Joint Stock Company Kaspi.kz Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 12, 2025

Key Takeaways

  • Payments platform: Q1 total payment volume grew 23% year-on-year, driving 16% revenue growth and 21% net income growth with the outlook unchanged.
  • E-grocery segment: Active consumers surpassed 1 million, GMV rose 64% and orders increased 66% as Kaspi expanded into five largest cities, supporting rapid scaling.
  • High-yield term deposits: Launched 3- and 6-month products at 17–18% interest, attracting 84 000 customers and KZT 379 billion in deposits, bolstering funding despite higher costs.
  • International funding & expansion: Issued $650 million Eurobonds at 6.25% and agreed to acquire a Turkish bank, planning a $300 million fintech investment to enter the Turkish market.
  • Revised guidance & headwinds: Lowered 2025 GMV growth to 15–20% from 25–30% due to temporary smartphone import rules and macro uncertainty, plus a ~200 bps net-income drag from new taxes and reserve requirements.
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Earnings Conference Call
Joint Stock Company Kaspi.kz Q1 2025
00:00 / 00:00

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Operator

Hello, and welcome, everyone, to the Kaspi KZ First Quarter twenty twenty five Financial Results. I will now hand you over to David Ferguson, Head of Investor Relations at Cassidy Cape Verde to begin. David, please go ahead.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Great. Thank you, Maxine. Good afternoon, good morning to everyone. Thanks a lot for joining us for our first quarter twenty twenty five financial results. I'm David Ferguson.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

I'm joined, as usual, by Mikhail Lantata, our CEO and Co Founder Yuri Dudenko and Ken Gies Masitsi, our deputy CFOs deputy CEOs. Sorry. So Mikhail 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 year.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

There's a couple of moving parts to discuss, and then we'll open up the call for Q and A. So on that note, I'll hand it over to Mikael. Mikael, over to you. Thank you.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Hello, everyone. So let's just go through our first Q performance. In in in general, we had a good good first Q. The company itself, it's performing at the levels which we expected broadly within our expectations. The payments, you know, will continue the strong growth.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Revenues plus 16%, net income 21%. The marketplace in the first two, you will do 20% year over year, and the revenue, 33%, net income, 19%. And the Fintech origination volumes grew 17%, eighteen % 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%. Overall, the company's underlying performance is probably within our expectations.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

It could have been better on the GMV side. There was requirements to register smartphones, which was introduced in Kazakhstan, and that had a quite significant, you know, temporary impact on the demand for smartphones. And then on the feedback side, you know, we see the the continuous high interest rate environment, which, again, will continue probably through this year. And and and we are here also introducing a higher interest new deposit products, which I will talk a bit as well. So next slide, David, please.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

So the e grocery e grocery, this is the business which we have started one of, you know, the fastest growing business in our ecommerce. We continue scaling fast and expect to continue strong growth through the year. The active consumers reached almost 1,000,000. The GMV, 64% up year over year, and then the purchases are 66% up year over year with 3,300,000 purchases in the first Q. As you know, we are operating in the three cities, three largest cities now, and we are planning to enter another two cities.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

So the team continues to execute on the grocery, and you see the average ticket is is is very good, stable. And, yeah, we just continue scaling because the country with the simultaneously, as you know, custody is very good. I think they're continuously from an operational side, but also scale. And and we are entering the new cities to support the growth, and we expect e grocery to continue scaling fast through the year. New term deposits that we have launched for for consumers, those deposits are aiming at a higher interest rate.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Our interest rate environment has been, you know, basically due to all sorts of factors which have nothing to do with the with with CASB 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 deposit basically anytime, but the term of deposit is actually fixed to the three or six months. The deposits itself have been pretty successful on the market. As you can see, we went from basically nothing to, yeah, 84,000 consumers and almost, yeah, 379,000,000,000 in of of those deposits.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

So if they're they're 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 set historically is those are the best consumers that are saving with you. And in the future, they are making purchases through all our other services and therefore investing into the acquiring the consumer deposits and the consumers with deposits and the part of our historical strategy always. Again, in the future, interest rates will go down, and therefore, there is additional opportunity for the, you know, for profitability. At this stage, we are in the high interest environment.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Therefore, we're taking advantage of this as well. 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 twenty four from 14 to 15%. But then in '25, we do have the high interest environment.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

