Turkey
Highlights for the period January - March 2026
- Growth in lending activity in the quarter was boosted by loans in Turkish lira
- Positive performance of recurring revenues
- Greater negative adjustment for hyperinflation
- Favorable evolution of the net attributable profit
BUSINESS ACTIVITY (1)
(VARIATION AT CONSTANT EXCHANGE RATE COMPARED TO 31-12-25)
(1) Excluding repos.
NET INTEREST INCOME / AVERAGE TOTAL ASSETS
(PERCENTAGE AT CONSTANT EXCHANGE RATE)
OPERATING INCOME
(MILLIONS OF EUROS AT CURRENT EXCHANGE RATE)
NET ATTRIBUTABLE PROFIT (LOSS)
(MILLIONS OF EUROS AT CURRENT EXCHANGE RATE)
| FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE) | ||||
|---|---|---|---|---|
| Income statement | 1Q26 | 𝚫 % | 𝚫 % (1) | 1Q25 (2) |
| Net interest income | 1,121 | 59.9 | 93.4 | 701 |
| Net fees and commissions | 565 | 2.7 | 26.9 | 549 |
| Net trading income | 146 | 18.2 | 42.3 | 124 |
| Other operating income and expenses | (120) | 11.6 | (31.2) | (107) |
| Gross income | 1,712 | 35.1 | 79.5 | 1,267 |
| Operating expenses | (679) | 17.6 | 42.1 | (577) |
| Personnel expenses | (395) | 18.6 | 44.7 | (333) |
| Other administrative expenses | (218) | 17.8 | 43.9 | (185) |
| Depreciation | (66) | 11.5 | 23.4 | (59) |
| Operating income | 1,033 | 49.8 | 117.1 | 690 |
| Impairment on financial assets not measured at fair value through profit or loss | (352) | 50.2 | 85.1 | (234) |
| Provisions or reversal of provisions and other results | (16) | n.s. | n.s. | (2) |
| Profit (loss) before tax | 666 | 46.9 | 135.6 | 453 |
| Income tax | (354) | 33.8 | 65.6 | (265) |
| Profit (loss) for the period | 312 | 65.2 | n.s. | 189 |
| Non-controlling interests | (49) | 60.5 | 280.1 | (31) |
| Net attributable profit (loss) | 263 | 66.1 | n.s. | 158 |
| Balance sheets | 31-03-26 | 𝚫 % | 𝚫 % (1) | 31-12-25 (2) |
| Cash, cash balances at central banks and other demand deposits | 9,593 | 5.9 | 6.7 | 9,061 |
| Financial assets designated at fair value | 8,133 | 62.3 | 63.9 | 5,010 |
| Of which: Loans and advances | 19 | 7.4 | 8.8 | 18 |
| Financial assets at amortized cost | 71,519 | (0.7) | 0.3 | 72,047 |
| Of which: Loans and advances to customers | 56,952 | 6.0 | 7.1 | 53,745 |
| Tangible assets | 2,047 | 7.5 | 8.3 | 1,905 |
| Other assets | 2,922 | 9.0 | 9.9 | 2,680 |
| Total assets/liabilities and equity | 94,215 | 3.9 | 4.9 | 90,702 |
| Financial liabilities held for trading and designated at fair value through profit or loss | 1,868 | 10.5 | 9.0 | 1,690 |
| Deposits from central banks and credit institutions | 3,317 | (6.9) | (6.2) | 3,565 |
| Deposits from customers | 65,433 | 3.9 | 5.0 | 62,984 |
| Debt certificates | 7,270 | (3.1) | (1.9) | 7,502 |
| Other liabilities | 6,937 | 21.2 | 22.0 | 5,726 |
| Allocated regulatory capital | 9,390 | 1.7 | 2.9 | 9,235 |
| Relevant business indicators | 31-03-26 | 𝚫 % | 𝚫 % (1) | 31-12-25 |
| Performing loans and advances to customers under management (3) | 56,115 | 5.7 | 6.9 | 53,080 |
| Non-performing loans | 3,130 | 12.0 | 13.5 | 2,793 |
| Customer deposits under management (3) | 65,356 | 4.5 | 5.6 | 62,535 |
| Off-balance sheet funds (4) | 26,823 | 2.0 | 3.4 | 26,290 |
| Risk-weighted assets | 74,171 | 3.7 | 4.9 | 71,551 |
| RORWA (5) | 1.7 | 1.4 | ||
| Efficiency ratio (%) | 39.6 | 44.4 | ||
| NPL ratio (%) | 4.1 | 3.9 | ||
| NPL coverage ratio (%) | 74 | 76 | ||
| Cost of risk (%) | 2.53 | 1.94 | ||
| (1) At constant exchange rate. (2) Revised balances with no significant impacts. For more information, please refer to the “Business Areas” section. (3) Excluding repos. (4) Includes mutual funds and pension funds. (5) For more information on the calculation methodology, as well as the calculation of the metric at the consolidated Group level, see Alternative Performance Measures at this report. |
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Macro and industry trends
Economic activity has remained resilient during the last quarter of 2025 thanks to the contributions of private consumption and the services sector, which allowed economic growth for the full year to stand at 3.6%. The conflicts in the Middle East represent significant risk factors for the Turkish economy given its proximity to the conflict zone, upward pressures on energy prices, the reduction in tourism, and the associated financial instability. For 2026, BBVA Research maintains its forecast of a slight improvement in growth to rates of 4%, conditioned on the duration and intensity of the conflict and the internal management of monetary and fiscal policies. Regarding the price environment, headline inflation has remained close to 31% in the first three months of 2026 (30.9% in March) and, although it is expected to gradually decelerate as the year progresses and the crisis in the Middle East is resolved, it could close the year at 28.5% (3.5 points higher than in the previous scenario). This could facilitate looser monetary conditions and a reduction in benchmark interest rates to levels of 35% (3 points above the previous scenario), compared to 37% in March.
