Kaspi.kz - Earnings Call - Q2 2025

Transcript

Speaker 5

I'll be your coordinator today. If you would like to ask a question, please press the Raise hand icon found on your screen if you have joined the call via Zoom. If you have joined us on the phone, please press star 1 on your telephone keypad. I would now like to hand over to David Ferguson. Please go ahead.

Speaker 4

Great. Thank you. Good morning. Good afternoon to everyone who's joining us. Welcome to Kaspi.kz second quarter and first half 2025 financial results. I'm David Ferguson from Kaspi, joined on this by Mikheil Lomtadze, CEO and Co-Founder of Kaspi.kz. Yuri Didenko and Tengiz Mosidze are Deputy CEOs. As usual, Mikheil will start the presentation, run you through an update on some of the key initiatives in the second quarter and first half of the year. I'll take you through the financial slides and then we'll open the call up to Q&A. On that note, over to you, Mikheil. Thank you.

Speaker 1

Thank you, David. Let's move straight away into the updates. For the second Q we had a good strong performance in spite of the still continuing environment of high interest rates. Our payments continue to perform well and this is a very sizable business. As you all know, our TPV is up 21%, revenue 16%, and net income up 19%, so we're pleased with the performance. Marketplace continues strong growth, GMV up 15%, revenue up 25%, and net income up 13%. GMV, especially on the e-commerce side, continues strong growth except the smartphones, up 31%. I will cover this later in the presentation. Fintech continues to generate strong volumes, up 17%, 21% revenue, and net income up 8%.

In spite of the high interest rates this year, consumers continue to be engaged strongly, probably one of the, we believe, being the leading business in terms of transactions per consumer of 75 transactions per month, and revenue up 20% and net income up 14%. e-Grocery, the business which we started, if I recall correctly, around three years ago, continues to be our probably fastest growing e-commerce business, up 57% year over year. In terms of the GMV, we already have over 1 million consumers, 1.1 million at the end of second Q, and generating 3.4 million transactions. Transactions were up 63% and in the GMV we're up 57%. We continue expanding the grocery across the country and entering new cities.

We are now in the five largest cities of Kazakhstan, which is Almaty where we started, Astana, and we also opened this year in Aktobe and Shymkent, and we're also expanding in Karaganda. We have five cities now and we are expanding further in Astana and Almaty. We're adding another dark store or logistics centers from which we're actually delivering to our consumers. We're planning to open another two basically in 2025. We have also introduced earlier this year a deposit on the fixed-term deposit at higher interest rate. Here we're giving you a bit of an overview of its performance. We're very pleased. This deposit has shown an extraordinary growth of 207% in terms of the amounts and 263% in terms of the number of customers, almost 160,000. It's performing pretty much as we planned.

As you can see, this is a product which is targeting consumers which are saving for something. Apart from the consumers which are shifting from our current deposit into savings deposit because they have savings needs, around a third of the volumes is actually a new inflow. Very successful product. We truly believe that even though interest rates are high, they will come down in the future. We just continue acquiring consumers and those are the consumers which eventually are transacting through our services because we are a transactional business and we allow sellers to sell, buyers to buy. When there are consumers with the money and savings, eventually they're spending those through our services. Really encouraging trends of the deposit products which we've launched.

We also have been giving an opportunity to others to leverage our payment network, Caspi QR, which allows our merchant partners to accept the payments not only from users of the Kaspi.kz mobile application, but actually other of our colleagues on the market. Have seen very good results. The volumes are up 128%. We have processed in the second quarter 3.4 million transactions. At the moment we have five banks working with us. As you recall, we also have integrated with Alipay and through Alipay, we're allowing our consumers to transact on their vacations in China or other locations where Alipay is functioning, as well as our partner merchants to acquire and to pay for the goods that they might acquire in China and then bring to Kazakhstan and sell through our marketplace. Very encouraged by those trends and we'll continue to partner with other financial institutions going forward.

