Q1 2025 Kaspi.kz AO Earnings Call
Maxine: I will now hand you over to David Ferguson, Head of Investor Relations at KaspiKz to begin. David, please go ahead. Great. Thank you, Maxine. Good afternoon. Good morning to everyone. Thanks a lot for joining us for our first quarter 2025 financial results. I'm David Ferguson.
Star one on your testing he passed I'm in a country that you David Paterson head of Investor relations across the Taser to begin David. Please go ahead.
David Ferguson: Alright. Thank you Maxime good afternoon, good morning to everyone. Thanks, a lot for joining us for our first quarter 2025 financial results I'm, David Ferguson I'm joined as usual by Mccallum Tulsa.
David Ferguson: I'm joined, as usual, by Mikhail Lomtadze, our CEO and co-founder, Yuri Dedenko and Tengiz Mesitsi, our deputy CFOs, deputy CEOs. So, Mikhail, we'll take you through the strategic update. I'll run you through the operational performance in the first quarter. I'll do that quickly and then spend a bit more time on the guidance for the remainder of the year. There's a couple of moving parts to discuss, and then we'll open up the call for Q&A.
Speaker Change: And co founder you already Danko in Tengiz Ms Etsy.
Speaker Change: Deputy CFO.
Speaker Change: Deputy CEO.
Speaker Change: Alright.
So Macau will take you through the strategic update I'll run you through the operational performance in the first quarter I'll do that quickly and then spend a bit more time on the guidance for the remainder of the.
Speaker Change: The year is a couple of moving parts to discuss and then we'll open up the call for Q&A. So on that note I'll hand, it over to Macau Macau over to you. Thank you.
David Ferguson: So, on that note, I'll hand it over to Mikhail. Mikhail, over to you.
Mikhail Lomtadze: Hello, everyone. So let's just go through our first few. performance. In general, we had a good first few. The company itself, it's performing at the levels which we expected broadly within our expectations. The payments continue the strong growth, revenues plus 16% and income 21%. The marketplace in the first group grew 20% year-over-year and the revenue 33%, net income 19%. And the fintech origination volumes grew 17%, 18% revenue, 8% net income. The monthly transactions have been strong and we continue to have a very engaged consumer base and the revenue plus 21%, net income plus 16%. The overall, the company's underlying performance is broadly within our expectations.
Speaker Change: Hello, everyone. So, let's just go through our first U.
Performance.
Speaker Change: In general we have the good.
Speaker Change: Good for scale the company.
Speaker Change: It's performing at the level of switch.
Speaker Change: We'd expected broadly within our.
Speaker Change: Spectation the payments.
Speaker Change: We'll continue the strong growth.
Speaker Change: It was plus 16.
Speaker Change: <unk> net income 21% of the marketplace and the first through growth grew 20% year.
Year over year, and the revenue project, 3% net income.
Speaker Change: 19%.
Speaker Change: And the Fintech origination volumes.
Speaker Change: It grew 17%, 18% revenue, 8% net income the monthly transactions have been.
Speaker Change: Strong clip and we continue to have.
Speaker Change: Very engaged consumer base and the revenue plus 21% net income plus 16%, but overall.
Speaker Change: The Companys underlying performance is broadly within our <unk>.
Speaker Change: Expectations.
Mikhail Lomtadze: It could have been better on the GNV side. There was a requirement to register smartphones, which was introduced in Kazakhstan and that had a quite significant, you know, temporary impact on the demand for smartphones.
Speaker Change: It could have been better.
Speaker Change: On the G&P side.
Speaker Change: There was.
Speaker Change: Requirements for registered smartphones, which was introduced in Kazakhstan and that had that.
Speaker Change: Quite significant.
Temporary impact on the demand for smartphones.
Mikhail Lomtadze: And then on the fintech side, you know, we see. The continuous high interest rate environment, which again, will continue probably through this year. And we are here also introducing higher interest new deposit products, which I will talk a bit as well.
Speaker Change: And then on the Fintech side, we see.
Speaker Change: The continuous high interest rate environment.
Speaker Change: Which again will continue probably through this year.
And we are here and also introducing.
Speaker Change: Higher interest.
Speaker Change: Deposit products, which I'll talk a bit.
Mikhail Lomtadze: So next slide, David, please. So the e-grocery, e-grocery, this is the business which we have started one of, you know, the fastest growing business. In our e-commerce, we continue scaling fast and expect to continue strong growth through the year. The active consumers reached almost 1 million, the GD&E 64% up year over year, and then the purchases are 66% up year over year with 3.3 million purchases in the first queue.
Speaker Change: As well so next slide 30. Please so the grocery grocery this is the business, which we have.
Speaker Change: Started one of the fastest growing business.
Speaker Change: In our E Commerce, we continue scaling.
Our fast and expect to continue strong growth through the year that give consumers reached almost $1 million.
Speaker Change: Of the G N V 64% up.
Speaker Change: It'll be a year and then.
Speaker Change: The purchases are 66% up year over year with a one.
Speaker Change: One 3 million.
Mikhail Lomtadze: As you know, we are operating in the three cities, three largest cities now, and we are planning to enter another two cities. So the team continues to execute on the grocery, and you see the average ticket is very good, stable. And yeah, we just continue scaling across the country with the Simultaneously, as you know, Kaspi is very good at continuously build from an operational side, but also scale. And we are entering the new cities to support the growth and we expect Ygal Arounian to continue scaling fast through the year.
Speaker Change: Purchases in the first Q.
Speaker Change: As you know we are operating in the pretty significant obviously it is now.
Speaker Change: And we are planning to enter.
Speaker Change: Other two.
Speaker Change: So the team continues to execute.
On the grocery and Youll see that average ticket is.
Speaker Change: Very good stable and.
Speaker Change: Yeah, we'll just continue scaling across the country with the.
Speaker Change: Simultaneously as you know coffee is very good at continuously but from an operational side, but also scale and we're entering the new cities to support the growth and we expect <unk> to continue scaling faster.
Mikhail Lomtadze: new term deposits that we have launched for consumers. Those deposits are aiming at a higher interest rate. Our interest rate environment has been, you know, basically due to all sorts of factors which have nothing to do with Kaspi itself. We are in the high interest environment and there is a demand for deposits which on the one hand have high interest, on the other hand those deposits are for sort of savings where you can top up deposits basically any time but the term of deposit is actually fixed to the three or six months. The deposits itself have been very successful on the market.
Speaker Change: Our new term deposits that we have launched four for consumers.
Speaker Change: Those deposits are aiming at a higher interest rate.
Speaker Change: Our interest rate.
Speaker Change: Environment.
Speaker Change: Has been.
Speaker Change: Basically do though.
All sorts of factors, which have nothing to do with the with coffee itself. We are in the high interest environment.
Speaker Change: And there is a demand for deposits.
Speaker Change: Which on the one hand have high interest another pad.
Speaker Change: Those deposits are for sort of savings.
Speaker Change: Where do you can talk of deposit basically any time, but the term of deposit is actually fixed so the three or six months the deposits itself had been.
Mikhail Lomtadze: As you can see, we went from basically nothing to 84,000 consumers and almost 379 billion in tenge of those deposits. So, they're growing fast. There is a demand for those deposits and therefore this product has been quite successful and we will be, as you know, the strategy we have always had historically is those are the best consumers that are saving with you and in the future they're making purchases through all our other services and therefore investing into the acquiring the consumer deposits and the consumers with the deposits have been part of our historical strategy always.
Speaker Change: We had a successful in the market as you can see we went from basically nothing.
Speaker Change: So.
Speaker Change: 84000 consumers.
Speaker Change: Almost.
Speaker Change: 379 billion in tenge.
Speaker Change: Deposit so it's been there growing fast there is a demand for for those deposits and therefore this product has been quite successful and we will be you know as you know the strategy, we have always had historically.
Speaker Change: As those of the best consumers that are saving with you and in the future and they are making purchases.
Speaker Change: Through all of our other services and therefore investing into the.
Speaker Change: Acquiring the consumer deposits and the consumers with the deposits have been part of the product.
Speaker Change: Vertical strategy always.
Mikhail Lomtadze: Again, in the future, interest rates will go down and therefore there is additional opportunity for the profitability. At this stage, we are in the high interest environment, therefore we're taking advantage of this as well.
Speaker Change: Again in the future interest rates will go down and therefore, there is additional opportunity for the.
Speaker Change: For the profitability at this stage, we are in the high interest environment. Therefore, we're taking advantage of this as well.
Mikhail Lomtadze: We have been going through the different deposit terms upgrades. So this is just a bit of a timeline for you guys to understand. So for example, we did reduce the deposit in February of 24 from 14 to 15%, but then in 25, we do have a high interest environment. So we have introduced six math maturity deposits at 17%. Then we have increased the rate on all our current deposits from 14 to 15%. And then we introduced the three math maturity deposits at 18% interest rate. The way that we work with our consumers, for example, when we increase the rate of the existing deposit from 14 to 15%, we reprice our entire portfolio.
We have been <unk>.
Speaker Change: Going through the different.
Speaker Change: Deposit terms upgrades. So this is just a bit of a timeline.
Speaker Change: Do you guys to understand so for example.
Speaker Change: We did reduce the deposit did February of 'twenty four.
Speaker Change: For 2014% to 15%, but then quantified.
Speaker Change: We do have a high interest environment. So we've introduced six month maturity deposits at 17% than we have increased the <unk>.
Speaker Change: All of our current deposits from <unk>.
Speaker Change: <unk> thousand 14% to 15% and then we introduced the three months' maturity deposits at 18% interest rate.
Speaker Change: The way that we work with our consumers for example, when we introduce when we increase the rate of the existing deposit from 14% to 15%, we repriced our in charter portfolio. So.
Mikhail Lomtadze: So That's the way our products work. And we have been doing this consistently for as long as we had basically deposit products. So that's something you should keep in mind. As soon as we increase the interest rate, we reprice our entire portfolio. So when we went from 14% to 15%, we therefore repriced the existing portfolio of our Kaspi deposit. And now the fastest growing are the ones which offer the higher interest rate of 18 and 17%.
Speaker Change: That's the way our products work and we have been doing this consistently for.
Speaker Change: Sure.
Speaker Change: As long as we had basically deposit products. So that's something you should keep in mind as soon as we increase the interest rate what are your price our entire portfolio. So when we went from 14% to 15% with therefore reprice.
Speaker Change: The existing portfolio of our customer deposit.
