Good day, ladies and gentlemen. Thank you for joining us on this conference call to review Halyk Bank of Kazakhstan JSC's unaudited financial results for the first half of 2025. My name is Mira Tiyanak, and I am Head of FI and IR. We have our executive team joining us on the call today, including Ms. Umut Shayakhmetova, Chief Executive Officer, Mr. Daryan Sartai, First Deputy CEO for B2B Banking, Marketing, PR and Acquiring, Mr. Murat Koshenov, CFO and Deputy CEO for Finance, Subsidiaries, Compliance, and International Activities, Mr. Roman Maszczyk, Deputy CEO for Risk Management, Data Science, and Collateral, Ms. Olga Vouras, Deputy CEO for Corporate Banking, Mr. Nariman Mukhushef, Deputy CEO for B2C Banking and Digital Government Services, Mr. Andrey Zavarzin, Deputy CEO for IT and Ecosystem, Mr. Viktor Skryl, Strategy Director, Mr. Almas Makhanov, Finance Director, and Rustam Telish and Nurgul Mukhadi from the IR team.
The format for the call today is as follows. We will start with our presentation by the Halyk team covering our B2C and B2B business segments, a new strategic partnership in Uzbekistan, and the first half financial results. We will open up the floor for a Q&A session, and please note that this call is being recorded. We will begin today with an update on the B2C segment. Let us remind you that our B2C platform, the Halyk SuperApp, forms the core of our digital ecosystem and gives consumers access to our banking and finance services, as well as a broad array of lifestyle solutions that help them manage their daily lives. In the first half of the year, we saw the number and volume of transactions carried out through the Halyk SuperApp grow by almost 32% and 26% year-on-year, respectively.
The SuperApp now has 8 million monthly active users, including 5.6 million who carried out transactions and 2.8 million daily active users. Halyk Bank of Kazakhstan JSC has a total of 11.1 million active clients at the end of the first half, and we account for 38% of active salary cards in Kazakhstan. 94% of the retail loans we issue are arranged through the SuperApp. Our gross B2C loan book rose by 20.6% since Q2 of last year, reaching ₸ 4.3 trillion, though on the back of low loan issuance, and we have an 18% market share for retail loans in total. In terms of deposits, Halyk Bank of Kazakhstan JSC has a 28.7% market share in the country and 70% comprise the deposits in ₸. A full 94% of deposits are now open digitally through the SuperApp.
Q2 saw a large increase in the number of deposits opened to almost 275,000. B2C deposits grew by 5%, further strengthening our leading market position. Next slide, please. Taking a look at some of the value-added services in our digital ecosystem, you can see remarkable growth in our car insurance offering with a 45% year-on-year increase in the number of clients and a twofold growth in the volume of premiums. The GMV of our entertainment tickets platform, Kino.kz, grew by 21%, while the number of tickets sold increased by 2.6%, showcasing increasing user engagement. Travel bookings grew by 18% as compared to the first half of the last year. Next slide, please. Halyk Marketplace and Halyk Market both saw GMV growth by more than 24%. We have substantially more partners working with us versus a year ago, thereby increasing product choice for consumers.
Halyk Market now has almost three times as many SKUs as it did just one year ago. Next slide, please. Now, let's move to our digital brokerage platforms, where we offer two key solutions: Halyk Invest in an app solution within our SuperApp 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 active clients rose by 50% as compared to Q2 2024, and transaction volume expanded by 58%, highlighting an increased client engagement. Assets under management and total brokerage assets were both substantially high year-on-year as of the end of the second quarter. I should also note that Halyk has a 67% share of pension assets under management and 66% market share among private asset managers. Now, we will move on and take a look at our B2B segments.
Let me again remind you that Online Bank is our platform for the B2B segment, offering a range of tools to help our commercial clients and particularly small and medium-sized enterprises with banking, lending, insurance, payroll solutions, and more, as well as access to Halyk Marketplace. Next slide, please. Monthly Online Bank stands at 313,000, including 227,000 monthly transactional users during the second quarter. Daily active users stand at 107,000, and in the first half of the year, the number of payments processed through the platform rose by over 25% year-on-year, and the volume of transactions was 26% higher at ₸ 71.6 trillion. Next slide, please. 63% of our corporate loan portfolio are in local currency. As you can see from the industry breakdown on the right, we finance clients across a range of sectors, from trade businesses to industrial enterprises in every industry.
