I'm Viktor Skryl, Strategy Director for Halyk Bank. On the call today are Ms. Umut Shayakhmetova, Chief Executive Officer; Mr. Murat Koshenov, CFO, Deputy CEO, Finance, Subsidiaries, Compliance, and International Activities; Mr. Dauren Sartayev, First Deputy CEO, B2B Banking, Marketing, and PR, Acquiring; Mr. Roman Maszczyk, Deputy CEO, Risk Management, Data Science, and Collateral; Ms. Olga Vuros, Deputy CEO, Corporate Banking; Mr. Nariman Mukushev, Deputy CEO, B2C Banking and Digital Government Services; Mr. Andrey Zavarzin, Deputy CEO, IT and Ecosystem; Mr. Almas Makhanov, Financial Director; Ms. Mira Tiyanak, Head of FI and IR; Ms. Nurgul Mukhadi; and Mr. Rustam Telish from IR team.
The session will start with the presentation by Halyk team and will be followed by Q&A. Please note that the call is being recorded. We are happy to report that 2024 was a banner year for Halyk. We recorded a record high profit of KZT 921 billion, an increase of 32.8% year- on- year. Our net interest margin was very strong at 7.2%, on the back of a record net interest income of KZT 1.1 trillion. Return on average equity, return on average assets set new records as well, while our cost to income ratio was the lowest it has ever been.
We hit record highs for total assets, net loans, total deposits, and total equity, while keeping our cost of risk in line with the previous year. We will have more details on our financial performance later in the presentation, but I would also like to highlight a continuously growing engagement by Halyk Digital Platforms. The volume of payments made via Halyk's B2C Super- App rose by 39% year-on-year. Halyk's B2B Online bank saw 16% growth in payment volume.
Here are some key events over the course of last year, which we would like to highlight. In December, S&P upgraded the bank to investment grade, following on Moody's earlier in the year. With regard to ESG performance, we saw our MSCI rating upgraded to BBB in April, and Halyk became the first Kazakhstani commercial bank to issue green bonds last December.
Major developments in capital management include dividend policy amendment from single to two-time dividend payment per year, and in April, we disposed of our Kyrgyz subsidiary. In September, the bank announced a buyback program of GDRs. In terms of funding base, Halyk fully repaid the outstanding balance of state support received by KKB prior to its acquisition. The funding base was further diversified by successfully signing Syndicated Term Loan in September and issuing local bonds.
The approval of LTIP by the Extraordinary General Shareholder Meeting was an important strategic decision of the last year. We remain focused on maximizing shareholder returns. Over the past five years, including 2024, we have achieved a compound annual growth rate of 22.9% in earnings per share and 20.1% in total shareholder return. We have a strong track record of high profitability backed by solid capital.
We have also seen consistent growth in our core banking operations, and increased engagement in our digital banking ecosystem is helping to power that growth. As the largest financial institution in Kazakhstan, Halyk plays a central role in powering the economy. We process transactions equal to 106% of the nation's GDP. We account for 53% of lending to the real economy, and we serve 86% of the country's largest taxpayers. Our reach is not limited to Kazakhstan.
We also play an important role in Central Asia's second-largest economy. Halyk processed more than KZT 2 trillion worth of payments between Kazakhstan and Uzbekistan last year. Our total loan exposure to Uzbekistan, where we operate a fully-owned subsidiary, Tenge Bank, was just shy of KZT 700 billion at the year-end 2024, an increase of 45% year-on-year. I mentioned earlier that we achieved record profitability last year, and here you can see consistent growth over the past decade despite a highly volatile operating environment.
The successful execution of our digital strategy allowed us to achieve a compound annual growth rate of 21.2% in net income and 30.7% average return on equity over the past five years, while our cost to income ratio continues to improve. We strive to maintain a strong capital position, and you can see on this slide how we have accelerated growth in total equity over the past decade. In the total past five years, total equity CAGR was 15.5%. At the same time, we have kept our common equity tier-one capital ratio steady.
This slide shows the acceleration of growth in total gross loans and total deposits over the past decade. As I mentioned earlier, we had a net interest margin of 7.2% in 2024. The average over the past five years was 5.7%. We are seeing very good progress in improving our margins. Next, we will take a look at our digital ecosystem and the progress we continue to see with both the Super App and Online bank. Since 2020, our B2C and B2B digital platforms have experienced strong and consistent growth in user engagement.
The volume of payments made through our B2C platform has grown at a five-year CAGR of 58%, while the number of transactions has increased at a CAGR of 46%. On the B2B platform, both the volume and number of payments have expanded at a five-year CAGR of 22%. In terms of active users, our B2C platform has achieved a five-year CAGR of 25% in Monthly Active Users, while the B2B platform now has grown at a CAGR of 28% over the same period.
