CORPORATE PRESENTATION
AUGUST 2019 AGENDA TURKISH ECONOMY & BANKING SECTOR
TURKISH ECONOMY & BANKING SECTOR
GARANTI BBVA CORPORATE PROFILE & FINANCIAL HIGHLIGHTS
CORPORATE GOVERNANCE & RISK MANAGEMENT
OUR TRANSFORMATION JOURNEY
CORPORATE PRESENTATION 2 AGENDA TURKISH ECONOMY & BANKING SECTOR
TURKISH ECONOMY & BANKING SECTOR
GARANTI BBVA CORPORATE PROFILE & FINANCIAL HIGHLIGHTS
CORPORATE GOVERNANCE & RISK MANAGEMENT
OUR TRANSFORMATION JOURNEY
CORPORATE PRESENTATION 3 TURKISH ECONOMY (I / II)
th 1 GROWTH 17 largest economy in the world 5-yrs avg. GDP growth: 6% vs. EM Europe: 4%1 6.2% 2019 – Further deceleration in economic activity 2.6% • Negative effects of recent financial shocks 0.3% • Rebound expected in the second half 1H18 2018 2019E • Net exports will be the key contributor
INFLATION CBRT FUNDING Improvement in inflation is expected to be COST more visible in the second half 20.3% The CBRT has started the easing cycle with 15.0% 24.0% 19.75% 11.9% 10.0% 12.75% the support of faster than expected recovery in inflation and expected easing in external financial conditions. 2017 2018 2019E 2020YE 2017 2018 Jul-19
E: Garanti Estimates as of August 2019 1 IMF’s World Economic Outlook Report dated December 2018. Ranking as of YE 2018 CORPORATE PRESENTATION 4 TURKISH ECONOMY (II / II)
Fiscal Discipline BUDGET DEFICIT / GDP EU Defined Government Debt Stock: 30.4% as of 4Q18 -1.1% vs. Maastricht criteria: 60% -1.1% -1.0% -1.5% -2.0% -3.0% Resilient central government debt composition • TL: 50.9%, FC: 49.1% (as of July 2019 vs. TL: 42%, FC: 58% in 2002) 2014 2015 2016 2017 2018 2019E • 75.8% fixed, 24.2% floating rate (as of July 2019 vs. 45% fixed, 55% floating in 2002)
CAD / GDP The continuation of the adjustment in economic activity with weaker domestic demand has contributed to a further decline in current 1.1% 2.5% Core -0.2% -1.2% -0.4% account deficit in 2019 CAD /GDP Core current account balance -4.7% -3.7%-3.8% -3.5% -1.4% CAD/GDP -5.5% (excluding energy and gold): US$42.6 bn (12-month sum, as of June 2019) 2014 2015 2016 2017 2018 2019E
E: Garanti Estimates as of August 2019 CORPORATE PRESENTATION 5 TURKISH BANKING SECTOR (I / IV)
StateBanks TOP 10 BANKS 34% Dominated by top 4 Private Banks & 3 State Banks Asset Size Foreign Shareholder Actual Free Float (Consolidated) Other Total Assets TL 646.0bn - - 30% US$737bn TL 524.5bn - 31.05% - 48.4% Top 4 TL 440.3bn Private Banks TL 422.3bn BBVA (49.85%) 50.1% 36% TL 409.0bn UniCredit Group (40.95%) 18.1% Share in Share in Share in TL 393.9bn - 25.2% # of Banks Assets Loans Deposits TL 375.8bn - 49.6% 4 36% 36% 38% Top 4 Private Commercial Banks TL 210.0bn Emirates NBD Bank PJSC (99.85%) 0.15% State Banks 3 34% 36% 36% TL 177.6bn Qatar National Bank (99.88%) 0.12% Other Private Commercial Banks 25 18% 15% 18% TL 103.2bn BNP Paribas (72.5%) - Development & Inv. Banks 13 7% 8% - Participation Banks 6 6% 5% 7% Total: 51
Note: Sector figures are based on bank-only BRSA monthly data as of June 2019. Top 10 banks make up ~80% of sector’s total asset CORPORATE PRESENTATION 6 TURKISH BANKING SECTOR (II / IV)
COMFORTABLE LIQUIDITY STRONG SOLVENCY SOLID ASSET QUALITY
