Kaspi.kz AO

NASDAQ:KSPI

Earnings Call Analysis

Kaspi.kz reports strong growth across platforms with promising outlook.

Kaspi.kz announced robust performance in Q2 2024, with revenue up 23% and net income rising 22%. The marketplace segment has become the fastest-growing, boasting a GMV increase of 62% and revenue growth of 96%. Fintech volume growth stood at 43%, projecting net income acceleration in the latter half of the year. The company anticipates a 25% net income growth for 2024, focusing on new services and expanding e-Grocery offerings. Despite lower growth expectations in Q3 due to promotional calendar shifts, a strong Q4 rebound is expected, confirming overall optimistic growth trajectory.

Strong Q2 Momentum Across Segments

In the second quarter of 2024, Kaspi.kz demonstrated robust growth across all its business segments, showcasing its capabilities in execution and innovation. Overall, revenue surged by 36% year-over-year, while net income increased by 25%. The marketplace emerged as the fastest-growing segment, recording a staggering 62% growth in Gross Merchandise Volume (GMV) and 96% growth in revenue, significantly enhancing its contribution to the company's bottom line.

Diverse Revenue Streams Fueling Growth

Kaspi's strategic diversification is paying off. The company's three main branches—Payments, Marketplace, and Fintech—now hold near-equal weight, contributing approximately 68% of revenue collectively. The Payments platform saw a transaction volume increase of 32%, translating to 23% revenue growth, while Fintech also performed well with a Total Financing Volume (TFV) growth of 43%. Consumers engaged actively, averaging 72 transactions per month.

Marketplace: The Star Performer

The marketplace segment continues to shine, fueled by a significant rise in both consumer demand and the introduction of innovative services. The e-Grocery business achieved 99% year-over-year growth, propelled by an increase in active customers to 639,000 and two million purchases in Q2 alone, up 83% from the previous year. With an average ticket size remaining favorable at KZT 14,000 (approximately $30), marketplace dynamics are set for sustained expansion.

Fintech Platform and Future Growth Prospects

In terms of Fintech, net income is predicted to accelerate significantly in the latter half of the year as interest rates decline and loan demand remains strong. The interest costs have decreased since rates were cut in February. The company expects net income growth for the Fintech segment to surpass that of Q3 compared to the first half, with anticipated TFV growth also rebounding in the fourth quarter. Overall, Kaspi.kz forecasts a 25% growth in net income for the full fiscal year 2024.

Challenging Q3 Ahead with Recovery in Q4

Looking ahead, Q3 presents some challenges due to the absence of major promotional events such as the popular Kaspi Juma. As a result, the company expects lower GMV growth and reduced profitability in Q3, followed by a significant rebound in Q4. The substantial marketing efforts and product offerings are leading to a cautiously optimistic growth trajectory into 2025. The leadership believes the revised guidance for the second half remains realistic and reflects both the challenges and opportunities.

Focus on Enhancing Consumer Experience

Kaspi.kz is heavily invested in augmenting consumer experience across its platforms. Innovations such as the introduction of brand advertising for merchants and expanding the e-Grocery service reflect the company's intent to diversify revenue streams and enhance customer engagement. The approach to advertising and promotional campaigns is designed to increase visibility and sales for partner merchants, further solidifying relationships within its ecosystem.

Final Thoughts on Strategic Directions

The leadership expresses excitement about future growth, anticipating that by prioritizing interactions with high-quality partners and leveraging its technological advantages, Kaspi.kz can extend its reach beyond Kazakhstan. The focus is on capturing adjacent markets and expanding its offerings, which highlights the company's strategic vision and commitment to shareholder value.

Earnings Call Transcript 2024-Q2

[Operator]

Hello, and welcome to the Kaspi.kz Second Quarter First Half Financial Results Conference Call. My name is Elliot, and I'll be your coordinator today. [Operator Instructions]

I would now like to turn the call over to David Ferguson. Please go ahead.

[David Ferguson, executive]

Thanks, Elliot. Good afternoon, good morning, everybody. I'm David Ferguson from Kaspi. Welcome to our 2Q first half 2024 financial results.

As usual, joining me on the call, I have our CEO and Co-Founder, Mikheil Lomtadze; our CFO, Tengiz Mosidze; and our Head of Capital Markets, Yuri Didenko.

Standard sort of procedure for the call, Mikheil will take you through the strategic product updates. I'll run you quickly through the financials and the guidance for the remainder of the year, then we'll open the call up to Q&A.

So on that note, handing over to you, Mikheil. Over to you.

[Mikheil Lomtadze, executive]

Hello, everyone. So pleased to report our second Q results performance. So we have done pretty well in the second quarter and for the first half year 2024, pretty much see the growth across all our businesses, and the new services showing a remarkable growth. Obviously, all that is a result of our team's historically known execution capabilities.

Our consumers continue sort of strong engagement. So we have 72 monthly transactions per active consumer, and that's an important as we build on this engagement all the platforms and individual services, and this is really driving our innovation. So the payments TPV is up 32% year-over-year, shows the growth is strong on top of a really sort of big business. Revenue up 23% and the net income up 22%. Marketplace has been showing a very strong performance and now is our fastest-growing business.

GMV is up 62% year-over-year and revenue 96% and net income, 68%. And again, marketplace is something which really excites us because that's a business where we add the value of connecting the sellers and merchants and most of the innovations from us actually will be coming from our marketplace business.

Fintech growing nicely on the TFV 43% year-over-year, revenue 23% and net income plus 2%. As TFV, which is basically the volumes of our origination are growing very nicely. You would actually see in the third Q and the rest of the year, quite rapid acceleration of our net income. And on top of it, the interest cost and interest rates have been going down.

And as a result, you will see profits going through our P&L and the net income growth accelerating. Our consolidated revenue consolidated financial is showing a very strong performance. So our revenue, 36% up year-over-year, and the net income is 25% up.

