August Investor Relations / Investor Presentation

Transcription

1 August 2013 Investor Relations / Investor Presentation

2 Agenda 1 Turkish Economy 2 Turkish Banking Sector: An attractive investment opportunity 3 Garanti Overview and Key Investment Highlights 4 Garanti 1H13 Results per BRSA Consolidated Financials 2

3 Moderate economic growth, downward risks still continue Investor Relations / Investor Presentation Slight Recovery Expected After the Slowdown in 2012 GDP Growth 5,3% 9,4% 8,4% 9,2% 8,8% 6,9% 4,7% 2,2% 0,7% 3,8% -4,8% E 17 th largest economy across the globe in 2012 A period of sustainable growth Rapid recovery in , slowdown in 2012, slight recovery expected in 2013 on the back of increasing domestic demand Much lower or even negative contribution from external demand in 2013 Inflationary Pressures Become More Apparent Benchmark Bond Rate Real Interest Inflation (CPI) 18,4% 27,2% 22,3% 9,3% 14,0% 7,7% 21,2% 16,6% 9,7% 8,4% 16,5% 10,1% 8,9% 7,1% 6,5% 6,4% 11,0% 8,0% 10,4% 6,2% 6,2% 6,8% Successful switch from hyperinflationary economy to price stability in the recent years More recent developments in currency basket and interest rate create upward risks on inflation Considering increasing inflationary pressures CBT follows tight liquidity policy and utilizes interest rate corridor more flexibly and actively E Inflation is expected to accelerate slightly to ~6.5%-7% in 2013 Source: Turkish Statistical Institute, Undersecretariat of Treasury E:Garanti Estimate 3

4 Ongoing strength in fiscal balance while external balance widens Government Indebtness EU Defined Government Debt Stock 78% 74% 68% 60% 53% 47% 40% 40% 46% Maastricht criteria 60% 42% 39% 36% 35% Government indebtness far below Maastricht Criteria Government debt has started to decline just after the crisis and the downward trend is expected to continue in the coming years E Current Account Deficit* Current Account Balance/GDP E Strong domestic demand and relatively weak external demand led CAD/GDP ratio to reach its record level after the crisis. In line with the weakening domestic demand and strong export performance external balance improved throughout ,5% -3,6% -4,5% -6,0% -5,8% -5.4% -2,0% -6,2% -9,7% -6,0% -7,3% Relatively higher growth in 2013 will result in slight expansion in CAD. Hence, macro prudential measures will likely remain in place for financial stability purposes. Source: Turkish Statistical Institute, Undersecretariat of Treasury E:Garanti Estimate * Figures including tourism revenue revisions announced by TurkStat, as of 2012 YE 4

5 Agenda 1 Turkish Economy 2 Turkish Banking Sector: An attractive investment opportunity 3 Garanti Overview and Key Investment Highlights 4 Garanti 1H13 Results per BRSA Consolidated Financials 5

6 Real GDP Growth (Rebased) Investor Relations / Investor Presentation 1 Underpenetrated market with strong growth potential High and sustainable Real GDP growth EU27 LATAM CEEMEA TURKEY Penetration Ratios 4 345% 90% 58% 39% 116% 116% 51% 52% 13% 2 nd largest banking system in CEE 2 with an asset size of US$728bn Q13 CAGR: 19% Well-regulated and strictly monitored Significant long-term growth potential backed by attractive demographics & underpenetrated market 59% of the 76mn population < age of 35 5 Loans/GDP: 52% vs. 116% in EU ROAE: ~17% 3 Total Assets / GDP Total Cus. Deposits / GDP Total Loans / GDP Turkey Turkey - 1Q13 Euro Area - 1Q13 1 Source: IMF. CEEMEA countries include Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Russia, Slovakia, Slovenia, South Africa. LATAM Countries include Argentina, Brazil, Colombia, Ecuador, El Salvador, Mexico, Paraguay, Peru 2 Source: EBF Banking Sector Statistics Database 2011, ranking per total assets 3 BRSA Monthly data for commercial banks as of March US$/TL: Source: ECB, TurkStat, BRSA for commercial banks 5 Source: TurkStat 6

7 2 Highly liquid Deposit-heavy funding structure Deposits fund 57% of assets 1 Comfortable level of Loans/Deposits at 102% 1 Comfortable liquidity levels Liquidity Adequacy Ratios 2 well-above required levels Total Liquidity Ratio -- Weekly: 164%; Monthly: 121% FC Liquidity Ratio -- Weekly: 154%; Monthly: 115% Continuous access to international funding sources Banking Sector External Debt Roll-over Ratio ,8 60 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 1 BRSA monthly data for commercial banks, as of March CBRT Financial Stability Report, November Liquidity Ratios are as of October

8 3 well-capitalized and underleveraged High solvency ratio Tier-I Ratio 1 (4Q12) 15,1% 13,5% 14,3% 13,3% Basel II CAR 2 : 16.8% (1Q13) Turkey LATAM CEEMEA EU27 Low leverage Leverage 1 (4Q12) 14,1x 7,3x 7,9x 9,2x Turkey LATAM CEEMEA EU27 High ROAEs 2 :~17% (1Q13) despite the low leverage 1 Source: Latest data from the IMF-FSI database. Represents country averages most of which are based on 4Q12 figures 2 BRSA monthly data as of March 2013, commercial banks only 8

9 Austria Turkey Belgium Netherlands Brazil UK Denmark S.Africa Czech Rep. Poland Russia Spain Portugal Italy Bulgaria Slovenia Hungary Romania Ireland Ukraine Greece Investor Relations / Investor Presentation 4 Standing out for its asset quality Non-performing loans/total gross loans Sustained sound asset quality No exposure to any toxic assets or problematic sovereign assets NPL Ratio 3 : 2.9% in Turkey (1Q13) NPL ratio 2 10,5% 9,5% 8,5% 7,5% 6,5% 5,5% 4,5% 3,5% 2,5% 1,5% CEEMEA 10.2% EU 27 9,2% TURKEY 2,8% LATAM 2.8% High cash 75% 3 Established & prudent underwriting procedures 1 Source: Latest data from the IMF-FSI database, most of which are based on 4Q12 figures 2 Source: Latest data from the IMF-FSI database. Represents country averages most of which are based on 4Q12 figures 3 BRSA weekly data for commercial banks, as of March 29,

