Turkiye Vakiflar Bankasi TAO

IST:VAKBN.E

Earnings Call Transcript 2019-Q1

[Operator]

Ladies and gentlemen, welcome to VakifBank Quarter 1 2019 Earnings Results on May 10, 2019. Today's speakers will be Mr. Mustafa Turan, Senior Vice President and Head of International Banking and Investor Relations; and Mr. Ali Tahan, Head of Investor Relations. I will now hand over to Mr. Mustafa Turan. Sir, please go ahead.

[Mustafa Turan, executive]

Thank you, operator. Good afternoon, ladies and gentlemen. Welcome to VakifBank First Quarter 2019 Earnings Announcement Conference Call. We will start with the highlights of the quarter. Ali Tahan, Head of Investor Relations, will continue with details of the financials, and we will welcome your questions as always afterwards. VakifBank achieved another good set of results. We have TRY 651.2 million net earnings for the unconsolidated basis. This number went up to TRY 796 million for the first quarter consolidated basis. When we look at the comparable net income of the quarter, we could be announcing TRY 1.5 billion, which is up by strong 44% Q-on-Q in terms of CPI linkers adjusted basis. And we're gladly announcing a very strong preprovisioning operating profit. We have 43% Q-on-Q and 26.3% year-on-year increase in the preprovisioning operating profit reaching TRY 3.275 billion. This even doesn't include TRY 1.1 billion lower interest income booked by CPI linkers because of the relative decrease in the inflation for the quarter. That preprovisioning operating profit would be 90% Q-on-Q, if adjusted with this CPI linkers decrease. First quarter 2019 net interest margin averaged at 3.22% versus 3.65% in fourth quarter of 2018, due to the CPI linkers impact. We had a nice improvement in the core spreads and supporting the margins. Adjusted with those CPI linkers impact, net interest margin would be a very strong 4.7% for the quarter. Due to lower cost of funding from customer deposits, there is a nice improvement in the core spreads. Turkish lira core spreads improved 1.8 percentage points to 3.16% and hard currency core spreads improved 1.7% to a very strong growth 4%. We had another significant improvement in the fee and commission income. Of course, it is also supported by strong loan growth of the quarter. Fee growth came a remarkable 120% year-on-year, which is coming on top of already good and high level of 2018. Fee to total revenues exceeded our medium-term target of 20%, and that gives us another interestingly high number of 63% for fee to OpEx ratio.

Looking at asset quality, we had a very strong coverage policy unchanged, total coverage of the NPL increased further to 102.5%, up by 2 percentage points. Stage II coverage ratio also increased 70 bps to 7.3%, and we remained solid at Stage III coverage at 74%. And Vakif remains one of the highest net coverage bank in the Tier 1 bank space despite higher new NPL origination. We will remain committed to this high provisioning policy as a conservative player in the market. I want to mention the liquidity levels of the bank. On top of already a high unsecured liquidity ratios, we have all-time high foreign currency LCR at 353% versus the required level of only 80%. Total LCR came at 119%, substantially above the required level now at 100%. And VakifBank's short-term available hard currency liquidity reached an all-time record level of TRY 6.5 billion, which doesn't include long-term right way swaps. And the bank had a lot of extra swap usage at TRY 3 billion short-term right way swaps remained a very good hard currency liquidity availability if needed in short term.

I want to talk a little bit about international borrowing and activities before I give the floor for Ali Tahan for the details. In the first quarter of '19, despite initially very challenging environment and another challenging end of the quarter, we had a lot of good transactions closed. We had TRY 1.5 billion fresh covered bond issuance for 8 years maturity with extremely low holding cost around 18% in Turkish lira only. This could be above 25% if we concluded this transaction now. We had another timely issuance of a Eurobond -- dollars-denominated Eurobond, TRY 600 million for 5 years. This was the last market deal out of Turkish DCM space end of March. VakifBank also recently closed TRY 700 million Basel III compatible additional Tier 1 issuance under our GMTN program with Perpetual Non-Call 5 structure with a concessional pricing just above 5% coupon, which is Turkish dollar [ investment ]. And we also closed 100% rollover ratio with April round of syndication just 2 weeks ago bump with $1 billion (sic) [ $1.1 billion ]. A 1 year syndicated loan was obtained from 38 banks with another successful ratio. These transactions took the bank's strength in financial capital markets. So I want to pause here and leave the floor for Ali for the details of the quarter.

