Turkiye Garanti Bk

Hello and thank you for joining us in Guaranty BBVA's Third Quarter 2024 Financial Results Webcast. Our CEO, Mr. Mahmut Akden, our CFO, Mr. Aydin Güler, and our Investor Relations Director, Misandan Saygın, will be presenting today. As always, there will be a Q&A session following the presentation, and you will be able to ask your questions either via raise hand button or by typing them into the Q&A area. I now leave the floor to our CEO for his initial remarks and to management for the presentation.

Hello, everyone. Welcome to our third quarter earnings results and call. It's a pleasure for me to be able to meet with you today, especially as we present again another stellar results. I've been part of this organization for 12 and a half years and from moving from the front line of retail banking to corporate and investment banking and as a part of executive leadership. And these 12 and a half years actually deeply shaped my understanding of our institution's strengths and potential. I'm excited to lead us today into a new chapter. While there may be changes in leadership, as you will notice from our results, our successful strategic direction remains unchanged, as you will see from our most recent figures. Now I hand over the presentation to Handan to present our third quarter results.

Thank you, Mahmut. Good afternoon, everyone. We're thrilled to be with you on another earnings call, presenting our outstanding performance. Despite the continuing market complexities and even further regulatory pressures, we sustained improvement in our core banking revenues. Before getting into the details, let's quickly go over the macro backdrop we're in. Rebalancing in the Turkish economy continues with a mild slowdown so far. Restrictive monetary policy and expected fiscal consolidation 2025 onwards might keep GDP growth at closer to 3% in the short term. We expect monthly inflation trends to decline to slightly below 2% by end of 2024, resulting in an annualized level of nearly 25% in 2025, with risks tilted to the upside. Depending on the improvement in inflation trends, we maintain our call of a modest first rate cut in December, but define risks as staying high for longer. Uncertainties about the wage and tax adjustments at the start of the year will require the central bank to remain cautious. Driven by weak domestic demand and lower energy prices, current account outlook further improves to below 1% of GDP. Medium-term program shows efforts to keep budget deficit to GDP below 5% in 2024 and close to 3% in 2025. Negative fiscal impulse will support the disinflation process and excluding earthquake spending, budget deficit to GDP will remain below 3%, which would be in line with the Maastricht criteria. Now, time for the financials results. In the third quarter of 2024 as well, Guaranty sustained its best-in-class performance with a 22.4 billion Liras of net income, bringing the nine months net income to 67 billion Liras. This represents a clean 27% year-on-year earnings growth when adjusted with last year's provision reversal. So even with the rules of the game changing midway through the quarter, causing further pressure on funding costs, we sustained our outstanding performance and ended with a year-to-date return on average assets of 3.5% and a return on average equity of 33%. This best-in-class performance is owed to our highest internal capital generation capability on the back of customer-driven asset mix, high asset quality, closely managed funding costs, and operating expenses. We registered an even higher performance in growing our core banking revenues. The quarterly growth of 12% in core banking revenues carried the cumulative year-on-year growth to 58%. Biggest component this year is net fees and commissions, as expected, with an 18% quarterly and 2.5-fold cumulative annual growth. Second biggest component remained to be growth in poor net interest income, despite stabilizing loan yields in the quarter and further tightened macro prudential measures, such as much higher reserve requirements, the deposit conversion rules, and minimum interest rate calculation changes in credit cards. Still, when we look at our core banking revenues to assets ratio, we have been consistently improving it and its level compares quite favorably to that of the average peers. For instance, our core banking revenues to assets ratio of 6.7% was 2.9 on average at peers in the first half. In other words, our core banking revenue generation capability remains to be the highest in sectors and our inherent strength. This achievement requires high share of customer-driven asset mix and relatively lower share of securities. Our performing loans and assets make up the majority with 56%. Securities share, on the other hand, is at its two-year low with 14% share, and it is the lowest among peers. We booked another 8% Turkish Lira lending growth in the quarter, bringing the year-to-date Turkish Lira loan growth to 38%. This growth is achieved while sticking to the imposed loan growth caps and booking higher growth in the preferred areas such as investments, export, credit cards, and earthquake-affected area loans. In foreign currency lending, we booked a strong 8% growth and a quarter, taking the year-to-date to a double-digit growth, suggesting an upside in our foreign currency loan growth projection. On the securities front, we're typically opportunistic and grow for either hedging purpose or regulatory-driven. In the quarter, we did replace our redeeming Turkish Lira securities and added a bit more to our fixed rate portfolio. Combined with the securities purchased