Ladies and gentlemen, welcome to Halic Bank First Half and Second Quarter twenty nineteen Results Conference Call. I will now hand over to Ms. Iira Kasianova, Head of International Relations. Ma'am, please go ahead.
Thank you. Good evening, ladies and gentlemen. Welcome to Halit Bank conference call and presentation of financial results for the first half and 2019. Participants to today's call on Halit Bank's side are Mr. Moushekhnecht, chief executive officer of HawiD Bank mister Liakopisko, deputy CEO, chief financial officer mister Murat Kasenov, deputy CEO, corporate banking mister Ramat Mohanov, chief risk officer mister Victor Skrills, head of strategic office, international activities and myself, Mira Kasenova, Head of Financial Institutions and International Relations.
During the 2019, the bank earned net income of billion. Net income for Q2 twenty nineteen increased to 9,700,000,000.0 compared to twenty four point one billion for Q2 twenty eighteen due to a loss from impairment of nonfinancial assets for 28,500,000,000.0 in Q2 twenty eighteen as well as KTV's recognition of tax loss carry forward of TRY 43,300,000,000.0 in Q2 twenty eighteen due to the merger into Holic Bank. Total assets increased by 1.1% versus the 2018 and by 2.2% versus Q1 twenty nineteen, mainly as a result of funds inflow from the repo transactions in Q2 twenty nineteen. Investment securities decreased by 17.2% versus Q1 twenty nineteen on the back of accumulation of funds for repayment of a one year cross currency swap with NDK on the 07/03/2019. This also resulted in significant increase of cash and cash equivalents versus Q1 twenty nineteen, mainly in short term deposits with NDK.
Compared with Q1 twenty nineteen, net interest income increased by 5.4% to billion. Net interest margin increased to 5.1% per annum for Q2 twenty nineteen compared to 5% in Q1 twenty nineteen, mainly as a result of increase in the share of placement of interest bearing liabilities into interest earning assets. Net interest spread decreased from 5.2% per annum in Q1 twenty nineteen to 5% per annum in Q2 twenty nineteen, mainly due to amortization of discount on receivables of sale of assets in installments in Q2 twenty nineteen. Fin commission income for Q2 twenty nineteen increased by 13.9% versus Q1 twenty nineteen as a result of growing volumes of transactional banking, mainly in payment card operations as well as cash operations and bank transfer settlement. Prior to the merger, the transfers within LegalEntity's current account in HALIC and KTB were treated as external transfers and relevant fees were applied.
After the integration, the transfers between those current accounts are being treated as internal and therefore are free of charge. As a result, fees derived from bank transfer settlement decreased in Q2 twenty nineteen versus Q2 twenty eighteen by 11.8%. Income commission expense increased by 14.9% compared to Q1 twenty nineteen, mainly due to increased number of transactions of other bank cards in the acquiring network of the bank. Operating expenses for the 2019 decreased by 36.3% versus the 2018, mainly due to loss from impairment of nonfinancial assets of 30,300,000,000.0 in the 2018 and cost optimization on the back of synergy effects from merger of KTB into the bank. Operating expenses increased by 9.9% for Q2 twenty nineteen versus Q1 twenty nineteen, mainly due to the indexation of salaries and other employee benefits starting from the 03/01/2019.
The bank's cost to income ratio decreased to 22.3% compared to 44.6% for Q2 twenty eighteen on the back of lower operating expenses and higher operating income in Q2 twenty nineteen. On the balance sheet, compared with Q1 twenty nineteen, loans to customers increased by 2% on a gross basis and 2.1% on a net basis. The increase in loan portfolio was attributable to increase in corporate loans, 1.1% on a gross basis increase in the same loans, 3.2% on a gross basis, and increase in retail loans, 3.2% on a gross basis. Halibank's ninety day NPL ratio decreased to 8.7% from 9.1% as of the end of Q1 twenty nineteen. The provisioning rate slightly decreased to 10.7% from 10.8% as of the end of Q1 twenty nineteen.
