StockWatch 3Q 2014 INVESTOR RELATIONS. US$ 14.7 Billion Market Capitalization constitutes 7% of the BIST 100*

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1 StockWatch 3Q 2014 INVESTOR RELATIONS ABOUT GARANTI STOCK GARAN With an actual free float ratio of ~50%, Garanti shares constituted 21% of all foreign transactions in BIST 100 and 41% of all listed banks in 9M US$ 14.7 Billion Market Capitalization constitutes 7% of the BIST 100* US$ 7.4 Billion Highest floating market capitalization in the BIST* US$ 297 Million Average daily turnover in 9M 2014, representing 21% of the BIST 100 US$ 24.6 Billion Total 9M 2014 foreign transactions in GARAN The most traded stock by foreigners ~ 11% Highest weight in the BIST 100 Note: Currency conversion is based on US$/TL CBRT ask rate. * As of September 30, 2014

2 GARANTI FINANCIAL HIGHLIGHTS Garanti Market Shares* Sep-14 Total Performing Loans 12.3% TL Loans 10.7% FC Loans 16.1% Credit Cards - Issuing (Cumulative) 18.2% Credit Cards - Acquiring (Cumulative) 19.9% Consumer Loans** 13.9% Total Deposits 11.1% TL Deposits 9.5% FC Deposits 13.3% Demand Deposits 13.8% Mutual Funds 11.5% * Figures are based on bank-only financials for fair comparison with sector. Sector figures are based on BRSA weekly data for commercial banks only. ** Including consumer credit cards and other YTD Δ In the first nine months of 2014, Garanti reached consolidated total asset of US$ billion and consolidated net profit of US$ 1.3 billion. SELECTED FINANCIALS* Total Assets US$ Billion Total Performing Loans US$ 62.5 Billion Garanti with Numbers* Total Deposits US$ 56.2 Billion Shareholders Equity US$ 11.4 Billion Dec-13 Jun-14 Sep-14 Branch Network 1, Domestic Abroad Personnel 18,738 19,075 19,201 ATM 4,003 4,000 4,025 POS** 534, , ,365 Total Customers 12,400,077 12,670,879 12,889,004 Internet Banking Customers*** 2,655,303 3,011,648 2,730,467 Mobile Banking Customers*** 842,191 1,143,335 1,364,460 Credit Cards 9,302,545 9,407,532 9,442,066 Debit Cards 7,350,311 7,673,897 7,847,064 * Figures are based on bank-only data. ** Includes shared and virtual POS. *** Active customers only -- min. 1 login or call per quarter Ordinary Banking Income US$ 3.1 Billion SELECTED FINANCIAL RATIOS* Return on Average Assets (ROAA) 1.7% Capital Adequacy Ratio (CAR) 13.7% Net Income US$ 1.3 Billion Return on Average Equity (ROAE) 16.1% Non Performing Loans (NPL) Ratio 2.8% * Figures are based on BRSA consolidated financials as of September 30, Note: Exchange rate used for currency conversion is based on Garanti Bank s September 30, 2014 dated financials.