10 5 Differentiating itself even in a challenging environment Decelerating pace in GDP growth moderates lending growth Global macro picture remains as the highest risk factor Regulatory changes supporting financial stability; pressure profitability In this environment Turkish banking sector s High liquidity Strong capitalization Low leverage and Sound asset quality remain as its main strengths 10

11 Agenda 1 Turkish Economy 2 Turkish Banking Sector: An attractive investment opportunity 3 Garanti Overview and Key Investment Highlights 4 Garanti 1H13 Results per BRSA Consolidated Financials 11

12 Garanti: Pre-eminent Banking Franchise Total Assets US$ 104 bn 1H13 Net Income US$ 1.1 bn ROAE 21% Basel II CAR 15% Branch network 969* # of customers ~12 mn* 2 nd largest private bank by asset size Robust balance sheet highly liquid, well-capitalized & low risk #1 in ordinary banking income proven track record of sustainable banking income generation Focused on relationship banking with broad geographical coverage and wide multi-channel distribution network Most valuable company on the BIST by market capitalization Note: BRSA Consolidated Financials as of June 30, 2013 US$/ TL = as of June 30, 2013 * As of July 29,

13 Integrated financial services company focused on retail Investor Relations / Investor Presentation Consumer Payment Systems Corporate Commercial SME ~10.4 mn customers* ~ 2,445 sales force 1 Affluent : 0.1% Personal Financial Assets: >$500k Upscale: 4.7% Personal Financial Assets: TL50k-$500k ~ 9.2 mn credit cards ~ 7.2 mn debit cards >540k POS >3,600 ATMs ~ 1.9k customers* ~ 40 sales force 1 Major Turkish & multinational operations ~43k customers* ~920 sales force 1,2 Annual sales >TL10 mn or Transaction Volume >TL600k ~ 1.5 mn customers* ~ 2,130 sales force 1,2 Medium: 8% Annual sales TL3 mn-tl10 mn Small: 24% Annual sales TL500k-TL3 mn Mass Market: 95.2% Personal Financial Assets: <TL50k Mass: 68% Annual sales <TL500k Financial Subsidiaries Asset Contribution: 5.3% Asset Contribution: 1.5% Asset Contribution: 2.4% Asset Contribution: 0.0% Asset Contribution: 2.0% Asset Contribution: 0.4% Asset Contribution: 0.8% Asset Contribution: 0.0% Note: Payment Systems data as of June POS figure includes shared POS *As of June 30, Sales force is field only, data as of 31 July, people within the sales force are responsible for serving both SME and Commercial banking. 13

14 State-of-the-art, proprietary IT platform -- fully aligned with the business Investor Relations / Investor Presentation Fully aligned IT processes & infrastructure with business strategy One of the largest private internal IT service providers in Turkey Most up-to-date IT infrastructure Tightly integrated and fully in-house developed, custom-fit IT solutions Uninterrupted transaction capability and infrastructure security Top down fast decision making and strong communication Centralized management reporting systems, enabling management to take timely actions Advanced CRM applications Paperless banking environment Reputation as innovator Continuous investment in technology since 90 s 14

15 Strong brand and reputation as a product and service innovator Investor Relations / Investor Presentation Interactive mobile-only platform In 1H 2013, 36 new products were launched 544 Products in total Mobile Banking Bonus Trink - credit card with contactless chip technology E-trader Application Cardless remittance via ATMs Golden Bonus Card First financial company in Turkey using call steering system in call center First cash management account in Turkey (the award - winning ELMA) First chip-based installment credit card loyalty program in Turkey (Bonus Card) First credit card offering air miles (Shop & Miles) First credit card with the concept of personalization (Flexi) First direct debit system in Turkey First web-based supplier financing system (Garanti Discount) in Turkey First inventory financing system in Turkey First gold financing system in Turkey First P2P mobile money transfer in Turkey (CepBank) First cash withdrawal with coins in Turkey First cardless bill payment via ATM in Turkey First NFC enabled SIM card Bonuslu Avea in the world First gold-saving credit card in the world (Golden Bonus Card) First-of-its-kind financial service leading the future of banking business and the revolution of conventional banking approach. (igaranti) 15

16 Extensive distribution network via strong branch coverage Investor Relations / Investor Presentation Number of Branches 2x H13 96% Geographical Coverage 99% GDP Coverage Presence in 78 Cities #1 in branch openings since 2006 ~450 new branch additions 1.25x of its closest peer 61% was outside of Istanbul, Ankara and Izmir Note: Represents net branch openings figure are as of December Source:Turkish Banking Association 16

17 and effective utilization of digital channels (I/II) -- Targeted solutions for new customer segment: Digital Customers Total Bankable Population 18x Increase in the # of mobile internet users in last 2.5 years 2 Social Media platforms to shape new era in CRM -- Turkey is the 6 th biggest user of Facebook 1 40% * Digital customers Garanti targets this new segment via; Simple Fast Personalized Anytime anywhere accessible channels + + Omni Channel Strategy Providing seemless experience across all channels (branches, ATMs, Internet banking, Mobile Banking, Call Center) Garanti Bank Application Store 2.7mn downloads World s first banking app for Windows 8 E-trader app: Leading trading platform in Turkey + 33% of customers use self-service channels + Product sales through ADCs GPL: 24% Time Deposit:13% *Source: McKinsey & Company Source: Socialbakers, last visit on February 21, Source: Information and Communications Technologies Authority, Quarterly Reports 17

