Thank you for joining us on this conference call to review Halyk Bank's un-audited financial results for nine months and Q3 of 2025. My name is Mira Tiyanak, and I'm Head of FI and IR. We have our executive team joining us on the call today, including Ms. Umut Shayakhmetova, Chief Executive Officer; Mr. Dauren Sartayev, First Deputy CEO for B2B Banking, Marketing, 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 Vuros, Deputy CEO for Corporate Banking; Mr. Nariman Mukushev, Deputy CEO for B2C Banking and Digital Government Services; Mr. Andrey Zavarzin, Deputy CEO for IT and Ecosystem; Mr. Viktor Skryl, our Strategy Director; Mr. Almas Makhanov, our Finance Director; and Rustam Telish from IR Team.
The format for the call today is as follows: we'll start with our presentation by the Halyk Team, covering our B2C and B2B business segments and nine months financial results. Then we'll open up the floor for questions and answers. Please note that this call is being recorded. We'll begin today with an update on the B2C segment. Let us remind you that our B2C platform, the Halyk Super- App, 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 nine months 2025, we saw the number and volume of transactions carried out through the Halyk Super- App grow by almost 29% and 23% year-on-year, respectively.
The Super- App now has 8.3 million monthly active users, including 5.8 million who carried out transactions and 2.9 million daily active users. Halyk Bank has a total of 11.3 million active clients as of the end of the Q3, and we account for 38% of active salary cards in Kazakhstan. Next slide, please. 94% of the retail loans we issue are arranged through the Super- App. Our gross B2C loan book rose by 16.3% year-over-year, reaching KZT 4.5 trillion, though on the back of lower loan issuance. We have an 18.2% market share for retail loans in Kazakhstan. Next slide, please. In terms of deposits, Halyk Bank has 28.2% market share in the country, and 71% comprised the deposits in Tenge. A full 94% of deposits are now opened digitally through the Super- App.
Q3 saw a large increase in the number of deposits opened to more than 276,000. B2C deposits grew by 18% year-over-year, 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 almost a 2x year-on-year increase in the number of clients and a 2.4 x growth in the volume of premiums. The GMV of our entertainment tickets platform, Kino.kz, grew by 55%, while the number of tickets sold increased by 15.7%, showcasing increasing user engagement. Travel bookings grew by 27.6% as compared to nine months of last year. Next slide, please. Halyk Marketplace and Halyk Market both saw GMV growth by almost 23% and 37%, respectively. We have substantially more partners working with us versus a year ago, thereby increasing product choice for consumers.
Halyk Market now has 2x as many SKUs as it did just one year ago. Next slide, please. Now, let me move 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. In Q3, the number of active clients rose by 43% year-over-year. Transaction volume expanded by 80%, highlighting an increased client engagement. Assets under management and total brokerage assets were both substantially higher year-on-year at the end of the third quarter. I should also note that Halyk has a 66% share of pension assets under management and 68% market share among private asset managers. We'll now move and take a look at our B2B segment.
Let me again remind you that Onlineb ank 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. We continue to strengthen our product offering to B2B clients through innovative solutions. Today, we would like to present two new products, which we launched and continue to roll over. First is Online- Duken. This is a B2B platform for small businesses fully integrated in the banking infrastructure, with digitalized processes between convenience stores and their distributors, including placing orders and settlements. Though it was launched in 2024, we already see strong traction in terms of connected stores and volume of orders. The second solution is called re: Kassa.
It provides a number of solutions for the SME segment, including cash register, sales automation, and tax accounting. Next slide, please. Monthly active users for Onlineb ank stand at 318,500, including 235,000 monthly transaction users during the third quarter. Daily active users stand at 113,000. In nine months, the number of payments processed through the platform rose by almost 25% year-on-year. The volume of transactions was 29% higher at KZT 113.6 trillion. Next slide, please. 60% 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 20% year-over-year. Next slide, please.
Halyk Bank works with 86% of Kazakhstan's largest taxpayers and accounts for 48% of loans to legal entities, along with almost 33% of their deposits. We have strong product penetration among our 3,000 active commercial clients, who carried out 2.7 million transactions during the third quarter. Next slide, please. You can see here that our gross SME loan portfolio is up 26.5% year-on-year, while digital loans, in particular, are up over 25%. We continue to see a notable growth in insurance of digital performance and bid bonds via our platform. 93% of new loans were issued via Onlineb ank, reflecting our strong digital capabilities. Our SME clients carried out more than 5 million transactions for the amount of KZT 14 trillion per month during the third quarter. Now, I would like to hand over the call to my colleague Rustam Telish from IR T eam. Thank you.
Thank you, Mira. Good day, everyone. Now, I'll take you through the financial results for the nine months and the third quarter 2025. Here, you can see the decomposition of the Net Income growth in nine months 2025 versus nine months 2024. It was primarily driven by the increase of net interest income by 22.3% year-on-year and other expense non-interest income, which was impacted by the base effect of one-off recognized loss due to the early repayment of the deposit of KSF in nine months 2024. Net Income was negatively affected by excess profit tax, which was introduced on profit from certain banking operations for 2025 only, and by an increase of minimum reserve requirements in third quarter 2025. The Net Income growth adjusted to effects from the early repayment of the deposit of KSF, excess profit tax, and an increase in minimum reserve requirements would be 20.6%.
