Good day, and welcome to the JSC Halluc Bank Nine Months and Third Quarter twenty twenty Results Conference Call. At this time, I would like to turn the conference over to Ms. Mira Kasanova. Please go ahead.
Good evening, ladies and gentlemen. Welcome to Halic Bank conference call and presentation of financial results for the September and 2020. Participants to the today's call on Halic Bank's side Muchaev Mietova, Chief Executive Officer Mr. Lia Karpvikova, Deputy CEO and Chief Financial Officer Mr.
Murat Kasenov, Deputy CEO of Corporate Banking and International Activities Mr. Victor Skrill, Financial Director of Finance and Subsidiaries and myself, Mira Kasenova, Head of FI and IR. And we would like to start our presentation with an update on current epidemiological situation in Kazakhstan, which is presented on slide number six. As of November 16, there were 121,000 confirmed cases, or six forty two cases per 100,000 people. Eighteen ninety nine infected individuals died, and almost one hundred and ten thousand people recovered.
In addition, four thousand cases of pneumonia with COVID-nineteen like symptoms, but with negative PCR tests were registered, and over twenty nine thousand people recovered. Unlike other countries currently experiencing surge in new daily cases, Kazakhstan has been relatively resilient, reporting around five sixty average daily cases in November, compared to peak levels of circa sixteen hundred average daily cases recorded in July 2020. In Kazakhstan, we have already experienced two waves of COVID-nineteen pandemic with respective lockdowns in March, May, and the softer one in July, August, which limited usual economic activity, especially within certain sectors of the economy. Currently, Kazakh government has extended travel restrictions on the back of global growth of COVID-nineteen cases, and applies customary preventive measures limiting certain activities outside daily working hours in affected regions. Next slide, please.
Detailed economy sector performance indicators presented on this slide could help to depict Kazakhstan's economic performance throughout 2020. The country's short term economic indicator showed strong growth in the 2020, with mild signs of deceleration in March. The economy was severely hit in April and May, as the state of emergency measures slowed economic activity. Also, we see some negative impact in July due to the second lockdown, with the recovery followed in August and September. The short term economic indicator for the nine months of twenty twenty decreased by 2.5% year on year, with better performance compared to decline by 2.9% in eight months of twenty twenty.
In August, short term indicator declined by 4% year on year, while in September it recovered to minus 0.4%. The improvement in the overall short term economic dynamics was facilitated by acceleration of positive dynamics in construction, agriculture, and moderate recovery in retail trade. The construction sector provided significant support to short term economic indicators in September by demonstrating growth at the level of 24.2% year on year. There is also a gradual decrease in negative dynamics in industrial production, which reduced from minus 5.6% year on year in August to minus 3.5% in September this year. Next slide, please.
Halib Bank has a well diversified loan book with 27.4% represented by retail segment, 15.9% by SME lending, and 56.7%. Our corporate book is further diversified by the industry, with the largest one constituting only 13% of the loan book. As of the September, sectors most affected by the current down cycle, including hotels, passenger transportation, commercial real estate, and oil and gas sector comprise 14.3% of our loan book and remains manageable. The bank's retail loans are either issued to payroll clients or secured by real estate or other property. Our FX lending exposure continues to decrease, and now FX loans comprise less than 25% of the loan book, and are primarily issued to the borrowers with FX linked income.
In the next section of our presentation, we would like to provide you an update on digital and transactional banking. In nine months of 2020, we have increasingly focused on developing our online customer proposition and enhancing digital touch points with our customers. Overall, 5,400,000 retail clients are using our online banking services at the September, and the number of users has by 28% since December 2019. We have seen an explosive pickup in online client engagement. Combat monthly active users and transactors increased by nine point one point nine and one point eight times, respectively, over the last The online channel penetration continues to grow rapidly with the number of monthly active clients increasing by 22% in the third quarter versus the 2020.
