Akbank TAS
IST:AKBNK.E
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Akbank TAS
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Dear friends, welcome to our third quarter 2021 financial results webcast and conference call. This is Ebru speaking, Head of IR and Sustainability of Akbank. Thank you for joining us. I hope that you are all in good health. Today, I have with me, as usual, Turker, our CFO; and Ilknur from our IR team.
Before moving on to the bank's 9-month performance, I'd like to share some insights of the macro environment we are operating in. Despite the negative impacts of the ongoing pandemic, the economic activity in Turkey has been trending strong. We now expect full year growth to be around 9%.
Looking at the demand components, domestic demand has slightly decelerated while external demand remains robust. Some macro prudential measures have been implemented to secure a balanced demand composition in economic activity as well as current financial stability risks in current account balance. The ongoing supply/demand imbalances as well as higher commodity prices and recent foreign currency developments have increased risks on inflation. Looking forward, financial market conditions and currency developments will be essential for inflation outlook.
On a positive note, current account balance is in an improving trend. We expect full year current account balance deficit to decline towards $20 billion, below 3% of GDP. This will be achieved with potentially better trending tourism revenues, robust export growth and lower gold imports. We expect overall export growth to outperform import growth for this year.
On this slide, we have provided the heat map of many economic indicators. To mention a few, there has been strong industrial and service sector activity in the second half of this year. PMI manufacturing index, real sector confidence, capacity utilization as well as most sector confidence indices have also improved. As a result of the positive trend in activity, employment conditions have started to somewhat improve as well.
Funding rates have started to ease with a 300 basis point rate cut over the last 2 months. TL deposit and loan rates have slightly declined as a result. Year-to-date, TL Business Banking loan growth has been moderate, but may increase with lower rates, while consumer loan growth has been relatively stronger. As for FX loans, demand remains to be weak. So far, funding costs and inflation have both evolved above our initial guidance. Though there is some improvement in the macro indicators due to high TL volatility, operating environment still remains challenging.
In light of all these, let's move on to our bank's performance. First, I'd like to touch upon a few of the achievements. Our 9-month reported net income was up by a stellar 67% year-on-year to 7,344,000,000, a record high. There were a number of contributors to this all-time high net income.
First, TL loan growth will have been robust. We had consecutive market share gains over the last year and relatively higher-margin consumer segment. Second, our strategic positioning in CPI linker portfolio worked as hedge in the higher-than-expected inflation backdrop. Third, our stronger-than-guided across-the-board fee performance underlines the success of our growth strategy and diversified business model. And finally, yet importantly, our net cost of credit evolution has fared much better than guided, thanks to our strong risk discipline through the cycle. As a result, we reached 14.9% ROE and 1.8% ROA with an 8.4x leverage, while our quarterly ROE and ROA were 18.7% and 2.3%, respectively.
Please note that on this slide, we have shared a link to our cheat sheet, which provides a data used for our presentation.
Let's move on to the drivers in more detail. First, the balance sheet. Our total assets were up by 23% year-to-date to almost TRY 590 billion. Net loans, which are 53% of our assets, were up by 19% in the same period to TRY 312 billion, led by TL loan growth. As mentioned in the previous slide, we continue to grow and gain market share in the consumer segment. This segment now accounts for 25% of total assets, up by 3 percentage points year-to-date.
FX loans were 35% of our total net loans, flat year-to-date, despite TL weakness due to the solid TL loan growth. Our securities stood at 21% of our assets with strategic positioning, which I will discuss further in a few minutes. Our balanced and prudent asset allocation, leverage of 8.4x and robust capital adequacy ratio of 19.4% will continue to drive sustainable long-term shareholder value.
On this slide, you may find further details to our 19% year-to-date TL loan growth. The highest year-to-date percentage growth was in consumer loans at 33%, and we gained 140 bps market share, reaching 7.8%. By the way, year-to-date market share gains in the consumer segment were across the board: 140 bps, specifically in general purpose consumer loans; 110 bps in mortgages; and 50 bps in autos.
