Joint Stock Company Kaspi.kz Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 4, 2025

Key Takeaways

  • Positive Sentiment: Kaspi reported Payments TPV +21%, revenue +16% and net income +19%; Marketplace GMV +15%, revenue +25% and net income +13%; and FinTech origination +17%, revenue +21% and net income +8% in Q2.
  • Positive Sentiment: E-grocery remains the fastest-growing ecommerce vertical with GMV +57% YoY, over 1.1 million consumers and 3.4 million transactions (+63%), now in five major Kazakh cities.
  • Positive Sentiment: The newly launched fixed-term deposit product saw balances rise 207% YoY and customer count up 263% to 160 000, with roughly one-third of deposits from new inflows.
  • Positive Sentiment: The KaspiQR network grew partnerships to five banks plus Alipay integration, processing 3.4 million QR transactions in Q2 (up 128%), boosting SME digital payments.
  • Negative Sentiment: Smartphone sales in the marketplace declined 17% YoY due to new registration requirements, leading Kaspi to introduce merchant and consumer verification tools.
AI Generated. May Contain Errors.
Earnings Conference Call
Joint Stock Company Kaspi.kz Q2 2025
00:00 / 00:00

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Operator

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

David Ferguson
MD & Head - IR at Kaspi.kz

Great. Thank you, Elliot. Good morning, good afternoon to everyone who's joining us. Welcome to Kaspi KZ Second Quarter and First Half twenty twenty five Financial Results. I'm David Ferguson from Kaspi, joined on this call by Mikhail Lontarza, CEO and cofounder of Kaspi KZ, Yuri Dudenko and Tengees Masitsi, our deputy CEOs.

David Ferguson
MD & Head - IR at Kaspi.kz

So as usual, Mikael will start the presentation, run you through an update on some of the key initiatives in the second quarter and first half of the year. I'll take you through the financial slides, and then we'll open the call up to q and a. So on that note, over to you, Mikhail. Thank you.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

Thank you, David. So let's move straight away into the updates. So for the second q, we had a good strong performance in spite of the still continuing environment of high interest rates. Our payments continue to perform well, and this is very sizable business. As you all know, our TPV plus 21%, revenue 16, and net income plus 19%.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

So we're pleased with the performance. Marketplace continues strong growth. GMV plus 15%, revenue plus 25, and net income plus 13%. GMV, especially on ecommerce side, continues a strong growth except the smartphones, plus 31%. I will cover this later in in the presentation.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

And then fintech continues to generate strong volumes, plus 17%, 21% revenue, and net income plus 8% in spite of the high interest rates this year. Consumers continue to be engaged strongly, probably one of the we believe being the leading business in terms of transactions per consumer of 75 transactions per month and revenue plus 20%, and net income plus 14%. E grocery, the business which we, you know, started, I if I recall correctly around three years ago, continues to be our probably fastest growing ecommerce business, plus 57% year over year in terms of the GMV. We already have over 1,000,000 cuss consumers, 1,100,000 in the in the end of second q and generating 3,400,000 transactions. In transactions, we're up 63%, and in the GMV, we're up 57%.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

We continue expanding the grocery across the country and entering the new cities. So we are now in the five largest cities of Kazakhstan, which is Almaty, where we started Astana, and we also opened this year in Aktoben, Schimkendt, and we're also expanding in in Karaganda. So we have five cities now, and we are expanding further in Astana and Almaty. We're adding another dark stores or, you know, logistics centers from which we're actually delivering to our consumers, and we are we're planning, to open another two, basically, in 02/2025. We have, also, introduced, earlier this year, a deposit on the fixed term deposit at a higher interest rate.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

So here, we're giving you a bit of a, overview of its performance. We're very pleased. This deposit has shown an extraordinary growth of 207% in terms of the amounts and 263% in terms of the number of customers, almost 160,000. And, you know, it's performing pretty much as we planned. So as you can see, you know, this is a product where which is targeting consumers which are saving for something.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

And apart from so and then, basically, apart from the from the consumers, which are shifting from our current deposit into this in into savings deposit because they have savings needs. We also around the third of the of the volumes is actually a new inflow. So very successful product, and we truly believe that even though interest rates are high, you know, today, they will come down in the future, and we just continue acquiring consumers. And those are the consumers which eventually are transacting through our services because we are transactional business, and we allow sellers to sell, buyers to buy. So when there are consumers with the money and savings, eventually, they're they're spending those through our services.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

So really encouraging trends of the deposit products which we have launched. We also have been giving an opportunity to others to leverage our payment network, KaspiQR, which allows our merchant partners to accept the payments not only from users of KaspiKeyz mobile application, but actually other of our colleagues on the market. So I have seen a very good results. The volumes are up 128%. We have processed in the second q 3,400,000 transactions.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

