Garanti Bank August 2016 NOT A COINCIDENCE
ADDING VALUE TO THE ECONOMY AND SOCIETY 2 nd LARGEST PRIVATE BANK by assets of US $ 100.1 billion ROAE* 16.0% BASEL III CAR 14.5% Robust Balance Sheet > Highly liquid > Low risk -- NPL Ratio: 3.1% > Well-capitalized -- Basel III Consolidated CAR: 14.5%; CET-I capital make up 96% of total capital Focused on Relationship Banking with Broad Geographical Coverage & Omni-Channel Distribution Network > 982 branches > Leading internet and mobile banking > Largest financial call center > 4,650 ATMs > Targeted investments to digital platforms #1 IN BANKING REVENUES ** >14.3 MILLION CUSTOMERS Note: Figures are based on BRSA consolidated financials as of June 30, 2016 * Excludes non-recurring items when annualizing Net Income for the second half of the year **Banking revenues defined as; NII adjusted with provisions and Net trading gains/losses+net F&C ~50% Free Float > The most traded stock of Borsa Istanbul -- Average daily turnover represents 20% of BIST 100 > The share of foreign investors including DR holders in actual free float is ~88% -- Shareholders from around 40 countries 2
SUSTAINABLE READY FOR FUTURE EMPOWERING RESPONSIBLE 3
RESPONSIBLE TOWARDS SOCIETY
Real GDP Growth (Rebased) ECOSYSTEM AWARENESS Operating in a Large and Dynamic Economy High and Sustainable Real GDP Growth * 450 400 350 300 EU EM Europe LATAM TURKEY Avg. GDP growth * >4% over 2005-2015 vs. LATAM * : 3.4% EU * : 1.2% EM Europe * : 3.5% 250 200 150 100 2002 2005 2008 2011 2014 2017 2020 2021 * Source: IMF s World Economic Outlook Report dated April 2016. Country groups are per IMF database. Ranking as of YE 2015 ** Source: EBF Facts&Figures 2015, ranking per total assets. ***BRSA Monthly data as of June 2016. $ 861bn *** 2002-1H16 CAGR: 15% 5 RESPONSIBLE
ECOSYSTEM AWARENESS Turkey with Young and Growing Population Total Population by Age * Turkey 42.3% 36.7% 21.0% 56% under 35 Russian Federation 27.4% 37.4% 35.2% Poland 26.5% 36.9% 36.6% Hungary 25.8% 36.8% 37.5% Population to reach Czech Republic 25.1% 37.2% 37.6% Europe 26.7% 35.1% 38.2% vs. <25 25-50 >50 *Source: United Nation, World Population Prospects: The 2015 Revision **Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: The 2015 Revision *** TurkStat, as of December 31, 2015, Address Based Population Registration System (ABPRS) negative growth in EU and CEE countries 6 RESPONSIBLE
ECOSYSTEM AWARENESS Underpenetrated Market with Strong Growth Potential 298% Attractive Demographics 58% 108% 39% 111% 103% 60% 68% 13% Assets / GDP Customer Deposits / GDP Loans / GDP Turkey - 2002 Turkey - 1Q16 Euro Area - 1Q16 Underpenetrated Market Source: ECB, TurkStat, BRSA for commercial banks 7 RESPONSIBLE
Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Rollover Ratio Average Maturity ECOSYSTEM AWARENESS Highly Liquid Banking Sector Deposit-heavy funding structure Deposits fund 55% of assets * Loans/Deposits at 114% * Comfortable liquidity levels Banks are required to meet regulatory Liquidity Coverage Ratio (LCR) limits. LCR shows the capability of banks to cover net cash outflows with the high-quality asset stocks in their balance sheets in a significant stress scenario lasting 30 calendar days Total LCR: Legal limit 70% FC LCR: Legal limit 50% Continuous access to international funding sources 140 120 100 % ** Banking Sector External Debt Roll-over Ratio(%) Average Maturity (Month, Right axis) 80 56 54 52 50 48 46 44 42 With CBRT s measures, avg. maturity of banks international funds has been rising Leverage remains low: ~8x * BRSA monthly data for commercial banks, as of June 2016 ** CBRT Financial Stability Report, May 2016 8 RESPONSIBLE