[Ali Tahan, executive]

Thank you, Mustafa. Good afternoon, everybody. As always, I will try to keep the presentation part as short as possible in this Friday afternoon so that we may leave more time for the Q&A session. Going through the details of the presentation, starting with Page 4, you can see the details of P&L details both on annual terms as well as quarterly terms. On Page 5, you can see the revenue breakdown. Total revenues are again strong, and they are up by 25% year-on-year, reaching to above than TRY 4.8 billion. Strong top line growth driven on high-quality revenue generation continued during the first quarter of '19. And core banking revenues, which is consisting of net interest income and net fee and commission income, is up by almost 21% year-on-year, reaching to above than TRY 3.3 billion. And those core banking revenues are consisting around 70% of our total revenue base. On Page 6, you can see the details of net interest margin. Our quarterly net interest margin came at 3.22%. Adjusted with CPI linkers, our quarterly net interest margin would be 4.71%, which is up by 106 basis points compared to previous quarter.

And effective NIM, net interest margin management, was very visible on the core spreads site as we guided and expected. Excluding CPI linkers, there is good level of improvement in both TL core spreads as well as hard currency core spreads. TL core spreads improved 178 basis points Q-on-Q and reached to 3.16%. And on the hard currency side, we see a similar level of improvement at 174 basis points. And fixed core spread level reached to above than 4% this quarter. As of first quarter, we had $2.6 billion short-term right way FX swap usage and that number further increased to around $3 billion as of early May. On Page 7, you can see the details of the fee income growth, also posted very strong performance during the '18 entire year. Just to remind you, last year, in total, we had around 70% year-on-year growth. And on top of this strong performance, in the first quarter of this year, we had 120% year-on-year fee and commission income growth, of course, supported by lending growth. Fee income growth was visible every possible front. And the results of that all KPIs related to fees improved significantly. For example, fee over total revenues for the first time exceeded our medium-term target of 20% as realized at 20.3% earlier. And fee-to-operating expense ratio, at the same time, reached all-time high level at 63.2%. Of course, this strong fee growth was also supported by lending growth in the first quarter. For the rest of the year, as lending growth will be much more slower compared to first quarter, this is a strong [ growth, to understand, ] 20% year-on-year fee income growth shouldn't be expected as sustainable. On Page 8, you can see the slide related to OpEx. Our cost income ratio continued to improve despite high-inflation-driven cost growth. OpEx growth came at 22.5% year-on-year and it was flattish on an adjusted basis Q-on-Q. And our cost-to-income ratio came further down to 32% for the year, which is of the lowest in the entire history of the bank maybe. And in terms of the OpEx breakdown, as of first quarter, 44% of total OpEx is coming from HR side, while the remaining 56% is coming from non-HR side. And the HR cost increase on a year-on-year basis is more visible because of the high inflation, and it is up by almost 28%, while the increase on the non-HR side is up by 18.5% year-on-year.

Starting with Page 9, we may go through the details of the FX side and lending. During the first quarter of 2019, our quarterly lending growth came at 11%, which is delivered by mainly Turkish lira lending growth. Turkish lira lending growth is up by 12.8% in Q-on-Q year-to-date. And Turkish lira lending growth was visible almost every area. On the retail side, for example, it was much more visible in the form of general-purpose consumer lending. On the nonretail side, it was very visible both in CGF lending as well as short-term Turkish lira business lending. And Turkish lira lending was main driver of quarterly strong lending growth, and therefore, lending growth on a year-on-year basis came at 26%.

