Good day, and welcome to the JSC Halluc Bank First Half and Q2 twenty twenty Results Conference Call. At this time, I would like to turn the conference over to Mira Kosnava. Please go ahead.
Thank you. Good evening, ladies and gentlemen. Welcome to Halic Bank conference call and presentation of financial results for the six months and 2020. Participants to today's call on Halic Bank's side Liakar Prikova, Deputy CEO and Chief Financial Officer Mr.
Murat Koshenov, Deputy CEO, Corporate Banking and International Activities Mr. Omaz Mohanov, Chief Risk Officer Mr. Viktor Skrill, Financial Director, Finance and Subsidiaries and myself, Mira Asenovas, head of FI and IR. Now I would like to hand over the call to mister Murat Koshenov, deputy CEO.
We welcome everyone to our investor call. I would like to start our presentation with an update on the current situation with fighting coronavirus in Kazakhstan. As of August 16, there were one hundred and three thousand confirmed cases or five forty six cases per 100,000 people. Twelve sixty nine infected individuals died. We noticed that reported statistics include both COVID-nineteen confirmed cases, and starting from August the first also includes the cases of pneumonia with COVID-nineteen like symptoms, but with negative PCR test.
It is important to note that countries substantially expanded testing capacity over the last four months. Since early April, the number of conducted tests per day increased from 2,000 to more than 28,000. By August 16, almost 2,300,000 tests for coronavirus were conducted in Kazakhstan. The state of emergency declared by the government of Kazakhstan on the March 16 and lasted through May 11 has efficiently limited the initial virus spread. However, with the gradual lifting of lockdown measures and expanded testing, we have seen the increased number of daily reported cases, and secondary lockdown measures were introduced starting from the June July 5 and until August 17, basically until today.
The situation has notably stabilized with reproduction level falling to 0.5. Almost eighty percent of infected individuals have recovered, thus substantially eased the pressure on the healthcare system. Next slide, please. We'd like to highlight how anti epidemiological measures have evolved and impacted the sectors of economy throughout the year. Following initial COVID cases registered in March, on the March 16, the government of Kazakhstan declared the state of emergency.
It included full closure of borders and establishing state of national emergency, imposing lockdowns in major cities and social distancing regime. All enterprises and organizations, including non food stores and malls, service entertainment organizations suspended their activities. These were harsh but necessary measures crucial for minimizing the virus impact. Already by the April, the situation has stabilized, the virus spread was contained. On the May 11, the state of emergency was removed and the economy started to open up, starting with industrial, construction, and transportation sectors gradually moving towards services sector.
On the May, non food retail and restaurants were opened. In June, passenger rail transportation air traffic with selected countries resumed. The second lockdown was introduced in Kazakhstan from fifth July till August 17. The new measures aimed to limit certain social activities and large people gatherings, including the closure of large shopping malls, food courts, fitness and spa centers, beauty and recreational centers, public beaches, and aquafox. Interstate bus and commuter train transportation has been ceased.
Social distancing and face mask order has been established in all public and workplaces, as well as regular disinfection of public areas. However, these lockdown measures imply less severe economy closure as it was during the state of emergency during March to May. Large part of service businesses were allowed to operate, including business centers, auto clean and repair companies, hotels running at 50% capacity, and so on. Recrements could serve outdoors. Air transportation has not been stopped.
Construction, industrial, and other large businesses remain operational. The government has developed a plan for gradually lifting the lockdown measures while limiting the spread of virus. Starting from today, trade centers, beauty salons, spas, fitness centers, education centers, and outdoor entertainment parks reopened, but only on weekdays with strict compliance to social distancing, masks, and other sanitary requirements. Companies are still recommended to keep at least 80% of employees working from home. In addition, started from today, Kazakhstan resumed flights with seven countries, Belarus, Egypt, Germany, Russia, The Netherlands, The United Arab Emirates, and Ukrainian.
Now let me speak more specifically about the impact on Kazakh economy. Kazakhstan'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. Retail trade and passenger transportation have been mostly impacted. At the same time, other sectors including mining, construction, communication services, and agriculture remained largely silent over this period.
Already in June, we have seen a positive performance across most of the sectors. Safety and transportation, which will take more time to revert to normal levels, And industrial production declined in June by 5.6%, mostly due to contraction in extraction sector following oil output decrease in accordance with OPEC plus agreements. SMEs and individuals have been the most affected in current economic turmoil. The government and the national bank have adopted a number of measures to support them. Banks were requested to provide debt holidays to individual entrepreneurs and SME borrowers affected by the current situation.
