Akbank TAS

IST:AKBNK.E

Earnings Call Transcript 2024-Q1

[Cenk Gur, executive]

Dear friends. This is Kaan Gur speaking, CEO of Akbank. I hope you are all well. Thank you for joining our first quarter earnings call.

Before moving on to our bank, I would like to share my thoughts on the operating environment. Economic growth in 2023 was 4.5%, in line with the medium-term program target of the government. Economic activity remains solid in first quarter on the back of upbeat consumption demand.

Accordingly, hard indicators imply an annual growth rate, around 5.5% for the quarter. Looking forward, higher borrowing costs and the prospective fiscal tightening expected to curb excess domestic demand and cool down the economy essentially in second half of the year.

For the full year, we forecast growth to be around 3.5%, as the weak global backdrop and the late effects of the monetary tightening will weigh on economic activity.

Inflation remains high and is set to increase culture in the short term. Cost push factors, strong demand and base effect will continue to drive annual inflation up. We expect inflation to peak around 75% in May before declining to 43% at year-end. Fiscal stands, including administrated prices and wage policy, will be key elements for macro rebalancing and this inflation path.

On a positive note, current account values is improving, which will be supportive for the external financing need. 12-month cumulative current account balance as of February fell to [ $31.8 ] billion from $45.5 billion in December. The underlying trend during the first quarter points to a more benign outlook than the market expectations for the full year.

We project current account deficits be around $22 billion, as the ongoing moderation in loan growth and the prospective slowdown in domestic demand will contribute to external rebalancing going forward. Worth to mention that one key risk factor remains for the external balance, namely geopolitical tensions and associated fluctuations in oil prices.

In light of our inflation expectation, we expect policy rate to remain high for loan. Macro stabilization, particularly bringing inflation down to single digits, requires enhanced coordination between tight monetary and fiscal policies. The recent tightening steps taken in March have started to give early signs of our moderation in loan growth.

Four-week annualized momentum in Turkish lira loan growth has already come down significantly below expected inflation. Slowing down the loan growth, along with the prospective fiscal tightening, is key to curb excess domestic demand.

The moderation in loan demand is expected to somewhat limit the profit-generation capacity of the banking sector. However, we believe that the sector has shown muscles to generate noninterest earnings to support profitability in the short term. In addition, maintaining macro stability will create a favorable environment for the financial sector over the medium to long term to utilize the growth potential in terms of low indebtedness, increasing digital penetration, the structural drivers of the prospective growth.

Let's move on to our bank. Dear friends, I am happy to share that we once again demonstrated our position as a leader in the banking industry with our performance. The capital position of the bank remains solid, with 17.3% total capital and 14.6% Tier 1, despite the dividend payment, which had negative 65 basis points on yearly BRSA applied to operational risk, which had negative 99 basis points impact during the quarter.

I'm proud to also share that thanks to our strong capital as well as growth potential, close to 200 investors showed $3.7 billion demand in our AT1 bond issuances, which was a first in our region during the first quarter. We believe this is an indication of confidence to both Türkiye economic management as well as Akbank.

The bank's strong momentum in expanding the customer footprint persists. We added 600,000 new customers, reaching 13.7 million in total active customer base, with a cumulative increase of 5.2 million since end of 2021, exceeding 60% growth on a cumulative basis. The exceptional increase in our active customer base has resulted in our pre market share remain private banks to increase by almost 3% for the same period.

The continuous customer growth solidifies our recursive revenues, the bank footprint for long-term success in improving markets. In addition, our strategic focus in high-yielding small ticket loans remain, whereby we gained, again, 90 basis points market share among private banks. This comes on top of the 300 basis points gained last year.

I would like to underline, due to high interest rate environment, we have remained prudent while growing with risk-returning focus. We have adjusted our lending criteria as and when needed. In addition, we have once again been very agile in adapting to regulatory environments.

We are doing optimization on a daily basis to manage the balance sheet in order to maximize sustainable shareholder return. As a result, despite the challenging macro and regulatory environment, we ended the quarter with 24.9% return on equity and 2.7% return on assets. This was in line with our projection for the full year.