As for TL business banking, following the heavy redemptions of first half, we accelerated our growth in third quarter and also gained quarter-on-quarter 60 bps market share. We reached 13% year-to-date growth in business banking, on track for our full year mid-teens guidance. Also, on the right side of the slide, you can see the breakdown of the quarterly TL loan growth performance.
As you know, digital transformation has been one of the top strategic priorities at Akbank. 82% of our general purpose consumer loans and 57% of our credit cards are sold through our digital channels. High ratios of mobile use by customers had to be met with corresponding high-level decision automation at our end. With the help of automated decisions in consumer lending, we are close to 100% on of automation, and we were able to respond to the customers' rising needs within seconds. The loan decision automations are made exclusively by Akbank's decision system without any human intervention.
Generally, the level of automation is a strong indication of the excellence in consumer credit decision systems. Automation levels above 90% to 95% requires robust score cards, reliable data structure and real-time analytical insight on customer behavior. The level of decision automation provides us with a method for testing new credit rules and policies with historical big data, ability to measure risks taken and carry out what-if scenarios in order to come up with new advanced rule sets, which aims to maximize profit while managing risks.
To put things into perspective, in this slide, we have shared our market share and balances for consumer loans and its main component, general purpose consumer loans, since 2019, which is when our digital transformation, risk management picked up pace. Also, you can clearly see here, due to our delevered book, we are coming from a very low base.
To sum up, we are using digital capabilities not only to enhance customer experience, but equally to manage risk. And our efforts have paid off with decent market share gains, which will be supported for NII evolution going forward.
Our net FX loans remained almost unchanged at $12.3 billion versus end of last year and also versus last quarter, totally in line with our full year guidance. We still observe muted demand for investment loans. Also given volatile currency environment, we do not expect imminent change in this trend.
Our total securities book was up by 23% year-to-date at TRY 125 billion. On the TL side, show CPI linkers and floating rate reached 80%, underlining our proactive and strategic security strategy. Year-to-date increase in TL securities mostly took place in CPI linkers, which are now 66% of total. We further added almost TRY 10 billion to our portfolio in our CPI linkers portfolio in third quarter at real yields above 3%. We updated our October-to-October CPI valuation for 9 months to 17% from the first half of 14%. We expect further positive impact from CPI Linkers portfolio in the fourth quarter, since CPI for the full year is expected to be above 19%.
In terms of sensitivity, every 1% CPI has around 326 million net income and 6 bps NIM and 50 bps ROE impact. Across all securities portfolio, we improved spreads visibly. Hence, considerable NIM contribution is expected in the coming quarters.
Our foreign currency securities balance stayed flat year-to-date, but spreads improved. With prevailing low foreign currency funding costs, this portfolio should also continue to be supportive to our NIM. Our focus remains on well-diversified and disciplined funding mix as deposits continue to be our main source of funding with 59% share. Our total deposits were up by 19% year-to-date to TRY 350 billion. Demand deposits were also up by a solid 21% year-to-date, increased its share to 32% in total. The increase in sticky and low-cost deposits, such as retail in consumer and SME, was also eye-catching at 30% year-to-date, reaching 71% of our total TL deposits.
Another highlight of the quarter was the improvement in the TL LDR by almost 10 percentage points quarter-on-quarter to 139%. The year-to-date improvement was even more pronounced with 14 percentage points.
Our solid FX liquidity, and -- with an FX LDR of 49%, remains as 1 of our strong muscles. As a result, our total LDR ended the quarter at a low level of 93%, still below sector's 98%.
We maintain a well-established and balanced wholesale funding profile, along with robust foreign currency liquidity. Our third quarter average foreign currency LCR was solid at 306%. And our foreign currency liquidity buffer was noteworthy at $13 billion versus our next 12 months rollovers at $2.2 billion. Of this $2.2 billion, we already paid around $800 million in equivalent in syndicated loans by successfully rolling over $700 million portion in October. Details regarding the syndication were announced last week. But still, I'd like to share a few highlights.
