NOT A COINCIDENCE January 2018
ADDING VALUE TO THE ECONOMY AND SOCIETY 2 nd LARGEST PRIVATE BANK by assets of US $96 billion ROAE 17.4% BASEL III CAR 17.1% Robust Balance Sheet > Highly liquid > Low risk -- NPL Ratio: 2.8% > Well-capitalized -- CET-I makes up 88% of total capital Focused on Relationship Banking with Broad Geographical Coverage & Omni-Channel Distribution Network > 948 branches > Leading internet and mobile banking > Largest financial call center > More than 5,000 ATMs > Targeted investments to digital platforms #1 in NIM & Net F&C base * 15.2 MILLION CUSTOMERS ~50% Free Float > The most traded stock of Borsa Istanbul -- Average daily turnover represents 12% of BIST 100 > The share of foreign investors including DR holders in actual free float is ~95% -- Shareholders from around 35 countries Note: Figures are based on BRSA consolidated financials as of September 30, 2017 Mcap, number of branches, ATM and customer numbers are as of January 03, 2018 *Among peers. Peers are defined as Akbank, Isbank, YKB, Vakıf and Halk 2
SUSTAINABLE READY FOR FUTURE EMPOWERING RESPONSIBLE
RESPONSIBLE TOWARDS SOCIETY 4
Real GDP Growth (Rebased) ECOSYSTEM AWARENESS Operating in a Large and Dynamic Economy High and Sustainable Real GDP Growth * 500 450 400 350 300 EU EM Europe LATAM TURKEY Avg. GDP growth >5% over 2006-2016 vs. vs. LATAM: 2.8% EU: 1.2% EM Europe: 3.9% 250 200 150 100 2002 2005 2008 2011 2014 2017 2020 *Source: IMF s World Economic Outlook Report dated October 2017. Ranking as of YE 2016 Country groups are per IMF database. ** Source: EBF Facts&Figures 2015, ranking per total assets. ***BRSA Monthly data as of September 2017. 2022 2 nd largest banking system in Emerging Europe after Russia ** $ 862bn *** vs. 2002-9M17 CAGR: 14% LATAM: 2.3% EU: 1.9% EM Europe: 3.5% RESPONSIBLE 5
ECOSYSTEM AWARENESS Turkey with Young and Growing Population Total Population by Age * Turkey 42.2% 36.6% 21.3% 56% under 35 Russian Federation 27.4% 37.3% 35.3% Poland 26.7% 36.8% 36.5% Hungary 26.1% 36.0% 37.9% Population to reach Czech Republic 25.2% 37.3% 37.5% Europe 26.8% 35.1% 38.1% vs. <25 25-50 >50 negative growth in EU and CEE countries *Source: United Nation, World Population Prospects: The 2017 Revision ** TurkStat, as of December 31, 2016, Address Based Population Registration System (ABPRS) RESPONSIBLE 6
ECOSYSTEM AWARENESS Underpenetrated Market with Strong Growth Potential 93% 103% 108% 98% Attractive Demographics 58% 52% 60% 39% 13% Assets / GDP Customer Deposits / GDP Loans / GDP Turkey - 2002 Turkey - 3Q17 Euro Area - 3Q17 Underpenetrated Market Source: ECB, TurkStat, BRSA for commercial banks, as of 3Q17 RESPONSIBLE 7
ECOSYSTEM AWARENESS Highly Liquid Banking Sector Deposit-heavy funding structure Deposits fund 56% of assets 1 Comfortable level of Loans/Deposits at 116% 1 Comfortable liquidity levels Liquidity Adequacy Ratios 2 well-above required levels FC Liquidity Coverage Ratio: 208% (Legal limit 60% for 2017) Total Liquidity Coverage Ratio: 124% (Legal limit 80% for 2017) RESPONSIBLE 1 BRSA monthly data as of September 2017 2 Top 4 private banks average of 3Q17, based on BRSA bank-only financials 8
ECOSYSTEM AWARENESS Well-Capitalized and Underleveraged CAR * (2Q17) 19.8% 18.0% 17.3% 16.5% 15.6% 13.4% > Basel III CAR ** : 17.2% (Sep 17) > CET-I capital ** : 84% of total capital > RWA/Assets ** : 77% vs. 82% 2016YE Eurozone Poland Brazil South Africa Turkey Russia Leverage * (2Q17) 8.3x 8.3x 8.9x 9.2x 10.4x Russia Turkey Poland Brazil South Africa 11.8x Eurozone > ROAEs ** : 15.3% with low leverage * Source: Latest data from the IMF-FSI database. Most of figures are based on 2Q17 figures ** BRSA monthly data as of September 2017 RESPONSIBLE 9
ECOSYSTEM AWARENESS Standing out in its Asset Quality Non-performing loans/total gross loans 1 > No exposure to any toxic assets or problematic sovereign assets > Advanced risk management systems > Established & prudent underwriting procedures 1 Source: Latest data from the IMF-FSI database. Most figures are based on 2Q17 figures 2 BRSA monthly data as of September 2017 for the sector 3 Includes specific and general provisions. TBA data for the commercial banks as of September 2017 RESPONSIBLE 10
ECOSYSTEM AWARENESS How We Address Challenges for Financial Health Savings Test Accumulating Gold Account Spend & Save Account Savings Account for Future Pension Funds RESPONSIBLE 11
EMPOWERING IN ALL POSSIBLE DIMENSIONS