Here's a quick look at the balance sheet. Total assets of the group increased by 10% year-to-date due to increase in amounts due to customers. Average interest-earning assets at the same period grew by 16.9%, which led to an increase in its share in total assets from 82.4% to 87.6%. Total deposits to total liabilities ratio was at the level of 82.6%. Despite the dividend payment in second quarter and third quarter 2025, at the end of nine months 2025, total equity of the bank increased by 6.5% compared to the year-end 2024, mainly due to the net profit earned by the bank during nine months 2025. Loan-to-deposit ratio was at the level of 87.7%. Interest income for nine months 2025 was up 26.4% versus nine months 2024, mainly due to an increase in average balances of loans to customers.
Interest expense for nine months 2025 increased by 30.5% versus nine months 2024, mainly as a result of the increase in average rates and balances of amounts due to customers, as well as the growth in the share of KZT amounts due to customers. Despite the increase in average rates in amounts due to customers in nine months 2025, NIM was positively impacted by the increase in share of total interest-earning assets versus total interest-bearing liabilities. As a result, net interest margin has grown to 7.2% for nine months 2025 compared to 7.1% for nine months 2024. In nine months 2025, the average rates of total interest-earning assets have grown to 14.8%. The average rates on securities grew to 8.6% in second quarter 2025, mainly due to the growth in the rates of fixed securities.
The increase of rates of amounts due from credit institutions and interest-earning cash and cash equivalents from 13.1% in second quarter 2025 to 14.7% in third quarter 2025 was due to the increase in the share of KZT balances. Average rate of total interest-bearing liabilities has increased by 0.8 percentage points from 8.1% in nine months 2024 to 8.9% in nine months 2025, mostly due to higher interest rates on amounts due to customers following the increase of base rate in March 2025. In nine months 2025, compared to nine months 2024, the overall dynamics of fee and commission income and expense was driven by the transactional activity. Net fee and commission income for nine months 2025 increased by 10% versus nine months 2024 due to an increase in net transactional income of legal entities, as well as in fees on letters of credit and guarantees issued.
Net transactional income of individuals slightly decreased due to an increase in the amounts of bonuses for the Loyalty program. There is an overview. Here is an overview of operating expenses, which increased by 22.5% versus nine months 2024, mainly due to the indexation of salaries and other employee benefits, including the cost of long-term incentive programs as well as IT development-related costs. The cost-to-income ratio decreased to 16.9% compared to 17.6% for nine months 2024, amid high operating income for nine months 2025. Compared with the year-end of 2024, loans to customers were up 8.2% on gross and 8.3% on net basis, with retail loans growing by 9%, while the loan portfolio of legal entities increased by 7.8% on a gross basis. The share of fixed loans in total net loans was 23.4%.
Cost of risk in nine months 2025 was at the level of 1.4% compared to 1.3% in nine months 2024. Stage three loans increased to 6.9% at the end of third quarter 2025 as a result of the moratorium on the sale of problem retail loans to collection agencies till May 2026. Compared with the year-end 2024, the deposits of legal entities and the deposit of individuals were up 11.3% and 7.2% respectively due to fund inflow from the bank's clients. At the end of nine months 2025, the share of KZT deposits in total deposits was 71.2% compared to 69.1% at the year-end 2024. In corporate deposits, the share was 71.7% versus 70.9% at the year-end 2024, while the share in total retail deposits was 70.7% versus 67.5% at the year-end 2024.
On consolidated basis, capital adequacy ratio of the bank decreased to 7.5% in third quarter 2025 as a result of second dividends paid by the bank for the financial year of 2024. RWA were up by 3.8% following the increase of retail loan portfolio. We would like to provide updated guidance for the full year 2025 and also provide an indicative target for 2026. Before going into details, we would like to make the following disclaimer. The indicative targets are forward-looking statements, and the bank's ability to achieve them will depend on a number of factors, many of which are outside of its control, including significant business, economic, geographic, regulatory, and competitive uncertainties, and contingencies and risks. As a result, the bank's actual results may vary from their indicative targets, and those variations may be material. We would like to update our guidance for 2025 across certain KPIs.
As a result of the revision, guidance of net income improved to the level of more than KZT 1 trillion compared to previous guidance at the level of KZT 1 trillion. This updated guidance includes tax and minimum reserve requirements effects for 2025. Going forward, the bank will continue its organic growth despite the fact of increases in taxation and minimum reserve requirements. That is being said, we are targeting for 2026 as follows: Growth in loans to customers is between 12%-16%. Net interest margin is in the area of 7%. Cost of risk is in the area of 1.5%. Fee and commission income increase is between 10%-15%. Cost-to-income ratio is between 18%-19%. Return on equity is in the area of 30%. CET-1 ratio from 17%-19%.