3 DID YOU KNOW? Total number of Mobile Banking downloads exceeded 3 million as of 3Q 2014 and the app maintained its leading position in finance category of the app stores. Garanti s number of followers on Facebook exceeded 3.3 million and Garanti videos on Youtube has been watched by more than 5.5 million users. igaranti became the first banking application approved on the Official Glassware directory by Google in the World. igaranti users can see their igaranti push notifications, limit indicator, smart shopping offers, coupons and market information through igaranti Glassware and check their credit card limit, account balance, market information, smart shopping offers and coupons with igaranti Glassware without using their phones. Moreover, igaranti is available at Sony SmartWatch 2 as well. Garanti Call Center was granted with ISO Information Security Management System Certificate. AWARDS & RECOGNITIONS Received Operational Excellence Appreciation Award from Wells Fargo. Received the Best Bank for Sustainability in Turkey Award for the second time from World Finance, one of the world s leading economy magazines. ISO 9001: 2008 Quality Certificate is renewed within the scope of ISO 9001 Quality Management System Audit. Named as the Best Domestic Cash Management Bank in Turkey for the third time by customer votes with its customer focused approach, in Euromoney Cash Management Survey Honored with three Bronze Stevie Awards for its Alo Garanti Call Steering service in the categories of Best Use of Technology in Customer Service - Banking, Award for Innovation in Customer Service - Financial Services Industries and IVR or Web Service Solution. Garanti Call Center received ISO Information Security Management System Certificate. igaranti was awarded with the Gold Mixx Award in the category of Branded Mobile Application, while Mobile Banking is honored with Silver Mixx Award and Bronze Mixx Award in the categories of Experimental and Innovative Campaign and Mobile Campaigns, respectively, by Mixx Awards Turkey. GarantiyeSor Team, Garanti s customer service team on social media, is honored with Silver Award for their creative excellence on the web at W3 Awards where the marketing professionals are recognized. The team also received the Bronze Stevie Award in the category of Best Team in Customer Service. Customer Satisfaction Department was awarded with a Bronze Award in the category of Customer Service Department of the Year by the Stevie Awards. Garanti s Experimental Banking campaign was honored with three Crystal Apple awards in the categories of Best Film in the Banking Industry, Best Digital Campaign, and Best Online Video and also the Judges Special Award in the film category in the 26 th Crystal Apple Turkey Advertising Awards Competition. The campaign is also awarded with a Silver Apple in the Viral Project Service category and a Bronze Apple in the Most Creative Social Media Communication Service category. Garanti Bank 2013 Annual Report was awarded with Gold Award in Vision Annual Reports Competition by LACP, Silver ARC Award and Galaxy Bronze Award in the categories of Infographics and Banks-Europe, respectively, by MerComm. Garanti Investor Relations Website received Silver Galaxy Award in the category of Corporate Websites from MerComm and Gold Stevie Award for being the Best IR website. Garanti Bank Romania was awarded for being the Best Consumer Internet Bank in Romania by Global Finance magazine in the 2014 World s Best Internet Banks Competition. Garanti Bank International N.V. received Straight Through Processing Award for Payments from Citibank for its outstanding achievement. Garanti Securities was awarded as the Best Investment Bank of Turkey in 2014 by International Finance Magazine. Garanti Pension awarded with Silver Stevie Award in category of the Marketing Campaign of the Year for Insurance where winners were selected among 3,500 nominees by more than 250 executives worldwide. WHAT ANALYSTS SAY ABOUT GARANTI? Bank of America Merrill Lynch: The bank has been very successful in managing its capital, growth and risk while also generating strong earnings outside its core banking business. Investor community mainly focuses on bankonly financials which underestimates the bank s subsidiaries value potential, in our view. Management targets to increase subsidiaries contribution to consolidated net income from 11% in 2013A to around 20% over the mid-term. This should help Garanti to deliver superior EPS growth (and superior ROE) at group level versus other Turkish banks. Citi: We see Garanti as the industry benchmark on revenue and cost efficiency and, along with its high free funds base, it commands one of the highest ROAs in the system. The case for high sustainable ROEs for Garanti is also underpinned by its low balance sheet leverage and strong capital position. Deniz Invest: Among the banks, we like Garanti Bank. Due to its proactive management, evident in its diversified loan book and fee income breakdown, along with a solid contribution from subsidiaries, the bank emerges as the most resilient player against the current volatile backdrop. Deutsche Bank: Strong capitalization and asset quality track record, low leverage ratio, fee generation strength, effective funding policies should all help Garanti stand out among peers in the upcoming more challenging banking era, in our view. Thanks to its proactive and innovative customer-oriented management approach, Garanti has been among the best performers in terms of organic growth performance over the last five years. Tera Brokers: Garanti stands as the best among peers given its balance sheet flexibility which should support healthy recurring income generation going forward.