A grace period on principal amount and interest for up to ninety days. The interest, however, continues to accrue. Within the first support package effective since March 16 until June, more than 1,900,000 individuals and 12 and a half thousand SMEs got an approval for that holidays. From June, SMEs affected by the new wave of lockdown got additional grace period on principal amount and interest at least for ninety days. Besides the virus in the 2020, we also witnessed dramatic decline in oil prices.
However, oil cut agreements under the OPEC plus resulted in balancing of energy markets by pushing the oil prices up to the level above $40 per barrel by the June. After certain weakness in March, Tengue strengthened amid certain amidst the foreign currency supply increase as a result of conversion of foreign currency funds into Tengue within the framework of transfer from the national oil funds and the sale of foreign currency by quasi sovereign companies. India appreciated from a level of $4.48 tenge per US dollar in the March to $4.48 tenge per US dollar at the July 1. Kazakhstan's economy demonstrated relatively strong performance in the first quarter twenty twenty. However, COVID-nineteen impact and sharp decline in oil prices resulted in economic contraction of minus 1.8% year over year in the first half of this year.
At the same time, we would like to note that first half contraction is much lower than one could see from other economies globally. Now I would like to give a turn to Viktor Skriv.
COVID nineteen pose certain challenges to businesses and
people in first half of
most of which are our clients. We have efficiently adopted measures to support them in time of economic turmoil. We have participated in all state support programs and provided additional support to SMEs that were most severely impacted by the pandemic, including concessional lending programs to end debt payment holiday. We have utilized PBT 109,500,000,000.0 out of PBT 180,000,000,000 concessional SME lending program allocated to the bank and provide the debt repayment hold date for 3,500 SME clients during first support package and 654 clients during second support package. For our retail clients suffering from temporary low cost of income due to decreased economic activity, we provide debt repayment holidays for up to three months.
By the mid June, almost 131,000 applications for debt repayment holidays were approved by the bank. We have transferred over 1,900,000 social payments of minimum monthly salary and 413,000 payments for QBT 50 thousand to socially vulnerable people. Our land remained fully operational, and we efficiently moved 64% of head office employees to remote workplace, while 33% of our head office staff stayed in the office while keeping strict social distancing and hygiene requirements. 3% were on paid forced lease to support. Our bank has a well diversified loan
book with 26.7%
represented by the sales segment and 15.8% placed in me linking and 57.4 by corporate loans. Our corporate book is further diversified by the industry with the largest one, constituting only 14% of the group. Our exposure to the sectors most affected by the current down cycle with hotel, passenger transportation, commercial real estate, and oil and gas sector comprised 14.5 of our loan book and remains manageable. We are in constructive dialogue with most of our customers that were impacted by COVID nineteen to support them through this period. The bank's retail loans are either issued to payroll clients or secured by real estate or other property.
Our fixed lending exposure has potentially decreased over the past few years, and now the fixed loans comprise under 26% of the loan book and primarily issued to the borrowers with the fixed. And now I would like to move to next sections where we provide digital and transactional banking update. Development of digital platform has been one of the top priorities for the bank over the last year, and it proves to be a major advantage within the COVID nineteen outbreak and the coming lockdowns as we experienced a dramatic increase in demand for remote and online services. We have seen a strong gap in online client activity. In 2Q two thousand twenty, number of retail clients using Internet banking increased by 17.5% to almost 5,500,000 users.
In the corporate segment, over 182,000 clients use our Internet bank by June 2020. In 2Q two thousand twenty, we have also seen p two p transfer steadily grow. Online loans and deposits are gaining significant sections and have increased by two point five and seven point six times, respectively, since the beginning of the year. At the same time, we have been continuously advancing our retail and corporate corporate online platforms, expanding their product verticals, functionality, and service tools to provide our clients with opportunity to fully manage their financial lives online. During the pandemic, we were focused on launching a number of strategic projects aimed at improving our digital proposition and offering a comprehensive online platform to for our clients.
Just within the last six months, we released a number of innovative services for our retail and SME clients. We have launched fully online client onboarding with our physical branch visits to attract new customers as well as introduce deposits and loan issuance and with the new loan transfers via mobile application method. Since the July, our clients can use self-service machine for card issuance just 5,000,000. We actively encourage our clients to use digital channels through implementation of various bonus programs and promotions. For instance, our clients may benefit from up to 5% bonus on each transaction in home bank application as well as may get back 2% bonus by paying with QR code.
We set up partnerships with leading customer retailers, such as Technobot, Fullpark, or Tear, and launched online installment program, which allows to make purchases without visiting stores and bank branches. Our payment platform now includes over 5,200 services for payment online. The KS SME and corporate platform, OnlineBank, provides full scope of transactional banking, online financial products, and variety of Fortune business services online. Since June 2020, small enterprises now become a client for the bank remotely. And since August 2020, our bank started to issue online loans for small enterprises without document delivery.