At the moment, we have, you know, five banks working with us. And as you recall, we also have integrated with Alipay. And and through Alipay, basically, we're allowing our consumers, to transact on their vacations in China or other locations where Alipay is functioning as well as our partner merchants to acquire and and to to pay basically for, the goods that they might acquire in in China and then, you know, bring to Kazakhstan and sell through our marketplace. So very encouraged by those trends, and we'll continue to partner with other financial institutions, going forward. But already, it's a pretty good decent result.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

We also are historically as you know you know, we are building up on our payment infrastructure and the payment use cases. You know, this is how we actually started our ecommerce business. This is how we've started our travel business. Just taking advantage of building additional value through specific vertical related innovations. And here is an example of, our entry into the restaurants business.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

So we are scaling quite nicely. It's it's a very high growth, still not sizable in terms of the size because we have just launched it, but quite good encouraging result. Net promoter score is very high from our customers and merchants. The functionality is pretty straightforward. You know, you are you know, as a as a as a restaurant, you basically are reducing the time for your waiters to spend on bringing the bringing the receipt and and so on.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

So they are focused more really on the serving. As a result, you know, restaurants get more sales. This is especially in the peak time, so this is the biggest benefit for the restaurants. From the consumers, quite straightforward, functionality, you just scan the QR code, which you have on the table, and you pay straight from our mobile application. And one nice feature, which is also part of the service, is you can actually tip the waiter.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

And the waiter is, you know, waiters are happy because everything goes seamlessly, and so we're delivering the value for everyone involved in this service, in the restaurant itself, in the consumers, and for the waiters. So it's, know, everybody working faster, more efficiently, and we enable our core competency through the technology, which is accepting payments fast and providing a very reliable service. We also have been expanding the suite of our advertising tools for the merchants. This business is growing really fast, and we have launched a new service for our merchants, which basically enables the merchants to provide the cashback sort of bonuses directly to consumers. Very simple, service to operate.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

We have positive feedback from merchants. You can basically, select the promotional terms, you know, select the products you would like to promote, and then you just push the button, and you can basically track the sales uplift, the views, and other metrics related to advertising. So have been really well received. As you know, our strategy is always to be rolling out their services with the confidence that we deliver the value. So we're still in the process of of scaling, but already have a very good results and engagement from the merchants.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

So this service continues to fuel our advertising services growth. So as you can see, our ad revenue has increased to by 67% in a in a second queue. And, yeah, this is one of the services which we're extremely happy with the trends and engagements and and more to come. We also have been describing and explaining to you during last call that we have growth of the smartphones has been temporarily impacted by the requirement of really the registered smartphones, which is, you know, in a simple words, it's quite natural. You know, the the legislation has been introduced, which require the consumers to register their smartphones.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

If this smartphone wouldn't be registered, then it's basically becomes an operational brick. So from from our perspective, you know, this supply and the consumer demand dis disruption just happens temporarily, really. But we still would like to indicate that, actually, the growth of all other verticals in our ecommerce continues to be very strong. And without the smartphones, the growth is at 3031%, which just an indication how underpenetrated the ecommerce is and how much growth we have ahead of us. And things like beauty and personal care and clothing are growing 6354%, respectively.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

Just telling you, you know, that there is still more growth and the innovations we can do around specific verticals, but the smartphones, this temporarily temporary setback. But we also are not just sitting and, you know, observing. We, of course, are introducing the services for both merchants and the consumers just to give them peace of mind and understand that, actually, the the phone is registered, and and we have developed a service for both merchants and consumers to overcome this obstacle. So, actually, merchants before shipping the smartphone through our ecommerce, they should be they should be actually they they must check the smartphone whether it's registered for bringing inside of the country on the one hand. And then on the other hand, merchants earn the the badge, which on their product, which just means verified by the merchant, the smartphone.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

And on the other hand, customers themselves also can verify smartphones and make sure that the smartphone they have acquired is the smartphone which which is registered. As a result, we are sort of tackling this, from the both sides. We're giving tool to the merchants. We're giving tool to the customers. And, yeah, we just believe that this the demand is there, and we just believe this is temporary setback due to due to the regulation, which just requires a bit more, you know, communication and help from our side, and that's what we're doing.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

We have also are, know, very excited to introduce the new service, which is domestic tours in Kazakhstan. Kazakhstan is a beautiful country, and there are so many destinations that you can visit. And it can be over the weekend. It can be a quick trip into mountains. It can be a ski resort, or you want to spend a week in the beautiful nature with your family.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

So we have introduced the domestic tours. And, basically, you know, as you recall the travel, we have international vacation packages. So that's that's is specifically targeted to promote beauty of the country, and we have we have developed the functionality, which it has been well received. You know, you can choose the region and the dates. You can browse browse browse list of offers.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

You can read the tour details and understand those better, and then you can seamlessly pay in our mobile application, and you get confirmation for your vacation. So really nice tour. You know, obviously, we started from the low base, but it's 10 x growth in June. It's the season now, so we observed quite the strong adoption. But, again, this this is the service which we will be purposely also promoting and building up.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

We are really honored and excited to to promote the beauty of the country, and and Kazakhstan is truly beautiful. It has so many beautiful locations to visit. So we're very happy and excited about this new business we have launched. David, back to you about the platform performances.

