CORPORATE PRESENTATION · INVESTOR RELATIONS CORPORATE PRESENTATION 13 SHAREHOLDING STRUCTURE Note:...

INVESTOR RELATIONSDecember 2018

CORPORATE

PRESENTATION

INVESTOR RELATIONS CORPORATE PRESENTATION

2

ENVIRONMENT WE OPERATE IN

OUR VALUE CREATION

MARKET POSITION & 2018 PROJECTIONS

ABOUT GARANTI



OUR VALUE CREATION

ABOUT GARANTI

3



GLOBAL ECONOMIES

4

growth

CENTRAL

BANKS

markets

The pace of global growth is being maintained..

…but is less synchronized. Growth remains strong in the US and steady in

China, but it is slowing in the Eurozone and there are risks of contraction in

several emerging countries.

Monetary policy normalization at different paces: Fed vs. ECB

The Fed remains comfortable with the exit strategy whereas the ECB delayed

the first hike.

Global risks intensify

A full blow trade war on the rise as main source of concern, along with greater risks in

EM (financial tensions) and the Eurozone (political instabilities due to Brexit and Italy)

Portfolio outflows are expected to continue in the coming quarters, on the

combination of global headwinds (global funding conditions to further tightening) and

idiosyncratic factors.


5

7,4%6,2%

3,0%

2017 1H18 2018E

GROWTH

INFLATION

11,9%

24.5 23.5

2017 9M18 2018E

CBRT FUNDING COST (Year-end)

12.8

24.0 24.0

2017 Oct'18 2018E

%

19th largest economy in the world1

Comprehensive and consistent policy mix to curb

currency volatility:

•Strengthened policy mix by New Economic

Plan (NEP) -- Prudent stance of the fiscal policy

should complement the already tight monetary

policy conditions to re-balance the economy

Tight policies to curb worsening inflation

TURKISH ECONOMY (I / II)

5-yrs avg. GDP growth: 6% vs. EM Europe: 4%1

E: Garanti Estimates as of October 2018

1 IMF’s World Economic Outlook Report dated October 2018. Ranking as of YE 2017

%

%

2H18 -- Decelerating economic activity

• Worsening high frequency indicators,

• High statistical base impact of last year

• Expected negative effects of recent financial shocks

%

%


6

-6,8% -4,7%-3,7% -3,8%-5,5%-5,1%

-1,2%-1,1% 0,2% 1,1% 0,3%-1,4%

2013 2014 2015 2016 2017 2018E

CAD / GDP

BUDGET DEFICIT / GDP

-1,0%-1,1% -1,0%-1,1% -1,5%-2,1%

2013 2014 2015 2016 2017 2018E

TURKISH ECONOMY (II / II)

Fiscal Discipline

EU Defined Government Debt Stock: 29.2% as of 2Q18

vs. Maastricht criteria: 60%

Resilient central government debt composition

• TL: 52%, FC: 48% (as of September 2018 vs. TL: 42%, FC: 58% in 2002)

• 76% fixed, 24% floating rate (as of September 2018 vs. 45% fixed, 55%

floating in 2002)

Core current account balance

(excluding energy and gold):

-US$0.2bn (12-month sum, as of August 2018)

E: Garanti Estimates as of October 2018

Core

CAD /GDP

CAD/GDP

The expected adjustment in economic activity will contribute to a

rapid decline in current account deficit, starting to be more apparent

at the beginning of next year


TURKISH BANKING SECTOR (I / II)