This gives us a target for net income in the area of KZT 1.1 trillion . Our target for 2026 incorporates all the changes in the tax code and other changes in regulations, including an increase in minimum reserve requirements. With respect to the base rate, we expect that we may benefit from its improvement to 16% closer to the end of 2026. Ladies and gentlemen, that is a quick look through the financials. We will now open the floor for your questions. Just a quick instruction. To state a question, you can raise your hand in Zoom, or if you join via cell phone, please press star nine to raise your hand. You can also enter your question in written form via chat. While stating your question, please also mention your name and company. Thank you.
The first question comes from Parvin. Please go ahead.
Hi, yeah, Parvin Mamedov here from Equinox Partners. Congrats on the release. Could you go into some more detail around the updated guidance? The loan growth targets have been lowered, but it seems like it did not affect profitability at all. What are the main drivers here?
Parvin, thank you for your question. Actually, the decrease in loan growth at the first place is triggered by the macro changes, as far as you are probably aware, like an increase in the base rate, which also probably, in our opinion, is delaying the utilization of certain facilities at the large corporate clients. Secondly, it is also affected by some more tightening at the regulatory level with regards to consumer loans. Saying that we have other interest earning assets and we see better utilization of interest earning assets, this is reason number one.
Secondly, we see that we are on target with our transactional income, net fees and commission, but also we have other income-generating sources, which would include dealing and net insurance. We continue to be disciplined on the operating expenses. All that, in combination, are bringing our guidance in terms of the bottom line net profits firmly above KZT 1 trillion.
Thank you. Thanks.
The next question comes from Simon. Simon, please go ahead.
Hi, thanks very much. Yeah, you've given targets as well, indicative guidance for next year, and you're looking for profits to, I guess, rise slightly despite the CHAP tax changes. Do you have any more clarity on the impact of the new tax code on the results? Any kind of color there would be useful.
Simon, thank you for the question. Yes, we did incorporate new tax code provisions.
Saying that, let me remind you that for 2025, in addition to, let's say, the regular tax regime which we have in Kazakhstan for banks, it was introduced the excess profit tax in the amount of 10% for certain income. The base of that would be including the income from state securities. The effective tax rate is increased for 2025 already. As you can see from our results, specifically for the nine months of this year, the income tax increase is almost exceeding the 40% increase. We do not expect the major changes for already higher tax base into the next year. One additional reason is that on top of the bank, we have subsidiaries, non-banking subsidiaries, for whom the corporate income tax would remain at 20%. This is reason number one.
The reason number two, the corporate income tax, which would be increased to 25%, it would also incorporate 20%, which would be applicable for the revenues from corporate lending. Because the corporate and semi-lending for Halyk Bank is relatively high, we also expect that altogether the change for the effective tax rate into the next year would not be materially different from 2025. It will be obviously much higher than 2024. Given the fact that excess profit tax would not be applicable for the next year, the tax situation would not be materially different from current year.
Okay, to summarize, you're saying that you expect the effective tax rate to be similar next year as this year, as the excess profit tax washes?
I cannot probably give you the exact percentage terms, but looking from the bigger perspective, yes, you have an increase in the corporate income tax, but also the excess profit tax, which is one of the largest components of increased tax this year, would not be applicable for the next year.
I think you gave guidance that you expect the excess profit tax to be roughly KZT 38 billion this year, or has that calculation changed a bit? I think you booked KZT 30 billion in the first nine months, right?
Yes, you're correct. Roughly KZT 38 billion, close to KZT 40 billion effect for 2025. This is what we're expecting.
Just one last one, if I may, on margins. You're guiding for roughly flat margins going into next year. Why are you confident that you can have flat margins when you're facing higher minimum reserve requirements?
Because we continue to grow our Loan portfolio. We see that utilization of the assets, meaning utilization of interest-earning assets, is also improving. We also expect that there will be some headwinds in terms of the increased minimum reserve requirements. In the second half of next year, we expect that the decrease in the base rates, in the interest rate, would provide support to the net interest margin.
Okay, thank you very much.
The next question comes from Olga Naydenova. Olga, please go ahead.
Yeah, hi. Thank you very much for the call and congrats for the great results. I have a few questions, if I may. One, also a follow-up on your 2026 guidance. If you may shed some light on why you see your cost-to-income ratios somewhat higher than we've seen last year, this year, if there is anything beyond that.
My second question is regarding your insurance income in the third quarter. It was really great. Are there any seasonality or are there any one-offs in there? Could you explain what you expect from the Insurance business going forward? My last question is about the unified QR code that is being introduced in Kazakhstan these days. What impact do you expect on yourselves from this measure? Just broadly, where do you see your parameters from that? Any growth you expect from that? Thank you.
Olga, sorry, I was on mute. Yeah, thank you for your question. Actually, regarding your first question on the cost-to-income ratio, we are still providing, let's say, a range here. I think by any measures, I think it's still showing great efficiency of the bank.
Saying that we see that the minimum reserve requirements might be the headwind for the operating income next year. That is why we are putting, at this point of time, the cost-to-income ratio a bit on the cautious side. Regarding your second question on Insurance, yes, we have actually two insurance companies. One is working in the life, one is working in the non-life area. Actually, there might be some peculiarities in terms of IFRS 17, which might be impacting quarter-to-quarter results. If I be talking from, let's say, a larger perspective, both of them are market leaders. Halyk- Life is number one, and Halyk- Insurance is number two in their respective markets. We see good developments in both companies. They are also working on the digitalization, and you probably saw in the presentation our insurtech product is also getting good traction.