We expect return on equity to remain relatively low in the first half and to improve towards our fiscal year guidance in the second half of the year.

Dear friends, I am delighted to share with you that we remain fully on track with our 2025 targets. I have already mentioned some of them in the previous slide. However, it is worth to highlight our revenues derived from customers have been dramatically enhanced.

Our fee to OpEx ratio surged impressively by 18 percentage points from 58% to 67% since -- 76%, I'm sorry -- since end of 2021. The robustness of the bank is driven by our agility, proactive and prudent sense on balance sheet and risk management and our long-standing commitment to investing in our people as well as infrastructure.

I would like to take this opportunity to express my sincere appreciation to all of our people. The driving engine of our success is powered by their commitment, passion and strength.

Now Ebru will provide insights regarding our first quarter performance. Following her presentation, I will be more than happy to answer your questions together with Turker and Ebru.

Ebru, now the platform is yours.

[Kamile Ebru GÜVENIR, executive]

Thank you so much, Kaan-bey, and thank you all for joining our call today. As you have just highlighted, regardless of the sector-wide challenges, especially in the margin evolution, we started the year in line with our full year projections. Our robust proficiency and flexible balance sheet management, including the quick adaptness in navigating the tight regulatory environment, as well as our sustained excellence in fee performance continue to be supportive factors for profitability. Our fee income almost tripled year-on-year, thanks to uninterrupted momentum in customer acquisition.

Our revenues were up by 42% year-on-year to TRY 35.571 billion for the quarter. Our net income increased by 23% year-on-year to solid TRY 13.185 billion, resulting in a quarterly ROE of 24.9% and ROA of 2.7% as expected.

Moving on to the key drivers of our healthy first quarter performance in more detail. Let's first start with the balance sheet. Our growth strategy incorporates a diligent approach to risk return balance with timely adjustments to lending criteria as needed. In first quarter, our TL loans were up by 12%, mainly led by consumer segment. This was in line with our ambition to grow in small tickets as consumer loans continue to provide better pricing opportunities during the quarter.

Accordingly, on top of a phenomenal 300 bps market share gain in consumer loans among private banks last year was successfully increased our market share by an additional 90 bps during the quarter. This underlines our competitive strength, especially when considering the significant milestone reached last year.

As a side note, advanced analytics and technology remain pivotal in our growth strategy, and this strengthens our robust asset quality further. Our 100% automated loan decision processes with an excellence in AI-based consumer credit models enable us to take quick and timely actions.

Please also note that in terms of volume, around 90% of our GPLs are preapproved, and 25% are to salary customers.

On the commercial loan side, we pursued a cautious and selective growth strategy during the quarter, while carefully managing maturity extensions depending on the pricing of the product. Accordingly, we maintained our strong positioning in business banking installment loans, where we had gained substantial 225 bps market share in the fourth quarter of last year. Supporting and strengthening the margins on a sustainable manner lies at the core of our growth strategy.

On the foreign currency loan side, despite some pickup in demand, our net foreign currency loans were down by 2.9% year-to-date to $9.7 billion due to a big ticket redemption in our fully owned subsidiary in Germany during the quarter.

Our solo foreign currency loan book increased by 5.1% year-to-date with 20 bps market share gain among private banks. Considering our already deleveraged foreign currency loan book, we remain committed to grow this year as guided.

Foreign currency part of the balance sheet has remarkable spreads. Therefore, any growth on this side would also be margin supportive.

Moving on to the securities side. Our strategically designed high-yielding security portfolio continue to provide margin support. We have been increasing our positioning in TL floating notes since the beginning of last year. Accordingly, IFRS, with a decent 54% yield at the end of the first quarter, reached 23% of our TL securities with a cumulative 12 percentage point increase since the end of 2022.

Note that majority of these notes are TL REF index bonds and have a robust above market spreads.

Our strategic approach also involves decreasing the share of CPI linkers and TL securities. This strategy resulted in a cumulative reduction of 19% since the end of 2022. Meanwhile, our treasury's proactive positioning in positive CPI linkers continue to be a differentiating factor, considering the tightening spread between policy rate and inflation. Our CPI linker portfolio now stands at TRY 166 billion, which equates to 78% of our equity, and continues to help to mitigate negative impact on inflation while creating a solid ROE support.