SINGLE POINT OF CONTACT FOR ALL FINANCIAL NEEDS Commercial Consumer Payment Systems Asset Contribution: 5.39% Asset Contribution: 2.87% Asset Contribution: 0.61% Corporate Digital Banking Asset Contribution: 0.77% Asset Contribution: 1.57% SME Asset Contribution: 0.02% Asset Contribution: 0.06% Note: Asset contributions are calculated based on BRSA Consolidated Financials as of September 30, 2017 EMPOWERING 13
ACTIVE LISTENING & DEVELOPING ACCORDINGLY Customer Centricity Index Market Research Investor Perception Study To Sustain High Quality & Corporate Governance Employee Idea Platforms Social Platforms EMPOWERING 14
2018 2002 INVESTMENTS IN DELIVERY CHANNELS Welcoming ~160k customers per day 100% Geographical Coverage Since Nov 13 vs. 49% in 2002 Number of Branches & Customers # of Branches # of Customers 11.8 mn 13.1 mn 15.2 mn 6.2 mn 936 1,005 948 3.7 mn 331 487 2002 2006 2012 2014 Jan.18 EMPOWERING 15
2b INVESTMENTS IN DIGITAL CHANNELS Omni-channel convenience 4,939 ATMs Cash deposits/withdrawals:110% Serving non-bank customers through cardless transactions 34 sec. avg. response time (sector 72sec) Centralized branch calls 32 product offerings 20% of total credit card sales ATMs >500 types of transactions 28% of non-cash financial transactions carried via internet banking Call Center Internet Banking Providing seamless experience across all channels Social Media Mobile Banking 55% of non-cash financial transactions via mobile banking 4.9 mn active mobile users 3.6 mn mobile-only customers ** Mobile banking app named as Best in class in Europe * in Forrester s Global Mobile Banking Functionality Benchmark Study 5 mn followers: Europe s Most Followed Financial Institution Present on 17 Social Platforms with 55 acct. Garanti Link: connecting customer ID with social ID, offering customer-tailored campaigns - First in Europe Garanti yesor (Ask Garanti): 24/7 customer care on social media. Response Time: max 2h Consumer Loan application & result w/o leaving Facebook Note: active customers defined as minimum one log-in in the last three months * In Marketing and Sales, and Cross Channels categories. ** Have only used mobile banking in the last month 16
2c INVESTMENTS IN DIGITAL CHANNELS Leading position & effective utilization Managing the largest customer base in Turkey 2.3 million logins/day Utilizing digital channels effectively 28.0% Online 55.4% Mobile 5.8 million active digital customers 4.9 million active mobile customers 95% of all non-cash financial transactions go through digital channels: 10.6% ATM with increasing weight in mobile Mobile transactions: 70mn in 2015 > 114mn in 2016 19% YoY 40% YoY 0.1% Call Center Tax Payments Bill Payments Credit Card Transactions 44% 26% 24% Tax Payments 23% market share in retail internet & mobile banking financial transactions volume > Online Banking financial transactions market shares: > Mobile Banking financial transactions market shares: Bill Payments Credit Card Transactions 63% 26% 29% Note: Market share info is calculated based on the figures provided by «The Banks Association of Turkey» for period Q3 17
2d INVESTMENTS IN DIGITAL CHANNELS Innovative products and services Empowering Customers Login via Eye Scanning A new way to log in to Garanti Mobile. Quick, easy and secure >451k unique customers logged in MIA Mobile Interactive Assistant Virtual voice assistant enables performing banking transactions by voice >1.5 mn unique customers New Paragaranti.com > Turkey s first one-step investment platform (2002) > Access to local and global market data > House view reports and video commentaries of Garanti experts Loan Application with Video Call A first in Turkey - meet face-to-face with loan consultants via Garanti Mobile. So far, loan disbursement reached $8.6 million in 2017 > GarantiOne > Turkey s first youth mobile banking application for people aged between 18 and 25. > Helps managing financial status and budget planning > Offers special campaigns personalized for users life styles Digital Gifting Mobile Appointment New appointment system routes customers to ATMs & digital channels - decrease branch density - gives appointments/suggests alternative branches - get digital ticket for the appointment Services available on Digital Enables users to send P2P digital gifts such as digital subscriptions, gaming credits, coffees Advantageous Casco: Product specifically designed for digital banking > Share of digital increased from 2% to 51% Overdraft Account now on digital > Share of digital has become 42% Money in Installment and Skip/Split transactions now on mobile > 24% increase in transaction volume in 5 months Travel health Insurance now on mobile > Share of digital is 54% Money withdrawal with QR, w/o even having to login > US$38 mn volume/month 18