ECOSYSTEM AWARENESS Well-Capitalized and Underleveraged CAR * (4Q15) 17.8% 16.5% 15.6% 15.5% 13.9% 12.7% > Basel III CAR ** : 15.8% (as of 1Q16) > CET-I capital ** : 86% of total capital Eurozone Poland Turkey Brazil South Africa Russia RWA/Assets 44% 67% 83% 72% 52% 91% Leverage * (4Q15) 8.1x 9.6x 10.2x 10.9x 11.5x 13.1x Turkey Poland Russia Brazil Eurozone South Africa > ROAEs ** : 14% (as of 1H16) with low leverage * Source: Latest data from the IMF-FSI database. Most of figures are based on 4Q15 figures ** BRSA monthly data as of June 2016 9 RESPONSIBLE
ECOSYSTEM AWARENESS Standing out in its Asset Quality Non-performing loans/total gross loans * 12.0 10.0 NPL ratio * EU 27 9.9% 8.0 6.0 4.0 2.0 CEE & Africa 8.0% TURKEY 3.0% LATAM 2.9% 0.0 2006 2009 2012 2015 * Source: Latest data from the IMF-FSI database, most of which are based on 4Q15 figures ** BRSA weekly data as of July 01, 2016, commercial banks only > No exposure to any toxic assets or problematic sovereign assets > Established & prudent underwriting procedures 10 RESPONSIBLE
ECOSYSTEM AWARENESS Strictly Monitored and Prudently Regulated Environment Main pillars of regulatory environment > Strictly regulated & supervised by risk Based & autonomous agency (BRSA) since 2000 > Independent Central Bank > policies targeting both financial and price stability > Deposit Insurance scheme (SDIF) > Separate authority to regulate listed companies (Capital Markets Board) > Authorities highly experienced in crisis management Prudent regulatory actions > Conservative provisioning policies > Buffers for possible downturns > Higher provisioning for consumer loans > Supportive regulatory actions on credit card asset quality > Limitations on installments and maturities of consumer loans > Active utilization of Reserve Requirement Ratio (RRR) and Reserve Option Coefficient (ROC) to manage liquidity 11 RESPONSIBLE
ECOSYSTEM AWARENESS How Authorities Address the Savings Challenge Savings / GDP (2010-2015 Average) 21.1% 19.3% 17.2% 14.1% EU LATAM EM - Europe TURKEY > Incentives through private pensions Encourage more participants through direct government contributions > Proliferation of gold deposits with effective use of RR tools Gold under-the -mattress will be revealed > New severance scheme Severance payments will accumulate in a pooled fund, thus act like mandatory savings by government > Withholding tax on deposits Lower rate for longer term deposits to encourage long term savings Source: IMF, World Economic Outlook Database, April 2016 12 RESPONSIBLE
ECOSYSTEM AWARENESS How We Address Challenges for Financial Health Savings Test Accumulating Gold Account Spend & Save Account Savings Account for Future Pension Funds 13 RESPONSIBLE
ACTIVE LISTENING & DEVELOPING ACCORDINGLY Customer Centricity Index Market Research Investor Perception Study To Sustain High Quality & Corporate Governance Employee Idea Platforms Social Platforms 14 RESPONSIBLE
EMPOWERING IN ALL POSSIBLE DIMENSIONS
SINGLE POINT OF CONTACT FOR ALL FINANCIAL NEEDS Commercial Asset Contribution: 5.7% Consumer Payment Systems Asset Contribution: 2.4% Asset Contribution: 0.1% Asset Contribution: 0.6% Asset Contribution: 1.8% Corporate Digital Banking Asset Contribution: 1.0% Asset Contribution: 0.0% SME Asset Contribution: 0.1% Note: Asset contributions are calculated based on BRSA Consolidated Financials as of June 30, 2016 16 EMPOWERING
2016 2002 INVESTMENTS IN DELIVERY CHANNELS Welcoming >150k customers per day 100% Geographical Coverage as of June 16 vs. 49% in 2002 Number of Branches & Customers 58% of branch openings since 2005 outside of Istanbul, Ankara and Izmir # of Branches # of Customers 11.8 mn 13.1 mn 14.3 mn 936 1,005 6.2 mn 982 3.7 mn 487 331 2002 2006 2012 2014 Jul-16* 17 * 23 investment centers operating under Garanti Bank were transferred to Garanti Securities at the end of October 2015. EMPOWERING