Please note that every 1% change in CPI has around 1.1 billion net income or 50 bps ROE impact. Also note that we have further redemption in our CPI linker portfolio in the second quarter, which will enable us to invest or lend in higher-yielding assets.

On the TL fixed rate securities, having met the regulations proactively, we were able to build this book at favorable levels. Similar to last year, we continue to lead the sector in TL corporate bond purchases from primary issuances.

Our high-yield in corporate bond portfolio, with an end of quarter yield of 53%, stands at TRY 29 billion or around 8% of our TL securities.

As shared in several occasions, our foreign currency securities, which make up around 1/3 of total, were timely hedged against freight rate hikes. Also worth to note that thanks to our timely actions taken by the treasury, once again, trading site remains supportive.

On the funding side, cost optimization has been our primary focus, serving as the pivotal factor in supporting margins. I am happy to share that our continuous efforts and dynamic cost of funding management, which strategically prioritizes in meeting CBRT's ratio requirements, harvested the rewards. Whereby during the quarter, the remuneration we received outpaced the cost, including commissions paid and additional deposits costs incurred. This is thanks to our analytical and agile asset liability management.

In the meantime, we broadly maintained our sound positioning in widespread and small ticket customer deposits on top of the eye-catching market shares gains last year. So recall last year's figures, thanks to our sound customer franchise and strong momentum in customer acquisition, we have gained 150 basis points market share in a widespread consumer-only TL-time deposits, while we had gained 260 bps market share in below 1 million TL deposits, while our market share in 0 cost TL demand deposits was also up by outstanding 260 bps during last year.

Please also keep in mind that the regulation-induced low level of TL LDR, which is at 84%, creates significant room for margin improvement going forward.

As Kaan-bey mentioned earlier, we pioneered the market with our successful Basel III compliant additional Tier 1 issuance to international capital markets investors in March. Our AT1 marks the first out of Türkiye fully purchased by international investors with a peak demand of around $3.7 billion.

The $600 million bonds with perpetual maturity with the call option in year 5 were also favorable rate priced at 9.37%. Please also note that we renewed our sustainable syndicated loan recently in April, which is a first in Türkiye in allocating according to sustainable finance framework and again, received record demand. 45 banks from 20 countries participated, with 16 new participating banks.

Our solid foreign currency liquidity remains intact, with a buffer of $9.3 billion, whereby $3.1 billion is short term, indicating a liquidity buffer of 3x. In addition to our sound foreign currency liquidity, we have succeeded to increase share of sustainable transactions in our wholesale funding book to 60%. This excludes our AT1 given its capital status. Hence, I am happy to share that we are well on track with our 2030 sustainable wholesale funding target of 100%.

Moving on to the P&L. Without any doubt, margin evolution has continued to be a major challenge in the sector. Despite the consecutive rate hikes, tight regulatory and competitive environment, our proactive and diligent balance sheet management and regulatory compliance with mature to mismatch and focus have been among the key enablers of a healthy start to the year.

Our swap adjusted NIM was 2.7% below our full year guidance of around 4%, but broadly in line with our expectations, whereby we expected a gradual improvement throughout the year. However, as you can see on this slide, our CPI adjusted quarterly NIM has improved by almost 70 bps quarter-on-quarter. Indeed, our strategically designed and sound balance sheet has been composed to support margin evolution going forward.

To name a few of the key elements of our margin evolution strategy, on the growth side, we prioritized high-yielding loans or installment loans and carefully extend maturities as well as diversified product mix to lock in spread. This offers strong room for asset repricing.

On the funding side, we use our strong expertise and agility to optimize cost even on a daily basis, while meeting CBRT's ratio requirements. Last but not least, our sound floating and high-yielding security positioning helps to minimize margin pressure.

As mentioned earlier, momentum in customer acquisition continues at full pace with an additional 600,000 net customer increase during the quarter. Accordingly, our active customer base reached 13.7 million, up 62% since the end of year 2021, with an impressive 5.2 million net active customer growth.

