Turkiye Vakiflar Bankasi TAO

IST:VAKBN.E

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, welcome to VakifBank 1Q 2020 Earnings Results Conference Call and Webcast. Thank you for standing by. [Operator Instructions]

I will now hand you over to Mr. Ali Tahan, the Head of International Banking and Investor Relations. Sir, the floor is yours.

[Ali Tahan, executive]

Thank you. Thank you, Rob. Good afternoon, everybody.

First of all, due to a technical problem, our colleagues, so far, couldn't publish the footnotes at the public disclosure platform yet. But we were informed that in a very short period of time, in like 5 to 10 minutes, it will be available via public disclosure platform. But our colleagues from Investor Relations site already started to share all necessary documents and presentations via e-mail to you. Sorry for this inconvenience.

And good afternoon, everybody, again. Given the fact that we are in the middle of holy month of Ramadan, compared to regular times, we would like to keep the presentation and the overall earnings conference call shorter.

And I will start with the presentation as always, related to earnings and ratios. As you can see on Page 2 in the presentation, we are very glad to announce another strong set of results. Our quarterly net income came at TRY 1.7162 million, which is up by 34% compared to previous quarters, and which is up by 164% almost compared to a year ago. And I just want to remind you that the market consensus for VakifBank for this quarter was also holding around TRY 1.6 billion. So our quarterly earnings came even higher than the market consensus, and such a strong profitability maintained despite additional coverage ratio increase during the quarter. As you can see at the right-hand side of the page, we increased both our Stage II coverage ratio from 5.9% to 7.3% as well as total coverage ratio from 90.4% to 93.3%. So this strong quarterly results came despite such additional provisioning burden. And on top of that, we didn't touch to our outstanding free provisioning amount, which was TRY 852 million. So if this missed us, we didn't release any free provisioning investment as well. And those quarterly strong P&L resulted average ROE of more than 20% versus sector average of 12.7%. And at the same time, average ROA of the quarter came at 1.55%. Again, 20 basis points higher than the sector average of 1.35%.

I will keep Page 3 related to highlights, Page 4 related to P&L details and Page 5 related to revenue breakdown because -- especially the highlights of the quarter, we will walk through those items in detail at upcoming pages.

And therefore, I will jump to the Page 6 related to net interest margin. As we guided, our first quarter net interest margin came strong at above 5%, 5.17%. Reported net interest margin at 4.48% -- swap adjusted net interest margin. Both figures are as stronger compared to 2019 averages in terms of both reported net interest margin and swap adjusted net interest margin. But as we guided in the beginning of the year, that level of net interest margin will not be repeatable during the rest of the year. And because of the repricing, each and every quarter, our net interest margin will be lower. But at this stage -- such to prove net interest margin levels, where one of the main drivers of strong profitability in the quarter.

At the left-hand side, we can see the developments related to net interest margin components, TL core spreads, FC core spreads and security yields. And at the right-hand side, you can also see, as always, the details related to money market transactions, total money market funding, cost of this funding, swap cost and average swap usage. Those additive information also provided within that page. As we are expecting in the beginning of the year, there is no change in [ business ] second quarter and the second half of the year, net interest margin outlook seems to be relatively weaker compared to first quarter results.

The next page is related to net fee and commission income. Our net fee and commission income is up by 4.4% year-on-year, above our initial guidance, despite regulatory headwinds, still, we managed to have a positive growth in terms of annual net fee and commission income growth, and in this sense, fee and commission income growth is also contributing to the high-quality revenue generation capacity of VakifBank as well as strong profitability of the bank. And at the left-hand side, you can see the quarterly growth and annual growth of fee income items in terms of lending-related fees, payment system fees, inquiry and expertise fees and insurance fees, especially on a year-on-year basis, we are glad to receive more support from lending-related areas as well as insurance, which is a key -- one of the key performance indicators for our branch managers and portfolio managers in the field.

And as you know, that regulatory headings, some of them became effective as of March, some of them became effective as of April. And in the middle of COVID-19 pandemic, we decided to provide many banking transactions free, especially through our alternative distribution channels like mobile platform, digital platform, et cetera, therefore, just to make sure that our customers do not have to visit our branches. Of course, this is also creating additional negative situation in terms of fee income generation. But still, as of first quarter, we are glad to have a positive growth in terms of annual fee income growth.

