Akbank TAS
IST:AKBNK.E
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Akbank TAS
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Dear friends, thank you all for joining our third quarter earnings call. I hope you are all well. This is Ebru speaking, the Head of IR and Sustainability. Today, I have with me Turker, our CFO; and Gulce and Bercem from our IR team.
Before moving on to Akbank's solid third quarter performance, we'd have to share a few words about the operating environment. This last earnings call, global economic outlook has deteriorated. Higher-than-anticipated inflation, monetary policy tightening and adverse repercussions of the war are weighing on growth prospects, world economy, particularly our main trading partners in Europe is expected to slow down in the period ahead.
As confirmed by the recently revised growth forecast, the policymakers confront on with an undesired trade-off between taming inflation and avoiding a hard [ level of ] economic activity. Looking ahead, global environment is likely to become more challenging for consumers, businesses and policymakers in the near term.
Turning to our economy. We maintained a solid growth in the first half, averaging at 7.5% growth on an annual basis. Strong credit impulse, robust export performance and buoyant tourism season were the main drivers of growth. Unemployment rates came down to 9.6% on a seasonal adjusted terms in August. This is the lowest level observed since 2014. Nevertheless, as outlook becomes gloomier on the global front, the support of foreign demand may wane next year.
Recent signals show that the economy started to lose momentum in the third quarter, mainly due to the slowdown in trade partners. The surge in natural gas prices inflates the import build by driving energy imports to historically high levels. On the other hand, we have good news coming from the service exports as tourism and transportation revenues have performed well beyond expectation.
Winter tourism is also expected to remain vivid. Inflation remains elevated and continues to take a toll on purchasing power of consumers. Despite the recent easing of supply chain disruptions, exchange rate and energy price pass-through remains to be main pro-inflationary factors. While strong dollar and the ongoing war pose upside risks to the outlook, consumer inflation is expected to peak soon at around 85% before coming down significantly in December due to the base effect.
Global slowdown and the associated decline in commodity prices are also expected to provide a partial relief in this high inflation environment. Before moving on to the bank's numbers on this slide, we have shared the recent trends in loan growth as well as the marginal market rates.
And now on to our bank. Our 9-month net income was up more than 5x year-on-year to TRY 38,223 million. We achieved an outstanding cumulative RoA of 5.6% and RoE of 51.5%. Our quarterly RoA and RoE were even higher at 6.7% and 59.6%. We have also further built capital during this quarter. Our total capital reached 19.3%, while our core equity Tier 1 was at 16.1% without any forbearances, with main contribution coming from internal capital generation, which is profit.
Our solid solvency ratios will continue to provide the bank significant competitive advantage going forward. Contributors to this outstanding performance for across the board as guided, including our subsidiaries. I would especially like to underline our significant momentum in customer acquisition, which reached 1.7 million year-to-date. This led to our swap-adjusted CPI excluded net interest income to surge by almost 180% year-on-year. Also, please note that the job calculation for inflation adjusted 9-month RoE stands at a high single digits.
Let's now dive deeper into the numbers, starting with the balance sheet. Our TL loans were up around 54% year-to-date, reaching our full year guidance. As shared in several occasions, the bank's motivation in SME and consumer banking continues at full pace. This motivation has resulted in a successful 80 bps year-to-date market share gain among private banks in the SME segment. As a result, the biggest growth contribution in TL business banking came from the SME segment.
Our new organization structure, which we implemented at the beginning of the year with a 360 degrees customer focus, a comprehensive SME movement package, which was designed to empower SMEs continue to be supportive factors in this success. This year, we have also been active in small ticket variable loans, such as CGS, ranking around TRY 7 billion year-to-date.
As for the consumer side, on top of the 160 bps market share gain last year, we gained another 40 bps market share year-to-date. Due to the global uncertainties while growing, our focus remains on maturity mismatch, interest rate risk management as well as asset quality evolution of the balance sheet. In that respect, please note that 50% of our TL loan book will reprice or mature within the next 6 months while most of the remaining by end of next year.