Customer Deposits fund Basel III CAR NPL Ratio 57% of assets 17.3% 4.7% Sufficient buffers against potential CET-I capital: Stage-3 Coverage Ratio: external liquidity shock 76% of total capital 68% Banks’ US$94bn ST external dues1: Quick FC Liquidity2 RWA/Assets ROAE: 11% US$71bn sufficient to cover 79% LEVERAGE: 8.5x (41% of total external debt) any liquidity shock ROAA: 1.2%
Note: Sector figures are based on BRSA monthly data as of June 2019, for commercial banks only 1 Source: CBRT, as of June 2019. Excludes non-residents’ FC deposits CORPORATE PRESENTATION 2 Quick Liquidity Buffers FC reserves Under ROM, swaps, money market placements, CBRT eligible unencumbered securities 7 TURKISH BANKING SECTOR (III / IV)
BANKING SECTOR Y-o-Y LENDING GROWTH TL LENDING GROWTH
TL Loans FC Loans 24.3%
20.1% 8.6% 16.1% 6.5% 11.0%
1.8% 3.0% 2.8% 1.0% 0.9% 6.2% -1.2% 0.1% 3.4% 2.8% -0.2% -0.3% -0.4% -1.2% -3.5% -6.4% -6.9% 1Q19 2Q19 3Q19 (as of Aug 16)
TL Business Consumer Loans Credit Cards
Jul-18 Jul-19
Jan-18 Jan-19
Jun-18 Jun-19
Oct-18
Apr-18 Apr-19
Feb-18 Sep-18 Feb-19
Dec-17 Dec-18
Aug-18
Nov-18
Mar-18 Mar-19
May-18 May-19
Sector data is based on BRSA weekly data, for commercial banks only CORPORATE PRESENTATION 8 TURKISH BANKING SECTOR (IV/ V)
BANKING SECTOR Y-o-Y CUSTOMER DEPOSIT GROWTH CUSTOMER DEPOSIT GROWTH TL Cust. Deposits FC Cust. Deposits (in USD) TL Cust Deposits FC Cust Deposits 16.4% 7.5% 15.3% 13.2% 12.5% 10.6% 12.6% 3.9% 5.5% 1.8% 7.3% 0.4% 0.1% 0.5% 3.7% -0.7% 2.6% 1Q19 2Q19 3Q19 -2.3% (as of Aug 16)
-7.6% TL LDR 145% 143% 134% -10.2%
TOTAL LDR 108% 106% 102%
Jul-18 Jul-19
Jan-18 Jan-19
Jun-18 Jun-19
Oct-18
Apr-18 Apr-19
Feb-18 Sep-18 Feb-19
Dec-17 Dec-18
Aug-18
Nov-18
Mar-18 Mar-19
May-19 May-18
Sector data is based on BRSA weekly data, for commercial banks only CORPORATE PRESENTATION 9 CHALLENGES & OPPORTUNITIES OF TURKISH BANKING SECTOR
UNBANKED POPULATION SHORT-TERM (>40% of adult HIGH population) NATURE OF LIQUIDITY DEPOSITS AND STRONG (~1 month) SOLVENCY
PENETRATION PRIVILEGED RATIOS STATUS OF Cust. Deposits/GDP: 55% YOUNG STATE BANKS vs. 111% in Euro Area SOUND SCARCITY OF in collecting deposits POPULATION ASSET LONG-TERM PENETRATION 55% population STRICTLY TL FUNDING is under age of 35 QUALITY RATIOS REGULATED DUAL CURRENCY Loans/GDP: 58% & HIGHLY BALANCE SHEETS vs. 99% in Euro Areas MONITORED BASEL III & IFRS9 FC EXTERNAL COMPLIANCE FUNDING NO FX OPEN SHARE IN POSITION TOTAL: 20%
Source: Eurostat (Euro Area for 19 countries), ECB, BRSA monthly data and Turkstat CORPORATE PRESENTATION 10 AGENDA TURKISH ECONOMY & BANKING SECTOR
TURKISH ECONOMY & BANKING SECTOR
GARANTI BBVA CORPORATE PROFILE & FINANCIAL HIGHLIGHTS
CORPORATE GOVERNANCE & RISK MANAGEMENT
OUR TRANSFORMATION JOURNEY
CORPORATE PRESENTATION 11 OUR PURPOSE OUR STRATEGIC PRIOTITIES TO BRING THE AGE OF OPPORTUNITY TO EVERYONE
EMPLOYEE EFFICIENCY DIGITALIZATION OUR VALUES HAPPINESS
CUSTOMER OPTIMAL CAPITAL RESPONSIBLE EXPERIENCE UTILIZATION & SUSTAINABLE DEVELOPMENT CUSTOMER COMES WE THINK BIG WE ARE ONE FIRST TEAM
CORPORATE PRESENTATION 12 A UNIVERSAL BANK WITH STRONG PRESENCE IN ALL BUSINESS AREAS
RETAIL Asset Contribution: 5.91%
Asset Contribution: 3.88% PAYMENT CORPORATE SYSTEMS Asset Contribution: 0.44%