Speaker Change: And now the fastest growing deposits are the ones, which offer them the higher interest rate of 18% 17%.
Mikhail Lomtadze: A couple of other things, we have raised Eurobonds, this is our first Eurobond, which we have successfully raised 650 million at 6.250%, which is due in 2030. Again, this was for us an opportunity to build a track record with the fixed income investors.
Speaker Change: Couple of other things we have raised bumps.
Speaker Change: This is our first euro bonds, which we have successfully raised $650 million.
Speaker Change: At a six point.
Speaker Change: So, 50%, which is due in 2000.
Sorry.
Speaker Change: Again this was for us.
Speaker Change: An opportunity to build a track record with <unk>.
With the fixed income investors.
Mikhail Lomtadze: And this is the first Euro bond we have done. And yeah, considering our strategy for international expansion and investments in Turkey more specifically, it's good to be in a position of the financial strength. So that's good to build a track record, but also specifically, that transaction was successful in our view.
Speaker Change: The first your first our euro bonds, we have done.
Speaker Change: And yet considering.
Speaker Change: Our strategy for international expansion.
Speaker Change: And and investments and took care of more specifically.
Speaker Change: It's good to be in a position of financial strength. So.
Speaker Change: That's that's a good to build a track record, but also the specifically that transaction was successful.
Mikhail Lomtadze: Eurobond Fundraising. We have also signed the agreement to acquire RubberBank and this is a fully licensed bank. which doesn't really have any customers and doesn't have a branch network. And this enables us to, you know, continue developing a fintech product in Turkey. And also our initial plan is that we'll invest roughly around $300 million in 2025 to fund our fintech strategy in Turkey.
Speaker Change: Euro Bond fund raising.
Speaker Change: We have also signed a.
Speaker Change: The agreement to acquire a rubber band.
Speaker Change: <unk>.
Speaker Change: This is a fully licensed bank.
Speaker Change: Which doesn't really have any.
Speaker Change: Customers and it doesn't have a branch network.
Speaker Change: And this enables us to.
Speaker Change: Continue developing a fintech products and they took it.
Speaker Change: And also our isn't.
Speaker Change: Initial plan is that we will invest roughly around $300 million in 2025 to fund our fintech strategy and took him.
David Ferguson: So David, I'm back to you, just to go through the platforms. Yeah, sure. So thank you, Mikhail. So firstly, on the payments platform, pretty straightforward, decent volume growth of 17% year-on-year, faster TPV growth of 23% year-on-year. That is a function of higher ticket size, higher inflation. All three of the core payment products are contributing to that, KaspiPay, bill payments, and B2B payments, with B2B payments growing and expected to continue growing at a faster rate than overall TPV. Take rate moves down to 1.13%. That is consistent with the trend over the last 12 to 18 months and is simply a function of mix change, namely B2B payments and KaspiPay QR growing in share within the mix.
Speaker Change: So there is that back to you just to go through the platforms.
Speaker Change: Yeah sure. So thank you Macau, so firstly on the payments platform pretty straightforward decent.
Speaker Change: Decent volume growth of 17% year on year.
Speaker Change: Mr TPB growth of 23% year on year.
Speaker Change: That is a function of higher ticket size higher inflation.
Speaker Change: All three of our core payment products are all contributing to that Kathy type Bill.
Speaker Change: Bill payments.
Speaker Change: <unk> payments with PCB payments.
Speaker Change: Growing and expect it to continue growing at a faster rate than overall PPE they take.
Speaker Change: Take rate moves down to 113% that is consistent with the trend over the last 12 to 18 months is simply a function of mix change, namely <unk> payments and Kathy page you are growing in share within that that the mix.
David Ferguson: In terms of the financials TPV growth. with some yield compression results in 16% revenue growth versus 23% TPV growth. There is slower revenue growth on interest balances. Average current account balances increased 8% year on year, but overall 16% is decent. And then as you've consistently seen with payments business, the combination of tight cost control and its inherent operational gearing ensures that strong top line drops through at a faster rate to the bottom line, 21% bottom line growth.
Speaker Change: In terms of the financials.
Speaker Change: CTV growth.
Speaker Change: With some yield compression results in 16% revenue growth that is 23% CTV growth.
Speaker Change: There is a slower revenue growth on interest balances average current account balances increased 8% year on year, but overall, 16% is decent and then as you've consistently seen with payments business. The combination of tight cost control and its inherent operational gear.
Speaker Change: And shows the strong topline drops through at a faster rate to the bottom line, 21% bottom line growth outlook for payments highly predictable.
David Ferguson: Outlook for payments, highly predictable, healthy and unchanged versus when we updated the market at the end of February.
Okay.
Speaker Change: Unchanged fastest when we updated the market at the end of February.
David Ferguson: Moving on to Marketplace. Marketplace remains the fastest-growing top-line platform. GMB growth up 20% year-on-year in the first quarter. Supported by purchases of over 36% year-on-year. E-commerce and e-grocery particularly playing the part. But actually again, just like with payments, all three services, e-commerce, m-commerce and travel are contributing to growth. Tape rate moves up, a continuation also of a theme you've seen over the last couple of years driven by value-added services. take rate accretion will ensure that fast GMB growth crops through to the revenue at a faster rate. Specifically on e-commerce, e-commerce increased 20, e-commerce GMV increased 23% year on year on the back of purchases of 97% year on year.
Speaker Change: Moving on to marketplace marketplace remains the same.
Speaker Change: It's just growing top line platform.
Speaker Change: GMB growth of 20% year on year in the first quarter.
Speaker Change: Supported by patches of SaaS.
Speaker Change: <unk>, 6% year on year.
Speaker Change: E Comm assignee grocery, particularly playing.
Speaker Change: But actually again, just like with the payments all three services E Commerce and commerce and travel.
Speaker Change: <unk> to growth.
Speaker Change: Hey price moves.
Speaker Change: <unk> also have a theme you've seen over the last couple of years driven by value added services.
Speaker Change: I'll take rate accretion will ensure that.
Speaker Change: Fast GMB growth drop sheets that revenue at a faster rate.
Speaker Change: Specifically on E Commerce E Commerce increased 20 E Commerce <unk> increased 23%.
Speaker Change: One year on the back of purchases of 97% year on year grocery.
David Ferguson: Grocery, the main driver of that growth, that high number of growth in purchases.
Speaker Change: The main driver of that growth that high number growth in purchases.
David Ferguson: As Mikhail talked about, however, in March of the year, the Kazakh government introduced requirements around the registration for smartphones imported into the country. a number of reasons for this but one being to ensure the correct These duties are paid by importers and merchants, and what that meant is a sharp increase in prices on smartphones countrywide. at a fall-off in demand in the final month of the quarter. Smartphones are an important GMB category for e-commerce. They account for around 18% of e-commerce. And we estimate the impact of the fall-off in demand in March knocked around 7 percentage points off growth.
Speaker Change: As <unk> talked about how about back in March of the year, the Kazakh government introduced.
Speaker Change: Requirements around the registration for smartphones imported into the country.
Speaker Change: A number of reasons for this one being to ensure the correct.
Speaker Change: <unk> all paid by importers and matches on what that meant is a sharp increase in prices on smartphones countrywide.
Speaker Change: I had a falloff in demand in the final month quarter.
Speaker Change: Smartphones are an important GMB category for e-commerce, they account for around 18% of E Commerce, and we estimate the impact of the falloff in demand in March knocked around seven percentage points of growth so that 23% GNP program.
David Ferguson: So that 23% GMB growth would have been around 30% You can expect this to remain a theme in the second quarter of the year, but the good news is that this will be temporary. Once this is sort of worked through, demand for smartphones in Kazakhstan is not going to change, and actually it's perfectly possible you see some catch-up effect in the second half of the year. Moving on to M-Commerce, M-Commerce also delivers decent growth, GMB up 17%. Take rate accretion in M-Commerce is less than for E-Commerce. E-Commerce is the beneficiary of value added, the main beneficiary of value added services, advertising, delivery, and classifieds.
Speaker Change: Would have been around 30%.
Speaker Change: You can expect this to remain a theme in the second quarter of the year.
Speaker Change: The good news is that this will be temporary once this is sort of WAC through demand for smartphones and Kazakhstan as is not going to change and actually it's perfectly possible you see some catch up effect in the second half of the.
Speaker Change: For the year.
Speaker Change: Moving onto and Commerce and Commerce also delivered decent growth GMB up 17% take trades accretion in M. Commerce is less than <unk> E. Commerce E Commerce is the beneficiary.
Speaker Change: <unk> vasculitis, the main beneficiary of value added services advertising the deliberate.
David Ferguson: So E-Commerce take rate moved up to 12.5%, 140 bits. M-Commerce take rate moved up 20 bits. M-Commerce growth also impacted by the slowdown in smartphone sales in March, but to a much lesser extent than E-Commerce. Kaspi Travel continues to deliver good, healthy results. GMB up 22%. Strong growth across the board, but again, Tours do it, which we introduced around 12 to 18 months ago, delivering really decent GMV performance and now up to 11% of travel GMV from zero just 18 months ago and driving the increase in take rate here. So take rate moves up to 5.3% from 4.5%.
Speaker Change: On classifieds, so e-commerce take rates moved up to 12.5%.
Speaker Change: 140 bps and commerce take rates moved up 20 bps M. Commerce growth also impacted by the slowdown in smartphone sales in March but to a much lesser extent the down economy.
Speaker Change: E Commerce.
Speaker Change: Kathy travel continues to deliver good healthy results.
Speaker Change: Results GMB.
Speaker Change: <unk> of 22%.
Speaker Change: Strong growth across the board, but again.
Speaker Change: <unk>, which we introduced around 12 to 18 months ago, delivering really decent GMB performance and now up to 11% of travel.
Speaker Change: <unk> from zero, just 18 months ago and driving the increase in take rate here, So take rate moves up to five 3% from four 5%.
David Ferguson: further innovations planned in travel over the course of the year. In terms of the financials for marketplace Fast GMB growth but with take rate expansion in all three platforms translates into faster revenue growth of 33% year-on-year that's versus the 20% GMB growth. Profit growth is lower and that again is consistent with trends over the last two years and is primarily a function of growth in e-grocery.
Speaker Change: Further innovations planned in travel over the course of the.
Speaker Change: Yes.
Speaker Change: In terms of the financials.
Speaker Change: Marketplace.
Speaker Change: Fast GMB growth bolt with take rate expansion in all three platforms translates into faster revenue growth of 33% year on year, that's a assets the 20%.