As for the asset quality side, our analytical data indicates that the PDs, or the probability of defaults of the portfolios remains at low levels while we are growing. Our net FX loans were down by around 9% year-to-date to $10.6 billion, which is in line with our shrinkage guidance. We continue to observe muted demand for foreign currency loans and do not expect any new change in this trend.
Our treasuries proactive positioning in CPI linkers continues to work as a hedge against higher inflation backdrop. Our CPI linker portfolio stands at TRY 99 billion, which is 78% of our equity and 70% of our TL securities. Excluding the mark to market increase, year-to-date growth was at 22%. This positioning will help mitigate the negative impact of inflation accounting if when implemented. Therefore, along with our solid customer base revenue growth, CPI linkers continue to be a supportive factor for NII.
As for the newly implemented regulations, we had proactively bought more than TRY 10 billion worth of fixed rate bonds around 19% levels at the June and July auctions. Our foreign currency securities, by the way, are down by 6% year-to-date, mainly due to the redemption of our Eurobond in September. I would also like to underline that thanks to our prudent ALM management, our Eurobond portfolio is fully hedged against Fed rate hikes.
And now on to the funding side. We do maintain our focus on the well-diversified and disciplined funding mix. Deposits continue to be our main source of funding at 63% of total liabilities. Our TL deposits were up by a solid 86%, resulting in an eye-catching 23 percentage points improvement in our TL, LDR to 119%. Our solid customer franchise successful in gaining 1.7 million net customers year-to-date, along with the new deposit scheme were among with supportive factors.
The new deposit scheme has reached over 56% of our TL time deposits. The renewal of the ones that matured were strong. Next renewals are mainly in November. Worth to mention that our sticky low-cost TL time deposits and 0 cost demand deposits were also up by an outstanding 91% and 92% year-to-date, respectively. All of these have been supportive factors for both our deposit maturity profile and cost.
Our foreign currency deposits, on the other hand, were down by around 8% year-to-date in dollar terms. With our FX LDR remaining flattish year-to-date at around 46%. Our foreign cash liquidity remains as one of our strong muscles. Regarding the new regulations for the liability side, please note that we have reached the 20% threshold for both retail and commercial customers foreign currency to TL deposit conversion, while we are very close to 50% TL deposit to total deposit ratio.
Moving on to our wholesale funding side. We have a balanced funding profile. Our third quarter foreign currency LCR was robust at 478% and our foreign currency liquidity buffer remains noteworthy at around $12.9 billion versus our next 12-month rollovers of around $3 billion, indicating a liquidity buffer of more than 4 times. Of the 3 billion deal within the next 12 months, $1.4 billion are syndicated loans and $500 million is a senior bond, which was repaid as planned and guided earlier this week on October 24. Please note that you are all aware that we are currently in the market for $670 million syndicated loan. It is, again, ESG linked. And first, as we always mentioned, we will pay back and then we will obviously borrow and we should be announcing the results quite soon.
In addition, as usual, due to our ample FX liquidity and low foreign currency loan demand, we may monitor the capital markets on an opportunistic basis, subject to the market conditions. Prioritizing such a low funding while extending overall maturity and now moving on to the P&L in more detail.
Our dynamic asset liability management, benign funding costs, ongoing asset repricing as well as strategic timely positioning in CPI linkers, have all contributed to our almost 4 percentage points year-to-date NIM improvement to 7.09%, which is in line with our full year guidance.
Our second quarter NIM stands at 863 bps. Our swap costs remained flattish quarter-on-quarter, while our CPI linker income was boosted due to our revised CPI assumption from 50% to 65%. Please note that our guidance for the full year is based on 65% October to October inflation assumption. Now looking at the latest September inflation data of 83.5%, it seems conservative. Every 1% inflation above 65 has 430 million net income, 6 bps NIM and 40 bps positive RoE impact on a yearly basis.
