of maturing our portfolio. Within the through the cycle position, as I was commenting in some older calls probably, it's difficult, let's say, to give the exact figure, taking into account that the structure of the portfolio is also changing. So when we had roughly 70% within our portfolio, large corporate position and when we have less than 50% of large corporate position, then typically your, let's say, normalized through the cycle cost of risk might also change. So we think that we're a bit higher than through the cycle, but probably I cannot give you whether the through the cycle would be 1% or 1.2%, probably closer to that range, but probably cannot give, let's say, more precise figure, if you like.

And another question from Simon Nellis.

Thanks again. Yes. Just a follow-up. You had mentioned that the regulatory environment will continue to tighten around unsecured consumer lending. Can you just elaborate on what new measures you're seeing? And actually, generally, if you could give us an update on any new regulatory initiatives that are being planned because we don't usually see them in the press over here in London necessarily. And then, just on Clicks in Uzbekistan. Can you just give us an update on where you are? And have you completed that transaction? And how is their business performing? And how is the work to integrate and cooperate moving forward?

Yes. First, on retail. Actually, the regulator is publishing on annual basis, the regulatory priorities. And within that regulatory priorities, as we see, there are a number of initiatives at which they are likely to look into this year. First of all, the introduction of countercyclical buffer starting from the April this year. That decision was taken actually a year ago, but the kicking of that norm would be effective of April this year. It will be 2% of risk-weighted assets of unsecured consumer lending. On the micro prudential, they would be looking into upgrading some ratios which they already have like the debt service capacity and might be looking introducing additional ratios like, for example, the ratio of maximum debt to the, I would say, income, yes, yes, yes, monthly income. With regards to Click, as we mentioned in our financial reporting, the transaction documents has expired at the date of signing of our financial documents. We, from Halyk Bank perspective actually -- just to remind, the transaction contemplated actually two transactions. One was to Halyk Bank acquired 49% in Click company. And the second leg was for Click shareholders to acquire 49% in Tinge Bank. So that is a combination of two transactions, which requires a number of regulatory approvals. From Halyk Bank perspective, we obtains all necessary regulatory approvals both in Kazakhstan and Uzbekistan to acquire 49% in Click. However, the -- not all regulatory approval has been obtained by our partners for the second leg of the transaction. So technically, transactional documents has a spike, but we are in a very good relationship with our Click partners. We continue discussions what are the options and potential terms of future cooperation.

Do you think a different structure is likely to be agreed upon? Or do you think you just walk away from the deal or you'd rather not...

I cannot comment more than what I said. Yes, what we mentioned that parties continue to discuss options in terms for further cooperation or future cooperation.

And now we go to Q&A chat. First question is about Click already answered about NPL also. The last question is from Greg [ Stansky ]. International expansion Uzbekistan is the only plant via organic growth or there are plans to participate in the bank amortization to grow market share Tinge Bank is pretty small on the are the target countries for expansion in sight?

First of all, within the international, we are focusing at this point of time into Uzbekistan. We think it's a large market. It's naturally fits to the business and strategy of Halyk Bank. And as we mentioned a number of times, we're looking into our Uzbekistan strategy in a very complex way because we can operate within our subsidiary Bank by providing transactional services, FX services to our large corporate SMEs and retail client base. We can provide retail loans and SME loans to our client base. And actually, our innovative digital services to SME has been awarded a couple of years already in a row by the International Finance. So it was a truly innovative product for the market of Uzbekistan. Within large corporate space, we have possibility also to book transactions out of Kazakhstan and the total exposure to Uzbekistan is shy of USD 2 billion. Halyk Bank is also the main bank within the region. So we have possibility also to leverage our position on the FX side. on the supporting trade, both direction, import and export operations. We are not looking into participating in privatization of the banks because we think that we have sufficient capabilities on the banking space. But what we are looking to increase our position in terms of the distribution because having very good products, we were somewhat lacking on the distribution. That's why we were targeting transaction because we believe the type of transactions are providing excellent distribution capability to already good products, which we have from the banking perspective and generally would allow us to build more broader products for our retail and B2B clients in Uzbekistan.

Now we conclude our presentation and Q&A session. Thank you very much. For further questions you may address us via e-mail. Thank you, and good bye.

Thank you. Bye-bye.