Both of the companies have actual investment portfolios, and we expect that there will be two components of sources of income. One would be related to their regular business, insurance. The second component would be interest rates because of the expected interest rate reduction that might be a supporting factor for overall revenues from our insurance subsidiaries. Obviously, on a consolidated basis, some positions would be showing in the insurance, while other positions would be showing more in the interest rate lines of consolidated P&L. Regarding your question on the unified QR, yeah, you probably saw news today. It was the symbolic launch, and our CEO was one of the other CEOs of the banks who is joining as a, let's say, first line of the banks. We do not see any, let's say, negative from that news. In fact, we are fully cooperating with the National Bank.
We think for our clients, it will be beneficial to have more convenient instruments. We consider that as an overall improvement of the payment infrastructure in the country. When infrastructure is improving, we as Halyk Bank are always supporting that.
Okay, nothing on your P&L or business growth expectations in relation to that?
We d o not expect any material change, which also can be seen from our indicative targets for the next year.
Okay, thank you. Thank you very much.
The next question comes from Konstantin Rozantsev. Please, Konstantin, go ahead.
Yes, thank you very much for the presentation and for taking my questions. This is Konstantin from JPM Research. Two questions that I wanted to ask. The first one, I see in the Outlook slide that you provide guidance, and you commented on this in the presentation for the corporate and SME loan growth.
I wanted to ask, is it possible to kind of roughly comment on what you see by these two segments? Corporate first and then SME second. If you see any material changes in 2025-2026 in each of these two segments relative to the historical growth rate trends in each of these segments, could you please also mention why? Why are these changes happening? The second question, could you please comment on the impacts that you see from the development program through Buy Direct on the growth in the corporate lending, corporate and SME lending as well, separately corporate and SMEs, if you could, please? Thank you.
Yeah, on the retail loan, I think Paschalayev commented that. We overall see a few factors which are affecting the level of growth which we are showing as Halyk Bank. One is regulatory tightening.
Secondly, I probably could mention the overall base effect because our retail loan portfolio was very actively growing in the past three years. In percentage terms, it's always more difficult to show the same growth levels if your base of your portfolio has increased substantially. We also see that inflation is affecting the overall credit quality of the banking sector. The limitations in terms of the Selling portfolio to the collection agencies is impacting the NPL levels of the sector. We see still that the sector is growing probably quicker than us. From Halyk Bank's perspective, I would say it's more deliberate action. We see that probably the momentum is not favoring getting the more aggressive position on retail this year. We are also cautiously looking into the next year.
If we would see that the situation with the Retail portfolio altogether would be improving, we would be able to increase our sales force. For now, we are taking a bit more cautious approach on the retail side. In terms of the corporates and SMEs, and this is partially related to your question regarding the state programs, we do not expect or we are not counting on increasing the state supports to the corporate and SME sector. It means that most of the growth would be coming from commercial interests of the companies. Here, obviously, the demand is impacted by the interest rates. We have sufficient pipeline which we have and even design documents, but we see that when the interest rates start increasing, including the recent increase in the base rate, we see postponement in terms of the utilization. That somewhat impacted our guidance for this year.
We are also a bit cautious but still remain cautiously positive into the next year because while we expect that the base rate might stay at 18% level for quite some time, we still expect that in the second half of the next year, it starts decreasing to the level of 16%. If the rate situation, the inflation situation would be improving, we might be in position to look again and might revisit our guidance.
Thank you very much. Could you please just, on this Buy Direct Program, so in terms of the large corporate lending, to what extent do you see any substitution with borrowers switching from commercial banks to development banks? Is it a big factor kind of possibly pressuring lending growth in large corporate lending?
Secondly, on the SME lending side, these increased guarantees through Damu, are they a material driver of this decent growth, I think, from what they see in the data in the SME segment or not?
Yeah, this is your first question. Yes, we see some companies are preferring to go into the state sources of funding compared to the Commercial segment. Still, we see sufficient demand from our clients who are sticking for us, either for relationship reasons or in certain cases, they might not fit into the criteria which are set by the state programs. Typically, the state programs have certain criteria, and not all companies might fit into them. Regarding the Damu Guarantee, yes, we have this instrument, but because the Guarantee is costing, so it is not given for free, that might increase the overall cost, the final financing cost for the clients.
Thank you very much. Thank you.
The next question comes from Ronak Gadhia. Please, Ronak, go ahead.
Good evening and congratulations on the results. I've got three questions, mostly just really follow-ups. Maybe going back to Olga's question on the QR code payments, you said there's no impact from a fee income perspective. Could you just give us some guidance on what the agreed take rate is on these transactions? Is there a unified take rate that's been agreed by the banking sector and the regulator? How does that compare with your current take rates on acquiring volumes? That's the first question. The second question on this implementation of the CRR.
