Garanti Holds the Line: Margin Pressure and NPL Normalization Define H1 2026

Solid top-line resilience meets rising cost of risk and a cautious NIM path as CPI assumptions are revised upward.

GARAN.IS · Earnings Call · 2026-07-30

A Resilient Half, but Cracks Appear

Garanti BBVA delivered TRY 64 billion net income for H1 2026, up 20% YoY, with a 28% ROE. As CEO Mahmut Akten put it, “Our diversified revenue sources once again enabled earnings resilience.” — Ceyda Akinç, Head of Investor Relations · 2026-07-30 Yet beneath the solid headline, the quarter revealed emerging pressures on margins and asset quality—pressures that management navigated with cautious guidance and a clear-eyed acknowledgment of headwinds.

Margins: Funding Costs Bite, CPI Assumption Revised

The most significant change is the upward revision of the CPI assumption to 27% from 23%, a direct response to higher energy and food prices. This revision, alongside a "higher for longer" funding cost environment, led management to temper its earlier NIM expansion guidance. In the Q&A, Akten noted, “It is still 75 bps achievable, but there is risks around it.” — Mahmut Akten, CEO · 2026-07-30 CFO Kemal Ozus added a more conservative Cost of funding outlook: “our improvement could be modest, maybe I mean 20, 25 to 40 basis point improvement we can see over last year.” — Kemal Ozus, CFO · 2026-07-30 The bank is actively managing deposit costs and swap lines, but the path to the original 75 bps target hinges on September’s policy normalization and deposit beta behavior.

Cost of Risk: Normalization, Not Deterioration

NPL inflow increased in Q2, driven by consumer loans and the end of the restructuring regulation that previously masked delinquency. Akten explained the context:

There is a normalization in cost of risk overall regardless of the segments over time. ... So far, we still believe that we are going to be within that 2% to 2.5% range.
Mahmut Akten, CEO · 2026-07-30

The restructuring regulation migration will continue into Q3 but normalize by Q4. The bank is proactively classifying SICR exposures, with 75% of the SICR portfolio now in consumer loans and credit cards, reflecting the evolving loan mix.

Fees and OpEx: Bright Spots

fee generation remains a standout, up 42% YoY, with payment systems, insurance, and asset management leading. Management signaled potential upside in both fees and OpEx, while emphasizing investment in customer acquisition and AI. The Romanian subsidiary sale, expected to close in Q4, adds ~1.3-1.5% ROE and is embedded in guidance—a new strategic lever mentioned in this call. Prior quarters set the stage for these dynamics. In February 2026, management guided to a 75 bps NIM expansion and a positive real ROE, but also flagged deposit rate competition. “We are conservatively forecasting 75 bps improvement.” — Mahmut Akten, CEO · 2026-02-06 In August 2025, they highlighted the trajectory of NIM recovery: “We'll see further improvement in the fourth quarter, especially.” — Unknown Executive, Executive Management · 2025-08-14 The current quarter’s message is more cautious, acknowledging that the funding cost shock and higher CPI have deferred the improvement.

Capital and Outlook

CET1 remains strong at ~12%, with excess capital of TRY 149 billion. Management maintains its cost of risk guidance of 2-2.5% (toward the upper end) and expects nominal ROE to be achievable, though real ROE faces downside risk from the inflation revision. The bank’s deposit strategy—deliberately growing TL deposits and maintaining a low cost base—provides a structural buffer. As Akten summarized, “We are using our cap and limits. ... We continue to grow on those product lines.” — Mahmut Akten, CEO · 2026-07-30 With a pending subsidiary sale, resilient fee income, and disciplined provisioning, Garanti is positioned to weather a difficult macro backdrop, but the margin recovery will be gradual.