Our corporate loan book has grown by 15.6% since Q2 of last year. Halyk Bank works with 86% of Kazakhstan's largest taxpayers and accounts for 49% of loans to legal entities, along with 33% of their deposits. We have strong product penetration among our 3,000 active commercial clients who carried out 2.4 million transactions during the second quarter. Next slide, please. You can see here that our gross SME loan portfolio is up 21.4% year-on-year, while digital loans in particular are up over 15%. We continue to see a notable growth in issuance of digital performance and bid bonds via our platform. 92% of new loans were issued via B2B Online Bank, reflecting our strong digital capabilities. Our SME clients carried out 4.8 million transactions for the amount of ₸13.3 trillion per month during the second quarter. Now, let me update you on creating a strategic partnership in Uzbekistan.
We would like firstly to highlight that Uzbekistan remains a strategic market and is a natural fit for Halyk, and Uzbekistan is one of the largest trading partners for Kazakhstan, engaging businesses from both sides. In addition, there are strong cultural and interpersonal ties. Next slide, please. Strategic agreement with Click allows us to scale up our existing banking business, with a reach to millions of users of Click SuperApp by passing years of organic build. Next slide, please. Both Halyk and Click would be creating a leading digital financial platform in Uzbekistan via reciprocal shareholding. tenge Bank provides a full suite of bank products, whereas Click is bringing on one SuperApp, retail payments, lifestyle, and nursing services. Our joint focus would be on retail, SME, and IE segments, developing transactional and ecosystem products. Next slide, please.
Through partnership with Click, our total addressable market in Kazakhstan and Uzbekistan is reaching 57 million people. Aggregate B2C client base is reaching a circa 33 million. In addition, we are capturing aggregate total payment volume in the amount of $316 billion USD for the both markets, as measured by statistics for 2024. Next slide, please. Click demonstrates robust operational and financial performance. Total payment volume increased by 30.3% in the first half of 2025, and revenue and net income increased by 25.8% and 28.3%, respectively, for the same period. Next slide, please. The transaction structure makes tenge Bank and Click strategically aligned and operationally independent. Partnership with Click enhances Halyk's digital capabilities and footprint in Uzbekistan and unlocks cross-sell and fee-based revenues. Now, let me pass the floor to my colleague, Rustam Telish, from IR team. Thank you.
Thank you, Mira, and good day, everyone. I will take you through the financial results for the first half 2025. Here you can see the composition of the net income growth in the first half 2025 versus the first half 2024. It was primarily driven by the increase of net interest income by 27.2% year-on-year and other expenses, non-interest income, which was impacted by the phase effect of one of the recognized laws in a view of expected yearly repayment of the deposit of TSM in accordance with the IR process in the first quarter of 2024. Net income was negatively affected by excess profit tax, which was introduced on profits from certain banking operations for 2025 only. The net income growth adjusted to the repayment of the deposit of TSM and excess profit tax would be 19.8%. Next slide, please. Here's a quick look at the balance sheet.
Total assets of the group increased by 5.8% year to date due to increase in amounts due to customers. Average interest earning assets at the same period grew by 21.6%, which led to an increase in its share in total assets from 91.9% to 93.3%. Total deposits to total liabilities ratio was at the level of 83.7%. Total equity of the bank increased by 4% compared to the year end 2024, mainly due to net profit earned by the bank during the first half of 2025. Loans to deposits ratio was at 85.4%. Next slide, please. Interest income for the first half of 2025 was up 27.4% versus the first half of 2024, mainly due to increased average balances of loans to customers.
Interest expense for the first half of 2025 increased by 27.6% versus the first half of 2024, mainly as a result of the increase in average rate and balances of amounts due to customers, as well as the growth in the share of TZT amounts due to customers. Despite the increase in average rates in amounts due to customers in the first half of 2025, NIM was positively impacted by the increase in share of total interest earning assets versus total interest-bearing liabilities, as well as an increase in the share of TZT interest earning cash and cash equivalents. As a result, net interest margin has grown to 7.2% for the first half of 2025 compared to 6.9% for the first half of 2024. Next slide, please. In the first half of 2025, the average rate of total interest earning assets has grown to 14.6%.
The average rates on securities grew to 8% in the first half of 2025, mainly due to the increase in the share of TZT securities and growth in the rates of fixed securities. The increase of rate of amounts due from credit institutions and interest-earning cash and cash equivalents from 10.5% in the first half of 2024 to 13.3% in the first half of 2025 was due to an increase in short-term TZT deposits with NBRK. Next slide, please. Average rate of total interest-bearing liabilities has increased by 0.9% from 8.2% in the first quarter of 2025 to 9.1% in the second quarter of 2025, mostly due to higher interest rates on amounts due to customers following the increase of base rate in March 2025. Next slide, please.
In the first half of 2025 compared to the first half of 2024, the overall dynamics of fee and commission income and expense was driven by the increased number of clients and the growth of clients' transactional activity. Net fee and commission income for the first half of 2025 increased by 11.2% versus the first half of 2024 due to an increase in net transactional income of legal entities, as well as in fees on letters of credits and guarantees issued. Net transactional income of individuals slightly decreased due to the increase in the amounts of bonuses from the loyalty program. Next slide, please. Here's an overview of operating expenses, which increased by 26.5% versus the first half of 2024, mainly due to the fixation of salaries and other employee benefits, including the cost of the long-term incentive program, as well as IT development-related costs.
