S&P upgrades outlooks on Freedom Holding Corp. subsidiaries amid strengthened capitalisation and risk management

The international rating agency S&P Global Ratings has revised to positive its outlook on the subsidiaries of Freedom Holding Corp. — Freedom Finance Europe Ltd (Freedom24), Freedom Finance Global PLC, Freedom Finance JSC, and Bank Freedom Finance Kazakhstan. — and affirmed the companies’ long-term and short-term credit ratings at "B/B".

S&P also revised the outlook on Freedom Holding Corp.'s long-term rating to stable and affirmed the rating at "B-".

S&P analysts noted the holding company's strengthening of its risk management and compliance systems, as well as improvements in Kazakhstan's banking supervision.

“The positive outlooks on Freedom Finance JSC, Freedom Finance Global PLC, Freedom Finance Europe Ltd., and Bank Freedom Finance Kazakhstan reflect our view that the Kazakhstan financial sector's good resilience to recent economic challenges, the gradual enhancement of financial oversight, and further strengthening of Freedom group's risk management and capitalisation will support its franchise over the next 12 months,” the S&P statement said.

The agency expects that Freedom Holding Corp. "will maintain its strong earnings in 2024–2025, supported by revenue diversification with the buildup of banking and insurance activities in Kazakhstan.” “In our base-case scenario, we expect the group's risk-adjusted capital (RAC) ratio to remain above 10% over the next 12–24 months compared with 11.6% as of March 31, 2024, and 9.4% one year earlier.”

S&P noted the holding company's efforts to strengthen corporate governance. “In 2023, Freedom group started building its consolidated risk management framework. It recently hired a chief risk officer, chief compliance officer, and chief legal officer. In May 2024, it increased the number of directors on its board to seven from six, with four being independent and having international backgrounds,” the statement said.

The agency may upgrade the ratings of Freedom Holding Corp.'s businesses over the next year if the positive trends of recent months continue. “We would raise our ratings on the operating subsidiaries over the next 12 months if we conclude that steps to build aggregated risk management and compliance and strengthen risk governance would endure, while our RAC ratio remains above 10%, supported by strong earnings and moderated growth,” S&P analysts said in the statement.