Turkiye Garanti Bankasi A.S.

Hello everyone, and thank you for joining us. We are excited to be with you on another earnings call.

Before getting into our financial performance details, let's as usual, go over the broader macroeconomic environment. Turkish economy grew by 1% Q-on-Q in the third quarter and for the fourth quarter, we now cast a slightly positive quarterly growth.

Therefore, parallel to our previous expectations, we maintain our GDP forecasts as 3.7% in '25 and 4% in '26, consistent with the still-resilient activity outlook. In terms of inflation and monetary policy, seasonally adjusted inflation improved into year-end, however, January CPI figure reinforces our view that the pace of monetary easing will become increasingly data-dependent and points to a slower pace of rate cuts compared to consensus.

In this regard, we maintain our call of 25% inflation and 32% policy rate for 2026-year-end. In terms of current account deficit, it remains broadly manageable, although the trend has deteriorated, reflecting domestic demand dynamics and the gold channel.

We expect the current account deficit to GDP to be around 1.5-2% range. The outlook remains sensitive to the Eurozone growth and Brent oil dynamics.

In terms of budget deficit, we expect budget deficit to GDP to remain around 3.5%. led by tighter expenditures control and strong revenue generation.

Now moving into our financials, I'll start with the headline figures. In '25 once again, we delivered a strong track record of achieving results in line with with our commitments.

Our key P&L metrics came in fully consistent with our guidance, and cumulative net income reached TRY 111 billion, corresponding to 21% year-on-year growth and a 29% return on equity. In the fourth quarter, our bottom line was impacted by tax-regulation-related effects.

Excluding this one-off impact, our ROE would have been around 30%, which was fully in line with our guidance. Despite operating with the lowest ratio, we continued to deliver an ROE above the sector average.

As always, we maintained our focus on capital-generative growth, which is clearly reflected in our sector-leading CET1, Common Equity Tier 1 ratio. This earnings outperformance was once again driven by core banking revenues-and with that, let me move on to page 7.

We have now delivered growth in core banking revenues for eight consecutive quarters. In the fourth quarter, core banking revenues grew by 11% Q-on-Q, driven mainly by higher net interest income, which was supported by a declining funding cost environment.

Trading income declined Q-on-Q during the quarter, we repositioned our TL securities portfolio and we reduced our exposure to securities with relatively lower yields. Net fees also remained resilient, registered 5% quarterly growth with the increasing contribution from money transfer and lending-related fees.

As a result, our core banking revenues reached TRY 300 billion, which suggests the highest level among peers. A big part of this success stems from our asset mix-now moving into Slide 8.

Our asset growth continued to be fueled by higher-yielding customer driven sources namely loans. Performing loans share in assets further increased to 58% and lending growth was across the board.

I will touch upon this on the next slide. In securities, I would like to highlight that we had a favorable securities mix with lower CPI and increase foreign currency share.

During the year, we had strategic additions to foreign currency and TL fixed rate securities. Moving into Slide 9 our TL loan portfolio reached TRY 1.7 trillion, while we continued to maintain a well-balanced mix between consumer and business banking loans.

In the fourth quarter, we sustained our quarterly growth pace of 10% in TL loans, bringing full-year growth to 45%, which is above our operating plan guidance. Throughout the year, we further strengthened our long-standing leadership in TL loans, with market share gains across all retail products and SME loans.

As we grow, we remain highly disciplined and continue to keep a close focus on asset quality and with that, let's look at the evolution of our asset quality. In the third quarter, consumer and credit card related flow to Stage-2 restructured and SICR portfolio continued, yet the share of Stage-2 within gross loan remained flat at around 10%.

Our Stage-2 coverage ratio declined due to improved repayment performance of some individual-assessed firms. While our stage-2 loans coverage is now 9%, if we look at the TL and foreign currency breakdown, our foreign currency Stage-2 loans coverage remains healthy at 16%.

In terms of NPL movements, Now, let's walk through the evolution of our NPLs; our NPL ratio increased modestly to 3.1% in line with expectations, and we are witnessing the natural consequence of robust consumer and credit card growth that sector registered in the last couple years. Retail and credit card portfolio still accounted for 70% of net NPL flows.

If we move on to the net cost of risk, on page 12. Net provisions increased in 4Q, reflecting the absence of the exceptional provision reversals recorded in previous quarters.

