Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Turkiye Garanti Bankasi AS (IST:GARAN, Financial) reported a 32% year-on-year growth in earnings, reaching TRY 44.6 billion in the first half of 2024.
- The bank achieved a robust 27% growth in Turkish lira loans in the first half of the year, maintaining leadership in Turkish lira lending.
- Core banking revenue grew by 63% year-on-year, driven by a customer-focused approach and strong performance in net interest income and net fees and commissions.
- The bank's net interest margin guidance remains stable, with expectations of improvement in the second half of the year.
- Turkiye Garanti Bankasi AS maintains a strong capital position, with a consolidated capital-ex ratio of 15.2% and core equity Tier 1 of 12.8%, well above regulatory requirements.
Negative Points
- The bank experienced a significant increase in Stage 2 loans, with a TRY 18.5 billion rise largely due to small ticket size retail and credit card loans.
- Net NPL inflows suggest a deterioration, with a notable increase in retail and credit card portfolio NPLs.
- Despite strong earnings, the bank's capital generation could not fully offset the negative effects of market and credit risk.
- The cost of risk is expected to rise, with guidance indicating an increase to 125 basis points for the year.
- Swap costs have increased significantly quarter-on-quarter, impacting overall financial performance.
Q & A Highlights
Q: Can you elaborate on the contribution of remuneration to the net interest margin (NIM) from the conversion efforts of KKM deposits, and how do you expect this to evolve in the second half?
A: Recep Bastug, CEO: We have received full remuneration from the Central Bank, amounting to around TRY 11 billion in the first half, which has been added to our NIM. We do not see any risk to our flat NIM guidance for the second half, especially expecting improvement in the fourth quarter due to asset repricing and stabilized deposit costs.
Q: Why is your FX lending growth tracking behind your peers?
A: Recep Bastug, CEO: Our growth in FX lending was achieved in 2023 when the market was stable, and we increased our loan portfolio significantly. This year, we are focusing on managing our portfolio profitably, which is not related to risk appetite but rather pricing issues.
Q: What strategic decisions have led to your profitability divergence from peers?
A: Recep Bastug, CEO: Our balance sheet structure, with the highest share of interest-earning assets and non-interest-bearing liabilities, is a key factor. We focus on customer-driven asset growth rather than securities income, and we excel in risk management with right pricing in lending and funding.
Q: Can you provide an outlook for 2025, considering potential easing policy rates?
A: Recep Bastug, CEO: We expect the year-end NIM to be around 5% or higher, influenced by inflation and policy rates. Rate cuts aligned with inflation will help improve NIM by reducing deposit costs and credit yields.
Q: Why are NPL sales achieving higher pricing levels compared to previous years?
A: Recep Bastug, CEO: The strong pricing levels for NPL sales are supported by inflation, which enhances collection performance. We remain opportunistic and will continue NPL sales as long as reasonable rates are available.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