HomeBank has already become a key customer acquisition channel with launch of fully online custom voting in April. In the 2020, 223,000 new clients were registered online with total 526,000 clients acquired online since the service launch. Next slide, please. This year, we have also experienced significant growth in our retail clients' payments and transfer volumes, driven by rapid shift to cashless transactions. Our service proposal encompasses full scope of modern payment services, including online and QR payments within the partner network and P2P and international transfers.
Broad partner network allow us to offer more than 5,400 payment services within our digital platform, and we are continuously adding up new payment options. As a result, total volume of cash and noncash payment processed by Halibank in nine months of 2020 reached 17,200,000,000,000.0 of ten year. At the same time, customer payments and transfer volumes through our online platform, HomeBank, have expanded by fifty three percent and one point nine times in the first quarter versus the 2020. Next slide, please. We also continue to see significant pickup of client activity in our digital channels.
It would be fair to say that COVID-nineteen had a profound impact on customers' behavior, and led to accelerated shift to digital services and channels. For instance, as of the 2020, over 22% of total deposits were attracted online, representing 1.6 times increase versus the 2020. At the same time, almost 10% of accounts have been opened online versus less than 1% in the first quarter. Loans issued online already accounted for 40% of total issuance volumes in the 2020, while this metric was below 12% in the third quarter. Our monthly online loan issuance volumes have increased 11.4 times in September versus January 2020.
And we believe that such trends have strong momentum, and they are likely to continue. Therefore, we are devoting a lot of our energy and resources to making sure that Halibank's digital offering and infrastructure remains best in class. Next slide, please. Apart from developing core banking and transactional digital services, we have made substantial progress in our retail ecosystem development. We are building an open ecosystem providing partners with specialized solutions.
We have partnered with major customers retailers, like Technoderm, Supak, and Alcerne, in the 2020, and added a number of others in October 2020. Having integration processes in place and tested, we expect to further expand our partnership network. Open ecosystem allows us to attract new clients, and to grow loan portfolio. Halluc ecosystem partners already contribute over 72% of total online loan issuance in the 2020. Besides open ecosystem framework, we're introducing proprietary lifestyle and auxiliary services for retail customers.
In March, we launched online auto insurance that allow customers to acquire an insurance in five easy steps in five minutes. HALIC Travel launched in September with a compared by engine for air and railway tickets, and hotel booking, and we aim to expand it further, offering loan and installment financing options, as well as partner promotions. We are building the largest ticket operator in Kazakhstan called Halik. Was launched in October, and we aim to gain strong momentum once COVID-nineteen effect on the entertainment industry would be over. In November, we launched Halic Invest, an online brokerage platform providing access to a range of investment instruments, including public IPOs.
Next slide, please. On slide number 14, we would like to highlight significant developments in corporate and SME digital proposition. Our leading digital platform for businesses called Online Bank provides full scope of transactional financing and business services online. Number of online bank users reached 197,000 in September, increasing by 21% since December 2019. We have been continuously expanding and improving our offering, and introduced a number of products and services over the last month.
Online client onboarding, which we launched in June, already resulted in over 82% of the individual entrepreneurs' accounts being opened online in September 2020. In August, we launched a full online business loan issuance for individual entrepreneurs. In November, we have introduced the GPI, high speed international payments processing. Volume of payments and transactions number through online banks have expanded by twenty nine percent and thirty one percent in the first quarter versus the 2020, supporting strong customer engagement. And now I would like to hand over the call to Viktor Skriv, our Financial Director, who will provide you an update on financial performance of the bank.
Thank you.
Hello. Now I'm going switch to how Group consolidated financial results for the nine months and 2020. In the 2020, we earned billion dollars of net income. The increase by 18.3% compared to 2Q twenty twenty was due to the growth in other non interest income, positively affected by the repayment of swap agreement in July 2020, decrease in credit loss expenses and increase in net income commission income Q on Q. In third quarter twenty twenty, we demonstrated 25.9% return on average equity and 3.6 return on assets.