On the commission revenue side, we further excelled our outstanding performance across the board, up 20% quarter-on-quarter. The performance is well ahead of our guidance. Our fee income reached TRY 7.7 billion, up by 84% year-on-year when adjusted for the one-off LYY commission gain last year. As you can see on this slide, all businesses have positively contributed to the revenue base, indicating the sustainability of our fee generation. Reasons behind this accomplishment can be summarized as customer-oriented solutions leading to customer acquisition, product innovation and diversity, increased transactions, pricing due to either currency or inflation and the success of our digital channels.
There is a lot of momentum across all business lines, as I mentioned earlier, including our subsidiaries, which solidifies our sustainable core revenue generation capability going forward. We maintained our momentum in customer acquisition, as I shared several times, but I wanted to give a bit more detail. We have added 1.7 million net active customers year-to-date. Our digital customers reached 8.3 million with all-time high penetration. Our monthly number of customers from which we collect commissions is at also all-time high, which solidifies our core revenue generation for the coming periods. Our digital strategy, which is based on our customers' journey, has been a key enabler for us to achieve record-breaking net customer growth for 4 consecutive quarters. 1 out of 3 new-to-bank customer acquisition was relaxed to digital onboarding year-to-date. Both our daily mobile users as well as our banking transactions are up by around 1.5x on a year-on-year basis. Customer growth will continue to be reflected to our numbers.
Challenges obviously remain on the OpEx side due to both high global inflationary pressures as well as pass through of weaker currency. Still, our relatively low cost base versus peers, gives the bank significant competitive advantage and a lot more flexibility, which can actually also be seen in our 9-month cost to average asset ratio, which remains limited at 1.9%. With our solid revenue generation, cost-to-income ratio also remains at historical low levels of 18%. This level is always not sustainable in the long term. But that being said, looking at our year-to-date performance, we will end the year significantly better than our revised cost-to-income ratio guidance.
And now on to asset quality. Our loan portfolio continues to perform well. Year-to-date, there hasn't been any net inflow to stage 2 when excluded for currency impact. As you know, foreign currency provisions are hedged. Therefore, our Stage 2 has declined to 7.5% of gross loans, down 2.4 percentage points year-to-date. Repayment performance continues to remain solid. As for Stage 3, the inflows were broad-based and collection performance remains robust.
Our third quarter net NPL inflow was only at TRY 139 million. While our third quarter NPL write-off was also immaterial at only TRY 49 million. For fourth quarter, we do not expect material increase in our NPL inflows, therefore, we remain confident in our NPL guidance of below 4% for the year. Our cost of credit evolution underlines our proactive provisioning as well as our healthy loan composition. We had model updates, both in first quarter and second quarter, which had 12 bps impact on our 9-month net cost of credit. We will consider another model update in the fourth quarter to reflect our updated macro assumptions.
Full repayments, especially ongoing strong collection performance contribute positively to our cost of credit evolution. As a result, our 9-month cost of credit, excluding currency, has remained at a low 49 bps underlying the strong risk discipline through the cycle. Including currency impact, which we are hedged against our net cost of credit would be at 78 bps.
Despite our solid loan growth as well as improved collateral values, our coverage ratio for first quarter remains -- for number Stage 1 remains flat but has increased for both Stage 2 and also Stage 3. We believe our significant provision build limits the need for additional provisions. As a result, we expect to end the year better than our full year guidance.
Record high profitability also reflected on to capital position as our internal capital generation added 515 bps to our total capital year-to-date. As a result, our total capital is up by almost 200 bps year-to-date to 19.3%. And please note that this improvement was despite repayment of Q2 during first quarter, significant growth and also the temporary risk rate increase applied to some loans as per BRC announcement.