Asset Contribution: 1.29%
DIGITAL Asset Contribution: 0.41% COMMERCIAL BANKING Asset Contribution: 0.13% SME Asset Contribution: 0.03%
Note: Asset contributions are calculated based on BRSA Consolidated Financials as of June 30, 2019 CORPORATE PRESENTATION 13 SHAREHOLDING STRUCTURE
Shareholders from 37 countries
Foreign investors in free float
88%
vs. peer avg. of 65%1
Note: Institutional shareholder and foreign individual shareholder composition data based on IPREO Shareholder ID Analysis dated December 2018; the actual free float ratio and the share of local individual shareholders are all based on Central Agency Registry Agency data. CORPORATE PRESENTATION 1 As of 28 August 2019. 14 GARANTI BBVA AT A GLANCE
$73 bn TOTAL ASSETS 2nd largest private bank per consolidated asset size
$6.5bn MARKET CAPITALIZATION* Largest floating Mcap (~$3.2bn) among banks in BIST
9% WEIGHT IN BIST Most invested stock by foreigners
7.7 mn DIGITAL CUSTOMERS 70% digital penetration2
100% GEOGRAPHICAL COVERAGE ~1mn new customers/yr via 926 branches
15% ROAE1 Highest return on capital
Note: Financial figures are per BRSA Consolidated data as of June 2019 * As of August 29, 2019 CORPORATE PRESENTATION 1 Non-recurring items are excluded when annualizing Net Income for the remaining quarters 2 Among active customers, as of June 2019. Active digital customers are defined as at least 1 login within 3 months 15 PERFORMANCE INDICATORS
CORPORATE PRESENTATION 16 GARANTI BBVA’S CONTRIBUTION TO THE BBVA GROUP
While Garanti BBVA has 9% contribution to the Group’s total asset, In Digital Banking, GARANTI BBVA its share in the gross income is 14%. ranks at the top within the group
DIGITAL CUSTOMER PENETRATION South Rest of Rest of 70% Turkey South America Eurasia Eurasia Turkey 9% America Garanti BBVA 56% 8% 3% 2% 14% USA 16% 12% USA 54% 13% Group 48% TOTAL ASSETS GROSS INCOME BREAKDOWN BREAKDOWN Jun.18 Jun.19 Mexico Spain 15% 23% DIGITAL SALES Spain Mexico 61% 67% 53% 32% Garanti BBVA
Group 44% 33%
Jun.18 Jun.19
CORPORATE PRESENTATION 17 STRONG 2Q 2019 RESULTS
Note: Figures are per June 2019 BRSA Consolidated financials CORPORATE PRESENTATION 18 LOAN PORTFOLIO BREAKDOWN
TL PERFORMING LOANS FC PERFORMING LOANS
Business GARANTİ Working Capital & Export loans 51% Other 11% Mortgage 29% 14% TL 146.2bn USD 14.0bn Auto 1% Other PF PF Energy 28% Credit Cards 15% 18% GPL 16% PF Infrastructure Project Finance 18% Loans 61% 22% of TL Business Lending is within the CGF scheme 78% of PF loans have lower currency risk 46% of GPLs are granted to salary customers 91% of infrastructure loans are State-guaranteed FX sensitivity analysis are regularly conducted as part of the Household debt to GDP is 14% vs. emerging proactive staging and provisioning practices 1 economies avg. of 40% Share of renewables in energy loans: 40%
Note: Figures are per June 2019 BRSA Bank-only financials for fair comparison. 1 Source: BIS, as of 2018 YE CORPORATE PRESENTATION 19 PIONEER POSITION
Highest ROAA Highest ROAE Highest Share of Demand Deposits in Total Cumulative, 6M19 Cumulative, 6M19 2.0% 15.2% 28% Peer 1 Peer 1 Peer 1 Peer 2 Peer 2 Peer 2 Peer 3 Peer 3 Peer 3 Second Highest Highest Market Share in Second Highest CET-I Market Share in TL Customer Deposits Consumer Loans 15.6% 13.5% 10.4% Peer 1 Peer 1 Peer 1 Peer 2 Peer 2 Peer 2 Peer 3 Peer 3 Peer 3