18 and effective utilization of digital channels (II/II) -- 80% of financial transactions carried through digital channels Every 1 out of 3 internet transaction is via Garanti Internet Banking ~2.5 mn active users >170 type of transactions Serving non-bank customers through cardless transactions Cash deposits/withdrawals: 105% ATMs Online Banking Mobile Banking #1 in mobile banking >500k mobile banking users 45% market share in financial transactions ~60 mn customer contact/yr Centralized branch calls Call Center Omni Channel Strategy Providing seemless experience across all channels Social Media Special offerings a first-of-its-kind application in Europe Money transfer Consumer loan application via secure full form A new banking experience targeting socially active & connected customers Digital Wallet credit, debit, identity and loyalty cards under one roof Location based offers based on check-ins from foursquare First in Europe: speech recognition, speech command 18

19 Customer-centric growth strategy aligned with Improving Process & Service Technologically advanced banking systems Competent HR & dynamic sales force Extensive training Incentive schemes Operational efficiencies Superior employee productivity 99% centralization ratio Cross-sell Growing Revenues Outperform sector in selective products Leader in ordinary banking income generation * ROAE : 21% ; ROAA :2.4% Net F&C Income market share ~16% * -- highest in the sector Customer Delighting Customers Innovative customer oriented products and services Multi-channel CRM tools offering effective & timely solutions Integrated channel strategy Internet & Mobile Banking ATM Call Center Branch Network Adding New Customers Extensive branch network Tripled in the last 10 years 96% TR coverage To open branches in 2013 Customer Centricity Index Making a difference in customer experience with smart business processes * As of March 2013, Garanti figure is per bank-only data for fair comparison with sector Sector figure is based on BRSA monthly data for commercial banks 19

20 key strengths feed the differentiated business model Investor Relations / Investor Presentation Leading market shares across all lucrative products Impressive track record and attractive platform for future growth Sophisticated customer segmentation model Solid asset quality High quality, multi-channel distribution Business-integrated IT Product, service and technology innovator High quality employee base & proven management team Strong shareholder support -- Jointly controlled by Doğuş Group and BBVA 20

21 result in sustainable outperformance H13 Growth CAGR Assets (TL Bn) x 30% Market Share 6.6% 12.9% +6.2pps Rank (1) #4 #2 Loans (TL Bn) x 35% Market Share 8.1% 12.8% +4.7pps Rank (1) #5 #2 Customer Deposits (TL Bn) x 34% Market Share 5.0% 12.3% +7.3pps Rank (1) #5 #2 Shareholders Equity (TL Bn) x 33% Net Profit (TL Mn) 205 3,070 * 15x * 25% * ROAE H13 Avg. >20% Note: Figures are based on BRSA Bank-only financials for fair comparison. 1 Among private banks 2 Rankings are as of 1Q13. Market shares are as of 1H13, calculated based on bank-only financials. *2012 Bank only Net Income used in calculations for fair comparison Asset market share is as of March 2013 as sector data for June 2013 has not been announced. 21

22 Agenda 1 Turkish Economy 2 Turkish Banking Sector: An attractive investment opportunity 3 Garanti Overview and Key Investment Highlights 4 Garanti 1H13 Results per BRSA Consolidated Financials 22

23 2Q 2013 Macro Highlights Mixed outlook on global growth with extreme volatility and uncertainty as Fed sees stimulus winding down Tapering of the accommodative Federal Reserve monetary policy and market s perception that the Fed s quantitative easing program would end sooner than had been expected triggered a sharp sell-off in EM bonds, equities, and currencies. The eurozone economy remained relatively stagnant suggesting the worst of the recession has passed. Global volatility and weak growth in China weighed heavily on EM equities and commodity prices. Gold prices were down 23% as Brent oil finished the quarter down 7%. The Fed's exit plans added to worries about slowing growth across the emerging world, rising interest rates, currency weakness and instability in major markets like Brazil and Turkey. Investment grade ratings suppressed under changing global dynamics, less optimism on growth, weaker currency, rising inflation, external vulnerabilities and political tension 1Q GDP growth was 3% YoY -- moderate improvement but weaker positive outlook o growth dynamics changed: positive support by domestic demand led by government expenditures as external demand contributed negatively o ongoing contraction in private sector investment expenditures Rising during April and May, 12m current account deficit increased to US$ 53.6 billion as of May -- uncertainties remain regarding improvement in domestic demand and global economic growth signaling limited external demand contribution Yearly inflation rose to 8.3% at the end of 2Q13 from 7.3% at 1Q13 -- depreciation in TL is an upward risk, however, uncertainty regarding the growth outlook may limit the negative impact. CBRT gradually cut policy rate by 100 bps from 5.50% in 1Q13 to 4.5% as of 2Q13 and continued to utilize multiple tools in order to support financial stability moved the interest rate corridor lower by 100 bps, increased reserve requirement on FC liabilities and Reserve Option Coefficient for holding FC instead of TL. After having depreciated by 0.7% against the currency basket in 1Q13, TL depreciated with an acceleration by 2.6% in 2Q13. Benchmark bond yield, that fell below 6.4% at the end of 1Q13 and further to below 4.7% in May, increased to 7.5% at the end of the 2Q13 and hit 9.6% on July 11, a record high since 2Q12. 23

24 1H 2013 Highlights Lending strategy -- Chasing profitable growth opportunities TL lending -- solid growth with selective market share gains. Main drivers: - lucrative retail products : Mortgages (10% q-o-q ), GPLs (9% q-o-q) & Auto loans (6% q-o-q) - mid&long- term TL working capital loans FC lending: Awaited pick-up started in 2Q, with project finance loans in energy & utilities - Growth: 2Q13: 4% vs. 1Q 13: 1% Actively shaped & FRN-heavy securities portfolio Securities/Assets: 18% Solid & well-diversified funding mix providing comfortable liquidity Deposits fund 57% of assets: ~23% of total customer deposits are demand deposits Opportunistic utilization of alternative funding sources to effectively manage costs & duration mismatch Risk-return balance priority Sound asset quality declining new NPL inflows, continued progress in collections Prudent coverage and provisioning levels Well-capitalization Basel II CAR: 15.2%, Leverage:8x Healthy profit generation Comparable * net income up by 30% y-o-y; ROAE: 21%; ROAA: 2.4%, Well-defended margin Outstanding performance in sustainable revenue growth -- #1 in net fees & commissions Strict cost discipline * Please refer to slide 18 for comparable net income analysis 24

