Good evening, ladies and gentlemen. Welcome to Halyk Bank's conference call on the presentation of results for the 1st quarter of 2023. Thanks everyone for joining us today. The session will start with the presentation by Halyk team and will be followed by the Q&A. Please note that the call is being recorded. The participants to the today's call on Halyk side are Mr. Murat Koshanov, Deputy CEO, Finance Subsidiaries and International Activities. Mr. Roman Maszczyk, Deputy CEO, Compliance, Risk Management, Data Science and Collateral, Chief Compliance Controller. Ms. Olga Vuros, Deputy CEO, Corporate Banking. Mr. Dauren Sartayev , Deputy CEO, SME Banking, Transaction Banking, PR and Marketing. Mr. Zhumabek Mamutov, Deputy CEO, Retail Banking and Soft Collection. Mr. Nariman Mukushev, Deputy CEO, IT, Digital Government Services, Ecosystem and Customer Experience. Mr. Almas Makhanov, Chief Risk Officer. Mr. Viktor Skryl, Financial Director of Finance and Subsidiaries.
Margulan Tanirtayev and Nurgul Mukhadi from IR team, and myself, Mira Kassenova, Head of FI and IR. I would like to start with the update on our digital initiatives for the 1st quarter of 2023. During 1Q, our customer engagement metrics have experienced sizable growth. As you can see, the number of MAU and DAU of Halyk Homebank Super-App has increased by 37.8% and 34.7% year-on-year respectively. The MAU reached 6.2 million. The number of users of Onlinebank increased by 48.8%, and the number of MAU increased by 48.7%. Halyk Homebank and Onlinebank apps continue to be within leading financial platforms in the country. The ongoing growth of customer engagement on our digital platforms continues to drive the expansion of credit and non-credit products.
In the 1st quarter, the share of retail digital loans issued reached 84% by count, which is up nine percentage points year-on-year. The share of new online deposits increased by 27 percentage points and was at 68%. In absolute terms, the number of new online deposits for the 1st quarter equaled 80,000. The share of non-cash card payments reached 72%, which is up seven percentage points. Our legal entities digital loan portfolio has grown by 44% year-on-year. The number and volume of payments made through Onlinebank have grown by 49%. Online onboarding for legal entities increased by 67%. Next slide, please. In the 1st quarter, the GMV of auto insurance increased by 28.7% year-on-year.
We are glad to note that the GMV of Halyk Travel and Kino.kz have expanded 2.2 times and 3.1 times year-on-year respectively. The market share of Kino.kz out of online sales of entertainment tickets increased by 8.3 percentage points to 27.8%. We achieved 1.8 times increase in GMV of Halyk Market year-on-year. More details on Halyk Market will be shown later in this presentation. On the next slide, we are delighted to present our success in brokerage service offering. In the 1st quarter, the number of clients soundly raised by 8.8 times year-on-year and reached 465.5 thousand clients. MAU increased by 11.4 times and equaled to 103 thousands.
We are glad to note that the transactions volume grew by 2.2 times and reached 17.7 billion KZT. Let me switch to business segments update for the 1st quarter of 2023. Firstly, moving to our retail segment results, we glad to note that we continue to demonstrate solid performance across key dimensions, and our retail customer engagement remains robust, resulting in an increase in transactional activity. The transactions volume raised by 18.7% year-on-year. The number of retail active clients grew by 10% year-on-year. On consolidated basis, the retail gross loan portfolio has expanded by 0.6% year to date.
The customer deposits decreased by 3.8% year-to-date as a result of transfer of a certain FX deposits into high-yielding securities market through our brokerage and asset management arm, Halyk Finance, as well as strengthening of US, USD/KZT exchange rate. We are glad to see a solid growth in retail products penetration by 6.2% year-on-year. Our main focus remains on enhancing the Halyk Homebank Super-App, which is at core of our retail customers offering. We continuously see notable results in clients' transactional activity. Moreover, in the 1st quarter, the MAU's penetration rate in retail active client base has risen from 54 to 62%. On unconsolidated basis, our retail portfolio has grown by 32% year-on-year. In the 1st quarter, the loan issuance volumes have increased by 7%.
