Progress on Strategic Priorities in 2024

During the reporting year, acting as the operator of the Housing and Utility Infrastructure Development Concept for 2023–2029 (hereinafter referred to as the Concept), the Bank provided loans to socially vulnerable groups on the housing waiting lists of local executive bodies. This groups include persons with disabilities (groups I and II), families raising children with disabilities, large families, single mothers, orphans, and children left without parental care, among others. Under the Concept, the Bank issues preliminary housing loans at interest rates of 2 percent and 5 percent per annum, depending on the borrower category.

All participants in the Concept use the loan funds to purchase housing constructed by local executive bodies.

In 2024, 118 projects were approved under the Concept (6,605 apartments), with a total area of 648,000 square meters and a total value of KZT 74.2 billion.

Under the state programs (including the Concept, and remaining housing stock from expired programs such as Nurly Zher and Shanyrak), a total of 9,004 loans were issued in 2024 for KZT 108.1 billion. Of these, 5,145 loans for KZT 59.6 billion at 5 percent interest and 3,859 loans for KZT 48.5 billion at 2 percent interest were issued. Loans under the 5-10-20 program were funded using unused budget allocations from 2023 totaling KZT 39.7 billion, as well as recycled repayments. Under the 2-10-20 program, the Bank received KZT 33.6 billion from the national budget in 2023 (in tranches of KZT 20 billion, 12.2 billion, and 1.4 billion). In 2024, this funding was used to provide loans to persons with disabilities, orphans, large families, and families raising children with special needs.

In line with the Bank’s strategic objectives to comprehensively transform its operations, business processes, competencies, corporate culture, and business models into a fully digital bank that maximally leverages digital technologies, the Bank continues to develop and implement innovative products based on new technologies to deliver a new customer experience. Since 2020, the Bank has operated a video banking service. This feature has enabled customers to apply for mortgages remotely, significantly reducing the need to visit Bank branches. In 2024, a total of 5,244 loan applications were submitted via video banking, totaling KZT 120 billion. Video calls have also allowed customers to receive post-deposit services remotely, saving time and enhancing convenience. In 2024, the video banking service was used 543,000 times. Additionally, more than 807,000 customers were served through audio support services during the year.

In 2024, the deposit portfolio of the internet banking channel achieved the following results:

• Total savings exceeded KZT 263 billion;
• Deposit inflows amounted to KZT 156.1 billion;
• Over 162,000 new contracts were opened;
• Deposit portfolio activity rate reached 64.0 percent.

As for the video banking portfolio, the following results were achieved:

• Total savings amounted to KZT 211.5 billion;
• Deposit inflows exceeded KZT 108.6 billion;
• 74,600 new contracts were signed;
• Deposit portfolio activity rate reached 38.9 percent.

To promote digital service adoption among customers, the number of digital assistants in Bank branches was increased to 118 employees in 2024, helping to expand the share of remote banking services. As a result, 53 percent of all transactions in 2024 were conducted through digital channels, compared to 42 percent in 2023.

Through a joint initiative with Kazpost JSC aimed at promoting banking products in single-industry towns, small towns, district centers, and remote rural settlements of Kazakhstan, the number of postal workers under contract with the Bank reached 250 by the end of 2024. These representatives from 16 regions actively participated in the project, effectively using digital channels to provide financial services to local residents. As a result, 532 new deposit accounts were opened with the help of postal agents during the year.

The Bank is continuously working to improve and develop its products and services, placing special emphasis on addressing the needs of all social groups.

Today, the Bank offers a range of socially focused housing programs, including national government programs, regional initiatives in partnership with local akimats, youth housing programs, a program for military personnel, programs for women and children, and others.

When developing its product line, the Bank pays special attention to ensuring that the interests of all social groups are considered. It is constantly refining and adapting its offerings. ESG factors are embedded in the Bank’s lending processes under special social programs.

In 2024, the Bank continued implementation of the national program With a Diploma to the Village. Within the framework of this program, the Bank has developed a remote application submission system for professionals in healthcare, education, social welfare, culture, sports, the agro-industrial sector, and civil servants working in rural akimat administrations, who relocate to live and work in rural settlements. In addition, a personal account interface has been created for local authorities to manage submitted applications. To improve customer service and increase the digitalization of public services, the entire application process was fully transitioned to an online format. This transformation helped save time for professionals in education, healthcare, and agriculture, as well as for local government administrators processing applications for budget loans aimed at rural development.