Adjusted for this risk rate increases, our capital would have actually been 170 bps higher at an outstanding 21%. Also, I would like to underline the eye-catching 320 bps year-to-date improvement in our Tier 1 and core equity Tier 1 ratio of 16.1%. Our sound capital buffers service shield against unprecedented challenges and volatility and also creates significant ammunition for sustainable profitable growth.
On this slide, you may find the summary of our solid financial performance. I am very happy to share that we have outperformed on every metric except OpEx, which remains a challenge and higher inflation backdrop. But still, as I mentioned earlier, our low OpEx base and CPI linkers will also help on a relative basis.
So what to take away from this call? Momentum across all business lines, including our subsidies continue as we deploy our capital with sustainable profitability and focus, with the key drivers being accelerated customer acquisition, healthy market share gains in SME and Consumer Banking, proactive ALM with maturity mismatch and interest rate risk management, highest level of efficiency, well-built provision book, and very importantly, our robust capital buffers, which is by far the highest among peers.
Before moving on to Q&A, I'd also like to share some latest developments on the ESG front. In line with our long-term commitments, we continue to support our customers, communities and our people towards a more sustainable future. We provided $40 billion sustainable finance this year, bringing us even closer to our long-term target of $200 billion by 2030. In line with market trends and needs of our customers, we have updated our sustainable finance framework to better integrate ESG into our lending and funding practices. We plan to announce our [ framework ] before the event with an SPO from a third party.
In line with our strategy regarding SMEs, in third quarter, we secured $50 million from EBRD, the second tranche of the Turkey women business program, reaching $100 million year-to-date. We remain committed to contributing to our ecosystem and communities, harnessing the power of technology while doing so. And to share an example, we introduced audio support to empower our visually impaired customers and their access to our mobile and digital banking services. This feature was endorsed by BlindLook.
Our digital platform for Akbank volunteers was also launched in third quarter. In collaboration with Ability Pool, this platform will help our volunteers to participate in community projects more efficiently, and obviously, most importantly or one of the most important pillar is climate change. The next milestone in fighting climate change will be to tackle the so-called inside out impact in a more systematic and quantitative way.
In line with our commitment to become a net zero bank by 2050, we all need to collect data from our customers to quantify our finance emissions. We'll be updating our stakeholders on the development of our decarbonization journey in the coming quarters. Last but not least, our transparent and proactive approach in nonfinancial disclosures continues to improve our ESG ratings. I am very happy to share that we recently received a double upgrade from Refinitiv for our ESG score to A.
This concludes our presentation, and now we are moving on to the Q&A. Please do raise your hand or type in your questions in the Q&A box. For those of you joining us by telephone, please send your questions by e-mail to investor.relations@akbank.com. And the first question comes from Konstantin.
I have 3 questions that I wanted to ask. The first one, could you please comment how high do you see the risk around the rollovers of corporate FX protected deposits in November. As you mentioned, many of these deposits would be maturing in November and I'm curious, do you expect the majority of this to remain within the scheme, how high do you see the risk around this leaving?
The second question that I had was that there was this recent regulation that restricted corporates with high FX cash holdings from accessing Turkish lira loans from local banks. And this regulation has recently been tightened. So previously, you said that if the corporate holds in excess of 10% of [indiscernible] assets, in FX cash, they are restricted from using these Turkish lira loans, but now this regulation has been tightened, the threshold has been reduced to 5%. So do you see this tightening as material? And what do you see with respect to the corporates behavior in response to this tightening in regulation?
And the last one, could you please comment what should we expect around the call of the dollar-subordinated bonds from early next year?
Okay. Thank you. Turker, I believe, the floor is yours.
Yes. Konstantin, thank you very much. Just start maybe with the last question, are the call option, which is coming due next April. As we recall actually, also this year, in the first quarter, we had other call option, and we used our exit option at that time. And actually, also, we know that the market practice actually and from both liquidity as well as capital perspective, we are in a better position. We are in a very good position. Actually, we want to follow the market practice as we did in the past. But surely, it will depend on the BRSA approvals, for which we will be applying next year. That's with regard to your first question.