The cost-to-income ratio decreased to 17.2% compared to 18.5% for the first half of 2024, amid higher rate income for the first half of 2025. Next slide, please. Compared with the year end of 2024, loans to customers were up 2.54% on a gross and net basis, with retail loans growing by 4.3%, while the loan portfolio of legal entities increased by 1.4% on a gross basis. The share of fixed loans on total net loans was 22%. Next slide, please. Cost of risk in the first half of 2025 was at the level of 1.4% compared to 1.3% in the first half of 2024. Next slide, please. TSG loans decreased to 6.6% at the end of the second quarter of 2025 as a result of the work-out of problem loans and loan portfolio growth. Next slide, please.
Compared with the year end 2024, the deposits of legal entities and deposits of individuals were up 8% and 4.1%, respectively, due to fund inflow from the bank's clients. At the end of the first half of 2025, the share of TZT deposits in total deposits was 72.1% compared to 69.1% as of the year end 2024. In corporate deposits, the share was 74.2% versus 70.9% at the year end 2024, while the share in total retail deposits was 70.1% versus 67.5% at the year end 2024. Next slide, please. On consolidated basis, capital adequacy ratio of the bank decreased to 18.1% in the first half of 2025 as a result of dividends paid by the bank for the financial year of 2024. RWA were up by 3.8% following the increase of retail loan portfolio. Next slide, please.
This slide summarizes the regulatory changes to minimum reserve requirements for the second-tier banks in Kazakhstan. On the left, you can see a comparison between the current and amended minimum reserve requirements standards. Minimum reserve requirements increased to 5% for Category 1 and 2 TZT liabilities and to 3.5% for Category 3 TZT liabilities. For fixed liabilities, minimum reserve requirements increased to 15% for Category 1 and 2 and to 10% for Category 3. The right table shows the stepwise implementation schedule. Transition is split into three phases: September 2025, April 2026, and September 2026. On the bottom, the definition of categories clarifies which liabilities are included in each category. Category 1 standard short and long-term liabilities except repos and bonds. Category 2 direct repos adjusted for reverse repo and interbank market positions. Category 3 is long-term bonds with no early redemption and that are not used for liquidity management.
Additionally, banks that have outstanding state prep support must set aside an extra 10% minimum reserve requirements on that amount. Next slide, please. Based on our six-month financial results, we have updated the outlook for the full year of 2025. Retail, corporate, and SME net loan portfolio growth is expected to be in the range of 15% - 20%. Growth of net fee and commission income is expected to be in the range of 10% - 15%. Cost of risk is projected to be in the area of 1.4%. Consolidated net income is expected to be in the area of ₸1 tr illion. Net income guidance was corrected mostly due to the increase of minimum reserve requirements, as well as the introduction of excess profits income. Return on average equity is expected to be more than 30%. Net interest margin is estimated to be in the area of 7%.
NIM guidance was partially by increase of minimum reserve requirements. Cost-to-income ratio is projected to be in the range of 17% to 19%. Dear ladies and gentlemen, this completes our presentation. Now, we would like to open the floor for your questions, please. Just a quick introduction. To state a question, you can raise your hand in Zoom, or if you joined via cell phone, please press #9. To raise your hand, say your question in written form via chat. While stating your question, please also mention your name and company. I will ask questions coming from Milosz. Please, Milosz.
Yes, hello. Thank you for the presentation. I take my questions. Firstly, it's Milosz from Edison Group. Firstly, I wanted to ask, what do you think Halyk is in the deposit revising cycle? And you know, what are your expectations in terms of your average cost of funding in the second half of the year? We've obviously seen a pickup in Q2 compared to Q4 last year, so over the first half of the year, which is partly due to higher deposit rates and partly due to a higher share of tenured deposits. Maybe if you could talk us through your expectations on the change in the cost of funding, excluding any change in the share of tenured deposits.
Secondly, can you maybe shed some light on the possible reasons behind the somewhat slower growth in your retail loan book in the first half of the year and the reduced outlook for 2025? Is it due to the impact of regulations, higher competition, or for other reasons? Thirdly, I saw that you have moved some of your corporate exposures from stage one to stage two in the second quarter due to an increase in the credit risk caused by a temporary deterioration in the operating performance of some of your customers. I think it was coupled with a lower provisioning rate for your stage two loans. Maybe you can also shed some light on that. Thank you.