This slide illustrates our track record in delivering consistent increasing earnings per share despite some turbulence through the cycle, including COVID, January events, and geopolitical instability. A 22.9% CAGR in earnings per share over the past five years gave, at the same period, an average annual total shareholder return of 26.9%. On the next slide, you can see how our dividend per share has grown consistently over the past five years, with the exception of the post-pandemic year in 2022. A compound annual growth rate was at 15.4%, while the average dividend yield was 14.1%.
Now, a few words about the macroeconomic environment, and specifically about our key market, Kazakhstan. The country accounts for 56% of Central Asia's GDP. With a median age of 29.5, Kazakhstan's 20 million population is relatively young and rapidly urbanizing. Both of these factors support our focus on digital services. Kazakhstan achieved real GDP growth of 4.8% last year, and the forecast for 2025 is 5.3%. The production of oil is expected to increase in 2025 up to 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.
I will now pass it over to Mira Tiyanak. Please.
Thank you, Viktor. Good afternoon, everyone. Now let's move on to the B2C and B2B update. We have the most extensive open ecosystem for both B2C and B2B. This slide highlights our B2C ecosystem and lifestyle solutions, offering a full in-app experience that includes daily banking, insurance, brokerage, and lifestyle services. As part of our strategic expansion, we are also developing a B2C application in Uzbekistan.
Next slide, please. Here you can see the strong digital engagement of the Halyk Super- App. In 2024, our monthly active users reached 7.9 million. Monthly transactional users stood at 5.5 million, and the daily active users number was 2.2 million. Over the year, we recorded a 29% increase in the number of transactions, along with 39% year-on-year growth in the volume of payments and transfers.
Our B2C lending operations are now almost entirely digital, with 91% of loans processed through our Halyk Super- App. Loan issuance by volume increased by 46% year-on-year, showing strong demand and lending activity. Our B2C gross loan book grew by 33% year-to-date, reinforcing our market position. In terms of portfolio quality, we continue to maintain prudent risk management. Our NPL 90+ days ratio stands at 4.5%, reflecting stable asset quality, and the NPL 90+ days coverage is 136%.
On the next slide, we present the B2C deposit dynamics over the year. The share of new deposits opened digitally increased by 13 percentage points, reaching 91%. B2C deposits grew by 24% year-to-date, further strengthening our leading market position. Next slide, please. Here we present an update on our ecosystem performance. Car insurance GMV and the number of its clients more than doubled over the year.
The GMV of our entertainment tickets platform, Kino.kz, grew by 16%, while the number of tickets sold increased by 32%, showcasing strong user engagement. Halyk Travel experienced a slight decline in GMV over the year. On the next slide, we present Halyk Marketplace dynamics. The GMV increased by 52% year-on-year, while the number of sales grew by 10.6%. The number of partners expanded by 63.5%.
The GMV of our in-app segment of the marketplace, Halyk Market, grew by 57.4% year-on-year. The number of partners more than doubled, while the SKU count nearly tripled. Next slide, please. Here we would like to highlight a strong synergy between our B2C and B2B segments, which led to the ramp-up of digital car lending. Launched in September 2023, this product has rapidly gained traction, and now Halyk is the number one player in the car lending market.
Our market share in issuance nearly doubled over the year, reaching 33.8%. The volume of car loans issued grew by more than five times. Now let's move on to our digital brokerage platforms, where we offer two key solutions: Halyk Invest and an app solution within our Super- App, and Halyk Finance, provided by our investment banking subsidiary. We continue to see a strong growth in this segment, reinforcing our market leadership. The number of clients grew by 54.6% year-on-year, while the number of active clients increased by 48%.
Transaction volume expanded by 1.8 times over the year, highlighting an increased client engagement. Pension assets under management grew by 3.4 times year-on-year, reaching KZT 47 billion, and we now hold a 72% market share. The total assets under management increased by 1.6 times, while the brokerage assets grew by almost 40% year-to-date, reaching KZT 2.5 trillion.
The next slide focuses on our B2B ecosystem, where we provide a comprehensive suite of digital banking and ecosystem solutions available in-app, including daily banking and financial services, Halyk Marketplace for businesses, and non-financial services to support business operations. Beyond the core banking, our subsidiaries offer a wide range of B2B solutions, including investment banking and insurance, cash collection services, leasing and cloud business solutions, internet acquiring, and infotelecom services.
As part of our strategic expansion, we are also developing a B2B application in Uzbekistan, further strengthening our regional presence. Now let's move on to the B2B platform update. As of the end of 2024, our monthly active users reached 305,000, while monthly transactional users number was 237,000, and Daily Active Users stood at 105,000.
Year-on-year, we achieved a 16% rise in the total volume of payments and transfers, alongside a 20% increase in the number of transactions, demonstrating a strong transactional business growth. Now let's turn to the corporate business update. Our gross loan portfolio grew by 18.4% year- to- date, reflecting strong demand and business activity, and further strengthening the bank's role as a powerhouse lender fueling economy.