4 GARANTI AND THE COMMUNITY The Women Entrepreneurs Executive School formed by Garanti to provide free training to women entrepreneurs in cooperation with Boğazici University founded in Kayseri, a city in central Anatolia. Total number of graduates in nine provinces reached 1,200 women entrepreneurs. Garanti, the Ekonomist magazine and the Woman Entrepreneurs Association of Turkey (KAGİDER), jointly organized the 8 th Woman Entrepreneur of Turkey Competition. Garanti Anatolian Meetings where SMEs get together with the representatives of local administrations from several provinces in Turkey since 2002 were held for the 95 th time in Bingöl, a city in eastern Anatolia. Teacher Academy Foundation (ÖRAV), which had been established through Garanti s pioneering efforts, held its annual Part-time Educators Workshop in August. 197 ÖRAV Part-time Educators from 65 cities of Turkey, ÖRAV Board Member İbrahim Betil, Garanti employees and the Foundation team attended the training sessions. Garanti was the main sponsor of the Turkish Men s Wheelchair Basketball Team who ranked third in the Wheelchair Basketball World Championship 2014 in Incheon, South Korea. DEVELOPMENTS AT GARANTI Total amount of notes issued in the third quarter of 2014 under the Global Medium Term Notes (GMTN) Program, where several issuances in different currencies and maturities were realized, reached to an amount of nearly US$ 250 million equivalent, including the first ever issuance from a Turkish Bank in YEN, YEN 500 million private placement issue with a coupon rate of 1.05% and maturity of 1 year. Issued EUR 500 million Eurobond with a maturity of 5 years, yield of 3.5% and coupon rate of 3.375%. The tight pricing resulted in an order book dominated by dedicated Euro investors rather than Garanti s existing Emerging Markets investor base. Continued to finance large-scale telecommunication, infrastructure and energy projects: Participated as a mandated lead arranger with a share of US$ 100 million in US$ 750 million financing provided to Ojer Telecommunication for refinancing purposes. Participated as a mandated lead arranger in the US$ 600 million financing provided to Otoyol A.Ş., for the construction of Gebze-İzmir Highway Phase IIA, which covers the section between Orhangazi and Bursa. Garanti participated in this transaction with a stake of US$ 75 million, and took the Facility Agent role as well. Provided US$ 40 million long term project finance loan for 35 MW capacity extension of two wind energy power plants. Garanti Factoring became leader both in asset size with 9.7% market share in the first half of 2014 and in factoring receivables asset size with 10.1% market share according to the Financial Institutions Union data. It also became leader in transaction volume which was realized at TL 3.63 billion, with 15% market share. Garanti Asset Management increased its volume in pension funds to TL 5.4 billion with a market share of 16.2% and its total volume of mutual funds is TL 3.9 billion with a market share of 11.5% in the 3Q Garanti Pension became leader with 852 thousand participants and 18% market share in the third quarter. Garanti turns commitments into actions in the matters of sustainability regarding the responsibilities towards society: Garanti is recognized as the first bank to receive a Green Office Diploma from WWF Turkey by successfully completing the WWF Green Office Programme launched at its Head Office building. Programme aims to reduce the ecological footprint by taking measures related to energy efficiency and depletion of resources in office buildings as well as increasing employee awareness on these issues and implementing recycling systems. Increased the number of its service points to 605, which covers nearly 70% of the Garanti employees, with the aim of managing environmental impact of all operations, within the scope of ISO certified Environmental Management System. Garanti demonstrated its support to prevent climate change by announcing new commitments in 6 areas throughout its value chain during the United Nations Climate Week organized by United Nations in New York. For more information on Garanti s commitments, please refer to business.un.org/en/commitments/3898 SELECTED CREDIT CARD FIGURES IN TURKEY 2.0 up from 1.95 in 2013 YE # of plastic cards per person 1.5% vs. Garanti s 1.7% Payment Systems Commissions/Payment Systems Volume* 17% Credit cards share in retail loans slightly down vs. 2Q 2014 Top 5 Categories in credit card spending Per card spending Sep.14 Sep.13 Supermarket and shopping malls 18.4% 15.3% Gas stations 10.3% 11.2% Apparel and accessories 7.9% 7.3% Household gadgets, PCs, etc. 7.4% 7.9% Various food products 6.0% 7.0% Credit card Garanti Sector 8,980 Garanti 605 Debit card 8,114 Sector 284 Source: Interbank Card Center, Turkish Statistical Institute, Banking Regulation and Supervision Agency Note: Official population is based on 2013 announced figure of 76.7 million. * Garanti Payment Systems analysis based on BRSA financials of peers as of 2Q14. Plastic cards defined as the sum of plastic credit cards and debit cards.