David Ferguson
MD & Head - IR at Kaspi.kz

Alright. Thank you, Mikhail. So just to run quickly through the performance financial performance of the respective parts of the business starting with payments. Demand volumes remained robust and consistent throughout the first half of the year. Volumes up 14% year on year in the second quarter, up 15% year on year for the first half.

David Ferguson
MD & Head - IR at Kaspi.kz

Faster TPV growth faster TPV growth versus volumes is a function of higher ticket size inflation, up 21 year on year in the second quarter, up 22% year on year for the first half. So, again, strong and consistent trends with, as usual, sort of three key flat products, CASB pay, b two b, and bill payments all contributing. Take rate moved down, a function of mix effect, again, consistent with what you see now over the last couple of years. Basically, as QR grows in the mix, it's take rate die die dilutive, but this is consistent with the long run trend. Payment revenue, up 16% in the second quarter.

David Ferguson
MD & Head - IR at Kaspi.kz

So even with take rate dilution ahead of volume growth, volume growth was 14% in the second quarter. So that also reflects both strong volume growth, but also good growth in liquidity revenue. And then, again, as you've consistently seen with the payment business, strong top line drops through to the bottom line. So faster bottom line, high profitability and faster profitability growth, up 19% in the second quarter of the year and up 20% for the first half of the year. Moving on to marketplace.

David Ferguson
MD & Head - IR at Kaspi.kz

Again, marketplace demand overall remains very strong and consistent, up 35 year on year in the second quarter, up 36% year on year for the first half. GMV growth is lower than volume growth. Although we did hold Juma in the second quarter and it was successful overall in the second quarter. Number one, we run we run fewer promotional campaigns. And number two, as Mikael talked about, declining smartphone sales down 17% year on year in the second quarter.

David Ferguson
MD & Head - IR at Kaspi.kz

That impacts GMV. It doesn't really impact volumes to the same extent, but smartphones are a higher ticket item, so it's more apparent at the GMV level. Despite that strong take rate improvement being driven as usual by advertising revenue, delivery revenue, and revenue from classifieds take rate moving up 70 basis points year on year in both the second quarter and in the second in the first half of the the year that will feed through to faster revenue growth. If you break it down by the respective marketplace segments, decent ecommerce GMV growth of 22% year on year in the second quarter, up 23% year on year in the first half. If you exclude the smartphone category, ecommerce growth in the second quarter would have been up 31% year on year.

David Ferguson
MD & Head - IR at Kaspi.kz

Take rate moving up a 120 bps in the second quarter and a 130 basis points improvement year on year for the the the first half. So pretty pretty decent take rate expansion. M commerce, slower growth, also just like ecommerce impacted by smartphones, but also, M commerce is being impacted by the structural trend of offline merchants moving to online. The beauty of our business model is we capture both and m commerce, actually, that relationship with the offline merchants is a source of competitive advantage relative to online only merchants. So solid growth and solid take rate trends around 9% in both the second quarter and first half of the the the year.

David Ferguson
MD & Head - IR at Kaspi.kz

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

David Ferguson
MD & Head - IR at Kaspi.kz

With take rate moving up, revenue growth is ahead of GMV growth. So revenue growth for marketplace was up 25% year on year in the second quarter versus the GMV growth I showed you of up 15% and for the first half of 29% versus GMV growth of 17%. So overall, pretty healthy revenue growth expansion for for for marketplace and also decent bottom line growth of 1316% year on year in the second quarter and first half respectively, albeit the ongoing trend of z grocery grows in the mix that is a lower margin business, but overall a good result for marketplace. And then on finally in in Kazakhstan, our fintech origination remains pretty healthy, up 17% year on year in both the second quarter and the first half of the year. As you've consistently seen over the last couple of years, the origination growth is being driven first and foremost by our our merchants and micro business business finance products, they grow at a faster rate, continue to grow at a faster rate than our consumer lending products.