And as I've already mentioned, we have seen an explosive pickup in online client engagement and lockdown. Slide 16 provides some little statistics on this. Online active clients and transactors increased by around 2.1 and around 9.9 times, respectively, over the last six months. Online payments and transfers volumes increased by 30190% since January. Even with the lockdown meeting, we expect our customers will continue to rely on digital platform for managing their everyday financial life.
We remain fully committed to further investments in the development of our digital capabilities. And now I would like to hand over presentation to Mirko Tiano.
Thank you, Viktor. Now let me switch to HALLE Group consolidated financial results for the six months and the 2020. In the 2Q twenty twenty, we earned billion of net income despite the tightening operating environment. The decrease by 7.6% compared to 1Q twenty twenty was caused by decrease in other non interest income, mainly related to loss from evaluation of swap with the National Bank of Kazakhstan and lower income from the sale of property by subsidiary SPVs. We demonstrated 21.2% return on average equity and 3.1 return on average assets.
Reduction of net income in the 2020 compared to the 2019 was mainly driven by substantially higher credit loss expenses, reflecting macro changes according to IFRS nine. Total assets of the group decreased by 3% versus the end of 1Q twenty twenty, mainly as a result of revaluation of FX balance sheet positions due to KZT appreciation versus U. S. Dollar during 2Q twenty twenty, and decrease in the volume of funds raised under report transactions. Customer deposits decreased by 2.6% versus the end of 1Q twenty twenty, mainly as a result of revaluation of FX deposits.
Net of FX changes, the customer deposits would increase by 2.7%. Interest income slightly increased by 0.6% to 180,500,000,000.0 for the 2020 compared to 179,300,000,000.0 for the 2020, mainly as a result of increase in average balances of interest earning assets. Interest expense increased by 1.2% compared to 1Q twenty twenty. As a result, the net interest income slightly increased by 0.3% to 104,300,000,000.0 yen interest margin decreased to 5% per annum for the 2020 compared to 5.3% in 1Q twenty twenty, mainly as a result of decrease in the average interest rate on retail loans due to a new unsecured lending program with the borrower's life insurance bundle, the premium on which reflected in insurance income. As an alternative to the existing unsecured lending program with a loan arrangement fee, which is reflected in interest 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. Compared to 1Q twenty twenty, our fee and commission income reduced by 4.5% as a result of decrease in fees derived from payment cards and cash due to the effect of COVID-nineteen lockdown. At the same time, the lockdown was a natural trigger for cashless transactions penetration in clients' habits, which caused pickup in non cash transactional banking and increasing the fees derived from the bank transfer settlement. Fee and commission expense decreased by 12.3% compared to the 1Q twenty twenty, mainly due to 17.3% decline in payment card expenses caused by the decrease in the volume of acquiring business. Operating expenses for 2Q twenty twenty decreased by 0.9% versus 1Q twenty twenty, mainly due to the decrease in salaries and other employee benefits as a result of a decrease in the variable part of the motivational payment, and partially offset by the increase in loyalty program bonuses payable to the customers.
The bank cost to income ratio increased to 28.2% compared to 23.8% for 1Q twenty twenty due to lower operating income in the 2020. Next slide shows from a different perspective our strong liquidity position, where deposits as a percentage of non equity funding equal to 81.8%. The share of liquid assets in total assets was 44.8%. In addition, we have relatively low loan leverage with net loans to deposits equal to 58%. And net stable funding ratio was at two, well above the regulatory requirement.
On the balance sheet, compared with the end of 1Q twenty twenty, loans to customers slightly decreased by 0.9% on a gross basis and 0.7% on a net basis. Decrease of gross loan portfolio in the 2020 was attributable to decrease in corporate loans, 5.1% on a gross basis, mainly due to revaluation of FX loans, whereas SME and retail loans increased by 8.33.9% on a gross basis, respectively. Halib Bank ninety day plus NPL ratio returned to 6.9% from 7.1% as of the end of 1Q twenty twenty. The provision rate slightly decreased to 10.1% from 10.3% as of the end of 1Q twenty twenty, and the ninety day plus NPL coverage ratio increased to 148.4%. Cost of risk increased to 1.3% in the 2020 compared to 0.5% in the 2019 due to additional allowances for expected credit losses reflecting the increased risk and uncertainty from COVID-nineteen outbreak and lockdown restrictions.