So we have introduced six month maturity deposits at 17%, then we have increased the rate on all our term deposits from 14% to 15%, and then we introduced the three month maturity deposit at 18% interest rate. The way that we work with our consumers, for example, when we introduced when we increased the rate of the existing deposit from 14 to 15%, we refreshed our entire portfolio. So that's the way our products work, and we have been doing this consistently for for, you know, as long as we had basically the full product. So that's something you should keep in mind. As soon as we increase the interest rate, we reprice our entire portfolio.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

So when we went from 14% to 15%, we therefore repriced the the existing portfolio of our custody deposit. And and and now the fastest growing deposits are the ones which offer the high interest rate of 1817%. Couple of other things. We have raised Eurobonds. This is our first Eurobonds, which we have successfully raised 650,000,000 at 6.250%, which is due 02/1930.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Again, this was for us an opportunity to build a track record with the fixed income investors, and this is the first euro first euro bond we have done. And, yeah, considering our strategy for international expansion and and and investments in Turkey and more specifically, you know, it's good to be in a position of the financial strength. So that that's that's good to build a track record, but also the the the specifically, that transaction was successful in our Eurobond fundraising. We have also signed the agreement to acquire Rabobank, and this is a fully licensed bank, which doesn't really have any customers and doesn't have branch network. And this enables us to, you know, continue developing a fintech product in the in the in the Turkey.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

And, also, our initial plan is that, you know, we'll invest roughly around $300,000,000 in 02/2025 to fund our fintech strategy in Tokyo. So, David, I'm back to you just to go on through the platforms.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

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.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

That is a function of higher ticket size, higher inflation. All three of the core payment products are contributing to that, CASBY pay, bill payments and B2B payments, with B2B payments growing and expected to continue growing at a faster rate than overall TTV. Take rate moves down to 1.13%. That is consistent with the trend over the last twelve to eighteen months, and it's simply a function of mix change, namely B2B payments and CAFD pay QR growing in share within the mix. In terms of the financials, TPV growth with some yield compression results in 16% revenue growth versus 23% TPV growth.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

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 gearing ensures that strong top line drops through at a faster rate to the bottom line, 21% bottom line growth. Outlook for payments, highly predictable, healthy and unchanged versus when we updated the market at the February.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Moving on to Marketplace. Marketplace remains the fastest growing top line platform. GMV 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 the payments, all three services, e commerce, e commerce and travel are contributing to growth.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Take rate moves up, a continuation also of a theme you've seen over the last couple of years driven by value added services. Our take rate accretion will ensure that fast GMV growth drops through to 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, up 97% year on year. Grocery, the main driver of that growth, that high number of growth in purchases. As Nick and I have talked about, however, in March of the year, the Quebec government introduced requirements around the registration for smartphones imported into the country.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

A number of reasons for this, for one being to ensure the correct duties are paid by importers and merchants. And what that meant is a sharp increase in prices on smartphones countrywide and a falloff in demand in the final month of the quarter. Smartphones are an important GMV 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 off growth.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

So that 23% GMV 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 delivered decent growth.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

GMV 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. So e commerce take rate moved up to 12.5%, one hundred and forty bps. M commerce take rate moved up 20 bps.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

M commerce growth also impacted by the slowdown in smartphone sales in March, but to a much lesser extent than e commerce. Kathy Travel continues to deliver good, healthy results. GMV up 22%, strong growth across the board, but again, tours, which we introduced around twelve to eighteen months ago, delivering really decent GMV performance and now up to 11% of travel GMV from zero just eighteen months ago and driving the increase in take rate here. So take rate moves up to 5.3% from 4.5%. Further innovations planned in travel over the course of the year.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

In terms of the financials for marketplace, fast GMV growth, but with take rate expansion in all three platforms, translates into faster revenue growth, up 33% year on year. That's versus the 20% GMV growth. Profit growth is lower, and that, again, is consistent with trends over the last two years. It's primarily a function of growth in e grocery. 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.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