David Ferguson
MD & Head - IR at Kaspi.kz

The average loan portfolio saw strong growth, of 33% year on year in both periods. This is a lead indicator for future revenue growth and stable pricing trends flat year on year in both second quarter and the first half. The deposit price is also now starting to see decent growth of 18% year on year in the second quarter, 19% year on year in the first half. And what you see here is that we raised rates in April. We started to promote the new deposit products more more more widely, a month on month month trends in the deposit base have started to improve with with June seeing the strongest month on month growth year to date, June deposits being at the highest level year to to to to trade.

David Ferguson
MD & Head - IR at Kaspi.kz

So the trend is now moving in the direction that we wanted to to to to to see. So it's good for the future that that is coming through the healthy deposit growth. Risk trends remain stable, flat year on year. Cost of risk, naught point 6% in the second quarter of the the the the year, and NPL trends have moved up slightly, but not materially. I would expect them to remain at around these levels or somewhere between where they were at the end of of of last year and current levels for the remainder of the the year.

David Ferguson
MD & Head - IR at Kaspi.kz

The lower coverage reflects the growth in the car loan product, which is a collateralized product and therefore requires lower coverage. And, again, that has been a trend over the last twelve months as the the car loan product has scaled. So a decent fintech origination and stable pricing trends that has translated into healthy revenue growth of 21% year on year in the second quarter, up 19% year on year in the first half of the year. Higher interest rates have impacted bottom line growth as we indicated they would at the time of our first quarter results. You see that up 8% in the second quarter and for the first half of the year.

David Ferguson
MD & Head - IR at Kaspi.kz

But the deposits are delivering what they're expected to to do. They will help us capture more transactions or fund more transactions in the the future. And when if rates move down, fintech will be a a dramatic beneficiary. Profitability will be a dramatic beneficiary of that. That wraps up the Kazakhstan side of the the business.

David Ferguson
MD & Head - IR at Kaspi.kz

Moving to Hepsie Berada in Turkey. Just to remind people, Hepsie Berada published its financial results on Thursday of last week, so its detailed financials are available on the Hepse Verada investor relations website. But what is clear in the second quarter, a much better performance versus the the first quarter of the year. Here you see that volumes moved back into positive territory, up 7% year on year in the second quarter versus down 2% year on year for the first half. The combination of growing volumes and mid single digit ticket expansion translated into decent GMV growth of 16% in the second quarter versus down 1% for the first half of the year.

David Ferguson
MD & Head - IR at Kaspi.kz

This GMV growth is in real terms is is inflation adjusted, and overall is a reflection of recovery in the retail environment post March, number one. Company specific issue initiatives, number two, particularly in the one p side of their their their business, which grew faster than three p during the quarter, and also favorable base effect second quarter of, last year or first quarter and second quarter of last year were impacted by the timing of the election. The first quarter of last year was was was strong, tough tough tough base. With good and improving revenue growth of 23%, helped by growth in one p and helped by delivery initiatives, helped by the growth of the delivery platform that translated into faster bottom line or faster EBITDA growth of 42% in the second quarter, which is illustrative of the actual strong sort of operational gearing that exists business and can be seen as the revenue growth comes through and improves. Net income was negative.

David Ferguson
MD & Head - IR at Kaspi.kz

Underlying sort of losses declined with small and declined materially year on year, 243,000,000 lira in the second quarter, an improvement versus a loss of 434,000,000 in the second quarter of last year. But also, there were that's only around $6,000,000, but there are also some one offs related both to credit provisioning. This is related to Pepsi's existing credit products, so they should this should not be confused with our planned acquisition. We're banking license in tech in the products that we will launch in the future. That acquisition is still on track to complete in the second half.

David Ferguson
MD & Head - IR at Kaspi.kz

So it reflects existing product set and also one offs primarily related to Pepsi Verada international. But overall good underlying trends in all aspects of Hep C's business in the second quarter of the year. So for Kaspi KZ, the second quarter exactly as we expected it to to be, trends in line with our full year guidance. And they also actually with Hep C Barada Hep C Barada moving as we expected it to to to be and its losses ultimately small in the context of KZ number one and small in the context of the opportunity that exists in Turkey. Finally, guidance in Kazakhstan reiterated the third quarter has started well and we are on track exactly where we expect to be.

David Ferguson
MD & Head - IR at Kaspi.kz

And just to clarify on capital returns, as you know, we have always had and we continue to have an extremely cash generative business in our core market. We told you that this year was about making investments in international Turkey to ensure strong future growth for many years to come. We've made good progress completing the final the acquisition of Hepzibirada. The final payment was made in June. We're on track to close the banking license acquisition in the second half of this year.

David Ferguson
MD & Head - IR at Kaspi.kz

So as we move into 02/1926, we expect to be able to once again have capital returns to our shareholders in much the same way was the case between 2020 and prior to the hep C acquisition. Capital returns can include both dividends and buybacks with the decision being made at the appropriate time. So that's it on Kazakhstan and Turkey. I think with that, we can open the call up to Q and A.