The Bank signed 183 commission agreements with local executive bodies for a total of over KZT 30 billion. Under the program, 3,263 loans were issued totaling KZT 26 billion, along with 2,081 relocation grants amounting to KZT 776 million.

The Bank’s current product portfolio includes a wide range of offerings tailored to various customer segments. In addition to government programs, the Bank successfully implements regional, youth, and corporate housing programs, as well as targeted offerings for military personnel, women, and children.

Regional and youth programs have been in place since 2017, providing reimbursable budget loans through the Bank from akimats (local executive bodies) in various regions. These loans are used to provide affordable housing to working youth. The key goal of such programs is to help working citizens access housing and to foster conditions that encourage them to settle and remain in their home regions. These initiatives target professionals who are especially in demand locally – doctors, teachers, journalists, athletes, cultural workers, and other specialists who play a critical role in regional development.

Two new government programs, Otau and Nauryz, were launched to help improve the housing conditions of citizens across Kazakhstan. These programs provide accessible mortgage loans to socially vulnerable groups at preferential rates of no more than 7 percent per annum. Under the Otau program, 3,192 loans were issued in 2024 totaling KZT 74.59 billion. Of these, 2,600 loans (81 percent) amounting to KZT 62.2 billion (83 percent) were for the purchase of primary housing. Under the Nauryz program, from the start of 2024 to 1 January 2025, the Bank issued 6,791 loans totaling KZT 176.83 billion. Of these, 5,372 loans (79 percent) amounting to KZT 141.87 billion (80 percent) were for the purchase of primary housing.

Since 2019, the Bank has been implementing the Corporate program to support companies in improving the housing conditions of their employees. The program is designed for organizations that are ready to allocate their own funds to help their staff obtain housing. This initiative not only improves social conditions but also helps retain qualified specialists in the regions. Each year, the Bank invites large companies to participate in the program.

The program for military personnel remains one of the Bank’s most in-demand products. To fund the program, the Bank raises capital on market terms and also uses its own resources. Currently, the Bank is the only financial institution where special deposits are granted a protected status and legal immunity.

Since early 2023, the Bank has been implementing Kazakhstan’s first Green Mortgage program for purchasing apartments in energy-efficient residential complexes built to green standards, supporting the national strategy to promote environmentally friendly housing. The program is aimed at protecting public health and the environment.

The key condition of the program is that the purchased housing must comply with a green standard certified under one of the systems operating in Kazakhstan (OMIR, GOST R, BREEAM, LEED), regardless of the certification level. This means that developers use environmentally friendly and safe materials in construction, develop and landscape the surrounding areas, ensure well-planned layouts, provide air temperature control within apartments, and ensure access to public transport, among other criteria.

To expand cooperation with key players in the construction sector, the Bank signed 25 memoranda of partnership with the country’s leading construction companies. In 2024, 763 loans were issued under the Green Mortgage program for a total of KZT 18.6 billion.

Modern trends in the financial sector of the Republic of Kazakhstan are defined by the rapid adoption of digital and technological solutions.

Digitalization has become one of the key drivers of global economic growth and has significantly impacted the banking sector. The application of digital technologies in banking is radically transforming decision-making processes related to the enhancement of operations and the expansion of products and services.

The pace of innovation in the banking industry continues to accelerate. The banking sector serves as a prominent example of fast-paced digital development. A digital bank must evolve at the same speed as the changes occurring around it, while also complying with the legal and regulatory framework of the Republic of Kazakhstan.

In 2024, the Board of Directors approved the Information Technology Development Strategy of Otbasy Bank JSC for 2024–2026 (hereinafter referred to as the IT Strategy), which outlines key priorities for the development of innovative technologies. The strategy is focused on advancing digital channels and creating an enabling environment for the growth of the mortgage lending market.

The IT Strategy was developed to establish an action plan for the advancement of information technologies and innovation, aimed at supporting the strategic goals of Otbasy Bank JSC.

The primary IT objectives include addressing essential digitalization needs in business processes, eliminating functional redundancies, and reducing operational costs. The Bank has already partially achieved the objectives between 2021 and 2024. This laid the foundation for the transition to the next stage of innovative digital development.

