Local banking sector sound, with high credit growth

The Kazakh banking sector has become more resilient since 2017–18 and now benefits from improved regulatory oversight. Loan book growth accelerated in recent years to 20%+ per year. This was against the backdrop of a high-inflation, high-interest rate environment, as average local CPI spiked to 15.0% in 2022, while the base rate peaked at 16.75% in December 2022. Inflation has moderated recently but remains elevated, at 11.3% in May 2025, and therefore the National Bank of Kazakhstan (NBK) has maintained a restrictive policy (with the current base rate at 16.50%). Local loan book expansion was supported by solid real GDP growth (4.8% in 2024 according to the International Monetary Fund, IMF) amid an oil price of over US$70/bbl and moderate penetration of bank lending, especially on the retail side.

Scope for growth despite the strong market position

Although Halyk became the largest financial group in Kazakhstan by total assets in 2017, it grew its gross loan book by 24% pa between 2019 and 2024 with some market share gains. We expect Halyk to grow its loan book at c 13% pa on average to 2028. Despite the already high penetration in the corporate segment, we expect its corporate loan portfolio to expand by 16% in FY25e and 10% pa thereafter as the local ratio of loans from commercial banks to GDP has scope to grow, partly because financing from state-owned entities to the real economy is likely to soften amid central budget constraints. Its retail and SME loan book could grow even faster on the back of low overall market saturation and Halyk’s further digitalisation.

Valuation: Strong performance not fully rewarded

Halyk’s shares trade at an FY25e P/E ratio of 3.3x and a P/BV multiple of 0.9x, which we believe do not fully capture its leading market position, healthy financials and digitalisation agenda. Our valuation implies a fair P/BV of 1.04x and a fair value of US$27.5 per global depository receipt (GDR), 14% above the current price.

Company description: Top player in Kazakhstan

Halyk Bank is a diversified financial group and the leading universal bank in Kazakhstan by total assets, offering a full range of financial services via the largest branch network in the country, as well as its well-developed digital channels, including Halyk Super-App (a B2C application that combines banking products and lifestyle services) and OnlineBank (a B2B digital platform for small and medium-sized enterprises (SMEs) and corporate clients). Halyk has a 52% market share in lending to the real economy and 86% penetration among the country’s largest taxpayers. It is the dominant player in corporate lending and has a solid market position in retail and SMEs, which are Halyk’s focus areas in terms of further growth. Moreover, it is eyeing further expansion in Uzbekistan, given the country’s population and growth prospects, as well as its strong historical, ethnic and cultural ties to Kazakhstan.

Financials: Best-in-class metrics

Halyk Bank has historically delivered a strong ROE of more than 25%, and even above 30% since 2022. Its recent particularly healthy performance was supported by robust loan book growth and net interest margin (NIM) expansion on the back of high local base rates, growth in retail loans above corporate loans and an increasing loan-to-deposit ratio. Its cost-to-income ratio (CIR) declined from an already low level of c 24–26% in FY19–21 to 16.5% in Q125, and cost of risk remains under control at c 120bp in FY24 and Q125. The bank also maintains a very solid capital base, with a CET-1 ratio of 19.3% at end-March 2025. We expect some moderation in Halyk’s ROE to 20–25% in the medium term as inflation declines (as expected by the National Bank of Kazakhstan), which should lead to lower base rates, and as the new tax code is likely to come into force in 2026. However, together with the double-digit percentage loan book annual growth, this would still translate into a FY24–28e EPS CAGR of c 5% (largely front-end loaded).

Valuation: Undemanding FY25e P/E and P/BV ratios of 3.3x and 0.9x, respectively

We value Halyk’s shares based on a sustainable return on tangible equity (RoTE) of 20%. We use a cost of equity of 19.7% with a risk-free rate of 13.9% based on average yields of KZT-denominated long-dated government bonds and the 5.0% yield on US dollar-denominated bonds issued by Kazakhstan in October 2024, adjusted for the inflation differential versus the US. We arrive at a fair P/BV ratio of 0.92x, which we then blend with the 1.16x ratio derived from a peer analysis. We apply the blended 1.04x ratio to our FY25 forecast of Halyk’s tangible book value per share, resulting in a fair value per Halyk GDR of US$27.5 (which implies 14% upside potential).

Sensitivities: Oil market, geopolitical risks, FX and taxes

While the local government has been making efforts to diversify the economy away from oil and gas, the sector still accounts for a significant share of GDP. Therefore, local economic growth remains sensitive to the oil price and the decisions of OPEC+ (of which Kazakhstan is a member), which has recently increased its production quotas. We consider the potential direct impact of US reciprocal tariffs of 27% (suspended for 90 days) as limited, as the vast majority of Kazakhstan’s exports to the US (including crude oil, uranium, silver and ferroalloys) are exempt from these tariffs. However, the indirect impact in the form of weaker global economic growth and in turn lower oil demand and/or price may be more significant. The recent OPEC+ output hikes and US tariff announcements triggered a fall in the price of WTI oil, though the price subsequently rebounded amid the conflict between Israel and Iran and currently stands at around US$72/bbl. Located between major powers Russia and China, Kazakhstan is influenced by regional geopolitical dynamics. We also note that the Kazakhstani tenge has been a vulnerable currency in the past and has depreciated significantly over the last 10 to 15 years.

Kazakhstan’s leader in financial services, with a long heritage

Halyk Bank is the leading financial group in Kazakhstan, a country with a population of more than 20 million (and growing) and the largest economy in Central Asia, underpinned by its abundant natural resources (most notably hydrocarbons, but also other commodities such as uranium, where it is the largest producer globally, and rare earths) and large territory, strategically located as a gateway between China, Russia, Europe and the Middle East. We note, for instance, that the key corridors of China’s Belt and Road Initiative, including the New Eurasian Land Bridge, pass through the country.

Halyk Bank was established more than 100 years ago and was privatised over 20 years ago. It has a diversified presence across retail, SME and corporate banking, as well as insurance, leasing, brokerage, asset management and lifestyle services. As the oldest publicly listed company in Kazakhstan, its shares have been listed on the Kazakhstan Stock Exchange (KASE) since 1998 and on the Astana International Exchange since 2019, and its GDRs have been listed on the London Stock Exchange since 2006. Halyk is majority-owned by Almex Holding Group (69.7%), an entity controlled by Timur Kulibayev (a prominent Kazakh businessperson with a diversified business portfolio) and Dinara Kulibayeva, daughter of former president Nursultan Nazarbayev. GDR holders represent a further 28.3% of the share capital, and the company estimates that it has more than 180k retail shareholders in Kazakhstan. Halyk has the highest credit rating among local banks: BBB- stable by S&P (upgraded in December 2024), Baa1 stable by Moody’s and BBB- stable by Fitch.