Already it's a pretty good decent result. We also are historically, as you know, building up on our payment infrastructure and the payment use cases. This is how we actually started our e-commerce business. This is how we've started our travel business, just taking advantage of building additional value through specific vertical related innovations. Here is an example of our entry into the restaurants business. We are scaling quite nicely. It's very high growth. Still not sizable in terms of the size because we have just launched it, but quite good. Encouraging result. Net promoter score is very high from our customers and merchants. The functionality is pretty straightforward. You know, as a restaurant, you basically are reducing the time for your waiters to spend on bringing the receipt and so on. They are focused more really on the serving. As a result, restaurants get more sales.

This is especially in the peak time. This is the biggest benefit for the restaurants from the consumers. Quite straightforward functionality. You just scan the QR code which you have on the table and you pay straight from our mobile application. One nice feature which is also part of this service is you can actually see the waiter and the waiter is, you know, waiters are happy because everything goes seamlessly. We're delivering the value for everyone involved in this service, in the restaurant itself, in the consumers and for the waiters. It's everybody working faster, more efficiently and we enable our core competency through the technology which is accepting payments fast and providing a very reliable service. We also have been expanding the suite of our advertising tools for the merchants.

This business is growing really fast and we have launched a new service for our merchants which basically enables the merchants to provide the cashback sort of bonuses directly to consumers. Very simple service to operate. We have positive feedback from merchants. You can basically select the promotional terms, select the products you would like to promote and then you just push the button and you can basically track the sales uplift, the views and other metrics related to advertising. Have been really well received. As you know, our strategy is always to be rolling out their services with the confidence that would deliver the value. We're still in the process of scaling but already have very good results and engagement from the merchants. This service continues to fuel our Advertising Service growth. As you can see, our ad revenue has increased by 67% in Q2.

This is one of the services which we're extremely happy with the transient engagements and more to come. We also have been describing and explaining to you during last call that we have growth of the smartphones has been temporarily impacted by the requirement of really the register smartphones which is, in a simple words, it's quite natural. The legislation has been introduced which require the consumers to register their smartphones. If this smartphone wouldn't be registered, then it basically becomes an operational brick. From our perspective, this supply and the consumer demand disruption just happens temporarily really. We still would like to indicate that actually the growth of all other verticals in our e-commerce continues to be very strong. Without the smartphones, the growth is 31%, which is just an indication how underpenetrated the e-commerce is and how much growth we have ahead of us.

Things like beauty and personal care and clothing are growing 63% and 54% respectively, just telling you that there is still more growth and the innovations we can do around specific verticals. The smartphones, this temporary setback. We also are not just sitting and observing. We of course are introducing the services for both merchants and the consumers just to give them peace of mind and understand that actually the phone is registered. We have developed a service for both merchants and consumers to overcome this obstacle. Actually, merchants, before shipping the smartphone through our e-commerce, they must check the smartphone whether it's registered for bringing inside of the country on the one hand. On the other hand, merchants earn the badge on their product which means verified by the merchant, the smartphone.

Customers themselves also can verify smartphones and make sure that the smartphone they have acquired is the smartphone which is registered. As a result, we are sort of tackling this from both sides. We're giving tool to the merchants, we're giving tool to the customers. We just believe that the demand is there and we just believe this is a temporary setback due to the regulation which just requires a bit more communication and help from our side. That's what we're doing. We also are very excited to introduce the new service which is domestic tours in Kazakhstan. Kazakhstan is a beautiful country and there are so many destinations that you can visit and it can be over the weekend, it can be a quick trip into mountains, it can be a ski resort, or you want to spend a week in the beautiful nature with your family.

We have introduced the domestic tours and basically as you recall the travel, we have international vacation packages. That is specifically targeted to promote beauty of the country. We have developed the functionality which has been well received. You can choose the region and the dates, you can browse list of offers, you can read the tour details and understand those better, and then you can seamlessly pay in our mobile application and you get confirmation for your vacation. Really nice tour. Obviously we've started from the low base, but it's 10x growth in June. It's the season now, so we observe quite strong adoption. This is the service which we will be purposely also promoting and building up. We are really honored and excited to promote the beauty of the country, and Kazakhstan is truly beautiful, has so many beautiful locations to visit.

We're very happy and excited about this new business we have launched. David, back to you about the platform performances.