25 Solid profit on the back of strong balance sheet Net Income (TL million) (TL Million) 1Q13 2Q13 D QoQ % (+) NII- excl.income on CPI linkers 1,470 1,498 2% (+) Net fees and comm % (-) Specific & General Prov. - exc. one-off on specific prov % = CORE BANKING REVENUES 1,797 1,761-2% Well-defended NII Quarterly drop due to timing of account maint. fees. Robust Y-o-Y 27% Flattish quarterly specific CoR. Higher general provisioning mainly due to increased originations & TL depreciation against FX (+) Income on CPI linkers % (+) Collections % Based on actual monthly inflation readings Continued progress in collections (+) Trading & FX gains % Capital gain realizations (+) Other income -before one-offs % (-) OPEX -before one-offs -1,022-1,128 10% On track with budget (-) Other Provision & Taxation % 1H12 1H13 (-) One-offs n.m 1Q12 2Q12 1Q13 2Q13 (+) NPL sale 0 35 n.m (-) Free Provision Reversal 55 5 n.m (-) Payment Systems tax penalty expense 0-24 n.m (-) Saving Dep. Insurance Fund expense 0-13 n.m (-) Various tax fine provisions n.m (-) Additional prov. to keep coverage ratio 0-35 n.m (-) Competition Board Fine n.m = NET INCOME 1,181 1,005-15% ROBUST PROFITABILITY 25

26 Increasingly customer-driven asset composition Total Assets (TL/USD billion) 10% 3% 185,8 179,8 6% 197,4 Composition of Assets 1 1H13 Loans 57,5% Other IEAs 7,9% Non-IEAs 16,4% Reserve req. 7.6% Others 8.8% Loans/Assets 58% Increasing weight of customer driven assets 108,5 112,9 119,5 IEA / Assets: 84% Securities 18,2% Growth: 40,5 40,9 40, Loans 54,7% Other IEAs 8,2% Non-IEAs 17,1% Reserve req. 7.4% Others 9.6% Loans 2 2Q: +10% 1Q: +5% Securities 2Q: -6% 1Q: +3% Q13 2Q13 TL FC (USD) Total Assets (TL) IEA / Assets: 83% Securities 20,0% 1 Accrued interest on B/S items are shown in non-ieas 2 Performing cash loans 26

27 Actively shaped & FRN-heavy securities portfolio Total Securities (TL billion) (3%) YtD: (4%) (3%) QoQ: (7%) 14% 9% 10% 9% % % 91% 90% 91% 90% 2Q12 3Q Q13 2Q13 TL FC TL Securities (TL billion) Currency (5%) Adj.Growth* (1%) (5%) 3% (6%) 3% (0%) 2% CPI: 28% FRNs: 30% CPI: 31% FRNs: 30% CPI: 32% FRNs: 30% 4% CPI: 34% FRNs: 29% (7%) CPI: 39% FRNs: 26% 2Q12 3Q Q13 2Q13 Securities 2 /Assets 18% hovering around its lowest levels Shrinkage in TL securities q-o-q, due to redemptions & capital gain realizations Total Securities Composition Trading 1,3% HTM 2,4% Unrealized loss (pre-tax) as of June-end ~TL 270mn AFS 96,4% FC Securities (USD billion) 3.1 FRNs: 33% (34%) % FRNs: 53% 2.3 (36%) (8%) FRNs: 52% (13%) 2.1 FRNs: 51% (6%) 2.0 FRNs: 46% 2Q12 3Q Q13 2Q13 Security additions to the portfolio, to timely & strategically manage the book, fell short of offsetting the disposals & redemptions FRN mix 1 in total 64% 1 Based on bank-only MIS data 2 Excluding accruals Note: Fixed / Floating breakdown of securities portfolio is based on bank-only MIS data. *YtD adj. growth is calculated with 2012 YE USD/TL exchange rate of QoQ adj. growth is calculated with 1Q13 USD/TL exchange rate of

28 Accelerated lending growth in 2Q, with sustained focus on profitability Total Loan 1 Growth & Loans by LOB 2 (TL million) Corporate 2% % % 3% 21% % 5% 15% % 10% % Currency Adj.Growth* YtD: 12% QoQ: 7% TL Loans 1 23% 17% 68,0 61,9 55,2 56,7 58,1 10% 7% 3% 3% + FC Loans 1 (in US$) 10% 5% 22,4 22,7 23,5 23,7 24,6 4% 3% 1% 1% Commercial SME Credit Cards Consumer 39.0% 13.4% 12.4% 19.2% 38.3% 12.8% 13.0% 20.0% 37.9% 12.1% 13.1% 20.5% 37.4% 12.6% 12.9% 21.1% 37.4% 12.6% 12.8% 20.9% 2Q12 3Q Q13 2Q13 Main drivers: > Lucrative retail products > Mid & long-term TL working capital loans with relatively higher yields 2Q12 3Q Q13 2Q13 > Project Finance loans in energy & utilities 2Q12 3Q Q13 2Q13 TL (% in total) 58% 58% 58% 59% 59% FC (% in total) 42% 42% 42% 41% 41% US$/TL Market share 3 : 11.0% at 2Q13 vs. 10.9% at 1Q13 & 10.8% at YE12 Market share 3 : 17.6% at 2Q13 vs. 18.2% at 1Q13 & 18.3 % at YE12 1 Performing cash loans 2 Based on bank-only MIS data 3 Sector data is based on BRSA weekly data for commercial banks only *YtD adj. growth is calculated with 2012 YE USD/TL exchange rate of QoQ adj. growth is calculated with 1Q13 USD/TL exchange rate of