If I look at the amount of reserves you're holding as a percentage of your deposits, that ratio has gone up from roughly around 2.5% as at first half to around 6% by the nine-month period. Could you give us some guidance on where that ratio could end up once you fully implement the additional CRR requirements, which I believe are being phased in over the next 12-18 months? Finally, again, just sticking to the regulatory theme, one of the other regulatory changes that was introduced this year was the tax on government securities, if I understand that correctly. Have we seen the full impact of that on your P&L? How do we see that impact? Is it just that it reduces your effective yield on government securities, or how does that play out in your P&L? Thanks.
Ronak, thank you for your question.
With regards to the commission rate, which is introduced for QR, as I understand, initially it's set at the level of 1.7%. Regarding the minimum reserve requirements, we actually provided—I can refer you to our previous presentation where we provided detailed information on the minimum reserve requirement levels and timing. Briefly, at the moment, the minimum reserve requirement for the foreign currency liabilities is set at 10%. It will increase to the level of up to 15%, but certain categories will remain at 10%. With regards to Tenge liabilities, it's set at 3.5%. Some categories will retain that level, and some categories will grow to 5%. Altogether, we expect that for 2025, the negative impact of minimum reserve requirement on our interest income would be at the level of KZT 30 billion. For the next year, it will be KZT 137 billion.
Our guidance, which we provided, already incorporated lower revenues or impact from minimum reserve requirements into the next year.
Sorry, Murat, just to clarify, you are expecting the net impact of the higher CRR in 2026 to be KZT 130 billion. Did I understand?
KZT 137 billion, yes. It is on the net interest income. Understood. It is pre-tax. Okay. Regarding your question on the taxes, yes, it is called excess profit tax. As I said, we already increased our tax expense for this year. For nine months, we already accrued KZT 173 billion, which is roughly a 50% increase year-by-year basis. For the next year, the excess profit tax would not be implemented, but it will be replaced by the regular tax. The regular corporate income tax is 25%.
For the state securities, there will be a possibility to reduce the taxable income by 50%, meaning that the effective tax rate for the state securities would be 12.5% for the next year. You will see that not as a decrease in the interest income. You will see that in the line of income tax expense.
Okay. For next year, there is a possibility that the tax rate of state securities could be 12.5%. That is only for one year?
No, no, no. It will be since it will be a new tax code, so it will be actually incorporated as a regular tax provision.
Okay. Okay. No, I think that was it from mine. Thank you. Thank you for taking the questions and the clarifications.
Next question comes from Jan Demir. Jan, please go ahead. Hi, good afternoon.
Thank you for taking my question.
My first question is on 2026 guidance. I just wonder, is there something other than increasing taxes that holds the bank back next year because the margin is flattish in your guidance? Cost of risk, a slight uptick, but nothing much. You are guiding for roughly KZT 1.1 trillion Net Income. This year, you are likely to be there anyway, around KZT 1.1 trillion. What is causing that? That is my first question. On the cost of risk guidance, I was actually expecting the cost of risk to go down, maybe even significantly, given the inflationary growth environment that usually boosts the value of collateral. Why is the cost of risk ticking up next year? Is it the mixed impact? That is the second question. The third question is maybe as a follow-up to Ronak's question on the national QR system.
You mentioned, Murat, that the take rate can be as high as 1.7%. The question is, why would any merchant use a system that's 80 basis points more expensive than the going rate in the market? That's the third question. Thank you very much.
Jan, thank you very much for your questions. Actually, we're guiding the Net Income for this year to be more than KZT 1 trillion. It's not the area of KZT 1.1 trillion. I think there are differences still between these figures. We think it's a positive development in terms of net interest income. Secondly, even if you would incorporate the unearned interest income because of the minimum reserve requirement for next year, in the absence of minimum reserve requirement, the figure would be even better. Because we are incorporating them, we are staying where we are.
It is not like—you cannot, let's say, compare them on a like-for-like basis. Yeah, if I understand what I mean.
Murat, yes, but the margin does not change. No? I mean, the margin guidance is the same for both years, so it does not look like it made an impact. I understand where you are coming from, but if the volumes are growing, the margin does not change much. Cost of risk does not change much. Is it just the tax rate that holds the bank back or holds the net income growth back? That is what I am trying to understand.
Yeah, but NIM is at the year of seven, but the balance sheet is expanding, the Loan portfolio is expanding. That is why the Net Income is also expanding.
Okay. Yeah, yeah, that is what I meant. That is what I meant. Okay.
If there will be no minimum reserve requirement changes, that means that the NIM for next year would be even higher. Okay, got it. I think we answered that question during our previous calls where we were estimating that the minimum reserve requirement is having an impact of 10-20 basis points on the net interest margin.
Okay, can I squeeze in one more question there? Would you expect the rate hike to make a significant impact on the fourth-quarter margin then? Let me twist the question a bit like that.
What we actually see is that this time, the sharp increase in the base rate is impacting mostly the shorter ends of the interest curve. We did not see much of—so it was not a parallel shift. There was some impact, but not to the previous cycles of increase or previous instances of increase.
Okay, got it.