First of all, demand was solid at $900 million from 36 banks across 20 countries. However, due to our solid FX liquidity, as well as to maintain optimal cost of foreign currency funding, we renewed $700 million. Second, we were able to improve cost by 35 and 50 bps, both for our U.S. dollar and euro tranches, compared to the latest 2 transactions, respectively. And lastly, it was again ESG-linked, similar to our first quarter -- actually our first ESG syndication in April, and the respective KPIs are also on this slide.
To sum up, we have prioritized sustainable funding this year, taking its share in the wholesale to over 40% versus our initially announced year-end target of 30%. Due to our ample FX liquidity and low FX loan demand, we will continue to be opportunistic in our borrowing strategies, prioritizing sustainable funding while extending the overall maturity.
Let's move on to the P&L in detail. Our quarterly self-adjusted NIM was up by 38 bps quarter-on-quarter to 3.11%. For the quarterly performance, significantly higher swap costs was more than offset with higher CPI linker contribution. Asset repricing also supported core NIM during the quarter.
To take this in numbers, our average short-term and long-term swap utilization was around TRY 59 billion, up by around TRY 9 billion quarter-on-quarter, led by higher short-term swap utilization. Swap rates also increased quarter-on-quarter. So both higher utilization and higher rates resulted in almost TRY 2.5 billion swap costs, leading to a 31 bps quarter-on-quarter negative impact on NIM. Meanwhile, the revised October-to-October inflation valuation for the CPI linkers to 17% led to 62 bps quarter-on-quarter positive contribution, offsetting the negative impact of the increased swap costs. That said, looking at the recent realization, the upside risk for October-to-October inflation is still evident, and every 1% CPI will have around 6 bps NIM impact.
Gradual decline in funding costs will support NIM in the coming quarters. Having said this, our NIM will close the year below our initial guidance at low 3% levels due to the higher-than-expected funding costs throughout -- through the year and worsening inflation outlook which is in line with our full year NIM indication that we had shared during the second half results.
Our fees and commissions were up by a solid 25% year-on-year at TRY 4,334,000,000, well ahead of our full year guidance. As you can see on this slide, there are many businesses that positively contributed to the revenue base. The increase in payment system performance was eye-catching, up by 58% year-on-year, related with both volume and interest rates in acquiring and issuing. Bancassurance continued its strong performance, up 52% year-on-year, as a result of new product launches and increase of digital premiums. There was significant contribution from digital bancassurance sales, which were up 75% year-on-year, as more products are migrated to the digital platform.
Money transfer fees were up by 40%, driven by strong volume growth. Also, our Wealth Management Business continues to grow and support our revenue base with new ESG and tech-focused funds as well as new digital features. To sum up, our 9-month fee performance indicates a clear beat to our full year guidance of high teens.
We continue to leverage our digital capabilities with our 6 million active digital customers. Some of the key features regarding interaction and financial engagement can be found on this slide, all of which reflect the drastic improvement in our digital channels. To name a few, monthly mobile app logins increased by 31% since the beginning of 2020. And more importantly, our Mobile Net Promoter Score has improved by 11 percentage points during the same period. Our active mobile customers not only visited Akbank Mobile almost every day, but also engaged in financial transactions, which increased by 41% year-on-year.
Value driven from each interaction and engagement also picked up remarkably. Though early days, digital onboarding's initial results are also promising. Since it was enacted in May, 13% of the new-to-bank customers haven't acquired new digital onboarding. And so far, the trend has been actually improving. As of September only, acquisition of new-to-bank customers to digital channels doubled from the previous monthly average. This continues to be a potential major customer acquisition channel for the bank.
Also worth to note that the calls of digital customers is twice of nondigital.
Effective cost management is our strong muscle. We have a low cost base, which gives the bank a lot of flexibility. Still, we continue to look line by line for expense control. Our reported OpEx was up only 13% year-on-year, even with currency volatility. For the full year, despite elevated inflation outlook, we are on track for the mid-teens OpEx growth, mainly driven by our continued marketing efforts and in line with our growth strategy. We expect our low-cost base and solid revenue generation to be a supportive factor of our best-in-class cost-to-income ratio. Our cost income calculation excludes foreign currency gains and also from our long FX position that was for LYY and also our hedges for our provisions on the FX side. We will continue with our disciplined cost management approach while investing in our future.