Next slide, please. Total assets of the group increased by 2.8% compared to the end of second quarter twenty twenty, mainly as a result of revaluation of fixed balance sheet positions due to PDT depreciation versus U. S. Dollar during third quarter twenty twenty. Customer deposits increased by 5% versus the end of 2Q twenty twenty, mainly due to revaluation of premium denominated deposits and to a lesser extent as a result of fund inflows from the bank's clients.
Next slide, please. Interest expense for third quarter twenty twenty increased by 15.5% versus 2Q twenty twenty, mainly due to the increase of average balance and share of deposits in the amount due to customers and due to recognition of discount on receivables on sale of assets in installments. Increase in interest income on loans to customers by 6.2 was partially offset by decrease in interest income on securities due to transfers in placements from high yield National Bank notes into low yielding FX deposits with National Bank following the repayment of swap agreements for the amount of USD $912,000,000. As a result, interest income Q on Q stayed flat, while net interest income declined by 11.3%. Net interest margin decreased by 4.2% for third quarter twenty twenty compared to 5% in 2020, mainly due to the increase in the volumes of placement into credit deposits with the National Bank following the repayment of swap agreement and due to one off effect of recognition of discount on receivable on sale of assets in installments.
Excluding these one off effects, adjusted NIM for third quarter twenty twenty would be 4.5%. NIM was also negatively affected by decrease in the average effective interest rate on retail loans due to increase in issued and unsecured loans with the Borrower's Life Insurance Bundle, income on which is reflected in insurance income, and increase in online installment loans, which includes fees from merchants recognized and fee and commission income. Next two slides demonstrate changes in monthly average balances of interest earning assets and interest bearing liabilities as well as average interest rates on different types of assets and liabilities and depict earlier mentioned last quarter trends. Slide '21, please. Compared to 2Q twenty twenty, our gross fee and commission income increased by 16.6% as a result of growing volumes of transactional banking, mainly in payment card operations as well as cash operations and bank transfer settlement.
The increase in fees derived from bank transfer settlement in 3Q twenty twenty by 38.3 compared to second quarter twenty twenty was caused by the pickup in issue of online installment loans, which are issued through Ecosystem Partners, the largest appliance retailers in the country. Fee and commission expense increased by 10.7% compared to 2Q twenty twenty, mainly due to increase in payment cost expenses caused by the decrease in the volume of acquiring volumes. Operating expenses for 3Q twenty twenty increased by 2.2% versus 2Q twenty twenty, mainly due to the increase in salaries and other employee benefits as a result of the increase in sales based payments in retail business in 3Q and due to lower motivational payments in 2Q twenty twenty. The bank's cost to income ratio decreased to 26.3% compared to 28.2% for 2Q twenty twenty due to higher operating income in 3Q twenty twenty. Next slide, please.
This slide shows from different perspective our historically strong liquidity position, where deposits as a percentage of long equity funding equal to 82.2%. The share of liquid assets in total assets was 42.1%. In addition, we have relatively low loan leverage with net loan deposits equal to 59%, and net stable funding ratio equal to 1.77%, well above the regulatory requirements. Next slide, please. On the balance sheet, compared with the end of 2Q twenty twenty, loans to customers increased by 6.1 on a gross basis and 6.6% on a net basis.
Increase of gross loan portfolio in 3Q twenty twenty was attributable to increase in corporate loans of 4.8% on gross basis, whereas SMEs and retail loans increased by 6.29% on cross basis, respectively. Next slide, please. The bank's asset quality is notably improving despite the turbulent economic environment. Thus, ninety day NPL ratio decreased to 6.4% from 6.9% as of the end of 2Q twenty twenty. The ninety day NPL coverage ratio increased to 154.5%.
The provisioning rate slightly decreased to 9.7%. Cost of risk decreased to 0.2% compared to 1% in 2Q twenty twenty due to repayment of large ticket problem loans of corporate borrowers and due to recovery of the payer loans. The cost of risk was also positively affected by changes in macroeconomic assumptions when calculating provisioning rates for collective loans in accordance with IFRS nine. Next slide, please. The ratio decreased from 15.7% as of the end of 2Q twenty twenty to 14.8%, mainly as a result of repayment of large ticket problem loans of corporate borrowers and due to recovery of write off of retail loans.