The company operates through the largest physical network in Kazakhstan and Central Asia (consisting of 542 branches) and its strong digital banking footprint (see details below). It has 16,656 full-time equivalent employees, and held around 30% of the Kazakh banking sector’s total assets at 1 May 2025 (see Exhibit 1). We note that it also holds a 40% stake in Altyn Bank (which accounted for 1.8% assets in Kazakhstan), with other shareholders being China CITIC Bank Corporation (50.1%) and China Shuangwei Investment Company (9.9%).

According to the company’s data the group represents more than half of the financing provided by commercial banks to the real economy. It is a key player in the corporate lending sector, with a 52% market share in lending to the real economy and 86% penetration among the largest taxpayers in the country as at 1 April 2025 (its market share of deposits to legal entities is 32%). It has more than 400k active legal entities on its platform. Halyk’s corporate loan book is balanced in terms of sector exposure, with wholesale and retail trade making up the largest part (17.2%), followed by energy (12.7%) and services (10.4%) (see Exhibit 2). The top 10 borrowers made up 18% of its total loan portfolio as at end-March 2025. Roughly one-third of Halyk’s corporate and SME loan book is made up of short-term (up to one year) working capital loans, while two-thirds is broadly balanced between medium-term (around three-year maturity) and long-term loans (normally up to seven years, never beyond 10 years).

The company also holds a meaningful position in the retail segment, with a c 19.5% share in retail loans and a c 28.8% share in retail deposits as at end-March 2025. Halyk Finance and Halyk Global Markets (Halyk’s 100% subsidiaries) offer brokerage and asset management services with total assets under management (AUM) of c KZT1.12n or c US$2.4bn (representing market shares of 68.8% and 66.1% in pension AUM and among private asset managers, respectively), as well as KZT2.7tn of brokerage assets as at end-March 2025. Halyk also has a strong insurance franchise, with its non-life insurance business (Halyk Insurance Company) holding a c 20% non-life market share in terms of net premiums, while Halyk Life had a 33% market share in terms of gross premiums as at end-2023 (last available data). Halyk has also made forays into other countries, with a current presence in Uzbekistan and Georgia, following the sale of its banks in Tajikistan (2022), Russia (2022) and Kyrgyzstan (2024).

Strategy: Digitally enabled retail and SME expansion

We believe that Halyk’s corporate loan book could still grow at an attractive rate despite its high penetration of the corporate sector and limited cross-sell opportunities (as large corporates need to use at least two banks to reduce operational risks and already have, on average, 4.5 of Halyk’s products). The growth opportunities would arise from the relatively low level of loans from commercial banks as a percentage of GDP in the country at 22.8% (last available data from the International Monetary Fund as of 2022) compared to c 39% on average across Southeastern and Eastern Europe and c 45% on average in Central and Eastern Europe. This partly comes from the role of the state in funding the real economy via entities such as Samryk Kazyna (the country’s sovereign wealth fund that manages several state-owned enterprises) and Baiterek National Managing Holding. However, given central budget constraints, the role of state-backed funding could decline. Therefore, we assume that the value of Halyk’s corporate loans will increase by 16% in FY25e (vs management guidance for growth in loan book to all legal entities at 15–20%), followed by around 10% pa in the coming years (vs c 19% pa in 2019–2024). Additional upside comes from the high need for fixed-asset base modernisation and the green transition in the country, although the World Bank expects the contribution of investments to GDP growth to be subdued in 2025 and 2026. Investments as a percentage of GDP slowed to below 17% in 2012 to 2023 compared to 28% in 2001 to 2009, according to the World Bank.

Halyk Bank has historically achieved an even higher loan book growth in retail and SME lending (c 32% and 24% pa in 2019–24, respectively). Its digital ecosystem is centred around its Super-App in the B2C segment and OnlineBank service for B2B clients (corporates and SMEs), which we believe offer a comprehensive range of services beyond what customers in many developed countries enjoy.

We believe that banks in emerging and frontier markets such as Kazakhstan often benefit from a ‘leapfrogging effect’ whereby they can bypass certain infrastructure development phases and adopt a digital-first model more quickly given a lesser, if not entirely non-existent, burden from expensive, legacy infrastructure (Halyk Bank has built its digital platform from scratch, bypassing its legacy systems). Digital adoption in Kazakhstan has likely been facilitated by factors such as (1) the consolidation of the banking sector in recent years, (2) high internet penetration in the country (c 92%, according to Halyk) and (3) the government’s push towards digitalisation. The latter includes the Digital Kazakhstan programme implemented in 2018–22, which resulted in, among other things, 85.4% of total public services volume being received in electronic form, as well as developments such as the introduction of biometric authentication, the launch of a unified credit bureau, instant payment systems and support of fintech. We note that Kazakhstan ranked 24th of 193 countries in the United Nations E-Government Development Index in 2024 (ahead of countries such as Switzerland and France). In 2020, the government also approved a five-year programme of more than US$200m of tax incentives for mobile operators to expand 4G coverage in the country. Kazakhstan is now among the top 30 countries in terms of average usage of mobile data, according to VEON. The share of cashless transactions in Kazakhstan increased to 85% and online banking penetration now stands at 70%, according to management. We also note the NBK’s efforts to introduce a digital tenge, which could, for instance, result in better governance of state-funded projects.

Halyk is well-advanced in its digital ecosystem

Halyk has the potential to significantly grow its retail business by leveraging its strong overall penetration of the retail customer base (its 11.1 million active retail clients represent more than 80% of the country’s population aged 15+, according to our calculations). Halyk Super-App integrates its comprehensive retail banking and brokerage product offering with a wide range of lifestyle offerings, such as booking entertainment and travel tickets, online learning (in partnership with Kundelik.kz), a marketplace for consumer goods and services, and access to e-government services (see Exhibit 3). Its Halyk Invest feature (which has over 230k active customers) is integrated with the Halyk Super-App and gives retail investors convenient access to a wide range of local and foreign equities (including NYSE and NASDAQ). Halyk estimates that around two-thirds of its shareholders use Halyk Invest.