You can see also the details of CGF lendings, just right-hand side of the below chart, that -- from that breakdown of FX loss is also stated in the middle of the page. And as you can see, 62% of our FX lending is coming from project finance, while the remaining part is coming from both export loans as well as working capital loans. And within the currency breakdown, around 64% of our total lending is coming from Turkish lira side, while the remaining 36% is coming from the FX part, which is more or less in line and similar compared to year-end of 2018. With Page 10, we may look in more detail to lending portfolio. At the right hand -- left-hand side, below chart -- above chart, you can see the sector breakdown of cash loans, which is more or less compared to previous terms. At the same page, you can also see the breakdown of project finance loans within infrastructure, energy and service. 44% of our project finance loans was infrastructure-related facilities, while 36% goes to energy, and 10% each goes to service and other facilities. And you may also see detailed information related to relatively problematic sectors of construction and energy. At the right-hand side of the slide, in terms of the breakdown of those loans between Stage I, Stage II and Stage III. And especially for the energy part, you may also see the distribution among production and distribution part. Page 11 and 12 are related to asset quality. Relatively weak economic activity reflected in asset quality, but that was something we were expecting. There is nothing unexpected here. NPL ratio came at 4.6%, which is relatively smaller compared to year-end of 4.65%. However, if you look at the Stage II, the share of Stage II Loans in total loans continued to increase as we expected. It was 8.6% as of year-end and now it is around 10% of total loan book. And within the Stage II Loans, restructuring part seems to be gaining more share in total, while the share of past due 30 days is becoming much lower. And at the right-hand side of Page 11, you can also see the sectoral breakdown of Stage III NPL at close watch loss on a sector basis. On Page 12, conservative approach on staging and further increased provisioning levels was very visible in the first quarter. We continue to have above than NPL specific coverage ratio with almost 74% versus sector average of 69%. And our total NPL coverage ratio further increased to almost 103% from 101% one quarter ago. So this quarter, despite further increase in Stage III especially, more provisioning ratios are maintained. Our gross cost of risk and net cost of risk ratios during the quarter materialized at 319 basis points and 267 basis points, respectively.

On Page 13, you may see the details of the deposit growth. Customer deposits driven by diversified funding structures maintained. The share of customer deposits came at 55% in total liabilities. And during the quarter, deposits growth came mainly from the FX part, which is also in line with the sectoral track. FC deposit growth came at 20% in dollar terms Q-on-Q, and therefore, total deposit growth came at 10% in Turkish lira terms despite flattish Turkish lira deposit growth Q-on-Q. And in terms of the breakdown of currencies, 55% of total deposits in our case is coming from local currency, while the remaining 45% is coming from hard currency. But this picture is just vice versa for the sector. In terms of the currency breakdown, 46% of total deposits came at Turkish lira, while the share of hard currency deposits increased to 54% for the sector-wise speaking. So in this sense, as what you expect, we continued to have Turkish lira deposit, heavy deposit portfolio.

And within our deposit structure, 20% is coming from demand deposit, while the remaining 80% is coming from term deposit. And at the right-hand side, on the graph, you can also see the breakdown of deposits via retail, state and other. Other deposits is also mainly coming from corporate and commercial deposits. On Page 14, you can see the details of nondeposit funding transactions. As Mustafa been mentioned, we had very successful transactions since the beginning of the year, coming from different programs like covered bond, like GMTN. And on top of that, we have also EUR 700 million Basel III compatible additional Tier 1 transaction, again under our GMTN program in April 2019. And we successfully handled -- rolled over our April 2018 syndication loan with 100% rollover ratio. And as of first quarter, total wholesale borrowing amount reached to almost $15 billion, which makes of taking 23% of total liabilities. Next page, Page 15, is related to solvency and capital. Strong solvency ratios amid challenging macro conditions maintained. Our total Tier 2 ratio came at 16.9% and Tier 1 ratio came at -- sorry, our total Tier 2 ratio came at 15.25% and Tier 1 ratio came at 12.23%. Adjusted with EUR 700 million additional Tier 1 issuance, our Tier 2 and Tier 1 ratios would be 16.9% and 13.9%, which is one of the highest in the Tier 1 space. And today, rating agency, Fitch, also commented positively for those transactions, simply saying that it is a clear indication of state support to state banks.