Additionally, KZT-denominated loans accounted for 64% of the total corporate loan portfolio. When it comes to the portfolio quality, we continue to maintain prudent risk management. Our NPL 90+ days ratio stands at just 1%, demonstrating stable asset quality. We maintain a robust NPL 90+ days coverage ratio of 381%, providing a solid buffer against potential risk. Halyk currently holds a 53% share of total B2B lending and 31% of B2B deposits, reinforcing our leading position in the market.
SMEs are a key focus of our commercial business, and we continue to see strong growth in this segment. Year- to- date, our SME loan portfolio has expanded by 18%, demonstrating our commitment to supporting small and medium-sized enterprises. Loan issuance has also seen a solid increase of 19%, with the digital channel playing a crucial role. In addition to loan growth, we are also seeing a notable growth in issuance of digital performance and bid bonds via our platform.
Next slide, please. Over 94% of new loans were issued via Online bank, reflecting our strong digital capabilities. As a result, our digital loan portfolio has grown significantly, up 55.7% year- to- date, while we continue to maintain strong portfolio quality. Now let us take a look at our business in Uzbekistan. First, a bit of background. Uzbekistan is the second largest market in Central Asia and one where we see a lot of potential. This country has a population of 37 million, with a median age of just 27, so like Kazakhstan, a very young nation.
Recent economic reforms have driven a spike in foreign direct investment, which soared by 50% last year to almost $12 billion. The economy is estimated to have grown at a pace of 6% in 2025. Economic, cultural, and interpersonal ties between Kazakhstan and Uzbekistan are getting stronger, and here you see a few key indicators for the last years. All this makes Uzbekistan a natural fit for Halyk's strategic development. Against the backdrop of Uzbekistan's rapid economic growth, we're seeing a similar dynamic in our loan portfolio there. Our total loan exposure increased by 45% last year.
Almost three quarters of that is cross-border lending from Halyk, which rose by 61%. Tenge Bank's loan portfolio grew by 14% during the year. Another key figures here are volume of transfers between Kazakhstan and Uzbekistan through Halyk and number of B2B payments through our proprietary systems, which soared by 85% and 63% in 2024 accordingly.
Digital banking is flourishing in Uzbekistan, and Tenge Bank is at the far front of that, having been the first bank there to launch digital onboarding for legal entities and first to launch digital loans to support individual entrepreneurs. A few words about Tenge Bank's consumer-facing business. We saw an 85% increase in monthly active users of B2C app year-on-year. The volume of payments and transfers via the app declined, however, the number of payments and transfers has climbed by 48%.
We continue to improve the app's functionality by adding new services and ways to make payments. Monthly transactional users for Tenge Business, our B2B digital app in Uzbekistan, more than doubled last year, although from a low base. We see substantial room for growth for this offering further. We close this section with a look at where we stand and compare to our peers in Uzbekistan.
Halyk Group is the fourth largest privately owned lender in the country, with a combined loan portfolio of almost KZT 700 billion, including both Tenge Bank and cross-border lending from Halyk Bank. Now I would like to hand over the call to my colleague from the IR team, Nurgul Mukhadi. Thank you for your attention.
Thank you, Mira, and good day, everyone. Now I will take you through the financial results for the year ended 31st December 2024. During our semi-annual results call in August last year, we provided our updated financial guidance for 2024. Despite a quite upbeat outlook, we met and most metrics exceeded our targets. Growth of our net loan portfolio amounted to 23.5%, with 34% growth in retail segment and 18.7% in corporate and SME.
Net fee and commission income grew by 10.2%. Cost of risk was at 1.2%. Our net income amounted to KZT 921 billion. Return on equity reached 34%. NIM is 7.2%, and cost to income equals 17.6%. As we mentioned earlier, Halyk had a strong year with the new record highs. Here you can see the decomposition of net income growth in 2024.
It was primarily driven by the net increase of net interest income by 39% and net gain on foreign exchange operations, financial assets, and liabilities by 36.7% year-on-year. Here is a quick look at the balance sheet. Total assets of the group increased by 19.7% year-to-date due to increase in amounts due to customers.
Total interest earning assets at the same period grew by 23.1%, which led to an increase in its share in total assets from 90.7% to 93.3%. The share of loans to customers in total interest earning assets increased from 36.4% to 64.2%. Total deposits to total liabilities ratio was at the level of 83.9%. At the end of 2024, total equity of the bank increased by 23.9% compared to 2023, mainly due to the net profit earned by the bank during 2024.
That led to respective growth of the book value per common share by 24.1% at the end of 2024. Loans- to- deposit ratio was up to 88.3% at the end of 2024 versus 85% at 2023. Interest income for 2024 was up 30% versus 2023, mainly due to an increase in average rate and balances of loans to customers.