29 Lucrative retail loans led the acceleration in lending growth Investor Relations / Investor Presentation Retail Loans 1 (TL billion) Mortgage (TL billion) 21% 13% ,5 12,5 12,5 12,6 4% 3% 4% ,6 9% 31,2 32,9 34,4 36,2 39,6 27% ,6 0,6 0,9 4% 6% 4% 15% ,6 10,1 10,5 11,0 11, ,7 10% 12,9 Rational pricing stance supporting margins Generating cross-sell & increasing customer retention 2Q12 3Q Q13 2Q13 Auto Loan (TL billion) Consumer Loans 2Q12 3Q Q13 2Q13 Commercial Installment Loans General Purpose Loan 5 (TL billion) Market Shares 2,3 3% 20% % 8% , ,3 9,2 9,2 9,2 2,1 2,1 1,8 1,8 2,0 2% 3% 5% 9% 1% (5%) 2% 6% 9,7 10,3 10,8 11,7 12,9 1,2 1,2 1,3 1,3 1,4 QoQ June 13 Rank 4 Mortgage 13.7% #1 Auto 17.1% #2 General Purpose % #2 Retail % #2 2Q12 3Q Q13 2Q13 2Q12 3Q Q13 2Q13 1 Including consumer, commercial installment, overdraft accounts, credit cards and other 2 Including consumer and commercial installment loans 3 Sector figures are based on bank-only BRSA weekly data, commercial banks only 4 As of 1Q13, among private banks 5 Including other loans and overdrafts 29

30 Solid market presence in payment systems -- good contributor to sustainable revenues Issuing Volume (TL billion) Acquiring Volume (TL billion) 12% 22% 34,7 39,5 31,0 32,4 Garanti debit card spending >2x of the sector Strong player in the market with the ultimate aim of creating Turkey s largest cashless society Credit Card Platform: Bonus Card 1H12 1H13 1H12 1H13 No. of Credit Cards (thousand) Credit Card Balances (TL billion) Market Shares ,8 6% 25% 12% 11,5 12,0 12,4 4% 4% 9% 13,4 YTD June 13 Rank Acquiring (Cumulative) +8 bps 19.2% #2 Issuing (Cumulative) -86 bps 17.0% #2 POS bps 18.0% #1 ATM -43 bps 9.2% #3 * Jun'12 Mar'13 Jun'13 2Q12 3Q Q13 2Q13 1 Excluding shared POS *Among private banks 30

31 Sound asset quality -- declining NPL inflows, successful collection performance & debt sale in 2Q supported the NPL ratio NPL Ratio 1 Net Quarterly NPLs (TL billion) Investor Relations / Investor Presentation Garanti (Cons.) 3,9% 2,7% 3,4% 2,4% Global Crisis & Hard Landing 5,9% 4,8% 5,2% 4,3% 4,6% 3,4% 3,6% 2,9% Recovery 3,7% 2,4% Soft Landing 2.4% 4.1% 3.1% 2.1% 2.6% 2.3% 4,1% 3,9% 3,0% 2,8% 2,6% 2,8% 2,7% 1,8% 2,3% 1,9% New NPL Collections Write-off NPL inflows resulting from few commercial files with strong collateralization; 4Q12 Garanti: TL 176mn Romania: TL 70mn 3Q12 GBI: TL 54mn 2Q12 Garanti: TL 60mn NPL sale Q13 Garanti Sector Garanti excld.npl sales & write-offs Sector w/ no NPL sales & write-offs 2Q12 3Q12 4Q12 1Q13 2Q13 NPL Categorisation 1 Retail Banking (Consumer & SME Personal) 23% of total loans Credit Cards 13% of total loans Business Banking (Including SME Business) 64% of total loans 2,0% 2,2% 2,1% 2,2% 2,1% 1,6% 1,7% 1,8% 1,9% 1,6% 5,2% 5,4% 4,8% 4,9% 5,0% 5,2% 5,4% 5,3% 4,6% 3,7% 2,4% 2,8% 2,7% 2,8% 2,6% 1,4% 1,5% 1,8% 1,9% 1,7% NPL sale effect on NPL ratio +30bps 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 Garanti Sector 2Q12 3Q12 4Q12 1Q13 2Q13 1 NPL ratio and NPL categorisation for Garanti and sector figures are per BRSA bank-only data for fair comparison 2 New NPL additions from GBM, GBI and Garanti Bank Romania 3 Garanti NPL sale in 2012 amounts to TL218 mn, of which TL188 mn relates to NPL portfolio with 100% coverage and the remaining TL31 mn being from the previously written-off NPLs; NPL sale in 2Q13 amounts TL 314mn of which TL310mn relates to current NPL portfolio and the remaining TL4 mn being from the previously written-off NPLs 31

32 Comfortable coverage and provisioning levels -- higher originations weighed on general provisions Quarterly Loan-Loss Provisions (TL million) *NPL inflows resulting from few commercial files with strong collateralization; Garanti (Cons) 2Q12 Garanti: TL 52mn Additional provisions of TL32mn set aside for alignment of coverage ratio to pre-npl sale level Coverage Ratio * * 161 3Q12 GBI: TL 14mn * General 4Q12 Garanti: TL 141mn Romania: TL 70mn GBI: TL 6mn Specific 2Q13 None Additional provisions of TL44mn set aside for alignment of coverage ratio to pre-npl sale level 78% 77% 78% 78% 79% Garanti 81% 81% 81% 81% 81% Sector 1 81% 75% 76% 75% 74% Q12 3Q12 4Q12 1Q13 2Q13 * * Quarterly Specific CoR down to 71bps from 90bps in 1Q13 when excld. additionally set aside provision to lift the coverage up to pre-npl sale level Cumulative Gross CoR 130 bps excld. additionally set aside provision to lift the coverage up to pre-npl sale level vs. High general provisioning in 2Q vs. 1Q due to > Strong loan originations & TL depreciation against FX 138bps on a reported basis 1 Sector figures are per BRSA weekly data, commercial banks only 2 Additional general provisions, defined by law, for loans extended before 2006 in the amount of TL150mn, TL 60mn of which is set aside in 4Q12 and remaining at equal amounts within the following three years 32