Regarding your question on QR, first of all, I said it's improving infrastructure because it allows clients of any bank to use a POS terminal of another bank using the QR. It's in a similar manner as you can do with your cards of the international payment systems. When it comes to the bank which already has a QR system, like Halyk Bank, for example, if our client is coming to the POS terminal, obviously, it will be our client on our QR system. We would be able to accept QR payments from the clients of other banks. It's actually improving the accessibility of the payment instruments.
Okay, okay.
But as far as I understand, if there's a substantial price difference or take rate difference of the currently dominant two players and the national system, then the market structure will not be changing much, right? I mean, do I understand it right? Because price is extremely important. No, I mean, the merchants don't really care about financial stability. I mean, that's a more financial world concern.
The take rate is different depending on what instruments it's using. If you're using the international payment cards like Visa, Mastercard, UnionPay, yeah, then the rate is higher. Actually, it depends on the merchant type, but it easily can go 2% even higher. But when it comes to internal QRs of each bank, so typically, it's below 1%. So 1.7% is standing somewhere in between.
Got it. Okay. Thanks, Murat.
And the next question comes from Milosz Papst . Milosz, please go ahead.
Yes, hi. It's Milosz Papst from the Edison Group. Thank you for the presentation and taking my question. I actually just wanted to ask about the pricing in the Corporate segment and in the Retail Auto segment. Previously, you highlighted that you've faced some aggressive pricing in the first half of the year, but did you expect this to ease in the subsequent quarters? Maybe you can give us an update on that. Yeah, as I commented before, indeed, we see a better pricing situation on the auto loans. Basically, we do not see aggressive pricing from some of players who were active in that pricing activity in the first half. That's why we see a better growth on the auto loans in the third quarter. Excellent. How about the broader Corporate segment then?
You're asking about the volumes? Yeah, volume-wise, as you see, we have improved the increase. It's across the large corporates as well as the SME segment. As I said, we have pipeline in place, but utilization is somewhat dependent on how the clients assess the interest rates and expectations in terms of the interest rate growth. It's probably more obvious. We'll see further how the clients would be reacting to rates. Altogether, as you see, in the third quarter, SME loans increased by more than 7%, corporate 6%. Quarter-wise, I think it's good growth levels. Yes, yes, absolutely. The fourth quarter might be affected by the higher interest rates. Okay, yes. All clear. The limitation may rather come from macro factors rather than aggressive pricing of competitors, basically. Yeah, on corporates, yeah, there was less, let's say, aggressive approach from other players.
We think that with minimum reserve requirement, there is even more discipline coming to the sector.
Okay, excellent. Thank you so much.
The next question comes from Lars Bain. Lars, please go ahead.
Thank you. This is Lars Bain at Salomon Capital Partners. I wonder if you could give us some color on the dividend payout ratio with regards to 2025 and maybe going forward. Specifically, is there any reason that the Board would consider any new factors when it comes to the payout ratio in comparison to previous years, or should we assume that the historical payout ratio remains constant? Thank you.
Lars, thank you for your question. The dividend policy is very important for Halyk Bank, and we are working constantly on developing, and we're getting the feedback. While developing it, we're getting the constant feedback from our investment community.
If you see, historically, we were improving our dividend policy in the sense that initially it was 15%-50%. Then we improved the increase range starting from 50%. Lately, we incorporated 2x payment. That means that it is a living document, but the current levels, I think they are already at very good levels because they are providing the balance between retaining capitalization, which allows us to deploy capital profitably. If you see from our return on equity, it is higher cost of capital, definitely. That means that we have the possibility to deploy capital profitably on one hand. Secondly, it is not unnecessarily leading to accumulation of the capital. We believe that in the current environment, we are striking the right balance.
Super. Thank you so much.
The next question comes from Part Takar. Part, please go ahead.
Great. Thank you. Hi, Murat. Thank you for the call today. Just a really quick question. On the NIM expectations that you're setting for 2026 on the indicative capital, could you help us understand what is your expectation on the dollar rate? How many cuts do you expect? Give me a total of the balance sheet of year to falling holiday, and that would be simply for us to understand.
Part, I'm sorry. I think it's a bad line, so we barely can hear you.
Now?
If you probably can speak up.
Yeah, can you hear me now? Hello?
Yeah, if you can talk closer to the microphone, that would be better.
Now it should be fine. Okay. Okay. I'm just checking on the net interest margins, Murat. So your guidance for 2026 implies that it's sort of flat compared to 2025.
However, I was trying to understand what is your expectation on the dollar rates in terms of how many cuts do you expect next year? That helps us understand where you're coming from in terms of the interest.
Yeah, probably I cannot give you the specific, let's say, answer on that question, but I think we're normally taking the market consensus on the USD rates.
Okay. Very good. Thanks, Murat.
The next question comes from Brad Verbitsky. Brad, please go ahead. Brad, can you hear? Next question comes from Brad Verbitsky.
Sorry. I was asking the question and muted at the same time. I have a couple of questions. The first is regarding the insurance profitability. It seems like your insurance profitability has increased a lot this year.
Is that mostly a function of the increased rate environment and something you would expect to decline over time, or is that something that can actually grow from here? Similarly, trading income has been elevated since 2022. Is that something that should decline as sort of rates come down, or is that something that can grow off of the current base? For your forecast for next year, are you sort of including growth in these two segments, or are you assuming that they decline?