Stage three ratio slightly increased from fifteen point five percent as of the end of last month, 2020, to fifteen point seven percent, mainly due to impairment of corporate borrower, previously considered as the borrower with increased credit risk. We additionally show here how well the work out of problem loans collateral was done by the Bank of Pvd during the 2020. On liability side, the deposits of legal entities and individuals decreased by 23.1%, respectively, compared to the end of the 2020, mainly due to revaluation of expected denominated deposits due to KDT appreciation in the 2020. And as of the end of 2Q twenty twenty, the share of corporate KDT deposits in total corporate deposits was 56.6% compared to 50.8% at the end of 1Q twenty twenty, whereas the share of retail TCT deposits in total retail deposits was 43.6% compared to 37.6%. Compared with the end of 1Q twenty twenty, total equity increased by 8% as a result of net profit earned by the bank during the 2020, and the bank continues to maintain very high capital adequacy ratios.
Despite the challenging macro situation, the bank managed to pay dividends in the amount of 60% of net income for 2019, thanks to strong financial performance and capital position, delivering very strong dividend yield and 13% per annum. On unconsolidated basis, the capital adequacy ratios as of the 08/01/2020 were as follows: K1 ratio was at 22.2%, and K2 ratio was at 24.2%. Based on our six month financial results, we have updated the outlook for financial year 2020. Net loan portfolio growth outlook remains unchanged, above 10%. Consolidated net income is to be around 300,000,000,000 yen of risk is expected to be in the area of 1.5%.
Cost to income ratio outlook remains unchanged, below 30%. Net interest margin also remains unchanged and is expected to be in the area of 5%. Return on average equity is to be above 20%. And this completes our presentation. Now we would like to start q and a session.
Thank you for your attention.
Thank We'll We'll take our first question from Elena Savara with BCS Global Markets.
My first question is about your guidance on cost of risk. So given you have a pretty good cost of risk, 1.3 around this area in first half, it means your guidance is expecting of cost of risk to to stay worth than second quarter. So does it assume that we do not see we haven't seen peak of cost of risk this year yet? And if it if it's so, what kind of worries and risk you see in many any particular, like, corporate area or retail or SME? This is my first question.
Thank you, Elena, for your question. Basically, this represents the budgeted figures, which we updated during the midyear review of of our performance and and made projections. It doesn't mean that we necessarily expect increase in cost of risk in the second half, but given the overall still difficult situation and some additional lockdown measures, which actually took a good time of the third quarter. And we also appreciate that during the previous crisis, it actually took time until some credit costs would transpire. So that's why we made decision to, I would say, to budget cost of risk at the level of which is somewhat higher than the one which was realized and also modeled during the first half of this year.
But again, this does not necessarily mean that we, as a management, already see signs that the cost of risk would definitely increase. It's more of a budgeted figure.
Understood. Thank you. And if you can disclose what kind of IFRS nine macro adjustment is in the course of fiscal first half of the year.
Actually, we updated our macro guidance in the first quarter of this year. We didn't adjust them in the second quarter. We might make certain adjustments in the second half, but no decisions being done yet at this point of time.
Understood. Thank you. And just another question on guidance as well. So except for cost of risk, it seems that, like, this year is more or that was already expected in second fourth quarter last year, so your previous guided numbers. So, yes, you feel some some uncertainty around the situation and potentially new risk around COVID.
But what's kind of, like compared to your previous guidance, should be some weakness in fee and commission and other some products. But does it mean that you're pretty comfortable that all other areas except for cost of risk will be really the same strong as you expect to see it?
Yelena, we only providing the outlook for items which we are pointing in the in the slide 33. So we are not specifically providing guidance, for example, on the interest income itself or fees and commissions. So we might probably discuss the dynamics of fees and commissions, which already we saw in the first half. But probably, you can see that from net income perspective, slightly reduced our guidance from the level of $350,000,000,000 to the level of 300,000,000,000. Yeah.
And at the same time, we maintaining our guidance on net loan portfolio growth. The fees and commissions business the fees and commissions income, as you see, has been impacted by the lockdown measures. It might still be affected because, I said previously, that we had lockdown introduced for six weeks, which affected certain retail trade businesses. There might be still some limitations in work of some retail businesses going forward in the second half of this year. So that might affect the fees and commission business.
But we are not providing any explicit guidance on on where we expect to see fees and commissions for the whole year.
And this is many things.
We'll take our next question from Andrew Kealy with Servbank.
Hi. Good afternoon. Thank you for the call. I have a few questions. First of all, on capital.
It was very strong in terms of your the kind of capital accretion in the second quarter. I'm just trying to understand a bit more some of the the moving parts in there. So it looks like your your tier one capital went up by about a 116,000,000,000 10 gig or so, whereas the the net income growth was about 75. So it'd be great just to understand what the difference is in in in that. And similarly, just from a back of the envelope calculation, it looks like the risk weighted assets fell around 11% q on q.