Hello, Mira. Thank you for the question. There were a number of them, so let's hit them one by one. Regarding the funding costs, as you mentioned, there are a few reasons which were impacting higher funding costs. First of all, the general increase in rates because the Central Bank, the National Bank of Kazakhstan, increased the base rate from 15.25% to 16.5% during the course of the first half of this year, which was impacting the overall interest rate environment. That also increased the rates, especially the deposit rates on the retail side. Secondly, despite some weakening of tenge, as you see from this slide, the share of tenge deposits increased, both on the retail and B2B side, which also increased the funding cost.
If we switch to NIM, that was also partially affected by the fact that deposits growth was higher than the growth in the lending book, which had some headwinds on the net interest margin. With regards to this cycle, as we were mentioning a few times, actually, we see that the first repricing is coming on the funding side, on the liability side, and it requires around two quarters or three quarters for the lending book to start picking up. We expect that in the second half of this year, that stabilization would start happening, irrespective of the fact that, starting from September this year, the National Bank of Kazakhstan would introduce higher minimum reserve requirement rates, which in itself would be having some negative impact on NIM.
While we were providing the guidance for NIM as a 7% for the full year, we also take into account the impacts from higher minimum reserve requirements, because we'll be earning no interest on the money which is set as a reserve asset. Given the fact that the overall interest rate environment is high, that also would be quite noticeable impacts from NIM perspective. With regards to growth on the retail side, I think there are a few reasons for that. First of all, the higher base, the higher base because our retail book was growing rather quickly during the last few years. In order to keep up the growth in the lending portfolio, we need to be in line in terms of the issuance of new loans. First of all, I would mention the base rate. Secondly, the impacts from the regulation.
Regulation was gradually tightening different requirements on retail lending during the last periods. For example, some of the regulatory requirements kicked up in the second half of last year, like, for example, getting the costs from the spouse for loans exceeding certain % amounts or getting some additional information for people new to loans, especially for younger age or older age people. These kinds of regulations are also impacting the overall growth of the retail book. Thirdly, the overall higher interest rate and inflation is impacting the real disposable income of the population, which leads us to be a bit more cautious on the lending side in terms of the approval rates.
We also mentioned that there are some other things like regulating reduced maximum rate on mortgages, which actually slowed down the use of new mortgages, certain more aggressive action on the auto loans from some competition, which we were not willing to fight for, basically unprofitable issues of auto loans. We see that currently the situation has improved. We would be starting our more active auto loans issues in the second half of this year. That's why overall, if you see for the guidance, it's showing quite a healthy projection for retail growth for the second half of this year compared to the first half of this year. I think you also had a question on the stage two loans. Actually, we had a number of corporate customers, from large corporate and medium-sized, where we had some temporal deterioration in operation performance of these customers. They are from different sectors.
They are not, in our opinion, having some systemic situation. That is cases which are isolated to that customers. That's why there was some increase from stage one to stage two loans. At the same time, we pointed that stage three loans actually somewhat reduced in the second quarter. We can also add that on these loans which were transitioned from the stage one to stage two, there is a good situation in terms of their collateral coverage. We feel that the amount of provisions which we created and the cost of risk which we are allocating in our budgets for the rest of the year would be sufficient to further that situation.
Yes, thank you. That's all clear. Maybe just one follow-up question to my first question. I mean, if you isolate the impact of the, you know, minimum reserve requirements impacts and the change in tenure deposits and the fact that deposits outpace your loan growth, can you share any expectations on just the average deposit rates in the second half of the year? This is where we are now. Do you expect a further pickup in the deposit rates in the current quarter?
No, we expect that on deposits, if there will be change, it will not be material. In our opinion, the larger portion of deposits has been repressed.
Excellent. Thank you so much.
The next questions come from Mikhail Butkov. Please, Mikhail.
Good day. Thank you very much for a comprehensive presentation. I have a few questions. Firstly, on taxation. It looks like that in the second quarter, your taxation cost was a little bit more than normal already. Did you frontload some of the costs already for the second quarter? I wonder how much of incremental taxation costs related to the tax code is left for the second half of the year and 2026, maybe? I also had a question continuing on the last one on net interest margin. Isolating the increase in reserve requirements, would you expect the loan-to-deposit spread to increase in the second half of the year, given that, as far as I understand, you expect deposits have peaked now, while loan yields still have room for increase?
Lastly, if you could once again clarify what you expect to be the drivers of growth acceleration in the second half for the corporate and the retail lending, we would also appreciate those comments. Thank you very much.
Michael, thank you for your question. Again, very comprehensive number of questions. Let me pick them one by one. Regarding the taxes, we recently saw that in the current tax code, there was some amendment introduced, which would be applicable for 2025 only. It will not be applicable for the next year or for the new tax code. This is actually the excess profit tax, which would be applicable for banks regarding certain types of profits, which primarily would include profits from state securities, but also would have some elements of repo derivatives and placement with the central bank. Because the Senate signed these amendments in the end of June, we set aside, we already allocated the pro rata on pro rata basis amounts which would be attributed for the first half because this excess profit tax would be applicable for the entire year. Indeed, a good catch.