For the sake of the time, I just want to stop here because other pages are related to appendix where you can see detailed information related to asset and liability composition, security portfolio, retail portfolio, digitalization and other key financial ratios and statements. And I just want to stop here, and we may continue with the Q&A session.

[Operator]

[Operator Instructions] Our first question comes from Sam Goodacre from JPMorgan.

[Samuel Goodacre, analyst]

I had a question actually about the inflation-linked deposits that have recently sort of come to the market and which VakifBank is significantly quite active in. Could you let us know a little bit about the pricing dynamics? How that works and also what appetite for those inflation-linked deposits has been? And also any pitfalls of those on the part of the consumer, indeed? So just a bit more clear about the structure of those deposits and the appetite of the customer base.

[Mustafa Turan, executive]

Thank you, Sam. Actually, that's a very new product. We are targeting retail customers. Mostly, dollarized customers trying to defend their savings and keep their savings in accuracy because of very high inflation. And actually more than that the volatility of the inflation makes people more nervous that we believe that's our provisions of dollarization. That's very new product for us. I have to say since we launched the product 2 weeks, we don't have enough data to talk about the success of this new product. So it's very new and very small so far. Probably, we will not have a big and meaningful number in short term but this kind of savings products promotion we believe is super important, especially with newcomers, new savers in the society. The structure is pretty easy. We are committing our clients certain uplift of the inflation, when the duration comes; or if inflation is low, we have a fixed rate as we commented in the beginning. So it's -- the necessary hedge behind it is done by treasury. But again, the product is very new, and we are not having ambitious targets in very short term.

[Samuel Goodacre, analyst]

Okay. And my second question is about the recent AT1 issuance you have conducted. Your solvency ratios pre that issuance were actually quite comfortable, I would argue. So could you tell us a bit about the -- perhaps the cost of that AT1 instrument, and if, indeed, this is more a -- an opportunistic issuance based on a decent cost?

[Mustafa Turan, executive]

Thank you, Sam. Actually, your comments are very true. The cost is -- this is market information, public confirmation. We have to announce this. It's 5.076% in euros for Perpetual Non-Call 5 notes. So you can understand from this number that it is a concessional price, Perpetual Non-Call 5 transaction. The sole investor is [ Southern Redford Managed Investor ]. So it is a very opportunistic trade for us.

And you are right, we didn't need this size of additional Tier 1 in the beginning. But obviously having a hard currency, additional Tier 1 is super important given the volatility of the currency in Turkey, and I'm glad that we have this. This only proved the Turkish sovereign's commitment to all state banks. In our case, even they before touch capital would be needed. So as Ali mentioned, rating agencies are also confirming the positive nature of this additional Tier 1 issuance.

[Samuel Goodacre, analyst]

And then my very final question, actually, is about recent news where we have heard related to some international investors and international banks showing an interest to acquire restructured or Stage II or indeed nonperforming loans from Turkish banks. And I just wondered what your appetite would be going forward potentially to dispose of any assets to third parties, given that this seems as if it may become a slightly more liquid market going forward. And then moreover, if there's anything bigger picture, you can let us know about these recent market developments?

[Mustafa Turan, executive]

Actually, VakifBank doesn't have any intention to sell any of its loan book, either it's Stage I or Stage II Loans. And as you remember, we never sold our NPL as well so far. And given the depressed pricing that we see in the market in a foreseeable future, we don't have any intention to sell any of our Stage III Loans at this level of pricing. But yes, you're right, we're also hearing from the news flow that there may be certain interest towards Turkish distressed assets. However, we don't have any exclusive talks by [ our name ].

Maybe, this is referring to the recently announced government initiative to help banking industry in order to mitigate some further asset quality pressures in certain industries, like energy and construction, as this is written in the government's program. But we don't know anything more at this stage rather than the public domain. So we are also indifferent like the other banks. But VakifBank will be part of those initiatives sponsored by the sovereign in line with the industry. But at this stage, nothing specific happening at VakifBank.

[Operator]

Our next question comes from Alan Webborn, Societe General.