On a cumulative basis, cost of risk closed the year better than the guidance with the impact of large-ticket provision reversals, which are not expected to repeat in this year, as I will explain in more detail on the guidance slide. Now moving to the other side of the balance sheet, how we are funding the balance sheet growth?

Not only in assets but also in funding, we rely on customer-driven sources. Total customer deposits exceeded TRY 3 trillion and now make up 69% of total assets and remain TL heavy.

This quarter, in TL deposits, we gained a notable market share and our TL deposit market share increased to 21% among private peers. On foreign currency side, deposits increased by 4%.

Half of that growth was due to gold price increase related parity impact. The rest can be explained by the flow from maturing KKM deposits.

Growing demand deposit base, which is one of the key pillar of our margin performance, continued to support deposit growth. Demand deposits currently make up 41% of total deposits.

Our diversified and liquid funding mix is also backbone of our success. With two new transactions successfully completed in 2025, total volume of subordinated bond issuances over the past two years reached $2.45 billion, making us the bank with the largest subordinated bond issuance in the recent years.

We achieved another major milestone by issuing Turkiye's first Biodiversity and Blue-Themed Bond. We also secured a syndicated loan from international markets with diversified maturities.

This year, we introduced a 3-year tranche for the first time, and a 2-year tranche for the first time since 2017. Putting all of this together, our total external debt currently stands at $9.8 billion, of which $3.5 billion is short term.

Against this, we maintain a comfortable and strong foreign-currency liquidity buffer of $7.1 billion. Our active funding management is also visible in net interest income, on page 15, in the fourth quarter, our net interest margin recovered by 60bps with the support of declining deposit costs.

On an annual basis, net interest income including swap cost doubled which points to 1.2% annual margin expansion. Our net interest margin reached 5.4%, we continue to have by far the highest net interest margin and net interest income level among major peers and our aim is to preserve this leading position.

If we look at the margin component, as shown on bottom-right side of the slide, TL core spread has started to recover as of 4Q, and we expect this recovery to continue throughout 2026. We utilized more swaps in 4Q due to its funding cost advantage relative to TL deposit costs.

In terms of CPI linkers' income, CPI rate used in the valuation increased to 32.9%, based on actual inflation data. Therefore, on a quarterly basis, we had positive contribution from CPI linkers' income.

However when looking at CPI interest, we should also take into account its funding cost and as of this quarter we have started to share with you the net contribution of CPI Linkers' to net interest margin. In the fourth quarter CPI Linkers' negative contribution is compared to 3Q due to increased income on an annual basis CPI increased net impact to margin was -0.4%.

Let's move on the other P&L item fees. Our fee base remains robust, up 50% year-over-year.

On an annual basis, payment systems fees were the main driver of the growth. In the fourth quarter, contribution from lending related fees and money transfer fees gained momentum.

I would like to highlight that, we are number one in money transfer fees and in both life and non-life insurance fees. We increased our mutual fund market share by 1.3% to 11.6%, which also provided additional support to our fee base.

Moving to our operating expenses, our OpExbase grew in line with our operating plan and was up by 67% in 2025. As we have been communicating, we have been investing in customer acquisition through salary promotions.

And to enhance customer experience and increase customer penetration, we have been leveraging the power of artificial supports our revenue generation capability. As a result, significant portion of operating expense base is covered by fee income and we have the lowest cost/income ratio.

As per our capital strength, In the fourth quarter, our solvency ratios improved with support from strong profitability and Tier-2 issuance we had in October. Our consolidated CET1 realized at 13.1%.

Capital adequacy ratio reached 17.5% without BRSA forbearance. The foreign currency sensitivity on capital remains limited, 13bps negative for every 10% depreciation.

With TRY 179 billion TL excess capital, we maintain a solid buffer to support our long-term growth strategy. With that, let me now summarize our performance before moving into operating plan.

As I mentioned in '25, we sustained our unmatched leadership in earnings generation capability and once again demonstrated a strong track record of achieving results in line with our commitments. Net interest margin performance and cost growth were broadly in line with our operating plan, while fee growth clearly stood out, driven by strong momentum in payment systems and lending-related fees.

In fact, in TL loans, our growth outpaced inflation, supported by consumer, credit cards, and SME loans. Net cost of risk performed well better than expectations, benefiting from provision reversals recorded during the year.

Now, let me walk you through our operating plan guidance. I will begin with the macro assumptions on the left, as these form the foundation of our planning framework.