On the other hand, the digital sales increased by 47% and reached almost 53% of total retail loan sales by volume. We observed slight increase in segment NPL 90-day plus ratio to 4.6% while maintaining strong NPL coverage ratio of 162%. To give you more color, let's discuss Halyk Marketplace dynamics in more details. In the 1st quarter, the GMV of our Halyk Marketplace increased by 1.8 times. The number of partners of Halyk Market grew by almost 2.8 times year-on-year, and SKUs raised by 2.4 times year-on-year. Over the 1st quarter, we continued to focus on further development of GovTech. We launched a number of new government services such as car legalization, marriage registration, and several highly demanded statements.
It is essential to note that we are the bank with the highest number of online government services available among second-tier banks in Kazakhstan. At the end of the 1st quarter, our clients had an access to 42 government services. In the 1st quarter, the government service were used over three million times. Turning to corporate segment, we would like to note that on consolidated basis, our loan book has expanded by 19.2% year-on-year. Our corporate portfolio remains well diversified across different industries, while local currency loans comprise 75.2% of the loan book. At the end of the 1st quarter, the segment NPL ratio decreased to 0.8%. The provisioning coverage comprised over 500%. Our active corporate client base reached over 2,200 customers.
Also, there has been a substantial increase in both the penetration of our products and transactional activities. The SME banking is continuously performing well. The number of SME MAU in Onlinebank digital platform has raised by 1.5 times year-on-year. We also want to highlight that year-on-year on consolidated basis, our loan book has expanded by 26.6%. The number of SME borrowers has increased by 45.2%. There has been a substantial increase in SME clients' transactional activity. As at the end of the 1st quarter, the segment NPL ratio comprised 4.1%. We are continuously developing our digital offering for SME clients, and in the 1st quarter, we achieved 57% growth in the SME loan issuance volumes year-on-year.
Mainly, it has been driven by digital loans, which already comprise 31% of our SME loan portfolio. Number of IE borrowers increased by 40% year-on-year. Number of LLP borrowers raised by 63%. Following the launch of digital tender guarantees in January last year, we saw a substantial increase in demand for this quite a unique product, and as a result, the total number of issued blank tender guarantees was 7.3 times up year-on-year, and 99% of guarantees are now issued digitally. Let me hand over the call to my colleague, Margulan Tanirtayev. Thank you.
Thanks, Mira. Before switching to the financials, let me briefly explain the overall mechanics and impact on our bank of recently adopted regulation on dividend payments by banks in Kazakhstan. Income received from state support funds cannot be distributed as dividends. Such income includes reversal of reserves and provisions, which were recognized by using state support funds and unamortized discount recognized on state support funds. Banks shall determine share of state support funds in a bank's equity. In case of the dividend payment, bank makes early partial prepayment of state support funds in the amount of the share of state support funds in the bank's equity, which cannot be less than 10% and not higher than 66% from the amount of dividends being paid.
In 2015, Kazkommertsbank or KKB received KZT 250 billion deposit from Problem Loans Fund with tenor of 10 years and interest rate of 5.5%. In 2017, terms of this deposit were modified to offset the loss resulted from additional provisions created by KKB. In 2018, following the merger of KKB into Halyk Bank, this deposit was transferred to Halyk Bank's balance sheet along with all KKB's assets and liabilities. Halyk Bank was not a recipient of state support funds. The amount of the unamortized discount of this deposit as at year end of 2022 is KZT 193.6 billion.
Subject to AGM approval on 25th of May, the amount of our proposed dividends for financial year of 2022 is KZT 276.9 billion. The share of the unamortized discount in the bank's capital on unconsolidated basis is around 10.26%. The amount of early partial prepayment for this deposit to be made by Halyk Bank is around KZT 28.4 billion. This repayment is separate and will not affect the total amount of dividends to be paid for 2022. Next slide, please. Let me switch to the overview of Halyk Group consolidated financial results for the 1st quarter of 2023.