The the the the loan book the net loan book drops about 1%. So would would would be good to understand what's happening in there. You know, is this how much of this is FX effect from the the 10 game move? Or are there other reasons for the big drop in risk weighted assets? Yes.
That's my first question, and I'll take the others after.
Yes, Andrew. Do I understand correctly? The question is about why the capital adequacy ratios increased in such a manner in the second quarter, and what was the main drivers?
Yes. Yeah. Basically, you know, the capital seems to go up more than the profits, and and the risk weighted assets decline seems to be Yeah. Very
Yeah. Actually, if if you see, we have the return on equity in the first quarter at good levels, but because the risk weighted assets increased as a result of revaluation of dollar assets, actually, it doesn't translate in increase in the capital adequacy ratios. What actually happened in the second quarter, we had a reversal of FX rate. So it was quite significant strengthening of thing here. That's why the dollar assets, the dollar risk weighted assets actually reduced substantially in the second quarter as a result of this regulation, which coupled with further profitability, the bank gains during this period of time.
And also, if we add to here that there was no dividend payment happened in the second quarter, and capital continued to accumulate, actually translated in this substantial increase in the capital adequacy ratios. I have to note that due to the dividend payments in the third quarter, we might see the, obviously, reduction of capital adequacy ratios in the third quarter as a result. And actually, on the Slide 31, we're presenting the capital adequacy ratios as of August 1. It's kind of pro form a figures, which showing the impact of dividend payments on the capital adequacy ratios. So they are given roughly two and a half percentage points reduction in in capital adequacy ratios.
Okay. Thank you.
Sorry. Sorry, 3.5%.
Yes. Yes. Okay. Thanks, Murat. Second question is on your margin.
You made a comment in the presentation that the drop in
the NIM
was due to this kind of accounting change on the retail lending kind of borrow and this bundle, life insurance bundles and hence this loan fee not reflected in interest income. Can you just let us know roughly kind of how material that was? I mean, what would the NIM have been if you haven't kind of made that adjustment? That would be helpful. Thank you.
Yes. We didn't make these pro form a calculations. So for me, it's probably difficult would be to calculate the pro form a NIM should there will be no change in the product. It's not only the accounting treatments, actually. We introduced one more loan program, consumer lending program, where some upfront fees have been amended by the life insurance.
And actually, in our unconsolidated results, which you might see from the National Bank or Kazakhstan Stock Exchange, you would find these fees these additional income as fees and commissions, because for us, it's kind of the bank insurance product. But because this insurance was actually done by our subsidiary insurance company on consolidated basis, you would see on the insurance income. And today, you can figure out what the impact was on these additional insurance income. But simultaneously, as I said, there was a reduction in upfront fee. And because upfront fee was amortized during the life of the loan, you also saw the reduction in net interest margin as a result.
But again, we didn't make calculations, so unfortunately, I'm not in position to provide any figures on this pro form a NIM should this insurance commission be added back to the interest income.
Okay. Alright. Anyway, that's that's helpful. Thank you. And then another question is just on your tax charge, which is almost zero in the second quarter.
Just any kind of explanation as to why that was the case and how should we think about the tax charges in the second half of the year?
Yes. In the first quarter of this year, you see a positive revaluation of our swap because of the big devaluation of Tingue, which resulted in the additional income on the swap, which is taxable. That's why you see the effective tax rate in the first quarter was substantially higher than the average effective tax rate for 2019. And because the effect direction changed in the second quarter, there was a loss recorded on the same line, which was actually a reversal of gain, which was happened in the first quarter. That resulted substantial reduction in effective tax rate.
However, if you look for effective tax rate for the first half, it should be close to the normalized level, which you saw for 2019 for the banks.
Okay. That makes sense. And just very briefly, a final question. In terms of the kind of the impact on your business of this second lockdown, I know, you you know, your your slide eight is very useful. I'm just wondering if you could give any brief kind of color as to how you see some of these indicators performing in in July.
You know, do you do you expect things to kind of take another kind of dip down after the kind of recovery in in in June,
kind
of July, August? Just trying to get a sense of, you know, how much of a negative impact this is on the business and the economy, relative to that that that first lockdown? That would be helpful. Thank you.
Yeah. Actually, we are trying to carefully review the high frequency data in Kazakhstan. The best one probably is the short term economic indicator. And the statistical agency recently provided figures for the month of July, actually, the first month of the second lockdown. I can give you some figures, actually.
Sectors like agriculture and telecommunication, they continue to grow. There was a reduction in construction by around 10.8%. But I think it's simply the volatility, because for example, in the month of June, the growth of construction area was more than 22%. So we don't think that it is the direct impact of lockdown measures. It's simply some timing difference in terms of, let's say, delivery of construction works, it's specifics of the sector.