Our baseline assumes a gradual easing cycle in the policy rate. The pace of monetary easing will become increasingly data-dependent and points to a slower pace of rate cuts in the second half of the year.

Inflation will continue to decelerate, closing the year at around 25%. However, given the stickiness in services inflation, we believe CBRT will maintain a sufficiently tight stance, implying ex-post real policy rate of around 6-7 percentage points.

Turning to balance sheet growth on the right-hand side, we expect TL loan growth to be in the range of 30-35% foreign currency loan growth at mid-single digit levels. Net cost of risk is expected to normalize, settling in the 2 to 2.5 percent range, reflecting the absence of large-ticket provision reversals and the natural impact of strong growth in consumer and credit cards.

Regarding margins, we project net interest margin expansion of around 75 basis points, on top of its highest level. I would like to highlight that the extent of this improvement will largely depend on the pace of rate cuts and the evolution of macro-prudential measures.

As I mentioned earlier, our assumption of 32% year-end policy rate represents the upper end of market expectations. We deliberately adopted a conservative approach during the budgeting process in order to prepare the balance sheet for funding costs remaining above the policy rate, particularly on the deposit side.

On fees, we expect growth of 30-35%, as a result of strategic investments, we expect OpEx growth to exceed average inflation. And that said, on a bank-only basis, we expect approximately 80-85% of the OpEx base to be covered by fee income.

Finally, bringing all these elements together, we are targeting mid-single digit positive real ROE. Since 2018, real ROE has remained negative; however, in '26, we expect this to turn positive, supported by declining policy rates.

This concludes my presentation. Thank you for your listening.

Now, we can take your questions.

The first question is on costs. Your cost growth has been running above the sector for some time, yet your revenue margins have also been higher.

So this hasn't weighed on your relative profitability. But for this year, guidance again suggests cost growth at the higher end of the sector.

So could you elaborate on the key cost drivers for this year? Should we view this as front-loaded investment ahead of what will hopefully be a lower inflation environment?

Or are these increases more structural? And looking ahead, should we expect Garanti's cost growth to move closer to or maybe potentially below the sector levels in the future years?

The second question is on fees. Your fee growth guidance appears broadly in line with the volume growth expectations.

Could you elaborate on your guidance here? I assume we'll see a meaningful deceleration in payment-related fees.

And in which segments do you expect to see stronger growth this year? And is there a meaningful seasonality that we should be aware of in terms of fees?

And the last question is on margins. Your year-end policy rate expectations of 32% seems slightly above the market review.

How would your NIM expectations change if the policy rates were closer to 30% instead? And could you also share your expectations regarding the deposit rates under your base scenario?

Do you assume deposit beta to improve at some point this year?

David, thank you for all the good questions. First of all, on the cost growth, as you noticed, yes, we have a higher than inflation cost growth for basically several reasons, but primarily one on non-HR, one on HR.

In Turkey, for a while now, most banks and institutions makes 2 salary increases every year. And then therefore, second increase, which is July to December, is not fully reflected in the prior year.

So when you make the increase in January, you also have further increase from the base. So there is a bit of higher than inflation increase in the cost base.

But as inflation comes down, the impact of that increase in the second half of the year will be lower, as you can imagine. That's number one.

But more important increase actually is related to non-HR. And within non-HR, we internally, we look at this differently, especially customer acquisition cost is a different animal.

It's an investment for the future. And in Turkey, especially payroll or pension, we pay promotion as you are aware of, and that's every 3 years.

So you get 3 years of inflation within those numbers as you replace 1/3 or slightly more than that of your acquisition cost suddenly with 3 years inflation. So those numbers are a bit investment for the future.

We expect as we go forward as inflation comes down, and this will affect also this payroll acquisition cost as well that 3 years inflation will come down. The impact to the extent is reflected on cost-to-income ratio.

But we expect that cost-to-income ratio slow down or reduce down to 40% going forward. That's our expectation.

And we have been highly investing in the AI within the BBA framework, and we start to see impact in efficiency, as you will see in the coming year. That's number one.

Number two, fee growth. Again, as you clearly and correctly point out, as interest rate and inflation comes down, some of the payment commissions will come down properly.

But we are actually offsetting that with both loan commissions, a bit of regulation also positive effect on the FX loans. So that has happened last week.

But more importantly, we have investment in especially insurance type of commission-generating products and wealth management. We are expecting that to be offsetting the decrease in payment commission.