Around ₸20 billion of profit of the corporate income tax is attributed to excess profit tax. The remainder would be allocated for the second half. The total impact for the year would be around ₸38 billion. Your second question was on the margins. Is this what I remember?
Yes, correct. On loan deposit spread into the second half, would you expect it to increase, isolating the impact of the reserve requirements?
We expect that there will be no substantial change because we expect the pickup in the lending and also the lending in the retail book. That's why we think that situation on the interest rate splits will be more or less stable in the second half of this year.
If you expect an increase in lending book, your loan-to-deposit ratio should improve, possibly somewhat in the second half plus. Also, the question, do you see that loan yields have repriced to the terminal level in response to the latest hike, or is there still some room for the repricing of loan yields upwards?
On the loans, there will be still repricing because certain loans are being matured and new issues are at high rates. If you see that we are allocating a certain increase in loan book in the second half, which would be coming with the new rates.
Okay. Understood. If you once again could clarify on the lending growth, what do you expect to be the drivers of acceleration in the second half, both on retail and corporate lending?
Yeah. On retail, as I said, there were certain products which were impacted, like on the mortgages. We see that the regulator is likely to reverse the decision. We're expecting at least that. At least the market is expecting certain decisions. Secondly, on auto loans, as I mentioned, we expect better market conditions for the margins, which would enable us to be more active on auto loans. On retail, because we saw some slowdown, the base effect has been improved because there were no major regulatory changes in place. That effect would be gradually fading out. We expect that retail loan book would start picking up more actively. On retail, on the corporate and SME, we are looking at a pipeline of loans and transactions which we have. That's why these are providing us the base for keeping the guidance at the previous level.
All right. Thank you. Very helpful. Just one last clarification on taxation. Basically, you prorated already the tax related to extra profits. Did I understand it correctly that you do not expect it to repeat in 2026? This taxation on extra profits, taxation on securities, on repo derivatives. Are there any other regulations which we should be aware of, except, once again, taxation on government securities and repo, and the increase of minimum reserve requirement, which is for this year?
The excess profit tax, as I said, is introduced for 2025 only. From next year, we expect that new tax codes would be active. We do not have, let's say, the full scope of the impacts. I think we will be providing that once we will be finalizing this year and providing guidance for next year.
Okay, thank you very much. This is very helpful and very clear. Thank you.
The next question comes from Tom Jakobi. Please, Tom, go ahead.
Yes, can you hear me?
Yes.
Wonderful. Yeah, this is Tom Jakobi from the Wikifolio Doppel Analyse. I've got three question blocks in a similar direction which we have heard before. First is related to the minimum reserve as well, but not in the direction of costs. I wonder, will there be any slowdown or even shrinking in your business related to this minimum reserve because you can't spend too much money into loans or whatever? Second question is about the taxes and the taxes regarding 2026. I have read that the corporate tax for banks is fixed now. It should rise from 20% to 25%. Can you confirm that? And that there's going to be a turnover tax for banks as well. I really wonder where on which products this turnover tax will come on top.
Will this more or less be related to the fee section, or will it even be related to some interest sections? Third and last question is about the Russian invasion. Are there any forecasts for Kazakhstan's economy as a whole? Are possible peace there and the release of all sanctions? What it would, how it would affect the Kazakhstan economy? Thank you.
Tom, thank you for your question. Regarding the minimum reserve requirements, indeed, this is one of the instruments in the arsenal of the central banks in order to influence their policies next to the interest rates. The National Bank of Kazakhstan said that our minimum reserve requirements are far below compared to some other neighboring countries. That's why they also decided to more actively use that instrument. Indeed, one of the aims is to have it as another measure to control the inflation, to counter the inflation. In that sense, obviously, it might impact the credit activity of the banks. At the same time, we feel the bank has substantial capacity of the funding, and especially if you see from the first half results when our deposits were growing quicker than the lending book.
On top of already a very robust funding position before, the introduction of minimum reserve requirements itself would not be, let's say, limiting us in terms of the guidance, at least the guidance which we're providing for this year. Regarding the tax code for 2026, indeed, there are some changes which will be impacting the banks or our clients, like increasing in the VAT level from 12% to 16%, introducing corporate income tax for the banks at the level of 25%. At the same time, there will be certain lower tax rates applicable for lending, which is allocated to so-called real economy. That's an entirely different tax code, which is quite big, and it requires a very thorough understanding of all the peculiarities. Not everything is described in the tax code itself. There are certain references to be made in the bylaws. Not all bylaws are introduced yet.
