Commercial banks in Kazakhstan are confronting a sharp deceleration in credit expansion alongside accelerating credit risks, as non-performing loans surge three times faster than healthy loan books. The aggregate sector net profit dropped 14.9% year-over-year to 1.40 trillion tenge (about $3 billion) over the first seven months of 2026. Profitability pressures intensified in July, compounded by higher minimum reserve requirements and fiscal adjustments.
Toxic loans outpace healthy credit growth
The banking sector’s overall loan portfolio expanded by just 0.5% in July to 44.6 trillion tenge (about $100 billion), marking a sharp growth slowdown compared to previous spring months. Monthly credit growth was sustained primarily by Otbasy Bank, a state housing lender that accounted for 69% of total July expansion. Universal commercial lenders posted modest gains, with Halyk Bank adding 63 billion tenge and Kaspi Bank adding 59 billion tenge.
Concurrently, loan portfolio quality deteriorated. Non-performing loans, encompassing Stage 3 and defaulted assets, jumped 3.8% in July and grew 16.4% year-to-date to 3.07 trillion tenge. Lenders Halyk Bank and Kaspi Bank generated the largest increases in default loans, adding 250 billion tenge and 125 billion tenge in toxic assets, respectively.
The average non-performing loan ratio climbed to 6.82% of total loans. Retail-focused institutions recorded elevated default ratios, with Kaspi Bank reaching 10.3% and Home Credit Bank at 9.88%. Bereke Bank provided a rare bright spot by resolving 41 billion tenge in impaired debt during July.
Corporate and retail deposits offer mixed relief
Sector assets rose 1.9% in July to 75.6 trillion tenge, led by ForteBank, Kaspi Bank, and Halyk Bank. Corporate deposits expanded 2.7% in July to 21.1 trillion tenge, though six lenders experienced nominal outflows partly driven by negative foreign exchange revaluations as the tenge appreciated 1.5% against the US dollar. Halyk Bank maintained its market leadership, holding 30.9% of corporate funds. Meanwhile, retail deposits grew 1.3% in July, with Kaspi Bank capturing 46.5% of net retail inflows.
State aid repayments squeeze bank profits
Earnings contracted across nearly all universal lenders, with Home Credit Bank standing as the sole exception achieving positive profit growth. Alatau City Bank registered a 95.8% drop in net profit following balance sheet revaluations of subordinated debt and early state aid repayments. The bank returned 35 billion tenge in state aid in August while paying 125 billion tenge in dividends. Eurasian Bank recorded a 66.8% profit drop while retaining 120 billion tenge in state liabilities.
