Good evening, ladies and gentlemen. Welcome to Halyk Bank's Conference Call and the Presentation of Group's Results for the Nine Months and Third Quarter of 2023. Thanks everyone for joining us today. The session will start with a presentation by Halyk team and will be followed by the Q&A session. Please note that the call is being recorded. The participants to today's call on Halyk Bank side are Mr. Mukhit Akhmetov, Chief Executive Officer; Mr. Murat Koshenov, 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, Transactional Banking, PR, and Marketing; Mr. Zhumabek Mamutov , Deputy CEO, Retail Banking and Soft Collection; Mr. Nariman Mukushev, Deputy CEO, Digital Government Services, Ecosystem and Customer Experience; Mr.
Almaz Makhanov, Financial Director, Finance and Subsidiaries; Mr. Viktor Skril, Strategy Director; Margulan Tayirtaev and Nurgul Mukhamedi from IR team, and myself, Mira Kasenova , Head of FI and IR. Let me start firstly with an update of our digital performance for 9 months and 3Q of 2023. In 3Q, our customer engagement metrics grew substantially, as you can see, and the number of MAU and DAU of our super app has increased by 38% and 27% year-on-year, respectively. MAU reached 7 million. The number of users of Onlinebank increased by 28%, and the number of MAU grew by 15%. Halyk's apps remain among the top financial platforms in Kazakhstan. Next slide, please. Growing customer engagement on our platforms continues to drive credit and non-credit products growth.
In 9 months and 3Q, the share of retail digital loans issued reached 82%. The share of new online deposits issued was 75% in 9 months, while in 3Q it reached 81% of total count, which is up 41 percentage points year-on-year. In 9 months, the share of non-cash card payments increased to 72%. Our legal entities' digital loan portfolio grew by 30% year-on-year. In 9 months, the number and volume of payments made through Onlinebank ramped up by 25% and 24% respectively. Online onboarding for legal entities increased by 2.2 x year-on-year cumulatively. Next slide, please. Now let me switch to ecosystem services update. In 3Q, the GMV of auto insurance increased by almost 84% year-on-year.
Halyk Travels GMV grew by 33%, and Kino.kz experienced a threefold increase year-on-year. The market share of Kino.kz out of online sales of entertainment tickets increased by 10.5 percentage points to 30%. Halyk Marketplace GMV grew by almost 65% year-on-year. Next slide, please. Now let me switch to our brokerage service. In 3Q, the number of its clients solidly raised by 3x year-on-year and reached almost 590,000 clients. We are glad to note that the transactions volume grew by almost 35% and reached KZT 17.6 billion. The number of active clients ramped up by 55%. Our brokerage assets increased by 31% and reached almost KZT 2 trillion. Now I will move to the business segments update.
We continue to maintain strong performance across key dimensions in the retail segment. Our active retail customer engagement drives transactional activity growth. The transaction volume rose by 13% year-on-year, and the number of retail active clients grew by 5.2%. On consolidated basis, the retail gross loan portfolio has expanded by 16.7% year-to-date. The customer deposits increased by 1.7%. Retail product penetration increased by 1.7%. Our next slide, please. We are primarily dedicated to upgrade the super app, which is at core of our retail customer offering, and we are glad to note that in 9 months, the MAU penetration rate in retail's active client base ramped up to 69%. On an unconsolidated basis, our retail portfolio grew by 17% year-on-year.
In 3Q, the loan issue volumes have increased by 42%. On the other hand, digital loan sales increased by 86% and reached 54.5% of total retail loan sales by volume. We observe a slight increase in segment NPL 90-day + to 4.1%, while maintaining a strong NPL coverage ratio of 169.8%. Next slide, please. To give you more color, let's discuss Halyk marketplace dynamics in more detail. In 3Q, the GMV of our Halyk Market increased by 2.8 x. The number of partners of Halyk Market grew by almost 2.2 x year-on-year, and SKUs raised by 1.8 x year-on-year. Next slide, please.
