Good day, ladies and gentlemen. Thank you for joining us. I'm Viktor Skryl, Strategy Director for Halyk Bank. We have our executive team joining us on the call today, including Ms. Umut Shayakhmetova, Chief Executive Officer, Mr. Dauren Sartayev, First Deputy CEO for B2B banking, marketing, NPL, and transactional business, Mr. Murat Koshenov, CFO and Deputy CEO for finance, subsidiaries, compliance, and international activities, Mr. Roman Maszczyk, Deputy CEO for risk management, data science, and collateral, Ms. Olga Vuros, Deputy CEO for corporate banking, Mr. Nariman Mukushev, Deputy CEO for B2C banking, digital government services and ecosystem, Mr. Mikhail Khasin, Deputy CEO for IT, Mr. Almas Makhanov, Finance Director, Ms. Mira Tiyanak, Head of FI and IR, and Mr. Rustam Telish from IR team.
Today, we will begin with a short video overview of the group's results and key highlights, followed by a presentation and Q&A. Please note that the call is being recorded.
Good day, and thank you for joining us. 2025 was another year of consistent performance and sustainable growth for Halyk. We continued to expand our customer base, grow business volumes, and strengthen engagement across both B2C and B2B segments. Client activity, transaction flows, and revenues demonstrated solid momentum, reflecting the strength of our ecosystem. During the reporting period, we delivered on our financial guidance strong results across key operational metrics, further strengthening our profitability profile.
Importantly, this growth was achieved despite the tighter regulatory framework, including the introduction of an excess profit tax and an increase in minimum reserve requirements, as well as a more competitive market environment. Our strategy focuses on clear priorities, deeper digitalization, data analytics, disciplined adoption of AI, and development of integrated B2C and B2B ecosystems, and focused on regional expansion, all aimed at improving efficiency, enhancing customer experience, and strengthening long-term competitiveness.
In B2C, we made a significant step forward in developing our digital ecosystem, with Halyk Super-App evolving into a core platform for everyday financial needs, delivering greater convenience, personalization, and broader customer reach. We substantially enhanced the personalized customer experience by launching a new multi-tier loyalty program, Halyk+. In B2B, we continue expanding our digital ecosystem. A clear example of this is Online Duken, our proprietary built-in B2B platform, fully integrated into our banking infrastructure, digitizing processes between convenience stores and their distributors, which has shown strong traction since its launch in the second half of 2024. We also remain strongly committed to shareholder returns. In 2025, we distributed 60% of net income as dividends. Dividend per share increased threefold compared to 2019 levels, reflecting the group's strong earnings growth.
In addition, we completed an SPO, further increasing our free float and strengthening Halyk's positioning in international capital markets. Looking ahead, we remain focused on sustainable growth, technological leadership, and creating long-term value for our stakeholders.
Beyond core banking, the group operates as a diversified financial and non-financial ecosystem, spanning insurance, leasing, brokerage, asset management, and lifestyle services. Halyk ranks number one in total assets, net loans, deposits, equity, insurance premiums, and assets under management. The bank provides for nearly half of real economy financing among commercial banks. The majority of the country's largest taxpayers are Halyk clients, demonstrating the bank's deep integration into the national economic framework. Halyk is the largest transactional service provider in the market, processing payment volumes that exceed the country's annual GDP. The group combines digital platforms with the most extensive nationwide branch network, serving millions of retail clients, a broad SME segment, and a large corporate client base.
Uzbekistan represents a key strategic growth opportunity, with the group steadily expanding its lending exposure, including cross-border financing. The group is a leading digital financial institution operating through its two core platforms, Halyk Super-App for individuals and Onlinebank for businesses. Powered by advanced technologies, including AI and data analytics, both platforms have demonstrated strong multi-year momentum, delivering sustained growth since 2021.
Halyk Super-App is the digital platform for retail customers, demonstrating strong engagement through growing monthly active users and high transaction frequency. Digital adoption continues to deepen with the vast majority of retail loans and new deposits originated digitally. The bank continues to broaden its digital payment capabilities and was the first to introduce the innovative Face Pay solution. In addition, the Super-App integrates insurance and brokerage offerings within a single ecosystem, with both services gaining strong traction over the past year.
The platform combines financial and lifestyle services, driving engagement and customer lifetime value through proprietary solutions in marketplace, travel, entertainment, ticketing, and GovTech, alongside partnerships in EdTech, eGrocery, and ePharmacy. Further strengthening its lifestyle offering, the bank introduced an integrated restaurant solution enabling discovery, reservations, takeaway, and dine-in ordering, and seamless QR payments across the full dining journey.
Within its B2C customer value management strategy, the bank applies AI-powered next best offer and next best action tools, along with recommendation engines that personalize client propositions, driving stronger engagement and higher cross-sell rates. Halyk's Online Bank is a B2B digital platform providing corporates and SMEs with integrated banking and business services seamlessly connected to corporate ERP and CRM systems. The platform enables rapid onboarding, giving businesses seamless access to the ecosystem. It combines daily banking with lending, deposits, factoring, and trade finance in one place.