[Alan Webborn, analyst]

And clearly, you did a good job in pulling your deposit costs down in the first quarter. I mean clearly, the market conditions have changed in the second quarter. Could you give us an idea about how you're seeing the sort of margin trends as we're going through this current quarter, and also, to give us an idea of how you feel maybe since the bank's latest reaction to the weakness of the lira is going to perfect your second quarter performance? And what do you think of this in terms of your view of full year margins? And also, the volume trends have clearly been quite good in the first quarter. So just give us a little bit of an update on current conditions would be very helpful?

[Mustafa Turan, executive]

Sure. Alan, thank you for the question. First of all, you're right, we did a good job in the first quarter to have significant widening in our core spreads. With this, we could mitigate a majority of the shrinkage spending from lower CPI linkers. And so far, in the second quarter, margins -- core spread improvement is still visible in the numbers. Having said that, CPI linkers methodology-wise nothing changed. So relatively speaking, we will keep having lower CPI figures. So margin outlook will remain below our expectations for the full year. And you're right, Central Bank is tightening because of the currency. However, as of now, we're not seeing any pressure. The deposit rates are going up as well as lending rates are going up. So we believe, this is quite a natural transition and further higher Turkish lira rates may only support the currency and the markets in our view. So we don't see this higher Turkish lira rates both sides of the equilibrium is problematic for the banking sector, given that they're helping reverse dollarization, which we believe the country needs. Actually, that was the case up until last week. We were seeing some small volumes of dedollarization, thanks to higher deposit rates. So in order to wrap up for the core spreads, there is nothing keeping us awake in the midnight, but it's too small to offset lack of CPI linkers support.

[Operator]

Mr. Alan, was your question answered?

[Mustafa Turan, executive]

I think Alan dropped. Operator, do we have any other audio questions?

[Operator]

Yes, we have one audio question from Yulia Di Mambro, Federated Investors.

[Yulia Di Mambro, analyst]

I have a few questions, please. My first question is on liquidity. Can you give us an update on your available FX liquidity and the split, please? And it looks to me like you've had very strong FX deposit growth in the quarter, probably among the highest that we've seen so far, among the banks that have reported. So generally, how are you using that liquidity? What are your plans for that? So that's my first question.

My second question is on your Stage II flows in Q2. What are you seeing so far? And are you seeing any sort of slowdown and also on your Stage II coverage, are you now happy with the level of provision coverage? Do you think it needs to go up a bit more the sort of like 9%, 10% level? And do you still have fee provisions that you could maybe use to offset that? And my last question is on the AT1s -- on the concessional AT1s that you received recently. In terms of structure, are they fully Basel III compliant? And would the rating agencies consider them capital as well?

[Mustafa Turan, executive]

Thank you for the questions. A good set of ones though. Let me start with the latter. Yes, this new Tier 1, this is a pure Basel III compliant drove down out of our program. Actually, it's a proper [ euro- ] settled bond. It's not rated, but it is similar in terms of recommendation as there is then a precedent in Turkey. And so far the rating agencies confirmed that they are basically compliant, and it has to be included in additional Tier 1 bucket for Vakif as well as other state-owned banks.