From a current perspective, we cannot provide, let's say, the full scope of the impact. As I said, we need time in order to fully digest and have all these set of bylaws to be available to us as well.
Yeah, understood. Can you explain on which products that VAT will come on top?
The 25% would be the general corporate income tax. For income which is generated from lending to real economy, the applicable tax rate would be 20%. The way how it will be calculated should be available in the bylaws, which is not introduced at this point of time. It is a work in progress. Regarding your question on the Ukrainian situation, it's already more than three years. Obviously, the economy in the entire region, the economy in Kazakhstan has adapted. The banks have adapted. We are following very strict rules, which is also impacting in certain ways the clients because not all the operations which were available four years ago are available now. As I said, the regulators, companies, economy, and the banks have fully adapted.
Is there anything like a forecast on science, for example, from the Central Bank, how a possible peace would affect the Kazakhstan economy as a whole?
We didn't see such analytics. I think the situation is so complex that it's really difficult to provide with guidance. I think no one knows what the agreements, for example, would be reached in the next few weeks. I have not seen any even global or regional analytics in that regard.
Okay. Thank you very much. It would be cool to get an update on the tax questions in the next running call.
Thank you.
The next question comes from Olga Naidenova. Olga, please go ahead.
Yes. Can you hear me? Yes. Thank you very much for the call and for taking my questions. I'm Olga from Roemer. I have two questions remaining. One, to follow up on margins. Maybe do you have floating rates on your asset side, particularly in the loan book? If you can share the proportion, that would be great. My second question relates to dividends. We saw today the recommendation. Is it fair to assume that this is the end of 2024 distribution and whether we should expect maybe not from 2025 distribution already this year, but maybe you would shift to distributing the first proportion of current year in net income earlier, not distributing the previous year's earnings? Is there a thought in that direction? Thank you.
Regarding the repricing, we have a mixed situation on retail and small businesses and medium-sized businesses. We do not have repricing incorporated in already provided loans. Depending on the situation on the interest rates, we can amend on the program basis, like new level of the loans, which would be applicable through new borrowings to new credits. With regards to corporates, we also have a different situation. We have certain facilities which are fully repriced during the life of the loan, including loans which are provided in US dollars, where repricing is based on the software rates. On the tenge side, we also have cases where on the working capital facilities, the rates are fixed for the drawdown amount. Because it's a working capital, it's short-term tranches, the new loan, the new tranches are provided at new repricing level.
There are certain agreements at longer-term facilities which have certain capabilities for the bank to reprice the loan. I would say, it's a semi-repriced type of situation. Regarding the dividends, according to the law, we can distribute dividends from the current year only if there are fully audited results. We have fully audited results only for the full year. The quarterly results, they are reviewed by the audit. In that sense, it's not fully audited results on which we would be able to make a decision on dividend distribution. That's why when we introduce the semi-annual payments, actually, the second payment is always based on distribution from retained earnings for previous years.
Thank you very much. Maybe your capital distribution policy does not incorporate buybacks, I mean, like the maximum amount. What policies do you expect in that regard?
On buybacks, we last year introduced that instrument in our arsenal. Currently, we have an existing buyback program for 1% of outstanding shares. I think it will be finished somewhere in September this year. We'll be discussing internally in terms of whether we would be willing to introduce a new program or extend the existing program.
The next question comes from Can Demir . If you go ahead, Can.
Yes, thank you. Good afternoon. Maybe, Murat, you already answered the question, but I missed it. How much of the margin guidance revision comes from the increase in reserve requirements? Would you expect this reserve requirement or the increase in reserve requirements to be reversed in 2026? I'm just trying to understand if this is a financial stability measure or is it more a monetary policy measure? That's the first question. The second question is on your roadmap in Uzbekistan. Could you shed some light on that? The third question is on costs. You still do very well on the cost-to-income side, so no complaints, at least from my side. There was a 37% year-on-year increase in personnel expenses. What does that really tell us? This far exceeds inflation. Is it something that has to do with talent retention? Does it have anything to do with competition?
How should we think about it? Thank you.
Thank you for your questions. Regarding the impact of minimum reserve requirements, the ballpark impact would be for the rest of the year, 10 basis points. In the situation, if the minimum reserve requirements would not be introduced, the guidance for NIM would be 7.1. This is the impact, let's say, of the minimum reserve requirement. It will not go next year. We would wish so, but in fact, it would be increased in stages, as you will see from this slide. We expect a high impact for the next year. Regarding your question on Uzbekistan, we provided an update already after we signed the agreements on our, let's say, strategic agreements with, hopefully, our new partners to be in Uzbekistan, Click. This is the leading payment super app in Uzbekistan. They actually were pioneers in introducing the payment platform in Uzbekistan.
