S&P Global Ratings recently upgraded the credit ratings of the subsidiaries of Nasdaq-listed US diversified financial services company Freedom Holding Corp., reflecting the company's strengthened operations, governance and financial stability. The international rating agency raised the long-term issuer credit ratings of Freedom Finance JSC, a local market broker; Freedom Finance Global PLC, a company providing access to international markets; Freedom Finance Europe Ltd, a European broker; and Freedom Bank Kazakhstan JSC from 'B' to 'B+' and affirmed their short-term ratings at 'B'. Freedom Holding Corp's rating was affirmed at 'B-' with a 'stable' outlook. The analysts cited the company's steady growth, geographic revenue diversification and robust risk management as key factors in the upgrades.
The subsidiaries are part of a strong ecosystem that the holding company has already created in Kazakhstan. According to Timur Turlov, the company's founder and CEO, the system is poised for international growth, potentially tapping into new global established markets, including China, and new emerging markets.
This recognition underscores Freedom Holding's readiness to expand its comprehensive financial ecosystem internationally. With record revenues of $1.03 billion and an 82% increase in net profit for the six months ended September 2024, the company has demonstrated the financial stability and operational capabilities necessary to scale globally.
The ecosystem model, which integrates lifestyle platforms and financial services, may act as a paradigm for creative global expansion. This approach could serve as the foundation for developing a scalable "everything application" that combines lifestyle, financial, and communication services, similar to Ant Group's Alipay or Tencent's WeChat.
In terms of cultivating client loyalty, financial institutions have a distinct edge over other industries. "Finance is one of the most regulated sectors, but it also offers unique opportunities to build customer-centric ecosystems," says Turlov.
Navigating stringent financial rules, capital flow constraints, and cultural quirks may be necessary when entering some new markets. Freedom Holding intends to leverage alliances with regional banks, fintech companies, and lifestyle service providers.
"Integration between financial companies is challenging, but we have the expertise and technology to overcome these barriers," says Turlov. Freedom Holding's digital banking and investment platform is designed to scale and localize, ensuring seamless integration into new markets.
The success of Freedom Holding in Kazakhstan offers a path forward for growth in both developed and emerging economies. The company aims to increase its presence in areas with fast digital adoption rates, like Southeast Asia, Africa, and Latin America, by adapting its ecosystem model to fit various legislative and cultural contexts.
S&P's optimistic assessment demonstrates confidence in the business's capacity to control risk, sustain growth, and explore cross-selling opportunities. With a strong foundation, a track record of success in Kazakhstan, and strategic expansion goals the Freedom Holding Corp. demonstrates how the global digital financial services industry could evolve, and bridges among various markets could be built.