The next page is related to OpEx. Reported OpEx cost is higher, but comparable OpEx growth is 19.5% year-on-year and 4.4% Q-on-Q. During this quarter, we have first-time experience of write-off. And without any P&L impact, we also have additional one-off OpEx item in terms of this write-off policy. Therefore, we should exclude that because at the end of the day, it doesn't create any positive or negative P&L impact. Therefore, reported OpEx growth is 19.5% year-on-year and 4.4% Q-on-Q. And during the first quarter of the year, we also have TRY 50 million donation to national campaign against the fight of COVID-19, which is also creating additional 3.2% impact on annual OpEx growth. And this quarter, we continue to close 3 more branches, and our branch numbers decreased to 940, just to create more efficiency. And this efficiency is very visible in terms of cost-to-income ratio. Thanks to strong revenue generation capacity, we are glad our comparable cost-to-income ratio came at one of the lowest in the last couple of years at 26%. At the right-hand side of the page, you can also see the OpEx breakdown in terms of HR cost growth and non-HR cost growth, both in quarterly and year terms.

With Page 9, we can move to OpEx slides and lending growth. This quarter, total lending growth of locals came at 14%, which is purely driven by Turkish lending side. Turkish lending is up by 15%. And a fixed lending is flattish in dollar terms. So therefore, all the lending growth within the quarter came from the TL and local currency side, and quarterly loan growth can be also seen within the different types of loan. At the right-hand side, loan chart in terms of GPC, mortgage, FC loans and business loans. And this quarter, especially business loans, with 16% Q-on-Q, lending growth and 11% General Pro Consumer growth on the retail side seems to be very visible compared to other types of lending.

Of course, since the outbreak of COVID-19, we also designed new loan packages, which is mainly under the CGF umbrella. And lending cost, especially in terms of TL, seems to be also very visible during the second quarter so far. And therefore, TL lending growth seems to be higher than initial guidance of high teens percent. But as of today, we didn't revise our budget officially. Once we revised our budget numbers officially, of course, we will inform and share those details with you. But as of today, we can say that in terms of the TL lending growth, the new numbers will be higher than the initial budget. But on the other hand, a fixed lending growth seems to be in line with the guidance. We don't need to change the guidance in terms of the FC lending growth.

Next slide will be this information related to lending portfolio, sectoral breakdown of cash lending as well as the detailed information related to construction loans, energy loans and project finance loans. I am also taking this page quickly.

The next page, Page 11, is related to NPL and asset quality. During this quarter, our NPL ratio came down to 5.3% from 5.93% as of year-end 2019. And as we discussed previously, this quarter, for the first time, we practiced TRY 888 million in NPL portfolio write-off, and this write-off created also additional 26 basis points decline in our NPL ratio. In case we have seen there is no such write-off, our NPL ratio, in other words, would be 5.56%. Of course, a relatively faster lending growth than in later effect as well as limited NPL inflow during the quarter is resulting in lower NPL ratios. And in terms of the Stage II loans, Stage II loans in terms of the share in total also came down to 9.5% area from 11.5% a quarter ago.

As you know, during the mid-March, BRSA also changed BRSA Stage II Loans definition. And we also updated our numbers and figures in accordance with such NPL and Stage II definitions. Just to remind you, rather than 90 days, any loan with no repayment of more than 180 days are classified as NPL. So in this instance, just to provide more relief to the banking sector, BRSA extended the NPL definition to 180 days. And at the same time, they also extended the Stage II definition to any loan in terms of past due, in terms of the days between 90 days to 180 days. And this definition changed in terms of NPL and Stage II, also one of the main reasons in terms of the decline in both ratios.

In terms of net cost of risk and gross cost of risk, first quarter on cost of risk came at 219%, 19 basis points. And gross cost of which came at 491 basis points, thanks to -- and mainly because of the additional provision increase. And as a result of that, our total coverage ratio, as we discussed in the beginning of the presentation, increased further to 93.3%. And especially in this quarter, the increase in our Stage II ratio seems to be very visible. Of course, assuming that there was no such write-off practice and coverage ratio increase -- total coverage ratio increased as well as and coverage ratio increase would be higher.