Speaker 4

All right, thank you, Mikheil. Just to run quickly through the financial performance of the respective parts of the business, starting with payments, demand volumes remained robust and consistent throughout the first half of the year. Volumes up 14% year on year in the second quarter, up 15% year on year for the first half. Faster TPV growth versus volumes is a function of higher ticket size, inflation up 21% year on year in the second quarter, up 22% year on year for the first half. Again, strong and consistent trends with, as usual, sort of three key products, Kaspi Pay, B2B, and bill payments all contributing. Take rate moved down, a function of mix effect, again consistent with what you've seen now over the last couple of years.

Basically, as Caspi QR grows in the mix, its take rate is dilutive, but this is consistent with the long run trend. Payment revenue up 16% in the second quarter. Even with take rate dilution ahead of volume growth, volume growth was 14% in the second quarter. That also reflects both strong volume growth but also good growth in liquidity revenue. As you've consistently seen with the payment business, strong top line drops through to the bottom line. Faster bottom line, high profitability, and faster profitability growth, up 19% in the second quarter of the year and up 20% for the first half of the year. Moving on to marketplace, again, marketplace demand overall remains very strong and consistent, up 35% year on year in the second quarter, up 36% year on year for the first half.

GMV growth is lower than volume growth, although we did hold Jooma in the second quarter and it was successful overall in the second quarter. Number one, we ran fewer promotional campaigns and number two, as Mikheil talked about, declining smartphone sales, down 17% year on year in the second quarter, that impacts GMV. It doesn't really impact volumes to the same extent. Smartphones are a higher ticket item, so it's more apparent at the GMV level. Despite that, strong take rate improvement being driven as usual by advertising revenue, delivery revenue, and revenue from classifieds, take rate moving up 70 basis points year on year in both the second quarter and in the first half of the year. That will feed through to faster revenue growth.

If you break it down by the respective marketplace segments, decent e-commerce GMV growth, up 22% year on year in the second quarter, up 23% year on year in the first half. If you exclude the smartphone category, e-commerce growth in the second quarter would have been up 31% year on year. Take rate moving up 120 bps in the second quarter and 130 basis points improvement year on year for the first half. Pretty decent take rate expansion. M-commerce slower growth. Also just like e-commerce impacted by smartphones, but also M-commerce is being impacted by the structural trend of offline merchants moving to online. The beauty of our business model is we capture both and M-commerce. Actually, that relationship with the offline merchants is a source of competitive advantage relative to online-only merchants.

Solid growth and solid take rate trends around 9% in both the second quarter and first half of the year. Travel continues to deliver good results. GMV growth up 16% in the second quarter, up 19% year on year in the first half of the year, helped still by international tours that we launched approximately 18 months to two years ago, and international tours also contribute, drive that take rate expansion here also. 50 bps of take rate expansion year on year in the second quarter and 60 bps in the first half of the year. We'd expect international tours to remain growth and take rate additive in the second half of the year, and we'd expect domestic tours Mikheil just talked about them to increasingly kick in as well over the next 12 months. A decent outlook for travel.

Speaker 1

With.

Speaker 4

Take rate moving up. Revenue growth is ahead of GMV growth. Revenue growth for Marketplace was up 25% year on year in the second quarter versus the GMV growth I showed you of up 15%, and for the first half up 29% versus GMV growth of 17%. Overall, pretty healthy revenue growth expansion for Marketplace and also decent bottom line growth, up 13% and 16% year on year in the second quarter and first half, respectively. Albeit that ongoing trend of e-Grocery grows in the mix, that is a lower margin business, but overall a good result for Marketplace. Finally, in Kazakhstan, fintech origination remains pretty healthy, up 17% year on year in both the second quarter and the first half of the year.

As you've consistently seen over the last couple of years, that origination growth is being driven first and foremost by our merchant and micro business finance products. They grow at a faster rate, continue to grow at a faster rate than our consumer lending products. The average loan portfolio saw strong growth, up 33% year on year in both periods. This is a lead indicator for future revenue growth and stable pricing trends, flat year on year in both the second quarter and the first half. The deposit price is also now starting to see decent growth of 18% year on year in the second quarter, 19% year on year in the first half. What you see here is that we raised rates in April and started to promote the new deposit products more widely.