Operator

Thank you. And Our first question comes from Wayne Chun with Citigroup. Your line is open. Please go ahead.

Wayne Trinh
Wayne Trinh
AVP & Equity Research Senior Associate at Citi

Hey, guys. This is Wayne on for Ygal. I just wanted to ask about what you're working on terms of product improvements at hep C. Could you highlight to us which ones are the most important and what we should expect as we progress through 2025 and 2026?

David Ferguson
MD & Head - IR at Kaspi.kz

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

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

Sure. Well, I mean, in in general, I would say that, you know, our our strategy is to, you know, introduce quite a lot of products which we have in our core market. Initial initial focus or the priority is still to make sure that existing customers and merchants are extremely happy with the current services. Just to remind everyone, our business model is and our execution skills are really based on ability to innovate at unprecedented rates. If you look at the history of Kaspien and the things we have innovated around in in a marketplace or fintech or the payments area.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

But in order for that strategy to be successful, it's it's super important that your current customers and merchants are extremely, extremely happy. And I'm not saying just, like, happy, like, for any ordinary business, but really happy. And that's is a foundation of the future success. And, therefore, at the moment, the main focus is really to, to make sure that the existing, services provided, specifically through ecommerce business, are and the pay and the payments and fintech to a certain extent even though it's really small, the those are brought to the level of, you know, standards. And and there are multiple projects which teams are running, and there is everything starting from from the delivery to, you know, user experience and and the fintech products.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

So the the year this year, as I've mentioned on the previous call, is is really the quality, and just bring bring those services to the level, which is which is required by by, you know, by the desire to innovate and all next services being a very high adoption. So the the the current performance is very encouraging. The results from some of the projects which have been already implemented or are in the process of being implemented and giving a very successful results, and you can see that in the growth acceleration in the second q. But, you know, we're really are focused on the quality rather than the quantity still this year. So main priority again is core business, which is ecommerce and all the services around the around the ecommerce.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

And then yeah. And the rest, the fintech side of things is the, you know, the major innovations are will be coming when we complete acquiring the banking license.

Wayne Trinh
Wayne Trinh
AVP & Equity Research Senior Associate at Citi

Got it. Thank you. And then maybe a second one for me is, how do you think about your growth initiatives in Kazakhstan, the opportunities that remain there? And how should we think about the progression of the restaurant business and maybe any other verticals

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

Well, the growth the growth in Kazakhstan is, the market is still underpenetrated, and you you can see, you know, example of the specific verticals we really showed, like, you know, you know, clothing and and fashion, you know, growing at the very high rates. I think it's, what is it, around 60% or something we've showed. So that there is there is a growth, and what we are executing really the strategy, which is going after specific verticals. Again, this is something which we'll already have done before and also articulated e grocery is a strategy around specific vertical. Buying e grocery is different from buying electronics.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

And, you know, travel, it's a it's a strategy around specific verticals. The same now we're doing pretty much in all major verticals, and restaurants is one of those. It's it's a may it's a major vertical in the household spending. We've just launched a very simple sort of functionality which brings immediate value. You know, in our estimate, you know, in general, every sort of vertical we're entering, it has to be in the range of a billion dollar size sort of market potential.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

You know? Like, the the same was with travel, the same was with grocery. So it really applies pretty much to all major verticals. If we take a vertical specific strategy, that scale matters, frequency of transactions matters, and this is how we're picking those verticals to to deliver the value. And, again, we're working on the both sides always.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

Our business is to connect merchants and the buyers, sellers and the buyers, you know, restaurants and the and their customers and our consumers from the mobile applications. And our technology enables just to connect them, deliver the value, and then on top of it, we we can start bringing up some additional value added services. In ecommerce, value added services are around advertising, for example, and the same opportunities exist in in restaurants. So we've just really started. We're rolling out at scale this infrastructure of, you know, scan and pay and leave the tip.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

And then, of course, in the future, some other added value services will, yeah, will will come together with the restaurants. I mean, I I would I wouldn't be really saying to you anything new, but the things which are related around the you know, in the in in other businesses in the world exist around restaurants. Right? Those are the reviews. Those are the marketing campaigns, you know, the loyalty programs, the cashbacks, and so on and so forth.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

So there is a really range of the services which we believe we can develop, but our priority is always we start simple. We deliver immediate value. We get sort of the scale, and then we start innovating by value added services when both merchants and and consumers are extremely happy with our base value proposition. And it's exactly the same strategy with the restaurants. It was exactly the same strategy with the marketplace, exactly the same strategy with the grocery, exactly the same strategy in Hepsigurada.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

We are really taking our time to make sure that our current offering delivers value, you know, delivers the excitement to consumers and merchants, and then we build with our strategy then becomes, let's build on this and let's start this wave of innovations. And that's what we have done historically successfully, and this is the playbook which we employ always in every single time.