The ninety day NPL coverage ratio increased to 128.4%. Cost of risk on loans to customers for q two two thousand nineteen was at 0.3% due to one off repayments of large ticket problem loans. Stage three ratio decreased to 18.6% from 20.4% as of the end of q one two thousand nineteen as a result of repayments and write offs of previously impaired indebtedness of corporate and retail borrowers. On liability side, deposits of legal entities and individuals decreased by 4.94.6% respectively compared to year end 02/2018, mainly due to partial withdrawal of funds by the bank's customers to finance their ongoing needs. At the 06/30/2018, FX share of corporate deposits decreased to 44.2%, whereas share of FX in retail deposits remained mainly the same.
Compared with Q1 twenty eighteen, total equity decreased by 1.9% due to dividend payment for financial year 2018, partially offset by net income earned by HOLIK during Q2 twenty nineteen. The bank continues to maintain very high capital adequacy ratios. Based on our six month financial results, we have updated our forecast for financial year 2019. Net loan portfolio growth outlook remains unchanged in the area of 7%. Consolidated net income is to be approximately billion.
Cost of risk is expected to be around 0.7%. Cost to income ratio is to be below 27%. Net interest margin outlook remains unchanged, around 5%. Return on average equity is to be above 26%. This completes our presentation.
Now we would like to open the floor for your questions, please.
Thank you. Ladies and gentlemen, we will now start a question and answer session. Our first question comes from Isaac Schwartz, Wabiti and Co. Please go ahead.
Hi, everyone. Congratulations on the strong earnings and also on improvement in cost of risk and provisioning. I was just wondering looking back at the decade since the financial crisis, you generally earn more in the second half of the year than in the first half of the year. I think the only year where you earned more in the first half of the year than the second was 2014 when the oil price and the ruble and the regional currencies spiraled at the end of the year. So I was wondering, first of all, why has the business tended to be seasonal in that way?
And can we draw any assumptions about 2019 given that track record?
Hello?
Hello? Hello, Isaac. Just just a moment, please.
Oh oh, sure. Sorry. I didn't know. Heard me. Thanks.
Yes. So yes, okay. You're probably right if we looking back into the history. The logic which we put in providing these assessments, first of all, we, as Khalik, always trying to look from the budget perspective from the conservative side. This is number one, one of the biggest probably reason.
Secondly, typically, operating costs are high in the second half of the year compared to the first half of the year. And as you noticed, we we also mentioned that coming from March year, we increased salaries of our employees, and that might drive our operating costs higher. Secondly, looking at the volatility on the FX side, we also put in certain conservative estimates on the cost of the swap, which we extended for another one year. And also, the first half was particularly good in terms of cost of risk. So you see, our cost of risk for the first half is standing at 50 basis points.
And while we're reducing the overall guidance for the whole year from 90 basis points to 70 basis points, it still assumes higher cost of risk for the second half of this year. But again, I want to stress that we when providing guidance, we basically look at the figures which are budgeted. And our typical approach in the budget process is look from more conservative point of view.
Thank you, Murat. Could you also just talk a little bit more about cost of risk? Looks like you guys have done a really great job on that side. But what what factors were at were at play that that made the that made the rate come down so sharply in the last year?
We think in terms of the cost of risk, we think that we already, for last probably couple of years, except probably someone else are running on the normalized level. Probably the first quarter was more normalized compared to the second quarter when we had some one off repayments of problem loans. That's why for the second quarter, our cost of risk is standing at 30 basis points, which probably is a bit lower than we would consider normalized level. That's why we are increasing the budget for the second half of the year. Saying that, I have to stress that we continue to work hard on the problem loans.
And while we do not see specific reasons why we should really expect any one off, but certainly, that might happen depending on whether we would be more successful in workouts than normally we would expect on certain bigger loads.
Our next question comes from Andrew Kealy, Sberbank. Please go ahead.
Good afternoon. Thank you for the call. I guess I have just a follow-up on Isaac's question in terms of your cost of risk, Murata. These kind of one off workouts that you referred to, are they mainly are they coming from kind of KKB kind of legacy related loans and recoveries? Or are they from kind of Halliks book?
And I guess just generally, do you kind of feel that you're pretty much through all of the kind of workout process and recoveries from the kind of legacy KKB book that you kind of inherited? Do you think that's more or less done now? Thank you.