With regard to the rollover corporate FX-protected deposits, yes, there may be some companies which may not prefer to roll it over because of their liquidity position borrowing, et cetera. But also in July, actually, we have seen the first behavior of corporate and commercial. And at that time, most of them have preferred to stay in this product. And also, as you know, the tax incentive for these products has been extended as well very lately.
And again, also just to mention, still, we see new inflows, maybe not at the same pace, but we still see some new inflows to this product by our commercial customers. Therefore actually, yes, there may be some of them who may not prefer to roll it over. But it will be important with regard to this 20% threshold of Central Bank. I think we will still be able to meet it because our current ratio is well above this minimum 20% requirement. That's what I can say on that side.
With regard to the latest regulation, as you already mentioned, this 5% net FX position. Actually, there are further regulations as well as you know with regard to corporate lending. So maybe we should look in the broad perspective. I don't think that it will make a major change compared to the current trends. Already lending activity on the corporate commercial side has slowed down. And also the latest fixed rate -- fixed bond reserve requirements also makes us to be very selective in our lending. We don't want to increase this portfolio too much. We want to keep it at the minimum level as much as we can. So that's the actually overall situation.
And the next question comes from Alan Webborn.
Can you hear me?
Yes, yes, we hear you perfectly fine.
A couple of questions, if I may. Firstly, could you talk a little bit about the performance and trends in TL loan yields and deposit costs across the third quarter? And in the context of the sort of ever-changing regulations and where you see that going as we -- where you are now compared to where you were, say, at the beginning of the quarter. So that would be helpful on that sort of core spread part of the P&L.
And then when you talk about net lending on the corporate side slowing, I mean how closely linked is that to the sort of regulation? I mean, has timing regulation caused corporate lending to slow down across Q3? Or are we going to see a more sort of brutal slowdown? And presumably, is the slowdown just focused on corporate, whereas on the retail, is it more stable? I just like to understand better the dynamics there.
And then the last question, I guess, was whether -- I mean, I appreciate that your risk experience has been extremely good so far this year. But are there any areas where you have some concerns and where your sort of macro adjustments to the models are focused?
Thank you, Alan.
Alan, this is Turker again. Let's start with third question, maybe the expectations around asset quality. As now currently, as Ebru has also mentioned, the asset quality always is quite robust. And it's also very understandable. The economic activity on the ground is very strong. Funding cost for companies as well as for retail customers are quite favorable. So therefore, actually, we have to see how the coming periods will be evolving actually. Surely, there are -- currently, we are seeing some slowdown of signals globally in terms of economic growth.
So we have to see actually how this trend will continue in '23. Assuming that current economic activity in Turkey on the ground stays at similar levels, so again, with a healthy economic growth. And I think asset quality may stay at these levels. What may be the risk actually going forward? A scenario where economic slowdown increases further and stays for an extended periods in place. And along with that, if we see also an increase in the borrowing cost for customers, surely, it may have a negative impact on the asset quality trends in the coming periods.
But I think we won't see it in the very close future because as I said, current the funding cost for borrowers is quite favorable. Therefore, actually, as long as they have the favorable cost and if this potential economic slowdown period does not stay for a very long period, I think it's still manageable, but we'll see. But what do we do for this potential risk even though actually the asset quality trend is quite positive, and also the collateral values have improved significantly, we don't change actually our provisioning levels and actually we have even further increased our coverage for our existing portfolio. And surely, in the fourth quarter towards the end of the year, we will again revisit our IFRS 9 models with regard to our macro parameters. And if needed, we will make further calibration at the end of third year to address this potential risk in the coming year.
