Turkiye Garanti Bankasi ((TKGBY)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The latest earnings call from Turkiye Garanti Bankasi reveals a strong financial performance, marked by record net income and sustained revenue growth. Despite challenges such as heightened inflation expectations and an increase in Stage 2 loans, the overall sentiment remains positive, suggesting a robust outlook for the bank.
Record Net Income and Continued Growth
Turkiye Garanti Bankasi reported a new record for net income in the third quarter, reaching TRY 30.9 billion, which represents a 9% quarterly growth. This achievement contributed to a remarkable 31% return on equity (ROE) with relatively low leverage, underscoring the bank’s effective financial strategies.
Sustained Core Banking Revenue Growth
The bank’s core banking revenues have shown consistent growth over seven consecutive quarters, now accounting for 7.8% of assets. This figure is the highest among its peers, highlighting the bank’s strong position in the market.
Strong Loan and Deposit Growth
Loan and deposit growth were significant in the third quarter, with TL loans increasing by 10%, and credit cards and consumer loans growing by 15% and 12%, respectively. The deposit base also expanded, with a 14% increase in foreign currency deposits.
Effective Margin Management
Turkiye Garanti Bankasi improved its core margin by 44 basis points through strategic liquidity management and proactive funding strategies, demonstrating its adeptness in navigating financial markets.
Improved Capital Adequacy
The bank’s capital adequacy ratio was bolstered by a $700 million Tier 2 issuance in October, improving the ratio by 92 basis points and reducing currency sensitivity, thereby strengthening its financial stability.
Inflation and Policy Rate Expectations
The bank revised its year-end inflation expectation to nearly 33% and adjusted the policy rate assumption to 38.5%, reflecting the economic challenges faced by Turkey.
Increase in Stage 2 Loans
An increase in Stage 2 loans was noted due to retail restructuring, although the restructuring regulation was terminated in October, which may stabilize this trend moving forward.
Modest NPL Ratio Increase
The non-performing loan (NPL) ratio saw a modest increase to 2.8%, primarily driven by robust growth in consumer and credit card segments in recent years.
Forward-Looking Guidance
Looking ahead, Garanti BBVA maintains a balanced outlook for Turkey’s economic growth, with GDP expected to grow by 3.7% in 2025 and 4% in 2026. Despite a slight GDP slowdown, the bank projects strong financial performance, with net interest income growing by 20% due to strategic liquidity management. The bank’s net cost of risk is expected to remain below 2%, and net interest margin expansion is projected between 1.5% to 2%. Fee growth is anticipated to cover 90% to 95% of operating expenses, supported by a strong capital position.
In summary, Turkiye Garanti Bankasi’s earnings call reflects a positive sentiment with strong financial results and strategic growth initiatives. Despite some economic challenges, the bank’s robust performance and forward-looking guidance suggest continued success in the coming years.