Now on to asset quality. The key highlight of the quarter was reclassification of a TL commercial loan and as a result of 30% risk reduction over the last 2 years. This loan has been in Stage 2 since first quarter of 2018 and, due to the continued risk reduction, is now classified as Stage 1. Accordingly, our Stage 2 loans have declined to 9.6% of total gross loans.
Also, our Stage 3 loans further declined to 5.2%. We had only TRY 22 million write-off during the quarter, which had a negligible NPL impact. On a very positive note, collection performance continues to be robust.
Another key highlight is the ending of staging forbearances effective October 1. If all of our 90 - 180-day files in Stage 2 were to be booked as NPL, the impact would be 45 bps. But looking at the past trends, we expect around 1/3 of these to become NPL. And also due to our prudent coverage policy, there will be limited P&L impact. Adding all together, we remain confident in our less-than-6% NPL guidance for the year.
On this slide, we provided details regarding our deferred loan portfolio. Please recall that loan deferral schemes for consumer loans has not been extended beyond September, whereas the scheme for business banking loans had already ended. Hence, we continue to support our customers in third quarter while maintaining good discipline and balance each strength. From now on, we will see a more pronounced decline in this bucket as the loans are maturing.
Total deferred risk principal amount to date has reached TRY 36 billion, but the outstanding risk has come down to TRY 20 billion at the end of 9 months. Outstanding deferred loans account for 6% of our gross loans, while total coverage was at 8%, up by around 1% year-to-date. It is also comforting that 82% of the deferred loans had matured installments, and the repayment performance continues to be very strong. Also, NPL migration of these loans have remained consistently low, resulting in only TRY 800 million NPL balance by the end of September.
Despite the BRSA staging forbearances, we did not deviate from IFRS finance as in the past and book necessary provisions for potentially problematic assets even before classifying them into Stage 2 or Stage 3.
As I just mentioned in the previous slide, due to a significant risk reduction, there -- in 1 TL and the classification of the TL commercial loan from Stage 2 to Stage 1, this has led to a provision reversal. Therefore, our net provision charges for the quarter was only TRY 14 million, lowest quarterly since IFRS 9 implementation was started at the beginning of 2018.
Other factors that feed into this performance were: our delivered loan book, prudent reserve build with our total provisions reaching 18 billion and better collection performance from both retail and corporate and commercial customer base. As a result, our total coverage was at 5.4%, which excludes our TRY 1,150,000,000 fee provisions as additional buffer.
Our 9-month cost of credit, including currency impact, stands at 52 bps, clear indication of strong beat to our full year guidance. If there were no reversals from the TL commercial loan, our cumulative net cost of credit would have remained at 80 bps, around the first half levels actually, and it would have still been a clear beat to our full year guidance.
The lower level of net provision charges provides substantial offset to the NII headwind. Our LYY risk -- loan risk was hedged last year third quarter, as you all know, and therefore, the mark-to-market adjustments is offset at the trading line, and it is not included in our cost of credit calculation, as you know. You may find all the provision charges, trading income and hedge details in our appendix.
And now on to our bank distinctive sign of strength, our capital position. Our solvency ratios remained well above regulatory limits at 19.4% total capital and 15.5% Tier 1 and core equity Tier 1, which all exclude forbearances. Due to our solid growth performance and also increase of risk weighting for general-purpose consumer loans and consumer credit cards by the BRSA during the quarter, our CAR declined by 60 bps quarter-on-quarter. Meanwhile, our internal capital generation was eye-catching and uplifted our capital by 73 bps in third quarter. All in all, our excess total capital stood at 32.3 billion, while excess core equity Tier 1 further advanced to 30.6 billion according to Basel III minimum requirements without forbearances. Our solid capital buffer serves as a shield against unprecedented challenges and volatility and also creates ammunition for sustainable profitable growth.
