S&P upgrades outlook on Freedom Holding Corp. entities to positive; affirms current ratings

As Kazakhstan's economy continues to grow, economic risks diminish and banking supervision improves, S&P Global Ratings is upgrading the outlook on the entities of Freedom Holding Corp, the Nasdaq-listed diversified financial services company headquartered in Almaty.

As Kazakhstan’s economy continues to grow, economic risks diminish and banking supervision improves, S&P Global Ratings is upgrading the outlook on the entities of Freedom Holding Corp, the Nasdaq-listed diversified financial services company headquartered in Almaty.

At the end of June, the international rating agency had raised the outlook on the holding company’s subsidiaries to positive, while the outlook on the holding company itself was raised to stable. Freedom Holding and its companies Freedom Finance, Freedom Finance Europe, Freedom Finance Global and Freedom Bank Kazakhstan also had their current ratings affirmed.

Improvements in the Freedom Holding Corp. company’s capitalisation and risk management system were cited as reasons for the improved outlook.

The agency said that Freedom Holding’s core earnings to assets ratio should remain stable at around 3.4 per cent from March 2022 to March 2024, which is high by international standards. It expects Freedom to maintain high returns in 2024-2025, which will be facilitated by income diversification through increasing the volume of banking and insurance activities in Kazakhstan.

Freedom Holding Corp. already provides financial services in 20 countries, including Kazakhstan, the US, Cyprus, Poland, Spain, Uzbekistan, Azerbaijan and others, but Kazakhstan remains its key market. Kazakhstan’s GDP is expected to grow by 3.6 per cent annually over the next four years, according to S&P’s forecast, while Robert Phillips, Senior Managing Director of Nasdaq, recognised Kazakhstan as one of the world’s leading innovation and technology hubs.

In Kazakhstan, Freedom is developing its ecosystem, which includes a bank, two brokerages, two insurance companies and a lifestyle segment.

Despite its ambitious long-term expansion and investment strategy, the company remains profitable. Freedom Holding Corp. posted record revenues of $1.6 billion, up 105% on the previous year, and net profit of $375 million, up 82% for the fiscal year of 2024. The holding company’s assets grew by 63% to $8.301 billion.

“We have built up a transparent, diverse business. Freedom is a fast-growing Western European broker and a member of the New York Stock Exchange, and we have a US investment banking licence. Our ecosystem and the loyalty programme we’re implementing provide a solid base for development,” said Timur Turlov.

S&P cited restructuring as a positive factor, including the completion of the brokerage relationship with Belize and the transfer of clients to the group’s brokerages in Kazakhstan and Armenia.

“We’ve closed our broker in Belize, it’s been a very long process but it’s part of our strategy to move all our clients into a holding company structure. As part of our restructuring, we transferred the entire business to the holding company and we have a more diversified business than ever before,” says Timur Turlov.

S&P also took notice of improvements in the consolidated risk management framework and strategic management changes such as the hiring of a chief risk officer, chief compliance officer and chief legal officer, and the expansion of the board of directors from six to seven members, including four independent directors.

The agency may upgrade Freedom’s ratings over the next 12 months if it believes the holding company continues to make good progress in implementing a common risk management system and enhancing compliance, while maintaining strong earnings and moderate business growth.

Currently, the holding remains focused on growing its banking and insurance segment, and building a unique ecosystem that includes investing in start-ups and new technologies.