Halyk Bank JSC published its financial results for the fourth quarter and full year 2025. We assess the fourth-quarter report as moderately negative: quarterly net income declined by 12% year-on-year and quarter-on-quarter to KZT 248.5 billion, mainly due to the compression of net interest margin, higher credit loss provisions, and increased operating expenses. Nevertheless, for the full year 2025 the bank met all of its own guidance targets. As expected, management’s new outlook for 2026 implies a slowdown. In particular, a slight decline in net profit is expected. In our valuation model, we updated financial indicators and significantly reduced the cost of equity, while also slightly improving expectations for the loan portfolio and non-interest income. The updated target price is KZT 470 per share, implying 22% upside from current levels. Recommendation – “Buy.”
Key factors for valuation
The main risk is the continued compression of net interest margin (NIM). In the fourth quarter, interest expenses increased by 38% YoY and 5.3% QoQ, while interest income rose only 18% YoY and 1.6% QoQ. The average rate on customer deposits increased from 9.6% to 9.9% during the quarter, reflecting the higher base rate. As a result, quarterly NIM declined to 6.9%, and the bank expects it to further decline to 6.8% in 2026. Additional pressure comes from the increase in NPL 90+, which rose from 2.6% to 4.3% over the year. Cash collection of interest income on customer loans has remained at a reduced level of 92% for the second consecutive quarter. The main valuation catalyst remains the bank’s strong market position, large ecosystem scale, and overall undervaluation relative to its financial performance. The bank remains the largest in the country, financing 47% of Kazakhstan’s real economy. Monthly active users (MAU) of the Halyk super app reached 8.5 million, while payment and transfer volumes through the app increased 20% YoY. We also note the successful $475 million SPO placement in November 2025, which increased free float to 37.6%.
Revenue growth but lower profit in Q4
Interest income in Q4 2025 reached a record KZT 709 billion (+18% YoY, +1.6% QoQ). At the same time, interest expenses rose faster to KZT 389 billion (+38% YoY, +5.3% QoQ). As a result, net interest income before credit losses totaled KZT 319 billion, remaining broadly unchanged compared with the previous year. Net fee and commission income showed solid growth, reaching KZT 38.3 billion (+17% YoY, +13% QoQ), largely driven by higher transactional income from corporate clients and growth in income from letters of credit and guarantees. Meanwhile, net insurance income declined to KZT 11.6 billion (-51% YoY, -54% QoQ). Quarterly credit loss provisions amounted to KZT 49 billion (+55% YoY, +6% QoQ), bringing the cost of risk to 1.3%, compared to 1.4% in the previous quarter and 0.9% a year earlier. Operating expenses totaled KZT 86.7 billion (+4.9% YoY). As a result, quarterly net profit reached KZT 248.5 billion, declining 12% YoY and QoQ. This represents the lowest quarterly profit in the past one and a half years and the only quarter in 2025 with negative YoY dynamics. For the full year 2025, earnings per share reached KZT 97.17 (+15% YoY).
Changes in the valuation model and our view
For the full year 2025, the bank achieved all key targets, including net profit exceeding KZT 1 trillion. However, several negative trends remained in the fourth quarter: rapid growth in interest expenses, NIM compression, and rising NPL levels. Management’s outlook for 2026 suggests: net profit around KZT 1 trillion, NIM declining to 6.8%, cost-to-income ratio around 18–20%, cost of risk increasing to 1.5%. Loan portfolio growth is expected at 9–12% (vs. 14% in 2025), while fee income growth may slow to 5–10% (vs. 11.9%). Overall, the guidance for 2026 does not appear overly pessimistic relative to our previous expectations. However, tighter regulatory requirements in Kazakhstan’s banking sector may affect financial performance. At the same time, Halyk Bank’s valuation multiples remain attractive, particularly in terms of dividends. In our view, dividends may reach approximately KZT 58 per share during the year. This would imply a dividend yield of around 15%, one of the highest in the market. In the valuation model, we updated all key financial metrics. The main positive change was the reduction in the cost of equity following the decline in Kazakhstan government bond yields. We also slightly increased expectations for the loan portfolio and non-interest income. As a result, the target price for Halyk Bank shares is KZT 470, implying 22% upside from the current market price. Recommendation – “Buy.”