We have been historically sort of diversifying across our 3 platforms, and happy to report they are more or less equal now in size. So 68% comes from payments in the marketplace, and the marketplace -- and the payments have been historically growing faster than Fintech. And now marketplace is the one that grows fastest from all 3. So we're really excited about this diversification is -- from all 3 and really excited about the new services, which actually also driving our growth.

In terms of the e-Grocery, we just started a couple of years ago. We're really excited about this business. Execution skills are top quality from our team across operations, marketing, the product and the user experience. So you can see that active consumers now reached 639,000 consumers in the second Q, almost doubled the GMV, 99% growth, and average ticket remains very high of KZT 14,000 , which is basically the weekly purchase. So it's not a quick commerce sort of small ticket transactions.

And then in terms of number of purchases, we bypassed 2 million purchases in the second quarter and up 83% from the last year. We are expanding our existing dark stores, which means just adding more capacity. We always work on 2 fronts. Number one is increase the capacity, which means increase the size of existing dark stores, but also work on the efficiency, which means throughput rate of the dark stores, and both are giving us a very good results, but demand is so high from our consumers that we are now investing into building another large dark store in Almaty. And as a result, we'll be able to basically support the growth and the demand we have for -- from consumers.

We are now present in 3 larger cities, Almaty, Astana and Shymkent and those cities represent roughly about half of the total food retail trade in the country. So for the remaining of this year, those cities would be our priority. And again, we just continue executing. Consumers are delighted. Demand is extremely strong, so we are just scaling in terms of the capacity, building the new dark stores, but also expanding the capacity of existing dark stores. So really excited about this business and the growth rates that we're achieving. Again, on the back of the consumers loving the service, and we have a very strong demand in this vertical.

We have been also scaling from last year, another new service, which is vacation packages, incredible growth, 644% from last year, this is the business when our consumers basically can book their vacations across several countries. And now we are going into the season, and the growth is really due to the fact that we have a very strong seasonal offering pretty much from every tour operator in the country.

The good thing about this service is not just that it gives us the volumes and consumers love it, but also it's a high take rate business for our travel. So it's really enhancing take rate. And that business in the second Q is showing 7.9% take rate. So we're really excited, we're still going into the season. So summer will be strong because different [ look ] from many other countries, our consumers actually don't plan their vacation sort of 6 months ahead. So they usually plan in a month, several weeks before actually taking the vacation. So there is a very good season in front of us, really excited about this business.

We are continue scaling and innovating across the value-added services. So as you can see, we have increased dramatically the size of that business that's advertising, classified and delivery. So almost more than 4x increase from last year.

And now out of 9.5% of total take rates in the marketplace, 1.6% is actually coming from the added value services, and that compared to 0.6% of last year. Again, added value services, in our case, is the services which we develop for merchants, so they can promote their products, they can deliver their products across the country. And the reason why we call them value-added because actually, they generate additional sales.

And we are -- again, I would like to emphasize, we are carefully scaling those services because we want to make sure they add value to our merchants. But even with such a careful scaling, it's showing a remarkable result. So we're really excited about innovations which come in from us and for our merchants in those sphere.

This example of the recent launch is the brand advertising. So this is the service which would just basically launched that service for the brands or the merchants that have their own brands and advertising agencies. So you can increase the brand awareness by launching this service. You can sort of go from very simple steps.

You basically create the campaign, you sort of select the products, which you would like to promote; you select the sellers, which you believe it should be a participant of your promotional campaign, then you upload your materials, which are banners to be shown in different locations of our Kaspi Pay Super App, and then you can see our ads in our mobile application.

So that's a service, which we like, because we are actually going after different revenue stream. We're going after digital and online marketing services, which come from the global brands, local brands and some of the merchants that actually are promoting their own brands. And just to remind everyone, that's a second service because our initial service, which we have launched for merchants was to promote their own products. So that's the different segments.

If I'm the merchant, I want to increase sales -- I want to increase sales of the specific product, I use product advertising. However, if I'm a brand, advertising agency or the merchants with my own brand, then I use brand advertising, and that really is all about top of mind, promoting brand awareness, views and things like that. So really excited about this addition. And reception has been really good. So hopefully, that's another service, which we will continue sort of scaling successfully and developing innovations around it over time.

[Tengiz Mosidze, executive]

Okay. So moving on to the financials. I'll start with the payment's platform. So transactions. Transaction trends remain very strong, up 46% in the second quarter, up 44% year-on-year in the first half, so slightly stronger in the second quarter, despite again the -- this is as Mikheil said, a pretty large business. The growth is being driven by all products led by Kaspi Pay QR, B2B but with Bill Payments still very, very robust.

Strong volume growth translates into, therefore, strong TPV growth, albeit with a lower average ticket size, as consumers use us more frequently for more of their everyday needs. TPV up 32% in the second quarter up 34% for the first half of the year. Take rates broadly stable albeit with the impact of lower take rate Kaspi Pay QR visible at the margin, and that is a trend that we've talked about over several years.

B2B payments is the fast -- remains the fastest-growing component of payments platform, up to 5% of TPV from 0 just 2.5 years ago, but with a long runway ahead both in its own right and in terms of the other products and services that can naturally open book strong transactions, strong TPV dropped through to good revenue growth.

Just keep in mind here that as interest rates fall, liquidity revenue grows at a slower rate than transaction revenue, so transaction revenue in the second quarter, up 26% year-on-year versus liquidity revenue up 12% year-on-year, overall payments revenue for the quarter, up 23% year-on-year and up 24% for the first half of the year.

Tight cost control is ensuring that, that strong top line drops through to the bottom line. I think overall, the message on payments platform is that it is comfortably on track for delivering on the full year guidance.

So moving on to the marketplace platform. As with payments, marketplace transactions remain or purchases remain strong and consistent, up 38% in the second quarter, up 36% for the first half of the year. The difference versus payments is higher ticket size. So that translates into faster GMV growth, up 62% year-on-year for both the second and first half of the year.