Month on month trends in the deposit base have started to improve, with June seeing the strongest month on month growth year to date, human deposits being at their highest level year to date. The trend is now moving in the direction that we wanted to see. It is good for the future that that is coming through. The healthy deposit growth risk trends remain stable, flat year on year, cost of risk 0.6% in the second quarter of the year, and NPL trends have moved up slightly but not materially and would expect them to remain at around these levels or somewhere between where they were at the end of last year and current levels for the remainder of the year. The lower coverage reflects the growth in the car loan product, which is a collateralized product and therefore requires lower coverage.

That has been a trend over the last 12 months as the car loan product has scaled. Decent fintech origination and stable pricing trends have translated into healthy revenue growth. Up 21% year on year in the second quarter, up 19% year on year in the first half of the year. Higher interest rates have impacted bottom line growth as we indicated they would at the time of our first quarter results. You see that up 8% in the second quarter and for the first half of the year. The deposits are delivering what they're expected to do. They will help us capture more transactions or fund more transactions in the future, and if rates move down, fintech will be a dramatic beneficiary. Profitability will be a dramatic beneficiary of that. That wraps up the Kazakhstan side of the business.

Moving to Hepsiburada in Turkey, just to remind people, Hepsiburada published its financial results on Thursday of last week. Its detailed financials are available on the Hepsiburada investor relations website. What is clear in the second quarter is a much better performance versus the first quarter of the year. Here you see that volumes moved back into positive territory, up 7% year on year in the second quarter versus down 2% year on year for the first half. The combination of growing volumes and mid single digit ticket expansion translated into decent GMV growth, up 16% in the second quarter versus down 1% for the first half of the year. This GMV growth is in real terms, is inflation adjusted, and overall is a reflection of recovery in the retail environment post March. Number one, company specific initiatives.

Number two, particularly in the 1P side of their business, which grew faster than 3P during the quarter, and also favorable base effect. Second quarter of last year or first quarter and second quarter of last year were impacted by the timing of the election. The first quarter of last year was a strong, tough base with good and improving revenue growth, up 23%, helped by growth in 1P and helped by delivery initiatives, helped by the growth of the delivery platform. That translated into faster bottom line or faster EBITDA growth, up 42% in the second quarter, which is illustrative of the actual strong sort of operational gearing that exists in this business and can be seen as the revenue growth comes through and improves. Net income was negative, underlying sort of losses declined, was small and declined materially year on year.

243 million lira in the second quarter, an improvement versus a loss of 434 million in the second quarter of last year. That's only around $6 million. There are also some one offs related both to credit provisioning. This is related to Hepsiburada's existing credit products. This should not be confused with our planned acquisition of a banking license in Turkey and the products that we will launch in the future. That acquisition is still on track to complete in the second half, so it reflects existing product set and also one-offs primarily related to Hepsiburada International, but overall good underlying trends in all aspects of Hepsiburada's business in the second quarter of the year.

For Kaspi.kz, the second quarter was exactly as we expected it to be, trends in line with our full year guidance and also actually with Hepsiburada moving as we expected it to be, and its loss is ultimately small in the context of Kaspi.kz, number one, and small in the context of the opportunity that exists in Turkey. Finally, guidance in Kazakhstan reiterated the third quarter has started well and we are on track exactly where we expect to be. Just to clarify on capital returns, as you know, we have always had and we continue to have an extremely cash generative business in our core market. We told you that this year was about making investments in international Turkey to ensure strong future growth for many years to come. We've made good progress completing the final acquisition of Hepsiburada. The final payment was made in June.

We're on track to close the banking license acquisition in the second half of this year. As we move into 2026, we expect to be able to once again have capital returns to our shareholders in much the same way as was the case between 2020 and prior to the Hepsiburada acquisition. Capital returns can include both dividends and buybacks with a decision being made at the appropriate time. That's it on Kazakhstan and Turkey. I think with that we can open the call up to Q and A.