On Page 12, you can see the development on the deposit side, which is the main funding source, as always. During this quarter, total deposit growth came at almost 7% Q-on-Q. And in terms of the currency breakdown, quarterly TL deposit growth was 5.5%. But on the deposit side, FC deposit side, we had slight quality contraction in dollar terms. The good thing is, within our deposit composition, the share of demand to profit further increased 22% from 20% a quarter ago. And another good part of our deposit portfolio is the currency breakdown, which is more Turkish-heavy, 56% of our total deposit portfolio, which is in the form of local currency, while that number is 48% during the quarter. And the good thing is since the beginning of second quarter, we are also witnessing additional increase in our Turkish lira deposit growth, which is very important given the fact that alignment growth is mainly coming from local currency side, additional acceleration in Turkish lira deposit gathering is also providing additional buffer and liquidity ratios for us. And as always, at the right-hand side, a ball chart. You can also see the deposit breakdown in terms of retail deposit, state deposit and other deposits mainly coming from the deposits held by our SME, corporate and commercial clients.

The next page, Page 13, is also related to international funding and securities issued. We are glad, so far, VakifBank got the highest amount of international funding year-to-date through different transactions like Eurobond issuance we did in the beginning of the year with $750 million with 5-year maturities, which is very timely and which is a very successful transaction. On top of that, through variety loans and post financings, we also obtained cash loans from our correspondent banks. And recently, we also got additional $950 million 1-year syndication loans from different Tier 3 banks participating from different -- 16 countries. And the roll-over ratio compared to at the same time of the previous year, in terms of syndication loan, came -- struck at 90%. Despite global challenges, despite many negative news flow all over the world, still VakifBank successfully roll-over with 90% ratio, and we believe that level of ratio will be amongst the highest in Turkish peer-group space. And total international fundings as of March end reached to almost $14 million, which is around 1/5 of our total liabilities.

Page 14 is related to our solvency ratios. You can see the capital and solvency ratios development in terms of total cash, Tier 1 and CET1 ratios. Of course, because of the balance sheet growth and because of the redemption of our Basel III comfortable Tier 2 as well as because of the dollar-Turkish price increase, et cetera. Our solvency ratio, despite strong profitability, decreased compared to year-end. And as we discussed and communicated with many of you during our previous meetings and calls, we also showed our solvency ratio without BRSA temporary forbearance measures, those numbers can also be seen at the right-hand side. And those BRSA forbearance measures resulted in 64 basis points positive impact in our solvency ratios, out of which 51 bps came from using 2019 year-end exchange rate while calculating our RWAs, and the remaining 13 bps came from disregarding and not deducting mark-to-market losses on security portfolio. The remaining pages are numbering 100 pages and for these are quite specific. We also put on Page 17, all the measures we take into account after the outbreak of COVID-19, but I don't want to walk through the details of those pages.

And maybe at this stage, I should stop here and leave the floor to Rob again. And if acceptable, we can move to Q&A section. Thank you.

[Operator]

[Operator Instructions] We have a question from Sam Drake [ Sam Goodacre ] from JPMorgan.

[Samuel Goodacre, analyst]

It's Sam Goodacre from JPMorgan. My question is on the last point you have just spoken about, which is capital. And it's related to the news flow we've seen today, that the state is considering a capital injection into the state banks. Could you give us, Ali, your view of your solvency ratios relative to the regulatory minimum? And also in light of the continued loan growth that you foresee for the rest of the year and ultimately give us certain color on the likelihood and mechanism for any potential capital injection?

[Ali Tahan, executive]

Thank you, Sam. Actually, you are right. Today, in the media and different platforms, we saw many news related to this issue. First of all, for those of you who also listened the global investor call that our Minister did on Wednesday, Mr. Berat Albayrak, the Minister of Treasury and Finance, also mentioned that as economy administration, they are planning to support state banks via capital injection, which is a very good news. And it is a very positive news for us. But at this stage, the details are not ready. In line with the CMB regulations and in line with the regulations in Turkey, once we have fully provisioned and once we have a solid road map, hopefully, in a short period of time, we will make all necessary announcements via public disclosure platform. But at least, as of today, we can say that the intention of the economic administration is very positive and supportive for us.

[Operator]

We have another question from Goldman Company.

[Deniz Gasimli, analyst]

This is Deniz Gasimli from Goldman Sachs. Yes, I just wanted to ask about -- you mentioned that you expect loan growth to be stronger than your initial guidance. So if you could touch upon it. I mean I know you haven't revised your guidance yet, but any upside or downside that you see at this point versus your 2020 guidance that you can talk about will be much appreciated.

And yes -- and also, I mean looking forward to getting the presentation and the disclosure on the website and the public disclosure platform. Because from my side, I still haven't received.