There were some corporate loans from HALIC portfolio, but the majority is coming from legacy KTB portfolio. And the more we work out and obviously, if you look, for example, results for the last year, we also were successful in recovering some bigger loans. The more we recover and the more we write off on the cases where we do not see any profit, the less is remaining in the port, if you like. So the chances on positive side is less when you have a reduced portfolio of problem loans. And we are currently in the trend that we are reducing our problem loans.
Okay. All right. That's clear. And I have a second question on your fee income. Now obviously, you explain to some degree why the year on year fee income growth is well or contraction in fee income is being is coming from this lower fees kind of derived from bank transfers.
But also, when you look at your kind of net bank payment card fee growth, I mean, I think the contraction in the first half of the year was almost 20% year on year. And I'm just wondering whether you can just give us a bit more color as to kind of what's going on there, why that is so weak? And just any kind of sense of whether you feel that you're going to be getting back to kind of positive year on year fee income dynamics anytime soon would interesting to hear your thoughts. Thank you.
Thank you for the question, Andrew. Just a moment, please. Yeah. We still think that the majority of reasons on Sync Commission Dynamics is related to integration process because as we said before, when the customers were paying from Khalid to TTB and vice versa, that was considered as external payments. And now it would be considered as a payment within the bank, whereby the cost of that would be fee for the customer would be basically zero.
Also, we, during integration process, had to unify the tariffs for the same customers. And for the benefit of the customers, in many cases, the tariffs was set at the lower level, like have some overlap on the corporate customers and on some products. And in many cases, we have to choose the tariff scheme, which is which the customer enjoys in one of the bank and which was the lowest. Yes, there was some dynamic in terms of high increase in fees and commission expenses compared to fees and commission income. That was, to a large extent, as I said, compared to the tariff policy.
We look into that. And if you see the dynamic for the second quarter, actually, our fees and commission income in nominal terms increased higher than the nominal increase in fees and commission expenses. So we see that on a accretive basis, the fees and commission net fees and commission income start increasing. So we think that the integration situation has been left behind, and we are ready to gain more on the fees and commission income.
Okay. So you would think that you would be returning to kind of positive growth certainly next year in terms of the overall fee and commission income. Is that fair?
Yes. In terms of direction wise, yes.
Okay. Thank you. I have a couple of other questions. On your retail lending, there's quite a contrast between mortgages and consumer. Your mortgages are basically contracting and your consumer are growing quite strongly.
Can you just give us a little bit more color as to why that's the case? And whether you expect those kind of directions in those two segments to kind of continue as they currently are? Thank you.
Yes. In terms of consumer lending growth, I think it's the sector general sector specific that we see a high increase in the consumer lending. And from that perspective, we, I think, are getting positive from our wider network, which we have across the city across the country, sorry. That's why we see that our consumer loans indeed increased more than by 5% in the second quarter. And also, this is a seasonal increase because typically, you see a high demand for the consumer loans in the second quarter.
In terms of the mortgages, we are increasing the new mortgage loans partly because of the new government program, but the because we will continue to lend mortgage even in a situation when other banks were not providing any mortgage, and that was specifically during last five or six years when we're probably the only commercial bank which was active on the mortgage area, we see that amount of mortgage loans which are being repaid is exceeding at this point of time the new mortgage generation. And thirdly, is still some problem loans on the mortgage side, and we continue to work out, repay and working on repayment of mortgages. And that also contributed to the decrease in the mortgage for the first half of this year.
Okay. And just final quick question, Although I have a feeling I know what your answer will be. Is there any update on this potential sell down by the main shareholder? Obviously, this was first mooted back in May. And we've not heard a great deal since.
Can you give us anything on that?
Nothing has changed, at least we know from Halibanc side, since the announcement. Yes, to reiterate, the Almex said that they're looking to consider sell part of that part of their shares, but to remain the controlling shareholder, and they're guided at the subject to the favorable market conditions. So since then, there was no further announcements from their side. So I think I cannot add anything on top of that at this point of time.
Our next question comes from Sundar Ojo, Harding, Lidner. Please go ahead.