Similar to last year, 65% of our new to bank customers were acquired through digital onboarding emphasizing the excellence of our digital capabilities and innovative offerings. We continue to leverage digital onboarding and revamp our value proposition in a comprehensive manner for our customers.

Our active product portfolio, a function of active customer base and average cross-sell per customer has enhanced further by 20% year-on-year, reaching a new all-time high. Our expanding active young customer base solidifies the sustainability of our recursive revenue generation from our customer-centric strategies in the years ahead.

Our numbers consistently demonstrates the impact of our digital strategy crafted around our customers' journey. A number of our digital customers is now approaching 12 million, with a robust 78% growth since the end of 2021.

Digital penetration continues to increase, extending to 86%, while migrational transactions to digital channels have already reached 96%. Our digital customer enters our mobile app 35 times a month, so more than once a day, playing a significant role, both in our sustainable fee income generation as well as asset quality evolution. Please note that digital channels have secured a visibly striking share in credit card sales with 69%, GPLs with 92% and time deposit account opening with 84%.

On the fee and commission income side, we started the year on a very strong note. All business lines positively contributed to the remarkable 195% year-on-year growth in the first quarter, which was significantly higher than our full year guidance of above 80% growth. This achievement even suggests an upside risk to our fee guidance.

Our dedicated investment through the cycle, strong momentum in customer acquisition and new product offerings have been distinctive factors of the sustained excellent in fee performance. This can easily be seen by the year-on-year increases in different products on this slide.

I am also proud to say that we are fully on track with our strategic target to increase fee to OpEx ratio above 80% by year 2025. Once again, during the quarter, our fee income growth exceeded the OpEx increase, thanks to all-time high fee chargeable customer base and cross -- and strong cross-sells. This success resulted in a fee to OpEx ratio to further improve by 4 percentage points year-to-date to 76% on top of the 14 percentage points increase during last year.

As a reminder, following the exceptional increase in our active customer base last year, our fee market share among private banks has surged 230 basis points. I am happy to share that we have been able to maintain our 16.2% solid fee market share as of February based on the latest BRSA data.

Despite the OpEx challenges, we have a notable competitive edge due to our relatively low OpEx base particularly in times of inflation. Our OpEx increased by 30% quarter-on-quarter due to some regulatory cost increases as well as salary adjustments during the quarter which we view as an investment for our future. We expect OpEx to ease towards our guidance throughout the year.

Moving to asset quality. Our loan portfolio continues to perform well, thanks to our prudent risk management and healthy loan composition. Robust and broad-based collection performance across all segments supported our NPL evolution during the quarter, which eats towards 2.1%. Both the majority of NPL inflows and collections were retail-led.

Share of Stage 2 and -- plus 3 in our gross loans, which would be deemed more problematic loans, continue to be limited in our loan portfolio at 8.4%, while coverage remained strong at above 28%. Our well-diversified loan book, proactive approach and provisioning, along with our sophisticated digital capabilities which plays a crucial role in managing the quality of the portfolio on a dynamic basis, are clearly reflected in the evolution of our cost of credit.

We ended the quarter at 32 bps net cost of credit, excluding currency impact, much better than our full year guidance of below 150 basis points. I would like to underline that our coverages remain solid, with loan loss provision bill approaching TRY 34 billion, excluding our TRY 1.4 billion free provision.

Looking forward, we are confident in our net cost of credit is manageable, well within our full year guidance, thanks to our robust provision bill, solid collateral values as well as our proficiency and digital capabilities, minimizing the need for additional provisions.

Our total capital, Tier 1 and core equity Tier 1 ratios without forbearances remain robust at 17.3%, 14.6% and 13.4% despite negative impact driving from a few items. Significant growth, including currency impact had around 149 bps negative impact; dividend payments, 65 basis; operational risk, which is a sector implementation during the first quarter of every year, 99 bps.

As you know, this operational risk is a main component of the methodology is the average net income of last 3 years and this directly correlated with the bank's financial performance. Hence, the higher profitability, the higher operational risk.