During 3Q, we continued to focus on further development of GovTech, and we launched a number of new government services, such as mandatory social health insurance, child allowances for large families, declaration of income and property, and penalty notification. We continue to be the largest provider of online government services in the market, and as of the end of 3Q, our clients had access to 51 government services. In nine months, the government services were used over 9.1 million times . Next slide, please. Turning to the corporate segment, we would like to know that on a consolidated basis, our loan book has expanded by 14.1% year-on-year. Our corporate portfolio remains well diversified across industries, while local currency loans comprises 75.6% of the loan book.
At the end of the third quarter, the segment NPL ratio decreased to 1.3%, and the provisioning coverage was almost 314%. Our active corporate client base stays at the level of 2,300 customers. As you can see, there has been a notable increase in both the penetration of our products and transactional activity. Next slide, please. Now, let's switch to SME banking performance. The number of SME MAU in Onlinebank digital platform raised by over 15% year-on-year. On a consolidated basis, our SME loan book has expanded by 11.3%. The number of SME borrowers has increased to 38,200. There has been a notable increase in SME clients' transactional activity. As of the end of third quarter, the segment NPL ratio comprised 4%. Next slide, please.
We are continuously developing our digital offering for SME clients, and in nine months, we achieved over 28% growth in SME loan issuance volumes year-on-year. Number of LLP borrowers increased by 48% year-on-year. We saw a substantial increase in demand for digital guarantees. As a result, the total number of issued digital unsecured bid bonds was 3.8 x up year-on-year. Now I would like to pass the floor to my colleague, Margulan Tayirtaev. Margulan, please go ahead. Thank you.
Thank you, Mira. Now, I would like to switch to the overview of Halyk Group consolidated financial results for the nine months and third quarter of 2023. Let us remind you that starting from January 1, 2023, Halyk Group's financial statements have been transited to IFRS 17, Insurance Contracts from IFRS 4, which resulted in the recalculation of certain P&L items for the nine months and third quarter of 2022. All of the ratios were also recalculated accordingly. For more detailed information, please refer to Halyk Group's financial statements for the third quarter of this year, note number four. During the nine months, the bank generated KZT 537.3 billion of net income. The year-on-year increase by 30.8% was mainly due to significant increase in lending and transactional businesses.
Other non-interest income decreased by 19.3% year-on-year, mainly due to lower net gain in foreign exchange operations amid higher volatility of exchange rates and interest rates in the nine months of 2022. Net insurance income improved by 3.3 x year-on-year due to overall business growth and as a result of recognition of insurance reserve expenses on unsecured consumer loans with a borrower's life insurance bundle in the nine months of 2022. In the nine months, we demonstrated 34.7% return on average equity and 5.1% return on assets. Total assets of the group decreased by 0.3% year-to-date as a result of decrease in amounts due to customers. Customer deposits decreased by 5.7%.
We will discuss this in more detail later in this presentation. Our bank continues to perform well in terms of net non-interest income. Despite its decrease by 0.9% year-on-year for the nine months of 2023 due to a decline in net dealing income, we should mention the notable increase in net insurance income and net fee and commission income. In the nine months, the bank's interest income increased by 35.9% year-on-year, mainly due to an increase in average rate and balances of loans to customers. While the interest expense increased by 47.8%, mainly as a result of the growth in average rate and balances of amounts due to customers.
Moreover, there was an increase in the share of KZT amounts due to customers, and as a result, the net interest income grew by 25.9%. In the nine months, 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 rate of a fixed amounts due from credit institutions and fixed interest-earning cash and cash equivalents following the global increase of USD interest rates. And as a result, net interest margin increased to 6.3% per annum, compared to 5.4% per annum for the nine months of 2022.
In the 9 months of this year, compared to year before, the overall dynamics of fee and commission income and expense were driven by the increased clients' transactional activity. Net fee and commission income for the 9 months increased by 37.6% year-on-year due to increase in net transactional income of legal entities and individuals. Operating expenses for the 9 months increased by 9.9% year-on-year, mainly due to the indexation of salaries and other employee benefits starting from March 1 of 2023. The bank's cost-to-income ratio decreased to 17.9% compared to 19.7% a year before, amid higher operating income for the 9 months of 2023.