Speaker Change: <unk> growth.
Speaker Change: The growth is lower and that again is consistent with trends over the last two years. It is primarily a function of growth.
Speaker Change: In.
David Ferguson: The other point to call out here is that going forward it is possible that some large ticket size discretionary transactions which would be largely weighted towards e-commerce are impacted by broader macroeconomic uncertainty. So categories to call out would be categories like consumer electronics and cars. Keep in mind that a category like cars one transaction makes a material contribution to GMV but a negligible contribution to the bottom line. We can come back to that later on.
Speaker Change: At E grocery.
Speaker Change: The other point to call out here is that going forward it.
Speaker Change: It is possible that some large ticket size discretionary transactions, which would be largely weighted towards E. Commerce are impacted by broader macroeconomic on SaaS and take so categories to call out would be categories like consumer electronics and in cost keep in mind that a category like <unk>.
Speaker Change: <unk>, one transaction makes a material contribution to GMP, but a negligible contribution to the bottom line.
Speaker Change: <unk>, we can come back to that later later on.
David Ferguson: Finally, moving on to the FinTech platform. Decent marketplace growth translates into decent TFV origination as has been the case over the last couple of years. The growth has been primarily being driven on the merchant side of the equation rather than on the consumer side of the equation. Again that should be a theme that replicates, it continues to be seen going forward.
Speaker Change: Finally, moving on to the Fintech.
Speaker Change: Sure.
Decent.
Marketplace growth translate into decent TSV origination assets.
As has been the case over the last couple of years. The growth is primarily driven on the <unk> side of the equation rather than on the consumer side of the equation.
Speaker Change: Again, it should be a theme that rep cases continues to be seen going forward.
David Ferguson: On the balance sheet side of things for the last two and a half years you've seen the loan portfolio grow at a faster rate than the deposit portfolio that will now switch around the other way. The loan to deposit ratio is high and just as you saw in 2022 will take advantage of a high interest rate environment to once again focus on growing the deposit base as Mikhail talked about the logic being more deposits will drive more future transactions and will give us more funding which again will drive more future transactions on the marketplace business.
Speaker Change: On the balance sheet side of things for the last two and a half year you can see in the loan portfolio grow at a faster rate than the deposit.
Speaker Change: Not we'll now switch round the other way the loan to deposit ratio is high and just as you saw in 2022, we'll take advantage of the high interest rate environment to once again focus.
Speaker Change: All growing.
Speaker Change: Deposit base as Macau talked about the logic being more deposits will drive more future transactions and will give us more funding, which again will drive more future transactions.
David Ferguson: Pricing trends in fintech stable year on year. Cost of risk in the quarter increased to 0.6% from 0.5%. The increase was primarily due to macro provisioning, and that macro provisioning is related to the sharp increase in interest rates in the first quarter. Underlying credit trends remain unchanged. And for the year, we expect a cost of risk to remain stable. Therefore, cost of risk was a drag on FinTech profitability in the first quarter, but over the course of the year, again, we expect stable trends. The increase in the NPL ratio versus the end of the year is normal Q1 seasonality.
Speaker Change: Marketplace business pricing trends in Fintech stable year on year.
Speaker Change: Yeah.
Speaker Change: Cost of risk in the quarter increased to <unk>, 6% from no 0.5%. The increase was primarily due to macro provisioning in that macro provisioning is related to the sharp increase in.
Speaker Change: And interest rates in the past quarter.
Speaker Change: Underlying credit trends remain unchanged for the year, we expect our cost of risk to remain stable. Therefore cost of risk was a drag on fintech profitability.
Speaker Change: In the first quarter, but over the course of the year again, we expect stable trends.
Speaker Change: The increase in the NPL ratio of assets at the end of the year is normal Q1 seasonality.
David Ferguson: Actually, if you look back on the last, the Q1 conference calls over the last couple of years, you'll see a similar pattern. Q1 NPLs move up and then they typically move down, again, in the second quarter related to seasonality. So decent TFB growth over the last 18 months has translated into decent revenue growth, up 18%. Higher cost of risk, muted net income growth in the first quarter, up 8%. But again, we expect cost of risk to be flat over the course of the year. Although as Mikhail has talked about, higher funding costs now will be a theme as we grow the absolute number of deposits and the cost of those deposits has increased materially.
Speaker Change: Really if you look back on the last the Q1 conference calls over the last couple of years, you'll see a similar pattern Q1, Mpls moved up and then they typically move down again in the second quarter related to seasonality.
Speaker Change: So decent TSB growth over the last 18 months has translated into decent revenue growth of 18% higher cost of risk you said net income growth in the first quarter of 8%, but again, we expect cost of risk to be flat over the course of the.
Speaker Change: Yeah, although as Macau as talked about higher funding costs now will be a theme as we grow the absolute number of deposits on the cost of those deposits has increased entirely you should keep in mind that we came into this year with interest rates at 14% across the portfolio and within a couple of months the top at the latest.
David Ferguson: You should keep in mind that we came into this year with interest rates at 14% across the portfolio. And within a couple of months, the latest product has rates of 18%. That's a substantial increase in costs in a short period of time. But we see it again as an investment in the business, assuming we successfully attract deposits over the remainder of the year.
Speaker Change: Success rates of 18%, that's a substantial increase in costs in a short period of time, but we see again as an investment in the business, assuming we are successfully attract deposits over the remainder.
Speaker Change: The year.
David Ferguson: Moving on to Hepsi Verada, their first quarter results were published at the close of market on Thursday of last week. You can refer to their disclosures for a detailed update. On the revenue side of things, we'd just say make the main call out would be the politically driven consumer boycotts in March did materially impact GMV trends. That also meant that the company pulled back on performance marketing initiatives, which again, exasperated the negative revenue momentum in the quarter.
Marotta: Moving on to Hep C marotta.
Speaker Change: First quarter results were published.
Marotta: At the close of market on Thursday.
Marotta: Last week, you can refer to the disclosures for a detailed update on the revenue side of things. We just St make the main call out would be the.
Marotta: Politically driven consumer boycott in March did materially impact <unk> trends that also meant that the company pulled back on its marketing performance marketing initiatives, which again.
Marotta: Oscar I said.
Marotta: The revenue.
Marotta: Negative revenue momentum in the quarter.
David Ferguson: On the cost side of things, the combination therefore of negative operational gearing, number one, and growth in loan loss provisions, number two, resulted in a net loss of 355 million Turkish Lira. Around 40% of that loss is coming from higher loan loss provisions. That is perfectly normal in the context of early-stage fintech products. You're testing your risk, you're experimenting with different risk models, so higher provisioning is a normal consequence of that, number one. And number two, just to avoid sort of any confusion here, these sort of loan products.
Marotta: On the cost side of things the combination therefore, RF negative operational gearing number one.
Marotta: And growth in loan loss provisions number two resulted in a net loss of $355 million Turkish lira around 40% of that loss is coming from higher loan loss provisions.
Speaker Change: That is perfectly normal in the context of early stage Fintech products Youre testing your risk.
Marotta: Experimented with different risk models the high provisioning.
Marotta: As a normal consequence of that number one and number two just to avoid any confusion here.
David Ferguson: should not be confused with what Kaspi is doing with its bank acquisition in Turkey. This relates to product initiatives that were started in HepsiBorada last year and have been part of its strategy over the last couple of years.
Marotta: Loan products.
Marotta: Not be.
Marotta: Confused with what <unk> is doing.
Marotta: But its bank acquisition in Turkey. This relates to the product initiatives that started in <unk> last year and have been part of its strategy over the last couple of years.
David Ferguson: So for Kaspi. Despite the impact of lower smartphone sales in March, and despite higher macro provisioning in the first quarter, the first quarter results were broadly where we expected them to be. Revenue up 21%, net income up 16% year on year. If you X out the impact of the macro provisioning, net income would have been up around 19% year on year.
Marotta: Yeah.
Marotta: So cafe.
Marotta: Despite the impact of lower smartphone sales in March.
Marotta: Despite.
Marotta: Higher macro provisioning in the first quarter. The first quarter results were broadly where we expected them to date revenue of 21% net income up 16% year on year, if you X out the impact of the macro provisioning net income would have been up around 19% year on year. These numbers.
David Ferguson: These numbers exclude Turkey. including Turkey revenue increased to 834 billion tenge net income loss was 200 net income was 254 billion profit the loss from Turkey was equivalent to six billion tenge so around sort of two percent dilution so a small negative impact from Turkey and particularly small in the context of Caspian relative to the long-term opportunity that Turkey offers.
Marotta: Exclude tacky.
Marotta: Including Tennessee revenue increased to 834.
Marotta: Billion Tenge net income loss was two net income was 254 billion profit the loss from tax heat was equivalent to six.
Marotta: At 10 gate, so around sort of 2% dilution, so a small negative impact from tax and particularly small in the context of Caspian relative to the long term opportunity that tacky office.
David Ferguson: So moving on to the guidance. GMV growth moves to 15% to 20% from 25% to 30% previously.
Marotta: So moving on to the guidance.
Marotta: ANV growth moves to 15% to 20% from 25% to 30% previously so number one that is a function of the new roles rules for imported smartphones and at higher prices in the short term and temporarily lower demand, but again this should be a short term effect that should work.
David Ferguson: So number one, that is a function of the new rules for imported smartphones. They meant higher prices in the short term and temporarily lower demand. But again, this should be a short-term effect that should work itself out in the second half of the year and into the following year.
Marotta: Somehow in the second half of the year and into the following year.
David Ferguson: Secondly, increased macro uncertainty and the potential for that to impact higher ticket verticals. I gave the example of cars, average ticket size for one car transaction $10,000 versus average ticket size for an e-commerce transaction $30. So you can see there how that vertical can have a disproportionate impact on GMB, but almost no impact on the bottom line.
Marotta: Secondly, increased macro uncertainty and the potential for that to impact a higher ticket verticals. I gave the example of cost average ticket size for long car transaction $10000 versus average ticket size for an E. Commerce transaction $30. So you can see that how that vertical can have a disproportionate.
Marotta: Impact on GMB, but almost no impact on the bottom line not changing outlook should not be confused with the change in outlook.
David Ferguson: That changing outlook should not be confused with a changing outlook for core 3P marketplace business beyond the point we've made on smartphones. TPV outlook unchanged, TFV growth of around 15% at the lower end of the range, given previously at 15 to 20%. Again, that just reflects slower marketplace growth.