Interest expense for 2024 increased by 21.8% versus 2023, mainly as a result of the increase in average rate on amounts due to customers, as well as the growth in the share of KZT amounts due to customers and the share of deposits in total liabilities. In 2024, net interest margin was affected by the increase in average rate on both loans to customers and amounts due to customers.
Furthermore, net interest margin was positively impacted by the increase in the share of higher yielding retail loans in total loan portfolio and share of loans to customers in total interest earning assets, as well as the increase in the share of KZT interest earning cash and cash equivalents. As a result, net interest margin has grown to 7.2% per annum for 2024 compared to 6.1% per annum for 2023.
As we mentioned on the previous slide, NIM was supported by growth of average rate on loans to customers, which increased to 16.9% in 2024 versus 16.3% in 2023. The significant growth of rate of amounts due to from credit institutions and interest earning cash and cash equivalents from 4.7% in 2023 to 12.6% in 2024 was due to an increase in short-term KZT deposits with NBRK.
You can also see that the average rate of total interest earning assets has grown by 1.2 percentage points from 12.8% in 2023 to 14% in 2024. Average rate of total interest bearing liabilities has increased by 0.5 percentage points from 7.5% in 2023 to 8% in 2024. The outpacing growth of the average rate of total interest earning assets supported the increase of net interest margin.
Despite the negative effect from the transition to amortization of tariff packages for legal entities starting from November 2023 and the revision of some retail tariffs in the second half of 2023, fin commission income in 2024 versus 2023 was up by 5.8% as a result of the increased number of clients and ramp-up of clients' transactional activity, as well as the growth in fees on letters of credit and guarantees issued. Fin commission expense in 2024 versus 2023 stayed almost flat.
The group's management decided to reclassify deposits insurance expenses from fee and commission expenses for 2023 in the amount of KZT 13.4 billion to interest expenses, as these expenses are directly related to deposits expenses. The increase in services fee on payment cards was offset by partial reimbursement of expenses on the loyalty program by the international payment system. As a result, the net fee and commission income for 2024 increased by 10.2% versus 2023.
Here is an overview of operating expenses, which increased by 21.7% versus 2023, mainly due to the indexation of salaries and other employees' benefits, including the costs of the long-term incentive program. The cost to income ratio decreased to 17.6% compared to 19.2% for 2023, amid higher operating income for 2024. Compared with the end of 2023, loans to customers were up 23.2% on gross and 23.5% on net basis.
The increase in the gross loan portfolio was driven by the growth across all business segments, with retail loans growing by 33.3% and the loan portfolio of legal entities increasing by 18.4%. The share of FX loans in total net loans was 21.2%. Cost of risk in 2024 was at a normalized level as per our guidance at the level of 1.2%. At the end of the fourth quarter of 2024, stage three loans decreased from the level of 7.5% to 6.3% year-to-date as a result of the workout of problem loans and loan portfolio growth. Compared with the end of 2023, the deposits of B2B and the deposits of B2C were up 13.5% and 23.5% respectively due to fund inflow from the bank's clients.
At the end of the fourth quarter of 2024, the share of Tenge deposits in total deposits was 69.1% compared to 67.8% at the end of 2023. In corporate deposits, the share was 70.9% versus 72.9% at the end of 2023, while the share in total retail deposits was 67.5% versus 63.4% at the year- end of 2023. On consolidated basis, capital adequacy ratios of the bank slightly decreased in the fourth quarter of 2024 due to dividend payments. RWA were up by 23.4% following the increase of the loan portfolio.
At the end of 2024, RWA density grew to 86% versus 82% at the end of 2023 due to an increase in the share of retail loans in total loan portfolio. I am pleased to present our outlook for the financial year of 2025. The outlook is based on the approved budget for 2025 and doesn't take into account potential regulatory changes that may impact financial performance. Retail net loan portfolio growth is expected to be in the area between 20%-25%. Corporate and SME net loan portfolio growth is expected to be in the area between 15%-20%.
Total net loan portfolio growth is expected to be in the area between 17%-22%. Growth of net fee and commission income is expected to be in the area between 10%-15%. Cost of risk is expected to be circa 1.3%. Consolidated net income is to be around KZT 1.1 trillion. Return on average equity is expected to be in the area between 30%-33%. Net interest margin is expected to be somewhat around 7.5%. Cost to income ratio is expected to be in the area between 17%-19%.
Dear ladies and gentlemen, that's a look through the financials. We will now open to the floor of your questions. Just a quick instruction. To state a question, you can raise your hand in the Zoom, or if you join via cell phone, please press star nine to raise your hand. You can also enter your questions in the return form via chat. While stating your questions, please also mention your name and company. The first questions come from Mikhail. Please go ahead.
Good day. Thank you very much for the presentation. I have a number of questions. In the last quarter, there was quite a solid improvement on the number of metrics, and I wanted to clarify which of them do you think are more sustainable and which of them are more one-offs. Starting from NII, we can see that for the two quarters, you had quite strong income from interbank interest income.