On the balance sheet, loans to customers increased by 9.4% on a gross and 9.3% on a net basis year to date. The increase in the gross loan portfolio was attributable to a rise of 5.9% in corporate, 7.3% in SME, and 16.7% in retail loans. The share of fixed loans was at 17% as at the end of third quarter, 90-day NPL ratio remained flat at the level of 2.6%. Cost of risk on loans to customers for the nine months was a normalized level within the scope of our full-year guidance of 1.2%. Despite some increase in absolute terms, Stage 3 ratio decreased to 7.8% as at the end of the third quarter, mainly due to an increase of Stage 1 loans.
Compared with the end of the last year, the deposits of legal entities were down by by thirteen percent, mainly due to overall transfers of funds across the banking sector into higher- yielding securities market in light of elevated interest rates. While deposits of individuals were up 1.7% due to fund inflow from the bank's clients. As at the end of the third quarter, the share of KZT deposits in total corporate deposits was 68.8%, compared to 60.6% as at the end of the last year, while the share in total retail deposits was 60% versus 52.6%. On consolidated basis, capital adequacy ratios of the bank increased in third quarter as a result of net profit earned by the bank during the same third quarter. Dear ladies and gentlemen, this completes our presentation.
Now we'd like to open the floor for your questions, please. Just a quick instruction, to state your question, you can raise your hand in Zoom, or if you joined via this mention your name and company. Mikhail Butkov. Mikhail, please go ahead.
Good day. Thank you very much for the presentation. I have four questions. Firstly, could you share any preliminary outlook or guidance for the year 2024? The second question is on provision increase in corporate loans. Was that connected to some specific one big loan, or it is more broad-based increase of provisioning over the corporate portfolio? Number three is the question about net interest margin. It expanded by 70 basis points on a quarter-by-quarter basis. Last quarter, there were included some repayment of the government funding connected to the dividend.
Do you have any plans to accrue that expense cost related to government funding more equally over the future quarters, or it will be booked in the same quarters as the dividend? And then it will be one more question in the end.
Hello, Mikhail. This is Murat. Thank you for your questions. Let me start answering one by one. On preliminary outlook, guidance for 2024, we typically provide guidance during our full year results call. So presumably, we do that in the months of March. That is the typical timing for annual results call. Regarding your second question on provisions increase for corporate loans, it was a result of creating provisions for a few some corporate loans. So it was not one specific big loan. But we also think that that is related to specific situation on particular customers, so we don't think that there is.
As you mentioned, a broad increase, so we think that isolated cases. Regarding your third question on repayment of partial repayments of government funding, indeed, during the second quarter of this year, we made partial prepayment of government funds. That resulted in increased interest expense. We, according to IFRS, should, let's say, made expense at the time we made decision for that repayments. So if the bank would make that decision, either because of anticipated dividend payments or otherwise, we would need to book that expenses in the same period.
Okay, t hank you. Very clear. And then I also had a question on your capital and RWA density. We just noticed that RWAs increased by around 6% in the quarter, compared to assets growth of, like, which was quite flattish. So was there any reason for the increase in RWA density in this quarter?
Yes. Thank you again for your question. There are dual reasons. The biggest reason, I think this is increase of share of the corporate portfolio in the assets. So you notice that the total assets has not increased, while the share of loan book has increased. So this is reason number one, and the biggest one. And it is also partially attributed to the high increase of unsecured loans. Some group of unsecured loans on retail clients, which, according to regulatory documentation requirements, have a higher weighting compared to the average portfolio.
Okay. Okay, thank you very much for detailed answers. Thank you.
The next question comes from Ronak Gadhia. Ronak, please go ahead.
