Turkiye Garanti Bankasi A.S. - GDR - 144A

Strong earnings momentum (what’s good): In 1H+9M 2026, Garanti BBVA delivered TRY 98bn net income (+16% YoY) and 27.5% ROE. Performance was driven mainly by rebounding net interest income (NII) and sustained fee growth—NII +23% QoQ in Q3; fees +5% QoQ and +36% YoY. Overall business model remains lending- and commission-driven, with trading income ~3% of gross income (more volatile vs. core lines).

Loan & asset mix shift; credit quality pressured by retail (what’s bad): Total assets reached TRY 5.6tn, with loans rising to 56% of assets. The bank is gaining TL lending market share, but risk is higher in the retail-heavy mix: Stage-2 increased to 14% (from 12%)—~90% of the increase came from SICR/SICR, and 85% of that SICR is non-delinquent, yet coverage ratio fell. New NPL inflows (~70%) were concentrated in consumer loans & credit cards, and restructuring regulation changes caused a temporary jump in NPL inflows (noted especially Q2 and Q3).

Cost of risk near peak but still rising (forecast/risk): Management said cost of risk is above original expectations due to higher-for-longer rates prolonging asset quality normalization and lower-than-expected provision reversals. They expect cost of risk to finish slightly above initial guidance. On timing, they were explicit: not at the peak, but near the peak, expecting ~10% or less additional increase going into next year (per their budgeting process).