So we expect a similar pattern in terms of ratio going forward as well. That will be the positive side.

And the third on deposit rates. Again, I think if you look at the third quarter and fourth quarter, even though the policy rate significantly reduced, we didn't -- we were not able to reflect all of it to the deposit cost up until very recently.

That's part of it, a tight monetary policy and data-driven Central Bank policy, which came with certain regulatory measures on the banks and one of which that is very important and relevant was related to deposit rate. We had 4 weeks windows to have a certain Turkish lira total deposit ratio, and that has been recently extended to 8 weeks.

That has been a big plus because every 4 weeks trying to hit the ratio, it creates this synthetic competition. And despite policy rate reduction, we are not able to reflect 100% of that reduction in deposit funding.

But a few weeks ago, that time break has been extended from 4 weeks to 8 weeks. That has been clearly a positive news.

And then also the -- we had some level of challenge with the gold prices, especially after, I think, starting October, right? As gold increases, the total Turkish lira deposit ratio came down.

That also put certain pressure on deposit ratios or deposit rates. But we start to see with this 8 weeks interval and a bit of stability now this week on the gold prices, we see that more stability and better correction in the deposit ratios and deposit interest rate.

It's getting very close to overnight repo rate, which is a good news for us. So we expect further improvement in deposit rates going forward in the next months.

I have a few questions. The first one being on your NIM dynamics.

You expect 75 basis points of expansion. Would you mind breaking that up between the impact from lower CPI and the impact on core spreads?

And in relation to the topic on NIMs, when do you expect to see NIMs peak? Would that be in the second half of the year?

My second question would be on the dollar exposures across your balance sheet. From what I can see, your loans are around 25% to 27% in terms of U.S.

foreign currency exposure, your deposits a bit higher in terms of 37%. Would you mind also telling me how much of your equity is also held in dollars or in foreign currency terms?

The third question I had was around the ROE. It's good that you're guiding for real ROEs to be in the mid-single digits.

My question here would be more on your expectations on your long term. Where do you think this real ROE figure would settle in an environment where there's inflation settling below or at 20% or below.

And in that scenario, where do you think currency's NIMs would be at and also its normalized level of ROE?

Okay. Let's try to answer all the questions.

One of them was related to 75 bps improvement, if I took my notes right. We see a further improvement in loan-to-deposit margin, 150 bps actually, but reverse repo and swap is additional 0.7%.

However, CPI income this year will be with the inflation coming down, minus 60 bps and the reserve remuneration will be another minus 70 bps as well. That's the reason we are conservatively forecasting 75 bps improvement.

And regarding the improvement in NIM and spread, we expect towards the end of second quarter, we'll probably see the highest level this year as well as we start to see a slowdown in the policy rate reduction starting third quarter, and we'll see further emergence between the reduction in loans as well as spreads. There was a second question about equity.

Can you?

Yes, we will get back to you regarding the second question.

On the dollarization. Okay.

And the third question was related to ROE, right? Atil, would you like to take that?

Yes. In terms of return on equity, our guidance for 2026 is a real return on equity improvement.

Over the long term, when we assume that it was your question, normalized ROE over long term, when we assume that inflation will limit teens, like, I mean, 15% to 20% level. We expect a return on equity -- real return on equity above inflation around 8% to 10% could be our sustained long-term return on equity.

And I think there was a question also -- a follow-up question on the -- what's a stable NIM for long term. We expect that to be around 500 bps as well.

We have been always relatively high. But conservatively, we think something around 500 bps will be a relatively good margin as we increase our customer base and loan book.

Does that answer your question?

But just wanted to clarify regarding the numbers in terms of expansions. You said 150 basis points in terms of core spreads, 60 negative from the CPI, 60 from the reserve requirements.

What was the other 70 you mentioned?

The rest was the -- between the repo and swap funding costs. So the other funding instruments.

That's also positive.

Yes, because swap costs will also come down in line with the declining funding costs. So therefore, we are projecting to get a positive from swaps and repos.

And we are already seeing it actually in the swap markets...

Valentina, we are seeing actually with this 4 weeks to 8 weeks conversion, we start to see a positive improvement in cost of deposits actually despite some volatility in the MTR market. So we might be even a bit conservative in first quarter, but we'll see an improvement to almost 50 bps in the first quarter, let alone.

So it's a positive improvement, and we start to see it this week further. To be honest, there is a certain level of regulation that has been published last week related, for instance, growth in overdraft, which is highly profitable product as well as credit card.