Please note that starting from 1st January of 2023, Halyk Group's financial statements have been transited to IFRS 17 insurance contracts from IFRS 4, which resulted in recalculation of certain balance sheet items as of year end of 2022 and P&L items for the 1st quarter of 2023 and 2022. All of the ratios were also recalculated accordingly. P&L items for the 2nd, 3rd, and 4th quarter of 2022 will be recalculated in the upcoming periods accordingly. For more detailed information, please refer to our latest financial statements for the 1st quarter, note number four. During the 1st quarter, the bank generated KZT 180.2 billion of net income.
The year-on-year increase by 51.2% was mainly due to significant increase in lending and transactional businesses. Other non-interest income decreased by 25.2% year-on-year, mainly due to lower net gain from financial assets and liabilities at fair value through profit and loss and net gain on foreign exchange operations as a result of high volatility of exchange rates and interest rates in the 1st quarter of 2022. Net insurance income increased by 12.5 times year-on-year due to recognition of insurance reserve expenses on unsecured consumer loans with a borrower life insurance bundle in the 1st quarter of 2022. In the 1st quarter, we demonstrated 37.3% return on average equity and 5.3% return on assets. Next slide, please.
Total assets of the group decreased by 1% year-to-date as a result of decrease in amounts due to customers. Customer deposits decreased by 3.6%. We will discuss the reasons for this movement in more details later in this presentation. Next slide, please. In the 1st quarter, the bank's interest income increased by 49.8% year-on-year, mainly due to increase in average rate and balances of loans to customers. While the interest expense increased by 71.7%, mainly as a result of the growth in average rate and balances of amounts due to customers. As a result, the net interest income grew by 33.2%.
In the 1st quarter of this year, the bank's net interest margin was affected by the increase in average rates on both loans to customers and amounts due to customers, following the significant increase in interest rates. Furthermore, the share of loans to customers in total interest earning assets increased substantially. Moreover, there was an increase in the average rates and balances of a fixed amount due from credit institutions and a fixed interest earning cash and cash equivalents following the global increase of USD interest rates. As a result, net interest margin increased to 6% per annum compared to 5.2% per annum for the 1st quarter of the last year. Next slide, please.
Our bank continues to perform very well in terms of net non-interest income as it increased by 40.5% year-on-year for the 1st quarter of 2023, mainly due to the notable increase in net insurance income and net fee and commission income. Next slide, please. In the 1st quarter of this year, compared to year before, the overall dynamics of fee and commission income and expense was driven by the increased transactional activity as a result of the client's inflow due to changes in the operating landscape. Net fee and commission income for the 1st quarter increased by 88.6% year-on-year due to increase in net transactional income of legal entities and individuals. Next slide, please.
Operating expenses for the 1st quarter increased by 7.2% year-on-year, mainly due to the indexation of salaries and other employee benefits starting from March 1st, 2023, which was partially offset by the higher charity expenses in the 1st quarter of last year. The bank's cost to income ratio decreased to 16.5% compared to 20.1% a year before amid higher operating income for the 1st quarter of 2023. Next slide, please. On the balance sheet, loans to customers decreased by 0.5% on a gross and 0.7% on a net basis year-to-date, mainly due to strengthening of USD/KZT exchange rate as well as a seasonality effect.
Corporate and SME loans declined by 0.9% and 1.2% respectively, while retail loans grew by 0.6%. The share of fixed loans was at 17.4%. Next slide, please. Cost of risk on loans to customers for the 1st quarter was a normalized level within the scope of our full year guidance of 1.2%. Next slide, please. 90-day NPL ratio increased to 2.6%, and Stage 3 ratio increased to 8% as at the end of the 1st quarter, mainly due to increase in non-performing small business and retail loans. Next slide, please.
