Net income up by 79.2% y-o-y due to Earnings Review June 30, 2006 solid organic growth
Performance Highlights Total asset growth was 28.7% YTD reaching 53.0 Billion YTL on a consolidated basis as of H1 2006 Net cash loans increased by 49.8% in real terms, constituting 54.2% of total assets TL loans increased by 41.4% in H1 2006, reaching 14.2 Billion YTL while FC loans increased by 35.4% in US$ terms, reaching 9.3 Billion US$ as of H1 2006 NPL ratio improved to 2.3% as of H1 2006 due to recoveries and loan growth YTD total deposits were up by 20.3% Total operating income reduced by fx losses and monetary losses expanded by 7.3% on a consolidated basis over the same period in 2005 reaching 1,700 Million YTL Income from operations 1 on a consolidated basis reached 870 Million YTL, an increase of 18.2% in real terms over H1 2005 Net income increased by 79.2% in H1 2006 over H1 2005, reaching 548 Million YTL ROAA and ROAE strengthened to 2.33% and 22.5% 2, respectively, on an annualized basis as of H1 2006 Cost / Income improved to 47.9% in the first half of 2006 1 excluding impairment losses but including monetary gain/(losses) 2 Includes the dividend distribution effect on average equity in 2006 2
Profitability Sustainable & Consistent Growth YTD Profitability improved: ROAE by 394 bps. 16.8% 18.5% 22.5% 1.87% 1.91% 2.33% ROAA by 42 bps and cost/income ratio by EPS ROAE 2 H1 05 261 143 ROAA Cost / Income 1 H1 05 62.5% 62.8% 47.9% 1,482 bps H1 05 H1 06 H1 05 1 Adjusted to exclude Retail (Tansaş) in 2005 & H105 2 Includes the dividend distribution effect on average equity in 2006 3
Balance Sheet - Summary (YTL million) % Change Cash & Banks 6,520 7,013 7.6% Securities 12,891 14,607 13.3% Loans to Customers 19,207 28,763 49.8% Tangible Assets 1,219 1,192 (2.2%) Assets Other 1,361 1,464 7.6% Total Assets 41,198 53,039 28.7% Deposits from Customers 24,525 29,235 19.2% Liabilities and SHE Deposits from Banks 1,060 1,553 46.6% Repo Obligations Funds Borrowed Other 2,340 6,689 2,552 5,686 9,617 2,854 143.0% 43.8% 11.8% SHE 4,032 4,094 1.5% Total Liabilities & SHE 41,198 53,039 28.7% 4
Balance Sheet Composition & IEA vs IBL Asset Composition Loans to Banks 5.3% Loans to Customers 46.6% Securities 31.3% IEA 85.7% Tangible Assets 3.0% Other 3.3% Cash Equivalents 10.5% Loans to Customers 54.2% Loans to Banks 4.7% Securities 27.5% IEA 89.1% Tangible Assets 2.2% Other 2.9% Cash Equivalents 8.5% Total assets increased to 53.0 Billion YTL in H1 2006 (US$ 33.9 Billion) Loans to customers (net cash loans) increased by 49.8% in real terms, bringing its share in total assets up to 54.2% in H1 2006 from 46.6% at YE 2005 Liability & SHE Composition Repo Obligations 5.7% Funds Borrowed 16.2% Deposits from Customers 59.5% IBL 67.3% Other 6.2% SHE 9.8% Deposits from Banks 2.6% Repo Obligations 10.7% Funds Borrowed 18.1% Deposits from Customers 55.1% IBL 71.0% Other 5.5% SHE 7.7% Deposits from Banks 2.9% Share of securities declined to 27.5% in H1 2006 from 31.3% at YE 2005 Share of deposits from customers in total liabilities and shareholders equity was 55.1% as of H1 2006 Share of repo obligations & funds borrowed increased from 21.9% to 28.8% as of H1 2006 5
Loans - Growth & Currency Composition Loan Growth & Market Shares, YTL Billion 15.3 88.3% 19.2 11.4% 11.5% 49.8% 23.7 12.8% 21.3% 28.8 13.2% Total loan growth H1 YTD was 49.8%, cash loans reached 28.8 Billion YTL TL loans increased by 41.4% in H1 2006, reaching 14.2 Billion YTL H1 05 2005 Q1 06 H1 06 of 49.2% of total loans Market Shares* FC loans increased by TL Loan Growth YTL Billion 7.4 8.7% 92.6% 10.0 8.8% 41.4% 12.1 9.9% 16.8% 14.2 9.9% FC Loan Growth US$ Billion 5.9 16.8% 57.6% 6.9 18.0% 35.4% 8.7 19.7% 7.3% 9.3 20.2% 35.4% in US$ terms, reaching 9.3 Billion US$ as of H1 2006 H1 05 2005 Q1 06 H1 06 H1 05 2005 Q1 06 H1 06 * Market share data as of BRSA bank only results 6