Speaker 5

Thank you for our Q and A. If you would like to ask a question, please press the raise hand icon found on your screen if you're in a call via Zoom. If you're joining us on the phone, please press star 1 on your telephone keypad. When preparing to ask a question, please ensure your line is unmuted locally. We'll pause for a moment to allow questions to register. Our first question comes from Wayne Tran with Citi. Your line is open. Please go ahead.

Hey guys, this is Wayne on Freegal rooting. I just wanted to ask about what you're working on in terms of product improvements at Kaspi.kz. Could you highlight to us which ones are the most important and what we should expect as we progress through 2025 and 2026?

Speaker 4

Mikheil, do you want to provide a bit of color on some of the projects that are ongoing at Kaspi, please?

Speaker 1

Sure. In general, I would say that our strategy is to introduce quite a lot of products which we have in our core market. Initial focus or the priority is still to make sure that existing customers and merchants are extremely happy with the current services. Just to remind everyone, our business model and our execution skills are really based on ability to innovate at unprecedented rates. If you look at the history of Kaspi.kz and the things we have innovated around in a marketplace or fintech or the payments area, in order for that strategy to be successful, it's super important that your current customers and merchants are extremely, extremely happy. I'm not saying just like happy, like for any ordinary business, but really happy. That is a foundation of the future success.

Therefore, at the moment, the main focus is really to make sure that the existing services provided specifically through e-commerce business and the payments and fintech to a certain extent, even though it's really small, those are brought to the level of Kaspi.kz standards. There are multiple projects which teams are running and there is everything starting from the delivery to user experience and the fintech products. This year, as I've mentioned on the previous call, is really the quality and just bring those services to the level which is required by the desire to innovate. All next services being a very high adoption. The current performance is very encouraging. That results from some of the projects which have been already implemented or are in the process of being implemented and giving very successful results. You can see that in the growth acceleration in the second Q.

We really are focused on the quality rather than the quantity still this year. Main priority again is core business which is e-commerce and all the services around the e-commerce and then, yeah, the rest fintech side of things is the, you know, the major innovations will be coming when we complete acquiring the banking license.

Got it, thank you.

Maybe a second one for me is how are you thinking about your growth initiatives in Kazakhstan, the opportunities that remain there, and how should we think about the progression of the restaurant business and maybe any other verticals you should consider?

The growth in Kazakhstan is, the market is still underpenetrated and you can see, for example, the specific verticals we really showed, like clothing and fashion, growing at very high rates. I think it's, what is it, around 60% or something we've showed. There is growth and we are executing the strategy which is going after specific verticals. Again, this is something which we've already done before and also articulated. e-Grocery is a strategy around specific vertical buying. e-Grocery is different from buying electronics and travel. It's a strategy around specific verticals. The same now we're doing pretty much in all major verticals and restaurants is one of those. It's a major vertical in the household spending. We've just launched a very simple sort of functionality which brings immediate value.

In our estimate, in general, every vertical we're entering has to be in the range of a billion dollar size market potential. The same was with travel, the same was with grocery. It really applies pretty much to all major verticals. If we take a vertical-specific strategy, that scale betters, frequency of transactions matters. This is how we are picking those verticals to deliver the value. Again, we're working on both sides always. Our business is to connect merchants and the buyers, sellers and the buyers, restaurants and their customers, and our consumers from the mobile applications. Our technology enables us to connect them, deliver the value, and then on top of it we can start bringing up some additional value-added services. In e-commerce, value-added services are around advertising, for example, and the same opportunities exist in restaurants.

We've just really started, we're rolling out scale, this infrastructure of scan and pay and leave the tip. Of course, in the future some other added value services will come together with the restaurants. I mean, I wouldn't be really saying to you anything new, but the things which are related around in other businesses in the world exist around restaurants, right? Those are the reviews, those are the marketing campaigns, the loyalty programs, the cashbacks, and so on and so forth. There is a range of the services which we believe we can develop. Our priority is always we start simple, we deliver immediate value, we get sort of the scale, and then we start innovating by value added services when both merchants and consumers are extremely happy with our base value proposition.