E-commerce is the fastest-growing component of marketplace. Now almost half of marketplace GMV, 45% in the first half of the year. And take rate moving up on the back of promotional events, namely Kaspi Juma, but also the value-added services that Mikheil talked about. So take rate of 100 bps, both in the quarter, second quarter and for the first half of the year.

Looking at the individual components. E-commerce. E-commerce GMV up 113% in the second quarter, a similar number for the first half of the year. So e-commerce demand very, very strong, driven by, number one, e-Grocery, number 2, general goods and the promotional campaigns that we're running in the value-added services, delivery and advertising driving take rate up 30 basis points in the second quarter, and up 60 basis points for the first half of the year.

Work just flagging here. We talked about we introduced Kaspi Postomats around 2 to 3 years ago as a key strategic initiative. And just flagging now is sort of past that milestone 50% of the e-commerce orders delivered via Postomats. So this is important because the initiative has proved extremely popular from a consumer perspective, consumers like the convenience of Postomats and important for merchants because it's more efficient. It's bringing the cost of last mile delivery down.

So adoption has been highly successful. We're targeting 7,000 Postomats by the end of this year. So there's still more we can do with this initiative. Kaspi Travel, decent GMV growth during both the quarter and the half up 33% and 38%, respectively. Tours are now up to 8% of GMV in the first half and tours are not only GMV growth enhancing, but are also take rate enhancing as well.

And then moving on to m-Commerce. m-Commerce in the first half of this year has seen very, very strong and GMV momentum, particularly as a result of the promotional campaigns that have driven higher ticket size, GMV ahead of purchases and have also driven higher take rates of 100 bps, both in the second quarter and in the first half of the year.

It's probably worth at this point just flagging the on marketplace, particularly promotional event Juma. Juma will take place 3 times this year, it took place in Q1, and it took place in Q2, and it will take place in Q4. Last year, it took place 2x in Q3 and Q4.

So what that means for Q3, it's the only quarter of this year without Juma, number one. And number 2, the comp is tough because it's up against the Juma events that took place in the third quarter of last year. The implications of that for the third quarter will be GMV growth at a lower rate and lower profitability before then a strong rebound in the fourth quarter.

The decision to hold Juma 3 times a year is just a reflection, the assortment on marketplace has expanded dramatically over the last couple of years. That includes items with high seasonality, like, for example, packaged tours. And by holding the events at 3 times during the year, it gives us the opportunity to focus on the right seasonal assortment at the right time, packaged tours, for example, or a big focus in the June Juma.

So this is something that is reflected in the full year guidance. But when you're trying to think about the phasing between Q3 and Q4, it's something to keep in mind. And I suppose it's also worth saying that for fintech and TFV, which is a big component of the Juma promotional campaigns, that also means you'll see lower TFV growth in the third quarter. But again, then the strong rebound in the fourth quarter and as we go into 2025.

For the second quarter, what you see is that the strong volume trends, higher ticket size, faster GMV growth with take rate expansion translates into even faster revenue growth for marketplace of 96% in the second quarter, over 100% for the first half of the year. And even with rapid growth from 1P, e-Grocery and e-Cars, net income up 68% in the second quarter and up 72% for the full year. So again, here, for the full year guidance that we've provided, marketplace very, very much on track.

Finally, moving on to the fintech platform. A strong TFV origination has been a theme for the last 2 years. That continues to be the case, driven by strong growth in marketplace and specifically linked to buy now pay later and merchant financing. So TFV growth up 43% in the second quarter, 45% in the second half -- in the first half of the year.

Portfolio conversion is stable. So that tells you that customer behavior is normal. They are repaying quickly and in a consistent manner, average loan term just over 5 months. And going forward, we still think that merchant financing, whilst it's now sizable at 17% of our TFV origination, it's the fastest-growing component and the backdrop is still an underpenetrated market opportunity. So there's a lot more we can do there.

In the first half of this year, for the first time in several years, net loan portfolio grew faster than deposits. In the second quarter, loan portfolio up 42% versus deposits up 26%, similar trends for the first half of the year. What that's meant is that the loan-to-deposit ratio has moved up from 74% to 85%. The implication of that will be particularly from Q3. And again, in Q4, you'll see a step-up in the profitability of the fintech platform. And again, that will be a run rate going into when you're thinking about 2025 growth.

Fintech yield is lower as a result of BNPL and merchant financing growing share within the mix. And again, that's something that we've talked about as a long run trend that's been playing out over several years.

In terms of risk metrics, whether you look at defaults, losses, collections, I think the message here is very simple that trends are low and consistently stable. And again, that mirrors itself in cost of risk metrics, broadly stable year-on-year at 0.6%, on track for around 2% this year and NPLs, again, broadly stable versus the beginning of the year, 5.6% versus 5.5% at the beginning of the year and down from 6% this time 12 months ago.

NPL coverage is lower in the second quarter, but over the course of the year, as your trend consistently with what you've seen in previous years, so around sort of 98%, 99%.

The combination of strong origination over the last 2 years, albeit with slightly lower yield, translates into decent healthy fintech revenue growth of 23% and 25% for second quarter and first half, respectively.

We lowered interest rates for the first time at the end of February. The deposit base takes 12 months to reprice fully. So at this stage in Q2, you don't see the rebound in net income and fintech profitability, but you will see that in Q3, and again, you'll see it to a greater extent in Q4.

So again, you've got those moving parts in Q3. For marketplace, you've got lower GMV growth, lower profitability, rebounding in Q4. For fintech, you've got lower TFV, limited near-term P&L implications of that, where you'll see the strong rebound in fintech profitability kicking in. So again, sort of as I said, different parts moving in different directions. But overall, fintech also comfortably on track for the full year guidance that we've provided.

So here is the consolidated performance. I think the summary -- the divisional platform summaries that have given sort of a clear dividend of KZT 850 declared. Just the message here remains consistent that whilst we have excess capital, we're happy to return it to our shareholders.

In the press release, we do say that we're working hard to expand Kaspi outside of Kazakhstan and when we think both the time and opportunity is right, we won't hesitate to deploy capital in that way. So that's just to sort of preempt any questions around higher dividends, buybacks, there's the sort of the message on capital allocation priorities.