[Ali Tahan, executive]

Thank you, Deniz. Related to loan growth and budget expectations compared to initial guidance in the beginning of the year, we were talking to you, as well as the overall investors community. Of course, we can talk about the plans without giving any specific numbers at any specific interval, let's say. And clearly, clearly, at this stage, we can tell to you that there is a positive trend and more room for additional TL lending growth. Clearly, it is visible as of today that 2020 TL lending growth will be above -- way above than our initial guidance of high teens. But as I mentioned, we cannot provide a specific number as of today. But on the other hand, a fixed lending growth seems to be in line with our budget. So at this stage, on the TL lending side, especially since the outbreak of COVID-19, we are passing through extraordinary times, very challenging times. And those extraordinary times requires extraordinary measures to take into place just to provide more comfort and more support to our customers as a bank with supporting the Turkish economy at all conditions. Therefore, second quarter, lending growth seems to be also strong. The thing is our economist, our Chief Economist would like to revise his macro expectations. Once we are at the final page of the COVID-19, because we believe only then we may have a better picture in terms of making a fair assessment related to negative impact of COVID-19 or macro. And accordingly, we will also revise our budget numbers, both balance sheet and lending P&L numbers. But as of today, as we discuss this in terms of plan-wise, TL lending growth, for sure, will be stronger than initial guidance of high teens.

On the other hand, we may also talk about some trends in terms of NPL and asset quality as well. Because of the BRSA regulations also, we understand that we also need to change our guidance in terms of NPL ratio and cost of risk. Just to remind you, in the beginning of the year, we were guiding an NPL ratio of somewhere between 6.5% to 7%. But as of today, we understand that because of the following reasons, we need to change the NPL ratio expectation in a downward trend. First of all, the denominated effect to be higher than our initial expectation.

Secondly, NPL, because of the change in the NPL definition, we understand that NPL inflow may be limited till the beginning of Q4. Of course, this COVID-19 will create additional pressure in terms of NPL inflow and asset quality going forward. But because of the postponement opportunity, as you know, since the outbreak of this COVID-19, in line with the practice of other Turkish banks, both state banks and other private banks, we also provided postponement opportunity to our existing customers, but we did without any discrimination for all existing loan customers of VakifBank. We have a simple application. All due payments are postponed to second quarter. And of course, this policy is not creating a negative P&L because at time of day, we are still charging interest for those postponements. But of course, it is creating pressure in terms of liquidity and cash management. But my point is, turning back to asset quality issue, that postponement opportunity and offer, as well as the change in the NPL definition, shows that potential NPL inflows and negative impact of this COVID-19 can be started to seen from the Q4 onwards. Therefore, we understand that NPL ratio for sure will be lower than our initial guidance. And on the other hand, in terms of the cost of risk, because of the similar reasons, in terms of denominator effect, lending cost effect, in terms of the nominal NPL inflow limitation, et cetera, cost of risk may also lower than our initial guidance of 180 to 190. But on the other hand, there is also another change or there is another important regulatory change in terms of the NPL, which is related to NPL collections and for closure process, as you know, just to provide more comfort to people and the companies, BRSA also asked banks to stop foreclosure process for NPL loans. Therefore, this is creating a negative impact in terms of collection performance. And of course, this is also creating pressure in terms of having lower cost of risk. But net-net cost of risk, probably because of the denominated effect and lower NPL inflows, will also be lower as of year-end compared to our initial guidance. So this is also another plan we can easily share and anticipate with you without providing any specific interval or without providing any specific numbers.

And on the other hand, even though NPL inflows will be limited, we can also say that they are changing our IFRS modeling to a more conservative tone. And therefore, provisioning requirement -- requirements will increase. For the rest of the year, we will continue to put more provisioning for our existing loan portfolio, which can be considered as a credit productivity. But the impact of this additional provisioning requirement, coupled with net interest margin evolution, we understand that first quarter strong profitability in terms of ROE and ROA cannot be sustainable for the rest of the year. For sure, clearly, profitability ratios and ROE numbers will decline. This is also visible.

But just to sum up, these are the trends we can share at this stage with you. And whilst the final budget numbers are approved from the Board, of course, as always, similar to previous terms, we will also share the revised budget numbers with you in a transparent manner. Thank you, Deniz.

[Operator]

All right. We have another question from Sam Goodacre from JPMorgan.

[Samuel Goodacre, analyst]

Ali, sorry, it was just -- I had a follow-up to my first question. So you've said that a capital injection may well happen and would be a welcome move. But am I right in thinking that you've effectively maxed out your Tier 2 and AT1 buckets such that in effect, it would have to be CET1 capital in order for you to benefit from it?