Halyk’s primary objective for offering lifestyle services is to drive customer engagement and, in turn, the sale of financial services, including payments, loans and insurance products. Halyk has dynamically ramped up its engagement with retail customers via digital channels, with the share of its monthly active users (MAU) up from 15% in 2019 to c 70% in 2024 (see Exhibit 5). This is despite the rise in its overall base of active retail users of around 40% between 2019 and 2024 (which itself was likely assisted by the Super-App). Based on our discussion with management, we understand that Halyk’s methodology of calculating active users for its SuperApp changed in 2024, resulting in a slightly lower figure compared to the previous methodology. We believe there is scope to increase the share of MAU in total active users, with 80–85% looking achievable for a universal bank with a strong digital footprint. MAU fell slightly in Q125 to 7.7 million, while the number of daily active users (DAU) went up slightly to 2.4 million in Q125 versus 2.3 million in 2023. However, we note that the Q125 figures were negatively affected by seasonal factors. DAU momentum has mostly kept up with the growth in MAU since 2019 and represented 31% of MAU in Q125 (in line with 2020). We consider this a robust result for a universal bank, with scope to increase to 35–40% if Halyk further enhances the lifestyle and marketplace features of its Super-App. Management’s recent focus has been on driving the number of average monthly transactional users (MTU), which in Q125 stood at 5.4 million (no figures for prior comparable periods were disclosed).

We also note that the share of digital loans and deposits for retail by count reached 96% and 94% in Q125, respectively (digital loans issuance by value reached 82% of total retail loans issued in Q125). The high penetration of digital retail loans has been assisted by the swift approval process (in less than 30 seconds), which so far has not resulted in a worrying spike in non-performing loans.

Halyk’s main competitor in the retail segment, Kaspi, which is now the second-largest local bank by assets, has been faster to roll out a comprehensive ecosystem and has made a strong shift in its operations towards a fee-based business model and digital banking. Many clients in Kazakhstan use more than one banking app, which often includes Halyk and Kaspi, the latter having a strong position in day-to-day payments. Halyk, on the other hand, is often the preferred bank for retail deposits and larger payments. However, Halyk has made significant progress with its digital ecosystem in recent years. It is the market leader in terms of the number of supported online government services (66 as at Q424), which its clients used more than 13m times in FY23. It also has a strong position in entertainment ticket sales with a 37.5% market share in FY23 and 7.8m tickets sold in 2024, up 32.2% y-o-y (and 2.2m sold in Q125, down 4.3% y-o-y). The company has also dynamically expanded its marketplace, with a 34.1% y-o-y increase in gross merchandise value (GMV) in Q125, although at KZT135.6bn (c US$270m) in the quarter, it is still quite a moderate retail commerce platform in size. There seems to be room to grow given the relatively low e-commerce penetration in Kazakhstan of 12%, according to Halyk management. Halyk Travel’s GMV remained broadly stable year-on-year at KZT2.0bn in Q125. Finally, via the partnership with Kundelik.kz, Halyk’s Super-App allows parents to look up their children’s marks and provides the latter with bonus points on a Halyk bank card for high marks (for students in grades 5 to 11).

Halyk’s growing digital penetration is also visible in the SME segment, where growth has been supported by the bank’s digital loan offering introduced in 2020. Around 96% of all SME loans by count issued in Q125 were digital loans. As a result, these currently equal around 15.0% of Halyk’s SME loan book value compared to c 10.6% in FY23. We also note the good take up of Halyk’s digital bonds (ie digital blank tender guarantees) introduced in January 2022, the volume of which reached KZT27.8bn in Q125 versus KZT19.4bn in Q124. Halyk was the first to introduce this product in Kazakhstan and has the most sophisticated offering, allowing it to become the leader in tender guarantees, supporting its fee and commission income. The average MAU and DAU of OnlineBank across all legal entities (corporates and SMEs) reached 299k and 102k in Q125, up 10% and 17% y-o-y, respectively. These figures were subject to similar seasonal factors to the numbers for retail active users.

Ample cross-selling opportunities between Halyk’s business lines

We note that Halyk’s future loan book expansion in the retail and SME segments should be supported by synergy opportunities arising from its strong position in the corporate sector. A good illustration of this is its digital car lending product, launched in September 2023 via a strategic partnership with the seven largest auto dealers in Kazakhstan (all of which are Halyk corporate clients). This drove the share of car loans in Halyk’s retail loan book from 2.4% in Q323 to 10.6% in Q125. Moreover, Halyk is well-positioned to capture the demand for financing fixed investments at the level of the corporate client and across its contractor/sub-contractor chain. Finally, we see cross-selling opportunities between Halyk’s banking and insurance franchises, as the penetration of insurance products among Halyk’s clients is currently limited. We therefore assume a mid- to high-teen percentage growth in Halyk’s insurance revenue per year.

Foreign expansion: Uzbekistan a priority

Halyk’s foreign operations are relatively limited currently, with market shares of 1.0% and 1.1% by total assets in Uzbekistan and Georgia, respectively, in 2023. Halyk sees a strategic opportunity for further expansion in Uzbekistan (which accounted for c 6% of its end-2024 loan book), both via direct investments and cross-border financing. This is underpinned by the size and growth of the market (population of c 37.5 million in 2023 with a median age of 27, and GDP growth of c 5–6% pa), as well as the strong historical, ethnic and cultural ties between the countries. Since 2017, the government in Uzbekistan has introduced structural economic reforms to improve the investment climate, liberalise its markets and foster private sector growth. Halyk’s management believes there are opportunities across various sectors in Uzbekistan, arising from the country’s strategic initiatives, such as infrastructure modernisation, digital transformation (internet penetration of 83%) and improving regulatory transparency. There is also a low penetration of banking services (49%), including cashless payments (33%). We note that Uzbekistan agreed to undergo a comprehensive IMF-World Bank Financial Sector Assessment Program in 2025, and it is looking to privatise two large state-owned banks (SQB and Asakabank) following the privatisation of Ipoteka Bank in 2023. The country experienced a 50% y-o-y pick-up in foreign direct investments to US$11.9bn in 2024.

Kazakhstan: Robust growth ahead, but diversification efforts yet to bear fruit

Over the 10 years to 2023, real GDP growth in Kazakhstan averaged 2.9% per year, based on IMF data, growing over several years at a rate of 4%+ while experiencing a slowdown in 2015 to 2016 (due to low oil prices), 2020 (COVID-19 outbreak) and 2022 (war in Ukraine and local social unrest in January) (see Exhibit 7). Kazakhstan’s oil and gas sector remains a key contributor to the country’s GDP (c 20% direct contribution, according to S&P Global Ratings), government revenues (more than 30%) and foreign exchange inflows (as it accounts for over 50% of the country’s exports). Therefore, the country’s economic situation is dependent on the oil price, as well as production quotas imposed by OPEC+ (even if the country’s production has exceeded the quotas lately). The IMF estimates the local economy grew by a solid 4.8% in 2024, and it forecasts 4.9% growth in 2025, which we understand should be driven by continued high public spending as well as the expansion of the Tengiz oil field. NBK currently forecasts an even higher growth rate of 5–6% in 2025, followed by 4–5% in 2026 and 3.5–4.5% in 2027. Q125 growth stood at 5.6%, which was supported by strong activity in the transportation and construction sectors, as well as accelerating growth in manufacturing, mining and trade. Here, we note the risk from potential downward pressure on the oil price from the US tariff turmoil and the recent output hikes announced by OPEC+. The last 411k hike for July brings the combined output increase since April 2025 to 1.37m barrels a day, which represents a 62% unwinding of the 2.2m barrels per day of cuts OPEC+ agreed since 2022. In the long term, the IMF expects real GDP growth to slow to 3.1% per year, broadly in line with the 3.0–3.5% forecast by the World Bank, which expects the economy to revert to its long-term potential, limited by the muted productivity outside the extractive industries.