Other30%

Total Assets

US$705bn

Foreign Shareholder

- -

- 30.9%

BBVA (49.85%) 50.1%

- 49.3%

UniCredit Group (49.5%) 18.0%

- 48.7%

- 25.2%

QNB S.A.Q. (99.88%) 0.1%

Sberbank (99.85%)* 0.2%

BNP Paribas (72.5%) -

Top 4 Private Commercial Banks 4 39% 40% 41%

State Banks 3 31% 33% 34%

Other Private Commercial Banks 25 19% 15% 19%

Development & Inv. Banks 13 6% 8% -

Participation Banks 5 5% 5% 6%

# of Banks

Share in

Assets

Share in

Loans

Share in

Deposits

StateBanks

31%

Share in Assets

13.1%

10.6%

10.0%

9.3%

9.3%

9.2%

8.4%

4.3%

3.5%

2.7%

Total: 50

TOP 10 BANKS

7

Dominated by top 4 Private Banks & 3 State Banks

Actual Free Float

Note: Sector figures are based on bank-only BRSA monthly data as of September 2018. Top 10 banks make up ~80% of sector’s total asset

*As per Denizbank’s disclosure, Emirates NBD and Sberbank announce that they have entered into a definitive agreement whereby Sberbank will sell

its entire 99.85% stake in Denizbank to Emirates NBD. The closing of the transaction is subject to regulatory approval in Turkey, Russia, the United Arab

Emirates (UAE) and other relevant jurisdictions where Denizbank and its subsidiaries operate. The transaction is expected to close in 2018.

Top 4

Private Banks

39%


TURKISH BANKING SECTOR (II / II)

Deposits fund 57% of assets

Liquidity Coverage Ratio (Total):118%1

vs. required level of 90% for 2018

Sufficient buffers against potential

external liquidity shock

SOLID ASSET QUALITYSTRONG SOLVENCYCOMFORTABLE LIQUIDITY

Banks’

ST external dues2:

US$79bn(44% of total external debt)

US$79bn

Quick FC Liquidity3

sufficient to cover

any liquidity shock

Basel III CAR

17.7%

CET-I capital:

79% of total capital

RWA/Assets

70% vs. 82% 2016YE

8

NPL Ratio

3.4%

Stage-3 Coverage Ratio:

~71%

ROAE: 15%

LEVERAGE: 9.4x

ROAA: 1.5%

Note: Sector figures are based on BRSA monthly data as of September 2018, for commercial banks only

1 Top 7 banks average per BRSA September 2018 Bank-only financials 2 Source: CBRT, as of September 2018. Excludes non-residents’ FC deposits

3 Quick Liquidity Buffers FC reserves Under ROM, swaps, money market placements, CBRT eligible unencumbered securities


9

CHALLENGES & OPPORTUNITIES OF TURKISH BANKING SECTOR

SHORT-TERM

NATURE OF

DEPOSITS(~1 month)

SOUND

ASSET

QUALITYSTRICTLY

REGULATED

& HIGHLY

MONITORED

HIGH

LIQUIDITY

AND STRONG

SOLVENCY

UNBANKED

POPULATION(>40% of adult

population)

SCARCITY OF

LONG-TERM

TL FUNDING

NO FX OPEN

POSITION

YOUNG

POPULATION55% population

is under age of 35

PRIVILEGED

STATUS OF

STATE BANKSin collecting deposits

EXTERNAL FUNDING SHARE IN

TOTAL: 25%

BASEL III &

IFRS9

COMPLIANCE

DUAL CURRENCY

BALANCE

SHEETS


10


OUR VALUE CREATION

ABOUT GARANTI



TOTAL ASSETS$76 BN

GARANTI AT A GLANCE

11

OWNED BY BBVA 50.04% ACTUAL FREE FLOAT

# DIGITAL CUSTOMERS~7 MN 66% DIGITAL PENETRATION*

GEOGRAPHICAL COVERAGE100%

DIVIDEND PAY-OUT RATIO27.6% HIGHEST DIVIDEND PAYMENT**

49.85%

2nd LARGEST PRIVATE BANK WITH ~10% MARKET SHARE

~1.5MN NEW CUSTOMERS/YR via 933 BRANCHES

Note: Financial figures are per BRSA Consolidated data as of September 2018

* Among active customers, as of September 2018.

