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223. Bull, Bear & Beyond – Halyk Bank: executive interview
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In this interview, Murat Koshenov, CFO and deputy CEO of Halyk Bank, discusses the role of Kazakhstan as the largest economy in Central Asia and a gateway between China, Europe and the Middle East. He provides background on Halyk Bank’s role in supporting the growth of the local economy, explains how Halyk Bank is navigating the high-inflation, high-interest rate environment in Kazakhstan and elaborates on the potential impact of the war in the Middle East on the local economy. Moreover, he highlights the key developments across Halyk’s digital ecosystem. The interview also covers Halyk’s dividend policy.
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Transcript
Introduction with Murak Koshnoff
00:00:07
Speaker
Welcome to Edison TV. We are delighted to be joined once again by the CFO and Deputy CEO of Halic Bank, Murak Koshnoff. Murak, welcome to Edison TV. Hello and thank you for having me.
Kazakhstan's Strategic Trade Role
00:00:20
Speaker
So please explain to our viewers the role of Kazakhstan as the largest economy in Central Asia and as a gateway to China, Russia, Europe and the Middle East.
00:00:31
Speaker
Central Asia indeed has a strategic location. The Asian Silk Road plays a key role in facilitating trades and cultural interaction between the East and the West.
00:00:42
Speaker
Currently we see a revival of the whole idea connecting East Asia, and particularly China, with Europe through the Central Asia.
Middle Corridor's Impact on Trade
00:00:51
Speaker
It started in the beginning of this century, when Kazakhstan emerged as a major exporter of oil, metals and uranium.
00:00:59
Speaker
The idea of increasing the transit potential of Central Asia, and particularly Kazakhstan, was further supported by the Belt and Road Infrastructure initiatives, as well as the most recent initiative of the Middle Corridor.
00:01:13
Speaker
Because of the global supply chain disruptions and current geopolitical uncertainty, we see that the Middle Corridor is rapidly becoming the new connecting points between descent between the China and Europe through Central Asia and it's becoming the new alternative route.
00:01:32
Speaker
And we see that the developments of transit potential of the region would be helping to support the broader developments and diversification of Kazakh
Halic Bank's Financial Sector Leadership
00:01:44
Speaker
economy.
00:01:44
Speaker
In this context, could you provide perhaps some background on Halek Bank's market position and its role in supporting the growth of the local economy? Halyk Bank is the largest financial institution Kazakhstan and the market share across the major metric like total assets, net loans and capital is around 30%. The Bank has more than retail clients we 3,000 clients.
00:02:08
Speaker
and we have more than three hundred forty thousand active iseic clients as well as we have three solvent corporate clients ah The bank is also present in Uzbekistan and Georgia through our 100 subsidiary banks.
00:02:22
Speaker
And we also have a joint venture with China City Bank through Alten Bank, where Halik Bank holds 40% market share. Beyond co-banking, the group app operates as a diversified financial and non-financial ecosystem, which includes insurance, leasing, brokerage, asset management and lifestyle.
00:02:40
Speaker
The bank provides nearly half of all real-economy financing among all commercial banks in Kazakhstan. The majority of the country's largest taxpayers are our clients, which demonstrates the banks' deep integration into the national economic framework.
00:02:57
Speaker
HALIC also the largest transactional service provider in the country and process the total transaction volume, which exceeds the country's annual GDP.
Lending Strategy Amid Economic Challenges
00:03:07
Speaker
Halleck Bank continues to operate in a high inflation, high interest rate environment. This supports the company's net interest margin, but also affects local appetite for credit as well as the credit quality of potential borrowers. How is Halleck Bank balancing these factors in its lending and decisions?
00:03:27
Speaker
Of course, high inflation is impacting the disposable income of population and high interest rates is limiting the credit demand from our corporate and SME clients.
00:03:38
Speaker
So this also leads to the situation when we provided a rather cautious approach for the long growth for 2026 and we guided that our retail portfolio would grow between 8 and 10 percent while the corporate SME portfolio would grow between 10 and 15 percent.
00:03:57
Speaker
At the same time, tight monetary policy, including the high base rates, high minimums of requirements, as well as fiscal discipline, is likely to lead the interest rate reduction in the second half of this year, which will typically consider as a supportive factor for net interest margin, as well as, we hope, will drive the credit demands later into
Digital Advancements at Halic Bank
00:04:23
Speaker
this year.
00:04:23
Speaker
Okay, please tell us a little bit more about the developments across your digital ecosystem and how it drives client engagement and your fee commission income. ah The group's digital infrastructure basically represented by two core platforms.
00:04:38
Speaker
One is for it retail customers called Halic Super App and Halic Online Bank for our SMEs and corporate clients. Halic SuperApp demonstrated strong engagement growth with increase in monthly active users which reached 8.5 million as well as the daily active users which increased to 3.2 million.
