Freedom Holding is a Kazakh financial group that has fused brokerage, retail banking, insurance and a nascent telecom into one customer ecosystem, and the second fiscal quarter of 2026 shows that engine still compounding. The group's scale story is real, but the earnings behind it are under regulatory examination, and that split between top-line growth and margin absorption defines the current setup.
Revenue climbed 40 percent to $732.5 million in the quarter. Yet net income fell 15 percent to $31.7 million, a gap the cost base and the insurance regulation filled. The quarter also paired a $300 million private equity raise at $126.35 per share with a wholesale CFO change, Evgeny Ler stepping down after a decade and Valeriy Kim taking over in his place. Both moves land in the shadow of the SEC Wells Notice delivered to the company and its chairman in early March, which is the single fact that caps how much of the growth story the market can underwrite.
Quarterly EPS printed $0.52, down from $0.62 a year earlier. The insurance line swung to a $19.2 million net loss on a regulatory commission cap. The next two quarters test whether brokerage scale and deposit growth can outrun that overhang, and whether the group can raise capital and fund its telecom build at the terms it needs.
Freedom Holding organizes its operating subsidiaries into four reportable segments, Brokerage, Banking, Insurance and Other, with Kazakhstan supplying the home market and a network of Cyprus, European, Central Asian and U.S. entities providing the cross-border rails. The group is controlled by Chairman and CEO Timur Turlov, who entered the structure through a 2015 reverse acquisition and retains controlling ownership, and it lists on Nasdaq, the Kazakhstan Stock Exchange and the Astana International Exchange while holding a place in the Russell 3000. The group employed more than 11,000 full-time staff across 230 offices at fiscal year end. Its retail brokerage customer base had grown to 858,000 accounts at the start of the fiscal year.
The strategic center of gravity sits in the brokerage franchise and the banking platform around it. Freedom Bank KZ launched its SuperApp in April 2024, an all-in-one platform bundling retail banking, payments, insurance and lifestyle services. The app had doubled its registered users within a year, reaching 5.2 million by the start of the fiscal year. The ecosystem logic is that each new customer touchpoint, from a card to a ticketing order to a cloud contract, feeds the next product and lowers the unit cost of serving the account. Regional banks and standalone brokerages in the area operate single-license franchises; FRHC is the rare multi-license platform where the deposit base, the loan book, the insurance book and the trading book are cross-sold into one relationship.
The second growth pole is the telecom build. Freedom Telecom, a subsidiary incorporated under the Astana International Financial Centre laws, is assembling Kazakhstan telecom assets through a series of acquisitions, including SilkNetCom in September 2024 and Freedom Cloud Holding (formerly Astel Group) in April 2025, with Freedom Media as a streaming subsidiary for the wider Central Asian region. Sales of goods and services in the Other segment nearly tripled year over year on this expansion. The company frames the build as the next layer of the digital ecosystem, and it has committed $113.1 million in five-year equipment and software contracts to date, financed in part by $1 billion bond programs at the Freedom SPC subsidiary.
The control structure is the load-bearing feature of the whole story. Turlov controls the company, sits on the board, and his related-party transactions with the group are disclosed in detail in the filings. That combination, paired with an active SEC inquiry, means governance quality is not a footnote to the operating story; it is the lens through which every acquisition, every capital raise and every margin decision should be read.
The brokerage franchise is the moat, and the moat is scale plus infrastructure rather than any single product. Freedom KZ and Freedom Global, the two Kazakh broker-dealers, plus Freedom EU in Cyprus and a U.S. registered broker-dealer, give the group the license coverage to serve retail customers in Kazakhstan with access to U.S. and European markets. The SuperApp's 5.2 million users give the platform a distribution reach no single-license competitor can match. The cross-sell architecture is the structural advantage: a customer who opens a brokerage account is a candidate for a deposit account, an insurance policy, a card, a ticketing subscription and a cloud contract.