Compared with the end of the last year, the deposits of legal entities were down 3.5%, mainly due to partial withdrawal of funds by the bank's customers to finance their ongoing needs, including tax payments and strengthening of USD/KZT exchange rate. As mentioned earlier by Mira, the deposits of individuals were down by 3.8% as a result of a transfer of certain FX deposits into higher yielding securities market through our brokerage and asset management arm, Halyk Finance, and strengthening of USD and KZT exchange rate. As at the end of the 1st quarter, the share of KZT deposits in total corporate deposits was 61.9% compared to 60.6% as at the end of the last year, while the share in total retail deposits was 55.6% versus 52.6%. Next slide, please.
On consolidated basis, capital adequacy ratios of the bank increased as a result of net profit earned by the bank during the 1st quarter amid the slight increase of risk-weighted assets. Dear ladies and gentlemen, this completes our presentation. Now we would like to open the floor for questions, please. Just a quick instruction. To state your question, you can raise your hand in Zoom, or if you joined via the cell phone, please press star nine to raise your hand. You can also enter a question in the written form via chat. Please, while stating your question, please also mention your name and company.
The first question comes from Can Demir. Can, please go ahead.
Yes. Thank you. Thank you for the presentation. I just wanted to clarify the dividend, the dividend part of the story. As far as I could understand. Thank you for explaining the mechanics behind it as well, as far as I can understand, your, I think it was $2.2 per share GDR that, dividend, stays the same, right? I mean, it won't be affected by the regulation, or at least you wouldn't expect it to be affected by the regulation. Is that right?
Hello, Can. Yes. That is right. In simple terms, because the share of state support money in the capital component, the capital component of state support is fairly small within Halyk Bank. Given the size of the capital and net profits, we as the bank would be in position to pay dividends with dividend payout of 50%. We, however, needs to make early partial prepayments of the state support received, and that amount would be on top of proposed dividend payment. These KZT 28.4 billion would be on top of any amount which would be included in dividend payments as it is showing on this slide.
Okay. Gradually, you pay the state support down. I don't know how many years it would take.
Yeah. Basically, how it will work going forward, according to this regulation, because we currently have the state support deposit in the amount of KZT 250 billion. Supposedly we'll pay KZT 28.4 billion. The outstanding amount will be reduced. In any future iterations of dividend payout, we would need to make the same exercise. The share of unamortized deposits, the discount, might, as a result of this payment, fall below the 10% threshold. That means that threshold will be applicable for us, we'll make in future payments the minimum 10% of any amount which we would be distributing as a dividend on top of dividend payment.
Okay. Okay. Understood.
By doing this, we will be amortizing, and then making early repayment of the state support amount.
Okay. Murat, just to confirm, I don't have the. Okay, I found it. KZT 27 billion-KZT 28 billion, I'm just trying to calculate the CET1 impact of that and whether that means anything. It's roughly 30 basis points of capital, right? It's not a huge impact in terms of capital ratio.
It's not the full amount because the size of the state support deposit currently is KZT 250 billion. It is, according to IFRS, split into a liability component and capital component.
Mm-hmm.
The capital component is KZT 193.6 billion as of beginning of this year. It is being amortized with the time itself. Basically, you have to look at the share. IFRS, to make things even more complicated, IFRS has certain requirements to make, let's say, recalculation based on the prevailing market rates at the time of material modifications. To make things simple, actually, we have to make certain repayments. All things being equal, the total amount of state support will be reduced, both the liability as well as the capital component.
Okay. In any case, I mean, it's not more than 30 basis points. I guess, let's call it, you know, 20-25 basis points CET1 additional impact on top of the dividends capital impact. I'm just trying to understand if, you know, in case there's a capital impact from that, I just wanted to understand it. I guess there isn't. Yeah.
Yeah. Again, I cannot probably confirm the specific figures because, again, it's subject to, let's say.
Okay
A mortization, which is done by the time and subject to applicable IFRS rules.
Okay.
These items might, let's say, affect the specific impact on the capital. In any case, given the size of prepayments, and its share in the capital, we do not expect that to have material impact on our capital adequacy ratio.
Okay. Okay. I guess in the grand scheme of things, the P&L impact will also be minimal, right? Would it be fair to say? If there is any, of course.
Any amortization of discount, whether because of the time or because of early repayments or otherwise when it is required by IFRS to make recalculation, it should flow through P&L.