I wonder, where does this interest income come from? Where does the demand come from on the interbanking lending side? Do you see this line and contribution sustainable? That is the first question. On your trading income and other non-core income line, we could see some improvement on the FX and gains on securities. What was driving that?
Were there any one-offs also on the net insurance side, or do you see these performances sustainable? That is the first block of questions. I also have a question. What are your latest views and outlook on the dividend for 2024? What will be the split between the first and second if, as you, I think, now pay twice a year? Thank you.
Mikhail, thank you very much for your very detailed questions. First of all, regarding the normalization or one-off items, I think overall net interest income, when we talk for the net interest income from loans, we do not see it as a one-off. In fact, it's a reflection of the continuation of the growth of our trade portfolio.
If you see from our outlook, we see that the trend overall should continue. When it comes to the interest income from non-loan type of assets, yes, you indeed notice that we have some pickup in that lines, primarily because of a more active approach to ALM. We had some strengthening of our ALM team during the year. That was the result of a more active approach.
When it comes to other lines, like net gains from foreign exchange operations, financial assets, and liabilities, probably there was one line which is related to net gains or trading operations, which might be considered as a one-off. We had certain positions in equities, which we realized in the fourth quarter. Probably with the exception of that particular item, overall, we see that overall results as a reflection of the continuation of our work in the activity of our clients, better management of our balance sheet. I think your question was also related to dividends. Could you please repeat if possible?
Yeah. What is your latest outlook on the proposal for the dividend for 2024? Previously, you approved the new guidance for dividends to be paid twice a year. What split do you expect this year?
Yeah. Last year, yeah, understood. Last year, we changed our dividend policy. We moved from one-time payments up to two-time payments. Last year, we already realized that open. Last year, we paid on a combined basis 55% of the net profit for 2023 in two installments. The first one, 40%, and the second one, 15%.
This year, so far, the board of directors is proposing to the general shareholders' meeting the dividend per share of KZT 29.64, which roughly represents 35% of the net profit for last year. There is a possibility that the board might be recommending the second payments in the second half of this year. The decision would be taken in the second half. At this point of time, I cannot provide probably more clarity.
I probably can refer to our general dividend policy, which says that within certain conditions, the dividend payout ratio is within the range of 50%-100% of the net profit.
Okay. Thank you. If I may clarify on interest income from non-loans and a more active ALM approach, could you give a bit more details? What particular changes have been taken into consideration? Do you, for example, allocate cash now more into some more high-yielding assets? By the way, this interbank interest income which you receive, is it interbank with the Central Bank of Kazakhstan or with the other banks, if I may ask?
I'll give the floor to my colleague.
Mikhail, thank you for your question. First of all, the main base of our operations was the switch of our focus from overnight activities with the National Bank to one-week deposits, which allowed us to gain an extra 1% in profit. That was the main shift.
Okay. It is mainly with the Central Bank of Kazakhstan, right?
Yes. Yes. Yes.
Okay. Also, one last follow-up on FX, on the trading income from FX and gains on securities, was it supported by volatility? To what extent was it supported by volatility of Tenge in the fourth quarter, or was it more supported by other factors?
Mikhail, thank you for your question. It was a mix of all activities. As you may know, last year was quite volatile for the local currency. We somehow managed to gain our fortune there as well.
Okay. Okay.
He did introduce himself. That was the response from our Managing Director, who is covering treasury operations and ALM, Ilyas Izotov.
Okay. Thank you. Thank you very much for all of the valuable comments. Much appreciated.
The next questions come from Milosz. Please go ahead. Milosh, please.
Milosz, could you please speak up? We cannot hear you.
As Milosz is experiencing—okay. Go ahead, please.
Okay. Apologies for that. Yes. Hi, Milosz Papst, Edison Group here. Thanks for taking my questions. Firstly, I've noticed that the share of local currency deposits in total retail deposits stabilized in the fourth quarter compared to the previous quarter after growing for a couple of years and also in recent quarters.
Can you shed some light on this in terms of what you expect in the coming quarters and what would be the associated impact of your interest expense? Secondly, I've noticed that the average number of monthly users in your retail segment, the super app, was broadly stable in 2024 compared to last year. The daily active users went down slightly.
I just wonder if you see further potential to grow from here or you expect these indicators to stabilize and maybe we should focus more on the monthly transactional user number, which you've disclosed as well. If so, can you give us some idea of what you expect here? Thank you.
Milosz, thank you very much. The dynamics in terms of currency split on deposits is primarily linked to two factors. The first one is anticipation of movement in currency and second, the interest rate differential. Because we already for a number of years live in a situation when the National Bank is not managing the currency rate but managing the rates.