Meanwhile, the government’s pro-cyclical fiscal policy (partly funded by tapping into the national oil fund reserves), coupled with high service inflation (partly due to higher tariffs for regulated utilities), rising global food prices and high inflation in Russia, is slowing disinflation in the country, though this is countered by the NBK’s prudent monetary policy. The NBK expects consumer inflation of 10.5–12.5% in 2025, followed by 9.5–11.5% in 2026 and 5.5–7.5% by the end of 2027, gradually approaching its 5% target.

The government is seeking to further diversify the economy by supporting sectors such as agriculture, manufacturing and renewable energy. This involves infrastructure investments of KZT40tn (c 29% of GDP) over the medium term in the utilities, transport, water supply and wastewater sectors through the National Infrastructure Plan, mostly funded by state-owned enterprises and public-private partnerships. The IMF forecasts non-oil GDP growth of 4.0% in 2025 and 3.8% in 2026, with its medium-term base case assuming a stabilisation of 3.5% pa. Kazakhstan’s structural economic growth is assisted by favourable demographics (median age of 31.9 versus 40+ across most Western countries, according to the CIA’s World Factbook), an expanding middle class (a common theme across emerging Asian countries) and strong employment levels (the IMF forecasts a 4.6% average unemployment rate in 2025).

Kazakh banking sector more resilient than 10 years ago

The local banking sector has emerged more resilient, and is now subject to improved regulatory oversight, after dealing with a high level of non-performing loans. These arose from legacy portfolio issues accrued during the global financial crisis (when the share of non-performing loans spiked to more than 30% across the sector), which were further exacerbated by the macroeconomic headwinds from a fall in the oil price in 2014–16 and a sharp devaluation of the Kazakhstani tenge in 2015 (as currency pressures led to the transition to a free-floating exchange rate regime). These exposed weaknesses in portfolio quality sparked a wave of government interventions, liquidations and consolidation in 2017–22, reducing the number of banks from close to 40 in 2015 to 21 currently. Halyk Bank acquired KKB in 2017 to create the largest bank in the country, which raised its share of total net loans in the local banking system from 15.1% in 2016 to 27.2% (on a pro-forma basis) in 2017.

Loan book growth across the sector stagnated in 2016–17 as banks focused on resolving portfolio issues. Between 2018 and 2020, the sector’s loan book rose at a single-digit percentage rate per year, but subsequently accelerated to 20%+ pa (see Exhibit 8). This was against the backdrop of a high-inflation, high-interest rate environment, as average CPI in Kazakhstan spiked to 15.0% in 2022, while the base rate peaked at 16.75% in December 2022 and remained at that level until August 2023. The IMF recently highlighted that the local banking sector remains sound overall amid high credit growth, which stood at 20% y-o-y in 2024. Inflation remains high though and recently increased to 11.3% in May 2025.

Loan book expansion has been supported by solid real GDP growth amid an oil price of over US$70/bbl, as well as the moderate penetration of bank lending in Kazakhstan, especially retail lending. Market penetration is particularly low in the under-banked rural areas, providing Halyk with the opportunity to further expand its customer base and drive financial inclusion.

Despite becoming the top local commercial bank, Halyk subsequently maintained a solid double-digit percentage average loan book growth rate. It has capitalised on the exit of subsidiaries of Russian banking groups due to Western sanctions imposed following Russia’s invasion of Ukraine, most notably Subsidiary Bank Sberbank of Russia, which was the second-largest bank in Kazakhstan by assets. Sberbank’s subsidiary was sold to Baiterek National Managing Holding and subsequently renamed Bereke Bank. In October 2024, Baiterek sold Bereke Bank to Lesha Bank (a Qatari bank listed on the local stock exchange). It is now a less prominent player in the market than Sberbank’s subsidiary, which used to be Halyk’s major competitor in the corporate and SME segments. In April 2022, Halyk acquired part of Sberbank’s loan portfolio with a volume of KZT550.4bn (or c 9.4% of Halyk Bank’s total customer loan book at end-2021), more than half of which were retail loans, with the rest being corporate and SME loans. Moreover, Halyk likely benefited from an overall ‘flight to quality’ of local banking clients amid the geopolitical turmoil, as well as social unrest in the country in January 2022. Consequently, its share in total net loans reached 32.5% in Q125 (see Exhibit 9).

Management

Members of Halyk’s experienced and well-qualified management team have worked for the company for many years. Halyk’s management board composition as of the date of this report is as follows:

• Umut Shayakhmetova was appointed CEO in January 2009 and overall has more than 20 years of experience at Halyk. She has served as chairperson of the management board of ABN AMRO Asset Management, as well as deputy chairperson of the management board of ABN AMRO Bank Kazakhstan. She has extensive national and international education and experience, including an MBA from Rutgers in the US and structural finance and asset management roles at ABN AMRO.
• Dauren Sartayev (first deputy CEO – B2B banking, marketing and PR, and acquiring) has been on the board of Halyk Bank since July 2018 and a member of the supervisory board of Tenge Bank since March 2023. His experience includes several positions at KKB (where he started in 2004) as manager, head of SME banking and head of small business banking, as well as management board member and managing director (since June 2016) and deputy chair of the management board (since July 2017). He also worked as head of credit risk, branch director and director of problem loans at Temirbank from 2010 to 2012.
• Murat Koshenov (CFO and deputy CEO – finance, subsidiaries, compliance, international activities and ESG) was appointed in September 2014 and has been the chair of the supervisory board of Tenge Bank. His banking experience spans around 25 years, with prior roles as head of broker-dealer operations (ABN AMRO Asset Management), head of risk management and deputy chairperson of the management board (SB ABN AMRO Bank Kazakhstan), as well as previous positions at Halyk Bank: chief risk officer and compliance controller (2010–14) and deputy CEO and head of corporate banking (2014–22). His overall experience at Halyk covers more than 15 years.
• Yertay Salimov (deputy CEO – operations, chancellery, resources and contact centre) joined Halyk Bank in 1995 and has held various positions across the group, including head of the chief operations department and chief operating officer. He is currently a member of the board of directors of Halyk Finance and the Kazakhstan Stock Exchange.
• Nariman Mukushev (deputy CEO – B2C banking and digital government services) joined the management board in April 2022. He is a former deputy minister of labour and social protection of the population, prior to which he worked at Kazpost (including as managing director for business transformation and board member responsible for IT) and in KKB’s Innovative Technology department.
• Roman Maszczyk (deputy CEO, risk – management, data science and collateral) joined Halyk Bank in October 2020 and Halyk’s board in April 2022. He has been head of risk management since September 2023. Prior to joining Halyk, he held various positions at BankCenterCredit, Asseco Kazakhstan, Eurasian Bank, Bank Pocztowy, PKO BP, Nadra Bank, National Bank Trust, Bank Handlowy and BISE Bank.
• Olga Vuros (deputy CEO – corporate banking) was appointed in April 2022, prior to which she held several positions in Halyk Bank’s corporate banking department as director and head of division, as well as chief manager and senior manager of Division No 1.
• Tlegen Matkenov (deputy CEO – security, information security and security-related matters of problem loans) was appointed in March 2025. He is a former high-ranking Interior Ministry official.
• Andrey Zavarzin (deputy CEO – IT and ecosystem) was appointed in March 2025. He has been chief ecosystem and IT officer since June 2023, prior to which he spent 10 years at Sberbank, most recently as chief digital officer from April 2019 to August 2022. Between February 2010 and September 2012, he was chief data officer at Alfa-Bank.