Coming to the first question. Yes, you're right. We had a very nice deposit growth in our currency. Unfortunately, it is also a reason of the dollarization. As you may see, despite pretty high deposit rates in Turkish and nominal terms, we had a Q-on-Q decrease, therefore, extremely strong quarter-on-quarter. Hard currency deposit growth is coming from dollarization, plus I have to say having 950 banks in today's Turkish market, it's paying more for us so we keep gaining market share as well with relatively low-cost Turkish hard currency deposit market. Given the high short-term rates at dollars, our deposit cost is extremely low in this [ cap ] basis. So we are very confident of our deposit franchise in our currency in Turkey. And what are we doing with those? First of all, it is increasing our hard currency liquidity. As I mentioned today, we have $6.5 billion hard currency liquidity for short-term availability, which doesn't include long-term hard currency right way swaps. We -- most of this extra liquidity is used to swap into Turkish lira in right way, which is around $3 billion, roughly half is with the Central Bank and remaining half is with markets. On a short term, we have -- we are using the ROC mechanism up until the upper end, which is around $1.5 billion. We have sizable volumes at our corresponding banks as well as we keep good volumes at Central Bank's pre-usage. So excess extra dollar liquidity year-on-year basis around $3 billion is used to generate Turkish liquidity as well as they are capped in our currency, and the plan is to keep these high-liquidity levels intact because the cost of the liquidity is pretty low compared to the previous years. And your final question in my notes is about Stage II. First of all, we're pretty happy with the coverage of the Stage II at around 7%. And as far as I know, our IFRS 9 model doesn't give us a higher coverage ratio for Stage II. But even if it happens because of further deterioration in the macro fundamental numbers in the model, as you mentioned, we have sizable TRY 900 million free provisioning, which, I believe, will be more than offsetting toward that extra provisioning requirement from IFRS 9 modeling. And so far, the first 40 days -- actually in the middle of the second quarter, we're not seeing a significant increase in our Stage II numbers.

And ratio-wise, we are flattish since the beginning of the second quarter. And most of the jump in the first quarter of Stage II, as you may see from presentation, is occurring because of some sort of forced restructuring, big files like all the other banks. We are glad that last past due 30 days loans, as a percentage of Stage II, is not growing, which could put pressure on the Stage III in the following quarters, but it's not. And I'm glad to mention that as of today, we are slightly better off than our budget numbers for the Stage II and Stage III loans. However, it is also supported by faster-than-budgeted growth in the first quarter of the year. So far, asset quality picture in the first 1/3 of the year is slightly better than our expectation and our budgets. I hope this answers your questions.

[Operator]

We have no other audio questions. Dear speakers, we can now switch to written Q&A.

[Mustafa Turan, executive]

Yes. We have a couple of webcast questions. So [ Amir ], we'll ask the question on behalf of the investor community, and I will try to answer.

[Unknown Executive]

Sure. The first question is coming from [ Moti Yap ] from [ BCB ] Securities. [ Moti ] is asking, are you still targeting 6% NPL ratio for 2019 year-end?

[Mustafa Turan, executive]

I think I just answered this. We are slightly better than our budget and target of 6% NPL. As of today, our NPL ratio is 4.1% and our budget was slightly above 5% for the first 1/3 of the year. So there is no need for us to amend roughly 6% target for NPL.

[Unknown Executive]

Thank you, Mustafa. The second question is coming from Deniz, Goldman Sachs. Deniz has a couple of questions. This first question is now that Turkish lira deposit cost is increasing on the system level, are you seeing better dollarization on deposits? The second question is how do you see this impacting your loan [ space ] and swap usage in second quarter and total swap cost in third quarter? And finally, he is asking, how do you see fee income in second quarter cost -- strong first quarter results? And finally -- this is the final question, third quarter ROE came at 9% versus 16% 2019 guidance. Does this change your view for the following results?

[Mustafa Turan, executive]

Thank you for this good set of questions, Deniz. I will try my best to answer all of it. If not sufficient, please do not hesitate to keep pushing us from webcast. First of all, Turkish lira deposit costs are increasing. Yes, you're right. And as I mentioned, up until last week, we were seeing initial signals of some sort of dedollarization. But it was thoroughly -- and probably it is not continuing so far this week with Istanbul rerun announcement. Having said that, we commit to the expectation that higher deposit rates, better the appetite for local currency deposits. And probably, not so soon, we will start seeing some sort of dedollarization of the locals. And we believe the existing hard currency share of deposits are all-time high. Moving on, this will not negatively impact our spreads. Core spreads are still improving and the swap costs are going up of course, relatively speaking. But on the other end, as I mentioned, lending rates are also higher compared to the first quarter. And we are seeing some sort of improvement in the core spreads. Swap -- the fee income, sorry. Fee income in second quarter is not growing as fast as the first quarter. But year-on-year basis, the fee growth is nicely above 25%. And so we will be easily beating our expectations of total fee and commission income. Despite so far in the second quarter, the loan growth is relatively weaker compared to the first quarter. ROE of the quarter was 9%, yes, you're right, but this is not a reflection of the other quarters and the full year average, given that we never guided the first half of the year to be more profitable. Secondly, [ mortgages ] are still below the expectations. CPI linkers are still not performing compared to the previous quarters. So we are not changing our full year guidance yet, which is still 15% ROE. And as mentioned previous quarter, we will not hesitate to use our free provisioning to smooth out earnings, if needed. So there is -- it's too early for an earnings revision. And I think the last question was about the swap costs. We had TRY 350 million swap cost, quarterly. And despite such high amount, treasury did a good job to have a positive trading income overall. Thank you.

