Release Date: November 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Halyk Bank of Kazakhstan JSC (STU:H4L1, Financial) reported a strong increase in net income, rising 29.1% quarter-on-quarter and 53.7% year-on-year.
- The bank's digital platform has seen significant growth, with monthly active users of the Super-App up 11% year-on-year and daily active users up 21%.
- Retail loan issuance increased by over 30% for the quarter and over 51% year-on-year, with digital loans making up 91% of the portfolio.
- The bank maintains a leading 39% share of active salary clients among the country's employee population.
- Halyk Bank's net interest margin improved to 7.1% for the nine months of 2024, up from 6.3% in the same period of 2023, driven by an increase in high-yielding retail loans.
Negative Points
- Fee and commission income only increased by 2% year-on-year, impacted by the transition to amortization of tariff packages and revision of some retail tariffs.
- Net fee and commission income decreased by 2.7% due to increased service fees for payment cards and higher deposit insurance fees.
- Operating expenses increased by 17.2% for the nine months of 2024, mainly due to salary indexation and other employee benefits.
- The cost-to-income ratio, although improved, is expected to rise in the fourth quarter due to seasonal increases in operating expenses.
- The proposed dividend for 2023 is only 15% of net income, which may be lower than some investors anticipated.
Q & A Highlights
Q: Which SME segments do you find most attractive in terms of growth, margin, and credit risk?
A: We see strong dynamics in small businesses in terms of percentage growth and profitability adjusted for risk. Medium-sized businesses are more diversified, including services, production, and trade, while small businesses are more geared towards trade and services.
Q: Should we expect further write-backs of loans previously at Stage 3, and will the cost of risk increase due to a shift towards household and retail loans?
A: The main reversals of provisioning were in the Corporate segment. We expect to stay within our annual guidance for cost of risk, with benign conditions for credit activities. The shift in portfolio composition is not expected to significantly impact cost of risk in the medium term.
Q: What factors contributed to the exceptional cost-to-income ratio improvement in Q3?
A: The primary factor was strong growth in operating income. Operating expenses also increased due to salary indexation and employee benefits. Typically, expenses are higher in Q4, so we maintain our guidance.
Q: Can you explain the jump in net insurance income?
A: Insurance income can fluctuate due to the timing of new contracts, reserve releases, and claims. It's better to look at longer periods rather than quarter-over-quarter comparisons to understand trends.
Q: What is the outlook for Q4 and your dividend plans?
A: We don't anticipate one-offs in Q4 and maintain our guidance. Regarding dividends, a second payment for 2023 is proposed, corresponding to 15% of the net income.
Q: With 11.2 million active customers, how much more can you grow?
A: Growth can come from increasing digital engagement and cross-selling products. Customers often use multiple banking applications, so it's about increasing our share of wallet.
Q: What is the outlook for net interest income given rate cuts?
A: We expect potential further rate reductions, influenced by inflation trends. The net interest margin is also driven by changes in asset and credit portfolio composition.
Q: What is the outlook for net interest margin and fees for next year?
A: We see strong growth in retail and small business loans, supporting net interest margin. Fee growth is impacted by accounting changes and deposit insurance fees, but strong transactional activity should eventually translate into better fee trends.
Q: What is the impact of portfolio shifts on net interest margin and cost of risk?
A: We can't provide specific sensitivity analysis, but the current cost of risk is close to normal. The regulatory environment remains stable, with no immediate tax changes expected until 2026.
Q: What factors led to strong net gain on trading operations and FX dealing profit in Q3?
A: Increased activity in the FX market and trading gains on our securities portfolio contributed to the strong performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