It also offers business registration beyond financial services, GovTech integration, insurance, and payroll, bringing the total to more than 150 offerings on the platform. Onlinebank powers financial flows across the economy, from government procurement and trade to corporate lending and tax payments. The platform serves a large and growing base of active users. Payment volumes and transaction activity continue to expand year-on-year, reflecting strong and sustained momentum. Digital penetration is equally strong on the SME side, with the vast majority of SME loans issued through digital channels.
The platform continues to evolve through new client-focused services. One example is Online Duken, developed in-house from the ground up, providing a full digital cycle connecting distributors and convenience stores from ordering to payment and supply accounting. This pioneering solution unlocks underserved micro-retail segments, connecting thousands of convenience stores nationwide and expanding transaction flows across the ecosystem.
Together, Halyk Super-App and Online Bank enhance cross-segment clients' engagement and retention, positioning the group as a core digital infrastructure connecting consumers and enterprises across the economy. This strengthens Halyk's role as a trusted partner to clients, businesses, and the nation.
Thank you. Now let me briefly highlight our operating performance for 2025. We delivered strong results with net income up 14.9% year-on-year, supported by growth in both net interest and non-interest income. Profitability remains best in class with return on equity at 32.6% and net interest margin at 7.1%, while we continue to maintain strong cost discipline with cost to income at 17.5%. Our balance sheet expanded with total assets up 12.7% year to date, driven by customer balances alongside solid growth in loans and deposits. Finally, our digital platforms continue to show strong momentum with double-digit growth in both volumes and transactions. Now, let me briefly highlight some key milestones over the past year.
In ECM, we executed a $475 million secondary offering, increasing free float to 37.6%, the largest follow-on transaction in Kazakhstan. On ESG, our Sustainalytics rating improved significantly, moving us from risk to medium risk. We also recognized as best bank in Kazakhstan by The Banker and Euromoney, among other awards. On funding, we became the first commercial bank in Kazakhstan to sign a landmark bilateral facility with China Exim Bank, further diversifying our funding base. Now, let me start with key highlights of Halyk Group. We remain the leading lender to the real economy in Kazakhstan among commercial banks, reflecting our strong positioning in core banking. Over the past five years, we have delivered consistent growth in our core businesses, with gross loans up 2.2x and deposits increasing by nearly 70%.
At the same time, we maintain a strong track record of profitability, supported by solid capital levels with consistently high returns. We are delivering attractive shareholder returns with total high teens to mid-20s growth in EPS, DPS, and total shareholder returns, alongside a five-year average dividend yield of 14.5%. Finally, our digital platform continued to show strong engagement with solid user growth and a vast majority of loans issued digitally across B2C and SME segments. Let me briefly highlight our role in regional economy. We are the largest lender to Kazakhstan's real economy, among commercial banks, supporting 47% of the economy and serving 86% of the country's largest taxpayers. We are also expanding regionally, with loans exposure to Uzbekistan up 34% year-on-year.
At the same time, we remain the leading transactional platform, with payment volumes equivalent to 160% of GDP. Our digital platforms continue to scale rapidly, with payment volumes growing by over 20% and online banking volumes increasing by nearly 30% year-on-year. Here you can see a consistent track record of profitability growth over the past decade, despite highly volatile operating environment. The successful execution of our digital strategy allowed us to achieve a compound annual growth rate of 18% in net income and 32% average return on equity over the five years, while our cost-to-income ratio continues to improve. We have delivered a consistent track record of equity growth over the past decade, demonstrating resilience across cycles and consistent capital generation.
Over the last five years, equity has grown at a CAGR of 17%, more than doubling over the period. This slide highlights strong and consistent growth in total gross loans and deposits over the past decade, with a CAGR of around 18% for loans and 14% for deposits. Next, we will take a look at our digital ecosystem and the progress we continue to see with both the Super- App and Online Bank. Since 2021, our B2C and B2B digital platforms have experienced strong and consistent growth in user engagement. The volume of payments made through our B2C platform has grown at a five-year CAGR of 38%, while the number of transactions has increased at a CAGR of nearly 53%.
On the B2B platform, the volume and number of payments have expanded at five-year CAGR of 24% and 21% respectively. In terms of active users, our B2C platform has achieved a five-year CAGR of 15% in monthly active users, while the B2B platform monthly active users has grown at a CAGR of 17% over the same period. This slide illustrates our track record in delivering consistent increasing return per share despite some turbulence through the cycle. A nearly 20% CAGR in earnings per share over the five years gave, at the same period, an average annual total shareholder return of 20.5%. Here you can see how our dividend per share has grown consistently over the past five years, with the exception of the post-pandemic year in 2021.
