The Pioneering Bank Creating Kazakhstan’s Tomorrow

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By John Manning, International Banker

 

In 2023, Halyk celebrated its 100^th birthday, thus marking a monumental milestone in the illustrious history of Kazakhstan’s biggest financial institution and undisputed banking pioneer. As a result of one century of hard work and dedication, Halyk became a leading financial-services group, operating across a variety of segments, including retail, SME (small and medium-sized enterprises) and corporate banking, insurance, leasing, brokerage and asset management. The bank’s dominant presence in Kazakhstan and the wider Central Asian region is a testament to its unparalleled standards of customer service, professionalism, robust corporate and governance standards, and relentless pursuit of the most innovative banking solutions over the decades. With the country undergoing a digital-banking revolution, Halyk stands at the forefront, ready to serve the rapidly evolving banking needs and preferences of its millions of customers.

Indeed, those millions underscore the dominant stature that Halyk commands in Kazakhstan today. The bank has both the largest customer base and the most extensive sales-channel network in the country, with 10.9 million active retail customers and more than 371,000 active corporate and SME (small and medium-sized enterprises) customers. As shown by its financial results for Q1 2024, Halyk managed to generate net interest income (before credit-loss expenses) of KZT 254,236 million (US$553 million), a spectacular 32.4 percent more than a year ago. The bank also has the highest credit ratings of any bank operating in Kazakhstan today.

Much of this success can be credited, indisputably, to Halyk’s digitalisation strategy. Whilst the focus was predominantly on creating a sprawling physical, branch-based presence across the country once upon a time, it is the bank’s advanced digital-banking capabilities that are attracting the Kazakhstani people to Halyk’s shores in today’s online-oriented world. In terms of hard numbers, this equates to a whopping 90 percent of Halyk’s retail loans issued through digital channels such as the bank’s mobile-banking application, Halyk Super-App. On the business-banking front, meanwhile, cutting-edge products such as digital performance bonds and credit lines are generating the most interest from Halyk’s SME customers at present.

Halyk also experienced phenomenal surges in both payment volume, by 43.5 percent to KZT 3.3 trillion ($7.1 billion), and payment numbers, by 25.3 percent, during Q1 2024. Again, this was almost exclusively driven by the astonishing evolution the bank is undergoing within the digital-banking realm.

Halyk Super-App provides a highly convenient platform for customers to make all kinds of payments, including peer-to-peer (P2P), legal entities, taxes and even fines—almost anything can be paid through the mobile application Halyk Super-App in just a few clicks.

None of this stellar growth would be possible without the supreme standards of customer service maintained by Halyk. Having such a wide range of customers across virtually all industry segments means that serving a diverse set of customer needs simply becomes a non-negotiable, which, in turn, requires exceptional levels of care for customers and society as a whole—a quality that is firmly ingrained in Halyk’s essence.

“We are playing a big social role,” Halyk’s CEO, Mrs. Umut Shayakhmetova, acknowledges. “We are providing pensions; we are providing salaries to people; we are providing a wide range of banking services; we are providing deposits and loans. We keep playing this social role in the country, and I think this is the DNA of Halyk’s corporate standards.”

It is perhaps that DNA that has helped Halyk navigate distinct challenges during its 100-year-plus history. Conducting a wholly comprehensive transformation during the 1990s from a Soviet-era lender to a market-oriented banking institution, for instance, was far from straightforward. Accompanying the independence of Kazakhstan were massive headwinds for Halyk that required wholesale changes to the bank’s core mission, including the structure of its business model, the legacy infrastructure of its IT systems and the segmentation of its customers.

The economic sanctions in 2022 following the outbreak of war in Ukraine have also presented distinct challenges, significantly reshaping the compliance requirements for Halyk to continue doing business with various banking customer segments. In practice, this has meant having to hire more people and conduct thorough reviews of all existing contracts. And as the sheer range and complexity of the sanctions have grown in the two years since the war began, the bank has had to invest further in human capital—mainly legal expertise, risk managers and specialists in currency-control issues.

Again, digitalisation has helped Halyk fully resolve these intricate matters with data fabric and artificial intelligence (AI). These are just a couple of the sophisticated technologies the bank has deployed to automate much of the required work. As for the bigger transactions with which Halyk is involved, human input is proving essential not only for fully understanding increasingly complex contracts but also for liaising with customers to ensure maximum accuracy.

“We know how to react to the new regulations,” according to Mrs. Shayakhmetova. “We already have well-established processes in the bank. We consider it routine, operational routine—it is the new reality for banks in the world, not only in Kazakhstan.”

And it is “not only in Kazakhstan” that Halyk has developed a strong banking presence. Georgia and Uzbekistan are now home to the bank’s growing footprint, with individual strategies being pursued in these markets. A modest niche presence in Georgia, for instance, means that the bank focuses on following its corporate customers’ leads and servicing their individual needs across various projects, mainly via financing, treasury and operational services. The bank is also working on developing a digital-banking presence in Georgia.