Good afternoon. Thanks for the presentation and congratulations on a very strong result. Two questions from me, please. The first is on the realization of cost synergies from the KKB acquisition. My understanding is the cost synergies are going to be they're going to start from this year given that the integration was last year.
Can you quantify kind of first half how much cost synergies you've realized from this merger and what is left to be done in terms of operational IT and sort of branch optimizations and other sort of synergies that you intend to realize going forward? That's my first question. The second is on the loan growth. I was expecting somewhat higher loan growth guidance for Halic Bank and even the entire banking system as a whole, you know, given that the Kazakhstan economic growth is is recovering, you know, the real GDP of about 4%. You know, if I laid out over on inflation of about 5%, I would have expected, you know, the the loan growth should be around 10% or even mid teens and just seeing some growth.
I was wondering what in your view is limiting loan growth in Kazakhstan and for Alix, specifically as well?
Yes, Sanjay. Thank you very much for your questions. One moment, please. Sandra, unfortunately, I do not have this particular presentation between myself, but we provided, I think, during the Capital Markets Day, the information on the synergies, which we realized. And you can find that presentation on our website.
But as a general guidance, what I can say that we start realizing synergies immediately we acquired So even before we, merged with KiKiB, we already start, looking at the possibilities to reduce our costs. Basically, it's coming from two sources, reducing the number of branches and outlets and secondly, reducing a number of FTEs. And already during 2017, the second half, we relaxed certain synergies. So by the time of we made the legal merger, part of the synergies has been realized. But still, you can look on the Slide 10 of this presentation, operating costs.
You see that even despite the increase of the salaries starting from March, still the salary and other employee benefits cost reduced by billion So even if you would exclude the recent increase in salaries, then the reduce would be by 2,000,000,000, which is roughly 10% decrease for the second half alone. And that is not the whole synergy because as said, even before the second half of last year, part of the synergies have been realized. But I encourage you to look through that presentation, I mentioned. And if you have the remaining questions, ready to reconnect with you. Regarding the loan growth, as you see, the growth in Kazakhstan is driven by different sectors.
And some of the sectors which are driving increase is actually the sectors which are presented by extraction sectors like oil and gas, metals and mining. And not all of the companies, or I would say, typically, the companies which operate in this extraction sector attempt to borrow either through their parent companies or their borrowing on the debt capital markets or from foreign banks. So when we talk about the growth of the Quebec banking sector, it's, to a large extent, limited to the sectors which are outside the extraction sector with probably some few exceptions.
Yes. Yes. If you look, for example,
for the growth of GDP, so we have preliminary growth figures for the first half of this year. In this, GDP growth constitutes 4.2%. But if you look for different sectors, they grew with different dynamics. Like, for example, extraction of fair of metals increased by 17%, and this is exactly the sector which which are not fully reliant on the covered banking sector as as a funding source. Some other sectors which are typically you'll find within Kazakh banking portfolio, like for example trade, increased by 7.5%.
Transportation increased by 5.4%. A fraction increased by 11.5%, but again, part of construction increase was related to activities on Tinkegee Oil. And again, this is the big project on the western part of Kazakhstan oil and gas field, and it's entirely funded by international investors. Part of that related part of construction activities, again, related to construction on Oktoberay production, and this is the facility of Kagminiros. And again, Kagminiros is funding itself from Chinese development bank.
So you see many of sectors and many of growth drivers is funded by external sources. And unfortunately, it doesn't allow CardBank to fully realize the potential of growth.
So thanks for that insight. That's very helpful to me. So in your view, when do you think the sectors that would directly benefit the banking sector will start accelerating in terms of growth and then the bank and know, a leak, of course, would then benefit from that and then you can start growing double digit. Do you think are you seeing that happening next year, or or you do you're looking at single digit curve loan growth in the foreseeable future?