A compound annual growth rate was at 23%, while the average dividend yield was 14.5%. Now, a few words about the macroeconomic environment, and specifically about our key market, Kazakhstan. The country accounts for 60% of Central Asia's GDP. With a median age of 32, Kazakhstan population of over 20 million is relatively young and rapidly urbanizing. Kazakhstan achieved real GDP growth of 6.5% last year, and the forecast for 2026 is 4.25%. The production of oil is expected to remain flat at approximately 96 million tons. The IMF's midterm forecast predicts that GDP and GDP per capita will continue to increase over the next few years, together with the rising population. Now, let me hand over the call to Mira Tiyanak.
Thank you, Viktor. We continue to see strong engagements in our Halyk Super-App with 8.5 million monthly active users and 3.2 million daily active users. Transactional activity remains robust, supported by 6.2 million monthly transaction users. This drives strong growth with payments up 23% and volumes increasing by over 20% year-on-year. Overall, this reflects continued momentum of our digital ecosystem. Next slide, please. Our retail lending business continues to grow with the loan book up around 11% year-to-date. Asset quality remains at a comfortable level with the NPL 90+ ratio at 7.2% and coverage close to 90%. At the same time, loan issuance totaled KZT 2.6 trillion, down 15% year-on-year, primarily reflecting regulatory tightening.
We continue to hold solid market position with 17.9% share, serving close to 1.9 million borrowers. Our retail deposit base continues to grow steadily with a 10.8% increase over the period. We maintain a strong market position and an increasing share of local currency deposits. We continue to see strong growth across all ecosystem verticals, including car insurance, e-commerce, travel and entertainment ticket platform. GMV is growing across platforms supported by an expanding partner base and increasing client activity. Overall, the ecosystem continues to strengthen client engagement and supports growth across the group. We operate two complementary brokerage platforms covering both in-app and full-service clients. We continue to see strong growth with client numbers up over 30% and transaction volumes increasing by more than 50%.
This drives growth in asset under management and brokerage assets while we maintain a leading market position. Now let me turn to our online bank platform. We continue to maintain a leading position in B2B digital banking in Kazakhstan with a large and highly engaged client base. Our monthly active users reached almost 344,000, with daily active users at around 150,000 and nearly 270,000 monthly transacting users. This strong engagement translates into solid transaction growth. The number of payments increased by 22%, while volumes grew by nearly 30% year-on-year. Overall, this reflects the strength of our B2B platform and its key role in driving transactional activity across the group. We continue to see solid growth in corporate lending, with the gross loan portfolio increasing by 14% to KZT 6.8 trillion.
At the same time, our portfolio remains well diversified across key sectors of the economy, with no single concentration dominating the mix. 57% of our corporate loan portfolio are in local currency. Now let me turn to our corporate business performance. We continue to demonstrate strong client engagement with around 3,000 active clients and a high level of product penetration. This is supported by strong transaction activity, with a total quarterly transaction number reaching three million. At the same time, we maintain a leading market position with a 30% share in corporate deposits. Asset quality remains at a comfortable level, with NPL 90+ days at 2.8% and coverage about 110%. We continue to see strong growth in the SME segment, with the loan book up nearly 20% and solid growth in loan issuance.
Digital lending is expanding rapidly alongside such innovative products as digital bonds. Overall, this highlights the strengths and scalability of our SME franchise. Turning to portfolio quality in the SME segment. Asset quality remains strong with the NPL 90 days plus ratio at 3% and coverage at 137%, reflecting a prudent risk approach. We also continue to see good client engagement with the product penetration at 2.7 products per active client. This is supported by solid transaction activity, with monthly transactions reaching 5.4 million and volumes totaling KZT 17.2 trillion . Importantly, our SME lending is highly digitalized, with 93% of loans issued digitally. Now let me turn to our insurance business.
We maintain a strong market position, ranking number two in both general and life insurance, with market shares of around 25% and 23% respectively. At the same time, our insurance companies are supported by solid credit ratings, reflecting their financial strengths and stability. In terms of key operational and financial metrics, we continue to see steady growth. Gross written premiums increased by 7%, while insurance revenue grew by 13%. Net insurance income showed strong momentum, increasing by 26% year-on-year. Overall, this reflects the strength of our insurance franchise and its growing contribution to the group. Let me now turn to our business in Uzbekistan. We are one of the largest private bank lenders in the market, with total loan exposure of KZT 936 billion, up 34% year-to-date.
This includes our cross-border lending from Halyk Bank, which grew strongly by 44% year- to- date to KZT 735 billion. At the same time, Tenge Bank continues to develop steadily, with its loan portfolio reaching KZT 201 billion tenge, up 8% year- to- date. Tenge Bank continues to scale, supported by ongoing investment and expanding digital capabilities, including digital onboarding and lending solutions. We also continue to explore strategic opportunities in this market, including our discussions related to Click. Overall, Uzbekistan remains a key growth market for the group. Tenge Bank continues to build a balanced platform across both retail and SME segments. We see active usage across digital channels alongside expansion of our SME client base and digital lending offering. Overall, we continue to strengthen our presence in Uzbek market.