Yeah, Brad, thank you for the question. As I said, I think I commented on the similar question before. We will overall see the increase in the insurance business, and that is probably reflecting in the overall increase in the net insurance income.
As I said, there are some quarter-to-quarter fluctuations because it really depends when certain contracts are underwritten, what reserves are created, when the insurance contracts are expiring, and reserves are being released. There might be some quarter-to-quarter variations. Altogether, as I said, we have two insurance companies: one in life, one is property and casualty or general insurance, and both of them continue to grow and continue to be leaders in their respective markets. Did I answer your question?
Yes, on the Insurance. Did you answer the trading income question, or I did not hear it?
On the dealing side, yeah, it includes the results from the group.
It's not only the bank because we also have the Brokerage company, and that would include both the revenues which we are getting from our clients, which would be normally flow business, but also some proprietary business of the bank, and our subsidiaries, which, as I said, also include our investment banking brokerage subsidiary, Halyk Finance.
You are assuming that that grows next year off of this year's base in your forecast?
We are incorporating some increase as well.
Okay. Thank you.
The next question comes from Kenneth Chiang. Chiang, please go ahead.
Hello? Thank you very much for your presentation. Can you hear me?
Yes.
Yes.
Great. Just want to make sure I'm not on mute.
I just wanted to understand, I guess, the forecast for which way you think interest rates are going, given your inflation forecast, and whether your assets or your liability side of the balance sheet is going to price faster. Is inflation going to be—I guess, what's your forecast going forward for inflation, therefore, interest rates, and over kind of the longer term after this bout of high inflation, and will that be a positive for Net Income, generally speaking, as your assets or liabilities price? The second question is, what risks do you see to, I guess, the next year coming overall to your forecasts? Thank you. I'm from Redwood Peak, Ken Chiang, Redwood Peak in Hong Kong.
Yeah. Thank you for your question.
With regards to the inflation, we are projecting that for this year, inflation would be standing in the range between 11.5% and 12.5%, and it will be reduced by the end of 2026 by 100 basis points to the 10.5%-11.5%. That would allow to reduce somewhat the base rate, which we expect to decrease by 200 basis points to the level of 16% by the end of the next year. Because our assets have a longer duration compared to liabilities, historically, when the rates are increased, we see a first increase in the funding cost. Typically, within two to three quarters, the assets repricing start catching up, and then the NIM is stabilized. When the rate is decreased, the opposite is happening. Actually, first, we see improvements in the liability sides with margins somewhat expanding, but then the asset repricing is catching up, and NIM again stabilized.
Saying that, we're seeing that the last increase, which was relatively sharp, is actually not increasing the medium and long ends of the curve. That is why the effects of the recent increase overall on NIM will not be to the larger scale. That is why we see that the NIM is probably close to stabilization in the fourth quarter and first quarter next year. Because the minimum reserve requirements would be increased again, and we mentioned that starting from the second quarter, we would see some impact on NIM before the decrease in rates would improve the NIM by the end of next year. Altogether, we do not expect the big change if we take year-over-year horizon.
Okay. Great. Thank you very much.
The next question comes from Tunda Ojo. Tunda, please go ahead.
Hello?
Yeah, yeah.
Okay. Sorry. I was on mute. My bad. Thanks for the presentation.
I want to ask about asset quality here. The NPL ratio, the 90-day NPL, is ticking up again in Q3, and the provision coverage is actually declining. I was just wondering what's driving the increase in NPL, and why is the coverage declining? I just want to square up what's happening in the portfolio that's driving that.
Tunda, thank you very much for your question. We see that the regulatory limitations in terms of Selling portfolio to collectors are bringing to the situation when the NPLs on the retail part are staying longer on the balance sheet. Previously, we were able to offload NPLs quicker, but they're simply now staying a bit longer. That's why, to a certain point, optically increasing the NPLs. On the Corporate and Semi-portfolio, we see the situation normalized. We do not see any bigger changes.
When it comes to coverage, we are doing that according to IFRS. We have models on the portfolio when we're analyzing the flows and NPL formation, walkouts, roll rates on the retail and small businesses. When it comes to medium-sized and larger corporates, we do that on an individual basis. Such a component like improvement in the change in the cash flow of the companies, the collateral coverage is impacting the level of provisions on an individual basis. That brings us to certain coverage, which we're reporting on quarter-to-quarter basis. Got it. Got it. Altogether, we say that the cost of risk is probably indicating some marginal increase in risks, but altogether, we stay comfortable. We made certain actions on the retail book, as I said, that we are growing slower in the market.
This is with a reason in order to control our cost of risk in the current situation.
Okay. Understood. Can you remind me why there is a limitation on the sale of retail NPLs in Kazakhstan? What exactly is driving that decision to limit your sales?
I think there are certain questions from the regulators with regards to activities of the collection agencies. That is why they decided to put certain limitations temporarily until May next year. In our cost of risk indicative targets, we are not incorporating improvement in terms of sales to collections. We are taking somewhat conservative stance in that regard.