Still, I I want to add to my previous messages that still we're able to have indicators on some of the projects which was drivers of the growth this year, we're able to directly participate. But of some of them, we are participating directly because still running the big project means that the companies are hiring contractors, they're hiring subcontractors, and this is directly the customers of Halib Bank or other Halib banks. So we're still able to, to a certain extent, gain from the growth projects, but not 200%, as I said. With regards to next year, probably it's a bit premature to say because as you see in current environment with globalization, a lot of elements might influence developed public economy, including development of oil price or developments of Russian ruble and and and in the environment when there are a lot of frequent changes like trade wars, geopolitical issues, probably looking for the next year to be premature if we talk about from the particular figures. If the figures remaining or if the situation remain as is, we expect that we will continue to grow at the same pace as we experienced in this year so far.
This This year so far. Okay. And just lastly for me, do you think the interest rate in Kazakhstan is still somewhat high enough to deter corporates from, you know, demanding more loans? Is interest rate a factor in this equation that we're just talking about? Or in your view, no?
In terms of the rates, they already reducing in Kazakhstan for the last probably three years. That was a reduction on both deposit side and credit side. The development on further develop on the interest rates would depend how the dynamic with inflation will continue. As you know, probably, national bank is reducing corridor for inflation. For example, last a couple of years ago, the corridor was between 68%.
Last year, it was 5% to 7%. Starting from this year, they lowered the corridor 4% to 6%. Currently, inflation is standing at the level of 5.4%, but there are some so some
Hello?
Please hold the line. The conference will resume shortly.
Yes. Hello? Yeah. I think we have been disconnected. What I wanted to say on the rate is that it depend it will depend on the dynamics of inflation.
While inflation has lowered to the level of 5.4% and it stays within the corridor of 4% to 6%, we see that, for example, on food inflation year over year is standing at level of 8%. So the National Bank said in recent statement that if they would see further pressure on inflation, they even might consider increasing the base rate. So for me, first, we have to look at inflation, and then depending on inflation dynamic, we'll see the direction of interest rates.
Yes. Okay. I think for me, the direction of my question is, are customers complaining about the interest rate being too high? Or do you think they're comfortable with it at this level?
I think currently the rates if we take, for example, ten year horizon, probably currently, the rates are not probably, they are not the cheapest, but I think they around the average rates. So Okay. Current rates for corporate and SME customers, they would allow, in our opinion, to to finance their ongoing needs and even look into the capital expenditures. Obviously, if the rates would lower, then it would increase activity. But in our opinion, it's not which is the main factor which might dampen the business activity.
Got it. Okay. Thanks. And this just last one, if you don't mind me chipping in one more, is with the size of your structured book right now as of June?
It's around 8.6%. 8.6%.
Thank you. Thanks.
Our next question comes from Svetlana Uzlanova, BTP Capital. Please go ahead.
Hello. Thank you very much. I have several questions. First of all, I would like to know what is your outlook for NIM performance. From what we saw in the second quarter, you have an higher share of KZT and term deposits, which might bear a high interest cost for you.
And we also saw quite rapid growth of consumer loans and corporate loans that outperformed the sector. So what do you think will be the trends in the second half of the year for NIM based on these changes? And I also wanted to ask looking at your results on insurance operations, Can we consider that those 2,000,000,000 yen of net result is a kind of run level normalized level for the coming quarters? Thank you.
Hello, Svetlana. We do not think that these changes would materially impact our net interest margin dynamics. So we didn't we're not changing the guidance for the year. So we still think that NIM would stay around 5%. And for the first half, as you notice, our NIM according to our calculation is standing at 5.1%.
Regarding your second question, please allow us we have one minute. Probably we do not have a specific figure, but the first and second quarter more normalized in terms of the insurance net insurance income. The exact figure will depend on how reserves are created and they are unwinded. There are some specific rules according to regulation. So that might, to a certain extent, affect the results of particular quarter.
The results are more or less normalized for this period of the year.
Okay. Thank you very much. And still on NIM, so basically, am I right then assuming that in the second half NIM will slightly decline both reported and risk adjusted? Or you can consider it will stay relatively stable?
It probably stay within relatively stable because we are saying the approximate 5%, so that also would include certain variations. Yeah. Okay. Any fact quite materially alter the results which we have just just posted. And on
Okay. Thank you very much.
Risk adjusted, I mean, including the provisions we already, I think, covered during discussions of cost of risk.
Yes. Thanks very much.