With regard to corporate and low-yield and [ deposit ] evolution, surely, there are some new dynamics in the system. One of them is actually the Central Bank regulation with regard to fixed rate bonds, actually, puts a cap on the lending rates to corporates and commercials. And we don't actually want to increase the fixed rate bond portfolio, as we want to -- actually, we don't want to increase our interest rates and maturity mismatch. We don't want to take interest rate basically for the future. Therefore, actually, we are quite careful actually in our lending activity, we refrain from lending in longer maturities because of this cap actually, we cannot price in the longer maturity interest rate costs into our prices.
So we are, in this respect, quite careful. And therefore, actually, currently, we are seeing some easing in the lending rates, maybe to continue into figures. The back book in commercial loans has a yield of roughly 22%, whereas on the front book, it's roughly at 18%, 19% levels. Whereas on the consumer side, since we don't have this such a cap regulation, the back book is at roughly 22% levels and font book is like 26% level. So the consumer portfolio is actually helping to reprice the loan book, but surely, there is an impact coming from the commercial side.
On the deposit side, currently, more than 50% of our TL time deposit today, is comprising from this FX deposit scheme and it is linked against the policy rate that surely there is some positive contribution coming from there. For the remaining portion of the time deposits, currently, actually, we see some increases there in the -- also in the market. And this is mainly due to the reason that maybe most of the banks are trying to meet this 50% threshold with regard to this latest regulation change.
And therefore, actually, while the back book on the TL time deposit is close to 17%, front book is roughly at 16%. So to put it together, probably in the fourth quarter, we may see some shrinkage in the core spreads, so loan-to-deposit core spread, but it is still manageable within the overall portfolio. And surely, there were some positive further positive contribution which will be coming from the CPI-linker reevaluation towards the end of the year, but maybe also to put it into net interest margin terms, our 7 -- 9 months net interest margin is at 7.1% levels on a cumulative basis.
Fourth quarter net interest margin is slightly below this cumulative rate, but not -- doesn't deviate too much and probably also with the repricing of the CPI-linker portfolio, we will beat our full year guidance of 7%, very significantly by the end of the year.
With lending to corporates actually already because of this -- since these regulation changes have been in place since July, August, actually, there was a previous regulation. Now this regulation has been changed with regard to fixed rate bond requirements. Previously, we were holding it as liquidity at the Central Bank. Already actually, since maybe the end of July, we are observing this slowdown in corporate commercial lending, and the similar trend is continued in the fourth quarter, actually. So maybe when I compare fourth quarter trends to the second half of the third quarter trends is our most at similar levels.
Pinar? Someone had their hand up, but they removed...
Maybe the question was already answered.
Maybe it was. Okay. All right. Okay. So there are 2 more questions coming. Okay. So Pinar, the next question comes from Pinar Uguroglu.
Can you hear me well?
Yes, we can hear you perfectly well.
Just 1 sort of detailed question on my side. In terms of the recent regulation change or the obligation let's put it that way, where do you stand on your detailed deposit to portfolio in terms of Turkish lira to FX? Are you close to 50% benchmark on the retail side? And I think you're very close on the institutional side, but I wonder where do you stand on the retail side? And we see that your Turkish lira security book has expanded. I mean, shall we expect more bond buying in the fourth quarter of the year, in the fourth quarter, how much more you should buy given the recent changes?
This is Turker again. Yes, actually, both on corporate and retail side we are very close to 50% threshold. As Ebru has mentioned, we have already met 20% threshold, but also we are very close to 50% threshold, so -- which will actually -- which will also minimize this bond requirements for the late regulation change. By the end of the third quarter, actually, the fixed rate bonds were making up roughly 1% of our total asset size. And assuming we meet and we keep the 50% threshold, so the maximum requirement actually -- because the latest regulation has been just announced, so we may still need to buy some fixed rate bonds in the fourth quarter as well. But again, it's very low levels. So probably at the end of -- the final picture will be roughly 2% of the total asset size.
And one last question regarding the inflation accounting. Would you announce anything with regards to the IFRS adjusted financials, which would include inflation accounting, I might have been missing it if you have already done it, but...