One customer dominates the economics, and that is both the engine and the exposure. A single institutional market maker customer of Freedom Global generated $89.8 million of the $156.7 million fee and commission income in the quarter. That is roughly 57 percent of the total, down from 67 percent a year earlier. The customer trades through omnibus accounts with third-party prime brokers, and FRHC internalizes a portion of customer orders by matching them against the institutional client's positions. The internalized-trades structure is the source of the revenue, the source of the margin, and the precise subject of the SEC's accounting-practices review, which the auditors flagged as their most significant audit matter for the fiscal year. The moat is real, but it is a moat the regulator is currently inspecting.
The banking product set is young and deposit-funded. Freedom Bank KZ, acquired in December 2020 as Kassa Nova Bank, is the deposit engine of the group. The funding model is deliberately deposit-based rather than wholesale-based, which is the opposite of the structure the trading book runs on. Average interest-bearing customer liabilities grew from $1.4 billion to $3.0 billion year over year. The average rate held roughly flat at 12 percent, so the expansion was almost entirely volume-driven. The bank's loan portfolio, led by digital mortgages, corporate loans, SME lending and auto loans, produced a customer loan book of about $2 billion in issued loans. The SuperApp's cashback loyalty program is deliberately priced as a margin trade: banking service fee income fell $17.4 million year over year as cashback accruals grew, an explicit choice to buy engagement and deposit growth with fee margin.
Insurance is the second pillar but carries a fresh regulatory headwind. Freedom Life and Freedom Insurance, both acquired in 2022 from Turlov's own holdings, write life, health, general and pension annuity business. Amendments to Kazakhstan's Law on Insurance Activities that took effect in September 2025 capped commissions payable to insurance agents for policies tied to bank and microfinance loan products, cutting agent-channel volumes and the commissions the group pays on them. The telecom stack, Freedom Telecom, Freedom Cloud, Freedom Media and the acquired Astel and SilkNetCom assets, is the optionality layer: it is developmental, capital-hungry and not yet a meaningfully profitable line, but it extends the ecosystem into infrastructure rather than stopping at financial services.
The second fiscal quarter re-derives cleanly from the income statement. Total revenue, net was up 40 percent year over year. Total expense rose 45 percent as the cost base expanded across every line. Net income was down 15 percent from the prior-year quarter. The gap between the two growth rates, revenue outpacing expense by five points in a year when the cost base expanded across every line, is the single fact the quarter asks the reader to explain, and the answer runs through the revenue mix and the cost base. Interest income of $295.1 million was the largest revenue line. It rose 49 percent on margin-loan growth. Fee and commission income was up 46 percent on brokerage volume. Net insurance revenue fell 14 percent on the commission cap, and the net gain on trading securities rose 75 percent on the Kazakh bond book. Sales of goods and services more than doubled on the telecom build.
Insurance claims and policyholder benefits doubled to $131.6 million on the expanding pension annuity block, a cost of the life business growing its in-force liabilities. Payroll and bonuses jumped 66 percent to $153.1 million on workforce expansion across the bank and the new telecom entities. The expected credit loss allowance nearly quadrupled to $17.7 million on loan migration and the year-end transition to internal loss data for CECL estimates. The mix shift toward the retail base matters because that book has no such concentration. Fee and commission expense fell 63 percent to $31.3 million, because the insurance agent cap cut the commissions the group pays as much as the commissions it earns. The effective tax rate rose to 22.5 percent from 21.3 percent, in part from incremental U.S. GILTI tax and in part offset by relief under the OECD Pillar Two rules, so the tax line moved for jurisdictional reasons rather than operating ones.
The interest income growth is volume-driven rather than rate-driven. Average margin-lending receivables nearly doubled to $4.6 billion. Average customer loans climbed to $2.0 billion at a 17 percent yield. The fee growth is real brokerage activity, with retail customers up 20 percent year over year. The single-institutional-customer share of fee income slipped from 67 to 57 percent over the year, a directionally right move that leaves a franchise-level dependency in place.