in the first half, year-to-date growth registered in Turkish Lira securities reached 32%. Drivers of our Turkish Lira loan growth were mainly consumer loans, such as mortgages and general purpose loans with preferably longer maturity, and credit cards. We gained market share in Turkish Lira across the board, except for a slight market share loss in business loans, due to low demand and current short-term preference of companies waiting for the rate cuts. Our Turkish Lira loan portfolio at the end of third quarter surpassed 1 trillion Lira's mark on the back of a year-to-date growth of 49% in credit cards, 40% in consumer loans, and 28% in business loans. Our market share in consumer general purpose loans among private banks neared 20%. In mortgages, it exceeded 26% and in credit cards, it's almost 23%. Also in business banking, we still have 20% market share. In total, we have the largest Turkish Lira loan book among private banks. Moving on to the quality of the total loan book of 1.7 trillion liras, 88% is in stage one. 10.4% or 176 billion lira is in stage two. Now, isolating the currency impact, which has affected largely the restructured portion of Stage 2, Stage 2 increase was predominantly due to the increase in the SICR portion, namely those expected small ticket size, retail, and credit card loans. Since the coverage of the SICR is relatively low, it did not pressure the Stage 2 provisions much, while the recovery of a highly provisioned wholesale book in Stage 2 diluted the foreign currency coverage portion of Stage 2. About one third of our stage two is foreign currency loans related, and their coverage even after this recovery remains at a strong 38%, while the Turkish Neural Loans coverage is at 8%. For the NPL evolution, let's see on next slide. The net NPL inflows in the quarters suggest deterioration, we all expected, after last year's exceptional low base and robust retail growth. New NPLs doubled quarter-on-quarter, and 90% of them related to the retail book. Half alone was from the credit cards portfolio, MPL, while MPL inflow from commercial side was almost nil. The ratio post MPL sale and write downs went up to 2.1% from 1.9 in the first half. It was also supported by the still strong fairing collection performance on the wholesale side. We sold a total of 5.9 billion Liras of MPLs for 2.3 billion Liras as they were feasible with positive spread in MPL sale price and the legal process time cost in this inflationary period. Our total provisions on balance sheet, including the written down portion went up by another 6 billion Liras and reached 76 and a half billion Liras. This is the highest provision level among the private banks and represents a 4.5% total cash coverage. On the next slide, we'll see the translation of this into cost of risk. Even though net provisions excluding currency and earthquake-related provisions of last year spiked almost fivefold year on year, and double quarter and quarter, collections from the wholesale book continue to support the year-to-date net cost of risk. Cumulative net cost of risk went up to 90 basis points from 66 basis points in the first half. This increase is very much parallel to our anticipated deterioration in the year. For that reason, we stick to our whole year guidance of 125 basis points of net cost of risk by year end. On the funding side, customer deposits dominate the funding of assets. The high share of demand deposits funding assets, in spite of the high interest rate environment, remains to be the key financial differentiation supporting margin outperformance. Borrowings share in funding assets remains low at under 6.5%. Total external debt as of the nine months was $4.6 billion, with some increase in the MPN program in the quarter. Of this, 41% relates to securitizations, 27% to sub-debt, and 19% to syndications. $1.5 billion of the external debt is due within a year, and against that, we have $5.1 billion buffer in foreign currency liquidity. The quarterly drop in foreign currency liquidity buffer is due to the significant increase in the total required reserve amount and decrease in bank depot placement. Overall, our leverage remained to be the lowest among peers at 8.5 times the equity. Conversion to standard Turkish lira deposits continued in line with the regulation targets given. As of the third quarter end, we grew another 6% in Turkish lira deposits, bringing the year-to-date Turkish lira deposit growth to 29%. Turkish dollar deposits now make up 56% of the total. On the foreign currency deposit side, even though there seems to be higher growth in dollar terms, 11% in the quarter versus 6% growth year to date, this growth though largely relates to gold deposits that went up in value and the parity move during the quarter rather than dollarization. Actually, half of the increase in foreign currency deposits in our bank-only foreign currency deposit growth relates to the appreciation in the gold value. A quarter of the impact comes from the change in euro-dollar parity in the quarter. On a consolidated basis, the reason behind the increase that looks much bigger is because of the non-retail foreign currency deposit volume growth at our foreign subsidiaries. Even though we manage the most sizable Turkishner deposit portfolio in high interest rate environment, we continue to lead in customer demand deposits share in total. That is 40% at guarantee versus the average of private peers of 34%. Also, within the time deposits, even though the conversion to standard Turkish Lira deposit has picked up significant pace, we still have the highest share of foreign currency protected deposits