Marotta: <unk> three P marketplace business beyond the point, we've made on smartphones.
Marotta: Tpa outlook unchanged TSV growth of around 15% at the lower end of the range given previously of 15% to 20% and again that just reflects slower marketplace growth.
David Ferguson: There's a couple of other factors to point out. Number one, higher interest rates. We've talked about it before. That in itself is probably the sort of biggest drag on earnings. But again, just to reiterate, whilst that is a headwind in the near term, interest rates in Kazakhstan are extremely high. And over the medium term, that should turn into an important tailwind for the business, number one. Number two, we expect the Kazakh government to introduce a 10% tax on revenue from investment, primarily in government securities. We expect this to be applied to interest revenue for the whole of 2025 at 10 percent, number one, and number two, we expect the government to increase national bank reserves from the summer of this year.
Marotta: Theres a couple of other factors to point out.
Number one.
Marotta: Interest rates, we've talked about it before that in itself is probably the sort of biggest drag on earnings but again just to reiterate while fast is a headwind in the near term interest rates in Kazakhstan are extremely high over the medium term that should turn into an import.
Marotta: Yeah.
Marotta: Tailwind for the business number one number two we expect the Kazakh government to introduce a 10% tax on revenue from investments primarily in government securities.
Marotta: We expect this to be applied to interest revenue for the whole of 2025 that 10% number one and number two we expect the government to increase National Bank Reserve from summer of this year. Both of these two factors are still to be confirmed but we can there is a high.
David Ferguson: Both of these two factors are still to be confirmed, but we think there is a high probability and hence we include them in our guidance today. The combined effect of those two factors will be around approximately 200 bits of net income this year.
Marotta: Probability and hence we include them.
Marotta: Our guidance today the.
Marotta: The combined effect of those two.
Factors will be around 200, approximately 200 bps of net income this year. So there's a number of moving parts of the question is is the guidance conservative what we tried to definitely reflect these different scenarios in the updated.
David Ferguson: So there's a number of moving parts. If the question is, is the guidance conservative? Well, we try to definitely reflect these different scenarios in the updated guidance to the best extent that we can.
Marotta: Our guidance to the best extent.
Marotta: We can.
David Ferguson: On that note, we'll open the call up to Q&A. Thank you.
Marotta: On that note, we'll open the call.
Marotta: Q&A.
Maxine: If you would like to ask a question, please press the raise hand icon on your screen if you've joined the call via Zoom. If you've joined us on the phone, please press star 1 on your telephone keypad now. While I'm preparing to ask your question, please ensure that your line is unmuted locally.
Marotta: Okay Alright.
Marotta: Thanks, Ross your question personally hand icon on your screen during the <unk>.
Marotta: He is joined US on the phone. Please press star one on your kind of thank you Pat now.
Speaker Change: Brian Ross Your question comes from Sean the airline company you're talking about.
Ygal Arounian: Our first question comes from Ygal Arounian. Please state your company name and proceed with your question. Hey, guys. Good morning, Drakun. Ygal Arounian from Citi. Maybe just on the macro, because I have a couple of factors, if you could expand on the macro uncertainty in Kazakhstan, is that driven just by the higher interest rates? Or are there more things you're seeing there, if you could help us kind of understand the framework, what's going on there? And then in Turkey, too, with the boycotts, does that change your – I know it's not going to change your long-term outlook, but your near-term outlook for the integration, your expectations around what you can do in Turkey.
Marotta: Okay.
Speaker Change: Our first question comes from Gal Iranian Please state your company name and proceed with your question.
Speaker Change: Hey, guys good morning.
Speaker Change: Good afternoon.
Speaker Change: Okay.
Speaker Change: Iranian from Citi.
Speaker Change: Maybe just on the macro because I have a couple of factors.
Speaker Change: If you could expand on the macro uncertainty and Kazakhstan.
Speaker Change: Driven just by the higher interest rates or are there more things you're seeing there. If you could help us kind of understand the framework that's going on there and then in Turkey to with.
Speaker Change: The boycott.
Speaker Change: Changed.
Speaker Change: You're I know, it's on a change your long term outlook, but your near term outlook for the integration here your expectations around what you can do in Turkey with up to kind of get a sense on that level. Thanks.
Ygal Arounian: We'd love to kind of get a sense on that level.
David Ferguson: All right, Ygal, so thanks for your questions. So on macro, I guess there's a couple of things you could sort of point to, but I think let's just keep it simple. Lower oil price can translate into slower GDP growth, number one. Volatility in commodity prices can translate into currency, volatility, and increased uncertainty, number two. Again, I wouldn't over-exaggerate this. I mentioned earlier, we expect payment trends to be resilient throughout the year. Payment trends are indicative of spending in the economy. But some high-ticket discretionary transactions, which would be weighted to marketplace and could disproportionately impact GMB, could be impacted to some extent.
Speaker Change: Alright, Yigal so thanks for your question.
Speaker Change: Question, So on macro I guess Theres a couple of things you could point to but I think let's just keep it simple.
Speaker Change: Lower oil price can translate into slower GDP growth number one volatility.
Speaker Change: Commodity prices can translate into currency volatility and increased on SaaS can take number number two.
Speaker Change: Again, I wouldn't over exaggerate. This I mentioned earlier, we expect payment trends to be resilience throughout the year payment trends are indicative of spending in the economy, but some high ticket discretionary transactions, which would be weighted to the marketplace and could disproportionately impact GMB.
Speaker Change: Could be impacted to some extent and we're choosing to take a conservative approach.
David Ferguson: And we're choosing to take a conservative approach. The third area, currency weakness, translates into inflation and higher interest rates, which we've talked about. And that is a pressure on earnings in the near term. So there are a number of different moving parts. They create some more uncertainty at the margin. We're taking a conservative approach. But again, overall, the outlook for this year remains robust and decent.
Speaker Change: The third area of currency weakness translates into inflation.
Speaker Change: And higher interest rates, which we've talked about what that is.
Speaker Change: Pressure on earnings in the near term. So there are a number of different moving parts there.
Speaker Change: Right.
Speaker Change: More uncertainty at the margin, we're taking a conservative approach, but again overall the outlook for this year remains where both stand.
Mikhail Lomtadze: On Turkey, simple answer for me is no, but I don't know if Mikhail has anything to add. Yeah, I mean, in terms of our plants, does it have any impact? Again, whoever has been following the Kaspi and the way we sort of work, I think it's all about quality of the products, quality of the consumer and the merchant experience. And that's what is important for the long-term success. Again, it's not about competition. It's really about delivering the super quality products and the services to the customers. And that has been our most important strategic priority always in our operation.
Speaker Change: And decent.
Speaker Change: On tacky simple answer from me is note, but and out of Macau has anything to add to that.
Jeff: Jeff I mean.
In terms of our in terms of our plants.
Jeff: But has that.
Jeff: It doesn't have any.
Jeff: It would have any impact.
Jeff: Again.
Jeff: Whoever has been.
Jeff: Who has been following the call.
The way, we sort of work.
Jeff: I think it's all about.
Jeff: Quality of the product quality of the consumer and the merchant experience and Thats what is.
Jeff: Important so for the long term success.
Jeff: Again, it's not about.
Jeff: Competition, it's not.
Jeff: It's really about delivering the right.
Jeff: Super.
Jeff: All of the products the services to come.
Jeff: And that has been our.
Jeff: Most important strategic priority always.
Mikhail Lomtadze: That remains our focus.
Jeff: Our operation so.
Jeff: That remains our focus.
Mikhail Lomtadze: Okay, thanks.
Mikhail Lomtadze: Just to follow up then on Turkey and the Bravo Bank acquisition, talk about a little bit more of the early steps there, building out the Fintech platform, you know, how much progress have you made, maybe an update on timeline products as you roll that out. Thank you so much. At this stage, we are still in the process of getting the approval for the acquisition. So that will happen probably sometime in the second half of the year. And therefore, that's basically the most important immediate step for us, you know, to put it in simple words, you know, a license to launch the products on the market.
Jeff: Okay. Thanks.
Speaker Change: Just a follow up then on Turkey, and the Bravo Bank.
Speaker Change: Acquisition and talk about a little bit more of the early steps there in building out the <unk>.
Speaker Change: The Fintech platform.
Speaker Change: How much progress have you made maybe an update on timelines products.
Speaker Change: As you roll that out thank you so much.
Speaker Change: Oh.
Speaker Change: Stage, we are still in the process of a dividend.
Speaker Change: The approval for the acquisition so that will happen.
Speaker Change: Probably sometime in the second half of the year.
Speaker Change: Uh huh.
Speaker Change: And therefore, thats basically the most important immediate.
Speaker Change: Step for us.
Speaker Change: So put it into simple words.
Speaker Change: The license to.
Mikhail Lomtadze: But we do see a lot of opportunities in the digital and online services. So as soon as we have approval, then we'll start, you know, yeah, we'll start introducing some of the Fintech products. Go on to the... the market in Turkey, but we're really excited about the things that we could do and how we can Uh, we can take, uh... Feedback and financial services to another level.
Speaker Change: To launch the products on the market, we do see a lot of.
Speaker Change: <unk> is in the digital and online services.
Speaker Change: So as soon as we have approval in there.
Speaker Change: Then we will start.
Speaker Change: Yes, we will start introducing some of the fintech products.
Speaker Change: On to the.
Speaker Change: So the market in Tokyo.
Speaker Change: We're really excited about the things that we could.
Speaker Change: Couldnt do it how we can.
Speaker Change: While we can take.
Speaker Change: Fintech and financial services to another level.
Mikhail Lomtadze: Great, thanks so much. Thank you.
Speaker Change: Great. Thanks, so much.
Darren Peller: The next question comes from Darren Peller from Wolves Research. Please go ahead Darren, your line is now open. Thanks, guys. Can we just start off by going a little further into those one-time factors impacting guidance one more time? I mean, I think the interest rate on security is just, is that a one-year item? Just trying to figure out the timing of that. And even on the smartphone dynamic, if you could explain a little bit more of what exactly happened, how you estimate it's impacting your numbers. And then putting those aside, what you see as marketplace normalized growth right now, if you were to pull out some of the factors on the macro front that you're just referring to now.
Speaker Change: The next question comes from Darrin Peller from Wolfe Research. Please go ahead Allen Your line is now open.
Speaker Change: Okay.
Speaker Change: Thanks, guys can we just start off by going a little further into those onetime factors impacting guidance one more time.
