Turkiye Garanti Bankasi A.S. - ADR

Strong earnings momentum (good): Garanti BBVA delivered TRY 98bn net income in 1H/9M 2026 (+16% YoY) with ROE 27.5%. The Q3 driver was a +23% QoQ recovery in net interest income (NII) supported by improving funding conditions and disciplined loan pricing; fee income +5% QoQ / +36% YoY. The bank emphasized that its earnings are still primarily driven by lending-driven asset mix (loans contribution ~56%, total assets TRY 5.6tn).

Cost of risk rising—near peak, not a surprise (bad but partially managed): Stage-2 increased to 14% (from 12%) with most of the increase from SICR, and about 85% of that SICR portfolio is nondelinquent (i.e., early-stage deterioration rather than fully delinquent). NPL inflows are shifting toward consumer/credit cards (management: ~70% of new NPL inflows from consumer loans & credit cards). Management stated cost of risk is above initial expectations and expects it to finish slightly above guidance; they suggested it is “near the peak” and forecast another ~10% increase or less into next year (while acknowledging normalization is prolonged by higher-for-longer rates).

2026 guidance/outlook: better nominal ROE, tougher inflation real targets (mixed): Despite macro revisions, management expects to deliver better than guided items for revenue; lending growth remains in line with guidance; fee growth in line; and OpEx growth below the initially guided range (cost discipline/non-HR). However, because inflation is now expected at ~30% vs initial 25%, they no longer expect to meet “real ROE” targets; they remain confident in nominal ROE guidance and said current ROE levels are expected to be sustained (best-in-class vs peers per management).