We see that exactly in the situation when KZT in the end of last year started weakening and also there was an increase in the inflation expectation, the Central Bank stepped in and increased rates. We think that that is a good stabilization factor in terms of the currency split of the deposits. On top of that, we also see that during the last couple of months, KZT starts strengthening.
We expect that that should lead not to big fluctuations in terms of the currency split on deposits. Regarding your second question, we in some previous years experienced a very strong increase both in monthly active users and daily active users. We used a different combination to drive that. We understand that the most focus should be not on increasing the audience per se, but increasing the transactional activity.
During 2024, we were particularly, let's say, focusing on increasing the transactional activity, so-called monthly transactional users. That probably was the main factor, saying that we overall expect that we will continue to increase both the active users on a monthly and daily basis as well as the transactional portion of that client base.
Okay. Perfect. Thank you.
The next question has come from Simon Nellis. Simon, please go ahead.
Hi. Thanks for the opportunity. Yeah, my first question would be really around your macro assumptions behind your guidance for this year. It would be useful if you could run through what you're expecting in terms of GDP growth, inflation, rate trajectory, and exchange rate. That would be useful. I have a question on fees. I see that fee income grew by 19% in the fourth quarter.
Sorry if I missed some of the color, but if you could just elaborate on what was driving that and why you expect it to slow down to 10-15% growth for the year? The last is just on the tax outlook. I think there were talks in the past to increase taxation rates on banks. I'm not sure if that's still the case. If you could give us an update on any new regulatory actions, particularly around tax. Thank you.
Simon, probably I did not probably record all your questions. Let me start one by one, and we might probably come back to some questions which I did not cover yet. First of all, on the macro assumptions, obviously, the recent movements in inflation and subsequent reaction from the National Bank in terms of increasing the base rates to a level of 16.5% also triggering the revision of the macro parameters.
At this point of time, the National Bank is anticipating GDP growth in the range of 4.2%-5.2%. Our colleague finance economists currently projecting the GDP growth at a level of 4.8%, primarily driven by increased production at the Tengizchevroil , which potentially might be limited by the OPEC Plus commitments from Kazakhstan. Also, the continuation of fiscal impulses to the economy by the government to finance some larger infrastructure projects.
Inflation, we see that it probably would be increasing this year. Again, the Central Bank is projecting inflation rates in the range of 10-12%, primarily driven again by this fiscal impulse, which I mentioned, but also the readjustment of pricing for utilities and on the petrol market.
Based on the inflation, we also expect that the base rate probably would continue to stay higher. It might reduce somewhat from the current levels, but we do not expect big movements from the current level. Overall, we do not expect some shocks in the economy. I think the economy continues to grow, obviously fueled by the aspects which I mentioned.
That's clear. Thank you.
On the fees and commission income, one of the aspects was actually that we were revising certain fees in 2023, and that probably was impacting the fees and commission growth for the second half of 2023 and beginning of 2024. That effect is fading out in the second half of this year, which triggered an increase in fees and commission income. Secondly, we saw a very strong traction in our documentary business, and that's why you see that there is a strong increase in fees and commission income from lack of credits and guarantees.
The other element was that in fees and commission expenses, previously, we were incorporating expenses related to deposit insurance funds contribution. We believe that that is more directly linked to deposits. That's why it should be accounted in the interest expenses line. That also reduced the base and also contributed somewhat to the better net fees and commission income. That was a combination of, let's say, joint activity on the clients, but also some changes which we think better reflects overall the fees and commission business of the bank.
Okay.
Could you please repeat your question on the tax?
Yeah. The last one was just whether the tax rate is likely to increase. I think there were discussions to increase tax on banks at one point. Yeah. Where are we on that debate in the government?
We're probably in the middle of discussions yet. There are different views in terms of what the overall tax system of Kazakhstan should look like. It's not only about the banks, but also about the corporate side, SME side. It relates to VAT, it relates to corporate income tax. Probably at this point of time, there is not too much clarity from our previous discussions. That's why in our outlook, we have not incorporated any changes yet because of the unclarity. Our outlook is based on the current state of tax regime.
Okay. Maybe just one last one on margin. You're looking for margin to increase by another 30 basis points. Is that largely driven by rates, or is there something else behind that?
It is primarily driven by the growth of our interest-earning assets in terms of composition because you see that our retail portfolio was growing quicker than the corporates. That is why it is contributing to it has more contribution to the interest income line, driving the net interest margin expansion.
Sorry, maybe just on your confidence with the cost of risk guidance, given that you are, I guess, these are higher margin loans, but probably riskier as well. What is the downside risk to your—well, what is the risk, the cost of risk actually ends up being higher given high rates and your shift towards?
Yeah. Obviously, inflation situation is—inflation is somewhat increasing. That's why we carefully review our models, especially models for our retail products. That's why we cautiously somewhat adjusted our cost of risk expectations. This is our base case and based on the macro assumptions which we just discussed.
Okay. Thank you very much.