They have license number one, and they started the business in 2011-2012. They have more than 20 million users on their platform. This is the super app which is providing the payment solution, lifestyle solutions, merchant services. We in Uzbekistan have our bank, which we started as a greenfield six years ago, which has a robust banking platform. We have a good number of new products. Some of them are innovative in the market of Uzbekistan, like digital onboarding of SME clients, digital lending of SME clients. We are the first bank to introduce that product on the market. We were lacking the scale in terms of providing our banking solution to the wider population. Click on itself is a very strong payment lifestyle and merchant services on the super app, but they were lacking banking products. We believe that our partnership is very complementary to both parties.
The transaction is structured in the sense that it's providing cross-shareholding, the reciprocal shareholding, which allows us to fully align on a strategic basis, but would retain the operational dependence, which is, in our opinion, is very important because we see that Click is operating as a fintech. We understand that a certain, let's say, more agile approach is required to be maintained on the Click side. We are very excited about the new opportunities which would be hopefully open to us in Uzbekistan. It's opening completely new horizons, additional horizons in Uzbekistan. We're currently in the process of regulatory approvals, and hopefully, we expect transactions to be closed in the first quarter of this year.
When you say unlocks cross-sell, I'm just trying to understand what products we're talking about. I mean, can you give us an idea, or is it strategically not convenient to talk about those things?
It's like bringing the banking products, lending products, and deposit products closer to the clients of the Click super app and vice versa, making payment solution, lifestyle solution more accessible to the current client base of the bank.
Just general by general product range.
Yeah. On the OpEx side, there was mostly increase on the employee benefits. We already previously announced that we introduced a long-term incentive program for top management and key people in the middle management of the bank. That was one of the main reasons for increase in the salaries and employee benefits line of the operating expenses.
Okay. In terms of the pace at which the expenses are growing, this is probably not a good quarter to take as a reference, right? I mean, it.
Yeah, certain expenses were introduced in the first quarter, as you see. There is a small increase in the second quarter vis-à-vis the first quarter. There's also some regular, let's say, review of the salaries because we are in a higher inflation environment. That's why we also need to regularly review the salaries of our employees. The cost-to-income level remains at a very healthy level.
Got it. Thank you very much. That's all from my end.
The next question comes from Ronak . Please, go ahead.
Hi. Good afternoon, Murat and the team. Congratulations for the results, and thanks for taking my questions. Mine really are just more or less follow-ups from the previous callers. Maybe to start from where Chan left on OpEx, like you mentioned, the big increase there was salary indexation. If you could just give a bit more details on what that really means and what we should be projecting in terms of salary or wage inflation going forward. Is it inflation plus 2%, 3%, 4%? Some guidance on that would be useful. Going back to the regulatory questions, firstly on the CRR. Thanks for all the details. Given the details that you provided and taking into consideration your current funding profile, what is the effective CRR ratio requirement for Halyk on your total funding base? Is it September? Is it April next year and September next year?
It would be useful if you could just provide what the effective CRR requirement for Halyk would be. Likewise, from a tax rate perspective, like you said, it's still very, very early days. You're still looking for various bylaws to be clarified, introduced, published. Based on what you've said, there's going to be a corporate tax rate of 25% and then 20% for lending to the real economy. Would it be fair to assume that the corporate tax rate or the effective tax rate for Halyk would be somewhere in the range of 20% - 25%? Or could it potentially land lower given the deferred tax assets that the bank has accumulated in the past? The last one, sorry, too many questions. The last one on dividends, break dividend again for the second quarter. By my estimates, the payout ratio is now up to 60%.
Is this somewhere where we can expect it to remain sustainably, or is this just a one-off because of the exceptional profits that the bank is generating this year? Thank you.
Thank you for your question. Regarding the salaries and other employee benefits, we have elements of continued impact and more, let's say, element close to one-offs. On the one-offs, we are talking about the employee long-term employee incentive program, which was introduced end of last year. That's having more kind of one-off elements. We are reviewing salaries on a regular basis. That is for general staff in order to adjust for the market condition. On top of that, I should also add that the structure of our staff base is also structurally changing because of the continuous digitalization of our services. We are reducing employees which are employed in the routine basis. It can be people in the branches and also people in the third quarters, mostly in the back offices level.
At the same time, we are increasing the number of staff which is devoted to IT, digitalization, data, AI, the new product developments because we are fully moving into bringing more products which will be enhancing our digital story, which will be enhancing our lifestyle solution, which will be enhancing our ecosystem in general. That is also increasing the salaries base. At the same time, we believe that it's actually providing the guide into new areas of the project or simply enable us to be more sustainable in terms of the growing projects going forward. Regarding the corporate income, the subject, I guess you meaning the tax reserve ratio or minimum reserve requirements, I think we provided these slides that in more detail where we're showing the stages and levels which will be introduced.