INVESTMENTS IN DIGITAL CHANNELS Omni-channel convenience 4,624 ATMs offering > 200 types of transactions Cash deposits/withdrawals: 105% Serving non-bank customers through cardless transactions In 2015, 280mn transactions in total (16mn cardless) 70 mn Customer Contacts in 2015 32 sec. avg. response time (sector 72sec) Centralized branch calls 30 product offerings 18% of total credit card sales 3.8 mn products sold in 2015 ATMs >500 types of transactions 44% of non-cash financial transactions carried via internet banking Call Center Internet Banking Providing seamless experience across all channels Social Media Mobile Banking 37% of non-cash financial transactions via mobile banking 2.8 mn active mobile users 1.8 mn mobile-only customers* > 4.5 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 EMPOWERING * Have only used mobile banking in the last month
INVESTMENTS IN DIGITAL CHANNELS Leading position & effective utilization Managing the largest customer base in Turkey 44% Online 4.4 million active digital customers 400K increase in 4M16 vs. >700K increase in 2015 2.8 million active mobile customers 300K increase in 4M16 vs. >1000K increase in 2015 Utilizing digital channels effectively.. 92% of all non-cash financial transactions go through digital channels: 37% Mobile 10% ATM with increasing weight in mobile Mobile transactions: 70mn in 2015 ~30mn in 4M16 alone 0.2% Call Center 1.3million logins/day Tax Payments 25% market share in retail internet & mobile banking financial transactions volume > Online Banking financial transactions market shares: Bill Payments Credit Card Transactions 46% 33% 24% > Mobile Banking financial transactions market shares: Credit Card Tax Payments Transactions Investments * 60% 30% 25% EMPOWERING * *Investments include saving deposits, FX, equity and options transactions
INVESTMENTS IN DIGITAL CHANNELS Innovative products and services Empowering customers Money withdrawal with QR Withdraw money from ATMs without even having to login MIA Mobile Interactive Assistant Virtual voice assistant enables performing banking transactions by voice Loan Application with Video Call >US$7.5mn volume/month >1.6mn interaction/month E- Government Log-in Integration through turkiye.gov.tr 32 K/month through Internet Banking 42 K unique visitors/month A first in Turkey - meet face-to-face with loan consultants via Garanti Mobile. loan disbursement reached $2.5 million in 2 months Mobile Appointment New appointment system routes customers to ATMs & digital channels - decrease branch density and - gives appointments/suggests alternative branches Messaging Services Integration Instant access to: ATM/Branch locations & market information via BİP, Whatsapp and Telegram. Money transfer available through messaging service BİP. Product specifically designed for digital banking: Auto Insurance Since launch in March 30% of total auto insurance sales through digital EMPOWERING
INVESTMENTS IN DIGITAL CHANNELS Feeding the sustainable and profitable growth model EMPOWERING
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 22 EMPOWERING
SUSTAINABLE FOR A BETTER LIFE
SUSTAINABILITY STRATEGY Our strategic priorities & key achievements Corporate Clients Performance > Advise our corporate clients to help them make their businesses more Management sustainable > Extend E&S risk framework and management systems across the bank, local and international subsidiaries > 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 > Develop innovative sustainable financial products linked to material issues for society and Garanti Retail Clients Impact Business Financial Systems Communities Individuals Stakeholders HR: Enhance employees knowledge and life style Environmental Footprint: Enhance operational efficiency Governance: Enhance integration of sustainability within the Bank > Develop and implement a financial education program > Engage with stakeholders and build partnership > Support philanthropic programs with a focus on material issues for society