Oh.
It's not the direct impact through capital, but through P&L.
Okay. Incremental P&L impact due to the change in regulation or because it's a deposit, right? So I'm thinking you were also accruing some kind of interest ex-expense on this, but did the regulation change anything on this?
Yes, you are right. The liability components actually is bearing the effective exchange rate. Because, as I said, due to early repayments, all things being equal, both capital and liability component is affected, then it might have positive as well as negative effect on PNL. The negative might be more quick amortization of discount. The positive effect is the lower nominal amount of liability components is reducing the interest rate expense based on the effective rate.
Okay, super. My last question. Sorry, this, I took up much more time than I should. On the insurance accounting change, I know you built up some reserves last year and, this year there's another accounting change. Can you please maybe summarize what exactly happened there and how it would change your underwriting profit this year from the insurance business?
As we mentioned during our previous calls, last year, we said that we're having the life insurance product, which is linked to unsecured consumer lending. Because of that product, we need to create reserves. That's why that reserves was affecting our net insurance income in the beginning of 2022. Now we see with more maturity of our and less aggressive growth of unsecured consumer lending, there was some kind of stabilization between new reserves being created and release of reserves on the life insurance contracts which is being expired. That's why that has been positive effect on the net insurance income during the last couple of quarters.
The future dynamics would depend, among other things, on the growth rate of our unsecured consumer lending and the growth rate of insurance premium.
This-
This is one component. The second component is a bit different. We have to shift our insurance accounting from IFRS 4- IFRS 17. Because of the first time introduction, it has some retroactive effect on our 2022 results. At this point of time, because we are just in the beginning of introduction of IFRS 17, at this point of time, it's probably a bit difficult to give you specific impact, how this particular move from IFRS 4 to IFRS 17 might have impact on that particular line quarter by quarter.
Okay. Just to confirm, this life insurance product that comes in a bundle with unsecured loans, is that your main product in the insurance business?
No, no. They have a number of different products, and this is just one of their products.
Okay, got it. Thank you very much.
I want to remind that we have two insurance companies. We have a life insurance company, and we have non-life insurance company. Both of them having their own set of products, which is aimed on retail clients and corporate clients.
Super. Thank you very much.
The next question comes from Mikhail Butkov. Mikhail, please go ahead.
Sorry, I was on mute. Yes. Good day. Thank you very much for the presentation. Yeah, I had a question on capital. Considering the capital generation trajectory for the year 2023, which you also outlined previously, what capital allocation do you see for the excess capital? All you have a dividend payout policy in place, but are there any additional things which you may consider like buybacks or maybe there are some M&As, anything on the list? Another question is on the Stage 3 ratio. Just noticed that it edged upwards a bit over the last quarter.
Was it some one-off case or you maybe see some signs of some asset quality deterioration on the back of high rates and general banking on the banking level? What was driving that increase in the Stage 3 ratio? Thank you.
Mikhail, hello. Thank you very much for your questions. I will first answer regarding the capital, and my colleagues will pick up the question regarding the asset quality and specifically Stage 3 dynamics. According to our estimations, the specific impact from dividend payout on the capital adequacy ratio would be in there of three percentage points. However, because we are showing capital adequacy to our investor community on quarterly basis, the impact quarter-on-quarter would be less because we continue hopefully to generate capital internally through ongoing profitability.
Probably know, having as a one of indicator in our dividend policy, the minimum capital adequacy ratio, which we currently have at the level of 70%. From that perspective, we would be in compliance with our dividend payout policy. However, we would not consider that capital position as something which is substantially excessive, while acknowledging that we have substantial buffers over the minimum regulatory requirements. So from that perspective, we have no imminent transactions, in our opinion, be it M&A or some other activities. We, however, continue to look into developing our ecosystem
Our initial start for building ecosystem was from building services in-house, but we are ready to look into some smaller M&A in order to complete our ecosystem proposition. In any case, again, if any of that potential transactions might be, it will be as a very small amounts which would not even affect our capital adequacy position. We are not considering any, let's say, large scale M&As definitely at this point of time. I'll give now floor to my colleague regarding the capital regarding the asset quality comment.