INVESTMENTS IN DIGITAL CHANNELS Feeding the sustainable and profitable growth model Increasing customer satisfaction & loyalty Branches with >65% digital penetration have >40% higher operational service quality & efficiency Higher cross-sell Product penetration of digital customers is 65% higher than average customers Sustained Growth Branches increased focus on: - Building relationships - Providing advisory - Generating sales - Acquiring new customers Value Creation through Digitalization Growing fee base Digital channels share in non-credit linked fees: 40% vs. 34% in 2016 Higher Profitability Profitability of a digital customer is twice that of a non-digital customer Lower transaction costs Transaction costs at Online banking is 30x and Mobile banking is 55x lower than branch banking EMPOWERING 19
CULTURE OF PARTICIPATION & SHARING IN DECISION MAKING A single source of data & common understanding > Single data dictionary > Standardized management reports > Consolidated data into MR platform Performance Management Management Information at all levels for performance monitoring > Bank level > Business line level > Region level > Branch level > Sales person level > Customer level Successful Decision Making Platform for management and legal reporting > Transparency > Accountability > Governance EMPOWERING 20
SUSTAINABLE FOR A BETTER LIFE
SUSTAINABILITY STRATEGY Our strategic priorities Strengthen the financial capacity of Turkish women by providing them financial education and access to our products and services Support financial planning and health of our retail clients Corporate Clients Advise our corporate clients to help them make their businesses more sustainable Extend E&S risk framework and management systems across the bank, local and international subsidiaries Performance Management Develop innovative sustainable financial products linked to material issues for society and Garanti Retail Clients Impact Business Financial Systems Communities Individuals Stakeholders Develop and implement a financial education program Engage with stakeholders and build partnership Support philanthropic programs with a focus on material issues for society HR: Enhance employees knowledge and life style Environmental Footprint: Enhance operational efficiency Governance: Enhance integration of sustainability within the Bank SUSTAINABLE 22
SUSTAINABILITY STRATEGY Sustainable Finance Transition to Low-Carbon Economy Supporting SMEs and Entrepreneurship Rolled out its Green Mortgage product to promote energy efficiency in buildings in 2017 32% share in Turkey s installed operational wind power capacity Launched GarantiPartners to promote and support entrepreneurs Total amount of loans disbursed to women entrepreneurs to date: nearing USD 1 billion Loans provided to renewable energy exceeded USD 4.8 billion Became the main sponsor of CDP Turkey to raise awareness of climate change & water risks among private sector Published Climate Change Action Plan in 2015 Women Entrepreneurs Executive School: 338 certificates in 4 provinces in 2016 Financial Inclusion & Health Reached out to 2.931 women through its financial literacy program Applied a shadow carbon price for PF loans 58% of its ATMs and 16% of its branches are disabledfriendly Launched Agricultural Irrigation Systems Loan to promote efficient irrigation systems in 2015 Cardless bill payment and cardless money transfer options provided by the ATMs for unbanked and underbanked population