Here is the guidance for the remainder of the year. So each of the respective platforms on track Kaspi.kz on track for 25% net income growth for 2024. So overall, we expect to deliver another strong year, albeit that we'll be phasing the growth in the second half will be Q4 weighted.

That's it. So maybe, Elliot, we can open the call up to Q&A, please.

[Operator]

[Operator Instructions] Our first question today comes from Darrin Peller with Wolfe Research.

[Darrin Peller, analyst]

Some of these initiatives are great to see the momentum on. But I just wanted to first touch on a financial question. And I know you kind of hinted or touched on that a little bit just at the end there, but you're reiterating your fiscal year expectations, obviously, the underlying assumptions call for somewhat of a deceleration in second half relative to first half, just given the guide on the segment level detail relative to first half growth rate.

So if you could just help us understand if it's just comps and maybe building in some element of conservatism, given how strong some of the trends have been in first half. So we understand the second half cadence, if there's any nuances on a per segment basis, we should keep in mind?

[Mikheil Lomtadze, executive]

All right, Darrin. I think sort of really, I'll just reiterate what I have said that. So I think the key thing you need to be aware of when you're thinking about Q3, Q4 is the Juma promotional events. It's important. And what's different this year is it's taking place 3 months. It only took place 2 times last year. And the phasing of marketing campaigns can always vary. This year, it -- those campaigns are taking place in Q1, Q2 then Q4. Last year, those campaigns took place in Q3 then Q4.

So the point really is that Q3 is the quarter without that sort of big important promotional events. It manifests itself in a number of ways. It manifests itself in lower GMV growth, lower marketplace profitability, lower TFV growth, although the nature of TFV, it feeds into the P&L over a longer period of time. So from a P&L implication, it's not material in the third quarter.

You've also got the added dynamic not related to Juma of just the rebound in profitability in the fintech division, starting from the third quarter of this year. But the takeaway ultimately is you will see lower growth across the board, across payments -- sorry, across marketplace and for the group as a whole in the third quarter, significantly higher growth in the fourth quarter. And that's important because that gives you a sense of the run rate going into 2025.

But the full year guidance that you have, that's the right number that you should be working to, so to your point about conservatism use that as your number, it's realistic guidance.

[Darrin Peller, analyst]

All right. Just one quick follow-up on the international efforts and aspirations. I know last time we spoke, there was a hope that it could come as early as maybe even the end of this year into next year in terms of some sort of momentum on any of those fronts. Any update there in terms of progress or just a sense of opportunities you're looking at in regions you're seeing the most opportunity in?

[Tengiz Mosidze, executive]

Mikheil?

[Mikheil Lomtadze, executive]

Sure. Darrin, thank you for your question. I mean in general; I would say that we'll continue working on this just to reinforce basically our -- really the desire and capability to bring this business outside of Kazakhstan as some people are saying during our discussions, basically bring the custom magic to other markets. And the good news is that we are passing -- basically, we're not pursuing some opportunities just to tell you that how selective we are and there is a healthy pipeline of some of the companies we're working on.

I wouldn't speculate about region or a specific target that we would like to work on or we're working on at the moment. But yes, but we are -- we are clearly sort of working on this, putting our resources and the time mostly and working with advisers and different opportunities, basically.

So -- but we are, again, we're careful. We want to make sure that we get it right. We want to make sure that the company and the market we look at there is added value from us, again, from vast knowledge, technology, experience perspective, but I think we are at this stage when we're also lucky that some of the companies and the targets we look at are really high-quality companies and high-quality targets, which means we're looking at how we can complement to those companies' management teams to become even better considering Kaspi's unique experience, technology and the business model.

So again, really excited. We're working on it at the moment, I can't really tell you any specifics of any project that we're executing.

[Operator]

Our next question comes from Reggie Smith with JPMorgan.

[Reginald Smith, analyst]

I appreciate the color on the brand advertising loss. So I was hoping to get a little bit more. Did you guys say exactly when that went live. I'm also curious about how many brands are on the platform today. And maybe talk a little bit about the process of adding brands. I'm not sure if you got a how each program is sailed like that, I'm curious how that actually -- how that plays out? I got a follow-up.

[Mikheil Lomtadze, executive]

Sure, Reggie. Thanks for your question. Basically, we are in a really interesting position as a company in a sense that some of the ideas are really coming from the use cases that we already have and they are almost requests from our merchants or the brands, whether we could launch the services. So that's something which is really exciting to be in the type of position as we are because when -- basically, what that means when we launch the service, that is already market for it. So that's why it's exciting.

The brand advertising, we are -- at the moment, it's at the scaling stage already have FMCG brands working with us just because we have become one of the largest groceries in the country and not just in Almaty, with the fastest growth compared to anyone on the market. So the brands on the FMCG side basically are working with us on the advertising and they already have the contract in place with them. So you will see a very healthy growth on the side of the brands, which are selling grocery through us.

On the other hand, general goods, the same brands. I mean I've just shown the Samsung as an example, is actually one of the brands that is working with us as we speak. And on the general goods, pretty much either the brands which are sort of global or the merchants, which have their own -- which they have -- which have their own brands like locally selling basically, they want to promote the awareness.

In terms of the size of this opportunity, I would say that's something which -- and another, it's a good question that you asked because another thing you need to keep in mind, we're launching the product when most of the brands have allocated budgets to this type of advertising, especially the global players that make the decisions end of the year. So -- and even in this environment, we're able to successfully scale. So opportunity is in my sort of opinion, probably equal to the size of the -- if not more, of the opportunity when merchants are promoting their own goods.

So -- yes, so it's a big -- it's really a big opportunity, and we're just sort of scaling it and it's not reflected in the numbers, which you see in advertising. The numbers at the moment are not material, but they will be growing really fast in the second half of the year because we have contracts in place already with those brands. [indiscernible] excited about.