Meanwhile, our inaugural 600 million AT1 issuance in March bolstered the capital by 126 bps while also mitigating the foreign currency sensitivity of the capital ratios, including Tier 1, reducing the first 10% depreciation impact to 25 bps from 40 bps at the end of the year. And also 100 bps increase in TL interest rates results in an 8 bps decline in our solvency ratios.

Note that sensitivity and solvency ratio shares have been -- have a diminishing impact. It is also worth to note that adjusted for the temporary risk weight increases applied by BRSA, our capital would even be 210 bps higher as an outstanding 19.4%. Strong capital buffers persist as a shield against unprecedented challenges and market fluctuations, offering significant resource for sustainable profitable growth.

Before moving on to Q&A, I'd like to share a few highlights regarding our ESG journey. Starting with sustainable finance, our strong commitment to embedding sustainability at the core of our operations continues at full pace. Please recall that not only did we surpass our 2030 sustainable finance goal, but we set a new ambitious benchmark of TRY 800 billion.

In first quarter alone, we provided TRY 41 billion of sustainable finance in Turkish lira, bringing our total to TRY 267 billion since end of 2021. Moreover, our ESG team funds have witnessed increased interest, leading to a 19% year-to-date search in investor participation.

As for ecosystem management, I am very pleased to report a remarkable 23% year-on-year increase in the number of women-led business customers last year. Furthermore, I'm proud to share that we are not -- we have not only met, but exceeded our annual financial inclusion target of 10%.

As for people on community pillar, we remain focused on our efforts to advance diversity and inclusion. A significant milestone includes the publication of the Board of Directors diversity policy, outlining clear objectives, measurable goals and proactive measures to foster diversity and inclusion at board level.

Furthermore, we have taken important steps by publishing our pay gap analysis results in our 2023 integrated annual report. Additionally, in the first quarter, our dedication to supporting women, youth and individual with disabilities persisted through ongoing projects aimed at their employment and inclusion.

At the core of our climate change pillar lies our commitment to achieving net zero by 2050, a pledge that has propelled us to join the net zero banking alliance. We have taken concrete steps by disclosing 2030 emission reduction targets for power, cement, iron and steel and commercial real estate sectors. And regarding our comprehensive approach, we continue to develop our sector net zero strategies. Moreover, I'm happy to say that we are on track towards our 2030 operational emission reduction targets to achieve -- and we have already achieved 82% reduction in operation emissions since our base year of 2019.

Finally, on this slide, you will find a summary of our sound start to the year. Momentum, as I shared earlier, continues across all business lines. We remain confident in our full year guidance. And therefore, I would like to end -- I would like to end our presentation now, and we'd like to move on to Q&A session.

[Kamile Ebru GÜVENIR, executive]

[Operator Instructions] And now the first question comes from Mikhail from Goldman Sachs.

[Mikhail Butkov, analyst]

Sure. I have a few questions. Firstly, on -- in the light of the recent rate hike and also some changes on the growth caps by the Central Bank, do you see any changes into the guidance, which you have on the screen? Or did anything -- did you do [indiscernible] any changes relative to the previous guidance here?

And also, what outlook could you share on net interest margin in the light the recent changes for the next quarter? Do you expect to see some improvement already in the second quarter? Or because of further repricing of deposits, you could see some more pressure?

And finally, also, what is your latest outlook on rates in the current environment?

[Cenk Gur, executive]

Thanks a lot. First of all, it's a very comprehensive question. I can tell that actually, we are very confident within our 2024 guidance and there's not going to be any change regarding our existing guidance so far.

Actually, this is a kind of a chance that I would like to give up much flavor regarding the latest regulations because your question covers the politics, net interest margin, the profitability, everything.

First of all, I would like to emphasize that the major challenge within the existing environment, actually margin evolution. So considering the comparatively low demand and the competitive environment. Actually, the most important thing is managing your funding costs. So because of the consecutive rate hikes from the Central Bank, there are lots of pressures on funding costs.

So what are we trying to actually achieve in terms of enhancing our net interest margin? That first of all, our expectation is about the net interest margin, a kind of gradual increase throughout the years remain unchanged. The other thing is, I really would like to emphasize that our balance sheet is very well positioned in order to support margin evolution.

