Halyk Bank of Kazakhstan JSC (FRA:H4L1) (Q2 2026) Earnings Call Highlights: Navigating ...

Yahoo Finance · 2026-08-18

Halyk Bank of Kazakhstan JSC (FRA:H4L1) (Q2 2026) Earnings Call Highlights: Navigating ... GuruFocus News Tue, August 18, 2026 at 7:01 PM EDT 8 min read H4L1.F This article first appeared on GuruFocus . Net Income: Down 15.3% year-on-year for the first half of 2026. Net Interest Income: Grew 2.6% year-on-year for the first half of 2026. Net Interest Margin: Decreased to 6.8% for the first half of 2026, compared to 7.3% in the first half of 2025. Net Fee and Commission Income: Decreased by 19.6% year-on-year for the first half of 2026. Operating Expenses: Increased by 5.5% versus the first half of 2025. Cost-to-Income Ratio: Increased to 19.2% from 17.2% in the first half of 2025. Cost of Risk: At a normalized level of 1.4% for the first half of 2026. Total Assets: Increased by 5.4% year-to-date. Total Equity: Increased by 4.1% compared to year-end 2025. Loans to Customers: Increased by 13.2% year-on-year on a gross basis. Retail Gross Loan Book: Reached KZT4.8 trillion as of July 1, 2026, up 10.7% year-on-year. Corporate Gross Loan Portfolio: Reached KZT6.8 trillion as of July 1, up 11.3% year-on-year. SME Gross Loan Portfolio: Reached KZT2.4 trillion as of July 1, increasing by 24.7% year-on-year. Retail Deposits: Reached KZT8.3 trillion as of July 1, increasing by 10.5% year-on-year. Capital Adequacy Ratio: Decreased in the second quarter of 2026 due to dividend payments. Warning! GuruFocus has detected 8 Warning Signs with FRA:H4L1. Is FRA:H4L1 fairly valued? Test your thesis with our free DCF calculator. For the complete transcript of the earnings call, please refer to the full earnings call transcript . Strong digital engagement with 8.6 million monthly active users and 6.1 million monthly transacting users, driving a 14.1% increase in transaction volumes. Robust retail loan growth of 10.7% year-on-year, with a recovery in origination activity in Q2 2026. SME segment is a key growth driver, with a 24.7% year-on-year increase in gross loan portfolio and strong digital lending growth. Corporate loan portfolio grew 11.3% year-on-year, with strong asset quality (NPL 90+ at 2.6%) and high client engagement. Management expects a positive impact from the National Bank's rate-cutting cycle, with potential for margin expansion as liabilities reprice faster than assets. Net income declined 15.3% year-on-year due to increased minimum reserve requirements, tighter retail lending regulations, and higher deposit costs. Net fee and commission income decreased 19.6% year-on-year, impacted by BNPL regulatory changes and VAT pass-through, with a full-year guidance of a 10% decline. Net interest margin compressed to 6.8% from 7.3%, pressured by higher funding costs and regulatory changes. Retail NPL ratio rose to 9.2% due to a moratorium on selling problem loans and slower portfolio growth, with coverage declining. Insurance income was weak in Q2 due to higher loss ratios and one-off model revisions, negatively impacting consolidated results. Q : How should we think about the underlying net interest margin (NIM) beyond the mechanical impact of higher minimum reserve requirements, and is the 6.8% guidance level sustainable? Additionally, what is the underlying run-rate for net fee and commission income once the impacts of BNPL regulation and VAT are absorbed? A : Murat Koshenov, Deputy Chairman - International Activities, Finance and Accounting and Subsidiaries, explained that NIM was pressured by two main factors: the increased minimum reserve requirements (which, if excluded, would put NIM at 7.2%) and rising tenge retail deposit rates. He noted early signs of deposit rate stabilization and even reduction following the National Bank's base rate cuts. On fees, he attributed the decline to VAT introduction on documentary business and tighter BNPL underwriting, but highlighted strong underlying client activity. He expects fee and commission income to return to positive growth starting next year, potentially around 10% growth, once the impact of these one-offs fades. Q : Given the one-offs this year (minimum reserve requirements and macroprudential measures), how should we think about the dividend for 2026? Will the payout ratio remain at the usual 60%, or could it be higher to reflect underlying profitability? A : Murat Koshenov stated that capital is needed to support the bank's growth, but management remains confident in strong profitability and capital position. He confirmed the bank will strive to stick to its dividend policy of a 50%+ payout ratio. He also noted that the second dividend payment for the year has been moved slightly earlier, to the third quarter, subject to shareholder approval. Q : Can you explain the reasons for the weaker net insurance income in Q2, particularly the spike in net finance insurance expense? Also, what drove the strong sequential deposit growth in Q2, and does the retail loan growth guidance imply an improving credit quality outlook? A : Murat Koshenov attributed the insurance weakness to a higher loss ratio on mandatory auto insurance products due to inflation (with tariff revisions lagging), a one-off revision of insurance liability assessments, and increased accruals on annuity-related products (offset by interest income). He described deposit growth as broad-based across retail and corporate, not specific to Halyk. For retail loan growth, he cited a stabilization in the base after previous slowdowns, allowing the bank to regain market share, and a strategic shift toward more secured portfolios like auto loans. Q : There was a significant divergence between the bank-only monthly figures reported to the NBK and the consolidated IFRS results. What contributed to this difference? A : Murat Koshenov confirmed that the primary driver was the weaker results from the bank's insurance subsidiaries, specifically the high loss ratio on auto insurance and the model revision for insurance liabilities. He indicated that other consolidation netting effects were not significant. Q : How has the quasi-fiscal stimulus from the government and Baiterek Holdings affected Halyk, and how will the recent agreement between the National Bank, government, and Baiterek impact future loan growth and fee income? A : Murat Koshenov explained that the agreement aims to limit Baiterek's financing to larger infrastructure projects, avoiding competition with commercial banks for medium-sized loans (below KZT15 billion). He stated that Baiterek's plans have not significantly affected Halyk, citing a strong pipeline in large corporate lending and robust SME growth in Q2, which supports the bank's full-year loan growth guidance. Q : You are guiding for a 10% decrease in net fee and commission income, which implies a significant recovery in the second half. Where is this optimism coming from, and how will you offset the fee decline to maintain the KZT1 trillion net income guidance? A : Murat Koshenov pointed to the sequential increase in fees from Q1 to Q2 as a sign of revival. He cited the gradual renegotiation of contracts to incorporate VAT, increased client activity, and tactical fee increases on certain SME and retail products. He also highlighted expected positive contributions from loan portfolio growth, early signs of deposit rate decreases, mark-to-market gains from falling rates on government securities, a strong FX and dealing business, and a reversal of the negative insurance trends. Q : What is preventing the asset side from repricing more meaningfully, given that average loan yields have been stable while funding costs have risen? How are you positioned for the interest rate decline cycle? A : Murat Koshenov explained that the stability in loan yields was due to a slight increase in the dollar portion of the loan portfolio. He confirmed that the bank is positively exposed to rate declines, as its assets have longer tenors than liabilities, meaning liabilities will reprice downwards faster. He estimated the repricing lag to be around two to three quarters. Q : Can you provide more details on the dynamics of the BNPL activity decline and the outlook for this segment? A : Kiril Bachvarov, Deputy CEO of B2C Banking, clarified that the downscaling of BNPL is not a strategic exit but a decision based on risk-adjusted returns. He stated that the product was writing thin margins into households with decreasing solvency. The bank has strategically shifted towards collateralized loans (car loans and mortgages) and is ready to reactivate BNPL when intrinsic profitability returns. Q : Why were short-term deposits with the National Bank replaced with deposits at OECD-based banks in foreign currency? Also, why are you confident in current provision levels despite rising NPLs and declining coverage ratios? A : Murat Koshenov explained that the NBK deposits were substituted with short-term NBK notes when the rate cut cycle began, and the increase in OECD bank deposits was due to an inflow of USD liquidity from corporate clients. Kiril Bachvarov added that the rising NPL ratio is due to the moratorium on selling problem loans, not the quality of new loans. He stated that the mix is shifting towards better-quality collateralized loans, which require structurally less coverage, and that the bank is adequately provisioned for the current book composition. Q : Do you think the NPL ratio has peaked in Q2, and what is the normalized NPL ratio for the B2C book absent the recent regulatory changes? A : Murat Koshenov reiterated that the NPL increase is due to the moratorium on loan sales and a more mature portfolio from lower growth. He highlighted that the cost of risk for the unsecured retail portfolio has remained stable at around 3% over the last few quarters, and he does not expect it to rise.