[Ali Tahan, executive]

Actually, Sam, this is the right assumption. I mean we are relatively in good shape from Tier 1 ratio and Tier 2 ratio point of view. So in terms of the capital injection, of course, by looking at our solvency ratios, one can easily see that CET1 ratio increase can be more useful and helpful for us. But on the other hand, without full port revision or without a full step taken by regulatory bodies, at this stage, I prefer not to comment officially.

But on the other hand, you are right. I mean as of today, and given the trends in the second quarter so far, and by comparing to minimum regulatory ratios, CET1 ratio support would be more useful and helpful for us because any CET1 ratio increase, as you know very well, automatically also creating positive impact in terms of Tier 1 ratio and Tier 2 ratio point of view.

[Operator]

[Operator Instructions]

[Ali Tahan, executive]

Well, actually, we also have some written questions at the web platform. At this stage, we prefer to continue with that, if you are also okay.

The first question on the webpage is coming from [ Vinod ]. [ Vinod ] is asking FC liquidity buffer short-term -- versus short-term FC debt and breakup of FC liquidity, especially as with swaps with Bank of Turkey and a fixed deposit trends in April and May.

In terms of the FC liquidity, as you know, so far, all Turkish banks also explained very good level of offer liquidity. This is one of the most strongest parts of Turkish banking sector so far, which is also the case for VakifBank. As of today, we are having around $5 billion free liquidity. And on top of that, we are also having around $1 billion on long-term cross-currency swap transactions. But on the other hand, our total liabilities in the short run, up to 1 year, is holding around $2 billion. So at this stage, our liquidity buffer, compared to upcoming redemption, seems to be at good stage. As most of the hard currency free liquidity is coming from the right way swaps with Central Bank of Turkey, we may say that more than 50% for sure. I don't have the exact numbers in my head. But at least more than half of the total hard currency liquidity -- short-term liquidity is coming from the right way swaps with Central Bank of Turkey.

And in terms of the deposits front in second quarter, it is not -- I am checking 2 numbers. Compared to March and FC deposit seems to be fresh. We are seeing, however, additional growth on the TL deposit side, which is very important. And because as signed off today, lending cost is coming from TL lending -- TL portfolio, therefore, TL deposit growth and TL funding is also very crucial. And I just want to take your attention to recent implementation of BRSA related to asset ratio. Clearly, our asset ratio is one of the higher in the Turkish banking space. And what we saw in the market after the implementation of OpEx ratio, it seems that we also enjoyed good level of our TL deposit growth because of the formula within the asset ratio, we are seeing some banks, especially whose asset ratio is less than 1% -- 100%, they are giving exit to some deposit accounts and during that period of time, even though we are offering lower deposit rates, still deposit gathering on the TL side seems to be very strong. Just to give you some numbers and ideas. Before the asset ratio, the maximum 1-month term deposit ratios were going around 11% to 12%. But as of today, we are offering maximum 8.5% area. But despite such decline in the deposit rates, still, we are enjoying additional TL deposit gathering, which is creating additional comfort in terms of TL liquidity, and TL loans deposit ratio. So my point is quarter-to-date in the second quarter, FC line -- FC deposit seems to be flattish in dollar terms, but we are seeing a good level of TL deposit growth so far.

I am taking the other questions. The question seems to be answered. Most of the -- Klim Fedoff from Lord, Abbett. He is asking, "What will the asset quality metrics be before BRSA postponement of the recognition of NPL and Stage II loans?"

Just to provide an answer to this question, our NPL ratio would be to 25 basis points higher compared to our deposit numbers. In other words, instead of saying 5.3% NPL ratio, we will say, NPL ratio would be 5.55%. And Stage II ratio will be 10% instead of 9.5%, assuming there is no change in the definition of Stage II and NPL ratio. Those ratios are still lower compared to year-end, but this is pure as many because of the denominator effect and relatively faster lending growth in the first quarter.

At this stage we don't also have -- actually, sorry, my friend's asking that we have one more question. Just a second, please.

[Unknown Executive]

Audio.

[Ali Tahan, executive]

But not on the webpage, so on the audio. So we can turn back to audio again.

[Operator]

Indeed, yes. We've got another question from Sam Goodacre from JPMorgan.

[Ali Tahan, executive]

Maybe Sam declined out of the line. If there is another participant want to ask questions, we can pass him. Otherwise, my colleagues are saying we have additional question on the webpage.

[ Rain ] on the webpage is asking, "Could you please indicate what is the outstanding terms of growth to loans? Why customers have asked for in some payment delays?"