Beyond the management board, key directors include Viktor Skryl (strategy director).

Board of directors

Halyk’s board of directors is populated by well-connected and well-qualified individuals, many with international experience, and five of the seven members are considered independent by Halyk (although we note that two have held key government positions in the past).

• Arman Dunayev (chairman) was elected as a director in September 2013 and re-elected in May 2023, and recently became chairman. He has extensive government experience as first deputy minister of finance, minister of finance and chairman of the Agency for Regulation and Supervision of the Financial Market and Financial Organisations. He has also held managerial positions in the quasi-government sector in Kazakhstan.
• Umut Shayakhmetova was elected as a member of the board of directors in April 2009 and re-elected in May 2023. For further details of her experience, please see the management section.
• Piotr Romanowski was elected in May 2020 and re-elected in May 2023. His professional experience includes senior managerial positions in Poland across McKinsey, Bank Millennium and PwC. He was also the first external investor as well as chairman of the supervisory board of Selvita and Ryvu Therapeutics. Since February 2021, he has served as chairman of the board of directors of payments infrastructure start-up Kevin EU in Lithuania.
• Franciscus Cornelis Wilhelmus Kuijlaars was elected in April 2009 and re-elected in May 2023. From 1990 to 2007, he served at ABN AMRO Bank and later at RBS as head of corporate and investment banking in Belgium, regional manager in Brazil and country manager in Russia and Argentina. He was also chairman of the board of directors and an independent director of National Company KazMunayGas between 2006 and 2017 (and adviser to the chairman from August 2017 to December 2018). He is also an adviser to several international organisations. In the past, he was also a member of the Foreign Council of the President of the Republic of Kazakhstan.
• Hermann Tischendorf was elected in May 2023. He previously held CIO/CTO positions at Eurasian Bank in Kazakhstan, SMARTnet in Vietnam, FEC VPBank Finance Company in Vietnam and 4Finance Group in Latvia. Since October 2016, he has been senior partner and technical director at MARFOR International Advisory in New York and Jacksonville. Since November 2009, he has been CTO and a member of the executive board at MTN Group in South Africa.
• Zhomart Nurabayev was elected in December 2023 as a representative of Almex Holding Group (where he has served as deputy chairman of the board since February 2014). He held key local government positions across the tax administration, as well as senior positions at financial and commercial organisations.
• Zhaksybek Kulekeyev was elected in December 2023. In the past, he has held key government positions, such as minister of education and science and minister of economy and trade, as well as chairman of the Statistics Agency of Kazakhstan and chairman of the Accounts Committee for Monitoring the Execution of the National Budget of Kazakhstan. He also held senior positions across the quasi-government sector, and is a member of the board of directors at KazAzot, Gumilyov Eurasian National University (as chairman) and Social Health Insurance Fund.

Halyk has achieved an ROE of 30%+ in recent years

Halyk Bank has consistently delivered a strong ROE of c 25%+, and even above 30% since 2022 (see Exhibit 10), with 34.7% reported in Q125. This has been driven by NIM expansion from 4.7% in 2020 to 7.5% in Q125 on the back of (1) an increase in the base rate after 2021, (2) growth in retail loans outpacing growth in corporate loans and (3) an increasing loan-to-deposit ratio (88.2% as at end-March 2025 compared to 69.3% at end-2021) and a higher share of loans in total interest-earning assets. While growth in real wages in the country remained positive despite high inflation (with nominal and real growth in Q125 at 10.7% and 1.2% y-o-y, respectively), Halyk reduced its CIR from an already low level of c 24–26% in 2019–21 to 16.5% in Q125 (see Exhibit 11), assisted by loan book growth as well as the implementation of process digitalisation initiatives. This was despite continued investments (including in its digital ecosystem) and growth in personnel expenses, which translated into a 22% y-o-y increase in operating expenses in Q125. While cost of risk has recently been higher at c 120bp in FY24 and Q125, versus below 100bp in 2019–21, we believe it remains under control (see details below) despite the strong growth in retail loans and the high interest rate environment.

We forecast an FY25e ROE of c 30% (within management guidance of 30–33%) and EPS growth of 12%. In our base-case scenario, we assume that Halyk’s ROE will moderate to around 20–25% in the medium term (and its CIR will reach c 20%), which we still consider a healthy level. The ROE reduction will be driven by (1) NIM contraction, (2) continued growth in real wages, (3) cost of risk remaining close to current levels, (4) further investments in business digitalisation (including AI) and (4) higher corporate tax rate from 2026 as per the new tax code (see details below). Our assumptions still imply an EPS CAGR of c 5% between FY24 and FY28e (though largely front-end loaded).

We expect a continued double-digit growth rate for Halyk’s loan book

Halyk’s retail loan book consists primarily of unsecured consumer lending (c 70% as at end-2024, see Exhibit 12), while mortgage loans make up only 12.0%. The state-owned Otbasy Bank offers preferential mortgage rates and therefore dominates the market. That said, we note that most of Halyk’s retail borrowers are salaried clients (often employees of Halyk’s corporate clients) taking on payday loans, which reduces credit risk.

Halyk has consistently grown its retail loan book at a double-digit percentage rate in recent years, with a 22.7% increase in FY23 followed by a 33.3% y-o-y increase in FY24. This reflects a broader trend across the local banking sector, and despite the acquisition of part of Sberbank’s retail loan book (cherry-picked to include only good-quality loans), Halyk’s market share in the segment remained stable in 2020 to 2023 at c 18%, although it rose to 19.5% at end-March 2025 (see Exhibit 9).