We are additionally showing here how well the work out of problem loans collateral was done by the banks at PV during nine months of 2020. Next slide, please. On liability side, the corporate and retail deposits increased by 7.92.3%, respectively, compared to the end of the second quarter twenty twenty, mainly due to positive revaluation of FX denominated deposits due to QDT depreciation in third quarter twenty twenty and to a lesser extent, to fund inflow from the bank's clients. As of the end of 3Q twenty twenty, the share of corporate TDP deposits in total corporate deposits was 55.5% compared to 56.6% as of the end of second quarter, whereas the share of retail PBT deposits in total retail deposits remained almost flat. On Slide 13, we show our capital position.
Compared to the end of the second quarter twenty twenty, total equity decreased by 6.9% due to payout of dividends to shareholders in third quarter twenty twenty. The bank continues to have significant buffer with CET and total cash spending in 22.824.3%, respectively, at the end of the quarter two thousand twenty. And this completes our presentation, and we would like to open the floor for your questions.
Thank you. If you would like to ask a telephone question, please signal by pressing star one on your telephone keypad. Please ensure your mute function is turned off to allow your signal to your equipment. We will take our first question today from Lina Sariva of BCS Global Markets. Please go ahead.
Good afternoon. Thank you very much for the presentation. I have several questions. First, my question is on guidance. So actually, I do not see in the presentation any slide on guidance.
But according to the previous guidance you provided, it looks like with cost of risk and margin now behaving a bit different. So we see just cost of risk very low, and just for nine months, it's already at the level of 0.9, and margin is a bit weaker than maybe it was in the first half of the year. Do you amend do you confirm the previous guidance you provided, or do you amend any lines of guidance for this year? That will be my first question.
Elena, hello. Thank you for your question. Yeah. While we formally do not change outlook in this time of the year, Yeah, indeed, we might say that the 1.5, which was our initial outlook is probably too much given the dynamics in the asset quality, which we witnessed in the quarter three. And we don't think that cost of risk would be higher than we have for the nine months of this year so far.
And for nine months so far, we have 90 basis point.
So I assume that 1.5 cost of risk for the full year is valid guidance, and it means that it should cap quite heavily in the fourth quarter. Did I get it right?
Yes. We do not expect that cost of risk would be more than 1%, probably somewhat lower.
Understood. Thank you. And just on repayment of corporate, large corporate account, if you just may provide any just details of such kind of like exposure of sector? Or maybe just it just the color? Is it just one off or maybe there is some positive triggers for from the payments to set sorry.
Incorporate part of the book.
Elena, unfortunately, the line is not good today. Do I understand correctly that you also asking the details on on revision of provisions on the corporate loans and on retail in the third third quarter. Is it correct?
Yes, sir.
Yes. We have certain repayments of problem loans. And as as you saw that from time to time, we were recording revision of provisions because we managed to to recover some problem loans. So that also happens in the third quarter of this year. As well as we made some revision some If you remember, in the third quarter, we due to change in the macro assumptions, we created some provisions related to COVID estimations.
And that mostly happens in our retail portfolio. And because by now, we already see the crystallization situation in our retail portfolio and some of provisions for loans which became past due, we actually recorded the actual provisions for them in the second and third quarter. So that also gives us the possibility to adjust the, I would say, the expected loss portion of provisions. And that also led to lower cost of risk in the third quarter.
Okay. And just another question on your margins. So it's quite a strong decline in the third quarter because of this swap repayment. So going forward, do you expect the same low margin to stay, like, around 4% next quarters? Or there is a chance you can somehow set this negative effect that happened in third quarter?