in Turkish Lira time deposits with relatively lower funding costs. So clearly, these provide significant funding advantage and continue to support our superior margin performance. Accordingly, our margins remained resilient despite the continuing tight stance in monetary policy and additional macroprudential measures. Quarterly margin improvement of 50 basis points largely stemmed from the CPI book, and our CPI estimate increased to 45% from 40 that we have used in the first half. On the other hand, the regulatory changes introduced midway through the quarter exerted additional pressure on our core net interest margin and limited the expected quarterly expansion. In the quarter, our core margin went up by a mere eight basis points to 2%. Nominally speaking, our net interest income, including swap costs in the quarter, ended 25 billion liras, Stripping out the CPI income of 13 billion liras in the quarter meant another 1.6 billion liras increase of core net interest income to 12.2 billion liras. Even though the core net interest income growth is lower than our projections in the beginning of the year, the level of core net interest income and the margin are by far the highest among peers. This strength proved to be our legacy. Please note that if we had not had the rules of the game change midway through the year, our cumulative net interest margin would have been 60 basis points higher and quarterly net interest margin expansion would have been 70 basis points rather than 51 basis points. And with that, we would have been perfectly on track to meet our flat margin guidance for the year. taking into account the further spreads and thus margin improvement we expect in the last quarter. As for Net Fees and Commissions, there is 18% Q-on-Q and 2.5% BOLT year-on-year growth driven largely by the payment systems business. Accordingly, of the 68 billion Liras of net fees and commissions booked in the first nine months, two-thirds relate to the payment systems business, owing to our number one rank in that business. Also, our number one rank in Turkish Lira cash loans, non-cash loans, as well as money transfer fees, non-life and life insurance were all supportive in our net fees and commissions growth. Key reasons behind our robust fee performance are the strength in relationship banking and the digital empowerment contributing to not only growth in our active customer base, but also penetrate further the existing customers. Our digital active customers now reach 16.3 million and digital sales in total is 89%. As for the operating expenses performance, quarterly growth was 18% and the annual growth pointed to 71% post the currency adjustment. Even though the salary adjustment hit the quarterly operating expense base, our efficiencies remained best in class. such that our cost-income ratio with 43% suggests the highest deficiency among peers in this period. Peace coverage of operating expenses remained at a strong 93%, and operating expenses in average assets were 3.8%. As per capital, consolidated capital X ratio without the BRSA's forbearance went up to 15.8% and core equity tier 1 to 13.4%. Net income generation in the quarter continued to support the solvency and became more visible, especially upon the normalization of risk weights assigned to consumer loans in the quarter for the regulator. If further normalization of risk weights on commercial loans gets realized, it will take the capital equity ratio level 95 basis points higher than the current one. The foreign currency sensitivity on our capital equity ratio is a low 21.6 basis points negative for every 10 percentage points depreciation. owing to our 500 million tier two issuance in the first quarter this year. Now, in summary, we hold the Olympic gold medal in the financial pentathlon. In the nine months into 2024, we recorded the highest net income via sustained increase in core banking revenues. The year-on-year growth in the core banking revenues was 58%, reaching 128 billion liras in the nine-month period. On the fee side, our diversified fee-generating businesses, along with the extraordinarily high payment systems fees, almost tripled year-on-year and brought the fees coverage of OPEX to 93%. On the asset quality front, we remain committed to robust provisioning. Total provisions on balance sheets reach 61 billion Liras, including the written down portion, it is actually 77 billion Liras, suggesting a total coverage of 4.5%, a level that is highest among the peers. With the rise in credit cards and retail NPL inflows, and normalizing collections from the wholesale business, our net cost of risk is well on track to be within the guided level by year end. On the capital front, we remain solid. We had 81 billion euros of excess capital as of the nine months end when calculating without the BRSA's forbearance. Our progress in business growth continues. Today, every one out of two bank customers has an account with Guaranty BBVA, and our digital active customers with 16.3 million is the highest in the sector. In conclusion, our agility and financial resilience once again validated our unmatched leadership. Looking forward, we maintain our full-year profitability guidance. Even though there is now a visible downside risk to our margin guidance due to the additional regulation changes in the second half, we are well on track to compensate that downside with better growth and fees and commissions and trading income. Therefore, we stick to our mid-30s return on average equity guidance for full-year 2024. Now with this, I end my presentation and we can now start to take your questions. Thank you for listening.

