Garanti BBVA’s favorite customer description is the “main bank.” The door where the salary lands, the card turns, the POS works, the transfer passes through, the loan is renewed, the insurance is sold. This is not poetry; in banking, it is one of the hardest economic habits. When a customer turns one bank into the main door, deposits become stickier, commissions more recurring, the credit relationship deeper.
The Q1 table shows that this habit prints money. Consolidated net interest income was 71.4 billion TL, net fee and commission income 42.9 billion TL. Net profit attributable to the parent was 33.2 billion TL. At the same time, market value was 543.1 billion TL: 1.20x book value and 4.1x earnings on a simple annualization of Q1 profit.
The problem is this: in a bank this cheap, the first question must be “why cheap?” And the answer does not come from outside the balance sheet, but from the balance sheet’s own capital line. Consolidated common equity tier 1 adequacy was 14.56% in the previous period and fell to 11.97% at the end of Q1.
| Line item | Amount |
|---|---|
| Net interest income | TRY 71.4bn |
| Net fee and commission income | TRY 42.9bn |
| Expected credit-loss expense | TRY 30.5bn |
| Parent-share net profit | TRY 33.2bn |
Garanti’s machine has two cylinders. The first is interest: the spread between income from loans, required reserves, banks and securities, and the cost of deposits and wholesale funding. The second is fees: payment systems, non-cash loans, money transfers, insurance, investment and account activity. The 2024 annual report clearly showed the weight of payment systems in the fee mix; the rise of net fee income to 42.9 billion TL in Q1 shows that this machine is still running.
That is why calling GARAN merely a “bank stock” is incomplete. This is a habit ledger funded by 3.167 trillion TL of deposits, carrying 2.768 trillion TL of net loans, extracting commission from customer behavior. Total assets are 4.784 trillion TL. The net loan/deposit ratio is 87.4%; in other words, growth has not been loaded only onto the shoulders of expensive external debt.
But in banking, the true owner of profit is not the bottom line; it is the capital buffer. In Q1, total capital adequacy was 16.20%, common equity tier 1 was 11.97%. In the year-end annual report, management said it targeted average return on equity of 30-32% for 2025. When Q1 net profit attributable to the parent is simply annualized against period-end equity, it comes to roughly 29.3%. It stands at the door of the target. But if the common equity tier 1 buffer narrowed in the same quarter, the investor cannot applaud profit alone.
| Metric | Q1 2026 | Read |
|---|---|---|
| Stage 1 and Stage 2 cash loans | TRY 2,773.5bn | Performing loan base |
| Stage 2 loans | TRY 308.3bn | About 10.8% of gross staged loans |
| Stage 3 non-performing loans | TRY 92.4bn | About 3.2% of gross staged loans |
| Stage 3 coverage | 62.8% | First loss-buffer read |
| CET1 ratio | 11.97% | Prior period 14.56% |
Credit quality must be read with the same coldness. In the Q1 notes, Stage 1 and Stage 2 cash loans total 2.774 trillion TL; Stage 3 non-performing loans are 92.4 billion TL. By this calculation, the non-performing loan ratio is about 3.22%. More importantly, the Stage 2 loan stock is 308.3 billion TL. These are not yet non-performing loans; but they are the waiting room the bank has set aside for increased credit risk.
At this point the bear case is strong. Garanti’s off-balance-sheet total is 25.895 trillion TL; within that are 3.028 trillion TL of commitments and 3.742 trillion TL of derivative financial instrument notional. These do not mean direct losses, but they remind us how large the ledger is in which the bank’s promises to customers and market risk are being kept. In the Q1 income statement, net trading loss is 5.3 billion TL; underneath it, a 24.5 billion TL derivative transaction loss and a 15.6 billion TL foreign exchange gain stand side by side. The bank is making money, but not in a quiet ledger.
The control question is also simple: as of 31 March 2026, BBVA owns 85.97% of the bank. On the good side, this means discipline, capital and know-how. On the bad side, it means the economic slice left to public investors has limited say over strategic decisions. The corporate governance pages describe the board, committees and risk appetite structure in detail; still, for the minority investor, the main truth does not change: BBVA sits at the head of the table.
Valuation here requires courage. It is easy to say “there is risk” and throw the cheapness away; but the materials do not allow that. Q1 net profit attributable to the parent was 33.2 billion TL. Multiply by four and it becomes 132.6 billion TL. Let us not trust the full speed of this run rate; cut it by 15%, call it 112.7 billion TL. A 543.1 billion TL market value still means around 4.8x earnings. Book value is 453.1 billion TL; the current price is 1.20x book. For a bank producing nearly 30% return on equity to remain at 1.20x book, the market must believe either that the profit is temporary or that capital will have to be replenished expensively.
| Bridge | Value | Comment |
|---|---|---|
| Market value | TRY 543.1bn | TRY 129.30 share price and 4.2bn shares |
| Consolidated equity | TRY 453.1bn | Price/book about 1.20x |
| Q1 parent-share profit | TRY 33.2bn | Simple annualized profit TRY 132.6bn |
| Annualized Q1 P/E | 4.1x | The market doubts profit durability |
| 1.4x book sensitivity | TRY 634.3bn | About 17% above current market value |
| 15% haircut profit case | TRY 112.7bn | Current market value is about 4.8x earnings |
The price I read contains both fears. But it has not yet proved either as judgment. The net interest and fee engine is running; the customer deposit base is large; Q1 profit does not fall short of management’s 30-32% return on equity target. The capital buffer is uncomfortable, yes. But the stock is not priced as if there is no capital problem; it is priced as if there is a capital question.
So the verdict is clear: Cheap.
Cheap, because the market does not treat the possibility of nearly 30% return on equity as durable. Cheap, because in Q1 the bank produced profit not only with one-off items, but with the spine of interest and commissions. Cheap, because a 543 billion TL market value remains too modest against the bank’s 453 billion TL book and 33 billion TL quarterly net profit attributable to the parent.
But this is not a cheapness that asks for patience; it is a cheapness that asks for control. The first line to watch in Q2 will not be net profit, but common equity tier 1. Then Stage 2 loans, non-performing loans and expected credit loss expense. If CET1 moves toward below 11% while credit stages deteriorate, the thesis changes. If the net interest and fee engine slows while provision expense accelerates, the thesis changes. If management’s 30-32% return on equity language softens, the thesis changes.
This stock is not suitable for an investor who cannot read a bank balance sheet. Anyone who sees 33 billion TL of profit in one quarter and relaxes will relax too early here. But for the investor who can follow the capital ratio, credit stages and the fee/interest engine together, GARAN today is not an expensive story. The main bank machine is still working; only the buffer around the machine has grown thinner. Buying the stock is a wager that the machine’s profit will thicken that buffer again.