[Reginald Smith, analyst]

No, it sounds like a really good business. How are you thinking about KPIs for that segment? I know it's early days you may not have anything backed out, but anything you can share there. And I have one follow-up after that.

[Mikheil Lomtadze, executive]

It's -- I mean, this is really different. I mean, for the KPI, which we -- or let's say, the targets that we have sort of on the quality level on the merchant, when merchants are advertise their goods directly, this is their own listings on our marketplace. Here, we are making sure that it's efficient. So they get the sales and they not overspend. And so that's something which is very important for us on the goods advertising side of things. And the revenue stream there comes from the merchants themselves as a part of their GMV, which they sell for us.

So for example, just one example, if we see the merchants exceeding sort of 5% of their GMV in advertising investments on that piece, we sort of work with the merchants to make sure that this is something which they really want because then the profitability of the business has to be respected right rate. I mean 5%. Not many merchants can really afford to invest into marketing and advertising. So we just need to make sure they understand the product and if anything we can improve. So that's on the side when actually merchants are launching their own listings and it's called sort of product advertising.

When we're talking about the brands, that's actually is a different service altogether because that's -- brands, they actually want to promote the brand awareness, whatever the global FMCG players or the local brands. And that means they're not necessarily looking just for sales straight away, but they are looking for people to know the brand and monetization there is really more on the reviews rather than on the sales, and they have budgets allocated also globally. So that basically is a very big difference.

And also from a consumer perspective, it's a different product. The goods advertising it's like Amazon ads or Google when you have the product in the listings when you search in our app and the brand advertising is the visual. So you know we started from banners, when you see the item, you see the brand sort of -- and then you go to the product after you click the banner. It's a different object. It's a different real estate of the app, and therefore, it's a different pricing, and it's a different revenue stream, and it's a different payers, brands payers or advertising agencies.

So from that perspective, we are -- we just need to make sure that our -- on the side of the brand advertising, we are more efficient and we're competitive. So we are competing with the platforms like Instagram, for example, at the moment, which are providing this type of capabilities. And the first test show us where number multiple times more efficient than Instagram and the brands are happy to move their budgets to us. So that's why we're excited about this opportunity.

[Reginald Smith, analyst]

That sounds exciting. If I can squeeze one more in on Juma. I guess you always have to be careful about like what fatigue there, but is this a product or an experience that you see that could happen 4 times a year like once every quarter? And then last piece on that, what do you tend to see post-Juma? Do you see a lift in engagement and usage on the app in general? Like I was just curious if there any positive benefits you guys see after Juma in terms of engagement and things like that.

[Mikheil Lomtadze, executive]

Yes. When you think about the Juma, in general, you can compare this to like a national sort of shopping events, which happened in other countries. I mean, it would be Black Friday or Amazon Prime and the things like that. So this is really like a nationwide event. And pretty much there is nothing else. So there is no other event. There is no other Black Friday. So it's really got the Juma, where thousands of merchants really participate. So that's number one.

Number 2 is Juma is great in a sense that it gives us -- as you said, it's an opportunity to get uplift on the engagement, it's a concentrated 3-day shopping festival, which basically give us an ability to introduce some of the new categories we have launched, some new merchant products. So it's really sort of the opportunity for the consumers in a very highly concentrated 3-day period to basically acquire some of the items and therefore, for us to promote these new categories, which we would like to promote because it's quite big.

It's also big in terms of moving consumers from offline to online. So for example, I would say that vast majority of electronics are now bought online rather than in off-line just because we have been able to change these sort of consumer and the merchant experience. So all of that is basically Juma -- it has been quite a success. As David said, again, the number one reason why we are moving into the seasonal because different categories just have different seasonality.

You move from one type of clothing to another during the spring, and then you move back to another clothing during the winter. So from summer and autumn to the winter clothing or the travel. So the variety of products is such -- I mean it's unmatched. There is no other company in the world that has such an assortment of different goods and services, which have such high seasonality.

And therefore, we basically reply to our consumer needs and the merchants. And this year, it will be a bit, I would say, unfair comparison to last year quarter-on-quarter. But in general, we think that 3 years is good. Answering your question, we will see because we have another promotion, which happens in August, September, which is back to school. So it's not Juma, but that's something which is also big. And that's why we're not really launching the fourth one -- sort of end of the summer, beginning of autumn because we want to see how consumer demand will be shifting as a result of this multiple Jumas during the year.

But once we get all these learnings, then next year will be both much easier to compare, but also it will be from our side, just much more, I would say, it's not the word predictable, but much more comparable year-over-year. But Juma itself it just shows incredible results really on all fronts during the Juma and after the Juma, shoppers continue to shop basically.

[Operator]

Our next question comes from James Friedman.

[David Ferguson, executive]

Jamie, maybe you're on mute. We can't hear you.

[James Friedman, analyst]

Sorry about that, David. It's Jamie at Susquehanna. I wanted to ask, by the way, good results here, but I had 2 questions about take rates. I'll just ask them upfront.

So first on Slide 11. When you -- this is about the payments take rate, when you have this outsized growth in QR code and, I think, B2B, are those deflationary to take rates? Because I know you talked about this in the past, you talked about today, and -- but one of the perspective on take rates for payments? And then I'll just ask the other one, too, which is about e-commerce take rates. So how should we think about unpacking the components of take rates in e-commerce between, say, e-grocery and general goods. So Slide 11 and Slide 16?

[Tengiz Mosidze, executive]

David, do you want me to pick it up?

[Mikheil Lomtadze, executive]

Well, I will start with the payments and then you can jump in, right? So James, thank you for the questions. In terms of the payments, what -- we have been sort of say historically that the QR payments, which is sort of increasing network basically the service of accepting the payments. It's a 0.95%. Basically, that's the fee.

So what you would see that simply over time, this is something, which we'll be getting closer to that number. We have been lucky or not lucky, I mean, because we have been diversifying the services and entering into different verticals, the take rate has been quite sustainable in general, around 1.2%, but we decided to provide this more details, not just 1.2%. But basically what it is 1.19%, 1.18%, which is 1.24%, which we had last year. Just to give you that it slightly sort of get towards bigger share of the QR payments. So that's basically how to think about the payments.

