JCR Eurasia Rating affirms the ratings of ‘AAA(Trk)’ on the Long Term National Scale, ‘BBB’ on the Long Term International Foreign Currency and ‘BBB+’ on the Long Term International Local Currency Scales along with ‘Stable’ outlooks for Türkiye Garanti Ba

JCR Eurasia Rating has affirmed the rating of ‘AAA (Trk)’ along with a ‘Stable’ outlook for Turkiye Garanti Bankasi A.S. on the Long Term National Scale, which denotes the highest credit rating grade assigned by the agency. On the other hand, the Long Term International Foreign and Local Currency ratings were affirmed as ‘BBB’ and ‘BBB+’, respectively. Other notes and details of the ratings are given in the table below:

Long Term International Foreign Currency

:

BBB /(Stable Outlook)

Long Term International Local Currency

:

BBB+ /(Stable Outlook)

Long Term National Local Rating

:

AAA(Trk) /(Stable Outlook)

Short Term International Foreign Currency

:

A-3 /(Stable Outlook)

Short Term International Local Currency

:

A-2 /(Stable Outlook)

Short Term National Local Rating

:

A-1+(Trk)/(Stable Outlook)

Sponsor Support

:

1

Stand Alone

:

A

Garanti, as one of the leading institutions of the Turkish financial system, continues to enjoy the advantages of economies of scale to an extent of contribution to the sustainability of the profitability level by sustenance of upward path in margins and be supported by a diversified and integrated business mix through its widespread branch network, alternative delivery channels, increased convenience through digit(al)ization practices and affiliates in retaining its high level of market influence.

The Bank’s performance over the sector averages with its recurring revenue components together with sector-wide downward-sloping profitability indicators; capitalization level together with net positive effect of possible regulatory changes and CET1 share well above the sector adequate to absorb incidental losses and support sustainability; continuation of upward path of NIM having settled much above the sector average; maintained asset quality regarding below-the-sector NPLs including and excluding write-offs despite sharp NPL growth during 4Q2015 through reclassification and high level of loan loss provisioning; and sectorial impacts of the commission rebates having weighed on OPEX and expected to do so during 2016 and increasing funding costs to be balanced with profitable and selective loan growth with continuing upward repricing of assets were the factors effective in the affirmations of Garanti’s ratings.

Such fundamental issues as short maturity profile of the sector deposits causing high level of liquidity requirements despite the generation of alternative funding sources with longer maturities and improvements in diversification of funding mix; existence of downside risks to growth exerting pressure on profit margins and impacts on debt-servicing capabilities of the real sector; and persistence of stiff political headwinds on international and domestic levels still prevail.

Taking into account the inclusion of BBVA (Banco Bilbao Vizcaya Argentaria S.A), one of the leading banking groups in Europe, in the Bank’s shareholding structure as one of the major controlling shareholders and finalized process of additional share transfer from Dogus Group as well as Garanti’s sturdy balance sheet composition, the long term international local currency (BBB+) and long term international foreign currency (BBB) ratings have been affirmed above Turkey’s sovereign ratings (BBB-).

The financial strengths of the current shareholders, their willingness to provide funds to the Bank and the Bank’s importance in the overall economy and financial markets due to its magnitude and geographical outreach have been assessed within the highest rank of (1) for ‘Sponsor Support’ category. The current senior management’s ability to administer the risks undertaken and high degree of convergence to corporate governance and sustainability practices given the Bank’s strong equity base, profitability indicators above the sector averages and asset quality also correspond to the highest level of ‘Stand Alone’ category with (A) under JCR Eurasia’s notation system.

For more information regarding the rating results you may visit our internet site http://www.jcrer.com.tr or contact our analyst Mr. Zeki M COKTAN.

JCR EURASIA RATING

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