But not everything has been applied so far yet. This might be a bit more limitation on credit growth, especially on the most profitable one on the consumer side.

And then there has been a bit of limitations on FX loans as well, further restriction given the higher inflation. As we point out all of this guidance, Ceyda, especially underlying is everything is data-driven a bit.

That's the reason on our guidance, as usual, we are a bit conservative, at least whatever we say we want to deliver at minimum that level. But we see limited downside, but regulatory framework might be always a bit challenging.

And then we forecasted even last year in our forecast, we have been a bit above the market in terms of our inflation expectation and policy rate expectation being year-end 25% and 32%. I think we have been the highest in terms of inflation and interest rate perspective.

We are more emerging to those numbers. It sounds like based on the January and February data.

At least for now, we don't see those are at risk because higher policy rate would definitely challenge us as well in terms of our expectation, but we are not at that point at the moment.

A perfect question. SME and?

Now in reality, 60%, 70% of our NPL is related to consumer retail segment. There, we are -- we continue to see improvement.

On consumer, we see substantial improvement versus a year ago, close to -- in terms of NPL roll rates, more than 40% improvement as well as we see further improvement in credit card, which is the highest NPL product normally. We also see an improvement of 20%, 25%.

We see a good January start. And then when it comes to wholesale and SME, wholesale, we had an exceptional year last year.

We had a lot of provision release because of the asset sales and collection efforts. This year, we have a bit of -- a bit more of those, but not at the same size.

But regular NPL flow in January has been half of what we have seen in terms of NPL inflow of last year. On SME, SME, I think in one of these calls, we have discussed this in the past as well, has been only 13%, 14% of our NPL roles.

It has been more like 16%, 17% lately. But when we look at the January as well, our NPL roll rate in SME has been 20% less than the last year.

So there is an improvement. And then the recent development regarding to credit guaranteed fund support by the government will be helping on the SME segment specifically for those who are late in their payments will benefit from this credit guaranteed fund.

So that will also further help our numbers. And in the third and fourth quarter numbers related to retail, I just want to underline that.

Lately, we see a further regulation that helps us to extend the terms for the delayed consumer customers as well. In the third quarter, we restructured quite a bit of them.

And then this reason our fourth quarter provision is higher than the third quarter because for those customers who were going to the NPL, we have deferred and restructured and some of them still went into the NPL. But lately, with the regulation last week and then similar to credit guaranteed fund in the retail side, -- the government also -- regulator also permitted us to restructure late credit and credit card and GPL loans for up to 48 months.

So it's going to help further to reduce overall provision and NPL flow. And there might be, to an extent, a shift between first quarter and second quarter as well, but overall will help to relieve this.

But overall asset quality is getting better, and we have regulator support and government support on both SME and retail customers.

Sorry I have one follow-up. Just wanted to confirm one technical point.

Is your mid-single-digit positive real return on equity guidance based on your year-end CPI expectation of 25% or on your average CPI assumption, which I guess is a few percentage point higher.

Based on 25%...

Can you hear me now?

Apologies for last time. I just have one clarification and follow-up questions that was asked before.

Possibly, I may have missed that when you answered that. But what will be the potential NIM upside should interest rates go further down to, let's say, 28%, not 32% as you guided because that's some market expectation that rates could go down as slow in Turkey this year.

How should we think about the NIM upside in that scenario? Thank you for confirming that...

Yes. Every 100 bps change in policy rate has -- for the full year, it affects the NIM by 15 bps.

I think I put these questions through the chat as well. But yes, my first one is on risk costs.

So you're guiding for higher risk costs this year. Can you just run us through the key drivers of that?

And where do you think risk cost normalizes kind of longer term? And my second question would just be on the effective tax rate.

What should we pencil into our numbers this year and next year given the big jump in the fourth quarter and recent regulatory changes there?

Yes. Regarding first question, actually, we had a lot of one-off large ticket provision reversal this year.

Excluding those, the bank only cost of risk could have been 2.4% this year. But we had all these one-off items that we successfully achieved this year for large ticket provision reversals, mostly related to sales and collection.

And our consolidated figure was 2.1%. And regarding next year, we have different products with different rates, but we expect conservatively again between 2% to 2.5% cost of risk.

Our credit card cost of risk has been historically as well around 4% for retail, 3% SME 2.5% and wholesale 0.5%. We don't expect that too much to change.