So there are some important actions that we are daily focusing on. The first one is actually our ongoing asset repricing with extending loan maturities, diversifying our product mix. So we grew more on the consumer side in first quarter. In meantime, we were prudently growing selectively commercial loans as the pricing was comparatively low.

So the other factor here differs, especially in the yield between our front book Turkish lira loans and back book Turkish lira loan side, give room for us future asset repricing.

The second important action is, of course, the cost optimization. This is our key focus on the funding side, but at the same time, we are diligently complying with the regulations. So we are dynamically meeting the calculations considering different scenarios like having higher remuneration from the requirements at the cost of higher Turkish lira conversion ratios or vice versa.

The third one, especially thanks to our, again, well established, well positioned security positioning. Floating and high-yielding security position, actually, we are going to get benefits starting from especially upcoming quarters.

Low Turkish lira LDR. Akbank has 84 -- less than 84% for the first quarter. Actually, this creates rule for net interest margin improvements.

Last but not least, I would like to emphasize that our growth ambition, it will continue because our fee income generation is a key factor to offset our net interest margin. So fee OpEx this year fee growth is expected to exceed OpEx growth again, I'd like to underline that, and yielding further improvement in the OpEx ratio.

So all in all, actually, I tried to give you a very large explanation regarding your question.

[Kamile Ebru GÜVENIR, executive]

The second question comes from Mehmet Sevim from JPMorgan.

[Mehmet Sevim, analyst]

Just maybe following up on the earlier question. Could you talk about the growth trends in more detail, especially following the CBRT's additional tightening measures that were announced earlier in the year? So where do you see demand coming from right now? What sectors are you lending? And how do you expect the momentum to evolve in the coming quarters?

And if we assume another 5 percentage points rate hike by the CBI, I appreciate that may not be your base case, but how would you expect your growth momentum, but also margins, et cetera, to change as a result of that?

And my final question, if I may, is on asset quality. It seems like the trends are still very strong. And in fact, I look at collections, they were extraordinarily strong this quarter. So could you talk about these trends a bit, particularly what's causing this?

And in line with that also, cost of credit was very low. So looking forward, when would you expect to see some normalization in the trends? And any color you may share would be helpful.

[Cenk Gur, executive]

Turker, you better start and then I'm going to support some areas that I would like to share with Mehmet.

[Türker Tunali, executive]

Mehmet-bey, actually, yes, maybe in our base case scenario, the late 5% rate hike was not embedded. So therefore, actually, which came towards the end of the first quarter. So therefore actually the repricing on the deposit side has also continued in April. So which will may be like maybe slightly delay this NIM improvement, the overall core spread improvement in the second quarter. Probably we'll see this cost development towards the end of the second quarter.

But there's actually one maybe like a slight offsetting factor on the deposit side. Up until elections, like the customer behavior was slightly different than nowadays. Because upon elections, like FX KKM holders were preferring mostly rollovers rather than the -- rather than switching to TL.

But nowadays, with stability in the currency after elections, we are seeing -- observing more appetite by the customers into like switching into [indiscernible] Turkish lira time deposits, which may like -- which will probably give us some room in optimize our deposit cost going forward. So therefore, it will be like a supporting factor on the deposit cost side.

But overall, yes, it's 5% but not embedded, but we are sticking to our full year net interest margin guidance of roughly 4%, where we are expecting the NIM improvement to like to happen more starting from the beginning of the second half of the year.

With regard to growth trends actually, as you may also like -- as you've also seen from like CBRT figures and BRSA figures, up until like probably March, like loan growth, but still significant on the corporate commercial side as well on the consumer lending side. As we have shared at the beginning of the presentation, with regard to the latest 4-week averages in the loan growth. Now this has come down significantly, both on commercial side as well as on the consumer side. Still like the credit card balance growth is like higher than the other products.

But also on that side, we are seeing some normalization. And in the light of maybe this 2% cap, probably actually -- the demand is also moderate. But if you would ask us that with regard to our full year guidance of 40%, actually it still -- it seems to be still achievable because 2% in compounded terms and still there are some exempts loan types like export loans, investment loans. So there are still like many other areas where we are, we believe, probably we can still end the year at around our full year guidance of 40%.