33 Solid funding mix reigned by deposits & reinforced with diversified funding sources Composition of Liabilities Bonds Issued Funds Borrowed Repos 2,3% 3,3% 4,5% 14,7% 14,2% 13,6% 7,2% 7,8% 6,3% Total Deposits (TL billion) 15% % 7% Time Deposits IBL: 44,9% 42,0% IBL: 43,9% 69% 67% IBL: 68% 48% 47% (1%) 1 49% 4% 1 46% (0%) 1 46% (0%) 1 FC Demand Deposits 11,7% 12,2% 12,7% 52% 7% 53% (6%) 51% 13% 54% 7% 54% TL SHE Other 11,3% 12,0% 11,1% 8,0% 8,4% 8,0% 2Q Q13 2Q12 3Q Q13 2Q13 Demand Deposits (TL billion) Consumer+SME / Total Deposits : 63% ~23% of total customer deposits Per bank-only figures 20% vs. sector s 18% 26% 14% 9% , ,9 0,8 1,3 1,1 19,1 19,8 20,6 21,8 23,9 2Q 12 3Q Q13 2Q13 Bank Demand Customer Demand 1 Growth in USD terms 33

34 Utilization of alternative funding sources to actively manage funding costs and duration mismatch Adjusted LtD ratio (TL Billion,%) Comfortable level of LtD ratio: 79% exclud. Funding base reinforced with alternative funding sources Opportunistic utilization of repos & money market borrowings Issuances under GMTN program ~TL700mn with an avg. maturity of 2 yrs ~TL 2.5bn TL bonds + + EUR 1.1bn 1 yr syndicated loan 110% roll-over ratio at cost of L+100bps TL 750 mn TL Eurobond issuance in 1Q13 with coupon rate of 7.375%, yielding 7.5% 34

35 Declining asset yields were mostly offset with lower funding costs Loan Yields 1 (Quarterly Averages) 16,1% 15,9% 15,4% 14,4% 13,3% 5,8% 5,8% 5,7% 5,4% 5,3% 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 TL Yield FC Yield Ongoing ease in deposit costs, yet; at a decelerating pace vs. 1Q 13 LtD SPREAD SLIGHTLY SUPRESSED QoQ by 20bps Cost 1 of Deposits (Quarterly Averages) 10,4% 9,8% 8,1% 8,9% 7,2% 8,4% 6,6% 6,9% 6,1% 5,5% 3,2% 3,0% 2,7% 2,4% 2,2% 2,5% 2,3% 2,0% 1,9% 1,7% TL Time TL Blended FC Time FC Blended Managed drop in loan yields backed by selective & healthy growth strategy 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 1 Based on bank-only MIS data and calculated using daily averages 35

36 Quarterly margin supression is securities book driven Quarterly NIM (Net Interest Income / Average IEAs) NIM 4,2% 3,4% -51 bps 5,4% 5,1% 4,6% Adjusted NIM 3,6% 3,9% 4,0% -93bps 4,9% 3,9% Quarterly NIM down slightly by 22bps when excluding CPI linker volatility 2Q12 3Q12 4Q12 1Q13 2Q13 2Q12 3Q12 4Q12 1Q13 2Q13 Q-o-Q Evolution of Margin Components (in bps) TL depreciation against FX in 2Q, boosted Avg IEA base & negatively impacted NIM Loans -25 Securities exc. CPI +20 Deposits CPI Sec. Other Income Items +10 Other Expense Items Provisions +37 FX & Trading 394 Adj. NIM down by ~93bps due to; Relatively higher general provisioning q-o-q Additional provisions for the alignment of cash coverage to pre-npl sale level 1Q 13 NIM 2Q 13 NIM 2Q 13 Adj NIM Adjustments to NIM: Net Interest Income/ Average IEA adjusted by FX gain/loss, provision for loans and securities, and net trading income/loss 36

37 Outstanding performance in sustainable revenues Net Fees & Commissions (TL million) %* H 12 1H 13 *Accounting of consumer loan fees were revisited in the beginning of 2013 upon the opinion of «Public Oversight» --Accounting & Auditing Standards Authority Sustainably growing and highly diversified fee base Growth 2 (y-o-y) Cash* & non-cash loans ~60% Brokerage 15% Money transfer 12% Insurance 17% Net Fees & Commissions Breakdown 1,2 Payment Systems 41,2% Leader in interbank money transfer 18% market share vs. the peer average of 10% Highest payment systems commissions per volume % vs. the peer average of 1.2% 4 #1 in bancassurrance 5 Sustained brokerage market share #2 in equity market with 8% market share Most preferred pension company 19.5% market share in # of pension participants 1H 12 1H 13 Other 10,8% Asset Mgt 1,7% Cash Loans * 20,9% Non Cash Loans 7,0% Money Transfer 9,0% Insurance 5,4% Brokerage 4,0% Payment Systems 35,2% Other 9,6% Asset Mgt 1,7% #1 in Ordinary Banking Income 3 generation with the highest Net F&C market share Brokerage 3,8% Cash Loans * 28,6% Non Cash Loans 7,6% Money Transfer Insurance 8,3% 5,2% 1 Breakdown is on a comparable basis to same period last year 2 Bank-only MIS data 3 Defined as; net interest income adjusted with provisions for loans and securities, net FX and trading gains + net fees and commissions; for 1Q13 4 Peer average as of 1Q13 5 Among private banks as of May * Cash loan fees on a comparable basis for 1H 12 and 1H 13, where 2013 consumer loan orignation fees are included in the respective fee bases on a cash basis 37

38 Comfortable solvency supports the healthy and profitable growth strategy CAR & Tier I ratio Strong capitalization Basel II CAR: 15.2% 16,9% 16,8% TIER I TIER I 15,5% 15,6% 15,2% TIER I 14,3% Recommended 12% Required 8% Low leverage Leverage: 8x No negative impact expected under Basel III High internal capital generation supporting long-term sustainable growth Basel II 2012 Basel II 1Q13 Basel II 2Q13 Free Equity = SHE - ( Net NPL+ Investment in Associates and Subsidiaries + Tangible and Intangible Assets+ AHR+ Reserve Requirements) Free Funds = Free Equity + Demand Deposits * Including the effects of consolidation eliminations 38