5 MACRO NOTES 2014 Q2 GDP growth was 2.1%. Turkish economy grew by 2.1% (YoY) in 2Q14, below the average market expectation of 2.7%. Domestic demand including stocks subtracted 0.8 points from GDP growth rate while external demand contributed to growth positively by 2.9 points. Total public expenditures contributed 0.2 points to growth (the lowest level since the end of 2011), while the contribution from the private sector was negative by 0.9 points. Total contribution from consumption was 0.5 points, being the lowest level in the last seven quarters, while contribution from total investment turned to negative by 0.9 points 2Q Growth indicators for 3Q14 signal that domestic demand may still be weak. Among the indicators related to 3Q14, consumption indicators have shown that private consumption continues to be weak. However, the indicators on the investment side draw rather a mixed picture. Following an annual increase of 2.6% on non-adjusted basis in 2Q 2014, industrial production increased by 3.2% during July- August period. The acceleration in the capital goods production resulted in an optimistic outlook for the investment performance in the following period. On the other hand, capacity utilization rate, manufacturing PMI and real sector confidence indices in 3Q 2014 fell behind the 2Q 2014 average. Hence, this fact accompanied by the ongoing geopolitical risks creates a blurred picture regarding 3Q 2014 growth performance. Risks are balanced on current account deficit. As of August, 12-month cumulative current account deficit decelerated to US$ 48.9 billion from US$ 52.2 billion at the end of 2Q The current account deficit to GDP ratio had decelerated from 7.9% in 4Q 2013 to 6.5% in 2Q14. We think that the risks that can distort the improving trend in the current account deficit are limited because domestic demand continues to be weak in line with the macro prudential measures. Even if slowdown in Eurozone growth has become evident and this imposes risk over Turkey s export performance; together with the decrease in demand vis-a-vis increase in supply of oil, oil prices are likely to lead a decrease in Turkey s energy bill in the forthcoming periods. Improvement in tax revenues in 3Q. Compared to 2Q 2014, the 12-month cumulative budget deficit increased from TL 24.9 billion to TL 25.9 billion at the end of 3Q 2014 while primary surplus decreased from TL 28.3 billion to TL 18.5 billion. According to our GDP estimate, as of September, although the budget deficit to GDP ratio remained stable compared to 2Q 2014; primary surplus to GDP ratio deteriorated due to the worsening (because of early public salary payments) in September. Risks on inflation are on the upward side. Annual CPI decreased from 9.4% in 2Q 2014 to 9.2% in 3Q14 on average. Annual core inflation decreased from 9.7% to 9.6% in the same period. We expect second round effects of weak currency to limit the improvement in core inflation and upward risks on food inflation remain on track in the rest of the year; hence, we keep our 2014 year-end inflation forecast at 9.5%. No more room for monetary easing by the CBT. The Central Bank (CBT) lowered one-week repo rate and ON lending rate by 50 basis points in July and ON borrowing rates by 75 basis points in August. It had lowered only one-week repo rate in 2Q 2014 by 125 points. The CBT stresses that the tight monetary policy stance will be maintained until there is a significant improvement in the inflation outlook. Looking ahead, we do not pencil in any further CBT easing in 2014 due to persistently high inflation and weak currency. We think the monetary policy, over the medium term, points towards a tightening via liquidity management. Compared to 2Q14, annual TL depreciation against the currency basket on average decelerated from 20.5% to 10% in 3Q Benchmark bond yields which was at 8.3% at the end of 2Q 2014, increased to 9.8% at the end of 3Q REAL-ESTATE SECTOR ANALYSIS IN TURKEY REIDIN Turkey Composite Residential Property Price Index: Sponsored by Garanti, the