Local regulators recently introduced measures to curb the rapid growth in retail lending, such as higher statutory risk weights on riskier retail loans, a reduction in the marginal interest rate on unsecured loans to 46% from 56% (which did not materially affect Halyk as average rates on its loans are below that threshold), as well as the introduction of a prudential debt to annual income ratio from 2025. Moreover, the local watchdog recently rolled out new regulations related to scoring models and the rate of loan approvals, which weighed on Halyk’s new ‘Buy Now Pay Later’ volumes. Halyk’s management expects slower growth in its retail loan book in FY25 versus FY24 given the persistent high inflation and because of the base effect from the maturation of its significant loan book originated last year (growth in Q125 was 26.5% y-o-y). Nevertheless, we expect continued robust growth in Halyk’s retail loan book of 20% in FY25e (at the lower end of management guidance of 20–25%), with some moderation afterwards. This is supported by the low level of household debt to GDP in Kazakhstan (c 15% in 2023 vs c 29% on average in Central and Eastern Europe and 50%+ in most Western countries, according to IMF data), the growing proportion of working people in Kazakhstan’s total population, as well as Halyk’s digital ecosystem.

In the SME segment, we expect loan book growth of 16% % in FY25e, followed by 12% per year throughout our forecast period. On the one hand, SMEs are an important growth engine in many countries, representing ample untapped opportunities for Halyk. On the other hand, the new tax code may put a significant burden on SMEs. Together with the above-mentioned 16% growth assumed in the corporate business, this translates into forecast total net loan book growth of 17.1% in FY25e (at the lower end of management guidance of 17–22%). Subsequently, we assume a gradual deceleration in total loan book expansion to c 11% per year by FY28e, which compares with Halyk’s FY19–24 CAGR of c 25%.

NIM should moderate when inflationary pressure abates

In the near term, we expect Halyk’s NIM to remain high at 7.5% in FY25e (in line with management guidance of c 7.5%) compared to 7.2% in FY24, given that both local and US dollar interest rates should stay higher for longer. While the NBK had been cutting its base rate since August 2023 (following the monetary tightening in 2022), it has raised the rate by a total of 225bp to 16.50% since November 2024 (see Exhibit 15). This was in response to increased FX volatility and persistent inflationary pressure amid ongoing fiscal stimulus as discussed above. Our base-case scenario is for the onset of base rate cuts in 2026/27, with the 2028 rate being close to the 9.0–9.5% level seen in 2019–21. In this context, we note that Halyk’s corporate loans are primarily fixed rate, which will slow their repricing as the base rate starts to fall.

Around 21.0% of Halyk’s net loan book at end-March 2025 was denominated in foreign currency (primarily US dollars), therefore its net interest income has a certain sensitivity to US dollar interest rates. The current reading of the CME’s FedWatch tool indicates a c 77% probability that rate cuts until December 2025 will not exceed 50bp. Halyk’s management expects growth in interest-earning assets should compensate for any impact of lower US dollar rates in the near term. Halyk’s NIM will also be assisted by a further rise in the share of retail and SME loans.

Some headwinds may come from the continued shift of Halyk’s customers towards local currency deposits (in line with the country’s broader de-dollarisation trend), on which Halyk offers a much higher interest rate (c 12–16% in the case of term deposits for individuals) than on US dollar deposits (where the rate is capped at 1% by the local regulator). The share of FX deposits in Halyk’s total retail and corporate deposit base stood at 32.4% and 29.7%, respectively, at end-March 2025, compared with 56.3% and 50.6% in 2019. On the positive side, this reduces the currency mismatch of assets and liabilities and allows Halyk to keep a greater proportion of interest-earning cash and cash equivalents in higher-rate local currency deposits and securities. Finally, Halyk’s management admitted that competition for deposits has increased, with some of its competitors recently raising deposit rates.

We assume that Halyk’s NIM will gradually decline after FY25e to around 6.6% in FY28e, still ahead of the 2019–21 level of c 4.7–5.3%, thanks to the higher proportion of retail and SME loans, as well as the higher loan-to-deposit ratio. This should allow Halyk to grow its net interest income before credit loss expense at a mid-single-digit rate per year in FY26–28e after the strong 37% in FY24 and the 24% we forecast for FY25e.

Halyk Super-App drives retail transactions

Halyk’s growing digital penetration of its active retail customer base has resulted in a significant increase in the volume and number of payments and transfers using the Super-App, most recently by 30.3% and 35.4% y-o-y, respectively, in Q125. It has supported the company’s growth in transactional fee and commission income from individuals, which made up 67% of Halyk’s total fee and commission income in Q125 and which rose by 17.7% and 8.3% in FY22 and FY23, respectively. Growth moderated in FY24 to 2.5% y-o-y (due to the impact of revisions to some retail tariffs in H223) but picked up again to 9.8% y-o-y in Q125. Halyk stimulates the transaction activity of its retail clients by means of loyalty programme bonuses, expenses for which stood at a level equal to 7.9% and 8.3% of its transaction income on individuals in FY24 and Q125, respectively. These expenses are accounted for in a separate negative line within fee and commission income. Halyk’s transactional income on individuals net of transactional expenses and these bonuses increased by 31.7% and 12.6% y-o-y in FY23 and FY24, respectively, with a slight 1.5% y-o-y decline in Q125.

Transactional income from legal entities declined by 3.9% in FY24, affected by the transition to amortisation of tariff packages from November 2023 as Halyk now offers a model based on tariff packages to its primary SME clients and some corporate clients. This should result in greater stickiness of legal entity clients and improved income visibility. In Q125, transactional income from legal entities rose significantly by 33.1% y-o-y. This was accompanied by strong 26.0% y-o-y growth in income from letters of credit and guarantees issued in Q125 (after 34.5% growth in FY24). Overall, Halyk’s net fee and commission income increased by 24.8% y-o-y in FY24 and by 13.4% y-o-y in Q125.

We forecast 13.6% growth in net fee and commission income in FY25e (within management guidance of 10–15%), followed by an average c 9% per year in FY26–28e.