There are a couple of -- yes, there are new things we're working on, which will be added value, which will be higher take rate. But those things on the payment side probably will come from us later in the year. So we'll be excited to share with you, but it seems like very exciting services.

On the e-commerce side of things, the take rate that you have is basically on the 3P. So the 1P is e-Grocery that's not in the take rate. So that's basically a gross profit net income business. And we basically are -- yes, e-Grocery, it's not part of the take rate. That's a simple answer. The e-Grocery itself continues to extremely strong performance, even though we're investing. It's still 7%, 8% net income margin business and our gross margin is growing in excess of 30% just because there is more demand from the consumers, but also the type of assortment strategy and relationship with the suppliers really enables us to also increase the gross margin. But e-Grocery it's not a part of the take rate. Take rate is only on 3P.

David, anything you want to add.

[David Ferguson, executive]

Yes. I mean just overall; I think the message on payments take rate is that it's broadly stable. We're showing you an extra decimal point today. But I wouldn't read anything too dramatic into that. Take rate is broadly stable.

[Operator]

Our next question comes from Soomit Datta.

[Soomit Datta, analyst]

Yes. It's Soomit Datta from New Street Research. A couple on fintech if I could, please. Firstly, in terms of the improvement in fintech net income through the second half, that seems to be predicated on deposit remuneration dropping back down.

Can you just talk through the phasing of that? How many -- is that a sort of rolling process where depositors kind of rolled back over time? Has that sort of -- is that -- will that have played out in Q3, Q4? Anything on the phasing of that?

And as a follow-up, how do you see the midterm loan-to-deposit ratio for the fintech business, it's -- as you say, it's moved around a little bit this quarter. Just curious how you see that over time?

And then if I could, just on the same vertical. Just Mikheil, I'm interested in your perspective on tax increases in Kazakhstan, which I think if they go through will impact the fintech business rather than the other businesses. Just curious what your take was on the likelihood of that happening and potential timing?

[David Ferguson, executive]

All right. Soomit, thanks for your question. Maybe I'll just try and expand on the fintech question and fintech profitability, and then hand over to Mikheil regulation.

So I'd say it's 2 things. It's one, rates coming down. So -- whilst the MBK rates have been coming down since the autumn of last year, our first cut in deposit rates was at the end of February. So that's the first thing.

And the second thing is it's the balance sheet being used more effectively although loan to deposit ratio moving up either because we're owning more money or because people are spending more money and saving less or a mix of those factors. So that's why.

In terms of phasing, deposit customers are repriced at maturity. It takes 12 months to work through that process. So if you think that the first-rate cut was in February and at the end of February this year, it starts to be visible immediately, but it only becomes more pronounced with each month that goes by.

So in Q3, for the first time, the combination of those factors, loan-to-deposit ratio moving up, cost of funding moving down, I think it will be visible to you and you'll see -- and you can yourself just simply work out what is implied by the guidance for fintech net income growth in the second half of the year.

Q4 will be more than Q3, but that sort of tells you -- and longer term, there's sort of no reason why the loan deposit ratio can't move up to maximize use of all of the tenge liquidity that we have.

[Mikheil Lomtadze, executive]

Yes. And David, thank you for your questions. I will add a bit more color in terms of our strategy and the way the products work.

So in our -- I mean, in our business, always consumer comes first, right? So we are very unusual compared to some traditional banks with the traditional savings, deposit accounts, which means when we have the -- when we're increasing the rate, we're increasing the rate for everyone. So basically, we reprice deposits upwards. And everybody gets benefit of it.

And when we reduce the rates, the rates are reduced over time at the maturity. So what that means in terms of the numbers in February, we decreased the deposit rate by around 1%. And as a result, the full savings portfolio which includes both new savings accounts and existing saving accounts, they will be repriced at this reduced rate by the February of next year. And as David said, that is actually means in the third Q, it will be more in the 4Q more, but they will be actually fully repriced in the first Q of next year.

Our business is on the fintech side of things also to put things into perspective. The interest rates increased over the last several years from 8% to 15% on the saving account. So that's basically when the savings interest rates will normalize, it might take a bit longer than everybody thought across pretty much most of the economies, but we will still see this natural reduction of interest expense.

But the good thing about us is that we also acquired consumers with the money, and we've built the capability and we have become the largest savings institution in local currency in the country during this period. So we are thinking about consumers, consumers always come first. So that's about the interest expense and how the savings work in our case.

In terms of the loan-to-deposit ratio, we see a very increased flow of the new saving accounts during the -- this -- the end of the second quarter and the third quarter. So really excited about that again. But at the same time, the origination is growing, especially on the new products such as merchant financing, car financing will be the fastest growing in the third Q, now fully online sort of products, which we are #1 in car financing in the country as we speak. So that really will be driving our financing volumes. So loan-to-deposit ratio probably would be broadly stable. So that's basically about your first 2 questions.

In terms of the taxes and in general, changes in the regulatory landscape, there has been several changes, which I think might be useful for everyone to know. So first of all, there was a change on the NPLs, which means the financial -- the banks or microfinance companies cannot sell their NPLs to collection companies. That was a one change Kaspi haven't done this. So there is no impact on us, but there has been the change in the regulation regarding selling your portfolios to collection companies. So no impact on Kaspi at this stage.

Then there was a change that you cannot accrue the interest after 90 days delinquency on the consumer lending, Kaspi has never been accruing interest after 90 days and already for 10 years. So that has no impact on us as well. And the third change is an interest rate, which is currently discussed. Currently, in the 56%, the interchange -- interest rate, which is suggested is 46% for consumer lending on both banks and the microfinance companies. And I think 170% on pay debt loans or something like that, that segment, we're not playing so, but I think it's around 170%. So again, it doesn't have really a material impact on us, but that change has not been in place. It's in the process of a discussion.