Having entered Uzbekistan’s market more recently in 2019, meanwhile, an active strategy is being followed by the bank. Identified as a market with significant growth potential, the bank holds lofty ambitions for Uzbekistan, a country of almost 40 million people currently enjoying steep economic growth and development. Halyk has already invested more than $100 million in Tenge Bank and more than $1 billion in the corporate segment.

Looking ahead, Halyk’s immediate task is to deliver a new strategic development model for the whole Halyk Group. “When we value what we’ve done in the previous three years and analyse what we are going to do in the next three years, from 2025 to 2027, we have to defend this strategy in front of our Board of Directors in the fall of this year,” according to Mrs. Shayakhmetova.

Halyk Group’s stated mission is “to provide services in Kazakhstan and a number of other countries in all segments of the financial market (banking, insurance, securities, leasing) in accordance with international standards”. Are you satisfied that the bank is covering “all segments of the financial market” in 2024, or would you like to enter any new markets or businesses?

No, I am not fully satisfied [smiles]. We do provide a wide range of services for our customers; we are a universal bank—we work with big corporates, SMEs and retail customers. We also work with financial institutions, state agencies and international companies. But when it comes to covering all of our customers’ needs through our physical and digital services within individual segments such as retail, I’m definitely not satisfied. We can still do much to boost customer satisfaction and offer more tailor-made products and services.

Taking the SME segment as an example, we are already looking at individual micro-segments such as coffee shops, beauty salons and restaurants. We have already boosted our data-analysis capacity for such customers. We have identified “segments within segments” and are now looking to service their respective needs more specifically. For different industry segments, different financial analyses are required, and we increasingly strive to develop these tailor-made products.

So, I’m not satisfied. We have a lot of work to do, and we will definitely continue to do it.

Halyk Super-App has been among the bank’s most successful growth stories this year, with 19.4-percent growth registered for monthly and daily active users (MAU and DAU) in the first quarter, as well as solid growth in Super-App penetration from 62 percent in Q1 2023 to 68 percent in Q1 2024. Which key features of the Super-App explain this impressive growth performance?

We are enriching our Super-App through key services, both banking and non-banking. We are building an ecosystem around our customers’ needs. For example, we introduced the service for car-parking payment by introducing geopositioning technology during the first half of the year. You can just go into the application, and the geoposition can find your parking location, so you can easily pay your car-parking fare.

We also introduced the registration of auto numbers—auto ledgers—through our Super-App, so you don’t need to go to the state offices anymore; you can do everything online. You can even obtain a marriage registration through our application.

It’s daily work. We have a big team of IT, customer-service and UX (user experience) specialists; they work according to the agile methodology and respond to everyday comments from our customers—where we should improve and what kind of services are needed, such as tax-declaration submission, payment of taxes or registration of legal entities. Everything.

That’s very impressive. How has the customer reception to the Halyk Super-App been from different age ranges? Are you onboarding older people at the same rate as younger people?

Well, I think it’s the opposite. Older people, especially pensioners, are used to going to our branches—and they continue to do so, where we can provide them with all our services through our managers and cashiers. But almost all of our customers who are younger than 50 are already using our Super-App.

Through the app, you can pay your taxes or even access entertainment, such as purchasing cinema tickets, as well as insurance and brokerage services and so on. So, in our application, you can find a wide range of services.

You mentioned brokerage services there. As key brokerage platforms for IPO (initial public offering) and SPO (secondary public offering) placements, Halyk Invest and Halyk Finance are exciting innovations in the bank’s portfolio of financial products. In your opinion, why have these products proven so popular among your customers? And what do their relative successes say about the shifting trends towards digital finance in Kazakhstan?

A very good question because, as Halyk, we are legally authorised to provide IPO placements in Kazakhstan. In previous years, we targeted institutional customers, like insurance companies and brokerage houses, for such services as origination and the placement of securities through our brokerage house, Halyk Finance.

Today, we offer Halyk Invest for our retail customers through Halyk Super-App—and for typically much smaller transaction tickets. The number of investors is still high, though—around 250,000 people are involved altogether in various transactions. Moreover, we see that this trend is growing, especially among the younger population, who are looking for different investment opportunities.

So, it’s not only through deposits that you can get rich on your assets but also through investment instruments such as bonds or the shares of our companies, which are now accessible. You can also buy shares of big international corporates through our application.

This is a very new trend in Kazakhstan—it has only been available for perhaps the last five years. But it is a growing trend; people are becoming more financially literate and educated. They are increasingly looking towards international markets. It’s not yet a big number overall for Kazakhstan; I think around 350,000 people out of approximately 20 million are now involved. But it’s still an excellent percentage growth. So, this is one of the potential sectors for financial-services development.

