Operational Excellence - I

FINANCIAL PERFORMANCE

Financial performance, which is at the core of value creation at Garanti BBVA, is both the cause and the result of sustainable growth. The bank has an indirect and direct impact on the economy by offering its products to customers, investing in facilities and continuously improving its business model and processes from an operational and environmental efficiency perspective.

Aiming to allocate capital efficiently in order to maximize the value produced, Garanti BBVA focuses on disciplined and sustainable growth with its real banking principle that does not compromise its solid asset quality and prudent stance. It continues to support the economy with its effective balance sheet management, combining its unconditional customer satisfaction approach with a strong capital structure and efficiency focus.

ASSESSMENT OF FINANCIAL POSITION, PROFITABILITY AND DEBT PAYMENT CAPABILITY

Due to the emergence of COVID-19 pandemic, loose monetary policies of global central banks and fiscal incentives applied have been the highlight in 2020. 2021, was a year in which we have experienced the impact and consequences of these developments, and the recovery process that started with the vaccination becoming widespread. Extensive impact of the lockdowns on the economy have been prevented as the vaccination process has gained speed, even though the case numbers continued to increase due to second and third waves of the pandemic. Recovery process on the global trade side has also picked up in a parallel manner. Global trade, which contracted by more than 15% annually in 2020, is estimated to grow by 10.8% in 2021, according to forecasts of WFO. The acceleration in the vaccination process enabled the restrictions to be loosened to a large extent as the tourism season opened. In light of these developments, the global economy is expected to record a strong growth in 2021 after the contraction last year. According to the IMF's latest forecast, the global economy is expected to grow by close to 6% in 2021.

Growth in the Turkish economy has gained pace with the contribution of both domestic demand and increasing foreign demand. The fact that growth was mainly driven by domestic demand and the fluctuation in the exchange rate, especially in the last periods of the year, has put some put pressure on inflation. The policy rate started the year at 17%, increased to 19% with a 200 bps rate hike decision in March, and then ended the year at 14% following gradual rate cuts starting from September. The decline in funding costs in the last quarter of the year and the strong loan growth with the contribution of domestic demand supported the banking sector margins. The CPI-linker securities portfolios of the banks have also helped protect the balance sheets of banks against the rise in inflation.

Garanti BBVA continued to grow without compromising profitability, strengthen its capital and asset quality thanks to its dynamic balance sheet management in this environment. While its total consolidated assets total consolidated assets reached TL 849 billion with an annual increase of 57%, total performing loans grew by 42%, whereas the security portfolio grew by 34%. Strategic purchases were made in the securities portfolio during the period, to support margin management. Interest earning assets’ share in total assets is the highest among peers with 82%.