Thank you for your question. Let me first explain what was dynamics what explained the dynamics of net interest margin in the third quarter. First of all, if you know, we had our swap with we had outstanding swap, which actually matured in the July. So actually, the impact was for the whole third quarter. And after we closed the swap, actually, we saw that on the asset side, the roughly 300,000,000,000 plus of Tengue was replaced by the matching the dollar amount.
That's why on the asset side, the high yielding Tengya asset was replaced by lower yielding dollar assets. So that was the first impact. The second one was due to discount of receivables because we, due to current situation, had to extend certain payment due for the assets which the bank sold. That actually translated in recognizing additional discount at the time we made that extension. Actually, that discount would be reversed due to time difference in the upcoming quarters.
So we don't think that it will be repetitive. So it's it has a more kind of one off impact, and we showed that in our presentation. And another impact is coming from the fact that we saw some repayment of dollar loans, and some customers were preferring to shift from dollar loans into Tengya loans. And while the Tengya was weakening in the third quarter, you see that the portion of dollar loans actually fused in our portfolio. That actually added so some portion of these dollar loans were shifted into other lower yielding dollar assets.
And the reason number four, and I'm giving in the seconds of reducing impact. And the reason number four was that we actually introduced loans which we launched together with our ecosystem partners, where the customers can buy the goods from them and make the payments in installments. And the interest is compensated by our ecosystem partners. So from that perspective, the interest on these loans are recognized in the fees and commission line. So that is not recorded in the interest income, but rather in the fees income.
So these four categories largely impacted the dynamics in NIM. Now let's talk about how we think the NIM will be evolving going forward. So the impact of swap is gone, so because we have fully repaid fully closed that transaction. And we think that the dynamics would be now more aligned with our activity in placing our assets, and we are working on building our credit portfolio. We are working on the instruments to place our excess of dollar liquidity into more higher yielding instruments.
And reason number of and and and another impact might be coming from upcoming repayment of Eurobonds. If you know, we have 500,000,000, which are due to mature in January year. So all these factors, we believe, would drive net interest margin to higher level. And while we do not set our full guidance for the next year yet, we think that we have good chance that our NIM will be approaching the area of five next year. But again, this is not the official guidance yet.
This is kind of the the, let's say, the the scale of reversal, which I'm more talking about.
Understood. Thank you very much for for detailed answers. We
will take our next question from Igor Fodorov, ING.
Hi. Thank you for picking up my question. Actually, you just answered my questions, and I need to think about new one. Well, just a follow-up for for NIM and the impacts of this well, four reasons you told us. If if we can break can can we break down this, well, 80 basis points in terms of the well, this this change negative change in passenger's margin for the first quarter.
What takes more? This swaps, how much is it took for for main? This would be my first question. And the second question, given the situation on on the Eurobond market, well, do you have any plans to to look for in to to to go to the market with the new issue, or you just said that you have, well, excessive fixed liquidity and you are thinking how to manage it? And, well, the first question actually comes from this.
What is their balance in terms of your ethics liquidity right now? Thank you.
Igor, yeah, thank you for your question. If I understood correctly, your your first question was regarding what was the particular impact from closing of swap transaction and and some other items on NIM. The impact from closing of swap transaction and subsequently rotating of assets from high yielding Tengue assets into low yielding dollars was in the area of 40 basis points. And the impact from additional discount on receivables is close to 30 basis points, and the other portions was having a smaller impact. And regarding your second question on our prospects and our plans on the debt capital markets, At this point of time, as you see, we have excess of dollar liquidity.
And from that perspective, we do not have current plans to go to debt capital markets. Okay. Thank you.
Our next question will come from Lino Distotle, Invest Capital. Please go ahead.
Hello. Thank you for your presentation. I have a couple of questions. First first question, do do you ever think of possibility of interim dividend? Because the dividends for the next year will be quite a good one.
And I think for many investors, it it will be very good to to get some interim payments, and it will be very good for capitalization of the bank. Do do you think of this possibility?
Lenny, thank you for your question. So far, we have a dividend policy to make payments once a year after we concluded the annual audited results, which needs to be approved by the General Shareholders' Meeting. So far, we are not changing the frequency of these payments. So next decision on dividend payments will be done first of all, proposal will be done by the Board of Directors. Usually, it happens in the month of March.