Actually, this is a data we also inserted in the presentation. If you go to Page 17, [ Rain ], at the right-hand side, you can see the actions, the 2 for our customers. And in the middle of the page, you can see the exact numbers. As of today, on the retail side, the amount of the retail portfolio asked for a postponement is TRY 17.7 billion. And the number for the non-retail portfolio seems to be TRY 23.5 billion. These are the total numbers as of today. And I think I give the answer to your question. Thank you.

[Operator]

I'm not sure who this person is, but if you could ask your question. From the U.K., go ahead, please.

[Alan Webborn, analyst]

Hello?

[Operator]

Yes, you're on the air. Go ahead.

[Alan Webborn, analyst]

It's Alan Webborn from SocGen. Ali, I understand and appreciate that guidance is going to be changed a little bit later on. But on the basis that your first quarter, the fee income performance was reasonable, I think, compared to what the guidance was after the very strong performance last year. And then clearly, you're way outperforming in terms of loan growth versus expectations. Does that have a similar sort of knock-on effect in terms of fees? Or I can see that you've done a number of things to support your customers in terms of fees in this sort of a difficult period. And I just wondered how -- what you're telling us in terms of the trend in loan growth works in terms of how we -- you think about fees this year. So even qualitatively, if you can give us some idea on that, that would be helpful.

[Ali Tahan, executive]

thank you. Thank you, Alan. Actually, in terms of the fee income, just to remind you, when we were announcing our year-end financials, we were saying that we are expecting low single-digit contraction in our fee income on a year-on-year basis because of the mainly, both hire-days effect of 2019 as well as because of the regulatory headwinds.

But as of today, very frankly speaking, I believe the realistic expectation for fee income should be a flattish fee income performance for entire 2020 compared to 2019. The reason is, I think all the negative impact of those regulatory headwinds as well as the negative impact of 3 banking services, as of today, we are providing through our alternative distribution channels, just to provide more comfort to our customers in the middle of COVID-19 pandemic. Those negative impacts will be compensated by higher lending growth driven by TL loans. So net-net, of course, subject to final Board approval, but in terms of trend, at least, my educated guess is we may end up with flattish overall fee income compared to 2019.

[Operator]

We have one more question from a person with their hand up. We don't have a name of company. Next question's from Turkey.

[Cihan Saraoglu, analyst]

This is Cihan from HSBC. Just a quick question -- confirmation. You said, I guess, during the presentation that the cost of risk for 2020 may be less than the initial guidance because of the regulatory forbearance on the NPL ratio. I just wanted to confirm that the do you think that the cost of risk could be less than the initial guidance of 180 basis points?

[Ali Tahan, executive]

Actually, you are right, Cihan, because of the Board change in the NPL definition and because of the higher lending growth compared to initial guidance, even though collection performance will also be lower than our initial expectation in the beginning of the year. Net-net, we understand that net cost of risk will be slightly lower compared to the guidance in the beginning of the year. I just want to open a [indiscernible] this year. Of course, this market development and the negative impact of COVID-19 will have a negative impact in terms of NPL ratio and NPL inflows. But it seems that it will start -- it will be starting to be visible from Q4 onwards in 2021. So asset quality problems and weakness may be visible since Q4 almost and may continue for a while. But on the other hand, is a [indiscernible] State Bank, we already started to put more provisions and ties in line with the peer group and other Turkish banks as well as this is more or less the global policy of all international banks as well. So my point is, even though NPL inflows may be more visible during the late 2020 and early '21, because of these potential asset quality weakness may be equally distributed between 2020 and 2021, which is more sustainable and manageable in terms of P&L, in terms of profitability. Because as we discussed, we already changed our IFRS modeling and macro indicators to a more conservative mode and tone. Therefore, it means that for the rest of the year, the provisioning ratio will further increase.

[Operator]

All right, Mr. Tahan, I believe we have no more audio questions. So if you could conclude, please, sir. Thank you.

[Ali Tahan, executive]

Thank you, everybody, for your interest and time for us. Even though today is a Friday afternoon, we are almost 1 hour since the beginning of the call. We are at office still if you have any follow-up questions. We are also ready to provide more details and answer your question. But as of now, thank you very much for your interest and talk to you, all of you, soon. Thank you.

[Operator]

Thank you very much, Mr. Ali Tahan. Ladies and gentlemen, this concludes today's webcast call. Thank you for your participation. You may disconnect now.