Wayne Trinh
Wayne Trinh
AVP & Equity Research Senior Associate at Citi

Alright. Great. Thank you much, David.

David Ferguson
MD & Head - IR at Kaspi.kz

Thank you. Great. Thanks, Wayne.

Operator

We now turn to Gabel Khamenei. Please state your company name and proceed with your question.

Gabor Kemeny
Senior Analyst - CEEMEA Financials at Autonomous Research

This is Gabel from Autonomous. I had a few questions on firstly, on the fintech. So I believe your funding costs increased as you expected relatively significantly in q two, maybe a 13%, 14% the blended average. Can you help us think about the outlook here? So how do you expect your funding costs to develop if rates stay where they are?

Gabor Kemeny
Senior Analyst - CEEMEA Financials at Autonomous Research

My other question would be on the on asset quality. I noticed the uptick in the NPL ratio and that your quarterly provisions seem to imply a 2.5% provisioning rate. I believe you formally guided for 2%. Just some color on how you think about asset quality going forward. And finally, on your comment on a balanced capital deployment from next year between cash and or like distribution and investments.

Gabor Kemeny
Senior Analyst - CEEMEA Financials at Autonomous Research

Can you help us scale the investments in Turkey beyond the banking business, the $300,000,000 you indicated? And in relation to that, I mean, given the stock's valuation, at what valuation levels would you say that you rather allocate a substantial part or most of your free cash generation to share buybacks? Thank you.

David Ferguson
MD & Head - IR at Kaspi.kz

Alright, Gabor. Gabor, I can make a few comments on that. So cost of deposit funding increased 70, I think, bps year on year in the second quarter. And the second quarter pretty much reflects the full impact. I raised rates not on the April 1, but very, very early in the the quarter, and the new products are out there.

David Ferguson
MD & Head - IR at Kaspi.kz

So at or between that and around a sort of 100 bps level is probably a reasonable expectation in terms of how the cost of funding increases over the course of the year. So that's on your first question. On and that's actually consistent. We said that at the first quarter results. On the second question on cost of risk, what you should remember is in the first quarter, we did put through additional macro provisioning related to higher interest rates.

David Ferguson
MD & Head - IR at Kaspi.kz

So that's sort of separate from underlying risk, underlying risk trends. So what we actually see are stable year on year. So let's see if that macro provisioning is is is is needed. So that's on that. On the third question from my side, I would just say, I mean, the bank acquisition is happening.

David Ferguson
MD & Head - IR at Kaspi.kz

So that needs to come come complete in the sec and that's a call on on on capital. That decision is is is being made, and it's fundamentally important. And, I mean, it's actually a a major competitive advantage to secure a banking license within such a short period of time. I think going into 02/1926, again, the point is that we're very, very fortunate that we have this massively cash generative business in our home market, and nothing has changed in that regard. Now I set a decision around sort of mix between if there is a mix between dividends and buybacks, we make that at the appropriate time, and that's true.

David Ferguson
MD & Head - IR at Kaspi.kz

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

Gabor Kemeny
Senior Analyst - CEEMEA Financials at Autonomous Research

Okay. You.

Operator

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

Darrin Peller
Managing Director at Wolfe Research, LLC

Guys, thanks. Just real quickly, I mean, the smartphone impact, I know you called out the actual quantitative impact in the quarter. But number one, mean do you feel like the progress you're making on certain partners is going to help stabilize that? And should we just expect that to be something that anniversaries in a couple of more quarters? Or is it a gradual impact that progresses in any way?

Darrin Peller
Managing Director at Wolfe Research, LLC

And then when thinking about the marketplace segment, I know you talked about less promotions around Joomla. Just curious what the dynamic were, the thought process was there? And putting it all together, I mean sustainable growth, you have some puts and takes this quarter. So sustainable growth, I mean you have a lot of drivers that are being innovated right now that you talked about before. But help us understand your updated and latest thoughts on the recent growth trends, how you think about that segment over the next year or two just given given what's really in front of you going forward? Thank you.

David Ferguson
MD & Head - IR at Kaspi.kz

Do you wanna take that, Mikael, on this the the the smartphones and promotional activity?

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

Sure. I mean, Darren, in general, thank you for your question. In general, I would say, we did we we we are trying to sort of explain, you know, just showing the growth in other verticals. Right?