So categories to call out would be categories like consumer electronics, earned and cars. Keep in mind that a category like CarsOne transaction makes a material contribution to GMV but a negligible contribution to the bottom line. We can come back to that later on. Finally, moving on to the fintech platform. Decent marketplace growth translates into decent TFE origination.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

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. And again, that should be a theme that replicates and continues to be seen going forward. On the balance sheet side of things, for the last two point five 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.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

And just as you saw in 2022, we'll take advantage of a high interest rate environment to once again focus on growing the deposit base, as Mikael 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. 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.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

And for the year, we expect our 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. Actually, if you look back on the last the Q1 conference calls over the last couple of years, you'll see a similar pattern.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Q1 NPLs move up and then they typically move down again in the second quarter related to seasonality. So decent TFE growth over the last eighteen months has translated into decent revenue growth, up 18% higher cost of risk, muted net income growth in the first quarter, of 8%, but again, we expect cost of risk to be flat over the course of the year. Although, as Mikael 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. You should keep in mind that we came into this year with interest rates of 14% across the portfolio. And within a couple of months, the latest product has rates of 18%.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

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 have successfully attract deposits over the remainder the year. Moving on to Hepse 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 just think make the main call out would be the politically driven consumer boycotts in March did materially impact GMV trends.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

That also meant that the company pulled back on its marketing performance marketing initiatives, which again, exacerbated the revenue negative revenue momentum in the quarter. 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 $355,000,000. 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.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

You're experimenting with different risk models. So high 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 should not be confused with what CASB is doing with its bank acquisition in Turkey. This relates to product initiatives that were started in Hefsibirada last year and have been part of its strategy over the last couple of years. So for CASB, 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.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Revenue up 21%, net income up 16% year on year. If you ex out the impact of the macro provisioning, net income would have been up around 19% year on year. These numbers exclude TENETI. Including TENETI, revenue increased to billion yen net income loss was 200 net income was $254,000,000,000 yen profit. The loss from TareHeat was equivalent to $6,000,000,000 at 10 gs, so around sort of 2% dilution.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

So a small negative impact from Turkey and particularly small in the context of Caspian relative to the long term opportunity that Turkey offers. So moving on to the guidance. GMV growth moves to 15% to 20% from 25% to 30% previously. So number one, that is a function of the new rules for imported smartphones in a 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.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

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, dollars 30. So you can see there how that vertical can have a disproportionate impact on GMV but almost no impact on the bottom line. That change in outlook should not be confused with a change in outlook for the core 3P marketplace business beyond the point we've made on smartphones.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

TPV outlook unchanged. TFE growth of around 15% at the lower end of the range given previously at 15% to 20%. And again, that just reflects slower marketplace growth. There's a couple of other factors to point out. Number one, higher interest rates.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

We've talked about it before. That in itself is probably the sort of biggest drag on earnings. But again, just to reiterate, while 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 investments, primarily in government securities.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

We expect this to be applied to interest revenue for the whole of 2025 at 10%, number one. And number two, we expect the government to increase National Bank reserves from the summer of this year. 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 sort of approximately 200 bps of net income this year. So there's a number of moving parts.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

The question is, is the guidance conservative? Well, we try to definitely reflect the different scenarios in the updated guidance to the best extent that we can. On that note, we'll open the call up to Q and A.

Operator

Thank you.

Operator

Our first question comes from Ygal Arounian. Please state your company name and proceed with your question.

Ygal Arounian
Ygal Arounian
Director - Internet Equity Research at Citi

It's Ygal 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?

Ygal Arounian
Ygal Arounian
Director - Internet Equity Research at Citi

If could help us kind of understand the framework of what's going on there. And then in Turkey too, with the boycotts, has that changed your I know it's not going change your long term outlook, but your near term outlook for the integration, your expectations around what you can do in Turkey? Would love to kind of get a sense on that level.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

All right, Igal. 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 that'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 number two.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

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 GMV, could be impacted to some extent, 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.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

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. On Sathi, simple answer for me is no, but I don't know if Mikhail has anything to add to that.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Yeah. I mean, it in in in terms of our in terms of our price, we the has doesn't have any doesn't have any impact. Again, you know, whoever has been who has been following the in the past and the way we sort of work, know, I think it's all about, you know, quality of the of the products, quality of the consumer, and and the merchant experience, and that's what is, you know, important for the long term success. It's again, it's not about competition. It's not it's really about delivering the the the the super quality products and the services to to your customers.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

And that has been our most important strategic priority always in our operation. So that remains our focus.

