Freedom Holding's Subsidiaries Earn Upgraded Credit Ratings Amidst Steady Growth and Strengthened Compliance

Rhea-AI Summary

Freedom Holding Corp.'s subsidiaries received credit rating upgrades from S&P Global Ratings. Four key subsidiaries - Freedom Finance, Freedom Finance Global, Freedom Finance Europe, and Freedom Bank Kazakhstan - saw their long-term issuer credit ratings elevated from 'B' to 'B+', while maintaining 'B' short-term ratings. The parent company's rating remained at 'B-' with a 'stable' outlook.

The company, which operates the largest retail brokerage franchise in Kazakhstan with expanding European presence, reported strong financial performance with total revenues reaching $1.03 billion (up 33.4%) and net profit increasing by 82% to $375 million for the six months ended September 30. Total assets grew to $8.82 billion from $8.30 billion in March 2024.

Positive

• Credit rating upgrades for four key subsidiaries from 'B' to 'B+'
• Revenue growth of 33.4% to $1.03 billion
• Net profit increase of 82% to $375 million
• Total assets growth to $8.82 billion
• Geographic diversification of revenues strengthening capitalization

Negative

• Parent company rating remains at lower 'B-' level
• Risk of rapid franchise expansion potentially straining risk management
• Complex structure with multiple subsidiaries across different jurisdictions requiring enhanced risk management

Insights

Financial Analyst

The credit rating upgrades for Freedom Holding's subsidiaries signal significant improvements in operational strength and financial stability. The upgrade from 'B' to 'B+' for key subsidiaries, while maintaining a 'stable' outlook, reflects enhanced creditworthiness and reduced risk profiles. The company's robust financial performance, with $1.03 billion in revenue (33.4% YoY growth) and $375 million net profit (82% increase), demonstrates strong execution of its growth strategy.

The geographic diversification across 22 countries and expansion of service offerings provide multiple revenue streams, reducing market-specific risks. The increased total assets to $8.82 billion strengthens the company's balance sheet position. However, S&P's caution regarding rapid expansion highlights potential risks to risk management and capitalization that investors should monitor.

Risk Management Expert

The development of comprehensive risk management and compliance systems across multiple jurisdictions demonstrates Freedom Holding's commitment to robust governance. The stable outlook from S&P reflects confidence in the company's risk control framework, particularly important given its complex structure and diverse geographic presence. The measured approach to international expansion, balanced with strict compliance policies, suggests prudent risk management.

The upgraded national scale ratings to 'kzBBB' for key subsidiaries indicate improved risk profiles at the operational level. However, the holding company's 'B-' rating suggests some remaining concerns about consolidated risk management capabilities, particularly in the context of rapid growth. The focus on maintaining strong capitalization while pursuing growth opportunities provides a important buffer against potential risks.

NEW YORK CITY, NEW YORK / ACCESSWIRE / December 13, 2024 / S&P Global Ratings has upgraded the credit ratings of four key subsidiaries of Freedom Holding Corp., the Nasdaq-listed U.S.-based diversified financial services company. The international rating agency has raised the long-term issuer credit ratings of Freedom Finance, a Kazakhstan-based market broker; Freedom Finance Global, a company providing access to international markets; Freedom Finance Europe, a European broker; and Freedom Bank Kazakhstan, from 'B' to 'B+' and affirmed their short-term ratings at 'B.' The rating of Freedom Holding Corp. itself was affirmed at 'B-' with a 'stable' outlook.

"This upgrade reflects the efforts and progress we've made in strengthening our operations and governance. Our focus on diversification, compliance and sustainable growth will continue to drive our success," Freedom Holding said in a statement.

In addition, the national scale ratings for two of its subsidiaries were upgraded to 'kzBBB' from 'kzBBB-'.

Freedom Holding operates the largest retail brokerage franchise in Kazakhstan and has a growing presence in Europe. The upgrades demonstrate the strength of the holding company. Freedom is also developing a comprehensive ecosystem in Kazakhstan and its businesses include insurance and lifestyle companies. The holding has streamlined traditionally complex processes, such as insurance claims and mortgages, and aims to build meaningful relationships with its customers.

The company plans to expand internationally and continuously evaluates opportunities in emerging and developed markets while maintaining strict compliance policies.

S&P also noted Freedom Finance's steady growth and geographic diversification of revenues, which is important for the company's capitalisation. The stable outlook reflects the analysts' confidence in the sustainable development of all holding structures and their financial stability.

"The holding is developing a risk management and compliance system within its complex structure with many subsidiaries in different jurisdictions.We expect that moderate business growth combined with strong earnings, diversified by sources and geographies, will help maintain Freedom's strong capitalization," the rating agency said.

However, the report cautioned against too rapid franchise expansion as this could strain the holding company's ability to manage consolidated risks and potentially put pressure on its capitalisation. On the other hand, Freedom Holding's outlook could be upgraded in the future if it demonstrates effective risk management, expands cross-selling opportunities between its subsidiaries and consolidates its franchise while maintaining strong capitalization.

Freedom Holding Corp. provides financial services in 22 countries, including Kazakhstan, the United States, Cyprus, Poland, Spain, Uzbekistan and Armenia. Its head office is in New York. The holding has posted strong financial results for the six months ended 30 September, reporting record total revenues of $1.03 billion, up 33.4% from $751.8 million in the same period last year. Freedom Holding's net profit for the same period increased by 82% to $375 million, and the total assets also saw an increase, reaching $8.82 billion compared to $8.30 billion in March 2024.

Contact Information

Natalia Kharlashina
Public Relations
prglobal@ffin.kz
+77013641454

SOURCE: Freedom Holding Corp.

View the original press release on accesswire.com

FAQ

What were the new credit ratings assigned to Freedom Holding's (FRHC) subsidiaries by S&P?

S&P upgraded the long-term issuer credit ratings of four key FRHC subsidiaries from 'B' to 'B+' while maintaining their short-term ratings at 'B'.

How much did Freedom Holding's (FRHC) revenue grow in the six months ended September 30, 2024?

FRHC's total revenue grew by 33.4% to $1.03 billion compared to $751.8 million in the same period last year.

What was Freedom Holding's (FRHC) net profit increase in the latest financial report?

FRHC's net profit increased by 82% to $375 million for the six months ended September 30, 2024.

What are the main risks identified in S&P's rating report for Freedom Holding (FRHC)?

The main risks identified were potential strain on risk management from rapid franchise expansion and challenges in managing consolidated risks across multiple jurisdictions.

How many countries does Freedom Holding (FRHC) operate in as of December 2024?

Freedom Holding Corp. provides financial services in 22 countries, including Kazakhstan, the United States, Cyprus, Poland, Spain, Uzbekistan and Armenia.