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

So, you know, as as we have explained the growth in Without smartphones is 31%. So, you know, it's really healthy sort of growth rates. And, for example, you know, clothing and and the beauty are grow growing around 60% year over year. So that's I think it's a good indication of the of the potential really of the marketplace business.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

And this and the smartphones, the the projections for what's going to the smartphones, I mean, we haven't been really in a in a similar situations before. So the only thing what we are doing is are doing what what, you know, can bring the results and and what we can ourselves control. Right? And what we are developing is a service which develop the service which gives comfort and peace of mind to both merchants and the consumers. So demand for the smartphones, for example, is there.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

It will have to be satisfied at some point. I think we are doing the services which will enable to sort of, you know, cross this obstacle or or doubt that consumers and merchants currently have around these devices. And, you know, we we just believe on our side that this demand will have to be satisfied eventually. So that's, you know, basically where we are in terms of the smartphones, and we are doing our part of the job. You know?

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

And and, yeah, we're not we're not over we're not over promising anything. What we're saying is we look at the consumers. This is our job is to understand the merchants and consumers because this is where our expertise is, and and they they do see the obstacle in their purchase decision. And we have developed the service which will enable enables them to overcome this hesitation to acquire smartphones. And, hopefully, the market, you know, the trends will recover because, again, there is a demand.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

So nothing happened really with the demand. This is sort of the obstacle which was created with the with the introduction of requirement to register the smartphones. But, again, if you take the smartphones separately, you know, you can see that the growth even in electronics, excluding the smartphones, growth on our platform is 26%. Home and garden and furniture, 35%. Clothing, 54.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

So those verticals are growing really at a very healthy rates. And therefore, yeah, we just we, you know, on our on our hand, we just believe that demand is is there. It will recover, and we just need to do our job. And our job is to enable transaction between sellers and the and our partner merchants and the customers, consumers, and enable this transaction through the technology, which we know how to develop and and and the and the tools of data, which we know how to how to use to help both parties. So that's what we're doing.

Darrin Peller
Managing Director at Wolfe Research, LLC

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

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

Well, I think, yeah, I think I think the bay the basic sort of observation there is is is is quite simple. If we're in a high interest rate environment, you know, we have to take this is an opportunity to to acquire more cons customers with the with the with the savings and build up these capacities because customers with the savings are the most valuable customers really for any of our products. And, yeah, we are in the high interest environment. You know, I am not micro macro person, so this is not, you know, my specialty to explain. But, you know, our job is when we see this environment, we take most of it and interest rates eventually will go down.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

And the way we sort of look at this in our business that there are high interest rates which evaluate our interest expenses, but this is almost like the the cushion, you know, on the expenses side. And, eventually, it will go down. And as we're focused on a very healthy user base, as we're focused on a on a healthy risk metrics on the fintech side, you know, eventually, pro profitability will follow because the top line is there, and the risk is is is a world class. And the interest rate rate eventually will go down, and therefore, this will this will flow to our bottom line.

Operator

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

Reggie Smith
Reggie Smith
ED - Equity Research at JP Morgan

Hey. Thanks for taking the question. I guess I just wanted to clarify the comments around the dividend and share repurchase potential. It sounds like you guys obviously have some capital commitments on the bank licensing side this year. But as we think about '26, should we assume a similar, I guess, return to capital ratio?

Reggie Smith
Reggie Smith
ED - Equity Research at JP Morgan

I think it was like 60% in '24. Should we assume that going forward? I know you said you suggested that, I guess, you would resume a similar type cadence, but I'm just curious about the ratio, recognizing that there may be some investment in Turkey. So should we think about it being in the same range as '24 with a cross dividend and and share repurchases or or something less than that?

David Ferguson
MD & Head - IR at Kaspi.kz

So maybe

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

Thank you, Rich, for your for your for your question. I I think that, you know, basically, what the what you know, from our from our perspective, you know, we again, we we we mentioned always that we'll be, you know, prioritizing the investment for the further growth, and and that's very exciting opportunity because we're building business for many years in front of us. And and we we we have this internal ambition as we mentioned that, you know, we would like to be a company of 100,000,000 users, and that's what is on on on our minds, and that's very important. So always, we have to keep that in mind. At the same time, what we're also saying is this year has been an extensive year for investments.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

I mean, the size of investments that we have done are quite substantial. And when we go into the next year, you know, there will be a balance between, you know, our ability to distribute capital to our shareholders either through the dividends and the buybacks or and and and investments. Again, investments will be important, but we're lucky to have a very, you know, profitable and cash generative core business, and and that's what allows us to, you know, to think in those terms for the next year. I mean, whether specific payout ratio or anything like this, at this stage, it's quite, early to have, you know, those specific discussions. So we'll we'll make those decisions, you know, as we go forward.

David Ferguson
MD & Head - IR at Kaspi.kz

And I just sort of Yeah.