Yes, hello. Mikhail, this is Almas. Yeah, Stage 3 increase in the 1st quarter, in absolute terms, does not come from any specific segment. On a net basis, we don't see concentration in increase of Stage 3 for specific client segment. Although we notice slightly high dynamics for small and retail sectors, in terms of NPLs, that increase for the 1st quarter also more attributed to those two specific sectors. So the impact of increased rates is not exact reason for these dynamics. As we commented in previous calls, we see a higher dynamics for this, for retail and small businesses due to two factors. First, changes to actual the portfolio.
We see increasing share of retail and small clients in our portfolio, and that's driving dynamics as well. No specific concentration on segments and dynamics for two client segments are slightly higher, but still in line with what we guided. Cost of risk in terms of cost of risk being returned to more normalized levels and within our guidelines.
Okay. Okay, thank you. Thank you very much.
Next question comes from Simon Nellis. Simon, please go ahead.
Hi. Thanks. Thanks for the opportunity. Yeah, I guess my first question would just be on asset dynamics. Lending was a bit weak in the quarter, and actually deposits were down 3%. Can you maybe unpack what's going on in both, and if you're concerned about maybe hitting your loan growth targets for this year, given the slow start to the year? That'd be my first question. Second question is on margin. If you could just walk us through how you see the margin outlook trending over the next couple quarters. I think you're guiding for margins above 6% for this year. They went up to 6% in the 1st quarter.
I guess you're expecting further margin expansion, if you can Walk us through how you see that and what are the risks either on the upside or the downside to the margin outlook. Then last, on risk cost, you're trending well below your 1.2% risk cost guidance. What risks do you see on the horizon that, you know, led you not to change that outlook? Thanks.
Hello, Simon. Thank you for your questions. Let start answering them one by one. I will start from the asset side on the credits. Indeed, during the 1st quarter, we saw some small decrease in the credit portfolio. If you seen the dynamics of credit portfolio for Halyk Bank for the 1st quarter in historical context, probably except for last couple of years, we had more or less similar dynamics in the 1st quarter. That was usually situation in, for example, years of 2018, 2019. The specific reasons for this year, we see the followings. Number one is strengthening of ten-year. It was roughly by 3%, because 20% of our portfolio is in USD terms.
Simply 0.6% of drop might be attributed to simple FX component. Secondly, there are some seasonality impact for the customers who are actively taking money in the 4th quarter before the season. Typically, we saw some repayments coming in the 1st quarter. That might be considered as a second element. Third element is elevated rates. We see that some clients which have both available credit lines as well as available deposits, some of them preferred to draw into their deposits instead of applying for higher rates. That was, in our opinion, third component. The fourth component is that we saw increasingly that our bank is considered as a main transactional bank for the corporates.
Because we had the tax payment season, we saw that many companies were using their money in the deposit and current account to make their tax payments. That also played its role in both on the asset side as well as the deposit side. I think I start mixing on the asset side and the effect on deposit side. Last but not least, we see the high rates as well as high inflation actually forced us, starting from last year, to revise the credit criteria for our clients. We actually tightened our underwriting credit criteria for retail and SME clients, specifically small businesses.
Basically, it also had its effect on the credit dynamics in the 4th quarter. Finally, we simply substantially increased our credit base. We saw quite a substantial growth of our credit portfolio during last couple of years. It's natural to see some quarter-to-quarter variations. Saying that, we, at this point of time, are not revising our guidance. The guidance which we posted on the credit growth remains intact as of now. We just having one quarter passed, and we stick to the guidance which we provided.
Partially, I already touched the reasons for also for liability portion, like as I said, that some clients use their deposits in order to make tax payments as well as to use them as a preference over tapping into higher-rated credit lines. Another reason for deposits, again, it's effects. The effect of strengthening of ten-year. And we also seen that especially on retail dollar deposits, because according to Kazakhstan Deposit Insurance Fund, the maximum rate for dollar deposit is 1%, which is substantially less than rates which is available on the capital markets
Because of more availability and easier client journey, to invest with them through our brokerage arms, we see some shift of client funds from deposits into our brokerage subsidiary.