Moving on to another focal area in our bank strategy, I'd like to mention some key highlights of the ESG in the third quarter. As some of you know, we announced our sustainable strategy this year, becoming the first deposit bank in Turkey to disclose quantitative targets of sustainable finance on both sides of the balance sheet. As of third quarter, it is reassuring to see that we have made significant progress in a diversity of areas in sustainability. We are well on track for our long-term targets for sustainable finance and climate change.
In the third quarter, we provided above TRY 6 billion sustainable finance while year-to-date total reach TRY 20 billion. And in parallel with our increased focus on providing sustainable finance, we completed 2 pioneering sustainability linked funding transactions. The first sustainable link repo transaction in CEEMEA amounting to $300 million, and the first Turkish deposit bank to secure funds from AIIB. And this 100 million proceeds will be used to support SMEs, fighting the adverse effects of the pandemic.
We have also further diversified our project base on both sides of the balance sheet this quarter to better address shifting sustainability-related needs for our customers. On the impact-investing side, we issued the first domestic retail social bond amounting to TRY 340 million. Of course, this transaction was in line with our sustainable finance framework. Also in this area, AUM of ESG themed funds launched by Ak Asset Management, reached TRY 850 million as of 9 months.
We have also introduced a new product, Transition to Low-Carbon Economy, to help companies make the necessary investments in reducing their carbon footprints. In addition to sustainable finance, we also supported our ecosystem and communities to achieve a more inclusive future for the next generation. Akbank Youth Academy, which aims to leverage the sources and the capabilities of the bank, provided training for 29,000 students year-to-date. The academy also held programs for improving gender diversity, such as addressing gender balance in technology roles.
In the third quarter, we also completed Akbank Labs sustainable finance for the future program. This program trained and supported young innovators to provide solutions for challenges of sustainable finance and financial inclusion.
To adjust to the long-term nature of challenges related to climate change and social inclusion, we are also working on ways to further enhance our governance structure. As a key milestone for our nonfinancial disclosures, we published our first integrated report, whereby 36 nonfinancial indicators were assured by a third party. We also published our supplier Code of Conduct. We will continue with our efforts across the bank to combat climate crisis and create meaningful change for our communities. To sum up, we have again navigated through a volatile year, maintaining our financial strength and operating -- operational resilience.
On this slide, you may find a summary of our 9-month performance versus full year guidance. Starting with TL loan growth, the solid performance in both Consumer and Business segments, we expect the end -- to end the year better than the full year 20% guidance. As said earlier, higher-than-expected funding costs through the year and worsening inflation outlook pressured NIM beyond our initial expectations. Accordingly, our NIM will close the year below our initially guided level with around 50 bps deviation at low 3% levels. This is exactly in line as we had shared in the first half results.
Net cost of credit evolution proved to be significantly better than our initial expectation of 200 bps, indicating that we could end the year somewhere between 50 to 100 bps. Therefore, better-than-guided performance and cost of credit fully offsets the ROE impact of the NII miss. And also adding a robust performance and fees so far, we have already delivered our mid-teens full year ROE guidance.
And this ends our presentation. Thank you for listening. Let's move on to the Q&A. You may raise your hand or type in it -- or basically send us -- or type in the Q&A box or actually send an e-mail if you're not joining -- if you're joining us by phone to investor.relations@akbank.com.
First question. Every participants, I saw [indiscernible] was raising a hand? Okay. Okay. Now our first question is from -- coming from Gabor Kemeny. I'm allowing him to talk, okay? Gabor?
First question is on provisioning and very solid performance in the third quarter. Did I catch you correctly that you were mentioning an 80, 8-0, basis point provisioning for the third quarter, excluding the provision release? And if you could please comment on the outlook here. And the other question is on the impact of the recent interest rate cuts. Can you comment on how this has -- how this impacts your pricing? I mean, to what extent have you reflected this in loan pricing and deposit pricing? And if you could comment on whether you have seen any dollarization on the back of the interest rate cuts.