With regard to asset quality, as you have also mentioned, first quarter was quite strong. This 30 basis points cost of risk was much lower than our full year guidance, where actually strong collections have also helped significantly. Like collections, collections were across the board, like in all segments, but also we had some big ticket collections, which have also kept our cost of which significantly lower than our full year guidance.

Probably in the coming quarters, there will be some normalization, but we are confident with our full year guidance of 1.5%. I think we will be -- we will end year below this full year guidance.

And like after first quarter in April, actually, still the trend is similar. There is no major change in terms of Stage 1, Stage 2 formation or into Stage 3 formation. And NPL inflows are mainly coming from more smaller tickets, but which were -- which was expected anyway and where we had viewed our provisions proactively in the last year when the asset cost trend was quite robust. So all in all, we preserve our strong provisioning levels, and we are confident with our full year guidance.

[Cenk Gur, executive]

Yes. Maybe I can add, again, more flavor to Turker's comments. Maybe I can add that on the FX loan book, actually, our focus will continue. Things are very strong, AT1 bond issuance, thanks to our very strong liquidity, thanks to our low -- very low level LDR on the fixed side. So those are giving us room to grow.

So actually, you can see that there is 20 basis points year-to-date, the market share gain on our side. So even though there are some big ticket redemptions, but our focus will be on the especially exported side. So there are some demand from the corporate side. So I can add that, all in all, we are comfortably positioned in order to reach our growth targets, both in Turkish lira and the foreign currency loans.

[Mehmet Sevim, analyst]

That's very helpful. May I follow up and ask if you could remind us of your latest pricing levels, both in the front book and the back book for both loans and deposits, if possible.

[Türker Tunali, executive]

Yes. Like in terms of the like back book, our loans are at around like mid-40s. Deposit cost is again like mid-40s to high-40s. But on the marginal side, like marginal loan price is at around 60% level, whereas the deposit pricing is at around like 50% level. So actually, in terms of the marginal spread, these are quite strong. But the struggle we are having with actually is the monthly growth gap and low LDR. So there is actually huge potential for us to improve the core spreads.

[Cenk Gur, executive]

Yes. Maybe I can add again, Mehmet, especially the most important thing is here, at the same time, since we are focusing our deposit cost in order to press down, especially most important to see here, KKM conversion and the standard Turkish lira ratio. So if you are successfully manage those conversions and the ratio of standard Turkish lira, which we are in that position, so it's going to be helpful in order to enhance the existing Turkish lira net interest margin.

[Kamile Ebru GÜVENIR, executive]

And there's one written question and basically it's, the rationale behind your AT1 given already your high capital and high liquidity? Turker, the floor is yours.

[Türker Tunali, executive]

Yes, you're right. So we are the best position bank in terms of the capital liquidity ratio, both in total CapEx ratio as well as CET1. But as you know, like we are operating in emerging markets. And like keeping like capital liquidity ratio at high achievable level, it's always really quite important. Also in order to like hedge it against current fluctuations. We did it in the past with our Tier 2, but AT1 is also helping for CET1 protection.

And on top of it, like at the beginning of this year, there was a regulation change. Legal lending limits were calculated based on total regulatory capital up until end of last year, but now we are calculating them in accordance taking into account only Tier 1 capital. So this AT1 will also, I think in managing our legal lending limits.

And not to forget actually, first quarter, actually, like the global marketable developments have also given really a very supportive environment, and we wanted to benefit from it. And I think that the pricing we have achieved is also quite advantageous.

[Kamile Ebru GÜVENIR, executive]

There are no further questions. We, as IR, are always at your disposal. So you can reach out to us at any time you want, and we are looking forward to seeing most of you hopefully in the upcoming months. And I leave the floor to Kaan-bey for closing remarks.

[Cenk Gur, executive]

Thank you, Ebru. Thank you, friends. With our experience in the mini cycles, I'm fully confident in our people's capacity and execution to deliver sustainable shareholder value. Once again, I would like to express my ample gratitude to all our people for their outstanding efforts. I would also like to thank all our stakeholders for consistently placing their trust and confidence in us. Keep well and look forward to meeting you all soon. Thanks again.