S&P Raises Outlook on Freedom Holding (FRHC) Subsidiaries to Positive

Freedom Holding Corp. (the “Company”) (NASDAQ: FRHC), a multi-national diversified financial services holding company with a presence through its subsidiaries in 20 countries, today highlighted an S&P Global Ratings (“S&P”) report published on June 28, 2024.

Among other aspects, the S&P report remarked that the ratings for Freedom Finance JSC, Freedom Finance Europe Ltd., Freedom Finance Global PLC and Freedom Bank Finance Kazakhstan (now known as Freedom Bank Kazakhstan JSC) were affirmed at “B/B” with outlook revised to positive from negative and the rating of Freedom Holding Corp. itself has been kept at “В-” with an outlook revised to stable from negative.

As the rationale for its rating action, S&P noted lower economic risk and improving banking sector supervision in Kazakhstan. S&P stated that it expects the country's GDP to grow by 3.6% on average per year over the next four years.

S&P also noted that it expects that moderating balance-sheet growth coupled with strong earnings will support the Company’s strong capitalization. “We expect Freedom will maintain its strong earnings in 2024-2025, supported by revenue diversification with the buildup of banking and insurance activities in Kazakhstan. Its three-year average (March 2022-March 2024) core earnings to S&P Global Ratings risk-weighted assets were stable at about 3.4%, a high risk-adjusted earnings ratio in an international context. The contribution of banking activities to the group's revenue and assets has significantly increased over the past two years,” S&P said in its press release issued on June 28, 2024, which can be found here: https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3204976

S&P also pointed out the gradual building of Freedom Holding Corp.’s consolidated risk management framework since 2023. S&P noted that the Company has recently hired a chief risk officer, chief compliance officer, and chief legal officer and has expanded its board of directors from six to seven members, including four being independent directors. They also noted that by March 2024 the Company had terminated its omnibus brokerage relationship with its Belize affiliate and had transferred clients of that affiliate to companies within the Company’s group.

S&P can raise its ratings on the operating subsidiaries over the next 12 months if it concludes that steps to build aggregated risk management and compliance and strengthen risk governance would endure while the Company’s capitalization (as measured by S&P’s RAC ratio) remains above 10% supported by strong earnings and moderated growth.

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