Sustainable Finance Environmental Impact of Operations Communities and Stakeholders ~34% share in Turkey s installed operational wind power capacity Started supporting CDP Water to raise awareness on water crisis among private sector Published Climate Change Action Plan in 2015 Total amount of loans disbursed to women entrepreneurs to date: TL 2.8 billion Women Entrepreneurs Executive School: 300 certificates in 5 provinces in 2015 1,013 service points covering 100% of employees certified to ISO 14001 Obtained limited assurance for its water consumption, energy consumption, renewable energy portfolio and ESIAP for the first time for GRI G4 Comprehensive Sustainability Reporting, in addition to Scope 1 and Scope 2 GHG emissions. The only Turkish company to be listed in CDP Climate Change A List and included in CDP Global Climate Leaders Report Received CDP 2015 Climate Performance Leader Award and CDP 2015 Turkey Climate Disclosure Leader Award The only Turkish company to qualify for Dow Jones Sustainability Index. First Turkish Bank to sign Caring for Climate Initiative (C4C) and UNGC s Leadership Criteria on Carbon Pricing First Turkish bank to become a member of WeConnect International, a global initiative, which is aimed at including women entrepreneurs in the supply chain. Successfully qualified for the second year in a row for the Borsa Istanbul (BIST) Sustainability Index. Member of UN Global Compact, UNEP FI and Business Council for Sustainable Development in Turkey 24 SUSTAINABLE
INNOVATIVE BUSINESS MODEL Process Technology People 25 SUSTAINABLE
THE MOST VALUABLE ASSET: HUMAN CAPITAL Investing in people Training hours per employee: 44 hrs per annum International quality standards > First Turkish company to receive the Investors in People (IIP) achievement certificate in 2005. > The first and only Gold IIP certificate in Turkey in 2012 I Performance Based Incentive Measured by customer satisfaction, service quality, efficiency and profitability 26 SUSTAINABLE
PIONEER WITH ITS TECHNOLOGY SUPPORTED OFFERINGS IT Vision Investing in Technology Full In-House Development Custom-Fit Solutions Driver (Integral Part of Management) 27 SUSTAINABLE
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) > igaranti: First-of-its-kind financial service leading the future of banking business and the revolution of conventional banking approach. (2013) > igaranti Glass application (2014) > 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 enabling Customer Relationship Managers in branches to offer service to customers from outside the branches as well First among large-scale banks in Turkey (2015) A Total of 551 Products INNOVATIVE Introducing Many Firsts 28 SUSTAINABLE
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: 92% of the non-cash transactions are carried out via digital channels Advanced CRM > Segmentation: Propensity Modelling > Personalized Product Offers 29 SUSTAINABLE
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 > Highest per branch efficiencies in terms of assets, cash loans, customer deposits and ordinary banking income 30 SUSTAINABLE
MANAGING WHAT WE MEASURE What to Measure Risk-Return Balance WE KNOW... Why to Measure How to Measure Customer Satisfaction Key Performance Indicators 31 SUSTAINABLE
OUR JOURNEY TO SUCCESS Strong Market Position Market Share and Rankings 1 (2000-1H16) 1H16 2006 2000 Assets Loans Consumer Loans (inc. CCs) Consumer Mortgage # POS Customer Deposits Customer Demand Deposits Net F&C Ordinary Banking Income #1 14.7% 14.6% 17.2% 14.0% 13.1% #2 11.7% 11.8% 12.3% 13.8% #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% Healthy market share gains in key profitable products Robust Profitability Expanding & broad customer base 1 Rankings among private banks as of June 2016 32 SUSTAINABLE
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