The main goals of the IT Strategy for 2024–2026 are: further development of IT platforms based on microservice architecture, digitalization of products and services, widespread use of analytics across all channels to enhance cross-selling and personalize customer offerings, implementation of new services to build an omnichannel customer experience, and creation and modernization of digital solutions.

As part of the IT Strategy, the Bank plans to continue advancing a number of innovative projects across nearly all areas of its business. These include leveraging robotic process automation (RPA) to optimize manual tasks and accelerate the processing of customer transactions and inquiries, expanding customer access to banking services and partners through open API technology, and implementing tools that allow the Bank to offer customers products and services using gamification and behavioral economics principles.

Rapid technological changes, especially in the areas of the internet, digital platforms, mobile, and social media, are driving shifts in customer preferences, behaviors, and decision-making models. The Bank’s goal is to create a dynamic digital bank with an optimized structure of digital business processes and to ensure the implementation of advanced technologies in banking services and innovative banking systems.

Currently, there are two key areas for integrating IT projects into the Bank’s operations.

The first is the digitalization of customer service and the improvement of internal and external communications.

The second is improving the performance of the Bank’s applications and information systems.

Under the IT Strategy, the Bank will continue working in both areas and will further develop its IT infrastructure in line with evolving business needs. It will also seek to maintain the infrastructure at a modern technological level.

The IT development initiatives are focused on the following objectives:

• increasing the efficiency of digital business processes,
• digital transformation of products and services,
• integration of artificial intelligence and robotics,
• enhancement of software solutions to improve performance and reduce financial costs,
• modernization of IT infrastructure and improvement of system resilience,
• strengthening data protection,
• advancing IT staff skills and promoting professional growth in the field of information technology.

In managing risks, the Bank employs various approaches in accordance with the requirements of the National Bank of the Republic of Kazakhstan, as a participant in the national financial system. These include:

• the three lines of defense model;
• formulation of the Bank’s risk appetite strategy and risk appetite statement;
• capital adequacy assessment;
• liquidity adequacy assessment;
• stress testing using sensitivity analysis and scenario analysis methods;
• implementation of a management reporting system to ensure timely communication of risk indicators to the Bank’s authorized bodies.

To assess and determine risk levels, the Bank also uses risk calculation metrics based on group-wide methodologies defined by Baiterek NMH JSC, such as risk-weighted assets (RWA), the probabilistic-statistical Value at Risk (VaR) approach, which estimates potential losses with consideration of their probability, and cash flow gap analysis for the assessment of liquidity risk and interest rate risk.

These models support strategic risk planning, oversight, and monitoring of risk-related decisions.

To successfully implement its strategy, the Bank regularly analyzes key risks that may affect the achievement of strategic goals and financial stability, and develops corresponding risk mitigation measures.

The Bank’s primary competitive advantage lies in its ability to attract top talents, provide professional development opportunities, hire the best candidates, and manage personnel effectively within an inclusive and supportive environment. In 2024, the Bank implemented a series of initiatives aimed at strengthening its HR brand in the labor market, enhancing employee knowledge and skills, automating HR administrative processes, etc.

Key performance indicators for the Bank’s HR management system included:

• Employee engagement level of 78.1 %, based on an assessment conducted by an independent consultancy – above the market average;
• Employee turnover rate of 5.9 % in 2024, down from 6.6 % in 2023.

The Bank maintains its financial stability by managing its financial operations in alignment with its strategic objectives. Through the effective implementation of state-funded and internally financed programs over the past five years, the Bank has achieved consistent annual growth in revenue and net profit. Total revenue for 2024 amounted to KZT 369,177 million, which is KZT 9,995 million higher than in 2023. Net profit for 2024 reached KZT 120,786 million, which exceeded the planned figure by KZT 13,221 million (112 % of the target). The average yield on temporarily available funds stood at 14.63 % for the reporting period.

For the first time, the Bank was assigned an ESG rating by the international rating agency Sustainable Fitch. The Bank received a score of “3” and an overall rating of “55”, driven by the positive social impact of its mortgage loan portfolio. A significant share of the Bank’s portfolio is directed at expanding access to adequate, safe, and affordable housing and basic services for certain vulnerable groups.