Active digital customers are defined as at least 1 login within 3 months


12

Listed on Borsa Istanbul (BIST) Turkey since 1990

Depositary Receipts (DR) listed on

London Stock Exchange and on OTC since 1993

Trades on OTCQX International Premier since 2012(OTCQX Ticker: TKGBY)

MCap1

$6bn

Weight in BIST

~7%

Avg. Daily Turnover2

$168mn

GARANTI SHARE

1 Figures are as of December 06, 2018. USD/TL CBRT ask rate is used in the calculations

2 Average of daily turnover during 9M18

Largest floating

Mcap among banks in BIST

Actual free float:

50.04%

Most invested stock

by foreigners

Foreign Ownership

in free float: ~85%1


13

SHAREHOLDING STRUCTURE

Note: Institutional shareholder and foreign individual shareholder composition

data based on IPREO Shareholder ID Analysis dated September 2018; the actual

free float ratio and the share of local individual shareholders are all based on

Central Agency Registry Agency data.

1 As of December 06, 2018.

Shareholders from

38 countries

Foreign investors

in free float

85%

vs. peer avg. of 61%1


14

Independent Members

Süleyman Sözen

(Chairman)

Ergun Özen

Ricardo Gomez

Barredo*

Ali Fuat Erbil

(President & CEO)

Jaime Saenz

De Tejada Pulido

M. Cüneyt Sezgin

Rafael Salinas

Martines De LeceaJavier Bernal

Dionis

Sema YurdumJorge Saenz-Azcunaga

Carranza (Vice Chairman)*

BOARD OF DIRECTORS

*Since their appointment as an Audit Committee member of Garanti Bank, they are deemed

as an Independent Board Member in accordance with the relevant regulations of the Capital

Markets Board of Turkey.


15

OUR TEAM

Ali Fuat Erbil

Mahmut Akten

Retail Banking

Didem Dinçer Başer

Digital Banking, Customer Solutions and Experience

Cemal Onaran

SME Banking

Selahattin Güldü

Commercial Banking

Ebru Dildar Edin

Corporate and Investment Banking

Osman Tüzün

Human Resources and Support Services

İlker Kuruöz

Engineering and Data

Aydın Güler

CFO

Aydın Düren

Legal Services and Collection

Ali Temel

Chief Credit Risk Officer

Strategic Planning

& Responsible Business


16

A UNIVERSAL BANK WITH STRONG PRESENCE IN ALL BUSINESS AREAS

RETAIL

COMMERCIAL

CORPORATE

SME

DIGITAL BANKING

PAYMENTSYSTEMS

Asset Contribution: 6.49%







Note: Asset contributions are calculated based on BRSA Consolidated

Financials as of September 30, 2018



RETAIL BANKING

We welcomed

73 million customers

at our branches in 2017

Building long-lived

relationships with

our customers

People became

homeowners

with Garanti

590K

12% MORTGAGE

MARKET SHARE(Mortgages / GDP: ~6%

-- Huge growth potential)

(NPL ratio: 0.8%)

Retail customers>14 MN

14% CONSUMER LOAN

MARKET SHARE(#1 in consumer loans among private peers)

Customers saved

with Garanti1.4 MN

12% CUSTOMER DEPOSIT

MARKET SHARE(Demand deposits share

in customer deposits: 25% vs. sector’s 21%)

17

Note: Market shares are calculated based on BRSA Unconsolidated

Financials as of September-end, 2018


SME BANKING

We offer information and advisory services to

support their development

9% TL BUSINESS

BANKING LOANS

MARKET SHARE

COMMERCIAL & CORPORATE BANKING

We position ourselves as the primary

business partner of our customers

PAYMENT SYSTEMSStrong presence in the credit card

business. License Turkey’s lovemark

Bonus card to 10 other banks

11% FC LOANS

MARKET SHARE

19% ACQUIRING &

ISSUING MARKET SHARE

18


Note: Market shares are calculated based on BRSA Unconsolidated

Financials as of September 30, 2018


DIGITAL BANKING

We encourage

our customers’ digital migration.