Ygal Arounian
Ygal Arounian
Director - Internet Equity Research at Citi

Okay. Thanks. And just a follow-up then on Turkey and the Bravo Bank acquisition. Talk about a little bit more of the early steps there in building out the fintech platform, how much progress have you made, maybe an update on time line products as you roll that out? Thank you so much.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Oh, at at stage, we are still in the process of getting the the approval for the acquisition. So that will happen over some time in the in the second half of the year, and and, therefore, that's basically the the most important immediate step for us, you know, to put in a simple words, you know, the license to to launch the products on the market. We do see a lot of opportunities in the digital and online services.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

So as soon as we have approval, then then we'll start, you know, yeah, we'll start introducing some of the fintech products onto the with the marketing toolkit, but we're really excited about the things that we could we could do and how we can how we can take feedback and financial services to another level.

Operator

The next question comes from Darrin Peller from Wolfe Research. Please go ahead, Darrin. Your line is now open.

Darrin Peller
Managing Director at Wolfe Research, LLC

All right. Thanks, guys. Can we just start off by going a little further into those onetime factors impacting guidance one more time? I mean, I think the interest rate on securities, 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's going 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?

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Yeah, Darren. So a couple of things. So alright. Firstly, let's do the smartphone one. So this is ruling that came into place in March.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

It relates to the import of all devices, smartphone devices, into the country. The the unique code within the device needs to be registered with the authorities. I think 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.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

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, I guess, a price adjustment, a short term price adjustment to the margin. Nothing to the market, nothing has changed in Kazakhstan with regards to people's use of smartphones and so on. So demand should normalize in the second half of the year, as I mentioned.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

There could also be some sort of catch up effect there. You asked about normalized rate. Well, would be able to take the normalized rate. You asked how we can quantify it. Although we know the size of smartphones as a category within e commerce.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

I said it's about 18% of e commerce GMV. 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.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

I think the second is interest rates. I mean, that is actually the biggest sort of drag, higher interest rates. You 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. Inflation started to wobble. Central Bank moved rates up in December and then again moved them up sharply in March of this year.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Higher national bank rates to combat inflation translates into higher deposit rates for us. But again, while this isn't one off, the good news here is that, well, don'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-twenty twenty two, rates were sub-ten percent. So it's a big change in costs. So what is for 2025 a headwind? It does have the potential to be a tailwind over the medium term, although the timing difficult to predict. On the 10% tax that's likely to be introduced for liquidity revenue, no.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

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 and L that comes from investment activities. We're a transaction based business.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

What at the margin it makes an impact, same also for National Bank, higher potential reserve requirements is 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. We've tried to sort of put them all together here and reflected in the guidance and hopefully we've done that correctly.

Darrin Peller
Managing Director at Wolfe Research, LLC

All right. That's very helpful, David. Mikael, just a quick follow-up would be on the payment side. 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, you were to break it down a little bit more on what you're seeing more granularly?

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

And, Mikael, that question was to you.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Yeah. Sure. I mean, on the 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 all of the money and the and the purchasing and and the transactions and the payments. So from that perspective, there is, you know, with there is, you know, less, you know, less impact just because we are the drivers of the cashless transactions. The b two b side, that's something which has been historically growing fast just because of the low penetration, but also the type of services that we launched when the payments can be processed between our merchants and distributors.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

So from that perspective, you know, we feel like, you know, payments business is yeah. It is in is in a good place, and and also we constantly innovate around the payments as well as supporting the growth and B2B is really just one example of what we do.

Darrin Peller
Managing Director at Wolfe Research, LLC

Right. Thanks, guys.

Operator

The next question comes from Reggie Smith from JPMorgan.

Reggie Smith
Reggie Smith
Executive Director - Equity Research at JP Morgan

I just had a follow-up on the mobile phone thing 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 showed that or 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. It sounds like there's a supply issue more so than a demand issue.

