Kazakhstan Regulations And Fintech Rivalry Will Reduce Banking Margins

Key Takeaways

• Higher regulatory burdens and tightening lending criteria are expected to erode profitability and constrain future loan growth.
  
• Rising competition from fintechs and limited diversification outside Kazakhstan could pressure margins and increase vulnerability to local economic shocks.
  
• Robust digital growth, regional expansion, strong market leadership, disciplined risk controls, and shareholder-friendly policies position Halyk Bank for sustained profitability and long-term stability.

Catalysts

Provides corporate and retail banking services primarily in the Republic of Kazakhstan, Kyrgyzstan, Georgia, and Uzbekistan.

• Higher regulatory burdens-including increases in minimum reserve requirements (scheduled to rise further through 2026) and new corporate tax rates-are set to directly erode net interest margins and reduce future earnings, as more capital will be tied up and effective tax rates will rise.
  
• Increasing digitization in Kazakhstan's financial sector is intensifying competition from fintechs, both domestically and from digital-first players in adjacent markets; if Halyk's continued digital investments are not sufficiently agile, this may compress long-term revenue and net margins.
  
• Kazakhstan's economy remains highly linked to commodity cycles and is exposed to global macro volatility; persistent uncertainty or volatility in oil and commodity prices could lead to slower loan growth and heightened credit risk, negatively impacting loan book expansion and asset quality.
  
• Halyk's core business is still heavily concentrated in Kazakhstan, leaving it exposed to local economic or political shocks; despite progress expanding into Uzbekistan, a lack of significant international diversification could constrain earnings growth and increase risk to future revenue streams.
  
• Ongoing regulatory tightening-including stricter lending criteria and caps on mortgage rates-may slow future retail loan growth and reduce profitability, especially if regulators continue to prioritize financial stability over credit expansion.

Halyk Bank of Kazakhstan Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Halyk Bank of Kazakhstan's revenue will grow by 5.9% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 57.7% today to 56.7% in 3 years time.
• Analysts expect earnings to reach KZT 1249.2 billion (and earnings per share of KZT 99.98) by about August 2028, up from KZT 1070.5 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting KZT1425.6 billion in earnings, and the most bearish expecting KZT1041.4 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 4.0x on those 2028 earnings, up from 3.6x today. This future PE is lower than the current PE for the GB Banks industry at 9.1x.
• Analysts expect the number of shares outstanding to decline by 0.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.89%, as per the Simply Wall St company report.

Halyk Bank of Kazakhstan Future Earnings Per Share Growth

Risks

• Sustained digital transformation and ecosystem growth: Halyk Bank's digital Super-App and Onlinebank platforms continue to see robust user growth, high transaction increases (32% in volume for Super-App, 25% in B2B online transactions), and rising product penetration, which supports revenue expansion and long-term improvement in operational efficiency and net margins.
  
• Diversification and cross-border partnership potential: The strategic partnership with Click in Uzbekistan materially expands Halyk's total addressable market, unlocking access to 33 million aggregate B2C clients and new cross-sell and fee-based income opportunities in one of Central Asia's fastest-growing digital financial markets, potentially supporting earnings growth.
  
• Strong market leadership and deposit franchise: Halyk maintains sector-leading market shares in retail loans (19%) and deposits (28.7%), along with a dominant position in SME and corporate banking (serving 86% of the largest taxpayers, 49% of corporate loans), which underpin low funding costs and strong net interest margins, supporting stable long-term revenue streams.
  
• Resilient profitability and disciplined risk management: The bank boasts a high net interest margin (7.2%) and a best-in-class cost-to-income ratio (17.2%), while asset quality remains stable (Stage 3 loans declining to 6.6%), suggesting the bank's ability to protect net margins and absorb regulatory/tax shocks through efficiency and strong risk controls.
  
• Healthy capital and dividend policy: Halyk continues to generate capital (capital adequacy at 18.1%) and has demonstrated a willingness to return profits to shareholders via high payout ratios (60% of net 2024 profit), while a share buyback program enhances shareholder returns-bolstering the potential for sustained long-term total returns, even amid sectoral or regulatory headwinds.

Valuation

• The analysts have a consensus price target of KZT25.933 for Halyk Bank of Kazakhstan based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of KZT28.8, and the most bearish reporting a price target of just KZT24.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be KZT2204.5 billion, earnings will come to KZT1249.2 billion, and it would be trading on a PE ratio of 4.0x, assuming you use a discount rate of 9.9%.
  
• Given the current share price of KZT25.9, the analyst price target of KZT25.93 is 0.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.