And then usually, we take usually, then it follows by the general shareholders meeting late late April or May.
Okay. Thank you. And second question, do do you have any plans or maybe a discussion about Moscow Exchange listing? So I I think it's also will be very good for your capitalization because many Russian investors interested in the shares. And so it will be much more convenient convenient for for them to invest in in Russia.
Lenny, I am afraid that we didn't get your question. Could you please repeat? Today, we have a bit of headlines.
Okay. Do you have any discussion about possibilities of Russian Moscow Exchange listing? Will be because many Russian investors interested in your shares and very, very good dividend yield, very good bank, and it will be much more convenient for them to invest in in Russian market. So it it will be very helpful for your capitalization.
At this point of time, we have our shares listed on Kazakh Stock Exchange and our GDS listed in London Stock Exchange on London Stock Exchange and IX. And at this point of time, we do not have plans to list our instruments on other exchanges.
Okay. Thank you.
Thank you. Our next question will come from Tuned Ojo, Harding Lochner LP. Please go ahead.
Hi. Thanks for the presentation. Two two for me, please. The first is, do you mind giving an update on the value of loans still under relief? Maybe if you can do it by segment as well, retail, SME, corporate, that'll be helpful.
And and more broadly, what are you seeing from your customers in terms of repayment behavior as things open up? You know, are they coming forward to repay further, or are they still likely on the moratorium? Just just to get a sense of the the movement over there. The second question for me is on the government concessional loan that, you know, you talked about in in previous quarters. I just wanted to get a sense of how that has progressed and whether you've you've made any sort of headway on that front and and basically, how much have you disposed since that have been launched by
the government? That kind of thing. Thanks.
Tunde, hello? Thank you for your question. One moment, please.
Sure.
Regarding your first question, just to remind, we had close to 16% of loans, of retail loans for which we providing repayment holiday. At this point of time, almost none of these loans remain in this payment holiday, and we had less than 1% of these loans which went into NPL 90 plus, so it's fully reflected in NPL position, which we are providing in our presentation. Regarding SME, as I remember, we had close to 25% of loans, which for which we provided the payment holiday. Again, majority of loans already starts performing according to the schedule. And we still have, at this point of time, around 6%, which are still in the in the payment holiday.
And could you please repeat your second question? Because I'm not sure that I get it correctly.
Yeah. I'm yeah. I'm talking thanks. Talking about a concessional government loan, about six hundred ten year concessional government loan that was launched, I think, in during I mean, think in q two during the pandemic. Right?
I was wondering how far have you gone on that? As the government disbursed, have you been able to make any headway on disbursing those loans to your customers and how much?
Yeah. We actively participated in this program, and now I get it. Yes. We had the highest allocation of of these amounts close to 30% in terms of the limit. But in terms of the placement, I think we have placed even higher portion of money which was allocated.
It was more than 30%. And we're also participating in other programs because also there are additional initiatives from the government side in order to lower the rates on these loans and also extending the tenure backwards. So there would be the concession interest would be applicable starting from month of March when the state of emergence was introduced. And we also now actively working with our customers and the government institutions in order to make these government programs eligible for not eligible, but that's which would be applicable for our customers.
Okay. Thanks. So I'm just gonna revert back to the first question a little bit. Do you
have can you give us
a sense of the level of corporate loans that have been given some sort of relief or been restructured just due to the pandemic?
While on the retail and SME, we were acting on, let's say, massive scale. That's why we were mostly approaching them formally in terms of providing On the corporate loan, we look from different perspectives. That's why we, on the Slide eight, are providing a number of sectors, which we believe is those which, to a certain extent, are affected either by the quarantine measures from the government side or because they are affected by a sharp reduction in oil prices. And we have been providing these statistics for the third quarter already.
