Halyk Bank half-year profit falls 15.3% as margins tighten

Profit falls despite higher interest income

JSC Halyk Bank reported net income attributable to common shareholders of KZT 447,568 million for the six months ended 30 June 2026. That was down 15.3% from KZT 528,600 million a year earlier.

The headline decline reflects a tougher operating backdrop rather than a contraction in the bank's core lending activity. Interest income rose 12.2%, helped by higher average customer loan balances, but interest expense climbed much faster at 21.6%.

Higher customer deposit balances and interest rates, along with a greater share of deposits held in Kazakhstan tenge, pushed up funding costs. As a result, net interest income before credit loss expense increased by only 2.6% to KZT 657,623 million.

Key first-half figures	1H 2026	Year-on-year change
Interest income	KZT 1,446,153 million	12.2%
Net interest income before credit losses	KZT 657,623 million	2.6%
Net fee and commission income	KZT 54,513 million	-19.6%
Expected credit loss expense	KZT 104,029 million	69.1%
Operating expenses	KZT 154,619 million	5.5%
Net income attributable to shareholders	KZT 447,568 million	-15.3%

The second quarter followed a similar pattern. Shareholder profit fell 16.1% year on year to KZT 212,759 million, while net interest income rose 3.0%.

The original company announcement contains the full interim financial statements.

Net interest margin comes under pressure

Halyk Bank's net interest margin, or NIM, declined from 7.3% to 6.8%. NIM measures the difference between the interest a bank earns and pays, relative to its interest-earning assets.

Management attributed the decline partly to new minimum reserve requirement coefficients. These rules require the bank to hold more reserves, limiting the proportion of its balance sheet that can generate interest income.

Halyk said NIM would have been 7.2% after adjusting for the effect of the tightened requirements. That suggests much of the reported decline was regulatory rather than caused by a sharp deterioration in underlying loan pricing.

Even so, the figures show clear pressure from funding costs. Average interest rates on customer deposits increased while average loan rates were broadly flat. This remains an important issue for investors because sustained deposit repricing could continue to restrict earnings growth.

Fees and insurance also weaken

Net fee and commission income dropped 19.6% to KZT 54,513 million. Halyk linked this to weaker buy now, pay later transactional income following tighter underwriting caused by regulatory changes. The gradual passing of value added tax on certain banking services to customers also affected the result.

There was a more encouraging sequential signal. Second-quarter net fee and commission income increased by 18.4% compared with the first quarter, although it remained 13.1% below the prior-year period.

Net insurance income moved from a positive KZT 25,840 million in the first half of 2025 to a loss of KZT 6,056 million. Meanwhile, other expense and non-interest income declined 58.0%, partly because the previous period benefited from one-off income in the bank's stress asset management subsidiary.

These weaker non-interest lines left Halyk more dependent on net interest income at a time when its margin was already under pressure.

Credit costs rise, but the cost of risk stays stable

Expected credit loss expense increased by 69.1% to KZT 104,029 million. This is the provision recognised for loans and other financial assets that may not be repaid in full.

Despite the sizeable increase, Halyk said credit losses remained in line with its full-year guidance. The annualised cost of risk on customer loans was unchanged at 1.4% and described as normalised.

There is still a credit-quality point to watch. Stage 3 loans increased to 8.6% by the end of June. Stage 3 is the category used for credit-impaired loans where repayment risk has become more serious.

The bank said the increase reflected the continuing moratorium on selling problem retail loans to collection agencies, alongside slower retail loan growth. This does not automatically mean losses will rise at the same rate, but the direction deserves attention in future updates.

The balance sheet continues to expand

Halyk's total assets increased 5.4% from the end of 2025 to KZT 22,036,296 million. Gross loans reached KZT 13,958,237 million, up 1.8% year to date and 13.2% year on year.

Customer deposits also grew. Amounts due to customers were 3.7% higher than at the end of 2025, reaching KZT 14,870,624 million.

Balance-sheet measure	30 June 2026	Change from 2025 year-end
Total assets	KZT 22,036,296 million	5.4%
Gross loan portfolio	KZT 13,958,237 million	1.8%
Net loan portfolio	KZT 13,265,697 million	1.2%
Customer deposits	KZT 14,870,624 million	3.7%
Total equity	KZT 3,643,116 million	4.1%

Individual deposits rose 3.8% year to date, while deposits from legal entities increased 3.6%. This growth supports the bank's funding base, although attracting and retaining those deposits has become more expensive.

Debt securities issued increased 22.2% from the end of 2025, mainly following bond issues listed on the Astana International Exchange with a 3.5% coupon.

Returns remain high, but efficiency deteriorates

Annualised return on average equity fell from 33.6% to 24.8%, while return on average assets declined from 5.6% to 4.2%.

These remain substantial reported returns, but the year-on-year direction is negative. The cost-to-income ratio also increased from 17.2% to 19.2%. A lower ratio is generally preferable because it means a bank spends less to generate each unit of income.

Operating expenses rose 5.5%, driven mainly by salary and employee benefit indexation, IT development costs and higher VAT. Expense growth was not excessive in isolation, but it came alongside weaker operating income.

Capital remained well above regulatory minimums. Halyk's unconsolidated k1-1, k1-2 and k2 capital adequacy ratios were all 19.0% at 30 June. The applicable minimums, including buffers, were 9.5%, 10.5% and 12.0%, respectively.

What matters for Halyk Bank investors now

The positive side of these results is continued balance-sheet growth, stable cost of risk and a substantial capital cushion. Loans, deposits, assets and equity all increased from the end of 2025, while the adjusted NIM indicates that regulatory reserve changes caused much of the reported margin decline.

The negatives are equally clear. Profit fell 15.3%, funding costs grew faster than interest income, fee income weakened and Stage 3 loans increased. Higher credit loss expenses and a worsening cost-to-income ratio add to the pressure.

Investors should now watch whether deposit costs stabilise, whether the second-quarter recovery in fee income continues and whether Stage 3 loans can be contained. The gap between reported NIM of 6.8% and adjusted NIM of 7.2% will also be worth tracking as the new reserve requirements feed through.

For another regional banking results perspective, see this coverage of TBC Bank's 2026 half-year results.

No dividend decision or updated numerical full-year profit guidance was disclosed in this announcement.