Excellent. So, on your website, the bank mentions its international credit ratings:

• Moody’s Investors Service (Moody’s Ratings): Baa2 (Outlook – Positive)
• Standard and Poor’s (S&P Global Ratings): BB+ (Outlook – Positive)
• Fitch Ratings: BBB- (Outlook – Stable)

Are you satisfied with these ratings? And what do you think these agencies would require to upgrade the bank’s ratings?

No, I’m not satisfied. The assessment process involves the credit-rating agencies visiting the bank, where they conduct a personal interview with me—this has been done for years. They spend the whole day here, interviewing various people, including department heads and other specialists.

They also check our processes, our numbers and our reliability. We have made it clear to them that the bank has very sound financial strength as well as strong reputational, social and ESG (environmental, social and governance) performances. This year, the outlook was changed to positive, and I hope that the next step will be an upgrade. That’s usually how it works with credit-rating agencies. First, they change their outlooks, and then they take other actions. So, we’ll wait for the time being.

Speaking of ESG, you mentioned during our previous interview that ESG-policy development is among the bank’s main priorities over the next few years. How is this policy progressing? And do you have any examples of an ESG framework being integrated into Halyk Bank’s offerings?

I can tell you that we have just been upgraded from ‘BB +’ to ‘BBB’ by the international agency MSCI (Morgan Stanley Capital International) for our ESG principles and how we follow our policies. We introduced a formal policy on ESG for our employees and stakeholders. Moreover, we have an ESG committee, which has a programme developed and approved by the Board of Directors.

For many years, we have initiated and supported projects to protect the environment, promote gender equality and preserve the historical heritage of the Kazakh people, as well as support and foster national cultural traditions, customs and values.

For these reasons, we were the first commercial bank in the country to join the UN Global Compact last year. In doing so, we publicly announced our commitment to global standards of responsible business conduct. We have integrated the principles of human-rights protection, responsible labour relations, environmental protection, anti-corruption and personal-data protection throughout our strategy, as well as numerous policies, codes, methodologies and other internal regulations.

Over the past year, we have achieved notable progress in embedding modern ESG approaches into the bank’s day-to-day operations. This includes enhancing human-capital management practices, promoting gender equality and inclusion, protecting nature, contributing to environmental improvement by reducing harmful emissions, consistently rejecting polluting technologies and expanding “green” finance.

We conduct many educational programmes for our employees, customers and other stakeholders. We explain which new principles will be tightened in the future, such as not financing the coal industry, and how our customers should rebuild their production. Especially for Kazakhstan, the coal and oil-and-gas industries are very crucial. Kazakhstan cannot just shut down one of its main industries. But what Kazakhstan should do for the future of ecology, what kind of cleaning policies should be introduced, how our customers can adapt, what they should bring, what kind of technologies they should adopt—these are the areas in which we advise our customers, including corporate businesses and SMEs.

Notably, through the ongoing digitalisation of business processes and minimisation of paper workflow, we reduced our paper consumption by 10.8 percent, which was also reflected in lower paper waste. In addition, through active product-line development with a focus on the use of digital bank cards, we decreased plastic consumption from 44 percent to 40 percent.

A few months ago, the 2024 UN Global Compact in Central Asia awarded Halyk and me personally with the SDG Central Asia Pioneers Award for promoting sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all (SDG 8).

So, for us, ESG is really important, and I am proud of our results on this issue.

And, finally, as chief executive, what has been the most significant lesson in banking leadership that you have learned throughout your career?

I think to be a leader, you need to earn the trust of your team—your colleagues, your customers and your daily counterparties as well. This trust is built through professionalism, through integrity and through the responsibility taken in making decisions. In addition, I have learned that it is important to possess professional knowledge of certain issues and not be afraid of crises. I always say to my team, “Don’t be afraid. There are no unsolvable situations. So, everything can be solved. You just have to find the right solution, and we will find it.” To be able to have a vision and believe that you are doing the right job is crucial in banking leadership.

Moreover, I think a love of the company, the organisation, the people and the customers is important. If you hate your work, you cannot do the work. For myself, it’s very important that I am satisfied from both professional and moral perspectives. When I come to my office, I’m happy, even though sometimes I am under pressure. Leadership, I think, is about being the main person who takes responsibility and who people trust to make the right decisions.

Of course, every person makes mistakes, and I think it’s okay. It’s not possible for a person to never make mistakes. But personally, for me—to err purposefully with no integrity or honesty is strictly unacceptable.

 

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Halyk Bank’s Executive Management Team Caption

(from left to right)

Roman Aleksander Maszczyk, Salimov Yertay, Nariman Mukushev, Murat Koshenov, Deputy CEOs

Umut Shayakhmetova, CEO

Aivar Bodanov, Olga Vuros, Andrey Zavarzin, Zhumabek Mamutov, Deputy CEOs

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