The next questions come from Ronak. Ronak, please go ahead.
Good afternoon, team. Thank you for the presentation and congratulations on the results. Just one quick follow-up on the dividends. Murat, you mentioned that the bank's policy is to pay out 50-100% depending on certain conditions. If I remember correctly, one of those conditions is capital adequacy ratio remaining above 18%. Is there a risk that the capital adequacy ratio could drop below that level?
Earlier this year, the Central Bank increased the risk weighting for retail loans, and that is the fastest growing portfolio for you. What is the risk weighted—what is the capital adequacy ratio under the new regulations? Could your capital adequacy ratio drop below 18% as a result of that?
Ronak, hello. Thank you for the question. Currently, the Central Bank, or I should say the agency for financial supervision, are not looking into revising the risk-weighted assets. In fact, the regulators are introducing the countercyclical buffer, but which exactly aiming to, let's say, can be considered as an instrument to minimize the credit to retail. It will be 2% of risk-weighted assets. Because we have substantial capital buffer above the regulatory requirements, we do not expect that it might impact our dividend policy at this point of time.
Understood. Thank you.
The next questions come from Dan Mikhaylov. Please go ahead.
Hi, this is Dan from Vergent. First of all, congratulations on the sublime set of results. I just had one question on asset quality. On the NPL breakdown, do you have an NPL breakdown between corporate and SME and retail? Where are you seeing the most NPL formation year-to-date? What is the outlook for 2025 across the different segments?
Thank you for the question. Roman Maszczyk speaking. I'd like to address this question. First of all, obviously, we have the breakdown of our NPL by business lines. Nurgul, I suppose, provided some details, but if you want a clearer picture, I can give you an overview and send you to more detailed information in our financial statements. Let's start with the corporate sector. NPL there is at around 1%, is the lowest NPL for the whole portfolios in our bank.
We have a slightly higher NPL in SME segment. When we go down to smaller and medium enterprises, NPL is rising slightly and is the highest for small businesses, individual entrepreneurs in the portfolio, but they do not contribute much to the overall SME portfolio. For retail segment, we have an NPL ratio around 3%. 4.5% is for 90+.
We would like to note that in 2024, we had a moratorium on cleaning the credit portfolio by selling NPL to external parties. This moratorium will last until April 26. We already have addressed this issue, and we take that into account forming our credit strategies for 2025 and 2026.
Please go ahead.
Sorry, I don't have any more questions. Thank you.
Okay. Thank you. The next question comes from Tom Jakobi. Please go ahead.
Tom Jakobi, Wikifolio Doppel Analyse. Can you hear me?
Yes, Tom, please go ahead.
Great. Thank you for having my question. First of all, congratulations for the very good business numbers. I've got three questions. The first is related to the buybacks of GDRs. We can read every week how many transactions there have been. I wonder what happens to the collected GDRs, and when is it going to happen? Can you give us any outlook there?
Yes, we have a dividend buyback, which was launched September last year for the duration of one year, and which is limited to 1% of the share count. We are reporting our progress on buyback regularly on our website. At this point of time, the bought-back amount is roughly $16.5 million. They are transferred to the Treasury stock. The only way they can be used at this point of time is for long-term employee incentive program, which was approved last year. Otherwise, they would not be able to come to the floating again.
Okay. So it's not the plan to withdraw or delete them, right?
Legally, they cannot be canceled according to Kazakh legislation. That is why they are kept on our Treasury stock. In order to, let's say, bring them back to circulation, there are decisions to be done by the General Shareeholders' Meeting. That is why to launch that program, we had to go to the General Shareholders' Meeting.
Oh, that's very clear. Thank you very much. Second question is about Halyk Travel and E-Com. There was a decrease quarter on quarter while mainly all the rest of business numbers really rose very well. There was a decrease. I wonder, is there any special explanation for that? Is this going to be a one-time effect, or are there other stronger platforms in this part of business?
Yes. Overall, on ecosystem, I think we have a good traction if we take some verticals like car insurance or Kino.kz and overall ecosystem. Because ecosystem, we can look from, let's say, our general approach if we include the M-Com and E-Com. On the Halyk Market, there was some decrease quarter-on-quarter basis. If you look from year-over-year basis, I think we had some strong increase in terms of the Halyk Market.
The increase was 57%. We continue to increase the number of partners, increase investment SKUs. We continue to strengthen our team. We expect that Halyk Market will continue its traction. When it comes to Halyk Travel, we were, let's say, trying to rebuild that business. We were present on one platform, and we last year devoted to moving to another platform that was affected probably last year's results. We still think that Halyk Travel is an integral part of ecosystem product suite. We expect that situation would turn around for Halyk Travel as well.
All right. Thank you. Last question block is regarding the dividends again. I had a problem acoustically to understand the planned dividend proposal. Can you repeat that, please?