Speaker Change: I think the interest rate on securities is that is that a one year item just trying to figure out the timing of that and you've been on the smartphone dynamics. If you could explain a little bit more of whats got what exactly happened.
Speaker Change: We estimate it's impacting your numbers.
Speaker Change: And then when putting.
Speaker Change: Putting those aside.
Speaker Change: What you see as marketplace normalized growth right now.
Speaker Change: If you were to pull out some of the factors on the macro front that you're referring to are now thank you.
Darren Peller: Thank you. Yeah, Darren, so a couple of things.
Speaker Change: Yeah, Darren so a couple of things so our access to let's say the smartphone law. So this is <unk>.
David Ferguson: So all right, firstly, let's do the smartphone one. So this is ruling that came into place in March. um it relates to the import of all devices smartphone devices into the country um the the unique code within the device needs to be registered with the authorities i mean this is actually quite common all around the the world there's different reasons for this security being one to ensure the relevant sort of import duties are paid number two amongst other factors and what that has meant is that over across the country the price of smartphones increased number one and demand temporarily fell off.
Speaker Change: <unk> that came into place in March.
Speaker Change: It relates to the import of all devices smartphone devices into the country.
Speaker Change: The unique code within the device needs to be registered.
Speaker Change: With your authorities and then this is actually quite common all around the world is different reasons for their security being.
Speaker Change: <unk>.
Speaker Change: To ensure the relevant sort of import duties paid number two amongst other factors.
Speaker Change: And what that has meant is that across the country. The.
Speaker Change: The price of smartphones increased number one and demand temporarily fell off we saw this quite dramatically.
David Ferguson: We saw this quite dramatically in our numbers in March and you can expect that to continue in Q2. It will work its way through relatively quickly. It's a short-term price adjustment to the market. Nothing has changed in Kazakhstan with regards to people's use of smartphones and so on. So demand should normalise. in the second half of the year, as I mentioned, there could also be some sort of catch-up effect there.
Speaker Change: In our numbers.
Speaker Change: In March.
Speaker Change: And you can expect that to continue.
Speaker Change: In Q2.
Speaker Change: Will work its way through relatively quickly with a I guess a price adjustment of short time price adjustments to the margin nothing kit to the market nothing has changed in Kazakhstan with regards to People's use of smartphones.
Speaker Change: And so on.
Speaker Change: So demand should normalize.
Speaker Change: In the second half of the year as I mentioned on that could also be some further.
David Ferguson: You asked about normalized rate. Well, I would take the normalized rate. You asked how we can quantify it. Well, we know the size of smartphones as a category within e-commerce. I said it's about 18% of e-commerce GMB. We saw the impact in March. So I'd say normalized e-commerce growth rate is around 30% if you adjust for that factor versus the 20%, I think, 3% that we reported in the quarter. So that's sort of one-off.
Speaker Change: Sure.
Speaker Change: Fact that you asked about normalized rate, while I wouldn't I would take the normalized rate you asked how we can quantify it we know the size of smartphones as a category within E Comm as I said, it's about 18%.
Speaker Change: E Commerce <unk>, we saw the impact in March so I'd say normalized e-commerce growth rate is around 30% if you adjust for that.
Speaker Change: The vessels to 20, I think 3% that we reported in the quarter. So that's sort of one off.
David Ferguson: think the second is interest rates. I mean, that is actually the biggest sort of drag higher interest rates. saw that the central bank we came into we sort of if you think back sort of six to seven months ago just as the trend globally rates were expected to move down uh inflation started to wobble central bank moved rates up in December and then again moved them up sharply in March of this year higher national bank rates to combat inflation translating to higher deposit rates uh for for for us but again while this isn't one-off the good news here is that well I don't wouldn't want to speculate on whether interest rates have peaked but they are incredibly high at the moment and there is a material drag on earnings in the near term it's not unreasonable over the medium term to think about rates normalizing if you think back to sort of pre-2022 rates were sub 10% so there's a big change in uh So what is for 2025 headwind does have the potential to be a tailwind over the medium term, although the timing Difficult to predict.
Speaker Change:
Speaker Change: I think the second is interest rates I mean that is actually the biggest sort of drag higher interest rates.
Speaker Change: So the central Bank, we came into we sort of if you think back to sort of six to seven months ago just.
Speaker Change: Trend globally.
Speaker Change: The rates are expected to move down.
Inflation started to wobble Central Bank moved rates in December and then again move to more sharply in March of this year higher national bank rates to combat inflation translates into higher deposit rates for for us, but again office isn't one off the good news here is that.
Speaker Change: Well I don't wouldn't want to speculate on whether interest rates have peaked but they are incredibly high at the moment and there is a material drag on earnings in the near term, it's not unreasonable over the medium time to think about rates normalizing. If you think back to sort of pre 2022 rates.
Speaker Change: So 10% so it's a big big change in costs.
Speaker Change: So what is for 2025 of headwind does have the potential to be a tailwind.
Speaker Change: Medium term, although the timing.
David Ferguson: On the 10% tax that's likely to be introduced for liquidity revenue, no, that's not one-off. You should assume that that stays in place going forward. It's not actually material for us. There's other banks in Kazakhstan that have a much larger share of their P&L that comes from investment activities. We're a transaction-based business. What are the margin it makes an impact, same also for national bank, higher potential reserve requirements. It's not huge for us, but again, at the margin, it makes a difference. I talked about sort of those two factors knocking around 2% off growth. So there is a number of different moving parts.
Speaker Change: But to predict.
Speaker Change: On the 10% tax that's likely to be introduced for liquidity revenue now.
Speaker Change: That's not one off.
Speaker Change: You should assume that that stays in place going forward.
Speaker Change: Actually material for.
Speaker Change: Those are the banks in Kazakhstan that have a much larger share of that P&L that comes from from investment activities. We're a transaction based business.
Speaker Change: What at the margin. It makes an impact same also for National Bank high potential reserve requirements.
Speaker Change: Huge.
Speaker Change: But again at the margin.
Speaker Change: That makes a difference that talked about sort of those two factors knocking around 2% of growth. So there is a number of different things.
David Ferguson: We've tried to sort of put them all together here and reflected in the guidance and hopefully we've done that correctly.
Speaker Change: March we tried to sort of put them all to it.
Speaker Change: Together here and reflected in the guidance and hopefully hopefully we've done not correctly.
David Ferguson: All right, that's very helpful, David.
Darren Peller: Mikhail, just a quick follow-up would be on the payment side.
David Ferguson: Alright, that's very helpful. David.
Mikhail Lomtadze: When I think of the underlying growth rate and I see the B2B side in particular or bill payment, maybe just break down the key drivers you're seeing more versus less strength than right now affected by macro perhaps, but on the payment side of the business, if you were to break it down a little bit more on what you're seeing more granularly. And Mikhail, that question was to you. Yeah, sure. I mean, on the payment side... You know, at this at this stage, I mean, it's it's I mean, our payments business, it's really all about, you know, enabling the money and the purchasing and the transactions and the payment.
David Ferguson: A quick follow up would be on the payment side, when I think of the underlying growth rate and I see the <unk> side in particular or bill payment, maybe just break down the key drivers youre seeing more versus less strength in right now.
David Ferguson: Affected by macro perhaps but on the payment side of the business. If you were to break it down a little bit more on what youre seeing more granularly.
David Ferguson: And the caller question was here.
David Ferguson: Yeah.
David Ferguson: Yes sure.
David Ferguson: On the payment side.
David Ferguson: You know this at this stage I mean, it's I mean, our payments business, it's really all about.
David Ferguson: Enabling the all of the money in the purchasing and the transactions and the payment so.
Mikhail Lomtadze: So from that perspective, that is. You know, there is. you know less impact just because we are the drivers of the cashless transactions.
David Ferguson: From that perspective, there is a.
David Ferguson: There is.
David Ferguson: Less.
David Ferguson: Less impact.
David Ferguson: We are the drivers so for Tesla so transactions.
Mikhail Lomtadze: uh the b2b side uh that's something which has been historically growing fast just because of a low penetration but also the type of services that will launch when the payments can be processed between our merchants and distributors so from that perspective you know we feel like uh you know payments business is uh yeah it is in is in a good place and uh and also we constantly innovate around the payments uh as well this you know supporting the growth and b2b is really just one example of what we do.
David Ferguson: The <unk> side.
<unk>, which has been historical growing faster just because of our low penetration, but also the type of services that were launched.
David Ferguson: <unk> assembly process between our merchants and distributors so from that perspective, we feel like.
David Ferguson: Payments businesses.
Speaker Change: Yes. It is in is in a good place and.
Speaker Change: And also we'd constantly innovated around the payments.
Speaker Change: As well.
Speaker Change: Supporting the growth in <unk> is really just one example.
Speaker Change: No.
Speaker Change: Alright, thanks, guys.
Reggie Smith: Thank you. The next question comes from Reggie Smith from J.P. Morgan. Please go ahead, Reggie. Your line is now open. Hey, thanks for taking the question. I've had a follow up on the on the mobile phone things to make sure that I'm understanding it correctly. So as I understand it, like I guess the government is cracking down on counterfeit phones and like a quick search show that was suggested that, you know, as much as half of the phones brought into Kazakhstan or sold in Kazakhstan were, I guess, believed to be counterfeit. You talked about things improving in the back half.
Speaker Change: Thank you. The next question comes from that disconnect from Jpmorgan. Please go ahead Matthew your line is now.
Matthew: Hi, Thanks for taking the question I just had a follow up on the.
Speaker Change: On the mobile phone bank to make sure that I'm understanding that correctly.
Speaker Change: Okay.
Speaker Change: Randy I guess, the government is cracking down on counterfeits zones and like.
Speaker Change: A quick search so that when a suggested then.
Speaker Change: Half of the phone.
Brian: Brian into products that are sold in Kazakhstan.
Brian: Or I guess believed to be counterfeit you talked about things improving in the back half.
Reggie Smith: It sounds like it's a supply issue more so than a demand issue. Am I thinking about that correctly? Because if the issue is that there just aren't, I guess, legit phones coming in, like, how does that correct in the back half of the year? And then a second piece of that, was there any. signaling prior to the announcement that this could be coming down the pipe.
Brian: Got.
Brian: It sounds like there's a supply issue more so than a demand issue or am I thinking about that correctly.
Brian: Because if the issue is that there just aren't there.
Brian: Legit homes coming in.
Brian: Like how does that.
Brian: Correct in the back half of the year and then a second piece of that was there any <unk>.
Brian: Signaling prior to the announcement.