It's exactly the same strategy with the restaurants, exactly the same strategy with the marketplace, exactly the same strategy with the grocery, exactly the same strategy in Hepsiburada. We are really taking our time to make sure that our current offering delivers value, delivers the excitement to consumers and merchants. We build with our strategy, then it becomes let's build on this and let's start this wave of innovations. That's what we have done historically successfully. This is the playbook which we employ always in every single time.

All right, great, thank you Mikheil and David, thank you.

Speaker 4

Thanks Wayne.

Speaker 5

We now turn to Gabor Kemeny. Please state your company name and proceed with your question.

Speaker 0

Hi there, this is Gabor from Autonomous. I had a few questions on, firstly, on fintech. I believe your funding costs increased as you expected, relatively significantly in Q2, maybe at 13%, 14%, the blended average. Can you help us think about the outlook here? How do you expect your funding costs to develop if rates stay where they are? My other question would be on asset quality. I noticed the uptick in the NPI ratio and that your quarterly provisions seem to imply a 2.5% provisioning rate. I believe you formally guided for 2%. Just some color on how you think about asset quality going forward. Finally, on your comment on a balanced capital deployment from next year between cash and, or like, distribution and investments. Can you help us scale the investments in Turkey beyond the banking business, the $300 million you indicated?

In relation to that, given the stock's valuation, at what valuation levels would you say that you rather allocate a substantial part or most of your free cash generation to share buybacks? Thank you.

Speaker 4

All right, Gabor, I can make a few comments on that. Cost of deposit funding increased 70, I think 70 bps year on year in the second quarter. The second quarter pretty much reflects the full impact. That is, we raised rates not on the 1st of April but very, very early in the quarter and the new products are out there. Between that and around a sort of 100 bps level is probably a reasonable expectation in terms of how the cost of funding increases over the course of the year. That's on your first question and that's actually consistent. We said that at the first quarter results. On the second question on cost of risk, what you should remember is in the first quarter we did put through additional macro provisioning related to higher interest rates. That's sort of separate from underlying risk, underlying risk trends.

What we actually see are stable year on year. Let's see if that macro provisioning is needed. That's on that. On the third question from my side, I would just say, the bank acquisition is happening, so that needs to come complete in the second and that's a call on capital. That decision has been made and it's fundamentally important and it's actually a major competitive advantage to secure a banking license within such a short period of time, I think going into 2026. The point is that we're very, very fortunate that we have this massively cash generative business in our home market and nothing has changed in that regard. I set a decision around sort of mix between, if there is a mix between dividends and buybacks, we make that at the appropriate time. That's true.

I think it would be fair to say today if we were making that decision today, there's an incredibly strong case for share buybacks and I doubt we would see any push from anyone on this call around that. We'll make that call at the end of next year. End of this year. Beginning of next year.

Speaker 0

Okay, thank you.

Speaker 5

We now turn to Darrin Peller with Wolfe Research, your line is open. Please go ahead.

Guys.

Speaker 6

Thanks. Just real quickly, I mean, the smartphone impact, I know you called out the actual quantitative impact in the quarter. Number one, do you feel like the progress you're making on certain partners is going to help stabilize that, and should we just expect that to be something that anniversaries in a couple more quarters, or is it a gradual impact that progresses in any way? When thinking about the marketplace segment, I know you talked about less promotions around Jooma. Just curious what the dynamic was, the thought process was there, and putting it all together. I mean, sustainable growth, you have some puts and takes this quarter. Sustainable growth, you have a lot of drivers that are being innovated right now that you talked about before.

Help us understand your updated and latest thoughts on the recent growth trends, how you think about that segment over the next year or two, just given what's really in front of you going forward.

Thank you.

Speaker 4

Do you want to take that, Mikheil, on this? Smartphones and promotional.

Speaker 5

Yeah, sure.