Very clear.
Yeah. I hope I covered all the aspects which was affecting both deposit side as well as the credit side.
Yes.
Yeah. On the margins, yeah. I'm sorry. Let me also briefly cover on the margins. Yes, indeed, we already for last couple of quarters, having net interest margin at the level of 6%, which is more or less in line with the full year guidance. Again, at this point of time, we sticking to our guidance. We see that, mostly both asset and liability side to a large extent has been repriced. There might be some fluctuations quarter to quarter, but to a large extent, we are not seeing anything which might substantially move the net interest margin at this point of time.
We are continuing to watch the dynamics and if we see any systemic shifts, so we'll be looking into updating our guidance. So far, as I said, we're sticking to those guidance which we provided during last quarter call. Almas.
I should say the same regarding cost of risk. We're sticking to the guidance that we provided earlier. So far, we're going below for the 1st quarter, but we see that the dynamics is in line with what we expect in terms of NPL levels for specific segments that we're seeing that the most cost of it came from for the past several quarters. Providing that there's no changes in or major shifts in the economy, what we think that the guidance that we provided is pretty much reflecting the dynamics that we saw last year.
For the, for this time, we don't see any risks to, our guidance on cost of risk.
Okay. Thank you.
The next question comes from Ronak Gadhia. Ronak, please go ahead.
Sorry, I was on mute. Firstly, just congratulations on the fantastic numbers for the quarter, and thanks for taking the time for the presentation and taking my question. I just really have one question. The regulation on dividend is out of the way, and that's good to see. Is there any other regulation that we should be looking out for, and what potential impact could that have on the bank in the next six, nine months?
Yes. Hello, Ronak. Yeah, from, let's say, large scale, regulations, so probably apart from, regulation on dividends, we might, probably refer to, recently adopted, law on personal bankruptcy. Probably my colleague, Almas Makhanov, might, provide some information on that if that's needed.
All right. That would be appreciated if there's more details on the same.
Yes. The new law came into act in the beginning of March. We see that the applications for personal bankruptcy, the number of applications for personal bankruptcy, amounted in several thousands, tens of thousands. The approval of the bank, the, of those applications on the tax authority side is very low. This most of the conversion in terms of the conversion rate is relatively low.
In terms of the portion on Halyk clients, we see that we see no material impact, even if the applications that were even if we account for applications that we see on our client side, the amount, the share of those clients in the retail portfolio is still small. This is a new regulation. We are watching this situation, so we see that we are looking at how the dynamics on application rate will change.
So far, we see that, given that approval rate is relatively low, given that the amount of clients in our portfolio is not material, we don't expect for the time that this should have a major change on the quality of the portfolio.
Okay. Just as a follow-up, are these clients applying for bankruptcy because they're stretched, or is it just because the new regulation allows them an easy way of exiting without having to repay their debt? What I'm trying to say, is the new regulation creating a moral hazard?
I think that's it's a matter of time because not all individuals are very well familiar with all the details or understand all the requirements of the new law. Indeed, until this practice settles, we will probably see some false, I mean, some applications that do not fall under full requirements. The individuals who can apply for the bankruptcy, they should meet several requirements. Indeed, if the individual is stretched in the financial difficulty, he or she is eligible for bankruptcy. You're right, there might be some behavioral factors in dynamics that we see for these past three months.
I would add that the regulation requires certain checks on the applications. That's why we see that currently the approval rates for these bankruptcies is very small and the very substantial % of that request is being turned down, either for reasons that documents are not provided in order, but also for the reasons that the clients actually who have the possibility to make payments because they have either assets or revenues which are not fall under that criteria. They still want to apply, but they would not be accepted due to not meeting the criteria for being eligible for personal bankruptcy.
Understood. Thank you very much.
Dear ladies and gentlemen, it seems that there is no questions remaining. 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.