Brian: With you coming down.
Mikhail Lomtadze: And I guess finally, is there anything else that is going on in Kazakhstan that could potentially be a thing or an issue for you guys from a regulatory perspective that we may not be talking about or thinking about today? When I say we, I mean U.S. investors. Thank you. I mean, from my side, I wouldn't say it's a supply issue. Let's not sort of overcomplicate it. There's there's no reason why smartphones can't be imported to Kazakhstan. So it isn't a supply issue. Is.
Brian: The pipe.
Brian: And I guess finally is there anything else that is going on in Kazakhstan that could potentially.
Brian: The athene or an issue for you guys from a regulatory perspective that we may not be talking about or thinking about.
When I say, we I mean U S investors. Thank you.
Brian: I mean from my side I wouldn't say, it's a supply issue, let's not sort of.
Overcomplicated. This there's no reason why smartphones can't be imported.
Kazakhstan.
Brian: So it isn't a supply issue.
Mikhail Lomtadze: um devices are being imported the correct way it's just meant a sudden increase in prices it means the duties are being paid actually this is a good thing in the long run because you are um again just bringing more more transactions into the formal economy which of which we are uh a beneficiary of this is a blip that will work itself out in the next couple of months. But for any e-commerce business, whether you're in Kazakhstan or globally in the US, smartphones are just an important e-commerce category. So any sort of change in demand is hard to escape from, but it will work itself out.
Brian: Yes.
Brian:
Brian: <unk> are being imported the correct why it's just been a sudden increase in prices. It means the duties are being paid actually this is a good thing in the long run because you are.
Brian: Again, just bringing more more transactions into the formal economy.
Brian: Which of which we are a beneficiary of this is a blip that will work itself out.
Brian: In the next couple of months book by any E Commerce business, whether you are in Kazakhstan will globally.
Brian: In the U S and smartphones are just an important e-commerce category, so any sort of change in demand.
Brian: It's hard to escape from but it will work itself.
Mikhail Lomtadze: Mikhail, anything else on the... The coming down the pipe that we need to be aware of. Well, I mean we did mention about You know 10% tax on revenue from government security. So at the moment the tax is It is zero, which you know is unusual for many other markets so as part of the new tax code discussions, you know, the new tax of around 10% on revenue for government securities will be introduced. At least we think that it will be introduced. And yeah, I mean, nothing really else comes to my mind. I think we did discuss on a previous call that the bank tax also being discussed as a part of the new tax code that the bank Bank income tax will be raised from 20 to 25 percent and the banking is one of the businesses.
Brian: Ouch.
Brian: Hmm.
Brian: Anything else on the.
Speaker Change: The coming down the pipe that we need to be aware of.
Brian:
Brian: Well I mean, we did mentioned about.
Brian: 10% tax on revenue from government Securities are at the moment to Texas.
Brian: It is zero.
Brian: <unk>.
Brian: It's unusual for many other markets.
Brian: As part of the.
Brian: New Texaco discussions and other new types of around 10% and on revenue for government securities will be introduced.
Brian: At least we think that it will be introduced.
Brian: And yes.
Brian: Yes, I mean, nothing really else.
Brian: My mind I think we did discuss on a previous program.
Brian: The bank.
Brian: Thanks also being discussed as part of the.
Brian: The new textile.
Brian: <unk>.
Brian: Income taxes will be raised from 20% to 25%.
Mikhail Lomtadze: that we have, so yeah. I don't know. I don't think there is anything else at this stage that we believe or we think might have an impact. That's the correct way to think about it.
Brian: And the banking is one of the businesses.
We hope so.
Brian: Yes.
Brian: No I don't think there is anything else at this stage.
Brian: As we believe or we think might have.
Brian: Impact.
Got it that makes sense and then I guess just to follow up on the.
Brian: The mobile phone and maybe I'm thinking about this wrong.
I guess previously there was a large supply of cheaper mobile phones due to kind of fitting or whatever and that supply is going to go away and so now people are going to have to buy legitimate phones. It may be more expensive is that the right way to think about or how about oversimplified, it or am I missing something.
Brian: That's the correct way to think about it.
Reggie Smith: Yeah, we estimate that the price for mobile phones will go up. Got it. Perfect. Thank you. Thanks, Reggie.
Brian: Okay.
Brian: Yes.
Brian: The price for the mobile costs will go up.
Brian: Got it perfect. Thank you.
Brian: Yeah.
James Friedman: Maxine. Next question please. The next question comes from James Friedman. Please state your company name and proceed with your question. Hi, good evening. It's Jamie Friedman at Susquehanna.
Brian: Thanks, Rocky Maxine.
Speaker Change: Your next question comes from James Friedman. Please state your company name and proceed with your question.
Brian: Yeah.
Brian: Hi.
Brian: Good evening.
Brian: Jamie Friedman of Susquehanna.
James Friedman: In terms of the Rabobank acquisition and the overall banking strategy in Turkey, Mikhail, I'm just wondering how you would compare the opportunity there relative to Kazakhstan, how the strategy may be different as you go to market there versus in your home country, and what the $300 million investment is targeted to achieve to get you standing up there? Okay, well, I mean, we will be discussing the details, you know, in a due course. The one thing I can, I can, I can mention that The investment itself should... JSC – Should the transaction be improved is a combination of the funding, the product development, but also the capital, which any licensed bank needs a minimum capital to operate.
Brian:
Brian: In terms of the.
Brian: Rabobank.
Brian: Acquisition and the overall banking strategy in Turkey Mikael.
Speaker Change: I'm just wondering how you would compare the opportunities there relative to Kazakhstan.
Brian: What the how the strategy may be different as you go to market there.
There versus.
Speaker Change: In your home country, and what the $300 million investment as is targeted to.
Brian: To achieve to get us standing up there.
Brian: Okay, well I mean, we will be discussing the details.
Brian: In the due course.
Brian: The one thing I can.
Brian: Ken mentioned that.
Brian: The investment itself should the.
Brian: Sure.
Brian: Transaction.
Brian: <unk> is a combination of pumping.
Brian: Development, but also the.
Brian: Capital, which.
Mikhail Lomtadze: So, all those things will just, you know, give us an opportunity to innovate around the financial services. I wouldn't expect, you know, anything or major introduction of the new sort of services this year. The approval only itself will take us into the second half.
Brian: Blackstone Bank need some minimum capital to operate so all those things we'll just.
Give us an opportunity to innovate around the financial services I wouldn't expect.
Brian: Anything or major introduction of the new sort of services.
Brian: This year.
Brian: The approval itself will take us into the second half.
Mikhail Lomtadze: And and when you think about the financial services in general, it's important to have the very high quality product from the very beginning, because that's what you know builds up the loyalty and therefore you know we will be looking to launch uh uh not I mean not launch but basically just uh uh do you know we have already I think the world-class financial products in our in our mobile application so those are the things we'll look to. to launch, but I don't expect anything sort of major to happen this year because we need to complete.
Brian: And when you think about financial services.
Brian: In general it's important to have.
Brian: High quality product from the very beginning because that slipped.
Brian: The sub the loyalty and therefore, we will be looking to <unk>.
Brian: Uh huh.
Brian: But basically just.
Brian: Yes.
Brian: We have already there, but I think the world class financial products, and our and our mobile applications. So those are the things for.
Brian: To.
Brian: So launch, but I don't expect anything.
Brian: Sort of a major to happen this year, because we need to complete.
Mikhail Lomtadze: acquisition first, get approval, and then set up everything right for the long-term success. So we're not, we are not in a, we never, we never hurry to launch things. We want to make sure we get them right and perfect, especially in financial service. and in the lending business it's equally important to Get paid back when you originate. So originating, you either build the asset or you build the liability. So in our case, you need to build the whole process to make sure that the product is a very high quality. Kaspi has, but also the cost of risk, which we have historically around 2%, which is the world class, is really the important metrics for any lending operation.
Acquisition first.
Evan: Hello, Evan.
Brian: So it's up over to synchrony.
Brian: Orders for the long term success.
Brian: We're not we're not saying that whenever whenever products launched things, we want to make sure we get them Brighton and perfect, especially in financial services.
Brian: And then the limbic business, it's equally important to.
Brian: Get the payback.
Brian: Originate so originated thank you either build ASUR to redo the liability so in our case.
Brian: You need to build the whole process to make sure that the.
Brian: Our product is a very high quality of life.
Brian: Coffee has but also the cost of risk, which we have historical around 2%, which is the world class.
Brian: Is really the important metrics for SME lending operation.
Mikhail Lomtadze: Okay, thank you for that.
James Friedman: And then my follow up is with regard to the relative growth of 1P versus 3P. So in terms of what is embedded in the assumption for the guidance. David, I think you alluded to this in your prepared remarks. Yeah, how should we be thinking about that? Because that can have an impact on take rates, obviously, and margin 1P versus 3P assumptions as we travel through the cadence of the year. Thank you. Well, 1P is really just grocery, much less, to an extent, 1P cars. So 1P grocery, actually we pulled it out in the first quarter.
Speaker Change: Okay. Thank you for that and then my follow up is with regard to the relative growth of.
Brian: One P versus three P.
Speaker Change: So in terms of wood.
Speaker Change: Is embedded in the assumption for the guidance David I think you alluded to this in your prepared remarks.
Speaker Change: Yeah, how should we be thinking about that because that can have an impact on take rates, obviously and margin <unk> versus threep your assumptions as we travel through the cadence of the year. Thank you.
Speaker Change: Well <unk> is really just grocery gross rent to a much lesser extent lumpy costs.
Speaker Change: So one P grocery actually be pulled out in the first quarter.
David Ferguson: You saw very, very strong growth and I think you can expect it to continue to post numbers not dissimilar to what you've seen in the first quarter, which is fast and is faster than the 3P business. In response to we talked about 3P business normalised rate of growth in the first quarter around 30% versus e-grocery growing north of 50%.
Speaker Change: So very very strong growth and I think you can expect it to continue to post numbers not to similar to what you've seen in the past quarter.
Speaker Change: Which is faster than is faster than the the <unk> business in response to <unk> question, we talked about three P business normalized rates of growth in the first quarter around 30% versus E grocery growing north.
David Ferguson: The one sort of to flag, but again, let's not over-exaggerate it because in practice, it's non-core, is 1P cars.
Speaker Change: 50%.
Speaker Change: The one sort of.
Speaker Change: To fly again, let's not over exaggerated because in practice, it's noncore is lumpy costs.