Hello again for the Q&A session. Just a quick reminder, you can ask your questions by either typing into Q&A area or by using raise your hand button. Once your name is announced, you are welcome to ask your question. One minute for the first question. The first question comes from Jihan Saroğlu. Hi, Jihan. Please go ahead.

Hi, Cihan.

Now we can hear you. Please ask your question.

Hello. Thank you very much for the presentation. I have three quick questions, actually. First one is about your non-HR operating expenses, which have grown almost 17% QonQ. If you could give us some granularity about that growth. I mean, I understand the HR growth because of salary adjustments, but I mean, 17% in a quarter for non-HR is also a significant growth. Then the second question is, obviously there is some increase in NPL formation. So if you could give us your preliminary thoughts about the 2025 cost of risk, where could it be? And then lastly, You have benefited significantly from the balance sheet positioning in 2024 as rates have increased. But obviously, in 2025, we are going to discuss lower rates. So is there any change that you're planning in balance sheet mix to benefit more from falling interest rates in the coming year? Thank you.

First of all, our non-HR costs includes promotions we pay to retirees as well as salaries. And that is, as you might know, amortized in income statement. When you compare it to our peers, likely we'll have the lowest increase, quarter over quarter. As you can imagine, the customer acquisition cost goes up with the campaigns. That's mainly driving the cost. Regarding your second question is cost of risk. Yeah, last few months shows that the last three months with a higher interest rate as normal. There is a bit of creep up in overall cost of risk related to consumer side because credit growth, which was not capped. credit card growth has been growing significantly, 200% year over year. And that translates into, with a delay, to NPL and increasing cost of risk. But if you go back four or five years, the cost of risk we had recently has been very low compared to historicals. As such, it's an early prediction, but we could expect 2025 cost of risk to go up to 200 to 250 BIPs. based on the cost of consumer loans primarily. Otherwise, our commercial and corporate provisions has been relatively stable and commercial one has been negative. On balance sheet, as you can imagine, we manage our balance sheet with significant agility. As we saw that higher interest rate coming in, we had reduced our duration very much over the last year in 2023. And then we start to increase our duration again to position ourselves better to leverage decreasing interest rates in the coming months and in the coming year. And so we will continue to be customer driven, although we have been building a bit of securities, but that was partially related to regulation. So there hasn't been any significant change. When you compare our results with peers, we have the lowest securities ratio that actually positively impact our overall results. I hope these answers your question.