And if you would see the percentage of that exposure is reducing, we can say that in terms of the oil and gas production and oil and gas services, the all the payments from our customers is done as the timing due. So there is no restructuring on that side, and exposure is being reduced as originally planned. While for real estate passenger transportation and hotels, this is the areas which, to a large extent, still experiencing certain restrictions in terms of their business. And the restrictions which we have is mostly in these three subsectors.
Okay. All right. Thanks. Thank you.
Thank you. Our next question is a follow-up from Leeny DiStotl, Invest Capital. Please go ahead.
My question, could could you just give some comments about possible competition with custody group? So it seems there were successful IPOs. What is your expectation from this side? What is the situation now, and what is your expectation for the next years?
Lenit, we are not sure that when so the exact question on CASTI file and competition file. Would you please specify?
Since CASTI has we're we're we're very successful IPO, and the business is expanding quite well in financial sector. Do do do you feel any competition from from their side? Is it influence on your business now, or and what is the expectation for the next year from this side?
Yeah, because we are playing in actually face on the same market. Obviously, any competition with any banking or non banking institutions is felt. Active not only on the bank side, we also have business on insurance side. We have also subsidiaries in the brokerage. So the competition is always present in Kazakhstan.
It's having different forms and shapes. Currently, yes, there is a very tight competition on retail side. It's not only about us or CASTIVE. We see more and more banks, and not only banks, but also other consumer place, for example, they becoming more active in terms of building different kind of platforms, marketplaces, financing solutions. So we think that competition is tight.
It will continue probably to be tight because the consumer airing Kazakhstan, I think, has potential, and not only on the consumer side, but also, for example, on the semi side. And we, as a bank, are trying to have our role in all these developments. And we act not only on retail side, as you see, we also launching certain solutions, which are on, for example, making online solutions on insurance side. We, in this month, launched solution which is targeting retail investors. So we, as the bank, trying to, let's say, make our efforts not only on the consumer retail side, but also along all the business lines, which where we as the group are present.
Yes. Thank you. Thank you.
Our next question will come from Simon Neillis, Citibank.
Oh, hi. Thanks very much for the call. I I have a question about the workout of problem loans collateral by STVs. I think you have some details on slide 26. Sorry if I I may have missed this, but did you report some gains in the third quarter from disposing these assets?
And how's the outlook for further disposals and the impact that, that could have on the earnings? That would be my first question. And then the second question actually from the same slide would just be, can you walk us through the decline in Stage three loans? Was that driven by curing or recoveries or by write offs or NPL sales? And then last, following up on the competition question, can you give us an update on your acquiring market share and your position in retail card issuance?
Because it does seem that CASB is trying to shake up the card market. They're telling us they have almost 70% market share in retail payments in Kazakhstan, and they're looking to roll out a QR based, acquiring solution that would basically bypass, most other traditional rails. So just wondering how you feel about that and how you can compete against that. Thank you.
Simon, thank you very much for your questions. Let me answer them one by one. Let us answer them one by one. So regarding the our work work of our SPV subsidiaries, despite the situation with quarantine, when the work of our subsidiaries as well as customers were limiting in terms of visiting these assets, were proposed for sale, I think they did a good job in terms of reducing the assets on their balance sheet, which is indeed witnessed in our bio presentation. In terms of how much gain we recorded, actually, I can refer you to the Note 26 in our financials, where we start providing more details in terms of income on nonbanking activities.
And you'll find there that we are showing net gains on sales of commercial property and net gains on of sales of assets held for sale. It's actually two items which are largely corresponding to any property which is sold either from bank balance sheet or from the balance sheet of our subsidiaries, which is related to stress assets or problem loans. And for three quarters sorry, for the third quarter, the aggregate gain was 4,300,000,000.0 Tyngyi. And for nine months, it is above 16,000,000,000 Tyngyi. So we try to maximize the gain, which we can get from the assets which is helped by our SPV or or or the banks.
Regarding the dynamics on stage three, just a moment, please.