AI 시장 분석

Kazakhstan's Halyk Bank announced that its net profit for the first half of 2026 decreased by 15.3% year-over-year, and its net interest margin (NIM) fell to 6.8%. Stricter minimum reserve requirements, rising deposit costs, and BNPL lending regulations were the main drivers of deteriorating profitability. On the other hand, customer loans and total assets both recorded double-digit growth rates, demonstrating robust loan demand.

상승 영향

Banks — As the central bank enters a rate-cut cycle, liability interest rates such as deposits are rapidly readjusted, leaving significant room for future net interest margin (NIM) expansion.

하락 영향

Banks — Stricter minimum reserve requirements, rising deposit costs, and BNPL lending regulations caused H1 net profit to drop by 15.3% and pressured NIM down to 6.8%.

DYAX 전담 분석

In this earnings release, Halyk Bank experienced a decline in net profit and NIM pressure due to rising deposit rates and tighter regulations, but its loan assets grew solidly, with small and medium-sized enterprise (SME) loans surging by 24.7%. Management expects that once the central bank's rate-cut cycle begins in earnest, liability refinancing costs will decrease, contributing to margin recovery.

Future stock prices will largely depend on the pace of the central bank's rate cuts and the stabilization of deposit rates. In a bullish scenario, NIM will rebound and earnings momentum will recover due to rate cuts, while in a bearish scenario, rising NPL (non-performing loan) ratios in the retail sector and persistent regulatory pressure could prolong profitability slowdown, requiring close monitoring of asset quality indicators.

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