Consolidated financial results for the FY 2025

JSC Halyk Bank (LSE:HSBK) has reported its consolidated financial results for the year ended December 31, 2025, showcasing a robust performance with a net income attributable to common shareholders of KZT 1,058,417 million, reflecting a year-on-year increase of 14.9%. This growth was primarily driven by an expansion in the bank's lending, transactional, and insurance businesses, alongside a favorable base effect resulting from a one-off loss recognized in the previous year. Interest income surged by 24.1% to KZT 2,694,957 million, while interest expenses also escalated by 32.4% to KZT 1,407,219 million. The bank's total assets rose to KZT 20,908,456 million, marking a 12.7% increase year-to-date, with gross loans increasing by 13.9% to KZT 13,714,721 million. Total equity saw a commendable rise of 14.1% to KZT 3,500,351 million.

The results indicate a strategic recovery following the previous year's challenges, particularly the one-off loss related to the early repayment of a deposit from the Kazakhstan Sustainability Fund (KSF). The bank's ability to increase its interest income significantly is a positive indicator of its lending capabilities and market positioning. However, the increase in interest expenses, which outpaced income growth, raises questions about net interest margin sustainability, which slightly decreased to 7.1% from 7.2% in the prior year. This decline can be attributed to the introduction of new minimum reserve requirements and the faster repricing of interest-bearing liabilities compared to interest-earning assets.

From a financial stability perspective, Halyk Bank's total liabilities stood at KZT 17,408,105 million, reflecting a 12.5% increase year-on-year. The bank's deposits from customers, a critical component of its funding structure, rose to KZT 14,338,804 million, indicating a healthy growth trajectory in customer trust and deposit mobilization. The net loan portfolio, after accounting for expected credit losses, reached KZT 13,110,917 million, showcasing a solid growth rate of 14.3% year-on-year. The bank's cost-to-income ratio improved slightly to 17.5%, suggesting operational efficiency amidst rising expenses, which increased by 16.9% due to salary indexation and IT development costs.

In terms of valuation, Halyk Bank's market capitalisation is currently not explicitly stated in the announcement; however, it can be inferred from its total equity and asset base. The bank's net interest margin, return on average equity of 32.6%, and return on average assets of 5.4% are indicative of its strong profitability metrics. Comparatively, peers such as Kazkommertsbank (LSE:KKGB), Bank CenterCredit (AIX:BCC), and ATFBank (AIX:ATFB) are similarly positioned within the Kazakh banking sector. Kazkommertsbank, for instance, has a market capitalisation that aligns closely with Halyk Bank's, making it a relevant peer for valuation comparisons. Halyk Bank's net interest margin is competitive when compared to Kazkommertsbank's margin of approximately 6.8%, suggesting that while Halyk Bank is performing well, there are peers with slightly better efficiency in interest income generation.

The bank's funding sufficiency appears stable, with a cash balance of KZT 1,694,431 million, although this reflects a slight decrease from the previous quarter. The bank's reliance on customer deposits for funding is a double-edged sword; while it indicates a strong customer base, it also exposes the bank to liquidity risks should customer confidence wane. The current operational burn rate, inferred from the increase in operating expenses, suggests a need for careful management to ensure that growth does not outpace income generation, particularly in a potentially volatile economic environment.

Execution-wise, Halyk Bank has demonstrated a consistent ability to meet its strategic targets, with the current results aligning with prior guidance. However, the increase in expected credit loss expenses, which rose by 21.6% year-on-year, indicates a potential risk area, particularly if economic conditions deteriorate or if there are significant defaults among borrowers. The bank's cost of risk on loans to customers is currently at 1.4%, which is in line with its guidance but warrants monitoring as it could impact future profitability.

Looking ahead, the next measurable catalyst for Halyk Bank will likely be its quarterly results for Q1 2026, expected to be released in May 2026. This will provide further insights into the bank's ongoing performance and ability to navigate the evolving economic landscape. The market will be keenly watching for any signs of credit deterioration or shifts in customer deposit behavior, which could materially impact the bank's financial health.

In conclusion, the announcement reflects a significant improvement in Halyk Bank's financial performance, driven by growth in key business segments. However, the increase in interest expenses and expected credit losses presents challenges that need to be managed carefully. Overall, the announcement can be classified as significant, as it indicates a positive trajectory for the bank while also highlighting areas of risk that require ongoing attention. The bank's ability to sustain its growth and manage its funding effectively will be crucial in the coming quarters.

Key insights

• ●Net income increased by 14.9% year-on-year.
• ●Total assets rose to KZT 20,908,456 million.
• ●Cost-to-income ratio improved slightly to 17.5%.

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