Actually, if I could just add add a follow-up question to the first one, because you have a 187,000,000,000 of assets left. What is generally the amount that you recover, like, in cents on the dollar, or is that not something that you you've looked up? I'm just wondering how much of that can be recovered in the future.
Actually, there is no specific percentage which we, let's say, usually gain from historical, because I think when we talk about the large items, then it's really one by one situation. So I'm afraid that there is no kind of the rule of thumb percentage. While you might notice the same note that the scale perspective, have more or less same amount which we recorded in the 2019 and 2020. Like in 2019, for nine months, we had gain of 14,000,000,000. And to remind, this year, we had 16,000,000,000.
So it's pretty much the same scale, but it's I don't think that it's kind of you should take it as a kind of guidance going forward. It really depends on particular particular situation.
But but if I compare the 16,000,000,000 with the 40,000,000,000 of reduction in disposals, does that have a look at it? You may you kind of recover 50
below 50%. Because because on STVs, we're showing only assets which is sold by STVs. But these lines in note 26, that also includes the workouts done by the bank itself from the balance sheet of the bank. And also, it would include any workout which is done by our other subsidiaries. Like we have subsidiaries, for example, in Russia, and they, because of acquisition of subsidiary of KKB, had certain acquired problem assets and problem loans.
So they also progressing well with reducing their portion. So that in that slide, in particular, we're only showing the proportion of that. So the total amount of workout position might be higher, but I don't have this piece at this point of time in front of me. Regarding your second question, I think it was on stage three dynamics.
Stage three I migration.
Yeah. Yeah. We indeed had a good quarter in terms of reducing the stage three, and that was the combination of working out of few larger corporate loans, problem loans, as well as some portion of that reduction was attributed to some sale of consumer credit card portfolio to a collector company. And, actually, that also helped to to reduce this this stage three. And could you please repeat your third question?
I think it was on the fees on on the Actually, was on The payments of
you know, payments. Yeah. Just how how how are you going to respond to Yeah. Yeah. Kathy's kind of competitive threat to take over the acquired portion?
Yeah. Yeah. Yeah. Yeah. One one one moment, please, Simon.
Yeah. Yeah.
It's a bit not straightforward question and answer, I think, because Mhmm. Yes. As you know, for example, on acquiring, there is a official path. And official path, I mean, it can be e commerce or the post terminals where banks are using the cards of, let's say, Visa, Mastercard, American Express or UPI. So this is one portion.
And you can measure the, let's say, market share of banks on that side. But then there is some other portion of payments, which are not necessarily coming through the cards issued by international systems. Sometimes they can be within the banks, and some players are actually heavily promoting that. And this is not necessarily visible for other players. And from that position, it's probably difficult to exactly estimate the portion of each banks, if you would include this portion of payments, I don't know how to call unofficial or some expanded.
I should be cautious in terms of the naming. But if we are talking about the, let's say, portion which we talk in the beginning, I mean, acquiring, which is coming through a network of cards which is issued by international companies, then definitely our position is quite strong, probably above 30%. But again, it depends really what particular payments you are talking about and what you will be including. And as I said, not necessarily all payments might might be visible from from from the statistics perspective.
But I guess what I'm really wondering is do do you see pressure on interchange rates or MDRs from from this competitive threat? Because I think they're they're rolling out, you know, disruptive pricing if you use the CASB app with a CASB point of sale terminal that can acquire a QR code. So do do do you think that's gonna put pressure on your fee business? That that's, I guess, the main question I'm asking.
The competition is tied to this in this kind of business. Again, it's not about CASK and Us only. There are a few other banks which which are still competing and competing hard, I would say, in this kind of the business. In terms of the dynamics, yes, we if you notice in few quarters last year, we see the situation when we had quite pricing dynamics in terms of net fees and commissions. But lately, we see some stabilization on last night.
And so we also are trying to provide other solutions of the customers. You see that we have increasing percentage of people who are using our home bank system, including the active users. There is a competition. It's tight competition, but we are in this competition. And we're trying to have our role this market.
Okay. Thank you very much.
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