index reflects an increase of 1.61% MoM and 17.01% YoY in residential sales prices in September Index series are calculated monthly, for sales and rent covering 7 major cities, including Istanbul, Izmir, Ankara, Adana, Antalya, Bursa and Kocaeli. Residential Property Price Index-Change in residential sales prices REIDIN.com-GYODER New Home Price Index: : Sponsored by Garanti index shows an increase of 0.27% MoM and 7.02% YoY in September Taking January 2010 as the base period, the index is calculated on 70 housing projects and with a monthly average number of 22,500 properties presented by 27 developers. New Home Price Index Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

6 DEVELOPMENTS IN TURKISH BANKING SECTOR Turkish banks raised a total amount of US$ 5.4 billion* equivalent international funding in 3Q14. US$ 3.5 billion equivalent amount was secured as syndicated loans; US$ 386 million equivalent amount was received from multilateral developments banks; US$ 310 million in securitizations and US$ 1.2 billion** from Eurobond issuances and issuances under GMTN (Global Medium Term Notes) program. Regulatory developments during the quarter: On July 11, 2014, Regulation on Banks Internal Systems and Internal Capital Adequacy Assessment Process entered into force. Accordingly, all banks are required to prepare an Internal Capital Adequacy Assessment Process (ICAAP) report per annum, where they calculate their internal capital in addition to regulatory capital. The calculation is done under various scenarios determined by banks and the BRSA. The report is due by the end of March of the following year. Banks were given additional time to hand in their 2013 report by September 30, On September 6, 2014, multiple regulations were announced. Highlights are as follows: Amendment to Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks: In addition to the standard methodology, an internal rating based (IRB) approach can be used for the calculation of value at credit risk. Amendment to Regulation on Equities of Banks: Banks choosing to utilize the IRB approach are required to make certain adjustments to Common Equity Tier I Capital and Supplementary Capital. Amendment to Regulation on Credit Risk Mitigation Techniques: Under the IRB approach, leased assets, liquid physical assets, trade receivables of borrowers due within a year can be taken as additional security in order to reduce risk. Regulation on Internal Rating Based Approach for Calculation of Value at Credit Risk and Regulation on Advanced Measurement Approach for Calculation of Value at Operational Risk: Banks can start applying to BRSA as of January 1, 2015 for approval to use the new approaches, if they do not want to continue with the Basic Indicator Approach and Standardized Approach. Once approved, the transition is to take three years. * Source: Public Disclosure Platform. Calculation based on publicly-traded banks. ** GMTN issuances of AK, FINANS, YKB, VAKIF and ISBANK are excluded. Rating actions during the quarter: On July 10, 2014, Fitch took action on seven small Turkish banks. The agency affirmed the ratings of Arap Turk Bank, BankPozitif, Tekstilbank and Turkland Bank. Anadolubank s Viability Rating (VR) was downgraded to bb from bb+, Long-term Issuer Default Ratings (IDR) to BB from BB+ and Long-term National Rating to AA-(tur) from AA(tur). VR of Alternatifbank was downgraded to b+ from bb. Outlook on Sekerbank s Longterm IDRs and National Long-term rating was changed to Negative from Stable. On July 10, 2014, JCR revised Albaraka s corporate governance rating to 8.44 from 8.34 and its outlook to Stable. On July 11, 2014, JCR affirmed both Foreign Currency and Local Currency ratings on Turkey at BBB-. On July 22, 2014, Fitch affirmed all ratings on Garanti. On August 18, 2014, JCR affirmed Halkbank s Long Term National Grade as AAA(Trk) and Long Term International Grade as BBB- along with Stable outlooks. On September 24, 2014, Moody s confirmed all ratings on Garanti. For the 4Q14 period, CBRT left the interest rate cap and overdue interest rate on credit card transaction in TL unchanged at 2.02% and 2.52%, per month, respectively. On July 17, 2014, CBRT cut the 1 week repo rate further by 50 bps, rolling back the interest rate to 8.25% (from 8.75% as of June 24, 2014) and O/N borrowing rate by 50 bps to 7.50%.; cut the O/N lending rate, by 75 bps to 11.25% on August 27, NPL sales during the quarter: Garanti sold its NPL portfolio receivables in the total principal amount of TL million for TL 18.7 million to İstanbul Varlık Yönetim A.