Now let me hand over the call to Rustam Telish from IR team. Thank you.
Thank you, Mira, and good day, everyone. Now I'll take you through the financial results for the year ended December 31st, 2025. During our nine months and third quarter results call in November last year, we provided our updated financial guidance for 2025. Growth of our net loan portfolio amounted to 14.3%, with 10.4% growth in retail segment and 16.4% in corporate and SME. Net fee and commission income grew by 11.9%. Cost of risk was at 1.4%. Our net income amounted KZT 1,058 billion. Return on equity reached 32.6%. NIM is at 7.1%, and cost to income equaled to 17.5%. Here you can see the decomposition of the net income growth in 2025.
Net income increased by 14.9% year-on-year, reflecting strong overall performance. It was primarily driven by the increase of net interest income, net fee and commission income, and net insurance income. Let me briefly highlight key balance sheet trends. Total assets of the group increased by 12.7% year-to-date due to increase in amounts due to customers. Average total interest-earning assets in 2025 grew by 18.5%. At the same time, average total interest-bearing liabilities grew by 17.3%. Total deposits to total liabilities ratio was at the level of 82.4%. As at the end of 2025, total equity of the bank increased by 14.1% compared to 2024 due to net profit earned by the bank during 2025.
Loans-to-deposit ratio was up to 91.4% at year-end 2025 versus 88.3% at year-end 2024. Interest income for 2025 was up 24.1% versus 2024, mainly due to increase of average balances of loans to customers. Interest expense for 2025 increased by 32.4% versus 2024, mainly as a result of the increase in average rate and balance, and balances of amounts due to customers, as well as the growth in the share of KZT amounts due to customers. In 2025, net interest margin was affected by the introduction of new minimum reserve requirements, coefficients, and faster pricing of average interest-bearing liabilities compared to average interest-earning assets following the increase in the base rate.
As a result, net interest margin has slightly decreased to 7.1% per annum for 2025 compared to 7.2% per annum for 2024. Net fee and commission income for 12 months, 2025 increased by 11.9% versus 12 months, 2024 as a result of increased number of clients and the growth of clients' transactional activity, both of individuals and legal entities. Here is an overview of operating expenses, which increased by 16.9% versus 12 months, 2024, mainly due to the indexation of salaries and other employee benefits, including the cost of the long-term incentive program, as well as IT development-related costs. The cost-to-income ratio decreased to 17.5% compared to 17.6% for 12 months, 2024, amid higher operating income for 12 months, 2025.
Compared with the year end of 2024, loans to customers were up 13.9% on a gross and 14.3% on a net basis. The retail loans growing by 10.8%, while the loan portfolio of legal entities increased by 15.5% on a gross basis. The share of fixed loans in total net loans was 25.2%. Cost of risk in 12 months, 2025 was at normalized level in line with our full year guidance and was at the level of 1.4. As at the end of fourth quarter, 2025, stage three loans increased to 7.7%.
Year- to- date, as a result of the moratorium on the sale of problem retail loans to collection agencies until May 2026 and the migration of few corporate clients from stage two to stage three. Compared with year-end 2024, the deposits of legal entities and the deposits of individuals were up 9.9% and 10.8% respectively due to fund inflow from the bank's clients. As at the end of 12 months 2025, the share of KZT deposits in total deposits was 71.7% compared to 69.1% as at the end of 2024. In corporate deposits, the share was 70.4% versus 70.9% as at year-end 2024.
While the share in total retail deposits was 72.7% versus 67.5% as at the year-end 2024. Capital adequacy ratio of the bank increased in the fourth quarter due to the net profit earned by the bank during first quarter 2025. RWA were up by 15.4% following the increase of loan portfolio. As at the end of 12 months 2025, RWA density slightly grew to 88% versus 86% as at the year-end 2024. I am pleased to present our outlook for the final financial year of 2026. Retail net loan portfolio growth is expected to be in the area between 8%-10%. Corporate and SME net loan portfolio growth is expected to be in the area between 10%-13%.
Total net loan portfolio growth is expected to be in the area between 9%-12%. Growth of net and commission income is expected to be in the area between 5%-10%. Cost of risk is expected to be in the area of 1.5%. Consolidated net income is to be around KZT 1 trillion. Return on average equity is expected to be in the area of 29%. Net interest margin is expected to be somewhat around 6.8%. Cost-to-income ratio is expected to be in the area between 18%-20%. Dear ladies and gentlemen, that's. Let's look through the financials. We'll now open the floor for your questions. Just quick instruction. To state a question, you can raise your hand in the Zoom, or if you joined via cell phone, please press star nine to raise your hand.
You can also enter your question in the written form via chat. While stating your question, please also mention your name and company. The first question comes from Dan Mikhaylov . Danil Mikhailov, please go ahead.
Hello, am I audible?