Actually, we have just given an indication in our presentation for this third quarter. So inflation adjusted RoE. So this draft is high single digit. We are still working actually on this transformation. We are very close, but we are also in close contact with our independent auditor with other participants in the market. Once this also -- so because there are too much detail behind this, and we want to really apply in the most correct actually manner. So once it's financed, so we will also share further details with you, but so far nothing has been published.
The next question comes from [indiscernible].
I think you can hear me now.
Yes.
I have 2 questions. The first one is on cost -- dividend payment out of 2022 earnings. So Turker, do you have any concerns paying out to, let's say, 10%, 15% of dividend payout ratio because the core equity Tier 1 ratio is pretty high around 20% level. I asked this question in -- regarding the inflation accounting actually. If it happens, what may happen on the dividend side, your view, I mean? And if inflation accounting is not applied what is your view?
And the second question is probably I missed your point about the fourth quarter core operating margin outlook, excluding the CPI linkers impact, how should we see the core operating margin in the fourth quarter versus the third?
With regard to dividend payout, always actually, we apply for BRSA's permission at the beginning of the year. Last year -- actually last year, we were more optimistic, actually, to be honest with you, and we were aiming a higher payout ratio maybe similar to our past ratio of like 20% to 25% levels. But at the end of the day, we had got the permission at 10%. So surely, next year, we will again aim to increase this payout maybe the levels as we had in the past. Surely, it will again depend on BRSA's approval. And since actually in local accounting standards inflation account, if not applied actually, I think BRSA will again take into consideration the existing published financials, I think.
With regard to the core spread evolution excluding CPI linker impact, when we look at latest net interest margin and NIM trends actually in the fourth quarter so far. These are slightly like maybe 50, 60 basis points lower than the third quarter. And this is mainly due to the fact that so this regulation changes actually are limiting our pricing on the loan portfolio side.
And on the deposit side, yes, FX deposit scheme is quite favorable in terms of funding cost, which makes up more than 50% for our deposit base. But surely currently, because of the 50% requirements, we see some increase in the TL time deposit cost for the portion excluding FX deposits scheme but also not to forget also, FX deposit cost is evolving very -- at a very low level. When I look actually -- I missed that portion actually, sorry. When I look at the back front book compared of our FX deposits, back book is at roughly 2%, 2.5% levels and front book in at 1% levels. So there is some positive contribution which will be coming from the FX balance sheet side. But surely on the TL side, we see the impact of the regulation change, which is putting some pressure, but not very material on the net interest margin.
We have 1 also written question that is coming from TCW from Javier. Thank you for your presentation. He was listening by phone. Could you please give us an update of your TRY 660 million equivalent syndicated loan? What amount do you expect to raise closing date? Turker?
Okay. Actually, there were some news today. Actually, we are just in the signing process. Once it's finalized, actually, we will make our public disclosure. But as we have mentioned in our previous meetings and previous calls, actually, the FX liquidity of the bank is quite strong and new FX asset generation capacity in the system is also -- is quite low, actually, which you can also see from the FX loan growth trends in the system. There is a significant -- there's a successive deleveraging in the FX asset price of Akbank, mainly if it's by FX loans.
And also on top of it, not to forget, actually, we should also look from the cost perspective as well, the cost of FX wholesale funding has been increasing for the last -- especially for the last 1 year, actually. Taking all of this into consideration, actually, we wanted to be very actually cautious in the stuff and we want to manage also our cost to actually the rollover ratio of this indication will be roughly at 60% levels, which within a cost of 4.25% for dollar site and -- for Euribor -- for Euro site, Euribor plus 4%. Just to repeat, once signature positive is finalized, we will make the public disclosure as well.
[indiscernible] the floor is yours.
A couple of confirmations I need from you. One is you just said that rollover ratio for this indication is going to be about 60%. Did I hear you correctly?
Yes, 60%, right?