David Ferguson: but one and three p cars but where it makes a difference to GMB again I make the point it's over a ten thousand dollar transaction versus a fifty dollar or thirty dollar transaction but the bottom line impact from that is is is very is is not material so don't confuse the GMB downgrade with an equivalent bottom line line downgrade you'll get to the wrong answer if you you you do Does that answer the question? Yeah, perfect. Thank you, David. Thank you.
Speaker Change:
Speaker Change: 103 P cards book.
Speaker Change: It makes a difference to GMB again, I made the point over $10000 transaction bass is a $50 a 30 dollar transaction, but the bottom line impact from that is is very is not material. So don't confuse the GMB downgrade within equivalent bottom line.
Speaker Change: Blind downgrade.
Speaker Change: We'll get to the wrong answer.
Speaker Change: If you you do.
Speaker Change: Does that answer the question, yes, perfect. Thank you David.
Speaker Change: Okay.
Neeraj Chandra: The next question comes from Neeraj Chandra. Please state your company name and proceed to do the question. Hey Miraj, can you hear us?
Speaker Change: Your next question comes from <unk> Chandra. Please state your company name and proceed with your question.
Speaker Change: Yeah.
Speaker Change: Hey, Raj can you hear us.
Neeraj Chandra: Are you on mute now, Neeraj? I think you're on mute, you're showing us on mute to me. Sorry Maxine, let's... Sorry about that David, I'll follow up with you guys afterwards. Apologies. Sorry Neeraj, we can hear you.
Speaker Change: Yeah.
Speaker Change: <unk> mutant <unk>.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: I think youre on mute you.
Speaker Change: Showing us on mute to me.
Speaker Change: Yeah.
Speaker Change: Alright, Maxine less if let's talk about that David I'll follow up with you guys afterwards apologize Andrew.
Neeraj Chandra: Do you want to ask a question?
Speaker Change: Hmm.
Maxine: I think we've lost him. Let's go to the next question, please.
John asked a question.
Speaker Change: I think we lost them less.
Gabor Kemeny: Yep, our next question is from Gabor Kemeny.
Speaker Change: Let's go to the next question.
Speaker Change: Question. Please and our next question is from Gabriel Khameni. Please state your company name and proceed with your question.
Gabor Kemeny: Please state your company name and proceed with your question. Hi there, this is Gabor from Autonomous. Thank you for taking my questions. Firstly on funding, can you help us scale how much more to come in terms of the increase in funding costs from higher deposit rates and possibly the change in the mix? So what do you pay on the back book and where do you see your incremental costs overall?
Cabo: And I ask this is cabo from autonomous Thank you for taking my questions Firstly on funding.
Speaker Change: Can you help us how much more.
Speaker Change: How much more to come in terms of the increase in funding costs.
Speaker Change: Higher deposit rates and possibly possibly the change in the mix. So what did you pay on the back book and where do you see your incremental bounce.
Gabor Kemeny: Secondly, on the pricing of your lending products, have you made changes there? I mean, I seem to recall you were pricing the buy now pay later in the mid-teens interest rates. Presumably you would consider making changes when your incremental deposits costed in the high teens.
Speaker Change: Overall, and secondly on the pricing of your lending products have you made changes there I mean I.
Speaker Change: I seem to recall you were facing the pricing the buy now pay later in the in the mid teens interest rates presumably.
Speaker Change: And you would consider making changes within your incremental deposit cost Linda in the high teens.
David Ferguson: And just finally on the Turkish lending products, Hepsi is experimenting with how comfortable are you with them, you know, introducing your new lending products when you are about to scale up the FinTech offering with a different franchise. Thank you. So Gabor, no change to pricing. Gross yield was flat year on year, 26%. Number one. Number two, increase in percentage cost of funding for the year annualized between 100 to 150 bits. Number three, just keep in mind that with a banking franchise, a banking license, you can do things at a different scale. You can have deposit functionality.
Speaker Change: And just finally on the Turkish lending product Pepsi is experimenting with how comfortable are you with the way that we've done.
Speaker Change: Introducing your new lending products.
Speaker Change: When you are about to scale up the fintech offerings.
Speaker Change: With a different franchises. Thank you.
Speaker Change: Yes.
Speaker Change: So no change to pricing gross gross yield was flat year on year, 26%.
Speaker Change: Number one number two.
Speaker Change:
Speaker Change: Increase in percentage cost of funding.
Speaker Change: For the year annualized between 100 to 150 bps.
Speaker Change: Number three.
Speaker Change: Just keep in mind that with a banking franchise. Our banking license you can do things at a different scale. You can have deposit functionality have you have got deposit functionality. The rationale is people who save with you will spend with you number one number two you can use that to fund.
David Ferguson: If you have dot deposit functionality, the rationale is people who save with you will spend with you, number one. Number two, you can use that to fund more lending, which drives more transaction on your marketplace, exactly the sort of thesis behind Kaspi marketplace in Kazakhstan. So you can do that at a much bigger scale over time. And Pepsi doesn't have anything like that at scale. Currently, all initiatives are just early in stage, but logical to do.
Speaker Change: <unk> lending, which drives more transaction on your marketplace exactly the services.
Speaker Change: Behind.
Speaker Change: Kathy marketplace in Kazakhstan. So you can do that in a much bigger scale.
Speaker Change: Over over time.
Speaker Change: And Hep C. It doesn't have anything like that at scale.
Speaker Change: Currently all initiatives are just early in stage, but logical to do.
Gabor Kemeny: Thank you, David. Oh, fair points. Just one small follow-up. The 100 to 150 basis points, that was the blended average increase in funding costs you expect this year or something different, please? Correct. Got it. Thank you.
Speaker Change: Thank you David all fair points and just one small follow up the 100 to 150 basis points that was the blended average increasing funding cost do you expect this year or something different place correct.
Speaker Change: Got it thank you.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yeah.
Maxine: Maxine, I think we're ready for the next question, please.
Maxine: Maxine I think we're ready for the next question. Please.
Can Demir: Yep, our next question comes from Can Demir.
Can Demir: Please state your company name and proceed to the question. Yes, good afternoon. This is John with Wood and Co. Thank you very much for the opportunity. So I have a couple of questions. So on rubble, I think it was acquired through the Kazakh entity and not through Hepsi-Borada as far as I understand it. And I was wondering why you didn't acquire it through HepsiBorada when, you know, this bank will work pretty closely with Hepsi. So that's the first question.
Speaker Change: Yes. Our next question comes from Ken Dennis.
Speaker Change: Please state your company name and proceed with your question.
Speaker Change: Yes. Good afternoon. This is John <unk>. Thank you very much for Newport clinically. So I have a couple of questions. So on rubble I think it was acquired through the covered entity and not through Hep C Bureau, as far as I understand it.
Speaker Change: And I was wondering why you didn't acquire it through a hipster borough the run.
Speaker Change: This bank will work pretty closely with prepared food so.
Can Demir: The second question is, how do you plan to get out of this boycott-driven drag in Turkey? Is it marketing? Is it PR? Are there any plans around it?
Speaker Change: So that's the first question.
Speaker Change: The second question is how do you plan to get out of this boycott.
Speaker Change: Driven drag in Turkey.
Speaker Change: Is it marketing is a.
Mikhail Lomtadze: And the third question is on your cost of risk and asset quality. So the cost of risk is, I think, exceptionally low in Kazakhstan, which is good news. But how is it possible that it's not affected by the macro outlook at all, when the macro outlook affects GMV and other things? So I was just curious about that. Thank you very much. Can, remind me what the first question was. The first question is rubble was acquired through the Kazakh entity. Yeah, thanks for a simple answer. Hep C doesn't have the money. acquire and subsequently invest, Kaspi has the money.
Speaker Change: P or are there any plans around it.
Speaker Change: And the third question is on your.
Speaker Change: Cost of risk and asset quality.
So the cost of risk is I think exceptionally low in Kazakhstan, which is good news, but how is it possible that it is not affected by the macro outlook and Paul.
Speaker Change: Random across look FX, Jeremy and other things. So I was just curious about that thank you very much.
Can you remind me what the first question was.
Speaker Change: The first question is rubble was acquired through the customer identity.
Speaker Change: Thanks, Ben simple answer <unk>.
Speaker Change: <unk> doesn't have the money.
Speaker Change: Two <unk>.
Speaker Change: Choir, and subsequently invest cafe has the money.
Mikhail Lomtadze: So it simply isn't possible for the Hep-C entity to fund that transaction. That's the answer to number one, a number in the absence of a capital injection into Hep-C.
Speaker Change: Somebody is impossible.
Speaker Change: Z entity to fund that.
Speaker Change: That transaction.
Speaker Change: That's the answer to number one number in the absence of a capital injection into assets number one number two the.
Mikhail Lomtadze: Number one, number two, the boycott. I mean, that's probably a question that is better directed towards the Hep-C management team. We wouldn't speak on their behalf. They will update in due course on trading in Q2. I think the results will answer that question. Number three, what you need to keep in mind is that the trade-off is not just cost of risk in isolation. It's cost of risk versus volume. So you can manage cost of risk at stable by turning down volume or turn it. You can accept a higher cost of risk with more volume. So whereas you're looking at cost of risk as the variable, I look at it the other way and look at volume as the variable.
Speaker Change: The boycott.
Speaker Change: But from your question is better directed towards the Hep C management team, we wouldn't speak on their behalf. They will update in due course, entre and trading gain in Q2 and I think the results will answer.
Speaker Change: Question.
Speaker Change: Number three what do you need to keep in mind is that the trade off is not just cost of risk in isolation its cost of risk fastest volume. So you can manage cost of risk stable by turning down volume or talent you can accept the higher cost of risk with more volume so buyers youre looking at.
Speaker Change: Cost of risk is the variable I look at it the other way and look at volume as the variable.
Mikhail Lomtadze: Okay.
Mikhail Lomtadze: And on the first first question, so I mean, why Why wasn't it possible to inject capital into Hep-C? Because, I mean, it doesn't look that smooth to me when, you know, rubber will work super close with Hep-C, but Hep-C you know, is, has minorities, right? I mean, isn't that a problematic structure slightly? No. So In terms of simplicity, this is the sort of simplest way to progress this transaction in the near term, number one. In the medium term, arrangements can be structured in lots of different ways. But again, you're getting You're probably jumping the gun a little bit.
Speaker Change: Okay.
Speaker Change: On the purse person question, so I mean why.
Speaker Change: Why wasn't the possible too.