Speaker 1

I mean, Darrin, in general, thank you for your question. In general, I would say we did. We are trying to sort of explain, you know, just showing the growth in other verticals. Right. As we've explained, the growth in e-commerce without smartphones is 31%. It's really healthy sort of growth rates. For example, clothing and the beauty are growing around 60% year over year. I think it's a good indication of the potential really of the marketplace business and this and the smartphones, the projections for what's going to the smartphones. I mean, we haven't been really in similar situations before. The only thing we are doing is doing what, what you know, can bring the results and what we can ourselves control. What we are developing is a service which, develop the service which gives comfort and peace of mind to both merchants and the consumer.

Demand for the smartphones, for example, is there. It will have to be satisfied at some point. I think we are doing the services which will enable to sort of, you know, cross this obstacle or doubt that consumers and merchants currently have around these devices. We just believe on our side that this demand will have to be satisfied eventually. That's basically where we are in terms of the smartphones and we are doing our part of the job. We're not over promising anything. What we're saying is we look at the consumers, this is our job is to understand the merchants and consumers because this is where our expertise is. They do see the obstacle in their purchase decision.

We have developed the service which will enable them to overcome this hesitation to acquire smartphones and hopefully the market, you know, the trends will recover because again, there is a demand. Nothing happened really with the demand. This is the obstacle which was created with the introduction of requirement to register the smartphones. Again, if you take the smartphones separately, you can see that the growth even in electronics, excluding the smartphones, growth on our platform is 26%, home and garden and furniture 35%, clothing 54%. Those verticals are growing really at the very healthy rates. Therefore, on our hand, we just believe that demand is there, it will recover and we just need to do our job.

Our job is to enable transaction between sellers and our partner merchants and the customers, consumers and enable this transaction through the technology which we know how to develop and the tools of data which we know how to use to help both parties. That's what we're doing.

Speaker 6

I was touching on Jooma, also your decision there, and the sustainable growth rates there, and just real quickly, profitability on fintech also and how we should think about that platform now with rates where they are, where they're likely. Just given your success on deposit rates and deposits in general, I'll leave it there. Thanks guys.

Speaker 1

I think the basic sort of observation there is quite simple. If we're in a high interest rate environment, we have to take this as an opportunity to acquire more customers with the savings and build up these capacities because customers with the savings are the most valuable customers really for any of our products. Yeah, we are in a high interest environment. I am not a macro person, so this is not my specialty to explain. Our job is when we see this environment, we take most of it and interest rates eventually will go down. The way we sort of look at this in our business is that there are high interest rates which evaluate our interest expenses. This is almost like the cushion on the expenses side and eventually it will go down.

As we're focused on a very healthy user base, as we're focused on healthy risk metrics on the fintech side, eventually profitability will follow because the top line is there and the risk is world class and interest rate eventually will go down and therefore this will flow to our bottom line.

Speaker 5

We now turn to Reggie Smith with JPMorgan. Your line is open. Please go ahead.

Thanks for taking the question. I guess I just wanted to clarify the comments around the dividend and share repurchase potential. It sounds like you guys have some capital commitments on the bank licensing side this year. As we think about 2026, can we assume a similar, I guess, return of capital ratio? I think it was like 60% in 2024. Should we assume that going forward? I know you said, you suggested that I guess you would resume a similar type cadence, but I'm just curious about the ratio, recognizing that there may be some investment in Turkey. Should we think about it being in the same range as 2024 across dividends and share repurchases or something less than that?

Speaker 1

Thank you, Rich, for your question. I think that, basically, from our perspective, we mentioned always that we'll be prioritizing the investment for the further growth, and that's a very exciting opportunity because we're building business for many years in front of us and we have this internal ambition, as we mentioned, that we would like to be a company of 100 million users. That's what is on our minds and that's very important. We have to keep that in mind. At the same time, what we're also saying is this year has been an extensive year for investments. The size of investments that we have done are quite substantial. When we go into the next year, there will be a balance between our ability to distribute capital to our shareholders either through the dividends and the buybacks and investments.

Investments will be important, but we're lucky to have a very profitable and cash generative core business. That's what allows us to think in those terms for next year. Whether specific payout ratio or anything like this, at this stage, it's quite early to have those specific discussions and we'll make those decisions as we go forward.

Speaker 4

I just sort of.

Yeah, that makes sense. Then thinking about, just.