But recent regulatory changes will provide further positive news for cost of risk. We have not incorporated those numbers yet.

We are just starting on credit guaranteed funds potentially in 2 weeks or so on restructuring on retail, this extra relief on conditions will be starting next week. So there might be some positive news on that, which might get us to be closer to 2% rather than 2.5%.

Our normalized cost of risk historically has been around 1.5% to 1.7%. But given the high interest rate environment, it's probably normal to be around 2%.

That's our take. And there was a second question.

It was about the effective tax rate.

Yes.

It will be similar to 2025 because already there's a change in the tax law, and it has been reflected in the fourth quarter. So full year, you can consider is full year 2025 is reflecting the new normal, let me say.

So you can use 2025 as a proxy for the next year as well.

Yes. And Simon, aside from this, I think when we show the numbers, there is always from one quarter to another, there is one-offs.

So it's not very easy in banking to normalize all the numbers and make it an apple. But again, quarterly income, especially the fourth quarter doesn't reflect fully the improvement in NIM.

One reason was tax rate that has been shown there are only 3 quarters of the tax around TRY 2 billion, but the full impact is TRY 2.7 billion if there wasn't any change in the tax regulation. So that will bring TRY 9 billion to TRY 9.7 billion actually, apple-to-apple, our profitability in the last quarter.

And because of the restructuring in the third quarter, there has been a movement of NPL. We saved some of these customers, but the movement also understated the P&L on the fourth quarter and overstated the P&L in the third quarter because of the consumer credit and credit card provisioning.

So quarter-by-quarter, if you correct those 2 items, our profitability last quarter would have been TRY 31.7 billion. And on top, we had certain security optimization, things like that.

So actually, even though you don't see directly the improvement in NIM in those numbers, if you correct for one-offs, the trend has been positive, and we'll continue to see that in the coming quarters as well. From that perspective, we feel comfortable with the improvements.

Okay. And -- just on the tax rate, if I calculate it right for the parent bank, you had an effective tax rate of around 22.5%, 23% for 2025.

I mean that's still well below the statutory rate, right, which is 30%. Are you sure that effective tax rate will be around that level this year?

Yes, around 20%, 25%, you can use because although the tax rule change about the inflation accounting, but there's still some cause inflation accounting treatment of the revaluation of assets, which are bringing some deferred tax asset year-on-year. This is one reason why effective tax rate is below 30%.

And also because of subsidies, different tax rates and as well as subsidies income level is different. In some subsidiaries, we have lower tax rate and some subsidies, we have some tax cushion as well.

So depending on the performance of all the subsidiaries and our consolidated figure will be still relatively good.

And do you think that should be sustained further out? Or will the DTA effect fade and the tax rate go higher?

It could change depending on the revaluation rate or the inflation rate, let's say, which is interlinked. So when the inflation is lower in the coming years, let's say, mid-teen inflation or devaluation rate, we may see an uptick in the effective tax rate.

My first question is about loan pricing. What should we expect in terms of loan pricing for the next year?

We have seen so much ups and downs in loan rates recently. And my second question about spread between policy rate and the deposit rate.

How much -- how many spreads do you expect for the next year and beyond? And my third question is around about ROE guidance.

Do you assume any mark-to-market gain in your ROE guidance? Because if there will be some mark-to-market gains, your equity base will be higher.

Thanks. First of all, loan pricing, as you point out, depending on the product, there has been some volatility on loan pricing.

But overall, because of the positive side of the regulation in some sense, given the limits on loan growth, the expected decrease in loan pricing has not been realized, given that we don't have much room to grow in loan because of the caps. Depending on the product, as you said, there has been sometimes ups and downs that's related to 8 weeks window.

Sometimes when we get close to the end of the 8 weeks, especially on very digital products, we might have sometimes need to change the pricing to be within the cap. But what is important is the trend in terms of trend the reduction or reduction in the loan prices is below our expectation, are not fully parallel with the policy rate reduction.

So it's not a perfect 100% beta there. Regarding deposit pricing as well, because of, again, regulatory measures because of the Turkish lira ratio, typically, in the past, what we have seen, we are not seeing right now, which means normally our incremental deposit pricing is below the Central Bank policy rate around 50 to 100 bps below.