The dividend proposal is to pay KZT 29.64, so KZT 29.64 per share. This is, let's say, a decision which we are presenting to the General Stakeholders Meeting to be held on the 30th of April. According to the dividend policy, we might consider the second dividend payments in the second half of this year.
Yeah. That is what my question is going for. Is it correct? I try to understand the GDR pricing structure and the fees. Is it correct that a second dividend would mean a second fee of $0.02 because they earn the dividend fee every time a dividend is going to be paid? If this is the case, I would say it's way better to do only one dividend a year. Is it true?
Yeah. We have dividend fee, which is related to each dividend payment, but also there is cap for the year.
Oh, okay. I see. Can you name the amount of the cap?
It is $0.03 per GDR for the year. This is the cap.
Okay. That has been my question. Thank you very much.
The next questions come from Mikhail Butkov. Please go ahead.
Yeah, thank you. I just had some follow-up questions. One, you mentioned changing structure of interest on assets and its growing contribution. I wonder what level of loan-to-deposit ratio you see as comfortable or sustainable. It has increased quite significantly over the last three to four years from, I think, around 70% to 90%. Can you see that at the level of 100%? Yeah, how do you think about that from ALM also perspective?
From ALM perspective, we are not focusing on loan-to-dividend. There are different ratios.
Loan-to-dividend?
Loan-to-deposit, sorry. We are targeting different ratios, which better reflects the overall asset liability and cash flow perspective. Also, I want to highlight that currently our liabilities are to a large extent represented by deposits. We, I think, have substantial capacity to go and to borrow without any—do not consider that as a guidance, but simply consider that as a potential capacity to expand and further diversify our liability basis.
Okay. Okay. Thank you. Just one other follow-up, again, on the interest income from interbank operations. You mentioned that you changed structure from overnight placements to one-week deposit placements. I wonder why it brings that much difference compared maybe to the previous year as the interest rate did not fluctuate maybe that much. I mean, and the difference in cumulative return on overnight placements versus one week, are they really that different to drive?
It's not only this, which is influencing. You also have to look for the currency composition. In previous years, there might be different currency composition. In dollar terms, it's much lower rates compared to tenge. Last year, we placed more tenge in these instruments, which probably might be a different explanation for the difference.
Okay. That is clear now. Thank you. Thank you very much.
The next questions come from Simon Nellis. Simon, please go ahead.
Hi. Yeah, just a quick follow-up from me on asset quality. You mentioned that there's a moratorium on, I think, selling retail loans to third parties. That only expires in April of next year. Is that right? What impact is this having on NPLs? Would you expect accelerated NPL work when you are able to, when this moratorium ends?
Yes. The moratorium is for two years. It was implemented on the 1st of April of 2024. According to plan, it will last until April 2026. As regards its impact, it affects our cleaning opportunities of our portfolio, our possibilities. We think that we can manage this challenge. We do not expect an exceptional increase in NPL ratios this year and next year.
Do you think you've actually saved money by doing this internally rather than outsourcing?
By selling NPLs, we could realize the cash flow almost immediately. Right now, we have to wait longer for realizing the collections. It is a balanced picture. We are taking that cash flow perspective into account when we assess the quality of the portfolio and the targets, our internal targets for the quality of the portfolio over the next year.
Thanks. Actually, one more from me on the workout of problem loans that are collateralized by SPVs. I think you have a slide, slide 54. I was surprised that this is actually stable. I think it's been going down in the past. Why are you seeing inflows of these types of assets? I thought this was a legacy.
These are legacy assets.
What is okay. But why aren't they going down faster?
Sure. Go ahead.
Yeah. Let me probably step in, Simon. It really depends on particular problem assets which are on our balance sheet. We have the possibility to make workout procedures out of our balance sheet or through our SPVs. It is really depending on the type. Sometimes it is more appropriate and quick to do it from the bank's balance sheet. Sometimes it is better from a practical point of view to do it through SPVs. That not necessarily will be considered as a link to the size of the problems, but the compositional loans which are inside the portfolio.
Okay. Over time, you still expect this number to go down. Would you be realizing these assets at a profit? Is that fair to say?
Yeah. Actually, we see good progress on the SPV side. We are quite happy with their performance. They are really contributing to the overall workout process of our problem loans.
Okay. Thank you.
The last questions come from the Q&A chat from Kuanysh Tuya kov. Could you tell, please, how, in your opinion, the expected tightening on regulatory capital requirements for second-tier banks will impact Halyk Bank's consumer lending segment?
Kuanysh, thank you for the question. I think I already answered that earlier, but let me repeat. Basically, we are talking about the potential introduction of countercyclical buffer, which would be 2% of risk-weighted assets related to retail loans. Because we have substantial buffer in our capital far above the minimum regulatory requirements, we do not expect it might be impacting the bank in terms of our business plans or in terms of our dividend policy.
Dear ladies and gentlemen, it seems there are 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.