39 Differentiated business model -- reflected, once again, in strong results Investor Relations / Investor Presentation (TL Million) 1H12 1H13 D YoY (+) NII- excl.income on CPI linkers 2,124 2,967 40% (+) Net fees and comm. 1,032 1,308 27% (-) Specific & General Prov. - exc. one-off on specific prov % = CORE BANKING REVENUES 2,835 3,558 25% (+) Income on CPI linkers % (+) Collections % (+) Trading & FX gains % (+) Other income -before one-offs % (-) OPEX -before one-offs -1,908-2,150 13% (-) Other provisions % (-) Taxation % = BaU NET INCOME (exc. non-reccuring items) 1,824 2,372 30% (+) NPL sale n.m (+) Free Provision Reversal 0 60 n.m (-) Payment systems tax penalty expense 0-24 n.m (-) Saving Deposits Insurance Fund expense 0-13 n.m (-) One-offs on specific prov n.m (-) Additional prov. to keep coverage ratio at 81% n.m (-) Competition Board Fine n.m (-) Various tax fine provisions 0-50 n.m = NET INCOME 1,782 2,185 23% Strong consumer loan originations 1 and well-diversifed fee sources generating across the board fee growth Solid core banking revenue generation Committed to strict cost discipline -- on track with budget guidance Omni-channel convenience supporting efficiencies 35 net branch openings; Successive & targeted investments in digital platforms: İGaranti +6% rise in # of ATMs >1,000 new hires OPEX/Avg. Assets 2.3% Flattish Y-o-Y High level of Fees/OPEX 60% vs. 54% in 1H12 Cost/Income 41% vs. 46% in 1H12 *Business as Usual= Excluding non-recurring items and regulatory effects in the P&L 1 Accounting of consumer loan fees were revisited upon the opinion of «Public Oversight» --Accounting & Auditing Standards Authority 39

40 with increasing contribution from subsidiaries Consolidated Net Income Bank_only Net Income 87% Bank_only Net Income 89% 1H 13 1H 12 Consolidation effect 13% 11% Subsidiaries contribution to bottom-line up by 65% Consolidation effect Total contribution mainly driven by: Garanti Pension Most preferred pension company Solid results even after decreased cap on enterance, fund management & administrative fees Garanti Leasing Coverage of a broad customer base-- corporates, commercial cust.s, & SMEs #1 in number of contracts Net income up by 18% YoY GarantiBank International Capturing new business opportunities Effective management of market risks Positive contribution from treasury operations further reinforcing the bottom line Net income up by 127% YoY GarantiBank Romania Sustainable operating revenue growth Net income tripled YoY 40

41 Appendix 41

42 Liabilities&SHE Assets Investor Relations / Investor Presentation Balance Sheet - Summary (TL million) Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 YTD Change Cash &Banks 1 12,407 12,794 12,973 11,800 13,656 5% Reserve Requirements 9,854 11,868 13,365 15,159 14,937 12% Securities 41,329 39,291 40,358 41,580 39,070-3% Performing Loans 95,056 96,933 99, , ,916 15% Fixed Assets & Subsidiaries 1,615 1,607 1,697 1,713 1,701 0% Other 10,334 10,584 11,860 11,346 13,111 11% TOTAL ASSETS 170, , , , ,391 10% Deposits 97,032 99,722 97, , ,011 15% Repos & Interbank 12,245 8,094 14,107 11,836 12,421-12% Bonds Issued 4,005 6,160 6,077 7,181 9,066 49% Funds Borrowed 2 25,253 25,530 25,893 25,680 26,962 4% Other 12,754 12,934 14,268 13,687 14,993 5% SHE 19,309 20,637 21,657 22,585 21,938 1% TOTAL LIABILITIES & SHE 170, , , , ,391 10% 1 Includes banks, interbank, other financial institutions 2 Includes funds borrowed and sub-debt 42

43 Long-term strategy of investing in CPI linkers as a hedge for expected reversal in market indicators Drivers of the Yields on CPI Linkers 1 (% average per annum) Interest Income & Yields on TL Securities (TL billion) 15,0% 13,1% 9,7% 6,6% 6,5% 6,2% 5,6% 5,4% 5,4% 19,7% 21,2% 15,3% 10,9% 1,3% TL Sec. Yield 1 incl. CPIs TL Sec. Yield 1 excl. CPIs 12,8% 10,0% 9,8% 7,2% 12,7% 8,8% 10,5% 8,0% 8,7% 7,4% -5,2% Real Rate Inflation Impact Yield (17%) 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 Income excl. CPIs 1, , CPI effect Q12 3Q12 4Q12 1Q13 2Q13 1 Based on bank-only MIS data 2 Per valuation method based on actual monthly inflation readings Note: All figures are based on bank-only data 43

44 Quarterly Margin Analysis Total Interest Income (% of Avg. Interest Earning Assets) Int. Income on loans (% of Avg. Interest Earning Assets) Int. Income on securities (% of Avg. Interest Earning Assets) Int. Income - Other (% of Avg. Interest Earning Assets) 9,57% 8,31% 9,62% 9,06% 8,25% 5,98% 6,11% 6,10% 5,97% 5,76% + 2,97% 1,69% 2,97% 2,61% 2,07% + 0,62% 0,51% 0,55% 0,47% 0,42% Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 - Total Interest Expense Int. expense on deposits (% of Avg. Interest Earning Assets) (% of Avg. Interest Earning Assets) 5,33% 3,65% 3,60% 4,89% 4,24% 2,95% 3,93% 3,63% 2,62% 2,42% + Int. expense on borrowings* (% of Avg. Interest Earning Assets) 1,45% 1,08% 1,04% 1,06% 0,94% + Int. Expense - Other (% of Avg. Interest Earning Assets) 0,23% 0,21% 0,24% 0,26% 0,27% = Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Net Interet Margin Prov. for Loans & Securities Net FX & Trading gains Net Int. Margin - Adjusted (% of Avg. Interest Earning Assets) (% of Avg. Interest Earning Assets) (% of Avg. Interest Earning Assets) (% of Avg. Interest Earning Assets) Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 4,24% 3,42% 5,38% 5,13% 4,62% - 0,80% 0,73% 1,41% 0,87% 1,05% + 0,19% 1,24% -0,02% 0,61% 0,37% = 3,63% 3,92% 3,95% 4,87% 3,94% Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Adjustments to NIM: Net Interest Income/ Average IEA adjusted by FX gain/loss, provision for loans and securities, and net trading income/loss * Funds borrowed and repos 44