Yeah. Hi.
Hello, this is Dan Mikhaylov from Vergest Asset Management. Congratulations on a great set of results. My question is on the guidance. In Q3 2025, you released a preliminary guidance 2026, which suggested a flat NIM and I think about 10% or, you know, high single digits to 10%, net income growth. Since then, you proceeded to downgrade the guidance on this earnings call. Would you be able to comment on the underlying reasons for that downgrade?
Dan, thank you for your question. Yeah, indeed, in the third quarter, we were providing the preliminary estimations. That was actually before the completion of our standard budget process. We were in the middle of that. Obviously, it's already five to six months passed since we provided around four to five months which passed since our preliminary estimations. What we've seen that we expect that rates might be staying somewhat higher, a bit for longer than we estimated in the third quarter. That is probably the primary reason for correction of NIM estimations.
Can you just clarify how many rate cuts you expect for 2026?
Yeah. What we're seeing from hearing from central bank rhetoric, so they do not expect the base rate to be reduced until the second half of this year. Obviously, the current geopolitical situation might also, let's say, influence the whole situation on the inflation side. There are a number of uncertainties given the current situation. I mean, not the Kazakhstan specific, but geopolitical related to oil price how it might affect the prices on import of goods and related issues.
The next question comes from Milosz Papst. Milosz, please go ahead. Sorry, the next question comes from Simon Nellis. Simon, please go ahead.
Thank you. Thank you for the opportunity. I'd also have a question on the revised guidance. I think you've also lowered the fee income growth a bit. Could you just unpack what's driving that? I guess generally, you know, to what extent have you assumed that the current environment, because of the conflict in the Middle East, is kind of persisting? Would you then, you know, if that conflict did stop and oil prices started to moderate and your inflation and
Right.
If your view changed, I mean, would you have to kind of revise your guidance back to what you had before? That'd be my first question. My second question is really around the trading and other income. Basically all the income that's not fees or net interest income, it grew 28% year-over-year in 2025. Can you kind of strip out how much of that is driven by kind of trading and securities and FX gains versus other income from some of your ecosystem investments and the outlook for both in terms of growth going forward?
Hello, Simon. Thank you for your question. Regarding fees and commission, net fees and commission guidance revision, we think that there are probably two areas which is impacting our current estimations, which might be a bit of conservative side. First of all, we are looking from the first two month dynamics, and what we see the economy-wise, there is a bit slower start to the year. If you look from the external trade, internal trades, investments and overall the short-term economic indicator perspective. So they are somewhat lower if you take a year-on-year basis. Second impact probably it's a slight, too, let's say minor impact. Still, there has been introduction of value-added tax to certain banking services.
We are still in the process of fully incorporating that. On some fees and commission, we had to allocate certain portion of that for the payment of value-added tax. Indeed, as we typically do, once we go further into the year, by the mid-year, we might be revising the guidance. This is what we see from current point of view. With regards to current situation, I think it is important to mention that we as Halyk Bank have no exposure to Middle East. We had certain positions on certain bonds including sovereign bonds, which we closed in the end of February without any loss. It was even some small mark-to-market gain.
Any, let's say, potential exposure might be coming through, as I mentioned, through increase in oil price, which might have a dual impact. The positive one is through increased export proceeds to the country. On the contrary side, we know that energy components might be feeding different parts of goods and services which Kazakhstan imports. It is in our opinion might be impacting both export, which probably is a quicker influence, and a bit longer term is import component.
Okay.
With regards to your question to trading income. Actually, higher trading income is driven by activity with international investment banks primarily. Halyk is probably the largest bank in the region. One of the major liquidity providers in the region. It is acting as a market maker for hedging carry trade instruments on NDF curve. Because not many international banks might have limits on the regional banks and we are well-placed to carry that position within Central Asia and Caucasus.
A portion of that income, that other income line would be income from your ecosystem activities, right? Your non-banking
No, it's primarily trading.
Is it? It's primary trading.
It also includes effects on our clients. There are other components of other income, and there are quite a few. It's quite diversified. It also, among others, includes, for example, positive gains on foreclosed assets, which we realize through our SPVs. There are quite a number of positions.
You think basically that it's a sustainable revenue stream, that it should continue to grow?
Well, different lines might change, let's say, in terms of dynamics, but because, as I said, it's quite diverse, so you should not consider that as having, let's say, big one-off component.
Okay. Actually, just one last question, if I could. I saw that the stage three loans went up quite significantly quarter-on-quarter. Actually, there was a large drop in stage two. If you could just kind of unpack what's going on and how worried we should be by the jump in the stage three loan number?
First of all, we do not think that the situation is, let's say, creating any issues. We remain to be well-covered, and so altogether the situation with credit portfolio remains stable. There was some migration from some wholesale names from stage two to stage three. To a large extent, they have been covered by provisions ahead of their, let's say, transition to stage three. We're looking at different restructuring measures, but the exposure is quite well-covered. Second component is transition of retail loans, and this is as a result of regulatory restriction to sell portfolios to collection agencies. This is the comment which we have been providing during last few calls.