Gabor, this is Turker. To start with your first question with regards provisioning. Yes, actually, your understanding is correct. If we were to have -- if we wouldn't have had that one-off reversal impact, actually our 9-month cumulative cost of credit would be at a similar levels, like at the end of the first half. So at around 80 basis points level.
With regard to the outlook, actually, a strong trend is continuing in the fourth quarter as well. So therefore, we don't expect such a major big off in the coming period. So we can take 50 or -- to the range of 50 to 100 basis points rate as a proxy for the coming periods. By the way, they are surely in the budgeting process for next year. But again, this can be -- this can be taken as a proxy as a normalized level for the coming periods.
With regard to the latest rate cuts actually of Central Bank, the 1 in September and the latest one last week, totaling 200 basis points. Actually, we see a major impact on the funding side, first of all. These rate cuts are -- will positively impact our funding costs going forward, led by the wholesale funding, which is repo and swap funding as well as our deposit cost. So so far, the reflection into the deposit prices was slightly lower than 300 basis points, so at around 200 basis points. So for big tickets, before the rate cuts in September, we were paying up to 19% currently, big tickets are priced at maximum 17%. And for -- so on a blended -- so for the portfolio for blended basis, again, we see a material [ easing ] in front book again. So this evolution will surely positively impact our net interest margin going forward.
On the asset side, so mainly short-term products. The prices for short-term products up to 6 months have been -- are -- have come down materially similar to the rate cut levels. So for -- but for longer maturities the reflection was rather limited. But again, these are very early days and a lot of things are moving in the market. And as you may know, yesterday, there was also an announcement by a state bank. So we'll see actually so how the market will settle and what -- how the competition will look like with regard to asset pricing.
And with regard to dollarization, actually, latest trade costs, so it didn't have any material impact on the dollarization in the system. So when you look at the BRSA figures, these are coming with 1 week lag. So far, the dollars -- dollarization level was similar to the third quarter spreads. And when I look at our own bank, actually, again, we haven't seen a major change in our customers.
Very useful. Just a small follow-up. So as I understand, you would expect a positive overall impact on your customer spreads potentially significantly positive from the rate cuts overall?
Exactly, Gabor. It's mainly led by deposit side. So we are seeing a positive contribution actually recently in the deposit side, yes. So it will surely be impacting cost of the net interest margin going forward.
But for sure, Gabor, so also the upcoming NPC meeting decisions will be important for the NIM evolution going forward. But then look at the press release of the Central Bank after last NPC meeting, actually. Probably there is rather limited room until the year-end for further rate cuts, but we'll see.
And the next question is coming from Simon Nellis. Simon, the floor is yours.
Actually, Gabor asked. Hope you can hear me.
Yes.
Actually, Gabor asked most of my questions, but I still have one on fee income. The question is actually more about next year. I know you're still in your budgeting planning, but can you kind of give us a an idea of how fee growth will trend into next year? Because I think part of the high growth is driven by the higher rates. And as they come down, that will have an impact on your payment fees.
Simon, thank you very much. Yes, this year, actually, we see a significant contribution from payment systems, led by volume growth as well as interest rates. So surely next year's interest rates evolution trends will make it -- may have an impact on the fee contribution from payment systems. But we want to grow. Actually, this is our main target for the coming period.
And also not to forget, this year, the volumes -- actually payment systems volumes on payment system side was relatively moderate in the first half of the year because of COVID restrictions. So the volumes have increased in the second half. So therefore, actually, yes, next year, rates may come down. But I think the volumes will continue to increase. So therefore, I think it will offset that rate impact. But with regard to full fee guidance, fee growth guidance, maybe we should wait a little bit. But surely, we will aim again a significant fee income growth for this year -- for next year with the help of our growth ambition.
The next question is coming from Jihan [indiscernible].
Hi, Jihan?
There's something wrong, I believe.
Maybe Jihan, you can send your question via chat.
Yes, we provided in the Q&A, Jihan, if you have a question. There's no problem.
Okay, then I continue with the written questions. One question is coming from [indiscernible] Sanan. Sensitivity of capital equity ratio to the TRY levels.