Cost of risk manageable

The share of stage 3 loans in Halyk’s loan book has been steadily declining in recent years, from the high level following the acquisition of the distressed KKB (21.2% at end-March 2018) to 7.5% at end-2023 and 6.3% at end-2024, supported by the working out of problem legacy loans and overall loan book growth. This has been coupled with a solid stage 3 coverage ratio of 75.2% at end-March 2025 (up from 67.0% at end-2023) (see Exhibit 17). Halyk’s share of credit-impaired loans increased to 6.8% in Q125, which was coupled with a higher provisioning rate of 5.1% versus 4.8% at end-2024. This was primarily due to a moratorium on the sale of non-performing loans introduced by the regulator on 1 April 2024 for two years (until May 2026). This means that problem loans that would previously have been sold are still on Halyk’s balance sheet, and the bank focuses on internal channels of debt collection. That said, management highlighted that the underlying credit quality of the portfolio remains firm and in line with its cost of risk guidance for 2025. Management also underlined that, given the recent tightening of credit standards at Halyk, the new vintages of retail loans should exhibit an even higher credit quality.

While Halyk’s share of stage 3 loans remains visibly above the average non-performing loan ratio of European banks of 2.28% in at end-December 2024 (according to European Central Bank data), we consider Halyk’s annualised cost of risk of 120bp as quite limited considering the bank’s strong NIM. Halyk’s cost of risk was historically assisted by recoveries of written-off loans, especially in the corporate segment (where the company has been particularly conservative in terms of provisions). Recoveries may continue in the medium and long term, though are less likely to be significant in the short term, according to Halyk. Management believes that Halyk’s cost of risk reached a normalised level in the current macroeconomic environment (see Exhibit 18) and guides to 130bp in FY25. It expects the relatively benign credit conditions to persist in the medium term, despite the high interest rates and the growing share of retail loans on Halyk’s loan book. We therefore assume a stable annualised cost of risk of c 120–130bp throughout our forecast horizon.

Capital base remains sound

Halyk has consistently maintained a strong capital buffer with its last reported CET-1 ratio and total capital ratio (TCR) at 19.3% each in Q125. The corresponding capital ratios as per local regulations (k1 and k2) stood at 19.8% each, well above the regulatory requirements of 9.5% and 12%. The Council on Financial Stability of the Republic of Kazakhstan recently introduced a sectoral countercyclical capital buffer of 2pp for retail loans, which Kazakh banks have to implement by 1 April 2026. This will still leave Halyk with ample capital buffers. Management’s internal target ratio is to maintain its capital ratios at or above 17%, which we consider prudent. We expect these strong levels to be maintained despite continued dividend payments and an increase in the average risk weight on its loan book stemming from a higher share of retail loans.

Halyk’s funding base consists primarily of customer deposits (83% of total liabilities at end-March 2025), although it has access to the wholesale market as well (even if interbank lending is limited in Kazakhstan). The company also has outstanding US dollar-denominated debt securities on which it pays a 3.5% coupon rate and Kazakhstani tenge-denominated debt securities with a coupon rate of 7.5–12.8% (some of which is fixed at 9.5%). Halyk’s liquidity ratio currently stands at a robust level of over 27.3%, as at end-March 2025. We note that the current minimum reserve requirements (MRRs) framework in Kazakhstan is under NBK’s review. Halyk’s management highlighted during the Q125 results call that, according to a draft proposal it saw, the MRR for local currency liabilities will increase to 5% (from 0–2% currently) and to 15% (from 1–3% at present) for foreign currency liabilities. It expects the new MRRs to be introduced in a phased manner between September 2025 and September 2026. These reserves are not generating any interest income for Halyk.

Draft of new tax code approved by Mazhilis

The lower house of Kazakhstan’s parliament approved the new tax code on 30 April 2025 in its second reading and has passed it on to the senate. If approved, it will come into force from 1 January 2026 and include a 25% corporate tax rate for banks on their banking operations (vs 20% currently), except for lending to the real economy (ie to legal entities) which will still be subject to a 20% rate. Income and capital gains on local state securities will be taxed at half the rate (ie 12.5%). Moreover, we understand that there is an ongoing debate about introducing a 10% windfall tax on 2025 ‘excess’ profits in the banking sector, including interest income on state securities, NBK’s deposits, short-term deposits with banks, as well as short-term reverse repurchase and swap agreements. We have cautiously reflected this additional one-off tax in our forecasts. Overall, we assume Halyk’s effective corporate tax rate at 18.2% in FY25e (vs 16.4% in FY24), followed by 20.6% in FY26e. Furthermore, the new tax code includes a 16% value-added tax (VAT) on banking activities, except for lending, deposit, securities and derivatives operations. That said, we expect that banks will be able to pass on the VAT to their customers.

Sustained capacity to pay attractive dividends

Halyk’s dividend policy assumes the payout of 50–100% of its consolidated net profit, and it has paid out between 50% and 60% in recent years (except for the 2021 payout of 30% due to COVID-19), delivering a five-year DPS CAGR of 27%. From 2024, Halyk introduced the possibility of paying dividends twice a year. With the Q324 results, the company announced that it would pay a second dividend from net income generated in 2023 of 15% on top of the 40% already paid. It subsequently paid the first dividend from 2024 profits of KZT29.64 per share in May 2025 (equal to 35% of 2024 EPS). On a last 12-month basis, this represents a very attractive dividend yield of 13% based on Halyk’s current share price. Following the full repayment in April 2024 of state support funds received by KKB in 2015, Halyk now has even greater flexibility in terms of dividend payments, as previously, upon each distribution, it had to repay a proportion of the state support. We understand that the new tax code implies that dividends paid by companies with shares that are actively traded on the local stock exchange will be exempt from a withholding tax.

Halyk also launched a buyback programme in September 2024, and may pursue further programmes in the future, but a decision will be made on completion of the current programme. That said, dividends will remain the key component of Halyk’s shareholder returns as each buyback programme is limited by local regulation to 1% of capital, beyond which Halyk would have to conduct a tender offer. In accordance with Kazakhstani law, repurchased shares cannot be cancelled and, therefore, Halyk accumulates them as treasury shares. We also note that the company launched a long-term incentive programme in December 2024.

