isn't kaspi exposed to currency and inflation risk in those markets?

Yes, Kaspi.kz is exposed to currency and inflation risks in both Kazakhstan and Turkey, and management openly acknowledges these challenges in earnings calls and financial reports. However, the company has implemented several active strategies to mitigate these risks, particularly currency exposure. Here is a detailed breakdown of these risks and how Kaspi manages them.

💹 Currency Risk: A Managed but Real Exposure

Currency risk is a primary concern for investors in Kaspi.kz, especially for those holding dollar-denominated securities like the GDRs (ticker: KSPI) that trade on the NASDAQ -1-10. The company's reporting currency is the Kazakhstani Tenge (KZT), but it generates revenues and holds assets in Turkish Lira (TRY) and has liabilities in US Dollars (USD) -1-4.

1. Risk: Translation and Transaction Exposure

• Turkish Lira (TRY) vs. Kazakhstani Tenge (KZT): This is the most direct risk from the Hepsiburada acquisition. Kaspi consolidates Hepsiburada's financials, which are in TRY, into its own reports, which are in KZT. A depreciation of the Lira against the Tenge reduces the value of the Turkish operations' contribution when translated into KZT. This was observed in Q2 2025, where a "weakening of the Turkish lira against the tenge led to a decline in valuation" -1. The net loss from the Turkish business also widened, partly due to these currency effects -1. Hepsiburada's reported order growth acceleration from -11% to +19% year-over-year is a positive sign, but currency swings can offset these operational gains in financial statements -1.
• USD/KZT Fluctuations: The tenge itself is volatile, influenced by oil prices and regional economics -5. When the tenge depreciates against the dollar (i.e., it takes more tenge to buy one dollar), the USD value of Kaspi's KZT-denominated earnings decreases, impacting the company's valuation for international investors -1-10.

2. Mitigation: Active Hedging and a "Natural Hedge" Strategy

Kaspi does not simply accept these risks. Its financial statements reveal an active and sophisticated risk management program.

• Derivatives and Hedging: Kaspi.kz actively uses financial instruments to manage its net open currency position. The company's 2024 financial report shows significant holdings in derivative financial instruments, including spot and derivative deals, specifically aimed at hedging currency risk -4.

• The "Natural Hedge": The company has built a "natural hedge" by matching foreign currency assets with foreign currency liabilities. Its financial data shows a significant increase in USD-denominated liabilities, which offsets the USD-denominated assets on its balance sheet -4.

• In 2024, Kaspi had USD-denominated financial liabilities of 579.7 billion KZT, compared to USD-denominated assets of 388.0 billion KZT.

• The net open position (assets minus liabilities) in USD was negative 191.6 billion KZT at the end of 2024, compared to a positive 25.2 billion KZT at the end of 2023.

• This shift suggests a deliberate strategy to take on more USD-denominated debt to act as a hedge against its USD holdings and future obligations.

• Sensitivity Analysis: Kaspi quantifies this risk. According to its 2024 report, a simultaneous 25% strengthening or weakening of the US Dollar against the Tenge would have a relatively contained impact of approximately ±7.4 billion KZT on its profit or loss -4.

📈 Inflation Risk: A Persistent Operational Challenge

Inflation is a major macroeconomic reality in both Kazakhstan and Turkey, and it directly pressures Kaspi's costs and profitability.

1. Risk: Increased Operational Costs and Funding

• Rising Interest Rates: To combat inflation, central banks raise interest rates. This directly increases Kaspi's funding costs. In Q1 2026, management stated that "higher funding costs continued to pressure profitability growth" in the Fintech segment, with funding costs in Kazakhstan up by about 220 basis points year-over-year -7. The high-interest-rate environment has been a recurring theme in earnings calls -5-7.
• Cost of Goods Sold (COGS): Inflation increases the cost of the goods sold on its platform. This was a key factor in Q1 2026, where net income was flat "affected by higher interest expenses and COGS," with the latter being associated with Hepsiburada's first-party (1P) business -3-7.
• Delivery and Operating Costs: The cost of logistics and delivery is also sensitive to inflationary pressures like fuel and labor costs -8.

2. Mitigation: Pricing Power and Structural Advantages

Kaspi has several advantages that help it mitigate, and in some cases benefit from, inflation.

• Pricing Power in Kazakhstan: In its home market, Kaspi has been able to increase the "take rate" (the fee it charges for services) to record highs. In Q4 2025, the e-commerce take rate reached 13.1%, driven by high-margin value-added services like advertising and delivery -8. This ability to raise prices faster than its costs increase protects its margins.
• Benefiting from Higher Rates: While higher rates increase its funding costs, they also allow Kaspi to earn a higher yield on its loan portfolio. Management reported that the average annual portfolio yield remained flat at 24% in early 2025, and it can earn similar yields on the larger loan book -1-7.
• Focus on Higher-Margin Products: In its Fintech business, Kaspi is deliberately shifting away from short-term, lower-yield "buy now, pay later" (BNPL) loans toward longer-duration products like merchant financing and general-purpose loans, which generate more revenue per loan -7.

💎 Summary: A Managed Risk, Not an Uncontrolled One

Kaspi.kz is not ignoring the significant currency and inflation risks inherent in its business model, particularly its expansion into Turkey. The company's strategy is one of active, transparent management. It publicly discusses these headwinds in its earnings calls and financial reports while demonstrating concrete actions to hedge currency exposure -4, maintain pricing power -8, and optimize its loan portfolio for higher yields -7.

The success of this strategy is a key factor for investors to watch. While the company remains confident, as evidenced by its reiterated "buy" ratings from analysts and its guidance for growth, these macroeconomic factors introduce a layer of complexity and potential volatility to its financial performance -1-2.