Ş. YKB sold its TL million NPL portfolio receivables for TL 28.4 million to Efes Varlık Yönetim A.Ş, Turkasset Varlık Yönetim A.Ş and Vera Varlık Yönetim A.Ş. Other developments: Kazakhstan s sovereign wealth fund, Samruk Kazyna diluted its ownership from 34% to 31% through Şekerbank s capital increase. YKB finalized the liquidation process of its exsubsidiary Yapı Kredi B Tipi Yatırım Ortaklığı A.Ş. Halkbank acquired its subsidiaries shares in Halk Sigorta and Halk Hayat ve Emeklilik ahead of the potential sale transaction. National Bank of Greece ( NBG ) acquired 5% of the common shares of Finansbank from IFC, upon exercise of IFC s relevant put option right. NBG s stake in Finansbank increased to 99.81%. Selected Sector Figures (TL Million) YTDΔ Total Deposits 951, ,096 1,030, % Bank Deposits 56,070 58,310 66, % Customer Deposits 895, , , % TL Deposits 563, , , % FC Deposits (US$ mn) 155, , , % Customer Demand Deposits 164, , , % Total Loans 944,088 1,007,343 1,061, % TL Loans 677, , , % FC Loans (US$ mn) 125, , , % Retail Loans* 448, , , % Housing 105, , , % Auto 20,076 19,025 18, % General Purpose Loans** 232, , , % Credit Cards 90,755 84,494 83, % Loans / Deposits 99.2% 103.2% 103.1% Gross NPL 26,333 22,099 23, % NPL ratio 2.7% 2.1% 2.2% NPL coverage 78.2% 76.8% 77.6% Gross NPL in retail loans 8,745 10,060 11, % NPL ratio in retail loans 1.9% 2.1% 2.2% Gross NPL in credit cards 4,761 5,286 5, % NPL ratio in credit cards 5.0% 5.9% 6.4% F/X Position, net (US$ mn) ,070-1,325 on B/S -31,356-36,293-38,062 off B/S 30,970 38,364 36,738 Source: BRSA weekly sector data, commercial banks only * Including consumer and commercial installment loans ** Including other and overdraft loans

7 MARKET RECAP Volatility returned back to markets in 3Q14 following calm market conditions in 2Q14. Growing uncertainty about FED and ECB policy intentions, geopolitical stress weighed on investor risk appetite. While economic recovery turned out to be uneven across the globe, the debate over the timing of the FED s first interest rate rise marked the quarter. Moreover, stalling euro-zone recovery forced the ECB to announce additional stimulus measures and policy rate cut. Hence, EUR/US$ dropped by 8% to 2-year low (1.25) in 3Q14. Although further liquidity expectations from the ECB somehow supported global markets, geopolitical risks and global growth concerns put a dent on investor sentiment. Falling prices for metals, oil and agricultural products reinforced the narrative of slower global growth, despite exceptional levels of central bank support. EM stocks posted quarterly decline as September selloff erased gains from the prior two months. MSCI EM decreased by 4% in 3Q14 mainly due to September s 8% drop. Sell-off came as signs of a stronger U.S. economy and expectations for higher interest rates diminished the appeal of EMs. Although most investors don t expect the FED to raise interest rates until mid- Garanti Bank Stock Performance in 9M Volume (million shares) Price (TL) Relative Performance to MSCI EM Banks & BIST Banks Index 2015, many started to favor less-risky U.S. assets. Currency weakness also reduced the attractiveness of EM assets as anticipation of higher U.S. rates caused the dollar to rally. Among EMs, Russia and Brazil suffered the highest depreciation against US$, 17% and 11% respectively. MSCI Russia tumbled by 17% in 3Q14 (22% YTD) upon ongoing Ukraine crisis, international sanctions, record-low ruble, plummeting oil prices (25% down