In terms of the taxes -- in terms of taxes, I think there are several sort of projects, which -- and the draft of legislation change, which have been put in place and still under the discussion, and I think it's just too early to draw sort of any conclusions and discussion has been also last year, and there is a general discussion also currently, but there is nothing really. All the other things, which I've said, I think there is a either happened or have a realistic chance to happen in terms of the taxes, it's difficult to say at the moment. I think there are a lot of pros and cons and I think different government bodies are involved together with the financial institutions.

The good thing about the tax changes, by the way, which I think are important is the reduction in simplification of taxes for SMEs. And that is really exciting thing because if that taxes are simplified and reduced for small and medium enterprises, which is the majority of our merchants and -- both on the payments and the marketplace that will fuel another source of the growth. And I think that's an exciting piece of what's happening. In general, there is really nothing major from us to hear that would have a material impact on us. If there would be something, would be the first one to tell you.

[Operator]

Our next question comes from Gabor Kemeny.

[Gabor Kemeny, analyst]

This is Gabor Kemeny from Autonomous Research. Just 2 quick follow-ups for me, please. The first one is on Juma, are you able to quantify roughly, and how much of the GMV in Q2 came from Juma, and just to get -- just to give us a sense of how much of the Q2 GMV this could be recurring, and possibly if you have a budget for the Q4, Juma, you are planning, please?

And the other question was on cost of risk, which I believe is slightly higher this time, maybe around 2.45% if we annualize. I mean you mentioned resilient asset quality, but is there anything specific you can call out? Like have you set aside all [indiscernible] provisions or any reason for the slight increase?

[Mikheil Lomtadze, executive]

Okay. So in terms of Juma, we've historically suggested that, in general, that's roughly about 15% sort of 20% of our GMV of that month roughly of -- in increase. I think it's difficult to extrapolate for this year, right? Because again, the seasonality has changed and the [indiscernible] GMV is different because, again, different seasonal products, assortment is different. So you should really just sort of bear with us through the year, and we'll give you sort of more details, especially let's see how the third Q performs because there are changes on all fronts before Juma, after Juma, basically, consumers are waiting for Juma, so they are making more purchases during 3 days. But afterwards, they continue to buy more in the different verticals.

And yes, so I think historic performance has been -- it would be different from what we have this year. Basically, the 2 Jumas in the 6 months of this year, there would be substantially more than 1 Juma that we had in the summer. So -- but again, I think we'll provide you details as we go through. We just would like to see how the merchant and consumer behavior is changing with our seasonal approach and the strategy.

In terms of cost of risk, I mean our sort of guidance is -- and the cost of risk, we are -- we see no indication of having anything really to report. So there is some seasonality on some specific products like merchant financing is already sort of 17% of our business. And so seasonality plays a bit differently, but for the year and especially in the third Q, we have no reasons to be concerned about the cost of risk. So it's -- it's stable that you will see basically no increase. I mean it's included it's always doubling. Yes.

[Gabor Kemeny, analyst]

Just a quick clarification here. When you said 15% to 20% amount, your previous guidance for Juma, was that -- so should that be like a quarter -- sorry, should that be like 1/3 for the quarter? So if it's a monthly number.

[Mikheil Lomtadze, executive]

Let us give you details. I just don't want to tell you something, which wouldn't be the right number.

[Gabor Kemeny, analyst]

Sure. No problem.

[Mikheil Lomtadze, executive]

Yes. Sure.

[Operator]

Our next question comes from Mikhail Butkov.

[Mikhail Butkov, analyst]

I have 2 questions. One is a clarification on the deposit side. Just what is the average duration of your deposits and also what -- do you see the other players in the market also reducing the deposit costs right now? What is the competitive landscape on the deposit pricing, which you see right now? It's the first question.

And the second question, we could see in some articles that there were some like investor interest to build large warehouses in Kazakhstan and in Almaty to make it a hub for international deliveries into the Central Asia and into the Europe, do you see any way how the Kaspi can benefit from this cross-border potential delivers e-commerce? Is it something that you at all consider in your pipeline for the international expansion there, the cross-border sales, I mean?

[Mikheil Lomtadze, executive]

So in terms of deposits, I mean, our deposit is quite straightforward. There's basically an annual deposits. So a very simple product. And at the moment, we have only one product on the market. So we're unusual compared to everybody else because everybody else, they have -- I don't know they have a different type of deposits, and they might have deposit for winter, deposit for spring, summer, whatever.

And we just had one deposit because we believe people just want to basically make money on the liquidity, which they have. And therefore, we've launched a simple product. And everybody is pretty much pricing of our product. So from that perspective, I would say, we're more or less in the market if we reduce the rate, then most of the people usually reduce it. So that's regarding the deposits.

In general, we're not thinking like traditional institution. We're not thinking just purely in terms of cost of funding, we're thinking in terms of consumers and the quality of the engagement. And we know that consumers with the money and the ability to shop and buy, are the best consumers for our marketplace and the rest of our products. So that's regarding the savings accounts.

Regarding the -- in general e-commerce infrastructure, I think it's in general, it's a great news because that's something which will be sort of promoting the another wave of the e-commerce growth on the market. We are having and sort of building the -- quite a significant size warehouses now for our e-Grocery. So that's not something which is new for us. I mean during some of the investors, we had to treat we showed some of the operations, which I think are quite impressive, and they're actually large. It's not like -- it's like basically a big sort of 10,000 square meter kind of warehouses. And -- yes, so we use that only for e-Grocery at this stage.

In terms of cross-border, that's something which is interesting to explore. We are careful about it in a sense that we are in the business to promote the local merchants and we are doing everything to help them to develop. And as a result, that's a central part of our strategy. So for example, it would be flooding our marketplace with some -- with some sort of cheap not branded items that will be detrimental to our merchants.

And we have been able, historically, and successfully compete with other marketplaces and stand our ground. But again, we're not spending either to which I do or whatever. I don't know how to say this one. But we are basically working on different ways to support the local merchants and the cross-border might be interesting from that perspective for us. But we're not going to -- ourselves directly go into the cross-border at least at this stage.