[Unknown Executive]

Thank you, Mustafa. [ Brati ] from [indiscernible]. [ Brati ] also has a couple of questions. His first question is, is there any free provisioning reversal in the quarter? And his second question is, could you give a ballpark figure of what percentage of 30 days past due loans in Stage II have been migrating to NPLs?

[Mustafa Turan, executive]

Yes. We have a -- we had a small revision of free provisions around TRY 113 million. And in terms of the migration, that figure changed a lot. But as a ballpark number, we see 25% of our past due loans migrate to NPL from Stage II. But this figure is changing every month, and the number I'm providing is an average. So it is -- it shouldn't be used for quarterly expectation purposes.

[Unknown Executive]

Thank you, Mustafa. And the last questions on the online is coming from fixed income side. Tolu from Tellimer Research. She has a couple of questions. Her first question is on the Eurobond side, is VakifBank now done for the year or is more planned? Her second question is, is there an update you can give on the [ erratic ] call option on the VakifBank subordinated bond, I believe, given that capital effect is being replaced? And her third question is can you give an update on the outlook for loan growth and FX quality? Do you expect foreign currency lending to recover this year?

[Mustafa Turan, executive]

Okay. Again, from the last question, loan growth was strong in the first quarter. But I want to also comment a little bit about this, our 11% loan growth is very strong. I mean no discussion. But on the other hand, especially in March, we saw private banks also jump to the growth, and that's why you're seeing 5% to 6% growth from our Tier 1 competitors -- private competitors. And we know this -- almost all of this occurred in the last month. So my point is our first quarter strong growth was not a big unexpected thing in that regard. However, since the beginning of the second quarter, numbers normalized. And for us, so far, it is very slower compared to the averages. So my point is loan growth target of 20%, for us, for the full year is unchanged now. But of course, we overdid in the first 1/3 of the year. And probably, for the rest of the year, you will see us with smaller numbers. I think asset quality side, we answered your questions. In terms of the Eurobond plan, [indiscernible] issued out of Turkey, end of March. Let's not talk about coming to the market. First, we don't see that in short term. But I also want to mention that if we were talking 4 months ago, probably nobody would say that Turkey would issue the most in the entire history. In first quarter of 2019, we Turkish issuers -- aggregate issued over $10 billion. So my point is, Turkish markets may reopen pretty quickly. And VakifBank proved that we may touch to markets in order to prefund our future needs, but I confirm that there is no further borrowing need for the rest of the year.

In terms of our 2025 Q2 notes, there is nothing new since our last communication. We see this as -- we don't see this as a mechanical process. We value the option, but VakifBank will not use this option at no matter what cost. So we will be deciding rigorously and talking with the regulators after summer break. And we commit that our decision, whether to call them or not, will not create a big surprise to the market. Today, it's too early to comment about whether we will exercise the option or not. However, I can only confirm again that this is not a binary decision, so we value the call. And we are aware about the importance of this decision. And hopefully, when we give the decision, we will announce this to the market at the same time, so nobody may treat this evenly.

[Unknown Executive]

Thank you, Mustafa, to all those questions. Those were the final questions from the website. And if there is any audio questions, we may switch.

[Operator]

We have no other audio questions. Dear speakers, back to you for the conclusion.

[Mustafa Turan, executive]

Thank you. Thank you very much, everybody, for your patience in this Friday afternoon. And looking forward to speaking with all of you not so soon. Thank you. Have a nice weekend.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect.