Garanti BBVA: The Retail Bill Comes Due

A strong NIM quarter, a quiet real-ROE retreat, and a pivot toward wholesale lending

GARAN.IS · Earnings Call · 2026-11-02

A quarter that flattered, a guidance line that didn't

Garanti BBVA's third-quarter headline is genuinely strong. Nine-month net income reached TRY 98 billion, up 16% year on year, with a 27.5% return on equity, a 6% cumulative net interest margin, and fee income up 26% year on year. The NIM recovery was the star: net interest income rose 23% quarter on quarter as deposit costs fell and loan yields repriced. Management also flagged a further 40 basis points of Turkish lira loan-deposit spread improvement already achieved in the fourth quarter. That is a bank benefiting from the downslope of a high interest rate cycle. But the tell is in the fine print. Ceyda Akinç, Head of Investor Relations, said plainly that with inflation now expected at 30% rather than the initial 25% assumption, “we no longer expect to meet our real ROE targets” — Ceyda Akinç, Head of Investor Relations · 2026-11-02. The bank still expects to deliver its nominal ROE guidance, and current profitability is sector-leading among private banks. Yet the real-ROE promise was the cleaner commitment, and it has been withdrawn. That is the quarter's quiet guidance retreat: nominal resilience masking a lower real return.

Cost of risk moves from background to center stage

The second change is asset quality. In July, the message was reassuring. The CEO said “we still believe that we are going to be within that 2% to 2.5% range” — Mahmut Akten, CEO · 2026-07-30 and that the bank was not much concerned about cost of risk. The CFO added that guidance was “within guidance but towards the upper end” — Kemal Ozus, CFO · 2026-07-30. In February, management had framed 2% to 2.5% as conservative, with normalized cost of risk closer to 1.5% to 1.7%. This quarter, the language has shifted. Cost of risk is now expected to finish slightly above the initial guidance. Stage 2 loans rose to 14% from 12%, with 90% of the increase coming from SICR and 85% of that SICR book still non-delinquent. NPL inflows are concentrated: roughly 70% came from consumer loans and credit cards. Restructured loans also migrated into Stage 3 after the restructuring regulation ended. The NPL ratio is still low, and early-stage SICR is mostly performing, so this is not a solvency scare. But it is a retail credit cycle that is lasting longer than the bank expected. The CEO was direct: “we are not at peak, but we are near the peak” — Mahmut Akten, Chief Executive Officer (CEO) · 2026-11-02, with another 10% or less increase in cost of risk expected into next year. The segment detail matters more than the aggregate.

in 2 segments, we see more pressure. One is on credit card in general ... And the second part is related to SMEs.
Mahmut Akten, Chief Executive Officer (CEO) · 2026-11-02

Credit card and overdraft borrowers face high minimum payments, and the bank has already done two restructuring rounds. About half of restructured customers exited the problem; the other half did not, and that is now showing up. SMEs are feeling the high-rate squeeze down the value chain. Large corporates remain benign.

The wholesale pivot and the IRB question

The strategic response is the most interesting part of the call. Garanti grew aggressively in Turkish lira lending and gained share across consumer loans and credit cards. That mix now looks less comfortable: retail is roughly two-thirds of the TL loan book, and credit card, general-purpose lending, and overdraft carry one to two and a half times the cost of risk of wholesale. Management is rebalancing. The CEO said the bank likes to grow in wholesale banking to balance interest rate risk and credit risk, while remaining disciplined on risk-adjusted returns. The keyword is new to this quarter's momentum list, and it captures a real shift: fewer marginal retail balances, more wholesale and business lending, and a willingness to cut certain segments even while gaining share elsewhere. Capital is not the constraint. CET1 is 12%, the capital adequacy ratio is 16.1%, and the bank carries TRY 169 billion of excess capital. That gives management room to absorb this normalization. The more forward-looking question came from the Q&A: would Garanti pursue an internal ratings-based approach? The IRB model was the top global keyword this quarter, and another reporter, JYSK.CO, cited a new corporate IRB model. Garanti's answer was cautious: “we are looking into it ... it's a bit early to make a guidance” — Kemal Ozus, Chief Financial Officer (CFO) · 2026-11-02. That is a contrast worth noting. The global regulatory wave is visible, but Garanti is still preparing, not leading. If IRB approval eventually comes, it could be a capital lever; for now it is a watch item, not a driver.

What actually changed

The NIM recovery is real, the fee engine is intact, and the bank remains highly capitalised. But the quality of the earnings mix has changed. Garanti is using a strong margin quarter to absorb a higher retail credit bill, and it is explicitly rebalancing toward wholesale lending after years of retail-led growth. The abandoned real-ROE target is the cleanest signal that management sees the trade-off differently now. This is not a crisis story; it is a profitability-quality story. The prior calls downplayed cost of risk and emphasised retail share gains. This call admits that normalization is prolonged, that the retail mix carries a higher price, and that the bank is willing to slow some lending to protect risk-adjusted returns. The stock tape is unavailable in the context, so we cannot judge whether the market has priced this shift. The transcript, however, has already changed its tone.