We have been investing in

digital for >20 years to offer our customers

seamless omni-channel experience.

19


>500 types of transactions

20% of non-cash financial transactions Internet

Best in class in Europe1

66% of non-cash financial transactions

ATM

5 mn followers: Europe’s Most Followed Bank

17 Social Platforms with 55 accounts

SocialMedia

77.4mn customer contacts in 2017

Avg. response time 33sec (sector 81 sec)

Call Center

Mobile

1 In customer user experience per Forrester’s Global Mobile Banking Functionality

Benchmark Study, 2018

Cash deposits/withdrawals: 105%

Serving non-bank customers through

cardless transactions


20


OUR VALUE CREATION

ABOUT GARANTI



21

WE ARE ONE TEAMWE THINK BIGCUSTOMER COMES

FIRST

OUR PURPOSE

TO BRING THE AGE OF OPPORTUNITY TO EVERYONE

OUR VALUES


KEY TRENDS

22

OUR

BUSINESS

MODEL

OUR PURPOSE

’’

‘‘ To bring the

age of opportunity

to everyone

Digital transformation

Ecosystem decline &

social trends

Economic conditions &

regulatory environment


30

40

50

60

70

80

90

100

30 40 50 60 70 80 90 100

1

2

8

4

3

5

1210 611 9

7

Customer centricity and increasing customer satisfaction

6Digital

Transformation

Financial

Performance

1

Investing in human capitalInvesting in

Human Capital

Digital transformation and technological advancement

Customer privacy and information security

12 Good corporate governance

5 Transparent disclosure of information for stakeholders

Financial performance (including solvency) & direct

and indirect impact on economy

Financial health and supporting customers in making

conscious financial decisions8

Imp

ort

ance

to

Sta

keh

old

ers

Importance to Garanti Bank

Customer

Experience

CLUSTER # of ISSUE MATERIAL ISSUE

4

Corporate

Governance and

Risk Management 3 Risk and crisis management (including integrated

management of financial and non-financial risks

14 Compliance

2

10

11 Climate change and energy

7 Management of ESG risks

Responsible and

Sustainable

Development 9 Pioneering the development of sustainable banking

13 Stakeholder dialogue

MATERIAL ISSUES

14

13

23


24

EFFICIENCY DIGITALIZATIONEMPLOYEE

HAPPINESS

CUSTOMER

EXPERIENCE

OPTIMAL CAPITAL

UTILIZATION

RESPONSIBLE

& SUSTAINABLE

DEVELOPMENT

OUR STRATEGIC PRIORITIES

• Cost and revenue synergies • Unrivaled customer experience

• Transaction convenience

• Pioneering solution suggestions

• Expand digital customer base

• Increase digital sales

• Fair and transparent

management policy

• Focus on their

development, satisfaction

and wellbeing

• Transparent, clear and

responsible

• Innovative solutions

• Design our processes from

our customers’ perspective

• Supporting financial

literacy, health and

inclusion in solutions that

we offer

• Use capital effectively

• Disciplined & sustainable

growth

• Strict adherence to solid

asset quality

• Act with the principles

of trust, integrity,

accountability and

transparency

• Lending based on impact

investment principles

• Focus on community

investment programs


UNDERSTANDING

CUSTOMER

DESIGN PHILOSOPHY

EMPATHETIC CULTURE MEASUREMENT SYSTEMS

864k customer feedbacks received in 2017

24 products or services changed & developed via customer feedbacks

AI program «Empathy Assistant»

to help branch employees

while resolving customer issues

4,930 Disabled friendly ATM

(98% of Garanti ATMs)

CUSTOMER

EXPERIENCE New service model in branches to

capture the benefits of emerging

digital world

Invests and applies the latest Big

Data and Analytics

Key Value Drivers

• Exceeding their expectations and

enhancing their satisfaction

• Supporting financial literacy, health and

inclusion with offered solutions

• Advise solutions to grow their businesses

in sustainable manner

Linked Sustainable Development Goals

Conducts after-service surveys for

all customer-facing employees

Operational quality indicator:

Customer Centricity Index

Net Promoter Score

highest among peer group

25


SHARE OF DIGITAL SALES

IN TOTAL SALES

GARANTI’S

MARKET SHARE IN DIGITAL

TRANSACTIONS

26

DIGITAL

TRANSFORMATION

Key Value Drivers

• Unrivaled customer experience

• Expand digital customer base

• Increase digital sales

• Ensure information security and

uninterrupted service


7.0 mn digital customers

6.2 mn mobile customers

4.7 mn mobile-only customers

LEADING POSITION

IN DIGITAL BANKING

24% YoYActive digital

customers

33% YoYActive mobile

customers

EFFECTIVE

DIGITAL CHANNEL

UTILIZATION

45%

1/5

#1 with 93 scoreMost loved mobile

bank in Turkey

1st in Europe in customer user experience

in Mobile Banking


27

INVESTING IN

HUMAN CAPITAL

Key Value Drivers

• Focus on employee development,

satisfaction and wellbeing

• Acting with shared wisdom

• Fair and transparent management policy

EMPLOYEE

ENGAGEMENT SCORE

OUTPERFORMS SECTORSector

65

53

0

TRAINING

PER EMPLOYEEShare of digital training: 27% vs. 17% in 2016

10 Programs

Note: Employee Engagement Score is per latest AON Hewitt Employee Engagement Study

36hours

EMPLOYEE

WELL-BEING

PROGRAMS

FIRST AND ONLY

COMPANY

FROM TURKEY

100



28

RESPONSIBLE &

SUSTAINABLE

DEVELOPMENT

Key Value Drivers

• Drive positive change through strategic

partnerships

• Impact investment principles

• Focus on community investment programs

• TL9.3bn Impact Investment

• 32 Sustainable products/credit lines

• 30% Market Share in wind power projects

• 36 Engagement Platforms

• Included in 6 Sustainability indices

• 100% of new PF commitments in Greenfield

Energy Production Portfolio are Renewables

• TL 20.3mn investment in community programsLinked Sustainable Development Goals


9,14 9,20 9,27

9,519,60

2014 2015 2016 2017 2018

29

CORPORATE

GOVERNANCE

AND RISK MANAGEMENT

Key Value Drivers

• Transparent disclosure of information

• Integrated Risk & Crisis Management

• Compliance

Rating increase was driven by;

Successful implementation of new

branch model,

The adoption of a Risk Based Audit Model,

CORPORATE GOVERNANCE RATING

To identify risks &

opportunities

Based on the

predicted capability of

safe handling of risks

to achieve goals

& strategic objectives

On metrics related to

capital, liquidity and

profitability and risk based

limits

Linking material themes

& strategic objectives

Determination of

manageable risks

Monitoring risk appetite

framework regularly

RISK MANAGEMENT PROCESS

Outlook:

Positive

Publication of the first integrated

annual report.

Risk

Measurement

By using methods compliant

with international standards,

and in accordance with the

applicable legislation.

Advanced risk management

tools are utilized



30

FINANCIAL

PERFORMANCE (I / III)

Key Value Drivers


• Cost and revenue synergies

• Disciplined and sustainable growth


14,7%

16,8%16,9%

16,2%

18,7% 18,6%

9,50%

10,00%

10,50%

11,00%

11,50%

12,00%

12,50%

13,00%

13,50%

14,00%

14,50%

15,00%

15,50%

16,00%

16,50%

17,00%

17,50%

18,00%

18,50%

19,00%

19,50%

20,00%

20,50%

21,00%

Dec 16 Dec 17 Sep 18

14.7%

Bank-only CAR

Consolidated CAR

USDTRY 3.51 3.77 5.98

CET-1/Total

Capital93% 88% 85%

Sector:15.9%

16.3%

11.5%2018 Minimum

Required Level

Temporary measures

• FX Rate Fixing on RWA calculation

• Suspension of MtM losses on CAR calculation

Total Impact: 237bps (Bank-only)