00:04:59
Speaker
And we see that transactional volumes also increased. The number of transactions increased by 23% and the volume of transactions increased by 20% during year. during last year Digital adoption continues to deepen and we see that roughly 94% of retail loans by number are issued digitally as well as the digital deposits.
00:05:21
Speaker
We see that the payment capabilities are also increasing and last year we launched innovative face-to-pay solution. The platform combines financial and lifestyle services, driving the engagement and customer lifetime lifetime value through proprietary solutions like marketplace, travel, entertainment, govtech, including the partnerships in e-gove, e-grocery and e-pharmacy.
00:05:48
Speaker
This open-up also integrates the solutions of our subsidiaries like insurance as as well as the brokerage. And we continue to improve our lifestyle offering.
00:06:00
Speaker
Like last year, the bank introduced the integrated restaurant solution, which enables discovery, preservation, takeaway and seamless QR payments across the full dining journey.
00:06:12
Speaker
Within its B2C customer value management strategy, the bank applies AI-powered next best offer and next best action tools with recommendation engine that personalize bank's proposition.
00:06:26
Speaker
And this drives the engagement higher and leads to higher cross-sell ratios. Halix Online Bank is B2B digital platform which provides corporate and SME with integrated banking and non-banking business services and seamlessly connected to corporate ERP and CRM systems.
00:06:47
Speaker
The platform enables rapid onboarding giving business seamless access to the ecosystem.
Expansion of Halic Online Bank's B2B Services
00:06:52
Speaker
It combines daily banking services with lending, deposits, factoring and other financial services within one platform.
00:07:01
Speaker
It also offers business registration beyond financial services, the government technologies integrations, insurance, payroll. Altogether, there are more than 150 offerings on the platform.
00:07:13
Speaker
Online bank powers financial flows across the economy, from the government procurement, B2B and B2C trades, to the corporate lending and tax payments. The monthly active users of online banks reached almost 344,000 clients and the daily active users reached almost 150,000 users.
00:07:33
Speaker
These strong engagements translate into solid transactional growth. The number of payments increased by 22%, while the volumes grew by nearly 30% during
00:07:47
Speaker
The platform continues to evolve through new client-focused services. One of the good examples is Online.ken, which is a new in-house developed service, ah which provides a full digital circle, which connects distributors and convenience stores from ordering, payments and supply accounting.
00:08:05
Speaker
This solution unlocks underserved micro-retail segments and connects southern of convenience stores nationwide and expanding transactional flows across the ecosystem.
00:08:17
Speaker
Together, Halik Soapirap, an online bank, enhance cross-segment clients' engagement and retention, positioning the group as a core digital infrastructure which connects consumers and their price across the economy.
Evolving Dividend Policy at Halic Bank
00:08:32
Speaker
Can you please summarize your current dividend policy and any changes currently being contemplated? Thank you all for your question. The bank has a long history of dividend payments and we have an interrupted flow of dividend payments for last eight years.
00:08:47
Speaker
Since 2024 we made dividend payments twice a year. And in recent annual January Showholder meeting, the changes to the corporate charter were approved, which would allow dividend payments up to four times a year.
00:08:59
Speaker
And this opens possibility to corresponding change in the dividend policy in the near future. At the same time, in annualized terms, dividend payout would remain at 50% plus level, as well as the minimum Tier 1 capital level at 17%.
00:09:14
Speaker
This would ensure the bank has sufficient capital to support our further growth as well as strategic initiatives.
Effects of Middle East Conflict on Kazakhstan's Economy
00:09:21
Speaker
So how is the current war in the Middle East affecting ah the economy of Kazakhstan? On the one hand, the recent spike in oil price represents a positive first-order effect because Kazakhstan's oil exports are not affected by the Straits of Hormuz.
00:09:37
Speaker
On the other hand, it does add to existing inflationary pressures in the country. According to Ministry of Finance, the export price of Kazakh CPC oil brand reached $122 per barrel, which should substantially increase the budget collection in coming months.
00:09:56
Speaker
Also, we see that logistics disruption in the Middle East leads to price increase on some other goods and commodities which is produced by Kazakhstan, for example, fertilizers.
00:10:08
Speaker
At the same time, the inflationary pressure might be coming from two channels. One is imported goods as well as potentially higher fiscal spending. So the national bank and the government need to stay disciplined in order to limit any negative implications.
00:10:24
Speaker
Murat, as always, a pleasure to have you on Edison TV. Thank you very much for giving us a good run through the issues in Kazakhstan and how our HALIC Bank is performing. Thanks again for joining Edison TV.
00:10:35
Speaker
Thank you and goodbye.