The trading gain is the softest leg of the story: $25.3 million of it was realized, mostly from Kazakhstan sovereign and corporate debt sales, and the rest was unrealized appreciation on the book held at quarter end, which can reverse with the tenge or with bond prices. The foreign exchange line tells the same story in miniature, swinging from a loss to a $13.7 million gain mostly because the tenge stopped depreciating against the euro, a pure translation effect with no bearing on the franchise. The cash flow picture is liquidity-neutral in a technical sense. Operating cash flow was negative for the quarter, and financing inflows of $1.22 billion covered it. Segment results show where the margin actually sits. Brokerage contributed $133.6 million of net income, while Banking added $3.7 million. Insurance produced a loss and Other an $86.5 million loss, the latter being the telecom build spending ahead of its revenue. The balance sheet ended the quarter with $1.35 billion of cash and $7.0 billion of customer liabilities, a structure that is liquid but funded at a premium, and the quality of the earnings line depends on keeping that funding cost below the yield the assets produce.
The capital structure is being rebuilt in real time, and that is the first execution question. Freedom SPC issued $400 million of 9 percent bonds in March. Total SPC bonds outstanding reached $1.47 billion. In June the group completed a $300 million Regulation S private placement at $126.35 per share. Cash and cash equivalents rose from $966.1 million to $1.35 billion over the quarter. The company is funding the telecom capex program and the balance sheet expansion with a mix of bond proceeds, deposit growth and equity. The discipline question is whether those funding costs, which run at double-digit bond coupons and double-digit deposit pricing, stay below the yield the assets produce.
The CEO and CFO transition changes who is running that process. Evgeny Ler, CFO since 2015, moved to a special-advisor role focused on financing and M&A. Valeriy Kim, former CFO of Freedom Finance Global, took the role on June 25, 2026. The change lands mid-capital-raise and mid-Sec investigation, and the new CFO's first full quarter is the third fiscal quarter, so the first test of the transition is the Q3 print itself.
The Wells Notice is the dominant forward variable. Issued March 11, 2026 to the company and Turlov in connection with the SEC's review of settlement practices, the institutional market maker relationship and the accounting for internalized trades, it signals a preliminary staff determination to recommend a civil enforcement action. The company and Turlov have challenged that determination. A Wells Notice is not a charge, but it is the furthest point on the SEC escalation ladder short of a filing, and the resolution, whether settlement, dismissal or litigation, is unquantified in the disclosures because the company cannot estimate the possible loss. Every forward number in this report should be read with that overhang still open.
Execution risk concentrates in three places. The telecom build needs sustained capex against an uncertain revenue base, with $113.1 million in committed contracts and a stated plan to finance it with own funds and borrowings. The credit cycle in Kazakhstan is showing up in the allowance: purchased retail loans are migrating to impaired status, and the shift to internal CECL data at fiscal year end resets the baseline from which future provisions are measured. And the insurance agent cap is a structural revenue change, not a one-time hit: the September 2025 amendment permanently shrinks the agent channel, so the insurance segment's contribution to the group's margin is now lower by design.
The single-customer concentration is the first risk in the list, and it is not a tail risk. The institutional market maker generated 57 percent of quarterly fee and commission income and a further share of margin-loan interest. If that relationship reprices, slows or ends, the brokerage segment, which produced $133.6 million of the quarter's net income, loses the foundation of its earnings. The fact that the share fell from 67 to 57 percent over the year is directionally right, though the dependency on one counterparty whose trading flows the group internalizes has not been resolved.
The regulatory risk runs in two parallel tracks. The SEC investigation, at the Wells Notice stage, could resolve into a civil action with monetary and non-monetary relief, or it could settle, and the disclosure cannot estimate the range. The other track is domestic: the insurance commission cap is an example of Kazakhstan's regulator actively reshaping the economics of a franchise line, and the same regulatory apparatus sets the bank's and broker's capital rules, the telecom licensing terms and the tax treatment, including the incremental GILTI and Pillar Two items now visible in the effective tax rate. The group operates in a jurisdiction where the rules themselves are a moving input to the earnings model.
The balance sheet carries genuine leverage and currency exposure. Total liabilities of $12.5 billion stand against $1.54 billion of equity. Some $1.3 billion of trading securities are pledged under repurchase obligations at a time when the trading book is the group's main proprietary asset. A 10 percent decline across local currencies would, by the company's own sensitivity work, produce a roughly $92.7 million consolidated loss. Some $150.3 million of that would sit in trading securities. The tenge is stable for now, which is precisely why the quarter's FX line swung positive; the same position works in reverse if oil prices move and the tenge weakens.