Yes. Thank you very much.

Sure.

Our second question comes from Mehmet Sevim. Hello, Mehmet. Please go ahead. Hi, Mehmet. Can you hear us? You have to unmute yourself if there is a problem. I think now we will be able to hear you.

Thank you.

Thank you.

Hi, Mahmoud Bey. Hi, Handan. Thanks very much for your time. Mahmoud Bey, congratulations for your new role and all the very best. I just was wondering if you could give a sense of your very near strategic priorities and what changes we may see at Guaranty under your leadership, if at all. Do you foresee to do any strategic changes in the coming year relative to your peers given obviously as we're entering the hopefully a more normalized environment with more growth etc so if you could give us any any sense of if we may see any changes or not that would be very helpful under your leadership and Also, as we're approaching the rate cutting cycle, hopefully for 2025 in a more normal environment, do you have any views of when we may see the relaxation of the macro prudential measures in terms of the timing and what levels of growth we may see in 2025?

Thank you. First of all, in terms of strategy, I've been part of the executive team and for many years, I think our focus on execution has been there and will continue to do so. Especially we'll be focusing on capital generative growth. And so our focus on managing the balance sheet prudently will continue to exist. I think as you know, we have had really four or five years, including COVID and monetary policy normalization has been tough years. And the prior CEO, Recep, has done an outstanding job throughout those years. Now we are coming into the time where, as you mentioned, there will be more relaxation on monetary policy in the coming year, hopefully, and adjustments. So we will continue to focus on customer experience. That's both BBVA's and Galant BBVA's focus to be always number one, but also focus on all the customer journeys and experience that makes a significant difference. And that includes digitalization of all the segments, not just retail. That will continue to be focused, as you know, in the mid to long term. The impact of AI will be crucial and pivotal in customer experience as well. So we'll continue to focus and invest in the mid to long term while we focus in the short term our execution capabilities. And third one. is our focus on winning team and talent and we'll continue to invest in talent. That's the third part of our strategy. And that's also the VA strategy. We are a global bank and Globally working together with BBVA gives us strength, not only in Turkey, but also for companies outside of the Turkey, help their businesses in trade finance, help their businesses when they expand beyond our borders. So it's important to continue to support and leverage BBVA's 20 plus countries existing and presence. That is more cross-border work. So in summary, capital generating growth is number one, and that is how we generate the numbers. Radical customer experience number two, including digital AI and leveraging more those in any segment. And number three is continue to build our global presence and strengths through better talent across the globe. In terms of your second question is related to relaxation of monetary policy as well as the loan growth related to that. As you hear also, our minister as well as head of central bank, they follow the data as we follow as well. There is a very tight stance and inflation is the most important data. As we see, there will be a decrease in interest rate in the coming months, but the timing is not predictable, as you can imagine. But toward the end of the year, we are hoping that the inflation comes down below 2% and we start to see some further decrease in interest rate. And I think given any inflation experiencing country, including Turkey, but you have seen over the last few years in US as well, inflation is a very tricky metric. And from month to month, it could fluctuate very easily based on many parameters. I would expect, but this is my personal view, we may not see every month a reduction in interest rate because there will be different factors coming in. But we see that clearly a very successful monetary tightening process will yield lower interest rate. And in a good scenario, we can expect Finishing the year next year, somewhere around 25% plus minus 5%, maybe more on the upside, close to 30%. But there is clearly an indication of decreasing interest rates. And what it means for us beyond extending duration, also it affects our loan growth. I would suspect again, when certain months when there is no interest rate decrease, there might be some relaxation on credit limits. Credit limits is very important also factor or regulation to limit the consumption and demand and therefore affect inflation reduction very effectively. But our loan growth right now is capped around 2% for most of the most of the loan types. So you can expect us to hit those numbers every month because we believe there is sufficient demand in many fronts, including renewables, including the country's investment and corporate investment in many fronts. So we expect to hit those 2% on capped loan products, but credit card, as well as more importantly, For those loans that are not capped, what I mean is investment as well as exports and agriculture. We continue to focus on those to grow beyond 2%. So overall, we expect to have reasonably good growth close or above inflation for next year, maybe between 35 to 40% at minimum. For next year, that will give us a very good balance sheet and income statement for next year. So we are relatively positive overall. It's just the trend month to month will be different. And we should expect, you know, very sound, continue to see very sound policies around both interest rate as well as these regulation that supports and the fight against inflation. So those are my quick answers. I hope it answers your questions. Yes, that's great. Thank you and all the very best. Thank you. Thank you.