from 2014 s high in June) and poor growth outlook. Investors were also concerned about a slowdown in the Chinese economy despite ministimulus measures. Pro-democracy protests in Hong Kong and regional conflict with ISIS further deteriorated investor sentiment. Turkish equities fell sharply likewise as investors were anxious about the impact of higher U.S. rates and TL, weakened by 7% against US$ in 3Q14 (by 5.5% in September). TL tested 8-month low (2.2877) against US$ on September 30th. Thus, the CBRT started tightening liquidity and increasing its funding costs for the first time since April 14. Concerns regarding a possible rating and/or outlook downgrade from Moody s and Fitch took its toll on financial markets; yet, the rating agencies took no action. From the Jan 23-Jun 13-Feb 6-Mar 27-Mar 17-Apr 12-May 3-Jun 24-Jun 15-Jul 8-Aug 30-Sep Close Price: High on 27-Jul-14: Low on 3-Feb-14: For further information please contact Garanti Investor Relations. Address: Levent, Nispetiye Mah. Aytar Cad. No: 2, 34340, Besiktas, Istanbul-Turkey Tel: +90 (212) Fax: +90 (212) Web: investorrelations@garanti.com.tr Disclaimer: This report has been prepared by Garanti Bank Investor Relations Department and is provided for information purpose only. Although the information on which the report is based has been obtained from sources which we believe to be reliable, no representation or warranty is made by Garanti Bank for the accuracy or completeness of the information contained herein. Information contained herein is subject to change without notice. Garanti Bank and/or any person connected with it accepts no liability whatsoever for any direct or consequential loss of any kind arising out of the use of this document or any part of its contents. TL 8.00 TL 9.25 TL GARAN BIST Banks Index MSCI EM Banks (Rebased-US$) (Rebased-US$) (Rebased-US$) Dec 30-Jun 1-Mar 31-Mar 30-Apr 30-May 29-Jun 29-Jul 28-Aug 27-Sep macro front, data was not supportive for markets either. While 2Q GDP growth (2.1%) came worse-thanexpected, the expected improvement in core inflation did not realize in 3Q14 due to record-high food prices. Economic risks coupled with escalating geopolitical tension with respect to ISIS caused Turkish equities underperform its emerging peers where MSCI Turkey underperformed MSCI EM by 8% in 3Q14, reducing its YTD outperformance to 4.4%. Benchmark interest rate climbed by 185 bps hitting above 10%, 5 month-high, at the end of the quarter. Looking ahead, low interest rate environment and favorable global liquidity conditions seem to prevail for longer amid weak global growth. Stronger US$ is a signal of confidence in the economy, but also a worry as it is a source of disinflationary pressure that might prevent the FED from taking quick steps for tightening. Volatility would be the unavoidable consequence of the FED s shift toward its first rate rise. Furthermore, geopolitics has been heating up this year. Nevertheless, none seem likely to generate the type of systemic shock to global growth that would cause a sustained market downturn. Riskier EM stocks are now trading at a significant discount relative to their history and developed market peers, making valuations still compelling for long-term investors. In Turkey, while lower FED rates might also give the CBRT some room to ease in 2015, lower oil prices will help narrowing CAD. Turkey also seems to be one of the biggest EM beneficiary of ECB QE with a great share of its bank lending from Eurozone banks. Thus, assuming no escalation in geopolitical tension, Turkey once again tends to lure foreign capital into financial markets given its cheap valuations, strong earnings momentum and fundamentals. Stock Market Performance* in Selected Countries (in US$) YoY QoQ Brazil -2% -9% China -2% 0% Hungary -19% -13% India 23% 2% Mexico 3% 2% Poland -3% -4% Russia -22% -17% Turkey 5% -12% EM 0% -4% EMEA -8% -9% EM Banks 2% -3% Eastern Europe -17% -14% Latin America -1% -6% * Based on MSCI s Emerging Markets Indices, as of September 30, Garanti_IR