Highest Net Fees & Commissions / Second Highest Share in Acquiring Highest NIM incl. Swap Cost IEA & Non-cash Loans Credit Cards Cumulative, 6M19 5.2% 1.6% 18.5% Peer 1 Peer 1 Peer 1 Peer 2 Peer 2 Peer 2 Peer 3 Peer 3 Peer 3
Note: Figures are per June 2019 BRSA Bank-only financials for fair comparison. In the calculation of Return On Average Equity (ROAE) & Return On Average Assets (ROAA), non-recurring items are excluded when annualizing Net Income for the remaining quarters CORPORATE PRESENTATION 20 2019 PROJECTIONS
TL Loans (YoY) ~5%
FC Loans (in US$, yoy) (10%)
NPL ratio <7%
Net Cost of Risk <300 bps
NIM Incl. Swap Cost Excl. CPI Flat
Fee Growth (YoY) Low-teens
OPEX Growth (YoY) < CPI
ROAE Low-teens Mid-term ROAE target remains in high-teens
CORPORATE PRESENTATION 21 AGENDA TURKISH ECONOMY & BANKING SECTOR
TURKISH ECONOMY & BANKING SECTOR
GARANTI BBVA CORPORATE PROFILE & FINANCIAL HIGHLIGHTS
CORPORATE GOVERNANCE & RISK MANAGEMENT
OUR TRANSFORMATION JOURNEY
CORPORATE PRESENTATION 22 BOARD OF DIRECTORS
Experience in Banking and Name and Surname Appointment Date Education Business Administration
Süleyman Sözen Non-executive 29.05.1997 Undergraduate 36 years
Ali Fuat Erbil Executive 02.09.2015 PhD 26 years
Dr. Muammer Cüneyt Sezgin Non-executive 30.06.2004 PhD 30 years
Jaime Saenz de Tejada Pulido Non-executive 02.10.2014 Undergraduate 25 years
Rafael Salinas Martinez de Lecea Non-executive 08.05.2017 Masters 28 years
Javier Bernal Dionis Non-executive 27.07.2015 Masters 28 years
Belkıs Sema Yurdum Non-executive 30.04.2013 Undergraduate 38 years
Sait Ergun Özen Non-executive 14.05.2003 Undergraduate 31 years
Ricardo Gomez Barredo* Non-executive / Independent 08.05.2017 Masters 26 years
Jorge Saenz Azcunaga Carranza* Non-executive / Independent 24.03.2016 Undergraduate 24 years
M. Canan Özsoy Non-executive / Independent 04.04.2019 Masters 31 years
*Since their appointment as an Audit Committee member of Garanti BBBVA, they are deemed as an Independent Board Member in accordance with the relevant regulations of the Capital Markets Board of Turkey. CORPORATE PRESENTATION 23 SENIOR MANAGEMENT
Aydın Güler CFO Aydın Düren Legal Services and Collection Ali Temel Chief Credit Risk Officer Ali Fuat Erbil İlker Kuruöz Engineering and Data Osman Tüzün Human Resources and Support Services Mahmut Akten Retail Banking Strategic Planning Didem Dinçer Başer & Responsible Business Digital Banking, Customer Solutions and Experience Cemal Onaran SME Banking Selahattin Güldü Commercial Banking Ebru Dildar Edin Corporate and Investment Banking
CORPORATE PRESENTATION 24 CORPORATE GOVERNANCE
CORPORATE GOVERNANCE RATING
Outlook: Rating increase was driven by; Positive 9.60 9.51 The adoption of a Risk Based Audit Model, 9.27 9.14 9.20 Successful implementation of new branch model,
Publication of the first integrated annual report. 2014 2015 2016 2017 2018
In 2018, Garanti BBVA achieved compliance with all of the mandatory principles of the Corporate Governance Communiqué No. II-17.1.