SUSTAINABILITY STRATEGY Key Achievements Initiatives* Recognitions Environmental Impact of Operations 971 service points covering 100% of employees certified to ISO 14001 Obtained limited assurance for its community investments, materiality analysis, Scope 3 GHG emissions due to business flights and sustainability governance for the first time for GRI G4 Comprehensive Sustainability Reporting, in addition to Scope 1 and Scope 2 GHG emissions, water consumption, energy consumption, renewable energy portfolio and ESIAP The only financial institution worldwide to qualify for CDP 2017 Water A List Listed in the CDP Climate Change A List in 2016 and 2015 Reduced its total Scope 1 and Scope 2 GHG emissions per total assets by 56% in 2016 compared to 2012, the launch year of Environmental Management System Pioneering Sustainability The only company in Turkey to qualify for Dow Jones Sustainability Index for the third time in a row First bank in Turkey to sign Caring for Climate Initiative (C4C) and UNGC s Leadership Criteria on Carbon Pricing Presented as a case study by the Carbon Pricing Leadership Coalition (CPLC) First and only company in Turkey to be included in the Bloomberg Financial Services Gender Equality Index Successfully qualified for the fourth year in a row for the Borsa Istanbul (BIST) Sustainability Index. Listed in FTSE4GOOD Emerging Index in its first year Vice Chair of Global Compact Türkiye and Business Council for Sustainable Development Turkey Sustainability Index *23 memberships & initiatives
INNOVATIVE BUSINESS MODEL Process Technology People SUSTAINABLE 25
THE MOST VALUABLE ASSET: HUMAN CAPITAL Investing in people Training hours per employee: 36 hrs per annum > 542K classroom training sessions > 113K hours of digital training International quality standards > IIP Gold certificate 2015 Performance Based Incentive > 1st company from Turkey to earn Gold Certificate from Investors in People for the second time. Measured by customer satisfaction, service quality, efficiency and profitability I SUSTAINABLE 26
PIONEER WITH ITS TECHNOLOGY SUPPORTED OFFERINGS IT Vision Investing in Technology Full In-House Development Custom-Fit Solutions Driver (Integral Part of Management) SUSTAINABLE 27
PIONEER WITH ITS TECHNOLOGY SUPPORTED OFFERINGS 5-Minute Loan FAST > 1 st private bank to launch SME support package (1996) > Started to offer «firsts» in cash management solutions (1997) > 1 st chip-based installment credit card loyalty program in Turkey - Bonus Card (2000) > Turkey s 1 st cardless transactions via ATMs (2005) > Cep-T paracard: Turkey s 1 st prepaid card enabling SIM based secure service (2011) > World s 1 st banking application for Windows 8 (2012) > Broke new ground in Turkey by offering banking service via WhatsApp by providing Branch/Paramatik ATM addresses and real-time market data (2015) > ipad Banking Application enabled Customer Relationship Managers in branches to offer service to customers from outside the branches as well First among large-scale banks in Turkey (2015) > GarantiOne: Turkey s first youth mobile banking application for people aged between 18 and 25. (2016) INNOVATIVE Introducing Many Firsts SUSTAINABLE 28
PIONEER WITH ITS TECHNOLOGY SUPPORTED OFFERINGS > 1 st bank in Turkey to create paperless banking operating environment and 1 st bank in the world with ID scanning facilities in branches (2006). > Digital Banking: 95% of the non-cash transactions are carried out via digital channels Advanced CRM > Segmentation: Propensity Modelling > Personalized Product Offers SUSTAINABLE 29
LESS IS MORE Smarter Touch-Points for All > 1 st Bank to set up centralized operations in Turkey > 99% Operational Centralization Ratio > Electronic Data Warehousing SUSTAINABLE 30
MANAGING WHAT WE MEASURE What to Measure Risk-Return Balance WE KNOW... Why to Measure How to Measure Customer Satisfaction Key Performance Indicators SUSTAINABLE 31
OUR JOURNEY TO SUCCESS Strong Market Position Market Share and Rankings (2000-9M17) 9M17 2006 2000 Assets Loans Consumer Loans (inc. CCs) Consumer Mortgage # POS Customer Deposits Customer Demand Deposits Net F&C Ordinary Banking Income #1 14.1% 13.2% 18.6% 13.5% 14.2% #2 11.4% 11.2% 11.2% 13.3% #3 10.7% 13.2% 15.3% 12.2% 15.6% 12.1% 14.9% 6.4% 11.4% #4 6.6% 12.7% 9.8% #5 8.5% 4.4% PROFITABLE SUSTAINABLE EFFICIENT Highest NIM & Fee Highest ROAE despite the lowest leverage among private peers 1 Best-in-class solvency High liquidity +5pp YoY improvement in Cost/Income ratio Rankings among private commercial banks. Market shares are calculated per BRSA weekly commercial banks data. Market shares of Assets, Net F&C and Ordinary Banking Income are per BRSA monthly commercial banks data. 1 Peers defined as Akbank, Isbank and YKB per bank-only financials SUSTAINABLE 32
READY FOR FUTURE
THANK YOU 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. Garanti Bank Headquarters Address: Levent Nispetiye Mah. Aytar Cad. No:2 Besiktas 34340 Istanbul Turkey www.garantiinvestorrelations.com /garantibankasi Email: investorrelations@garanti.com.tr Tel: +90 (212) 318 2352 Fax: +90 (212) 216 5902