We have identified the following key sensitivities for Halyk’s investment case:

• Kazakhstan’s sensitivity to oil prices: As discussed above, despite efforts to diversify its economy, Kazakhstan remains reliant on oil and gas exports. Fluctuations in global energy markets, coupled with government policies towards the energy sector, may have an impact on the country’s economic growth and stability. We believe a prolonged period with a Brent oil price below US$60/bbl would strongly weigh on economic growth and central government finances. For instance, GDP growth in 2015 and 2016 (at an oil price of c US$40–60/bbl ) was 1.2% and 1.1%, respectively, although we note that Halyk’s net income grew by 5.2% and 9.2%, respectively, in those years, and its ROE remained above 20%. The country’s 2025–27 central government budget is based on an average oil price assumption of US$75/bbl (slightly above the current rate).
• US tariffs: We consider the potential direct impact of US reciprocal tariffs of 27% as limited, as the vast majority of Kazakhstan’s exports to the US (including crude oil, uranium, silver and ferroalloys) was exempt from tariffs. These products represented 92% of the c US$2bn exports in 2024, according to a statement issued by the local Ministry of Trade. However, the indirect impact in the form of weaker global economic growth and in turn lower oil demand and/or price may be more significant.
• Geopolitical risks: Located between major powers Russia and China, Kazakhstan is influenced by regional geopolitical dynamics. Kazakhstan and other former Soviet Union countries have traditionally been within Russia’s sphere of influence. Russia remains an important economic partner, not least through the Caspian Pipeline Consortium (CPC), which transports, via Russian ports, around 80% of Kazakh total oil exports. Russia holds a 24% stake in the project via Transneft, with other major owners including KazMunayGas (Kazakhstan), Chevron Caspian Pipeline Consortium Company, Lukoil, Mobil Caspian Pipeline Company and Rosneft-Shell. The IMF recently mentioned potential disruptions to the CPC pipeline among the downside risks to Kazakhstan’s economic growth. There is also a risk of secondary sanctions if Western countries conclude that Kazakhstan has failed to fully comply with sanctions imposed on Russia. Moreover, US senators prepared a bill which, in the event Russia does not advance peace talks with Ukraine, would impose a 500% tariff on all imports from countries buying Russia’s energy (Kazakhstan is an important buyer of Russia’s gas). However, we note that US share in Kazakhstan’s exports is at a low single-digit percentage level, including mostly crude oil, precious metals and uranium. Kazakhstan is also a member of the Collective Security Treaty Organisation (CSTO) alongside Russia, Belarus, Kyrgyzstan and Tajikistan (Armenia suspended its activities in the organisation). A small group of CSTO troops (mostly Russian) were called in by President Kassym-Jomart Tokayev during the social unrest in January 2022, though these troops were not deployed to quell protests and left in the same month. We note that President Tokayev has pursued a more balanced foreign policy, as illustrated by Kazakhstan’s neutral stance on Russia’s annexation of Ukrainian territories. We also note that US capital is invested in most of the country’s large oil fields, and the Belt and Road Initiative may strengthen China’s influence in the country, providing some balance.
• Foreign exchange risks: The tenge has been a vulnerable currency in the past, depreciating 55% against the US dollar between end-2013 and end-2015 and having lost another 34% to date. This is, at least partly, a reflection of the high level of inflation in the country, which averaged around 9.3% pa in 2015–24, according to IMF data. The tenge has also exhibited some correlation to the Russian ruble, which has been under pressure due to Western sanctions and inflationary pressures. If the tenge continues to depreciate against the US dollar and other major Western currencies, this would weigh on the returns foreign investors generate on an investment in Halyk’s shares. That said, this would likely encourage the NBK to maintain a high base rate, benefiting Halyk’s net interest income.
• New tax code: The World Bank recent highlighted that Kazakhstan’s tax revenues remain significantly below those of aspirational and structural peers, at an average 17% of GDP in 2015–22 compared to an OECD average of 34%, and lagging notably behind resource-rich peers. High public spending, coupled with weak revenue collection, has put pressure on the government to revise the country’s tax code, including a differentiated corporate income tax for the respective sectors, and changes to dividend taxation. At the beginning of 2024, the president said that new taxation rules should be fair in order not to limit the investment attractiveness of the country. The final shape of the current tax code is yet to be decided, creating near-term uncertainty.

Halyk Bank currently trades at an FY25e P/E multiple of 3.3x and FY25e P/BV ratio of 0.9x, which we believe is a reflection of the broader market environment, including geopolitical developments and the higher US interest rates compared to pre-2022 levels weighing on capital flows to frontier markets (Kazakhstan represents c 10% of the MSCI Frontier EM Markets Index).

We value Halyk Bank by estimating a fair P/BV ratio based on two valuation methods and then applying it to our forecasted tangible book value for Halyk in FY25e. Firstly, we use a P/BV-ROE model based on: a conservative assumption of the bank’s sustainable RoTE of 20%; cost of equity estimated from the capital asset pricing model (CAPM); and a growth rate of 5% (in line with NBK’s inflation target).

In our CAPM model, we assume a beta of 0.90x, calculated based on a regression analysis of Halyk’s monthly share price returns versus the KASE Index over the last 10 years. We consider it appropriate given Halyk’s leading market position in the local banking sector, as well as its high profitability and sound capital base. While Halyk Bank’s ROE has been very strong over many years, we acknowledge that its profits are generated in local currency. Therefore, Halyk’s valuation prepared for foreign investors must reflect the distinct risk profile of the Kazakh economy (which is reflected in the volatility of the tenge), as well as higher local inflation than in developed markets. We estimate Halyk’s cost of equity using a 13.9% blended risk-free rate based on the yield of its KZT- and US$-denominated government bonds. For the former, we use the average 14.2% ask yield to maturity of government bonds with maturities of 10 years or more (as per current Bloomberg data). For the latter, we use the 5.0% yield on its 10-year US dollar-denominated Eurobonds issued in October 2024 (which marked the country’s return to the US dollar bond market after nearly a decade), adjusted for the 2025 inflation differential in Kazakhstan (10–12% according to NBK) and the US (3.0% according to the IMF). This blended risk-free rate, together with an equity risk premium of 6.5% (estimated by Aswath Damodaran as of January 2025 based on Kazakhstan’s sovereign rating of Baa1 from Moody’s) results in a cost of equity of 19.7% and in turn an implied P/BV ratio of 0.92x.

We blend this with the 1.16x estimated fair P/BV based on a regression analysis of current FY25e P/BV and ROE ratios for a group of banks operating in Southeastern Europe, Eastern Europe and Turkey (see Exhibit 22). As a result, our blended fair P/BV stands at 1.04x, which translates into a fair value estimate for Halyk of US$27.5 per GDR (14% upside potential).

We note that the two Georgian banks, Lion Finance Group (formerly known as Bank of Georgia) and TBC Bank Group (both of which have an ROE above 25%) trade at FY25e P/BV ratios of 1.3x and 1.5x, respectively, visibly above that of Halyk. This is despite the current political turmoil in Georgia. Turkish banks presented in Exhibit 22 trade at ratios between 0.7x and 1.1x. Kaspi.kz currently trades at 5.7x its FY24 book value per share (no LSEG Data & Analytics consensus data for FY25e is available) but its business model is not fully comparable with that of Halyk, as discussed above. Two other listed Kazakhstani banks – Bank CenterCredit and ForteBank – have no available LSEG Data & Analytics consensus estimates either. Based on last reported book value per share, they currently trade at P/BV ratios of 1.0x and 1.3x, respectively, while their last 12-month ROEs stands at 40% and 34%, respectively. We believe that the above analysis reaffirms our P/BV-ROE valuation.