And you see that right away in the 2 days after the Central Bank policy rate, we see a significant reduction. But given that there is ratios and there is a lot of dependency on the FX situation and interest, which has been recently realty has been around gold and silver, but regardless, because of those ratios, the incremental cost of deposit has been slightly higher than the policy rate nowadays 50 to 100 bps.

So instead of actually 50 to 100 bps below the policy rate. So we are not seeing the similar reduction in deposit as well.

But overall, despite all this, we are improving as we see on the fourth quarter, our margin regardless because of the duration differences. We have been always investing in the customer side on loans.

As you see in this quarter as well, our security fixed book has not changed much. We actually had some optimization, which you don't see from the numbers to be more sustainable and more profitable security book, but we are still at 58% customer loan versus our peer group at 49%.

So I believe this is going to be reflected relatively positively on our numbers going forward. But we see 50 bps to 100 bps above policy rate.

This will diminish in the following weeks as well as volatility reduced in the market, given that we are switching from 4-week windows to right now 8 weeks, which is a big plus in terms of our major. And then there was the last question about return on equity guidance.

I can take that. I mean we did not incorporate a significant amount of mark-to-market gain in our ROE calculation.

Our foreign currency -- our securities foreign currency TL, there's an increase in the foreign currency part toward 40%. And in TL, we have AFS book and the hold-to maturity book.

So we don't have much exposure to interest rate changes in equity in total. So we did not incorporate a significant amount of mark-to-market.

We have significantly lower sensitivity to interest rates -- that has been our policy and strategy.

I had this question actually about the TL spread policy rate. My question is just actually about wholesale funding.

I mean what should we expect from Garanti this year in terms of issuance? I mean, last year, you have been very active in the Tier 2 format.

But also in terms of other instruments, I mean, are you looking to do more in the DPR format or others? That would be great to have some color.

Sure. Let me speak first and then Atil will add.

On wholesale funding in the past as well, we have been opportunistic. We have relatively high liquidity always, but going to always grow -- further strengthen our capital as well.

So we had, yes, Tier 2s. But at the time we did Tier 2s, there has been substantial spreads or cost between Tier 1 and Tier 2.

Depending on the needs in the following months, we'll be, again, opportunistic on how we decide on funding, but we don't have a decision at the moment, but we see very much reduction in the overall spread between different instruments. But also from senior funding standpoint, we don't -- we are not in rush to do so.

But DPR type of instruments or senior loans is always 2 depending on the cost, we might tap those markets as well. What do you think, Atil?

Yes. I mean, nothing to add.

I mean, yes, DPR for many years, I mean, we were not in the market. I mean -- but with the new developments, DPR market could also increase.

So we may be in the market depend on conditions and the pricing.

83 bps.

Yes. I think when do we see easing of the regulation, I don't really have an answer.

Yes. I mean you would expect with the reduction in interest rates, there might be further reduction, but there are 2 main instruments on cooling down the economy.

Number one, interest rates. And if you believe that interest rates are coming down, that will further strengthen growth and investment and loan book.

So I'm not sure whether we will see a significant release on loan caps. However, having said that, as I said, it is not fully negative for us as one of the -- I mean, one of the largest bank in terms of balance sheet, given our customer base, we have a higher growth cap, and we are pretty much tapping that growth every quarter to meet our customer needs.

And those caps also in parallel are requiring to interest rate or loan yields to settle at a higher rate, which also helps cooling down economy. So we'll see how it goes.

Inflation is not an easy animal. So we'll see quarter-by-quarter, data by data.

I would say that. And then that was the first part.

The impact of regulation, the recent regulation, yes, there are several parts. One is significant growth in credit card limits and overdraft limits.

Those have been 2 products used extensively. And there were other items, as we mentioned, one that was very helpful doing restructuring of the credit card blade loan book, which is significant.

And then FX loan book growth has been reduced to 0.5%. Again, recently, we have seen on the FX loan book decreasing interest.

So further limitation on the growth of FX will actually help in the NIM side, but it has a negative impact on the volume side. So it makes us more road focus in our customer day-to-day business.

So I'm not concerned about that as well. On the credit card and overdraft, yes, I mean, Turkey is a consumption-driven market and credit card has been highly utilized versus the past 5 years, especially after COVID and after effective money being only TRY 200 and then rising of the e-commerce and online shopping, we have seen 40%, 45% credit card share in terms of day-to-day payment going up to almost 70%.

I think still the tax -- still the regulation on credit card is being worked out. The details has not been fully published.