We have a written question from Valentina Stoykova-Barclays. She asks, can you please explain a bit more how you managed to expand core net interest income and net interest margin in third quarter? And how do you see net interest income and net interest margin trajectory going forward into fourth quarter and the next year?

First of all, thanks for the question, Valentina. Number one, in this quarter and going forward, the most critical item in NIM management is managing the funding costs. As you can imagine, with the expectation of lower interest rates, we start to be able to manage more on funding costs. As we continue to keep our loan yields almost at the highest level, we still maintain those levels. And to an extent, having caps also helps to maintain those levels given our large customer base. In fourth quarter, with that and with slightly higher CPI revenues, we expect to have 1.5% higher NIM in fourth quarter, and our cumulative NIM will be slightly lower than 2023, even though we earlier declared that we will keep it flat, but the increase in reserve requirements remains. actually deviated us from hitting that number. In terms of 2025, it's hard to guess at what level we will be, but we will definitely be significantly higher than today, given that every day we are able to manage our cost of funding further without actually even seeing an interest rate cut yet. So with that coming and with higher duration in our loans, we are confident that we will see very, very good names. All I can say will probably see the, again, the best names in the sector and we'll continue to execute on that.

Thank you. We have a question on the line from Mikhail Butkov. Hello Mikhail, please unmute yourself and ask your question.

follow-up question on asset quality. I think you mentioned that there was nearly zero formation on the corporate side. Was that a net zero formation or also from the gross formation perspective, gross and pale formation, it was low in the quarter? Basically, I'm asking if there are still 2C recoveries in the corporate segment which support your Yeah, cost of risk and NPL and for how long do you think it can continue? And then also a question on, yeah, on inflation accounting in the TL accounts. So do you expect it from the beginning of the next year? What's your outlook on this? Thank you.

Let me start with the first one. In terms of corporate and commercial NPL formation, actually, we have almost non-corporate NPL, very little commercial NPL that has been offset by continuing collection, actually. Without going further detail of the companies, but as you see, the Turkish corporate Eurobond market is quite open and the companies are going out that market. There are different opportunities for financing the growth of commercial customers and that has a positive result on our collection performance. On net, we had zero NPL for September. We expect the same thing in October and going forward for the last two months as well. So overall story is good. And then corporate and commercial customers have very strong performance. actually balance sheet coming out of the low interest and COVID environment, the ones who had issues or challenges, those are coming even before, from the time even before that. And right now they are also able to manage their NPL. So we are lucky there. And then the second question regarding inflation accounting. For us, regardless whether it's applied next year to banks or not, we continue to do that for BBVA. I don't have any impact on tax regime, but the numbers you might see differently if we all switch to inflation accounting for local reporting. But from BBVA perspective, for us, it doesn't matter. We are calculating our numbers based on that. Earnings per share growth will be higher, but we'll see with the inflation versus without inflation.

Thank you very much. And just to follow up on the first question, as you see collections from the past and pale vintages on the commercial side. Do you expect these collections to continue into the next year and maybe later, or the scope of collections is gradually coming down on the front?

