This article first appeared on GuruFocus .
Release Date: October 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Turkiye Is Bankasi AS ( IST:ISBTR ) delivered a strong set of results in Q3 2025, with a notable 116% increase in swap-adjusted net interest income on a quarterly basis.
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The bank's net fee income generation remained robust, registering a quarterly increase of 10% and an annual growth of 47%.
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Asset quality indicators remained solid across retail, SME, and corporate segments, with an NPL ratio of 2.7%.
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Capital and liquidity metrics further improved, providing ample flexibility to support future growth opportunities.
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The bank's diversified fee base, built on stronger customer relationships and expanding digital channels, continues to provide resilience to its overall revenue stream.
Negative Points
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The macroeconomic environment posed challenges, with production activities losing momentum and inflation expectations exceeding 30% by year-end.
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There was a significant charge in asset quality due to credit card restructurings under the newly introduced retail restructuring framework.
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The bank's return on equity guidance of 25% for the year appears challenging, with expectations now adjusted to around 20%.
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There is upside pressure on the cost of risk, which remains elevated at 218 basis points.
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The easing in Turkish deposit costs is slower than initial expectations, impacting the net interest margin trajectory.
Q & A Highlights
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Q: Could you elaborate on why there was a large charge in the quarter and the outlook for risk costs going into the fourth quarter and next year? A: This is Nemeth. The large charge was due to some companies facing challenges in a high-interest environment and softer domestic demand. The increase was mainly in stage 2 loans, driven by credit card restructurings under a new retail restructuring framework. This was anticipated and reflects the program's mechanics rather than incremental stress. We expect to close the year with an NPL around 3% and cost of risk around 200 basis points, with potential upside pressure on the cost of risk going forward.
Q: Your 25% return on equity guidance for this year looks challenging. How much downside do you see to this guidance, and can you confirm the exit NIM around 5%? A: We have revised our NIM guidance due to changes in rate expectations. We now assume a pulse rate around 38%, with inflation around 31-32%. We expect to increase our quarterly NIM by around 150 basis points in the last quarter, aiming for an exit NIM around 5%. Our return on equity is expected to pick up in the last quarter, reaching about 20% for the full year.
Q: How do you see the outlook for the fee to OpEx ratio and operating expenses in 2026 and onwards? A: We expect strong and sustainable momentum in fee and commission income generation, driven by digital banking and product innovation. Our OpEx growth has been disciplined, and we aim to keep it that way while investing in key growth enablers. We expect further cost benefits from process automation and branch network optimization, aiming for a fee to OpEx ratio of 100% in 2026.
Q: Can you provide more color on the decision to increase the fixed rate security portfolio and your FX liquidity? A: As a primary dealer bank, we maintain a diversified security base. We increased the share of fixed income securities to 48% due to the current yield curve. Our FX liquidity is more than our short-term liabilities, hovering around $7 billion USD.
Q: What is the exit NIM for the third quarter, and how does it compare to your expectations? A: The exit NIM for the third quarter was over 3%. We expect a 150 basis point increase in the average quarterly NIM, aiming for around 5% as an exit NIM.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