Good afternoon, team. Firstly, congratulations on the results and for taking my questions today. We have two or three questions. Firstly, could you just update us on the status of the proposed regulatory changes that have been announced at various points over the last few months? Specifically with regards to the taxation of government securities, and maybe introducing a cap on consumer loans. Where are we with those regulations? And if you could maybe help quantify the potential impact on the bank. And then the second question, maybe just talk a bit around the strong fee income growth that we have been seeing consistently, I guess, since the start of the year. You know, could you maybe just talk a bit about what the key drivers there are, and the sustainability of that through the rest of the year and into next year? Thank you.
Hello, Ronak. Thank you for your questions.
Welcome.
Regarding your first question on the proposed regulatory taxation issues, I think that's it, it's probably a proper definition. The discussions are still in the air, so there are chances that certain tax amendments to the tax code might be introduced starting from January 1st, 2024. But some probably more broader changes might come with overall amendments or changes in the tax code. In this case, the changes would be introduced from the 1st January, 2025. The discussions still continue. At this point of time, there is no full clarity what particular amendments, for example, regarding taxation or state securities, would be implemented. So we expect that we'll get more clarity within coming weeks.
With regards to reducing cap on loans, which is currently consumed at 56%, we have not seen recently any update from the regulator. There is a possibility that that change might come starting from the next year. But the particular timing is not clear at this point in time, yet. With regards to your third question on net fees and commission income, as you have seen from our presentation, that was a broad-based increase in net fees and commission. Particular, we've seen good increase in fees and commission income from our retail clients, from SMEs and corporate clients. There was also good contribution in fees and commission from our trade-related business, namely issuance of letter of guarantees and letters of credit and guarantees.
From that perspective, we see a broad-based increase in our net fees and commission income during this period of time.
Thank you, Murat. Maybe if I could just go back to the questions on the regulations. So let's just assume that, you know, the tax code is changed, it's implemented, and the tax is applicable to income from all government securities, whether that's from the government or from the NBK. Theoretically, what would that do to your effective tax rate? And likewise, there's a lot of rumors out there that the cap could be reduced to around 44% on consumer loans. If that were to be implemented, what impact does that have on your consumer loans portfolio?
Starting from your second question, the average rate on our retail portfolio is below 30%, so we don't expect the impact from reduction of the cap from 56 to the level of 42, or 42%. With regards to your first question on the taxation, again, we have not seen in detail what particular proposal on taxes would be, so I would be very cautious with any estimations. But assuming that the tenge-based, the Ministry of Finance and National Bank notes would be included in the taxation, the approximate impact will be from 2-3 percentage points to the effective tax rate.
So if current effective tax rate, assuming that the current effective tax rate is the range of at the level of 16%, so the effective tax rate might increase to the level of from 18%-18.5%. But again, it's very preliminary, and it is based on certain assumptions, so please do not take it as as official guidance.
Absolutely, and understood. Just, sorry, one final one on the regulations. When you were talking about the changes in the taxes, you said there could be also some other broad regulatory changes that could be implemented from, I think, 2025. Could you just maybe highlight what these changes could be?
There were discussions that certain industries in Kazakhstan might see a revision in corporate income tax. Currently, there is one corporate income tax in Kazakhstan, which is 20%. There were discussions that certain industries, including oil and gas, metals and mining, and potentially some segments or completely entire financial sector might fall under higher corporate income tax. There is no specifics available at this period of time, and there is no specific what potential increase might be. We're hearing that some levels, like 25%-30%, were discussed, but we have not seen the exact proposal at this point of time.
We were also noting that any such potential discussion might be coming with simultaneous introduction of some lower interest rates or waivers for corporate lending to stimulate its banks to provide more credits to real economy. So if the combination of the changes would be taken, so the overall impact on the effective corporate income tax for the banks who have corporate loans in their portfolio might be less than for the banks which is purely retail or which have less of corporate lending in their portfolio. However, at this point of time, it is, as I said, at very preliminary stage. We have not seen the any final drafts at this point of time.
For us, it's difficult to provide comments, what the particular amendments would be and from what timing, that changes, might be introduced.