Reggie Smith
Reggie Smith
Executive Director - Equity Research at JP Morgan

Am I thinking about that correctly? Because if if if the issue is that they just aren't, I guess, legit phones coming in, like, how does that correct in the 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 the pipe? 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.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

I mean, from my side, I wouldn't say it's a supply issue. That's not sort of overcomplicated. There's there's no reason why smartphones can't be imported to to to Kazakhstan. So it isn't a supply issue. If devices are being imported the correct way, it just meant a sudden increase in prices.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

It means the duties are being paid. Actually, this is a good thing in the long run because you are, again, just bringing more more transactions into the formal economy, which we are 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 CapEx stand alone globally in The US, and smartphones are just an important ecommerce category. So any sort of change in demand is is hard to escape from, but it will work itself out.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Mikael, anything else on the the coming down the pipe that we need to be aware of?

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Well, I mean, we we did mention about the, you know, 10% tax on revenue from government securities. So at the moment, the tax is is zero, which, you know, is unusual for many other markets. So the 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.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

I think we did discuss on a previous call that the the bank tax also being discussed in the part of the of the new tax code that the bank bank income tax will be raised from 20 to 25%, and the banking is one of the businesses that that we have. So yeah. I don't know. I don't think there is anything else at this at this stage that that we believe or we think might have a impact.

Reggie Smith
Reggie Smith
Executive Director - Equity Research at JP Morgan

Got it. That makes sense. And then

Reggie Smith
Reggie Smith
Executive Director - Equity Research at JP Morgan

I guess just to to follow-up on the the mobile phone, and maybe I'm thinking about this wrong. I guess, previously, there was a a large supply of cheaper mobile phones due to counterfeiting or whatever, and that supply is gonna go away. And so now people are gonna have to buy legitimate phones that may be more expensive. Is that the right way to think about it, or or have I oversimplified it? Or am I missing something?

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

That's the correct way to think about it.

Reggie Smith
Reggie Smith
Executive Director - Equity Research at JP Morgan

Got it. Got it. Thank you.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Yeah. We we we estimate that the price for mobile phones will go up.

Reggie Smith
Reggie Smith
Executive Director - Equity Research at JP Morgan

Got it. Perfect. Thank you.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Thanks, Ricky. Matthew, next question, please.

Operator

The next question comes from James Friedman. Please state your company name and proceed with your question.

Jamie Friedman
Senior FinTech and IT Services Research Analyst at Susquehanna International Group

Hi. Good evening. It's Jamie Friedman at Susquehanna. In terms of the Rabobank acquisition and the overall banking strategy in Turkey, Mikhail, I'm just wondering how you would compare opportunity there relative to Kazakhstan, what the how the strategy may be different as you go to market there versus in your home country and what the $300,000,000 investment is targeted to to achieve to get you standing up there.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Okay. Well, I mean, we will be discussing the details, you know, in a in a in a due course. And the one thing I can I can I can mention that the the the the investment itself should should the transaction be improved is a combination of funding the product development, but also the, you know, capital which, you know, any licensed bank needs a minimum capital to operate? 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.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

The approval only itself will take us into the second half. And and when you think about the financial services in general, it's important to have the very high quality products from the very beginning because that's what, you know, builds up the loyalty and therefore, you know, we will be looking to launch not I mean, not launch, but basically just 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, you know, I don't expect anything sort of major to happen this year because we we need to complete acquisition first, get the approval, and then set up everything right for the for the long term success. So we're not we are not in a we never we never had it to launch things.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

We want to make sure we get them right and and perfect, especially in financial services. And in the lending business, it's equally important to get paid back when you originate. So originating, you either build assets or you build the liability. So in our case, you know, you need to build the whole process to make sure that the the product is is is is is a very high quality like has, but also the cost of risk, which we have historically around 2%, which is the world class, is the is the is really the important metrics for any Atlantic operation.

Jamie Friedman
Senior FinTech and IT Services Research Analyst at Susquehanna International Group

Okay. Thank you for that. 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. Yes, how should we be thinking about that?