And for core spreads, as an answer to this question, you said 50 to 60 basis points compression, is that...
On the net interest margin side, which is what we are seeing very lately, yes.
Okay. And one last...
Maybe -- but also, we have to see actually how the coming period will be evolving. This regulation change, which I've announced last week is quite new. So we have to see how it will impact the pricing in the markets for TL time deposits, excluding FX deposit scheme.
Okay. Would that risk be on the upside or the downside for the spread?
Maybe some downsides. It's really -- this pricing on that site gets, so increases TL deposit rates above current levels. It may create some downside. But no, since we are actually maybe when talking for this year actually since only 2 months are left actually, it doesn't pose a risk into our full year guidance.
Okay. And one last thing -- or 2 final questions from my side. One is you said that the front yields on the commercial loans are now 18%, 19% and front yield on the TL deposits at 16%. Are these numbers before the last rate cut or after the last rate cut?
After last rate cuts, but surely, we have to see actually how this shall evolve in the coming days because the rollover of especially corporate FX deposit scheme will be happening in November, so which may bring down the cost on that side. Whereas on the commercial lending side, the new reference rates have just been announced. So this may also negatively impact lending rates starting from next week.
Okay. And final question is about the credit card loans. There is a 17% or so increase on a Q-on-Q basis in credit card balances. So I wonder how you think that will continue in the fourth quarter and probably also in the first quarter of next year because the cap rate for those loans, the cash withdrawals, et cetera, is also going down. So should we expect this momentum -- growth momentum in credit cards to continue?
Yes, that may be the case actually also we see a similar trend in the fourth quarter, probably currently from the experience, we also have actually in our daily life, and most of the customers are actually preferring to use their credit cards. And it's also linked to the economic activity trend actually in the coming period and the consumer consumption behavior.
There's a question regarding our capital level and the currency impact on the capital from Vinod. He says [indiscernible] FX rate, to what FX exchange rate levels are you comfortable with currently with the capital buffer?
Our sensitivity of 10% TL depreciation is at 70 basis points, but with further increase in the depreciation, actually, this sensitivity is showing a decreasing trend. It doesn't stay stable at 70 basis points level. And also, we are from a very high level of capital. That's actually -- of 70 basis points. Probably -- actually, I haven't made this calculation roughly, but we are running some internal stress scenarios with some interest rate shocks and depreciation shocks for different scenarios. And in all these scenarios, our capital is at very healthy levels, well above the minimum requirements. That's what I can say.
We have 1 question from Zeno. Could you please identify, Zeno?
Yes.
Could you identify your company?
Yes, Finance in Motion, German asset manager. Can I go on?
Yes, yes, please go ahead.
Just a very quick question. You mentioned before about high collateral values. My question is if you expect collateral values to decline drastically in case of an economic contraction given that collateral values might be indeed inflated by high loan growth and high credit growth.
As you have actually mentioned, yes, we are -- it's also partially inflation driven. This year, we have seen a significant appreciation in asset prices. And despite that fact, actually, we have kept our provision levels at existing levels. So we haven't said actually, yes, there is a significant improvement in our collateral value and let's make some reversal and we haven't done this, and we continue to book further provisions to our portfolio.
Yes. Actually, that's something that's quite important to underline maybe because if you look at, for example, the provision build has actually increased that's also provision build, which actually excludes our free provisions has increased since the end of the year. And this is a result of the bank's prudent basically risk management. And as I mentioned also and Turker reiterated, in the fourth quarter, we could do another -- a further basically macro update if we see necessary for the upcoming -- ahead of the coming year, Zeno.
So I guess there are no further questions. Is there -- give them -- is asking a question.
I guess, there is a mistake. I wasn't asking the question. Apologies.
All right. So thank you all for attending our call. Once again, we are here at your disposal if you need any further assistance or if anybody need further questions. And hope you all keep well and really look forward to seeing you all soon. Take care. Bye-bye.
Thank you very much. Bye-bye.