Thank you very much. That's very clear. Thanks.
The next question comes from Can Demir. Can, please go. Can, please go ahead. The next question comes from Simon Nellis. Simon, please go ahead.
Thanks. T wo questions. First, I was just hoping you could repeat some of the key drivers of the margin expansion and the relative importance of each. So was there one particular thing that led to the expansion? And any comments on the outlook that you could provide, given the your expectations on the interest rate front? And then my second question would be just about the reinsurance profits. I think historically, you've generally had losses from reinsurance, but in this quarter, it was a sizable positive. Thank you.
Yes. Hello, Simon. Thank you for your question. Regarding net interest margin, I understood that your question is related to the credit margins. Yeah, we have seen increase in the third quarter to net interest margin to 6.8. The main reason is again, increase in the rates. We have seen the positive impact from rates increase both on tenge side and on USD. So basically, during this period of time, we're seeing continuation of repricing of asset side, which is taking a bit longer period of time compared to repricing of liability side.
And secondly, increase in size of the corporate portfolio, share of corporate share of credit portfolio in total assets, as well as high increase in high-yielding retail loans and loans to semi clients in the loan portfolio. So the combination of these factors led to increase in net interest margin. At this point of time, we cannot provide the guidance how the NIM would looks like in the next year. As I said, we'll be providing the guidance during the full year call.
I guess just in shorter term would you expect continued faster repricing of assets for the next quarter or so? Or are you kind of done in terms of expansion?
W hile some repricing might still happen, to large extent, we can say that, the material portion of portfolio has been repriced. But there is still continuation of certain loans which would continue to be repriced.
It seems on the deposits, on the funding side, you're pretty much done, right? I mean, the deposits funding expense didn't go up much so such n o change expected there.
Yes. On the liability side, we might say that the repricing has completed in terms of increases, and now we might enter the cycle of decreases. So we might be facing trends where on certain assets and liabilities, interest might still increase, but on some of them, there might be decreasing trend. So that will be a combination of diverging trends.
Clear. Thank you. And on in reinsurance?
On question regarding reinsurance, we increased our reinsurance business starting from this year, so that contributed to increase in reinsurance. The reinsurance itself is not the material at this point of time, but we studying the possibilities to for some increase on this business. It will be not a game changer at this point of time, but we looking probably more tactically.
But I'm just wondering why the delta from negative results in the past to positive is , just wondering why that happened.
In general, on insurance side, there are few elements which is influencing. One of the big impact is the transition from IFRS 4 to IFRS 17, and generally, we're told that 2023 is a transition year. So the full impact of, IFRS 17 transition would be visible during our full year results. Also, when it comes to, wholesale insurance, the results might be influencing by certain contracts, which is concluded or which is expiring, during certain period of time, as well as certain claims which, might be received during a particular quarter. That's why quarter-to-quarter results, might seem a little bit volatile. That's why we recommend, to look at longer period of time, to see, a more proper trends in our insurance business, results.
Understood. Okay, thank you. That's all from me.
The next question comes from Olga Naydenova. Olga, please go ahead.
Yes. Thank you very much for the call, and thank you for taking my questions. I also have a probably follow-up question regarding the regulatory environment. There were also initiatives to ban dividend payments for the companies with state funding. Where does this stand in terms of the process, and what would be your response if the initiative comes through, and how much will it cost? My second question relates to very strong performance of marketplace this quarter. What is behind what happened in the second quarter or in the third quarter, basically, why this quarter was so good? Thank you.
Olga, thank you very much for your questions. Regarding your first question on the news which you have probably seen in media regarding the comments from regulator on ban of the dividend payments for the banks which received state support. In our understanding, that was result of the study which is done by IMF, and the recommendation which it provided to the regulator. In our understanding, the comments was regarding the overall framework around the state support, and any of that framework details, including inter alia approach towards dividend payment restrictions, is applicable or would be applicable for new cases.
We understood that framework would be put in place next year. So at this point of time, there is no draft which is put in front of the banks for discussion.