[indiscernible] with regard to currency sensitivity?
Yes, currency sensitivity, correct.
Yes, actually, as you are sharing on the screen actually, 10% TL depreciation impacts by roughly 60 basis points. That's actually the most significant substance actually compares NPL interest rates.
Okay. Maybe I can just add one thing, but obviously, this is not linear. And it's also worth to note that over the last few years, as you know, the bank has been able to improve its capital ratio despite the currency depreciation, because the bank takes necessary actions in terms of its overall balance sheet management; and also, obviously, internal capital generation, which we saw this quarter being 71 bps, but it's usually, let's say, anything above 50 bps on a quarterly basis also helps to offset that. And one last thing, obviously, there is a Tier 2 that also works as a hedge for the balance sheet as well.
Okay. Jihan asked via the -- via our question Q&A box. Why are consumer loan linked fees up only 14%, whereas your consumer loans have run significantly?
Actually, yes, there are no restrictions on the consumers loan fees. The legislation changed actually last year in the first quarter actually. So there was some base effect. That's actually the main reason.
Okay. And a question from -- you were eager to grow year-to-date. After recent rate cut, would you still consider growing loan book at the same pace?
Actually, our ambition is to grow, surely. So -- but we have to see actually how the competition also will look like in the coming period. It's really, again, too early days announcement of central -- of state banks of yesterday, how it will impact the competition in the market. But yes, our ambition to grow is still there. And actually, in the first 9 months of the year, actually, we have actually performed better than our guidance. And also fourth quarter so far, again, we are -- we keep this strong trend -- strong growth trends.
Okay. Another question regarding asset quality. Do we expect any asset quality deterioration given recent Turkish lira weakness?
Actually, as you know, there has been quite -- there has been quite deleveraging in the FX loan book of Turkish banks in the system. Also versus 3, 4 years ago, our FX also amounting to USD 18 billion levels. Now it's amounted to USD 12 billion levels. And also when you look at the short FX provisions of nonfinancials -- non-finance in Turkey, short FX position was amounting to roughly USD 190 billion levels 2 years ago. Now it is down to roughly USD 130 billion levels. So a reduction by around 1/3. And also, when you look at the composition, short-term portion of the FX position of nonfinancials, it actually is positive, roughly positive by USD 50 billion.
And also, when I look at the FX deposits composition in the banking system, so this year so far, corporate commercials have increased their FX deposits. So maybe it was also again an action they have taken for hedging their FX liabilities. So we don't expect such sensitivity on our asset quality, negative impacts on our asset quality.
Okay. The next question comes from our written questions. What are the drivers of trading line? You had significant spot loss yet the total trading loss was much lower. What are the contributors? Can you elaborate on that?
Actually, this is mainly a customer business. Also the volatility is also impacting this line. This is actually driven by derivative income and FX income, mainly led by customer business.
And also maybe it's worth to highlight that if you look at it on a Q-on-Q basis, it's actually at -- I mean the clean because we share here LYY, ECL and other. So you can see here the clean trading basically line is actually very similar to second quarter levels.
Yes.Q-on-Q, flattish [indiscernible]
Yes.
Okay. The following question. Can you please talk a bit about the exposure that was transferred from Stage 2 to Stage 1?
Actually, it was a big commercial exposure we had. And after restructuring of that exposure, it has been classified into Stage 2, 3 years ago. And since that time, actually, we've seen a sizable risk reduction in this exposure by more than 30% risk reduction we've seen with continuous down payments. So per BRSA and IFRS rules actually, you know them very well, we had to classify it back into Stage 1. So therefore, actually, it does obviously impacted this. So it had a major impact on this provision reversal.
Okay. We don't have any other questions at the moment.
Okay, then. Well, thank you, everyone, for joining us today. And we're always here to help if you have any follow-up questions following the call. And hopefully -- I keep on saying this, but hopefully, next time we meet in person.
Thank you very much.
Thank you very much. Take care.
Yes. Thank you.
Bye-bye.
Bye-bye.