Sparks - Halyk Bank

Halyk Bank reported a 3.0% y-o-y increase in net interest income to KZT324.3bn in Q226, with the 13.2% y-o-y growth in gross customer loans partly offset by a lower net interest margin (NIM) at 6.7% compared with 7.1% in Q225. This was due to the impact of new minimum reserve requirements (H126 NIM would have been 7.2% adjusted for the effect of the tightened minimum reserve requirements versus the reported 6.8% and 7.3% in H125). Halyk’s net fee and commission (F&C) income declined by 13.1% y-o-y in Q226 to KZT29.6bn amid weaker ‘buy now, pay later’ transactional income dynamics due to regulatory-driven tightening of underwriting, as well as the only gradual pass-through of VAT on certain banking services to clients. However, net F&C income increased sequentially by 18.4%. Halyk’s cost of risk remained somewhat elevated at 1.4% in Q226 (vs 1.5% in Q225) but was in line with management expectations. The share of Stage 3 loans reached 8.6%, driven by the ongoing moratorium on the sale of problem retail loans to collection agencies and lower growth in the retail loan portfolio. Expected credit loss expense and recovery of other credit loss expense went up by 32.8% y-o-y to KZT51.2bn in Q226. The company’s cost-income ratio increased to 20.2% in Q226 (19.2% in H126) from 17.8% in Q225. Together with a lower net insurance result and net foreign exchange gains, these factors contributed to a 16.1% y-o-y net income decline in Q226 and a return on average equity of 23.5% in Q226 (24.8% in H126) compared with 32.2% in Q225 (33.6% in H125).