Okay. So, you made your understanding that this will not be applied to Halyk, right?
A gain, we have not seen the draft at this point of time, but this is our understanding that any such framework would be applicable for new cases because it will be applicable for cases starting from the time when that framework, which would include a number of elements. So dividend restriction would be one of them. So typically how the regulation or any legislation works, that it applies for cases on the forward basis, so they are not applicable for backward cases.
Thank you so much, and if you could comment on the marketplace, please.
On the marketplace, indeed, we've seen some acceleration of our marketplace. This is a result of the work which the team has been doing for the last few quarters, namely increasing, improving the functionality of the marketplace. Also, working with the merchants, increasing the number of SKUs. We also made upgrades to our team. We were working on some logistical solutions. So all that actions which the team was taking during last few quarters resulted in increase in marketplace sales.
There was not like a one-off event or something, some sort of event-driven?
No.
Okay, thank you.
We have several questions from our written chat. So the first question comes from Can Demir. The question is: You obviously made the balance sheet work harder this quarter, and the balance sheet got less liquid. Do you think the current structure of the balance sheet is here to stay, or will the balance sheet get more liquid over time?
Yeah, John, thank you for your question. We indeed have seen some, as you call it, a harder structure of the balance sheet. That was entirely a result of a higher increase in our corporate loan portfolio, as well as some a reduction in our corporate deposits. We expect a reduction of corporate deposits having a temporal nature, on which we made explanation during previous calls. Namely, some outflow from banking system into state securities. And secondly, in the situation of higher rates, we see some clients were using their existing funds in order to use it for corporate needs, including taxation, payment of taxes, as well as for their capital expenditures.
We expect that situation with deposits would be reversing. So all in all, we do not expect that the balance sheet structure might be substantially changed, because we also expect the continuation of the corporate and retail SME loan portfolio increase. But also with more liquid funds coming back to the balance sheet.
The next question comes from Tom Jacobi. Tom, please go ahead.
Thank you for having my questions. I just got a follow-up questions for the potential, dividend restrictions in the future. You told us, that it would only hit, future cases, so what, what exactly is such a future case? Is it, also regarding, the future earnings of Halyk, or is it just affecting other banks that are founded or, making new business in the future? So, so would the 2024 or 2025 earnings be affected by such restrictions, or could they be affected by such restrictions? And, how big would such restrictions be or might be? Thank you.
Thank you for your question. At the moment, we have a regulation in place, which actually applies for the banks who have existing state support money on their balance sheet. So Halyk technically falls under that regulation, because we have a legacy state support money came in to the Halyk's bank balance sheet from the acquired KKB Bank, who was the main entity which was receiving that state support back in 2015. So the existing regulation actually links the possibility to pay dividends with the pro rata repayment of that state support. So this is existing regulation, and this is applies to Halyk, and we already used that provision to make early prepayment of the state's support money and to pay dividends.
The anticipated changes, again, we have not seen the draft regulation or draft legislation at this point of time. It is our understanding, it is not, let's say, confirmed by the document which we might specifically refer, so please, take that into account. Our understanding is that there were comments from IMF during the FSAP process, regarding a number of regulatory points. And one of that regulations on which IMF made a recommendation concerns the overall framework on how the state regulates insolvent banks, and that itself includes a number of points or might include a number of points. Probably starting from in which cases the government would allow to step in, at which terms, how the previous shareholders would be dealt with, et cetera, et cetera.
And dividends prohibition, if any, or restriction on bonus of the management is one of that topics which might be included in this framework. If you take the overall approach to the legislation, so typically any legislation which is introduced would normally apply for any situation around insolvent banks. If our understanding how the general legislation works, we might assume that any such requirements, any such restrictions would apply for any new cases regarding a new resolution cases. But again, this is our assumption. Please take that as is. We have not seen any draft at this point of time, so please do not take it again as official guidance from Halyk Bank.