Given that we have significant market share on credit card and overdraft, any optimization on limit or risk will adapt easily. Last year, we have captured a very high market share of the new credit card customers as well.

Last year, our customer growth has been close to 3 million customers, and now we have more than 30 million customers who have account with us more than 50% of the total market. So I think any optimization that's guided by the regulator will apply it.

And then we have -- we will have some effect, but will not be significant in my view. But we'll see how it turns out over the next few months.

As you know, in the regulation itself, things are being worked out. What I mean is like, for instance, there has been regulation regarding the school payments, which is an important one ticket, large ticket item.

There has been some exceptions on the overdraft. Potentially, there might be exceptions on credit card as well.

That reason we'll see over the next few weeks and months how this play out. But as the largest player in the credit card market and overdraft, we believe that we can optimize and leverage our customer base and will not affect it negatively from this change as well.

Just to clarify, you said for every 100 basis points of rate cuts, 15 basis points of effect on ROE, right? Is that true?

On NIM, but full year -- so initially lower, yes.

No.

No, we don't expect macro prudential, which means around the ratios not fully normalized this year. So we still -- even in this environment, we expect to have a real ROE at the end of the year.

So we are, again, I mean, I briefly said only no, but the prior question as well, we have been conservative in our approach. As I said, everything is data-driven.

And so far, inflation and interest rate expectation of other banks has been wrong or it has been going up. So we have been conservative in our approach, and we expect no change on the regulation.

Yes. I can just ask for clarification on your fee guidance.

Does this include any changes to regulation in terms of interchange fees or anything like this? Could you please clarify that as well?

Yes, we expect some changes and reduction interchange. But at the moment, the interchange is already set up a bit low.

So we haven't seen a change recently, but it will, at some point, there's a breakeven policy rate. But we expect to compensate that with wealth management, insurance and other service and commissions.

So we incorporate the reduction in payment. Normally, payment has not been that high as a percentage of total fee.

We normally normalized rates around 55%. But nowadays REI is around 67%.

So there will be a reduction to normalization, but the insurance and wealth management brokerage commissions and crypto type of commissions is increasing in our overall commissions. So that has been always within the plan, and that's the reason in our strategy, these type of commissions are important to offset the very strong payment commissions we have.

I hope that answers.

We actually -- we have a perfect number of 1%, 15 bps. We didn't calculate, but back of the envelope, you would expect to around 0.5%, 0.6%.

But Ceyda will get back to you on the exact number that Ceyda needs. These are the questions I need to answer.

You need to calculate that as well. But definitely, that will be an improvement in ROE as well to get a better number.

So I think we finish all the questions. There is one more.

Okay. Let's go for it.

Yes. Of course, this 83 basis points is one-off impact since, I mean, in the new year, the operational risk is increased based on your prior year income calculation.

With the current year profit, I think we will be compensating that. Of course, in the first quarter, there will be some reduction out of the dividend payment.

And I think we will be compensating these...

There will be some baseline effect as well.

There could be baseline impact around 45 basis points in the second half, assuming that Basel IV will be enforced at that time. But with the internal revenue generation, we will be compensating those impacts.

Any further question? So I think we finished the questions.

So it was really good list of questions. So thank you very much for everybody's participation.

Really, we are pleased to conclude 2025 with very strong numbers. Again, reflecting our strategy, as I pointed out in the prior meetings as well.

We are focused on customer-driven business. Our strategy is to expand our customer base and have sustainable profitability, not quarter-on-quarter, but on the long term.

And so we continue to do some investment you see in the non-HR OpEx or trading, sometimes optimization, things like that. And -- but regardless, if you do one-off corrections, as I pointed out, our Q4 apple-to-apple is better than Q3.

Q3 is better than Q2. So this continues like that.

And then in the first month, January, we see also relatively good results for January above our budget, our internal targets. So we continue to make consistent progress.

But our focus on digital transformation, AI transformation, efficiency, sustainability agenda, innovation continues to be our top of the agenda. And then going into new year, as you point out in your questions, our sensitivity of our security portfolio is relatively low.

We are positioned ourselves in any situation. And then our focus is sustainable, delivering sustainable value for all of our stakeholders.

So that's the strategy, hopefully, 3 months later, these days, we'll come together and we'll also show you even a better picture going forward. Again, thank you very much for everybody's participation and your patience late in the evening.

So I hope to see you and to hear from you 3 months later in the next earnings presentation. Have a nice evening to all of you.

Thank you.