Credit and governance risks complete the picture. The expected credit loss allowance jumped from $4.8 million to $17.7 million in the quarter on loan migration and the CECL data transition. The bank's $2 billion loan book is still young, and the downside is a Kazakh credit cycle turning down while the deposit base, grown at 12 percent funding cost, continues to scale. In that case the bank's contribution, already a thin $3.7 million, goes negative. Turlov's controlling position, the related-party transactions disclosed throughout the filings, the acquisitions of companies he previously controlled, and the Wells Notice addressed to him personally create a pattern in which the quality of the control environment is inseparable from the quality of the financial information. The auditors' most significant audit matter, on internalized-trade revenue recognition, is the point where governance risk and financial-statement risk converge.
The share price of $162.43 in early September sits below the 52-week high. That gap is itself a data point. The market paid the company $300 million in June and has since bid the price up roughly 29 percent from that placement level. The placement price is the cleanest hard anchor in the structure, because it is a negotiated, market-clearing transaction between the company and institutional investors two months ago, and it frames the valuation discussion in terms of what a sophisticated buyer actually paid.
On trailing numbers the multiple is demanding. The fiscal year just closed produced net income of $153.3 million and diluted EPS of $2.51. At the current price that is a trailing P/E above 64 times. Even against a trailing twelve months that blends the two halves of the fiscal year, the multiple is in the high fifties. The premium is not being paid for current earnings; it is being paid for the brokerage customer base growing 20 percent a year, the deposit base doubling in a year, and the assumption that the telecom build and the insurance franchise add value over the next several years.
A framework for the three cases is more useful than a single multiple. In the bear case, the SEC matter resolves unfavorably, the institutional customer's contribution declines faster than the retail base grows, and the insurance cap keeps the insurance segment in the red; the stock re-rates toward a multiple that prices the regulatory overhang and the concentration, which is where the 52-week low near $108 is the relevant reference. In the base case, the customer mix keeps diversifying, the deposit engine funds profitable growth in the bank, the Wells Notice settles for a manageable outcome, and the stock holds its current level, supported by the $126.35 placement floor as the institutional cost basis. In the bull case, the telecom build reaches its revenue inflection, the Kazakh credit cycle stays benign, and the equity story earns a multiple expansion off the growth in the core franchise.
The valuation question that carries the most weight is whether the equity is being priced on the franchise or on the growth narrative, because the answer determines how much of a regulatory setback the stock can absorb. At a 64-trailing-times multiple, the market has already paid for years of clean execution. The counterargument to the current level is that the company has demonstrated its growth, and the multiple reflects that; the answer to that counterargument is that the growth is real but the margin behind it is thinner than the revenue line suggests, and the overhang is unpriced in any quantifiable way.
The quarter revealed a company whose growth is real but whose earnings quality is under active examination, and the two facts now travel together. Revenue grew 40 percent on brokerage scale and deposit expansion. Net income fell 15 percent on insurance regulation, telecom capex and a rising credit allowance. The same quarter brought a $300 million equity raise and a decade-old CFO's departure, all under the shadow of the March Wells Notice. That is the complete picture of the second fiscal quarter: the operating engine is compounding, the margin is not keeping pace, and the governance overhang is the binding constraint on how much of the engine's output the market can convert into a multiple.
The central strategic initiatives running through the next several quarters are the continued build-out of the SuperApp ecosystem, the telecom expansion financed through the Freedom SPC bond programs, the insurance franchise operating inside the new commission cap, and the capital program that pairs bond issuance with Regulation S equity raises. Each of these is a bet that customer scale in Kazakhstan converts to durable margin, and each is expensive to sustain while the SEC matter is open. The CFO transition and the $300 million raise are both investments in that bet, and both carry the risk of the same overhang.
The variables that the next two to three quarters resolve are the institutional customer's share of fee income, the banking segment's contribution as the deposit book scales against 12 percent funding costs, the credit allowance after the internal-data CECL transition, the insurance segment's margin under the permanent cap, the progress of the telecom revenue line against its $113.1 million of committed capex, and the status of the Wells Notice itself. The first of those is the falsification test for the concentration risk; the last is the one that decides whether the equity can keep pricing the franchise rather than the overhang.