Yeah, thank you. Can you give us any outlook on the upcoming dividend? Do you plan to pay a single dividend? Because you thought about paying two dividends a year before, so will it be a single or a two-time dividend? And do you plan, like, 50% payout ratio again?
So far, there is existing dividend payout policy which has not been changed. We indeed receiving from time to time from our investors, shareholders, recommendations or views or suggestions regarding changes in dividend payout policy. The management considering and making discussions, but at this point of time, there is no decision done yet. If and when any decisions on change in dividend policy would be made, we would make announcements or would be coming to investor community with any such changes. But at this point of time, there is no change done yet.
Okay. Thank you.
The next question comes from the written chat. The question comes from Jose Tangari. There are several questions. The first one: in the last two quarters, cash on hand has decreased, while loans to customers and placement in treasury bills of the Ministry of Finance of the Republic of Kazakhstan have increased. Could you please provide some insight into this movement? The second question: considering that the capital adequacy ratios are higher than in September 2022, can we infer that the dividend for next year is practically assured? The third question: what is your opinion on Halyk's stock dividend yielding 16% and the company being able to issue debt in U.S. dollars at 3.5% below the three-year U.S. bond? Why do you think the stock price remains so low?
The fourth questions, yeah: what happened with the net insurance income in the third quarter? The fifth question: do you have any plans to list Tenge Bank on the stock exchange in Uzbekistan? And the last question: inflation in Kazakhstan is decreasing, which should reduce rates in the short term or medium term. Do you view this as favorable or unfavorable for Halyk Bank?
So thank you for your question. Please allow us a minute to come back with our answers. Regarding the, let's say, changes in cash and cash equivalents and T-bills, there is a combination of two things. One, we were extending tenors of our KZT investments to slightly longer instruments, because cash and cash equivalents is typically include instruments up to 90 days. So anything higher is going under appropriate alliance in the balance sheet. And secondly, there was, let's say, tactical changes from one to another instrument. Like some positions was held in the National Bank, like, in deposits, and they were shifted to state securities.
Regarding your second question on the capital adequacy ratio and dividend, dividends for next year, I think I have covered that already. That we have dividend history, dividend, policy, which is in place. Any decisions on dividend payments, would be done, after we, would, would finalize our, our full year results for 2023. Regarding your third question, I guess that was regarding the, dividend yield 16% and, the issuance of debt at 3.5%. For us, it's difficult to comment on the, stock, price. We think that, with the management are focusing on consistent, results and profitability.
We hope that the market would note that consistency of our profitability sooner rather than later, and that would be reflected in the stock price performance going forward. Regarding the debt issuance at 3.5%, that was a particular instrument which we placed in Kazakhstan, which was primarily taken by our retail clients. The retail clients benefited from possibility to buy a high-yielding USD instruments compared to retail deposits in USD, which is capped at 1%. On net insurance income, I have already commented that. Regarding the plans to list the Tenge Bank at the stock exchange in Uzbekistan, at this point of time, Tenge Bank is 100% owned subsidiary of Halyk Bank, Kazakhstan.
So from that perspective, there is no need for such a listing at this point of time. And in terms of the inflation dynamics, yes, indeed, we see the disinflation process, which started in Kazakhstan. The rates are still relatively high, close to 11%. But we expect that inflation would start coming down next year, probably to high single digit. That would finally affect the short term rates, which typically during a short period of time have a positive impact on banks, unless the rates would go too low, which at this point of time is not our base scenario. Thank you.
One more question's come from the chat, from Anton, Anton Berg: How does Halyk attract merchants to your marketplace? Are merchants generally on both Halyk and Kaspi Marketplace?
Thank you for your question. We have identified priorities by category of merchants, then we attract them based on the target market that we have. Based on the results, we see that some clients are also presented on the other markets as well. So coming to your question, yes, we see that the merchants can be placed in, on our marketplace. At the same time, they can place their goods on other marketplace too.
Dear ladies and gentlemen, it seems that there is no questions remaining, so this completes our presentation. Thank you very much for participation. As usual, our IR team remains open for any of your further questions. Take care and goodbye.