As I said, the current impacts from a margin perspective would be around 10 basis points until the end of this year. Now, t hat is only for four months, and the next year will be full impact. Probably you can make some assessments getting these figures from our presentation. Regarding the corporate income tax, again, to repeat, there will be a new entire corporate tax code introduced from next year. There will be many elements which will be introduced. Some of them will be impacting business. Some will be impacting our clients. We do not know the full details at this point in time in order to have a more exact assessment. Regarding the dividends, in terms of the timing and amounts, I think timing-wise, we link that this year to the first half results.
We try to do it as well as practically possible. Let's hope we will be able to maintain that timeline going forward. In terms of percentage-wise, I think we had some comfortable level of capital adequacy. We're standing above 18%. In our dividend policy, we have the reference rate of 70%. We're comfortable about that. That's why we're able to provide recommendation to make dividends in the amount of 25% of the last year results, which on an annual basis is equal to 60% of the net profits of 2024.
Okay. Just very quickly on the MRR/CRR. When I look at the balance sheet for the bank, most of the liabilities are tenge denominated. Would it be fair to assume that the effective CRR for the bank, MRR for the bank, should be roughly somewhere in the range of, let's say, 7% or so of deposits or of total funding?
There might be certain variations. Please don't take it as an exact guidance.
Sure. No, understood. Thank you very much. Looking forward to catching up again. Thank you.
Question comes from Dan Mikhaylov. Please, Dan, go ahead.
Hi, this is Dan from Vergent. Congratulations on the results. I just had one question on corporate loans growth year to date. If I look at Halyk Bank of Kazakhstan JSC's published data for the system, it appears that loans to legal entities by second-tier banks grew slightly more than 6% quarter on quarter. At the same time, your corporate loans growth this quarter was, if I'm not mistaken, more like 3%. I think the market share slide on your last page of the presentation corroborates that there is a market share loss reported. I was wondering if you could provide some commentary around your hesitancy to originate more loans. Was it a matter of pricing? Was it a matter of asset quality considerations? That would be very helpful. Thank you.
Dan, thank you for the question. Yeah, indeed, we see that the market was growing slightly higher than our own book. We saw that certain players on the market were quite aggressive on the pricing, which, in our opinion, was not justified to engage in that pricing situation. We believe that the loan should be adequately priced. We had such a situation in previous market conditions. I mean, we were looking at our pipeline, and we are quite comfortable that what was not achieved in the first half would be more actively compensated in the second half of this year.
Thank you. Just a follow-up. I appreciate on the MRRs, I appreciate there being loads of questions asked already. Given these new changes, should we expect the liability mix to change over time? Should we expect more tenge liabilities, perhaps, now that the delta, the relative differential between KZT and FX liabilities has widened or not?
Might be. Let's see. I think when the regulators set in such a differential, probably this is one of the aim at which they're looking, probably not the main one, but kind of a secondary one. Let's see how the market would be reacting to that regulation. Only the market would tell what will happen.
Okay, thank you so much.
Next question comes from Milosz. Milosz, please go ahead.
Yes. Hi. Thank you. It's Milosz. Pleasure to meet you again. One last question for me, if I may. I've seen that you reported quite good growth, year-over-year growth in transactional income of individuals in Q2. The growth in transactional expense of individuals in actual terms was roughly the same, which means that the net transactional income of individuals in Q2 was probably stable year over year. Can you maybe talk us through the underlying factors, whether any like one of the factors behind the increase in the transactional expense, like kind of high fees from card providers or other reasons? Thank you.
Yeah. We saw that on the business commission income, there were a few reasons for that increase. First of all, as you see, the client activity picked up substantially in terms of the number of transactions and volume of transactions. There was a certain theory driven on a certain type of transactional services and payments. On the legal entities, I think if you remember in the previous year, we were saying that there were some accounting treatments for introduction of the subscription model, which is now fully accounted for. It's not dragging the recognition of business commission income. On retail sides, also the impact is in terms of the volunteer program, which is having an impact on the fees and commission income as well.
Because certain pickup in transactional activities related to current business, there are certain expenses on current transaction, which is providing impact on the expenses on it and bringing the net fees and commission to levels which we reported.
Okay. That's it. Thank you.
Next question comes from the chat. Brad Virbitsky. With respect to the Click transaction, are there any agreements to purchase the minority stakes at a future time? If so, there is a valuation set.
At the moment, there are no such firm agreements. We are quite happy at the setup which we agreed with our future partners. We believe that the founders of Click are having a very strong view, which is fully aligned in a way how we would like the focus to be structured for future development in Uzbekistan. We are looking at jointly developing Uzbekistan business together. This is the current setup which we agreed with our future partners.
Dear ladies and gentlemen, it seems that there is no question 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.