UNIDENTIFIED Thank
you for the opportunity to ask a question. I just want you to provide a little bit more detail on the deposit side where you mentioned that seen an outflow because there's been a requirement for customers to finance ongoing needs. That seems like a very high level comment. Can you provide more granularity on that specific trend in the deposit book?
Hello, Konark. Thank you for
your
question. Basically, under that definition, we can provide more granularity. There was one customer which used the proceeds in order to repay outstanding Eurobonds, so that was a significant amount. The second customer actually used that fund in order a big contractor in one of the biggest projects which currently undergoing, and it's received financing from non banking sources, but it's used that fund in order to buy capital goods in this project. And there are a number of customers which moved their deposits from Kazakh banks.
Was not only actually in Khalik, but they moved dollar deposits from Kazakh banks into foreign banks. So basically, probably there are three biggest reasons, but we also see a number of other customers which use their funds in some financing of their needs, with the working capital or capital expenditures.
Okay. That's very helpful. So I guess when if it's such large ticket items, it sounds one off in nature. Does that mean we can expect the deposit balances to remain more static going forward?
Yes, we think so.
Okay. And then the second question I have is somewhat If I step away and I look at the business model, your capital formation is strong. You did indicate that you're going to look across the border at a little bit of M and A activity. Then on the loan growth side, it's not dramatically strong.
So we're probably going to end up with a balance sheet with extremely capital strong capital levels by the end of
the year. You did indicate you're going
to pay higher dividends going forward. But this must clearly provide a lot more upside for us as shareholders to expect a dividend payout of larger than 50%. Can you comment on that?
Generally, you I think are right that in the situation when our return on equity is far above 20%, in a situation when our risk weighted assets are not growing more than by 10%. If we would be paying 50% as we did this year, then we still would be sensation of further accumulating capital increasing capital adequacy ratio. We think that we already strongly capitalized financial institution, so we do not have intention to further build capital in situation. Do not see particular need for that. That's why during June, the Board of Directors made decision to amend dividend policy where the corridor has been increased from 50% to 100%.
So we think that we have all the possibility to increase dividend payout with a minimum level of 50%. The particular figure would depend on the prospects on particular results of a particular year. As usual, areas where we look during determining the particular dividend payout ratio for a particular year.
Okay.
Would you be prepared to give us a guidance on how we think should think about capital ratios at the end of the year?
Yes. Normally, we do not have a particular target on capital adequacy ratio because it's dependent on different factors. And one of them is difference between how capital adequacy ratio is calculated according to National Bank guidance and, for example, how the rating agencies are looking to that. So there is different risk weight depending on the composition product wise and sector wise of our credit portfolio. So we are looking at different factors when we're determining whether we have sufficient capital or we have possibility to pay out.
But the level which we have at this point of time is, in our view, is more than sufficient to allow distribution of dividends above that figure.
Okay. Yes, those are the questions I have. Thank you very much.
Our next question comes from Ivan Arjovic, Renaissance Capital. Please go ahead.
Yes. Hello, colleagues. It's Ivan from Renaissance Capital. Thank you for the call and opportunity to ask questions. I have a couple of questions.
My first one would be on the AQR in Kazakhstan. Could you share us any details that you know about the exercise? What are your expectations and potential implications for both HELIK and the sector in your view? And my second question would be a bit more high level discussion. I mean, if could just give us some color on how competitive balance is evolving in the sector.
I mean, banks were going through the cleanup and some ownership changes earlier this year. So if you could just maybe highlight a little bit how this has affected so far competition in corporate lending, in mortgages and in consumer lending. It would be really helpful. Thank you,
Juan. Regarding your first question on AQR, the process has already started. Actually, the National Bank chose 14 banks, the top 14 banks, which is actually half of the banking sector in terms of the number of the banks. But in terms of credit portfolio, they're covering close to 90%. So pretty much significant coverage of credit portfolio of covered banks.
Because actual AQR started just a few weeks ago, at this point of time, it's probably too premature to say what the potential outcomes might be. The only way we can say that the exercise is very comprehensive, very intense, and it's taken a lot of resources of parties which are participating in this project. So we have to wait until the results. And National Bank expect that the preliminary results would be at the end of this year, and probably it might take some more time in order discuss with them. In terms of your second question, how the recent trends in the banking sector is affecting competition.