The Turkish banking system continues to be affected by the impact of inflation. The total volume of credit in the system increased by 55.1% year-on-year at the end of February 2026, similar to the previous months. The stock of credit continues to be driven by consumer credit and credit card portfolios (+47.4% year-on-year) and especially by corporate lending (+59.6% year-on-year). Total deposits maintained the strength of recent months and grew by 40.9% year-on-year at the end of February 2026, with greater growth in dollar deposits (+63.13%) than in lira deposits (+29.4%). Dollarization of the system increased slightly to 39.5% in February 2025, from 34.2% a year earlier. As for the system's NPL ratio, it increased slightly in February 2026 to 2.81%. For their part, capital indicators remained at comfortable levels at the same date.
Unless expressly stated otherwise, all comments below on rates of changes for both activity and results will be presented at constant exchange rates. These rates, together with changes at current exchange rates, can be observed in the attached tables of the financial statements and relevant business indicators. For the conversion of these figures, the end of period exchange rate as of March 31, 2026 is used, reflecting the strong depreciation by the Turkish lira in the last twelve months. Likewise, the balance sheet, Risk-Weighted Assets (RWA) and the equity are affected. Additionally, the activity, results, and relevant management indicators of the area include, on an ongoing basis, the contribution of the subsidiaries in Romania included in the sale agreement described in the "Highlights" section.
Activity18
The most relevant aspects related to the area’s activity in the first quarter of 2026 were:
Lending activity (performing loans under management) increased by 6.9% (below the quarterly inflation rate, placed at 10.0%), mainly driven by the growth in Turkish lira loans (+7.1%), as dollar loans remained stable (+0.2%). Within Turkish lira loans, credit cards, consumer loans, and business loans continued to drive growth.
In terms of asset quality, the NPL ratio increased by 25 basis points compared to the figure as of the end of December to 4.1%, mainly as a result of the increase in non-performing loans, in the retail portfolios, partially offset by sales of impaired loans and recoveries. On the other hand, the NPL coverage ratio recorded a decrease of 246 basis points during the quarter, affected by the increase in NPL inflows, standing at 74% as of March 31, 2026.
In the positive evolution of customer funds during the quarter (+4.7%), the growth in Turkish lira time deposits stood out (+6.4%), more than offsetting the decline in demand deposits in local currency. Meanwhile, US dollar deposits increased by 2.9%, with growth in both demand and time deposit balances.
Results
Turkey reached a net attributable profit of €263 million during the first quarter of 2026, which compares very favorably with the result achieved in the same period of the previous year, as a result mainly of the good performance of recurring revenues in banking business (net interest income and net fees and commissions).
As mentioned above, the year-on-year comparison of the accumulated income statement at the end of March 2026 at current exchange rate is affected by the depreciation of the Turkish lira over the past twelve months (-19.8%), with a less pronounced drop in the quarter (-1.3%). To isolate this effect, the highlights of the results of the first quarter of 2026 at constant exchange rates are summarized below:
Net interest income grew year-on-year, mainly driven by the dynamism of lending activity and by the improvement of the Turkish lira customer spread. In addition, the central bank has increased the remuneration of certain Turkish lira reserves since February 2025 and a decrease in the cost of wholesale funding.
Net fees and commissions recorded a significant increase, driven by the solid performance in fees and commissions associated with payment methods, followed by those related to asset management, insurances, guarantees and brokerage activity, which compensated the increase in fees paid for payroll acquisitions.
Increase in NTI, originating from higher results in Global Markets and derivatives, partially offset by higher losses from the foreign exchange positions.
The other operating income and expenses line had a balance of €-120 million, which compares favorably with the same period of the previous year. This line incorporates, among others, the loss on the net monetary position, together with its partial offset by the income derived from inflation-linked bonds (CPI linkers). Considering current exchange rate, the net impact of both effects was more negative at the end of the first quarter of 2026, compared with the same period of 2025. This line item also includes the results of certain subsidiaries of Garanti BBVA and the performance of the insurance business, whose contribution was increased in both cases.
Operating expenses continued to grow, mainly due to increased fixed employee remuneration linked to a salary review in the context of high inflation. On the other hand, general expenses also increased, highlighting the technology expenses.
Regarding the impairment on financial assets, higher provisions were recorded, which is explained by the growth of the activity and higher requirements in retail portfolios. Meanwhile, the cumulative cost of risk as of March 31, 2026 stood at 2.53%, with an increase of 7 basis points compared to the quarterly cost of risk of the previous quarter.
The line item for provisions and other results closed March 2026 at €-16 million, reflecting an unfavorable evolution compared to the same period of the previous year, due to higher provisions for risks and contingent commitments.
18 The variation rates of loans in Turkish lira and loans in foreign currency (U.S. dollars) are calculated based on local activity data and refer only refer to Garanti Bank and therefore exclude the subsidiaries of Garanti BBVA, mainly in Romania and Netherlands.
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