Because the bank is restricted, the NPLs are staying on our balance sheet somewhat longer than previously. We have all the necessary infrastructure in terms of soft and hard collection. We have quite good coverage as well.
Okay. Thank you. That's all for me.
The next question comes from Milosz Papst. Milosz, please go ahead.
Yes. Hi. Thank you for taking my questions. Some of them have already been answered. Milosz Papst, Edison Group here. Maybe you can shed some light on the reduced loan growth outlook for 2026 compared to your indicative guidance you've shared during the Q3 results, especially on the corporate and SME segment. Is it due to less favorable pricing in the market or just broader macroeconomic, let's say, slowdown? Or maybe is it related to some of the clients which were transitioned from stage two- three? And is there an impact of the disruptions to these CPC on any of your clients? Let's maybe start with these questions.
No direct any impact by CPC situation or oil export situation which impacted, let's say, first couple of months. First of all, on retail side, we see that regulator is going ahead with further, let's say, regulatory tightening to limit the retail, especially in secured growth. Secondly, we see that the situation with inflation high rates is probably taking a bit more time in terms of normalization. Third, we take into account, as I mentioned, a bit slower starts on the client's activity in the first couple of months of this year. One of the impact is related to FX. In some aspects, the stronger tenge is actually good if you, let's say, looked from a return from, for example, GDP perspective.
When it comes to reporting of credit growth in tenge, because we have certain position in U.S. dollars, current strengthening of tenge is actually impacting the growth of loan portfolio in tenge terms.
Excellent. Thank you. My second question will be regarding your digital ecosystem. I mean, we've seen, especially in the fourth quarter, there was a quite significant increase in your monthly active users, daily active users, and MTU, both for the Halyk Super-App and for Online Bank. Were there any particular reasons for that? Maybe you can give us some background to that.
Yeah. We substantially invested in upgrading our UI, UX and the bringing more features to our super apps, like specifically on Halyk Super- App. We introduced new layouts, so it's truly looking as a not only financial, but also non-financial services. We see the increased engagement of the clients on different services, including, for example, GovTech on some elements of our ecosystem. We upgraded our loyalty program, Halyk+ , which is loved by our clients and also increasing our engagement with our clients. Our kino.kz is also driving in terms of bringing more clients to the platform. We introduced few new services.
Some of them are with our partners, not being part of the Halyk, let's say, legal perimeter, like APPTEKA, which is the digital purchases of pharmacy goods. Cooperation with Airba Fresh, which is the e-grocery. We are bringing, for example, the cooperation with inDrive, which is one of the leading mobility platform. We do similar exercises with our B2B online bank, like our cooperation with re:Kassa, bringing more business-centric services. Actually we see that both B2B and B2C ecosystem starts feeding each other. One of the good examples which we mentioned in our today's call and presentation is Online Duken.
Which is a center between bringing our retail clients through their activity with small businesses in terms of the store and merchants, which in itself are driving their connections and the activity from distributors, which is represented by our large and medium-sized clients. This is just one of the example that our investment in the ecosystem is bringing more engagements, bringing more cross-sell opportunities, and we continue to look into more opportunities in that space. One of the solution which we also quickly mentioned is Halyk рестораны, which we rolling out starting from 2026.
Perfect. Thank you. Do you have any expectations in terms of the, you know, positive impact on, you know, transactional activity, the income from transactional activity in 2026 versus 2025 from these developments or is it difficult to quantify?
Yeah. We start looking into these quantifications internally, but probably we will do that externally at some point of time, but not at this point of time.
Okay. Understood. Thank you.
We're already seeing some uplift.
Okay. Perfect. Thank you.
The next question comes from Ronak Gadhia. Ronak, please go ahead.
Good afternoon, Murat and the rest of the team. Congratulations on the results. Mine maybe the first one is a bit of a follow-up. On the NIM question you mentioned, you know, NIM is slightly lower because you're expecting rates to remain higher for longer. I'm a bit confused by that because in the past I thought higher rates were good for you. I mean, certainly if we look at the numbers since 2020 when interest rates have gone up sure, you know, in the short term we've seen a bit of an impact because funding costs increase faster, but eventually asset yields catch up and we end up with higher NIMs.
If you just maybe could help us understand why, you know, we're seeing maybe a bit of a reversal now with higher rates for longer being a bit negative for NIMs. That's the first question. The second question is on dividends. On the AGM notice this morning, we saw that, you know, the bank is planning to transition to maybe quarterly dividends. Could you maybe just discuss that a bit more? What does that mean in terms of dividend payments? Will the sort of payment system remain similar to what it is now, whereby the banks will be paying dividends in the current year based on profits from the last year?
Will the transition to quarterly dividends, we start seeing the banks, the bank paying dividends from earnings, earned in the current year, as we see for some of the peer banks in the region? Thank you.
