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Garanti flags risks to capital ratio as FY'16 profit rises

Türkiye Garanti Bankasi AS reported a year-over-year rise in 2016 profit but warned that Fitch Ratings' recent downgrade of Turkey is expected to negatively impact the bank's capital adequacy ratio by about 105 basis points.

The capital adequacy ratio, which stood at 14.7% as of Dec. 31, 2016, is also at risk of shedding 60 basis points for every 10% depreciation of the Turkish lira, Handan Saygin, senior vice president of investor relations, said during an earnings call. The bank will remain "well above" the required capital levels, Saygin added.

The bank reported net profit attributable to the group of 5.11 billion lira in 2016, compared to 3.58 billion lira earned in 2015.

Net interest income rose to 12.26 billion lira from 10.26 billion lira in 2015, while net fee and commission income also increased to 3.28 billion lira from 2.96 billion lira. The total operating income came in at 16.91 billion lira, compared to 13.91 billion lira in 2015.

Provision for losses on loans and other receivables amounted to 3.39 billion lira, up from 2.64 billion lira a year ago. The bank also booked a net trading loss of 743.7 million lira, compared to a loss of 830.6 million lira in 2015.

The return on average equity stood at 15.4%.

Garanti said its nonperforming loan ratio decreased to 2.97%. The bank expects its loan portfolio to expand by 11% in 2017 and its NPL ratio to be at around 3%.

As of Jan. 31, US$1 was equivalent to 3.77 Turkish lira.