225bps (Consolidated)

TL1.9bn

Excess Capitaltaking into account 11.5%

req. level & excluding

positive impact of temporary

measures

Bank-only:

TL14bn

Consolidated:

TL>10bn

Free Provision

1 Required CAR for 2018 = [8.0% + SIFI Buffer for Group 3 (1.5%) +

Capital Conservation Buffer (1.875%) + Counter Cyclical Buffer (0.09%)]

Note: Per BRSA measures, as of August 14th 2018, FX credit risk exposures will be converted with maximum of following two; (i)June 30, 2018 FX rate and (ii)

252 day average of CBRT FX bid rates. Also, as from August 14th 2018, MtM losses will not be included in CET1 capital

STRONG SOLVENCY VIA CAPITAL GENERATION


31

FINANCIAL

PERFORMANCE (II / III)

Key Value Drivers




Note: In the Cost/Income calculation, Income defined as NII + Net F&C +Trading gains/losses

– Provision for loans –Free Provisions set aside during the year +Other income+ Dividend Income


2015

20162017

9M18

10%

13%

16%

19%

40% 45% 50% 55%

RO

AE

COST/INCOME

43.1%

COST/INCOME

2.1%

OPEX/ AVG. ASSETS

60%

FEE / OPEX

+5pp

-14pp

INCREASING EFFICIENCY


32

FINANCIAL

PERFORMANCE (III / III)

Key Value Drivers





TL LOANS BREAKDOWN56% of Total Loans

FC LOANS BREAKDOWN44% of Total Loans


33


OUR VALUE CREATION


ABOUT GARANTI


34

Highest NIM incl. Swap Cost Highest Net Fees & Commissions /

IEA & Non-cash Loans

Highest CAR Highest CET-I

4.9% 1.3%

17.5%

Highest ROAE Highest ROAA

2.2%

16.3% 13.8%

Lowest Cost/Income

40.1%

Peer 3

Peer 2

Peer 15,576

Highest Net Income

ACHIEVED PIONEER POSITION

Highest Dividend Distribution

27.6%

TL Million, 9M18

Note: For fair comparison with the peers, latest available bank-only financials (30 September 2018) were used

Rankings are among private peers, namely Akbank, Isbank & YKB

* Per BRSA measures, as of August 14th 2018, FX credit risk exposures will be converted with maximum of

following two; (i)June 30, 2018 FX rate and (ii) 252 day average of CBRT FX bid rates. Also, as from August

14th 2018, MtM losses will not be included in CET1 capital

Cumulative, 9M18

Cumulative, 9M18 Cumulative, 9M18

Cumulative, 9M18

Cumulative, 9M18

Excludes BRSA’s temporary measure* Excludes BRSA’s temporary measure*


35

2018 PROJECTIONS

Deteriorating Macro Environment Posing Downside on Growth & Provisioning

TL Loans (yoy) <14%

FC Loans (in US$, yoy) Shrinkage

NPL Ratio4.0-4.5%

(No NPL sale assumed)

Net Cost of Risk~150 bps

(excl. currency impact)1

NIM incl. Swap Cost (yoy)Flat

(including CPI impact)

Fee Growth (yoy) > 20%

Opex Growth (yoy) ~10%

ROAE > 17%

ROAA > 2.2%

Garanti works to create

sustainable value for all

its stakeholders


37

APPENDIX – SUSTAINABLE DEVELOPMENT GOALS


38

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.

DISCLAIMER STATEMENT

Garanti Investor Relations

www.garantiinvestorrelations.com

Levent Nispetiye Mah. Aytar Cad. No:2

Beşiktaş 34340 Istanbul – Turkey

Email: [email protected]

Tel: +90 (212) 318 2352

Fax: +90 (212) 216 5902

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.

https://play.google.com/store/apps/details?id=com.garanti.garantiIR&hl=en

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