[Mikhail Butkov, analyst]

Okay.

[Mikheil Lomtadze, executive]

But we support -- we support local merchants and some of the warehouses, which have been built in Kazakhstan, they are also for not just for Kazakhstan itself, but for maybe some regional ambitions, I don't know. But these warehouses have been built for a long time, already. So -- when you see -- when you read me if I have something in the press, you should come and see the warehouses themselves.

[Operator]

Our next question comes from Can Demir.

[Unknown Analyst]

Yes. This is John with Wood & Company. I wanted to ask 2 questions. Can you maybe describe the e-Cars business model and your value add that Mikheil, because e-Cars is now a substantial portion of the e-commerce GMV? So I think that would help.

And also, in e-Grocery, can you discuss business model? It's been a growing business, but I mean I personally don't know what the business model there exactly. And -- and do you also offer BNPL for e-Grocery purchase as well? That's the other question about the e-Grocery.

[Mikheil Lomtadze, executive]

Okay. So bunch of questions about our business model. I will take a step back for a second. And before going into the specific verticals, I would mention that we are growing now and really excited about it is we are going into specific verticals and building our use cases on the specific user experience, right? So basically buying -- I don't know, buying the package vacation, for example, is not the same as buying iPhone or a car or pumpers for the kids. So really a different user experience.

So we have started that with -- initially with the travel. Then we went into the grocery and then we went into the cars. And what you would see over time from us and maybe second half of this year, really cool ideas about what else we're doing around specific verticals in our marketplace. So we're just pulling out the specific need of the consumer and merchant, and we are creating the user experience, which is specifically designed for that vertical. So that's the general role, the way we're creating this new wave of innovation across our services, which will continue sort of supporting our growth in Kazakhstan.

In terms of the cars, the way you should think about the cars really is if you combine together, well, I would take the U.S. market as an example. If you combine together Carvana, CarMax in a certain sense, like the biggest sort of one is fully online dealer, the biggest after trader, I think, is the biggest classified, if I'm not mistaken, in the U.S. And then you would combine some platform, which sells the spare points, which I think nobody has been successful in many other countries. And here, we are working really hard to crack that. So that's a huge market.

And now you're thinking in our car marketplace and on top of GMV and generating businesses, it does seem that you don't really know much about our business, but things like drivers can issue the driving license in our app. They can register car ownership, they can pay car taxes, so that they can buy tires. So there is -- as they can buy a car, actually car. So there is a lot, they can get car finance. So it's a huge universe of different services around the car.

So we are excited about that business just because it's after an apartment, the real estate forward the biggest household spending, both buying, servicing, maintaining the car and selling it afterwards. And we are in this market, and we started this strategy from acquiring the largest car classified business last year. So now we are basically #1 clearly in a car vertical, but we are just starting to innovate because there are some things we're really excited about that maintaining and serving the car vertical. So that's about the car.

[Unknown Analyst]

Just to clarify on car. So e-Cars is actually -- the business you got with Kolesa, did I understand it correct?

[Mikheil Lomtadze, executive]

Portion of it. In the e-Cars we combined together, we're #1 in tires. So that -- you could actually see in our first-year numbers. The breakdown, I think -- we provide a breakdown for spare parts, Cars 1P, car 3P.

[Unknown Analyst]

Got it.

[Mikheil Lomtadze, executive]

It imposes pretty much everything around selling and servicing cars. We're #1 in car sales, we're #1 in tire sales as we speak, and we inspire to become #1 in the spare part sales and other services that you can imagine around the car. I don't want to talk too much about some of the things we are working on.

So if you have anything around the cars, whatever you can imagine, feel like your car, everything around the car. So there will be some cool stuff talking later this year about it.

The grocery is pretty much the e-Grocery business. We went into the business. We have around 10,000 SKUs. We deliver you weekly purchase home and we are working directly with the suppliers and whatever Amazon Fresh, something like that. And the main difference of our business compared to many other businesses globally that we have been able to make it in just 12 months 7 -- I think, 7% net income margin business.

So it's profitable, it's growing. And actually, we are -- our challenge is to cope with the demand because there is such a strong demand for that service. And this is a huge market that we're talking about sort of the $14 billion, $15 billion market in front of us. So -- and we are in 3 cities, and we just started 1 city in spring of this year.

So that's something which we'll be scaling, and it includes delivery, it includes stock store everything relationship with it. FMCG brands to our marketing platform, but also with the brands and suppliers and distributors. And we are the biggest grocery player, I think, now in Almaty already. So we're really excited about that. So that's about the grocery business. I'm not sure if you had any other questions, but...

[Unknown Analyst]

The last question was, do you also offer the BNPLs for grocer repurchases?

[Mikheil Lomtadze, executive]

Well, I mean, BNPL in our case is basically a substitute of a credit card, right? So we offer our consumers an ability to have the payment options, which are related to your own money or BNPL. So consumers decide.

And what happens with the consumers is consumers don't use BNPL actually for grocery because that's a small ticket -- relatively small ticket transaction, and they actually prefer to pay with their own money. But our consumers have a choice of using any payment option they want.

Then we basically completely killed the credit card business because we make approval within 99% and whatever seconds -- less than 2 seconds, I think. And it can be -- it can -- basically people don't need the credit card, which has a fees and untransparent products pricing. And as far as I'm concerned credit card business does not exist in Kazakhstan anymore, just because we've built such incredible transparent product for our consumers.

[Operator]

That's all the time we have for our Q&A. I'll now hand back to David Ferguson for any final remarks.

[David Ferguson, executive]

All right. So thanks, Elliot. Thank you, everyone, for your time. Thank you for your questions. Let's wrap it up for today. Happy to take any further questions offline. But if not, thank you and speak to you in the autumn. Thanks a lot. Bye-bye.

[Mikheil Lomtadze, executive]

Thank you.

[David Ferguson, executive]

Thank you, everyone. Bye-bye.

[Operator]

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