Jamie Friedman
Senior FinTech and IT Services Research Analyst at Susquehanna International Group

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.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Well, 1P is really just grocery Grocery. To a much lesser extent 1P cars. So 1P grocery, actually, we pulled it out in the first quarter. We 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 the first quarter, which is fast and is faster than the 3P business in response to Darren's question. We talked about 3P business normalized rate of growth in the first quarter around 30% versus e grocery growing north of 50%.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

The one sort of the flag but, again, let's not overexaggerate it because in practice, it's noncore is is 1P cars both one and 3P cars, but where it makes a difference to GMV. Again, made a point sort of a $10,000 transaction versus a $50 or $30 transaction, but the bottom line impact from that is is is is very is is is not material. So don't confuse the GMV 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?

Jamie Friedman
Senior FinTech and IT Services Research Analyst at Susquehanna International Group

Yeah. Perfect. Thank you, David.

Operator

Thank you. The next question comes from Neeraj Chandra. Please state your company name and proceed with your question.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Hey, Niraj. Can you hear us? Are you on mute now, Niraj?

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

I think you're on mute mute. You're showing us on mute to me.

Analyst

Sorry, Maxine. Let's if let's Sorry about that, David. I'll follow-up with you guys afterwards. Apologies.

Operator

Sorry, Neeraj. We can hear you.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Do you wanna ask me a question? I think we lost him. Let's let's go to the next question, please.

Operator

Yep. Our next question is from Gabriel Khomeini. Please state your company name and proceed with your question.

Gabor Kemeny
Senior Analyst at Autonomous Research

Hi, there. This is Gabriel from Autonomous. Thank you for taking my questions. Firstly, on funding, can you help us scale how much much is 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? 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 mid teens interest rates, presumably, you would consider making changes when you implement that deposit cost in the high teens. And just finally, on the Turkish lending products Pepsi is experimenting with, how comfortable are you with them introducing your new lending products when you are about to scale up the fintech offering with a different franchise?

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

So, Gabel, no change to pricing. Gross gross yield was flat year on year, 26%, number one. Number two, increase in percentage cost of funding for the year and the line between a hundred to a 50 bps. Number three, just keep in mind that with a banking French, a banking license, you can do things at a different scale. You can have deposit functionality.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

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 CASI marketplace in Kazakhstan. So you can do that at a much bigger scale over over over time. And hep Pepsi doesn't have anything like that at scale currently. All initiatives are just early in in in stage, but logical to do.

Gabor Kemeny
Senior Analyst at Autonomous Research

Thank you, David. All fair points. Just one small follow-up. The 100 to 150 basis points, that was the blended average increase in funding cost you expect this year or something different, please? Correct. Got it. Thank you.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Maxine, think we're ready for the next question, please.

Operator

Yep. Our next question comes from Cam Demig. Please state your company name and proceed with your question.

Analyst

Yes. Good afternoon. This is John with Wood and Co. Thank you very much for the opportunity. I have a couple of questions.

Analyst

So on Rubble, I think it was acquired through the Kazakh entity and not through Hepsie Burada as far as I understand it. And I was wondering why you didn't acquire it through Hepsie Burada when you know, this bank will work pretty close with Hepsie. So that's the first question. The second question is how do you plan to get out of this boycott driven drag in Turkey? Is it marketing?

Analyst

Is it is it PR? Are there any plans around it? 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?

Analyst

So I was just curious about that. Thank you very much.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Can't remember what the first question was.

Analyst

The first question is Rubble was acquired through the Nasdaq entity. Yeah.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Great.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Thanks. I mean, simple answer, hep C doesn't have the money to acquire and subsequently invest, CASB has the the the money. So it simply is impossible for the hepc entity to fund that transaction. That's the answer to number one. Number in the absence of a capital injection into Hepcie, number one.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

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 trade and could trading in q two. I think the the the results will answer that that question.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

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, get stable, by turning down volume or turning you can accept a higher cost of risk with more volume. So whereas you're looking at cost of risk as the variable, I'd look at it the other way and look at volume as the variable.

Analyst

Okay. And on on the first first question, so, I mean, why why wasn't it possible to to to inject capital into hep c? Because, I mean, it 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 had minorities. Right? I mean, isn't isn't that a problematic structure slightly?

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

No. So in terms of simplicity, this is the sort of simplest way to progress this transaction in the near term, number one. And the medium term arrangements can be structured in lots of of of of of different ways. But, again, you're getting you're probably jumping the gun a little bit.