Yeah. Sorry. Just last on this topic for me. Your accrued interest income versus your cash interest income kind of deviated somewhat more in the third quarter. Is that still related to this retail NPL, or is there a different reason for that?
I would say there might be a combination because the increased cost of risk means that certain companies might be under or borrowers might be under the restructuring. Also, it's fair to look not particularly quarter- to- quarter, but look on a year-over-year basis. Let's see how that particular indicator would be reported in the fourth quarter. Overall, as I said, we saw only a small uptick in the cost of risk marginally. Altogether, the asset quality of our loan book remains robust.
Thank you so much. Appreciate it.
The next question comes from Ivan Kushanytsa. Ivan, please go ahead.
Hello. Hello, gentlemen. Thank you for your presentation. Congratulations with your results. Excellent results. My question is regarding the future growth, or I would say demand on the loans.
Do you see some kind of diminishing demand or slowing demand in, as I'm also looking at other Kazakh regional banks entities, especially in SME and Retail segments, taking into account higher interest rates and higher deposit rates? Also, probably that the Central Bank of Kazakhstan tries to slow that down by raising its benchmark rate and lifting up the reserve requirements. I see that you decreased a bit your projections for the next year. Do not you think it could be much lower, single-digit growth?
Thank you. Ivan, thank you for your questions. When it comes to demands on the corporate SMEs, especially on the small business, we see demand is in there. There is probably a little bit less demand for the longer-term financing at this point of time, which is the function, in our opinion, the higher overall interest rate environment.
When it comes to total financing, the working capital facility, the inflation is actually driving higher working capital facilities because simply the same goods would be costing more. Overall, I would say it's normal demand taking into account the current situation with inflation. On the Retail side, I think demand is in there, which is evidenced probably by higher growth sector-wise. Let me reiterate that we're probably taking a bit more conservative approach on the unsecured lending in the current environment, given the high inflation. When the situation would start improving, we would be able to, let's say, to improve supply from our side. Altogether, we think that the indicative targets for the next year are balanced, taking into account the inflation situation, the month which we see, the asset quality, as well as our projection on the dynamics of the base rate of the National Bank.
Thank you. Thank you very much. Thank you.
The next question comes from Kenneth Chiang. Kenneth, please go ahead. Kenneth, you're on mute. Okay. Konstantin Rozantsev. Next question comes from Konstantin Rozantsev. Please, Konstantin, go ahead.
Yes. Thank you very much for taking my question a second time. I had a follow-up question to the previous discussion we had on this Buy Direct Support Program. You mentioned that there is some substitution, right, that some borrowers choose to switch from Halyk to some state entities, right, to borrow. Is it possible to quantify this impact? In large corporate lending, do you expect to see Lending growth actually this year? How much would it be higher if there was no such substitution? Is it possible to quantify it roughly?
Second, on the guarantees through Damu as well, is it possible to roughly quantify to what extent the growth in large corporate lending first and then SME lending second is higher because of this incremental increase in the guarantees that they are seeking this year through Damu? Thank you.
Yeah. Konstantin, I think it is a very technical question. I think probably I do not have exact figures in front of me, but also I can note that we have not seen the latest reports. Probably we should wait for some reports which will be done particularly by Buy Direct or Damu. I am sure they will be in the public domain. There are some impacts, as I said. We can see that from certain reactions of clients. Unfortunately, I am not in a position to quantify them sector-wise.
Is it possible just to high-level comment?
This impact, is it measured in, say, a few single-digit, low single-digit percent of loan growth, or is it something kind of more meaningful? Just high-level qualitative comment. To what extent is?
For us, particularly immaterial. We believe that it will not have material impact on our guidance because we are providing the range. With regards to the sector, as I said, we do not have that figure. Again, I can probably refer to some reporting which might be issued by relevant quasi-sovereign names.
Sure. This is specifically so immaterial impact from this substitution, right? Within large corporate lending, that is exactly what you mean, right?
I mean, the guidance which we are providing is probably not materially affected by certain our corporates which switched from our lending to Buy Direct, particular Buy Direct Program which you mentioned.
Understood. Thank you. Thank you very much.
The next question comes from the chat.
Jurrien Hoffman, please provide an update on the partnership with Click and the potential share sale by the controlling shareholder, ALMEX.
On partnerships with Click, we are still in the regulatory stage. We are waiting. Not all regulatory approvals are in place yet. That is why I can also comment that the indicative targets for the next year are not incorporating that transaction at this point of time. When we receive such regulatory approval, in such case, we might be revising the targets if they will be adding some material changes to our current targets. With regards to potential share of controlling shareholder, ALMEX, I probably can refer to our press release which we issued on the 4th of November.
Actually, in that press release, ALMEX said that they are evaluating a number of alternatives in order to improve liquidity of the Halyk Bank shares and GDRs, including potential partial disposal of its stake in the capital markets. The potential alternatives are subject to supportive market conditions. ALMEX expressed their commitment to retain majority stake in Halyk and remain fully committed to the development of Halyk Bank. Apart from that, probably we cannot provide any more comments at this stage. Everything remains at the decision of ALMEX.
Dear ladies and gentlemen, it seems that 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.