In terms of the transportation, example, on the I don't have figures for passenger transportation, but in terms of the the cargo transportation, there was more or less same figures as we saw during the months of June and May and April, actually. So there was no substantial change. We saw, obviously, because of the lockdown measures, a drop in retail trade. But the overall drop in retail trade was relatively mild. It was minus 7.5%, which given the lockdown measures, I think I would take a positive from this figure.
Again, to remind you, in the month of June, the retail trade grew by 1.6%. This was actually the month when there was no limitations. And for comparison, for example, in the month of April and May, reduction year over year basis was 4530%. So 7.5% year over year basis reduction in July, I think it should be considered as a positive sign, like retail trade being adapted to lockdown measures and try to make sales on delivery basis. In terms of industrial production, there was 9.6% reduction, mostly in oil production.
The drop was 10% month over month basis. And this is the direct result of OPEX plus because the country tried to over comply because it was lagging compliance in the month of May. Though somewhat reduction in some metals production, production, I don't know exactly the reasons, but I also don't think that they were result of lockdown measures. So all in all, some sectors were dropping in July. Again, as I said, the direct impact from lockdown is probably on retail trade, but was relatively mild and on the cargo transportation.
But otherwise, in production, I think it's no direct And, on construction, no direct, impacts from from lockdown. At least this is how, we see the figures and interpret interpret them.
That's brilliant. Thanks very much, Miriam. Thank you.
And we have no more questions. Oh, wait. We do have one more question in the queue. We have Kunde Ojo with Harding.
Hi. Sorry. I joined the call pretty late, so apologies if you've probably answered this question before. The the first question I have is the the gap between your cash and your accrued interest on loans kinda widened again this this quarter from last quarter. I was wondering if you could help me provide an explanation for that, please.
Hello, Tunde. Thank you for your question. The biggest impact is probably the decision which the bank made on providing the death holiday for the customers who were impacted by the initial strict quarantine measures during the state of emergency. And to remind, we provided the debt holiday for retail customers, for SMEs, as well as large corporates, which worked in the segments which businesses were either fully prohibited to operate by the government degree or whose business was severely impacted. So that was probably the main reason.
Next to that, obviously, we have the natural interest income gap related to the fact that we have some good portion of national bank notes on our balance sheet. And these notes, they are discounted instruments, so they do not have a coupon. And all the interest income is earned through amortization of of discount. And also, there is some timing difference. But, again, the largest impact was the debt holiday, which was provided in starting from the month of March.
March. Okay. Yeah. That that's very helpful. And just just to follow-up on the on the debt repayment holiday that you you gave.
Has that changed from the numbers you gave as at the as at your last earnings call? And and if you want me to just push out those numbers to you, I I can. But, you know, you gave a different you gave numbers for the SME and the and the retail portfolio you didn't really give it for the corporate because you said that's, you know, on a case by case basis. So the number you gave for retail was about 21,000,000,000, same year. SME was 46,000,000,000.
Has that number changed materially from that level?
No? We have not updated the figures because I can say that the regulator asking the banks again to look into the SME businesses which operate in the businesses which were affected by the second lockdown measures, like, for example, small business working in the services area. Basically, this is the segment which we paint in red on the slide seven. Actually, remains up to the bank to consider these applications. We also start receiving, and we're still processing applications from retail customers whose, let's say, initial death holiday is expiring or has expired.
Because we still not processed all the applications, so that's why at this point of time, we cannot provide the updated figures. For example, how many customers came for this secondary request. But we hope to provide these updated figures when we're reporting the third quarter results. But not all customers are coming back to us because we see that there are also a good number of customers which start servicing after the death holiday being being expired. But, obviously, there is a number of customers who are requesting the second the extension of debt holidays.
Again, I cannot give you, unfortunately, the exact split percentage wise for that.
Yeah. Yeah. Well, actually, that was gonna be my next question. Because I I was I was just trying to gain any sort of indication on what the performance of the portfolio have been after the expiry of this debt with payment holiday. Right?
You know, ninety days initially. We're past that ninety days for a lot of those initial applications now. Are you more comfortable just broadly now? Are you more comfortable around how the portfolio is behaving? Are they coming back today, or have you seen more situation where you have to then sort of extend those holidays for them?
And I know you said you can provide a number, but just an indication whether you just maybe your comfort level, let's put it that way. It'd be helpful.