Analyst

Right.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Know.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

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.

Analyst

Super. Thank you. Thanks, David.

Operator

Thank you. Our next question comes from Salman Ali. Please state your company name and proceed with your question.

Analyst

Hi. Good evening. I am from Mountain Head Partnership. My question again comes back to the deposit cost. There are two questions related to it.

Analyst

One is that how does your 18% compare with the deposit rates being offered by other banks? And second is that if the central bank is planning to increase the reserve requirements, do you expect another amount of increase in deposit costs as other banks try to manage their liquidity? Thank you.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Do you wanna talk about the attractiveness of the deposit products, Mikael?

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Yeah. Yeah. Of course.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

I mean, in general, our strategy has been always to be to have attractive, you know, products for for our consumers, but not the highest, you know, interest rate on the market. And, again, you know, our deposit is a bit different from many others because it's it's a mobile application. You know, consumer experience is better. The the the process is better. The the product itself, it's it's it's probably better.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

So I would say that our interest rate is is on on on the on the compatible sort of term deposits, the, you know, low 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 that income is because the additional national bank reserves, as as they have been discussed currently, there will be interest fee with the national bank. So that's where the impact really comes on the on the bottom line. So it's not really an an a liquidity issue.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

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, we balance this with National Bank, obviously. You know, we we don't have lot of interest revenue associated with this.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Does that answer the question?

Analyst

Yes. Yeah. Thank you. I'm just wondering that what what is the system LDR? Like, you are at 97%.

Analyst

So do you know what is the system LDR, and does it mean it will squeeze other banks?

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Well, I can't really help you with the with other banks. Okay. 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 a % loan to deposit ratio. So, you know, it's in our in our case, we're we're good.

Analyst

Thank you very much. Really appreciate it.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Thank thank you.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

So, Maxine, maybe in the interest of time, we can take the final question, please.

Operator

Thank you. Our final question today comes from Ronak Gardia. Please state your company name and proceed with your question.

Analyst

Hi. Good afternoon. This is Ronak from Danlos. Just a quick one on your take rate on payments. We've seen a pretty significant, okay, consistent decline over the last two or three quarters, whereas if I look at the TPV breakdown, that hasn't the contribution hasn't changed much.

Analyst

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.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

I wouldn't say it's a dramatic change. I'd say it's a gradual change. But if you think about it, the CASB 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. So your base case going forward should be on ongoing gradual attrition in take rate, but it's not not substantial.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

I guess over time, as as as growth moderates, then so also will there'll be also a moderation in in in take rate dilution as well.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Yeah. And just to just to, again, mention if you look at the track record and the the last, you know, several years, whatever, our, you know, transact the main the the fastest growing transactions are you know, the the the task to take, you know, transactions 0.95% take rate. So we have always said that, you know, as this business becomes, you know, bigger, you know, the the take rate basically will be gradually moving towards 0.95. And and exactly for that reason, I think two calls before this one will introduce to give a bit more details. So before we would say, like, 1.2 take rate, then we said we start to say two digits, you know, like, one fifteen or one nineteen just so that you can guys track.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

But this strategy and the trends hasn't changed. So in the 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.

Analyst

Understood. Thank you.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

All right. So I think we're going to wrap things up. Apologies if we haven't got 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.

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

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.

Mikheil Lomtadze
Chairman of the Management Board , CEO & Director at Kaspi.kz

Thank you.

Operator

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

David Ferguson
MD & Head of Investor Relations at Kaspi.kz

Goodbye.

Analysts
    • David Ferguson
      MD & Head of Investor Relations at Kaspi.kz
    • Mikheil Lomtadze
      Chairman of the Management Board , CEO & Director at Kaspi.kz
    • Ygal Arounian
      Director - Internet Equity Research at Citi
    • Darrin Peller
      Managing Director at Wolfe Research, LLC
    • Reggie Smith
      Executive Director - Equity Research at JP Morgan
    • Jamie Friedman
      Senior FinTech and IT Services Research Analyst at Susquehanna International Group
    • Analyst
    • Gabor Kemeny
      Senior Analyst at Autonomous Research
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