Improving Loan Quality & Well-Diversified Portfolio NPL Ratio & Coverage 74.4% 68.1% 67.3% 67.4% 4.1% 1.3% 3.7% 3.3% 1.2% 2.3% 1.0% 0.6% 2.8% 2.5% 2.3% 1.7% H1 05 2005 Q1 06 H1 06 Provisioned NPL Unprovisioned NPL NPL Coverage Asset Quality Secured Loans 64.45% 75.05% Unsecured Loans 35.55% 24.95% Sectoral Loan Allocation 16.9% 18.5% 2.1% 3.9% 2.9% 4.3% 4.4% 3.9% 4.7% 4.2% 4.5% 4.6% 3.5% 4.5% 5.3% 5.2% 7.7% 6.9% 7.2% 9.9% 39.9% 35.0% Consumer Service Sector Financial Institutions Textile Energy Food Transportation and logistics Construction Metal and metal products Tourism Other* NPL ratio improved to 2.3% as of H106, factor of recoveries and loan growth. The coverage ratio increased 630 bps mainly as a function of lower NPL The share of unsecured loans in total loans decreased to 24.95% as of H1 2006 from 35.55% at YE 2005. This was mainly due to declining share of credit cards in consumer loans * Other includes loans extended to sectors such as transportation vehicles and sub-industry, data processing, agriculture, chemistry and chemical products, durable consumption, mining etc. 7
Demand Deposit Growth Overweighs the Total Deposit Growth Deposit Growth & TL/FC Mix YTL Billion 41.7% 25.6 21.7 53.4% 56.5% 43.5% 46.6% 20.3% 30.8 27.6 11.4% 53.4% 49.8% 50.2% 46.6% TL FC Deposit Growth YTL Billion US$ Billion 11,914 20.5% 14,356 10,249 2.5% 10,500 Main source of funding: Solid deposit base (58.0% of liabilities and SHE) YTD deposit growth 20.3% while the YTD demand deposit growth was 22.2%. Demand Dep. Growth H1 05 2005 Q1 06 H1 06 TL FC 34.2% 22.2% 8.2 6.7 6.5 26.3% 6.1 11.5% 10.9% 11.5% 11.9% Customer Deposits Demand/Time Mix TL 72.8% 73.4% 27.2% 26.6% FC The contribution of demand deposits reduce the cost of deposits on a blended basis H1 05 2005 Q1 06 H1 06 Market Shares* Demand Time * Market share data as of BRSA bank only results 8
Increasing Free Funds 2,058 21.2% 2,329 7.1% 2,495 Free equity increased by 21.2% YTD. Free Equity YTL Million 2005 Q1 06 H1 06 Free Funds*/IEAs YTL Million 35,326 8,728 9,700 39,513 24.5% 24.7% 22.5% 10,645 2005 Q1 06 H1 06 47,280 YTD growth of free funds was 22%. Free funds / IEAs stood at 22.5% level in the second quarter largely due to 1.5 Billion YTL increase in demand deposits in this period. Free Funds IEAs Free Funds / IEAs *Free Funds: Free Equity + Demand Deposits 9
Summary Income Statement YTL Thousand June 30, 2005 June 30, 2006 Change Net Interest Inc.Adj.by FX & Monetary Gain/Loss 947,102 917,688 (3.1%) Net Fee & Comm. Income 378,617 546,417 44.3% Other Non-Interest Income 258,167 235,740 (8.7%) Total Operating Income 1 1,583,886 1,699,845 7.3% Operating Expenses (848,075) (830,258) (2.1%) Operating Income 2 735,811 869,587 18.2% Impairment Losses (306,611) (189,368) (38.2%) Taxation Charge (123,199) (131,893) 7.1% Net Income 306,001 548,326 79.2% Compared to same period last year; total operating income increased by 7.3% on a consolidated basis, reaching 1, 700 Million YTL. Consolidated operating income was up by 18.2% Net fee and commission income increased by 44.3% in H1 2006 on a consolidated basis. Consolidated net income reached 548 Million YTL in H1 2006, reflecting an increase of 79.2% 1 Adjusted by fx and monetary gain/(losses) 2 Excluding impairment losses but including monetary gain/(losses) 10
Fee & Commission Income Growth (YTL thousand) H1 05 H1 06 % change Q1 06 Q2 06 % change Fees and Commissions, net 378,617 546,417 44.3% 263,149 283,268 7.6% Trading Account Income, net 8,238 87,883 966.8% 43,183 44,700 3.5% Retail 135,689 - n.m. - - - Insurance 71,369 124,950 75.1% 48,356 76,594 58.4% Other 42,871 22,907 (46.6%) 10,373 12,534 20.8% Non-Interest Income (excl. fx gain) 636,784 782,157 22.8% 365,061 417,096 14.3% Non-Interest Income excl. Retail (Tansaş) 501,095 782,157 56.1% 365,061 417,096 14,3% Fees and Commissions YTL Thousands 33.8% 521,093 697,352 Fees & Commissions Received 5.9% 142,476150,935 Fees & Commissions Paid 44.3% 546,417 378,617 Net Net Fees & Comm. /Avg. Assets 2.31% 2.32% H1 05 H1 06 H1 05 H1 06 11
Effective Cost Management Non-Interest Expenses 1 YTL Million 719 15.4% 830 396 9.8% 52.8% 51.7% 49.2% 54.0% 10.6% 10.0% 10.4% 9.6% 36.6% 38.3% 40.4% 36.4% 434 Y-o-y operating expenses went up by 15.4% due to expanded banking network in this period Opex 1 /Avg. Assets 1 H1 05 H1 06 Q1 06 Q2 06 Personnel Depreciation Other Admin. 4.46% 4.37% 3.16% H1 05 Fees & Comm. /Opex 1 73.5% 52.7% H1 05 50.8% Operating expense over average assets ratio improved by 130 bps y-o-y ending the first half of 2006 at 3.16%. Net fees and commissions cover 73.5% of operating expenses. 1 Adjusted to exclude Retail (Tansaş) in 2005 & H105 12
For further information please contact investorrelations@garanti.com.tr 13