Reggie Smith
Reggie Smith
ED - Equity Research at JP Morgan

That makes sense. And then and then thinking about

David Ferguson
MD & Head - IR at Kaspi.kz

Just to add to that, I can, Reggie, just one point. There will be investments, and there always has been investments. You should keep that in mind. So e grocery has been a massive investment. The largest poster network in the country in Kazakhstan has been a massive investment.

David Ferguson
MD & Head - IR at Kaspi.kz

So, again, the business has the potential to achieve a balance, make investments, and and return return capital.

Reggie Smith
Reggie Smith
ED - Equity Research at JP Morgan

Got it. Understood. And then just thinking about the banking license, does this does this put you on par with competitors there? Or does it kind of extend or create a gap where you'll have capabilities that some of your competitors in Turkey won't have? And then finally, as I think about the investments, obviously, for the banking piece would be one, but like how what do investments look like?

Reggie Smith
Reggie Smith
ED - Equity Research at JP Morgan

Is it rewards to consumers? Is it like, talk a little bit about the nature of of what investment looks like in Turkey. Thank you.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

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

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

So from that perspective, once we get the license, I wouldn't again, I wouldn't expect, like, quick wins. You know, you never saw from us that we'll be we always like to discuss the results and actual trends when we do something rather than just tell you about some ideas which we have been working for three or six, you know, months in a pipeline. So we always do something, and then we tell you, you know, the the initial encouraging results and how this is going to evolve. So step number one, get the banking license. Step number two, just put the framework to launch the innovative financial services for for consumers and merchants.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

And then, you know, we just believe that, you know, we can make a difference in the consumers and merchants' lives just because the services we have are, you know, technology and and and machine learning AI driven, and they're really, really improving everyday, life of our customers and merchants and their needs. But that's basically so the the the big then taking and building up the bank, of of course, it also requires our diligence with the with the compliance, you know, risk management, and all other requirements, which we have a lot of experience in, but that obviously also requires from us to be very detail oriented and execution driven. But, you know, once we get the license again, we'll be, you know, introducing and and and launching the services which are which services which you already guys know of on the Kaspi side for a long time.

Operator

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

Cihan Saraoglu
Cihan Saraoglu
Analyst at HSBC

Hello. Thank you very much for for this call and the presentation. I have two quick questions. One is, in the past, we you used to distribute dividends or do the announced buybacks on a quarterly basis. So based on your comments about resumption of dividends in 2026, shall we expect dividends to start in the 2026?

Cihan Saraoglu
Cihan Saraoglu
Analyst at HSBC

Or is that just a broad guidance? That's one. Second question is about FinTech bottom line, which on a Q on Q basis seems to have grown despite the increase in funding costs. So if you could explain what mitigated the increase in funding costs beyond volume growth there? Thank you.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

Okay. So on the thank you for your question. On the on the dividends, or buybacks, basically returning the capital, I I I think, as we said, there is not much really to add. You know, we can't really commit to you at this stage on quarterly or semiannually or whatever. So we were just saying that, the know, we have a very good solid cash generative business, and there is a, you know, the next year, we'll have the we'll be, finding the balance, between the investments and distributing capital to our shareholders.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

I mean, everybody should also keep in mind that I'm shareholder in the company, and I'm, you know, making decisions based on what is going to bring the the most value to the company and its shareholders long term. So I am, you know, investing alongside with with with other shareholders. In terms of the, in terms of the the question about the fintech business, I think we did mention this before, yeah, exactly what happened. The volumes increased. With the volume increased, revenue increased.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

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

Cihan Saraoglu
Cihan Saraoglu
Analyst at HSBC

Thank you.

Operator

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

David Ferguson
MD & Head - IR at Kaspi.kz

Okay. So thanks, Elliot. We've got to wrap things up now. We have another meeting starting shortly. So thanks a lot for everyone's time today.

David Ferguson
MD & Head - IR at Kaspi.kz

Please feel free to get in touch if you have any questions. But thank you. Have a great summer, and we'll speak to you at our q three results. Thanks, everyone.

Mikheil Lomtadze
Co-Founder, Director, Chairman & CEO at Kaspi.kz

Thank you, everyone. Have a good week.

Operator

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

Analysts
    • David Ferguson
      MD & Head - IR at Kaspi.kz
    • Mikheil Lomtadze
      Co-Founder, Director, Chairman & CEO at Kaspi.kz
    • Wayne Trinh
      AVP & Equity Research Senior Associate at Citi
    • Gabor Kemeny
      Senior Analyst - CEEMEA Financials at Autonomous Research
    • Darrin Peller
      Managing Director at Wolfe Research, LLC
    • Reggie Smith
      ED - Equity Research at JP Morgan
    • Cihan Saraoglu
      Analyst at HSBC
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