When talking about the impact of the rates, actually, when the rates are going up, we see that the liability is repriced somewhat quicker than the asset side. When the rates start going down, the contrary is happening, so your let's say liability is also repricing downwards quicker than the asset side. Secondly, when you have the portfolio of assets which, let's say, are mark-to-market through P&L, then the reduction in rates is actually leading to positive revaluation of those assets. We expect a bit quicker, probably by a quarter or so, the cycle of reduction of rates starting probably in the middle of second quarter.
Now we're hearing that, probably, the rates will stay flat until the mid-year. We're a bit conservatively looking at the start of downward repricing of the rates, which might be impacting, on one hand, a bit slower repricing downwards of liabilities, and secondly, a bit slower positive mark-to-market of our portfolios. As a bank, we have certain portfolio of fixed income instruments, but also our larger subsidiaries, including insurance companies and brokerage, they also have their respective fixed income portfolios. Anyways, I'd like to mention that revision of NIM is not drastic. We're talking about of very small revision of 20 basis point or so. In terms of the dividends, we I think gradually are moving into more frequent payments.
We started that process back, I guess, two-three years ago when we started signaling that we are considering moving to more frequent payments, and we did that a couple of years ago when we introduced two-time payments. We see a positive reaction from the investor community and also from our growing retail investor base. The more frequent payments is also better from liquidity management perspective. That's why we think that we might be looking into bringing dividend payments up to 4x . First of all, that proposal would be considered at the annual general shareholders meeting. If it is approved, then we'll proceed with revising our dividend policy.
It might take some more time before we might actually move into that. Direction is coming into quarter payments at some point of time.
Yeah. Okay. Just on that, I mean, like if you move to quarterly, does that mean, like, you'll be paying dividends from profits for this year? Or like we've seen under the current setup where dividends, the biannual dividends were paid in the current year but based on profits from the previous year?
Yeah. Well, probably it's a bit premature for me to provide, let's say, more clear guidance at this point of time. Because I said we first looking into updating or changing our charter from that perspective. Once, if the annual general shareholder meeting would approve that, we might proceed into further steps.
Understood. If you don't mind, I just have one more question, which is the impact of the regulatory increase in cash reserve ratio. We saw obviously the cash to deposit ratio increased quite significantly last year, because of the initial increase in reserves, and the second phase, I guess, comes from April. At the same time, when I look at the balance sheet, you know, the loan to deposit ratio is now quite high, so doesn't seem like there's much spare liquidity on the balance sheet. With the increased cash reserve requirement coming through, does that mean, you know, you might have to aggressively chase some deposits to try and meet that requirement?
First of all, sector-wise, obviously, let's say, the clearance of liquidity is quite high. I've recently seen comments from the central bank, which I think estimated that after all cycles of minimum reserve requirement increase would be completed. The estimation is that sector-wise, the excess liquidity, as they called it, would be removed in the amount of close to KZT 4 trillion. When it comes to Halyk Bank, we think that from the funding and liquidity perspective, we have traditional fortress position. While the minimum reserve requirement is definitely impacting us from reduction in net interest margin. From funding liquidity perspective, we remain quite sufficient. We have capabilities to further diversify our liability base if there will be needs for that.
At the moment we think that we sufficiently funded through deposits, but we occasionally look into diversification capabilities. One of them is tapping the yuan market through our bilateral loan agreement with China Exim Bank. This is just one of the example that we have. We are capable to extend our capabilities in diversifying funding base.
Understood. Thank you.
The next question comes from Brett Berbeskey . Brett, please go ahead.
Hi. Thanks for taking my question. I wanted to ask about the asset quality in the corporate loan book. Could you describe a bit more about sort of what drove the increase in the NPL ratio and sort of the broader, I guess, slight deterioration in that book? Was that also sort of concurrent with that, your market share in corporate decreased in the quarter. Are those two things related? Did sort of for some bad loans cause you to lend a bit more conservatively or were those two things not related? Just one more question somewhat related to that.
The cost of credit forecast for this year of 1.5% is that related more to the corporate side or more to the retail side? What would you see as your sort of mid-cycle cost of credit number? Thanks.
Brett, thank you for your question. When it comes to our, let's say, position of Halyk Bank as a main lender to real economy from the commercial bank's perspective. I think that position retains. There might be some fluctuations quarter-over-quarter over the year, but I think we remain the corporate bank in terms of the scale and our capabilities because we have the largest balance sheets from be it capital perspective, funding perspective, and we have the largest penetration and coverage of the large corporates in Kazakhstan.
When it comes to calculation, then they should be looked from position that's in that funding there might be also included the small and micro businesses where some of the banks might be somewhat let's say higher growth during recent few quarters. Secondly, we also have within our loan book exposure to Uzbekistan as we mentioned on the relevant slides. In the context of financing of Kazakh economies, obviously, this exposure is being excluded. Altogether, we remain by far the dominant player on the large corporate space. With regards to dynamics of NPL, that was isolated situation with a few wholesale names as I mentioned. They're not sector specific. We're controlling the situation.