I think we do not see the situation as, I would say, a a very bad one, actually. But to be frank, we probably need more time in order to get the more clearer picture, because typically you see that the situation becomes more transparent, more transparent with, say, three to six months, even probably a bit later. So I think the autumn would show the provide a more clearer picture what is happening. I think it's So fair that we we we should probably wait for a quarter in order to give, I would say, a more clear view how the the overall quarantine, the second lockdown, and overall situation has impacted this immediate. But again, we see a lot of support from the government on also on non general population because there was question whether the second lockdown people would receive the social payments in the same manner, what have been taking place in the first quarantine.
And actually, the government made payments for all six weeks for people who making applications. And actually, for employed people who was of was sent for unpaid leave, the the employees themselves was eligible for making these applications.
Got it. Got it. And then I'll just probably round up soon. Now I just wanted to get a sense of the impact of the second lock down that you had, you know, in July to August on office quality. Is it has it been damaging like the first, or is it more, you know, a nonissue, if I if I may call it that?
What what's your view on on that one? I know it's still still kind of very recent, but just wondering what would you expect from that?
Again, the second lockdown is just, let's say, it's on on the list today. And, again, the the lifting is not done as a as a one time. I think the government will be gradually removing these limitations. But as I said during our presentation, the impact on the businesses during the second lockdown is more mild than during the quarantine. So more businesses were able to operate unlike the situation during the month of April, for example.
But some businesses, they were not able to operate. And, of course, these businesses, they continue to face stress. And at this point of time, again, it's difficult to see how they will be coming out of of the second lockdown. But we have seen, for example, from some of our customers which are operating, for example, in the in in the trade centers. We see that during the month of June, actually, the full month, which they were able to operate almost on full basis, except probably for some weekends, we see some good rebound in their businesses.
But but, again, we probably have to see a bit longer period of time because we don't know whether we might see some new waves coming in Kazakhstan. And if they will be coming, what the government reaction would be in terms of limiting the business. So I think these kind of things would would dictate a lot. If there will be no same situation with infection as we faced in the month of July, for example, there's a good chance that the businesses would be rebounding to probably not 200% level, but at least to 90% level in a very, very quick manner. But again, how long it will stay, I think it's difficult to judge at this point of time.
Yep. Yep. Yep. And just last follow-up from me from the first question I had on the cash interest gap, you know, on loan is that, you know, given the explanation that it's, you know, likely due to the debt repayment holiday, does that mean that, you know, that gap widening is not a good measure of, you know, sort of asset quality issues now given that we don't even know who can pay or who cannot pay, you know, given you just a bunch of a lot of people that payment holiday. Is that a fair assumption that I have?
But now that is not a good measure of asset quality problem.
Overall, it's a good indicator. Probably two things I have to say nevertheless. Number one is that you might still see the fluctuations quarter on quarter, because some instruments and some loans, for example, the coupon on them is paid on quarterless semi annual basis. So that's why they are affecting these fluctuations. Number two, there was not the, let's say, the structural situation with the interest payments in the second quarter.
This is because the government imposed certain limitations. It's not like some businesses, they lost their clients because there was less of demand. But because the government didn't allow certain businesses to operate. Just to give you example, for example, today, the hairdressers start operating, and the anecdotal evidence is that today, they were opening from eight till, I don't know, until 10:00 probably, and they are fully booked. Because Thursday, they were able to operate last six weeks.
And there are many evidences, like probably demand is not fully gone. It's because there was some limitations imposed demand side. Again, how demand would rebound starting from today, it's it's I think this is something which we have yet to see. And that would directly translate it into the cash interest gap in the third and fourth quarter.
Got it. Thank you very much. Appreciate it.
We'll take our next question from Andre Michalos with Sova Capital.
Hello. Good evening. Thank you very much for the call. I have a question on dividends. I would be grateful if you could share your thoughts on the dividend payout ratio increasing further for the FY '20 based results dividend to stay around 70%.
And also if you consider a possibility to introduce interim dividend payments. Thank you very much. Yes. Hello, Andre. Thank you for your question.
I think it's too premature to discuss what the dividend payout would be for the full year results of 02/2020. I think there is still many uncertainties laying ahead from economy perspective. In terms of the interim dividend payments, I think at this point of time, the answer would be no. We have, as you probably know, the dividend payment cycle set as a one year. Typically, the decision is done on the Annual General Shareholders Meeting, typically taking place in the month of April.
And dividend payment is the following shortly. This is only this year because of the extraordinary situation, we made some postponements on dividend payments. But this is no indication that we would be making payments a few times a year. So, so far, we're sticking for one year payment. Thank you very much.
That's clear. Thank you.
We'll take our next question from Siplana Aslanova with VTB Capital.