To add to that, Reggie, just one point. There will be investments, and there always has been investments. You should keep that in mind. e-Grocery has been a massive investment. The largest poster map network in the country in Kazakhstan has been a massive investment. The business has the potential to achieve a balance, make investments, and return capital.

Got it? Understood. Just thinking about the banking license, does this put you on par with competitors there or does it kind of extend or create a gap where you'll have capabilities that some of your competitors in Turkey won't have? Finally, as I think about the investments, obviously capital for the banking piece would be one. What do investments look like? Is it rewards to consumers? Maybe talk a little bit about the nature of what investment looks like in Turkey. Thank you.

Speaker 1

I mean in general I would say that the license, obtaining the license is a very important step for a very simple reason. The license really gives you an operation that can offer products to consumers and the merchants, both on the saving side or on the lending side. That's basically what a license really allows you to do. At the same time I would say that, if you think about Kaspi.kz, the way we really operate, we're focused on the quality of the services we provide and we're focused to the lesser extent on competition. From our perspective I think the products, and the services and the expertise we have on the fintech side is world class and the products that we have which can be introduced in Turkey is also.

From that perspective, once we get the license, I wouldn't expect quick wins, you know, you never saw from us. That would be. We always like to discuss the results and actual trends when we do something rather than just tell you about some ideas which we have been working for three or six months in a pipeline. We always do something and then we tell you the initial encouraging results and how this is going to evolve. Step number one, get the banking license. Step number two, just put the framework to launch the innovative financial services for consumers and merchants. We just believe that we can make a difference in the consumers and merchants lives just because the services we have are technology and machine learning, AI driven and they're really, really improving everyday life of our customers and merchants and their needs.

That's basically so building up the bank, of course it also requires our diligence with the compliance, risk management and all other requirements which we have a lot of experience in. That obviously also requires from us to be very detail oriented and execution driven. Once we get the license again, we'll be introducing and launching the services which are, which services which you already guys know on the Kaspi.kz side for a long time.

Speaker 5

We now turn to Cihan Saraoglu with HSBC. Your line is open. Please go ahead. Hello.

Speaker 2

Thank you very much for this call and presentation. I have two quick questions. One is, in the past you used to distribute dividends or announced buybacks on a quarterly basis. Based on your comments about resumption of dividends in 2026, shall we expect dividends to start in 1Q26 or is that just a broad guidance? That's one. Second question is about fintech bottom line, which on a Q on Q basis seems to have grown despite the increase in funding costs. Could you explain what mitigated the increase in funding costs beyond volume growth there? Thank you.

Speaker 1

Okay, so on the. Thank you for your question on the dividends or buybacks, basically returning the capital. I think as we said there is not much really to add. We can't really commit to you at this stage on quarterly or semi annually or whatever. We were just saying that we have a very good solid cash generated business and there is the next year we'll be finding the balance between the investments and distributing capital to our shareholders. I mean everybody should also keep in mind that I'm shareholder in the company and I'm making decisions based on what is going to bring the most value to the company and its shareholders long term. I am, you know, investing alongside with other shareholders. In terms of the question about the fintech business, I think we did mention this before. Exactly what happened.

The volumes increase with the volume increase, revenue increase with the revenue increase, profits increase. The revenues just picked up in the second half, in the second quarter of this year. I think we did have a discussion in the first Q about it and volumes are nice and therefore the profitability is following on the fintech side. Profitability would be growing much faster if interest rate environment would be, you know, interest rates will be, will be smaller. Therefore we're focused on the top line and the bottom line we follow in the future has been our strategy always.

Speaker 2

Thank you.

Speaker 5

That's all the time we have for Q&A today, and I'll hand back to David Ferguson for any final remarks.

Speaker 4

Okay, thanks Elliot. We've got to wrap things up now. We have another meeting starting shortly. Thanks a lot for everyone's time today. Please feel free to get in touch if you have any questions. Thank you. Have a great summer and we'll speak to you at our Q3 results. Thanks everyone.

Speaker 1

Thank you, everyone. Have a good week.

Speaker 5

Thank you everyone. This concludes today's webinar. You may now disconnect from the call.