We have sufficient coverage, and so we do not expect that it might be impacting the, let's say other borrowers or might impact the bigger picture from our asset quality perspective. When it comes to cost of risk, increase of cost of risk to 1.5%, well, it's partially might be impacted by a bit lower growth within our portfolio. Might be considered as a impact of maturing our portfolio. Within the through-the-cycle position, as I was commenting in some older calls probably, it's difficult, let's say, to give the exact figure, take into account that the structure of the portfolio is also changing.
When we had roughly 70% within our portfolio, large corporate position, and when we have less than 50% of large corporate position, then typically your, let's say, normalized or through the cycle cost of risk might also change. We think that we a bit higher than through the cycle. But probably I cannot give you whether the through the cycle would be 1% or 1.2%. Probably closer to that range, but probably cannot give, let's say more precise figure if you like.
Thank you. Appreciate it.
Another question from Simon Nellis. Simon, please go ahead.
Hi. Thanks. Me again. Yeah. Just to follow up, you had mentioned that the regulatory environment will continue to tighten around unsecured consumer lending. Can you just elaborate on what new measures you're seeing? Actually, generally, if you could give us an update on any new regulatory initiatives that are being planned, because we don't usually see them in the press over here in London necessarily. Just on Click in Uzbekistan, can you just give us an update on where you are and have you completed that transaction and how is their business performing and how is the work to integrate and cooperate moving forward? Thank you.
Yeah. First on retail. Actually, the regulator is publishing on annual basis their regulatory priorities. Within that regulatory priorities, as we see, there are a number of initiatives at which they are likely to look into this year. First of all, the introduction of a countercyclical buffer starting from the April this year. That decision was taken actually a year ago, but the kicking of that norm would be effective of April this year. It will be 2% of risk-weighted assets of unsecured consumer lending.
On the microprudential, they would be looking into upgrading some ratios which they already have, like the debt service capacity, and might be looking into introducing additional ratios, like for example, the ratio of maximum debts to the, let's say.
Income.
Monthly income. With regards to Click, as we mentioned in our financial reporting, the transaction documents has expired at the date of signing of our financial documents. From Halyk Bank perspective, actually, just to remind, the transaction contemplated actually two transactions. One was to Halyk Bank acquire 49% in Click company. The second leg was for Click shareholders to acquire 49% in Tenge Bank. That is a combination of two transactions, which requires a number of regulatory approvals. From Halyk Bank perspective, we obtained all necessary regulatory approvals both in Kazakhstan and Uzbekistan to acquire 49% in Click. However, not all regulatory approvals has been obtained by our partners for the second leg of the transaction.
Technically, transactional documents has expired, but we are in a very good relationship with our Click partners. We continue discussions, what are the options, and potential terms of future cooperation.
Do you think a different structure is likely to be agreed upon or do you think you just walk away from the deal or you'd rather not comment?
I probably.
I can see why you wouldn't.
Cannot comment more than what I said.
Yeah.
Yeah, what we mentioned that parties continue to discuss options and terms for further cooperation or future cooperation.
Okay, thanks. Thanks very much.
Now we go to Q&A chat. First question's about Click, already answered, and about NPL also. The last question is from Greg Stansky. International expansion in Uzbekistan is only planned via organic growth or there are plans to participate in the bank privatization to grow market share, as the bank, Tenge Bank is pretty small. Only other target countries for expansion in sight. First of all, within the international, we are focusing at this point of time into Uzbekistan. We think it's a large market. It's a natural fit to the business and strategy of Halyk Bank. As we mentioned a number of times, we're looking into our Uzbekistan strategy in very complex way.
Because we can operate within our subsidiary, Tenge Bank, by providing transactional services, FX services to our large corporate SMEs and retail client base. We can provide retail loans and SME loans to our client base. Actually, our innovative digital services to SME has been awarded a couple of years already in a row by the International Finance Magazine. It was a truly innovative product for the market of Uzbekistan. Within large corporate space, we have possibility also to book transactions out of Kazakhstan. The total exposure to Uzbekistan is shy of $2 billion. Halyk Bank is also the main bank within the region, so we have possibility also to leverage our position on the FX side on the supporting trades both direction, import and export operations.
We are not looking into participating in privatization of the banks because we think that we have sufficient capabilities on the banking space. What we are looking to increase our position in terms of the distribution. Because having very good products, we were somewhat lacking on the distribution. That's why we were targeting transactional with Click because we believe these type of transactions are providing excellent distribution capability to already good products which we have from the banking perspective. Generally would allow us to build more broader products for our retail and B2B clients in Uzbekistan. Now we conclude our presentation and Q&A session. Thank you very much. Further questions you may address us via email. Thank you and goodbye.
Thank you. Bye-bye.