Yes, hello. Thank you very much for this opportunity to ask a question. I'm sorry if you already answered this, but what actually Retail loan growth do you see going forward? Because we saw quite significant growth in the second quarter, both in mortgages and unsecured loans. Do you see this as a sustainable level?
And do you see any risks building there on the second lockdown or you consider that the actual state support will basically limit those risks? And also my second question is on your staff costs. Do you expect that the development of the digital platform will cut your staff count by the end of the year? Or do you expect any staff counts decline going forward? Thank you.
Svetlana, thank you for your questions. Regarding the retail loan, consumer loans, actually, there is a combination of a few factors. Factor number one, I think there was accumulated demand because people were not able to visit the banks during months of, for example, March. And obviously, in the month of April, and once the bank starts operating, we see some lack of demand, the natural demand coming in. We didn't actually make changes to our program.
Definitely, we were not relaxing our terms of the consumer loans. So that is not the factor, for example. We also, starting from the end of last year, made certain changes in terms of how we sell the loans, mean, in terms of the the sales force. So one might say that we became more proactive in in in terms of that without changing our target customer bases, without changing the risk risk profiles and risk requirements, we were still able to get more customers on board. And we made some additional products, the one which we mentioned during the call, the one you you would find in the presentation.
Like, we teamed up with certain big consumer retail shops in Kazakhstan, and we also introduced some additional products. And they also while not material, but they also start providing some contribution. Whether we might see some deterioration on the consumer credit side, well, it's difficult to judge at this point of time. But as I said, we're sticking to our credit policies, and we were mentioning during our previous calls that we have strong consumer bases, people who are employed by large companies, by governmental agencies, people who get salaries from the budget, including doctors, for example, and teachers. So some good portion of our customers, they can be called as essential in the context of current situation.
So we see comfort in our credit portfolio, but obviously, we screening the situation. And if there will be adutirations happening, we would be definitely reacting to that. But so far, we we do not see some participation of in in this part of portfolio.
Okay. Thank you. And on the staff count?
On the staff count, actually, already starting from January, actually, from beginning of this year, we put some hiring freeze, actually, where we see probably slower staff turnaround because of current situation. They will still we still saw some people resigning for their personal reasons. And in most cases, this vacancies has not been filled. At the same time, we continue to hire in some other areas like areas related to digitalization and automation of processes. At this point of time, we do not have specific plans, let's say, for additional layover, except probably from the natural trends which we have seen so far.
At the same time, we, as the bank, obviously see the more structural changes which might come from overall change of a more longer term change in terms of how many people would need to work from office, how many people would work from home, even if the situation with infection would be changed. We are studying that. Obviously, no decisions done at this point of time. We have a certain split in terms of how many staff is working from home and from staff. And those people who work from home, they have full access and they're full operational.
So we do not have staff who, I would say, sitting idle as a result. At least their proportion is very material at this point of time.
Okay. Thank you.
And we'll take our next question from Andrew Kealy with Sabre Bank.
Hi. Just a couple of quick follow-up questions. On your provisioning,
was there any changes in
the macro inputs in the second quarter? They obviously had a pretty big impact on the cost of risk in the first quarter. And, you know, if not, then are your kind of GDP kind of full growth expect your kind of core macro expectations for the kind of full year more or less the same following the second quarter as they were following the first quarter? And then just a brief second question on this, swap with the, National Bank. So that was closed in early July.
So is it right to assume that there basically won't be any further, p and l impact there in the third quarter? Thank you.
Hello, Andrew. This is, almost Mohammed. Yes. We've reviewed the impact of macro changes in the second quarter, same as we did in the first quarter. And some of the macro assumptions has changed.
You probably could notice from the financial or from our report that GDP assumptions has reduced a bit. So basically, we reviewed GDP numbers for the second quarter. And, however, based on the review of all
the
macro scenarios, we have not made any adjustments to IFRS models in the second quarter because, overall, the impact from these changes was not significant. As Murat mentioned, we are in the process of reviewing on a constant basis. We're reviewing the quality of the portfolio, also looking at the impact of the macro changes and the lockdown. And also, this debt payment holidays also be crystal the situation around those will be more clear in the third quarter. So, basically, in the third quarter, we will do this job once again and see if any changes are needed, any adjustments, any additional adjustments are needed to IFRS models based on macro and lockdown situation.
And in terms of your question on swap back in the third quarter, yes, the swap has been fully paid in the July. So there might be some still some impact, but it should be much mild comparing to previous quarters because the timing of the swap entering in the third quarter was very limited.
Great. Thank you.
And we have no more questions in the queue at this time.
Yeah. Ladies and gentlemen, thank you very much for participating our call today. And our IR team, as usual, is open for any further questions. Thank you very much. Bye.
This concludes today's call. Thank you for your participation. You may now