So far, this year, we see a situation when First Sarcom Bank acquired Dusan Bank or they actually became related banks, actually. We do not see that particular event impacted the competition. Competition. From other activities, we know that Casanova merged into Forte. Again, they were banks within same group.
No change. And the most recent one is merger of three banks. Each of them are outside top 20, so no no impacts on the competition really from these particular three events.
Great. Thank you very much.
Our next question comes from Elena Tazerova, BCS Global Market. Please go ahead.
Hello. This is Tazirova from BCS. Thank you for the opportunity to ask questions. I have just several follow-up questions. First in on dividends.
Could you please advise if new dividend policy is effective this year? I mean, if there is any, like, possibility, no constraints to pay theoretically more than 50% as a payout for this year for the income of this year? This is my first question.
Yes. As I said, while we amended the dividend policy to pay dividends from 50% to 100% of net income, Obviously, during making any decision on payouts, we are looking at any contractual limitations. At this point of time, we have covenants set in our Eurobond issues, which limit dividend payments to 50%. One of the bond is maturing January 2021. So if we're making would be making decision for results of 2019, that bond would still would be outstanding.
But when we would be making decision for the year 2020, and we would make decision in March the boss would be making decision or recommendation in March 2021. By that time, this bond already would mature. We have another bond outstanding, which also have that limitation. But these bonds, while maturing in 2022, it is have option the bank have option for early repayment. And as you know, in this first quarter of this year, we made decision to prepay $200,000,000 of that amount.
There's still five fifty million dollars outstanding, but as I said, the bank can make partial or full repayments anytime when it decides. So we don't see the limitations on a particular bond as a big hurdle.
Hello?
And I think you also said that you also asked whether there is limitations to pay more than 100%. Yeah? Probably didn't understood your question correctly.
No. I I was asking about paying above 50. Yeah. But if you if you can share your views about 500, is there any limitations? It could be also helpful.
We
do not currently have situations where we'd be making some one off big payments because we don't think that it's benefiting either the bank or our investors.
Mhmm. Fair enough. Thank you. And you have you said that, like, one of the bonds has option for redemption, but the second one which matures, like, January 2020 doesn't have any early redemption opportunity, and you don't intend to to early redeem it?
On the bond which is maturing January 21, there is no prepayment options. That was the bond which was issued by by Hollybank itself, but it's maturing within seventeen months.
Understood. And just a small follow-up on deposits. So given all these explanations you gave about dynamics in the second quarter, what is like your strategy in terms of deposits given you have like very, very liquid balance sheet and particularly you don't need to track more deposits? So what is strategy maybe in terms of interest rate rates, in terms of volumes, how you manage deposits in this industry?
Well, there is no change to the policy. Generally, we tend to keep diversification of our deposit sources. This is important to have, from risk perspective, diversified funding sources. But also, we are trying to be on lower sides compared to the competition. So we are trying to keep these two things, to find the balance between diversification and to lower cost of funds when we see these possibilities.
Generally, on the retail customers and the corporate customers, we would charge deposit rates, which typically would be cheaper than the average on the market.
Yeah. Understood. Thank you. And just a small, like, question on Uzbekistan. So just you just recently entered the the market a bit, but maybe you can share your views, what the the opportunity you see there, and I think you can benefit there as well.
Yes. We have developments. Indeed, May year, we received the license, full banking license to operate in Uzbekistan. And already last month, the bank starts operation, start activities with the customers, and they already start granting loans. So the first loans have been granted a few weeks ago.
So the bank is up and running. It's start operating with activities with corporate customers and private entrepreneurs on the on providing cash management. The bank is working on introducing the Internet banks, so hopefully, it would also be running in near future. And later on, we also would look to would also look into opportunities to work with private individuals. So we see the bank the market as very interesting, and we see big prospects in this market.
We have no further questions. Dear speakers, back to you for the conclusion.
Dear, ladies and gentlemen, thank you very much for participating our call today. And as usual, our IR team remains open for any further questions. Thank you very much. Bye.
This concludes today's conference call. Thank you for your participation. You may now