Speaker Change: To inject capital into Hep C because I mean.
Speaker Change: It doesn't look that smooth to me ran rubaboo work Super closer to type C about Hep C.
Speaker Change: You know is have minorities.
Speaker Change: I mean isn't that problematic structure slightly.
Speaker Change: No.
Speaker Change: So.
Speaker Change: In terms of simplicity.
Speaker Change: This is a sort of a simplest way to progress this transaction in the near term number one.
Speaker Change:
Speaker Change: In the medium term arrangements can be structured in lots of.
Speaker Change: Different ways.
Speaker Change: But again you're getting.
Speaker Change: Yeah, probably jumping the gun.
Mikhail Lomtadze: Right.
David Ferguson: Let's just complete this transaction. It's subject to regulatory approval expected in the second half of the year. And then then we'll be in a better position to talk in more detail about how we address the point that you fairly raised. Super. Thank you. Thank you, David. Thank you.
Speaker Change: A little bit.
Lastly, complete this transaction is subject to regulatory approval expected in the second half of the year and then then we'll be in a better position to talk in more detail about how we address the point that you have failure rates.
Speaker Change: Super. Thank you. Thank you David.
Speaker Change: Yeah.
Salman Ali: Our next question comes from Salman Ali.
Salman Ali: Please state your company name and proceed to the question. Good evening. I am from Fountainhead Partnership. My question again comes back to the deposit cost. There are two questions related to it. One is that how does your 18 percent compare with the deposit rate being offered by other banks? And second is that if the central bank is planning to increase the reserve requirements, do you expect another round of increase in deposit cost as other banks try to manage their liquidity? Thank you.
Speaker Change: Our next question comes from Salman Ali Please state your company name empathy for your question.
Salman Ali: Hey, good evening.
Speaker Change: I am from Arlington Head partnership My question again comes back to the deposit cost there are two questions related to it.
Salman Ali: Is that how does your 18% compared with the deposit gave BMO offered by other banks.
Salman Ali: And second is that if the central Bank is planning to increase the reserve requirements do you expect another round of increase in deposit cost as other banks try to manage their liquidity.
Salman Ali: Do you.
Mikhail Lomtadze: Do you want to talk about the attractiveness of the DePrazzo product, Mikhail? Yeah, of course. I mean, in general, our strategy has been always to be, to have attractive, you know, products for our consumers, but would be the highest interest rate on the market. Again, our deposit is a bit different from many others because it's a mobile application. Consumer experience is better. The process is better, the product itself, it's probably better. So I would say that our interest rate is on the compatible sort of term deposits, the low end. That's number one. Number two, in terms of the National Bank reserve requirements, I mean, that's, you know, the impact that it has on the potential impact it has on the net income is because the additional National Bank reserves, as they have been discussed currently, there will be interest free with the National Bank.
Salman Ali: Do you want to talk about the attractiveness of the deposit Brotherhood Macau.
Salman Ali: Yes.
Salman Ali: In general our strategy has been always to be.
Salman Ali: So have a attractive.
Salman Ali: They are our products for our consumers.
Salman Ali: That would be financed.
Salman Ali: Interest rate on the market and again in our deposits there is a bit different from many others because it's.
Salman Ali: So the mobile application consumer experiences better.
Salman Ali: The processing bedroom the product installed groups.
Salman Ali: It's probably better so I would say that our interest rate is.
Salman Ali: So on the on the comparable sort of term deposits the low end.
That's number one number two in terms of the.
Salman Ali: National Bank reserve requirements.
Salman Ali: That's the impact that it has on the.
Salman Ali: Potential impact it has on the net income is because.
Salman Ali: The additional.
Salman Ali: National Bank reserves.
Salman Ali: As they have been discussed currently there will be interest fee when the national Bank, So that's where the.
Mikhail Lomtadze: So that's where the impact really comes on the bottom line. So it's not really a liquidity issue. Well... And I don't think it's a liquidity issue for most of the banks, I would assume so, but no, not in our case, definitely. But it just said, this is why we have it in the net income section, because if it's an interest-free balance with National Bank, obviously, we don't have interest revenue associated with this. Does that answer the question?
Salman Ali: Impact really comes on the on the bottom line so.
Salman Ali: So it's not really.
Salman Ali: The issue.
Salman Ali:
Salman Ali: And I don't think there was a liquidity issue for most of the banks I would assume so but.
Salman Ali: No not in our case decremental, but it just and this is why we haven't been the methane domo actually because of the pension interest rate balances with National Bank obviously.
Salman Ali: We don't have.
Salman Ali: Rob interest revenue associated with us.
Salman Ali: Yeah.
Mikhail Lomtadze: yes yeah thank you i'm just wondering that what what is the system ldr like you are at 97 so do you know what is the system ldr and does it mean it will squeeze other banks The whole country will help you with the... without events. We're really focused on our business, and this is what we care about. Historically, we had anywhere from 80 to pretty much close to 100% loan-to-deposit ratio. In our case, we're good. Thank you very much, really appreciate it. Thank you.
Salman Ali: Does that answer the question.
Yes, yes. Thank you I'm just wondering what are the system LDR like you are at 97%.
Salman Ali: So number two the system LDR and does it mean it will squeeze other banks.
Salman Ali: Our country, we help you with.
Salman Ali: Without events.
Salman Ali: We're really focusing our business and this is what we care about.
Salman Ali: Historically, we had anywhere from 80 to pretty much close to 100% loan to deposit ratio. So.
Salman Ali: Hello.
Salman Ali: <unk>.
Salman Ali: In our case, where we're good.
Salman Ali: Thank you very much really appreciate it thank you.
Ronak Gurdia: So Maxine, maybe in the interest of time, we can take the final question, please. Thank you. Our final question today comes from Ronak Gurdia. Please state your company name and proceed with your question. Good afternoon, this is Ronak from Dan Ross. Just a quick one on your take rate on payments. We've seen a pretty significant, consistent decline over the last two or three quarters. Whereas, you know, if I look at the TPV breakdown, that hasn't, you know, the contribution hasn't changed much.
Speaker Change: Some vaccine maybe in the interest of time, we can take the final question. Please.
Speaker Change: Thank you. Our final question today comes from Bryan Garnier. Please state. Your company name then proceed with your question.
Ironic: Hi, Good afternoon. This is ironic from donors.
Speaker Change: A quick one on your take rate on payments, we've seen a pretty significant consistent.
Speaker Change: Client over the last two or three quarters.
Speaker Change: Whereas if I look at the TPB breakdown that hasnt the contribution hasnt changed much. So if you could just talk about what's driving the reduction in take rate and where we should expect that to normalize. Thank you.
Ronak Gurdia: So if you could just talk about what's driving the reduction in take rate and where we should expect that to normalise. Thank you. It wouldn't say it's a dramatic change. I'd say it's a gradual change. But if you think about it, the Kaspi pay is 95 bps and B2B is less than that, then just mechanically, if they grow slightly faster, then you will just see gradual attrition. And I think you should expect that to continue for a period of time. And that is the expense, which you can't really see in that chart of things like interchange on the legacy car product, which would have been a higher take rate business.
Speaker Change: Yeah.
Speaker Change: And it wouldn't say et cetera, massive change I'd say, it's a gradual change.
Speaker Change: Change, but if you think about it the cafe is 95 bps.
<unk> is less than the not then just mechanically.
Speaker Change: If they grow slightly faster than you will just see gradual attrition and I think you should expect that to continue for a period of time and ASIC the expense, which you can't really say in that chart that things like interchange on the legacy.
David Ferguson: So your base case going forward should be on ongoing gradual attrition intake rate, but it's not not substantial, I guess, over time, as growth moderates, then so also will there be also a moderation in take rate dilution as well. Yeah, and just to again mention, if you look at the track record, and the rest, you know, several years, whatever, our, you know, the fastest growing transactions are the KaspiPay, you know, transactions, 0.95% take. So we have always said that, you know, as this business becomes, you know, bigger, you know, the take rate basically will be gradually moving towards 0.95.
Speaker Change: <unk> product, which would have been a higher take rate isn't so your base case going forward should be an ongoing gradual attrition.
Speaker Change: In take rate, but its not not substantial I guess over time.
Speaker Change: As growth moderates and then settle so the adult male saw moderation in take rate dilution as well.
Speaker Change: Yeah, and just so just again mentioned if you look at the track record there.
Speaker Change: Russ.
Speaker Change: Several years whatever.
Speaker Change: Our transact remains the fastest growing transactions are.
Speaker Change: Sure.
Speaker Change: The cost to pay transactions Zillow board, 95% take rate.
Speaker Change: So we have always said that.
Speaker Change: You know as this business becomes.
Speaker Change: Bigger.
Speaker Change: Take rate basically will be gradually moving towards silver cord 95.
David Ferguson: And exactly for that reason, I think, so-called before this one, we have introduced to give a bit more details. So before we would say like 1.2 take rate, then we said, we started to say two digits, you know, like 1.15 or 1.18, just so that you can guys track. But this strategy and the trend hasn't changed. So in the medium term, it will be going towards, you know, the lowest take rate business, which is growing the fast, which is the 0.95% take rate. Thank you.
Speaker Change: And exactly for that reason I think.
Speaker Change: Calls.
Speaker Change: Before this one we are introduced to give a bit more details. So the portable let's say like 1.2 take rate than we said we started to say two digits like one.
Speaker Change: If I may have been just so that you can guys track, but this strategy and that trend hasn't changed so in the in the medium term it will be going towards.
Speaker Change: The lowest take rate business, which is growing fast which is the zero point, 95% take rate.
Speaker Change: Thank you.
David Ferguson: All right, so I think we're going to wrap things up. Apologies if we haven't got to your question, please. We're happy to follow up separately, but we need to move to another meeting now. So thanks a lot for your time today. Thanks, everyone, for your questions. Keep in touch. Let us know if you have any follow-up and we'll speak to you all soon. Thanks a lot, everyone. Thank you. Thank you everyone.
Speaker Change: All right. So I think we're going to wrap things up apologies that we haven't got to your question. Please we're happy to follow up separately, but we need to move to.
Speaker Change: The meeting now so thanks, a lot for your time today. Thanks, everyone for your questions keep in touch let US know if you have any follow up and we'll speak to you. All soon thanks a lot everyone.
Maxine: This concludes today's webinar. You may now disconnect from the call.
Speaker Change: Thank you.
Speaker Change: Thank you everyone. This concludes today's webinar you may now disconnect for nickel.
Speaker Change: Yeah.