It will gradually come down. We had four or five important FAS that comes from the past and we have been collecting on those. I think there will be some more in the first quarter of next year. But overall, we don't see new growth NPL in commercial and corporate. Where we see the challenges where also regulators took action was, as I mentioned, in the consumer side, especially related to credit card and a little in GPL or general loan. And there, as you know, there has been a restructuring process. program that has been provided to us that we can actually structure the loans up to five years, which gives quite a bit of relaxation and helps us in the collection side. And then on top of that, the minimum payments level For 20% payment has been increased. That also helped the consumers. And we haven't seen much on SME yet, on NPL, gross NPL yet. As I said, commercial corporates, we feel very comfortable. We still have some more files that we can collect on in the next four to five months. In SME, we don't see much yet. In consumer side, there has been an increase, I think, for all of our peers as well in the third quarter, but that has been stabilized and we expect to see some even improvement over that level with these restructuring programs that have been permitted by the BRSA.

All right. Yeah, thank you very much for these answers. Very, very helpful. Thank you.

Thank you.

Our next question comes from David Taranto. Hello, David. Please go ahead.

I have two questions, please. How should we think about the fee growth into 2025, particularly on the payment side, given the disinflation trend and anticipated rate cuts? How much of a deceleration should we expect there? Fees over assets or fees over revenues have been hovering well above the historical levels. What should be the normalized level there in the aftermath of the macroprudential measures? And secondly, Shall we expect a change in the payout policy given the uncertainty around the inflation accounting? Would you expect any change there from regulators' point of view? Thank you.

Yeah, I mean, fee growth may not be as strong as you can imagine this year with the interest rates coming down. That will impact at some point what we can charge in terms of commission to our merchants. So we expect a reduction. At some point, we are still not there. There needs to be more than a few cuts to see lower fee generation. Therefore, I don't have a very good prediction because we don't know how quickly interest rates will come down. But we expect a fee growth, regardless, slightly above inflation for next year. And in terms of dividend payout, if this is applied, as you know, BRSA sets every year the maximum dividend payout ratio by looking at the solvency ratios and For sure, hyperinflation account lowers the current year net income with no negative impact on regulatory capital in fact. So PRSA may allow banks to distribute cash dividends over hyperinflation adjusted net income of 2025. Therefore, with a higher payout ratio, if no deterioration of capital ratios is observed, it's too early to make an estimation or assumption of PRSA approaching regarding 2025. dividend payout of the banks. On top of this, there might be additional option to pay dividends out of the retained earnings as well, but we'll see as we approach. I mean, this is one of the potential discussion with BRSA as we go into the next year. As you know, it has very little impact on us because we are still applying the tax on the nominal terms. I hope we still report on nominal terms, maybe. We'll see in the coming days. Thank you, David.

We have a written question from Valentina. Do you see market conditions conducive currently for Eurobond issuance and can we expect a higher appetite for issuance from Garand going forward both in senior and capital instruments? Any color on this will be very helpful.

Sure. First of all, we don't need senior issuance as you know, our FX liquidity is really high and there is a cap already on swaps. Therefore, additional liquidity sits with us and we cannot grow above regulatory caps on FX loans. As such, we cannot utilize really more FX. If CDS go lower, we might consider it depends on the cost. We are looking into the invest in five to 10 years bonds if you have extra liquidity, but the yields are not there for our appetite. So from senior issuance standpoint, we are not there in thinking. We don't need really AT1 issuance, but maybe we will consider tier two in the coming months. Currently, we are observing the market and it will be opportunistic for the possible issuance in the coming months. Thank you.

Seems like we don't have any more questions, so this concludes the Q&A session. I'll leave the floor to our CEO for closing remarks.

Thank you all for your participation. In concluding this quarter's calls, I would like to emphasize once again our commitment on capital generated responsible and sustainable growth strategy that has guided us so far successfully in the past and will continue to always prepare in any environment to succeed and exceed expectations and as well as the sector. And I think our third quarter results and market positions as Turkey's most valuable company are clear evidence of this capability. consumer-focused and agile business model will remain at the heart of everything we do and will continue to transform our process. As I mentioned, the questions invest in the future, not just the next year or next quarter in expecting and meeting the evolving needs and expectation of our customers and the sector and the shareholders. Thanks again for your time and hope to meet you in person in Istanbul or anywhere and have a great evening. Thank you for listening.