45 Cumulative Margin Analysis Total Interest Income (% of Avg. Interest Earning Assets) 9,48% 9,21% 8,62% Int. Income on loans (% of Avg. Interest Earning Assets) 6,02% 5,94% 5,84% + Int. Income on securities (% of Avg. Interest Earning Assets) 3,02% 2,67% 2,33% + Int. Income - Other (% of Avg. Interest Earning Assets) 0,52% 0,53% 0,45% 6M12 12M12 6M13 6M12 12M12 6M13 6M12 12M12 6M13 6M12 12M12 6M13 - Total Interest Expense (% of Avg. Interest Earning Assets) Int. expense on deposits (% of Avg. Interest Earning Assets) Int. expense on borrowings* (% of Avg. Interest Earning Assets) Int. Expense - Other (% of Avg. Interest Earning Assets) 5,33% 4,94% 3,77% 3,67% 3,47% 2,51% + 1,44% 1,25% 0,99% + 0,22% 0,22% 0,26% 6M12 12M12 6M13 6M12 12M12 6M13 6M12 12M12 6M13 6M12 12M12 6M13 = Net Interest Margin Prov. for Loans & Securities Net FX & Trading gains Net Int. Margin - Adjusted (% of Avg. Interest Earning Assets) 4,85% 4,28% 4,15% - (% of Avg. Interest Earning Assets) (% of Avg. Interest Earning Assets) 0,96% 0,82% 0,55% + 0,49% 0,40% 0,20% = (% of Avg. Interest Earning Assets) 4,38% 3,80% 3,87% 6M12 12M12 6M13 6M12 12M12 6M13 6M12 12M12 6M13 6M12 12M12 6M13 Adjustments to NIM: Net Interest Income/ Average IEA adjusted by FX gain/loss, provision for loans and securities, and net trading income/loss * Funds borrowed and repos 45

46 Further strengthening of retail network... Number of Branches Number of ATMs Number of POS (thousand) #3 ** #3 #1 * (11) H12 3Q Q13 1H13 1H12 3Q Q13 2Q13 1H12 3Q Q13 1H13 Number of Customers (million) Mortgages (TL billion) Demand Deposits (customer+bank) (TL billion) #1 ** 5.1 #2 ** 11,6 11,9 Sustained momentum in customer acquisition 10,7 11,2 11,9 12, ,6 20,0 20,6 21,9 22, ,1 1Q13 1H13 1H12 3Q Q13 1H13 1H12 3Q Q13 1H13 *Including shared and virtual POS terminals ** Branch, Mortgage and Demand Deposit rankings are as of March All rankings are among private banks Note: All figures are based on bank-only data except for mortgages amd demand deposit balances 46

47 ...while preserving the highest efficiency ratios Ordinary Banking Income per Avg. Branch (1Q13) (TL million) Loans 1 per Avg. Branch (1Q13) (TL million) 2,4 2,1 1,6 1,4 127,2 116,5 110,8 114,3 Garanti Peer 1 Peer 2 Peer 3 Garanti Peer 1 Peer 2 Peer 3 Assets per Avg. Branch (1Q13) (TL million) Customer Deposits per Avg. Branch (1Q13) (TL million) 178,1 162,1 144,0 136,1 96,9 77,7 80,4 75,2 Garanti Peer 1 Peer 2 Peer 3 Garanti Peer 1 Peer 2 Peer 3 1 Total Loans=Cash+non-cash loans Note:Figures are per bank-only financials for fair comparison 47

48 Key financial ratios Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Profitability ratios ROAE 19.3% 18.3% 17.0% 23.8% 20.8% ROAA 2.2% 2.1% 2.0% 2.9% 2.4% Cost/Income 45.6% 45.9% 47.5% 36.4% 41.2% NIM (Quarterly) 4.2% 3.4% 5.4% 5.1% 4.6% Adjusted NIM (Quarterly) 3.6% 3.9% 4.0% 4.9% 3.9% Liquidity ratios Liquidity ratio 29.7% 29.3% 28.9% 28.2% 26.2% Loans/Deposits adj. with merchant payables1 94.3% 93.5% 97.8% 95.8% 98.7% Asset quality ratios NPL Ratio 2.1% 2.3% 2.6% 2.7% 2.3% Coverage 78.1% 76.5% 78.0% 78.3% 78.9% Gross Cost of Risk (Cumulative-bps) Solvency ratios CAR* 15.3% 16.4% 16.9% 16.8% 15.2% Tier I Ratio* 14.3% 15.1% 15.5% 15.6% 14.3% Leverage 7.8x 7.4x 7.3x 7.2x 8.0x 1 Payables from credit card transactions. Please refer to footnote miscellaneous payables as per BRSA Unconsolidated financial report * CAR and TIER I ratios are per Basel I for the periods Mar 12, Jun12 and per Basel II for Sep 12,Dec 12,Mar 13, Jun

49 Disclaimer Statement Türkiye Garanti Bankasi A.Ş. (the TGB ) has prepared this presentation document (the Document ) thereto for the sole purposes of providing information which include forward looking projections and statements relating to the TGB (the Information ). No representation or warranty is made by TGB for the accuracy or completeness of the Information contained herein. The Information is subject to change without any notice. Neither the Document nor the Information can construe any investment advise, or an offer to buy or sell TGB shares. This Document and/or the Information cannot be copied, disclosed or distributed to any person other than the person to whom the Document and/or Information delivered or sent by TGB or who required a copy of the same from the TGB. TGB expressly disclaims any and all liability for any statements including any forward looking projections and statements, expressed, implied, contained herein, or for any omissions from Information or any other written or oral communication transmitted or made available. 49

50 Investor Relations Levent Nispetiye Mah. Aytar Cad. No:2 Beşiktaş Istanbul Turkey Tel: +90 (212) Fax: +90 (212) Internet: /garantibankasi 50