Visit Garanti BBVA IR website for the compliance report and more information
CORPORATE PRESENTATION 25 ADVANCED RISK MANAGEMENT SYSTEMS
RETAIL BANKING: CENTRALIZED PROCESS Address Social Identity Fraud Credit Central Registry Security Sharing Check Bureau Bank System Institution System Loan to Value: Consumer Mortgages Max: 80%; Loan Scoring Auto Loans Max: 70% up to TL120K; Application System Credit Decision and 50% for the portion above; HQ Retail Loans Department
WHOLESALE BANKING: DECENTRALIZED PROCESS
Regional 25 regional loan offices Loan Offices Company Weekly Credit Committee meetings Evaluation Credit All credit lines automatically expire one year after approval Report Proposal HQ Loans Department Credit Decision Decentralized credit decision via Regional Loan Offices for fast approval process & local management of smaller exposures
Credit Multi layered committee structure at the HQ to approve & Committees manage larger exposures
CORPORATE PRESENTATION 26 RESPONSIBLE & SUSTAINABLE DEVELOPMENT ACTIONS
• TL35.2bn Impact Investment (to date) • 100% of new PF commitments in • 44 Engagement Platforms Greenfield • Included in 7 Sustainability indices • 32 Sustainable products/credit lines Energy Production Portfolio are Renewables • Founding member of UN Principles for • 28% Market Share in wind power Responsible Banking and local projects • TL 20.2mn investment in community programs Sustainable Finance Declaration • Green Bond (Mortgage program) • EM’s first Social Bond issuance • Turkey’s 1st, World’s 5th Green Corp. LINKED Loan SUSTAINABLE DEVELOPMENT • Turkey’s first Green Project Finance Loan GOALS • SDG Bond Programme launched in 2018
CORPORATE PRESENTATION 27 AGENDA TURKISH ECONOMY & BANKING SECTOR
TURKISHTURKISH ECONOMY ECONOMY& & BANKING BANKING SECTOR SECTOR
GARANTI BBVA CORPORATE PROFILE & FINANCIAL HIGHLIGHTS
CORPORATE GOVERNANCE & RISK MANAGEMENT
OUR TRANSFORMATION JOURNEY
CORPORATE PRESENTATION 28 OUR NEW SERVICE MODEL IS A KEY MILESTONE IN OUR TRANSFORMATION JOURNEY
What we transformed?
WE DEVELOPED A NEW LOBBY SERVICE MODEL & REDESIGNED OUR BRANCH LAYOUT
WE RE-DESIGNED AND DIGITIZED OUR PROCESSES & ENHANCED CUSTOMER JOURNEY
REDEFINED ROLES & EMPOWERED EMPLOYEES
CORPORATE PRESENTATION 29 OUR NEW SERVICE MODEL IS A KEY MILESTONE IN OUR TRANSFORMATION JOURNEY What we achieved?
Financial analysis reporting process Increased Digital, Fast Digital loan approval in 7 mins decreased to 2.5 min from 25 min Efficiency 85% and Lean 55% Processes
«Positive feedbacks from More our customers» Happier Competent Sales capacity increase: +35% Avg. waiting time: ~13 mins Customers Employees Max. waiting time: by 20%
CORPORATE PRESENTATION 30 OUR TRANSFORMATION JOURNEY CONTINUES…
….TO BRING THE AGE OF OPPORTUNUTY TO EVERYONE
CORPORATE PRESENTATION31 APPENDIX – SUSTAINABLE DEVELOPMENT GOALS
CORPORATE PRESENTATION 28 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.
Note: Net Promoter Score research is conducted by independent research agency Ipsos for Garanti Bank. According to the research results, Garanti has the highest Net Promoter Score, among retail customers representing its own profile, compared to peer group. Peer group consists of Garanti Bank, İş Bank, Akbank, Yapı Kredi Bank, QNB Finansbank and Denizbank. Research was conducted between October ’17 and January ‘18. Main bank customers, who have communicated with the banks over the last 3 months, surveyed face to face in the representative cities of Turkey by quota sampling. Score is calculated as a weighted average of retail segments’ scores.
Garanti BBVA Investor Relations www.garantibbvainvestorrelations.com Email: [email protected] Levent Nispetiye Mah. Aytar Cad. No:2 Tel: +90 (212) 318 2352 Beşiktaş 34340 Istanbul – Turkey Fax: +90 (212) 216 5902
CORPORATE PRESENTATION 29