Akbank T.A.S. (AKBNK) Earnings Call Transcript & Summary

Hello, everyone, and thank you for joining us today. Hope you're all well. This is Ebru Guvenir, Head of Investor Relations and Sustainability team at Akbank. Today, we are here to discuss the drivers behind Akbank's success and customer acquisition as well as customer-driven revenue generation over the last few years. We are very happy to be hosting Burcu Civelek Yüce, EVP of Consumer Banking and Digital Solutions to share her insights on this impressive journey of Akbank.

During the first quarter of this year, we gained 730,000 active customers, and it's on top of 2.3 million gain last year. Could you share with us the main driving force behind the success?

Ebru, thank you for this opportunity to share our growth drivers. As you said, we've had record growth in our active customer base since the last quarter of, in fact, 2021. By 2022 year-end, we had already achieved an all-time high customer acquisition. However, on top of it, in the first quarter of this year, we've broken our own record with an even greater multiplier, and of course, aligned with our target of approximately 5 million net growth in active retail customer base in [indiscernible]. Our active customer base reached the highest level ever 11.5 million by the end of the first quarter, up from 10.8 million of year-end 2022. Contribution from digital onboarding, Ebru, has been noteworthy, 60% of new to bank customer acquisition originated from DoB, named digital onboarding in the first quarter of this year. The weight of DoB in overall new-to-bank acquisition is 20 percentage points higher than the quarter 1 last year. Our active young customer base ages from 18 to 26 has reached 1.7x year-on-year, thanks to DoB again. We have a strong belief, Ebru, that we have the best service design and funnel management practice in the sector in DoB. We are also very innovative in creating new structured programs and value offerings in this acquisition channel. For instance, our member get member and [indiscernible] banker programs and also key value propositions in loans, deposit, credit cards offerings are quite impactful in boosting DoB impact in Advance retail performance.

Yes. Actually, Burcu, we have also been able to maintain the cross-sell of the bank, and that's actually quite a big success as well. I mean, I believe that use of investments in our digital capabilities, infrastructure, have differently been among the key enablers. You yourself actually have been working for many years on the digital transformation of the bank, and needless to say, that the bank has already gained like 220 basis points market share in fees since the end of actually 2021. This is among obviously, private banks. And this is a proof as well that our services are appreciated by our customers. Could you also briefly share how Akbank differentiates itself in the customers' journey and the underlying factors that will lead to increased customer base revenue going forward?

Ebru, in line with the growing customer base, but also on top of it, our active product portfolio, namely a number of active products have increased by 35% year-on-year. This is the highest active product portfolio scale growth of all times. Digitalization, obviously, reinforces sustainable to customer base revenue growth. Digital customer cross-sell compared to nondigital is twofold. Therefore, we focused on ensuring more than commensurate growth in mobile customer base and also a significant increase in digital activity of our customers. Let me give you some examples with numbers. Our digital customer base on average tariff per active customers are both at their highest levels. Number of active digital customers reached 9.5 million in the first quarter. We've reached over 80% digital and mobile customer penetration, achieving our best performance. Number of daily active mobile users has reached almost 4 million, Ebru, with more than 60% growth. Monthly login has increased by nearly 50% year-on-year. Now average login frequency per customer is 32 login's per month, which is a significant indication of strong loyalty and engagement with the customer. And thanks to the growing digital active customer base, we've also reached very high digital migration levels over 95% in total number of transactions as of this first quarter. Nomination transactions through mobile increased by 43% year-on-year, payments by 36%, money transferred by 70%, and investment transactions by 50%, almost 50%, including our investment app. This is the transaction slide, but digital performance has had a significant impact, not only on transaction labor and engagement, but also on sales, 86% of GPLs, 69% of credit cards, 70% of bancassurance products are sold through digital at Akbank. And also an important side note, share of digital channels in small ticket sized time deposits is more than 95%. So as a result of this, we observed growth in multiple, of course, in products compared to last year and our market shares as well. Growth in demand deposits is 1.4x, in GPLs, it's 3.9x, overdraft accounts, 4.9x, credit cards, 1.3x and bancassurance products, 8x compared to last year same period. We have seen over 180 basis points increase in total TL demand deposit market share in Q1. Price sector, total TL time deposit market share increased by over 50%. We also had a great momentum in consumer loans. Our volume growth was almost 30% quarter-on-quarter, and our market share increased by 190 basis points among private banks. Another interesting data point, our market share in number of consumer credit cards increased by almost 30 basis points in the first quarter, and we have become the second largest growing bank in the sector in that sense. And payment systems, as a result, fees and commissions grew by 33% quarter-on-quarter and over 100% year-on-year, Ebru.

Burcu really, really solid figures. But what about some recent updates on the digital capabilities of Akbank Mobile?

Well, exciting developments, of course, to place recently in the first quarter on our digital capabilities front as well, Ebru. As you know, we constantly enhance Akbank Mobile, it's our major, major channel. In terms of services, products. We also try to keep the application very simple and the processes as seamless as possible at the same time, so it's a great challenge. Akbank Mobile, in fact, further augmented a number of new and significant digital products and services recently to Akbank Mobile. The first one is on Akbank Assistant front. Akbank Assistant is our AI-based chatbot that assist our customers in doing nearly 200 different types of transactions in our digital channels, being our customers communicate easily, success rate of understanding is 90%. So it's sizable. It reaches more than 1 million transactions monthly. In 2023, we have started providing voice assistant services with Akbank Assistant as well and this is new. And also, we have had an interesting IoT use case. As of April with a partnership with BSH Home alliances, now Akbank customers can even brew their coffee by talking to Akbank Assistant. This is the first IoT integration with an AI-based voice assistant in Turkey. The second major development was on credit card application functions in Akbank Mobile. We completely renewed all the functions and processes and experience. Our customers, Ebru, can now learn their application results through Akbank Mobile in an average of 7 seconds, not minutes, seconds, and they can immediately start using our instantly usable credit cards online with QR and also contactless payment transactions. Akbank, new service is an assistant service for our customers, recently commenced the service which we called application specialists. We keep full transparency throughout the application funnel for our customers, and we present them with reasons who, in fact, received negative responses for their credit card applications. And we guide them for having a better, let's say, credibility through what they can do in order to complete these applications successfully. It's crucial to stay in constant contact with both potential and existing customers so that we create more value for them and they remain loyal, even if they receive negative responses. Also, we have made significant improvements in our invoice and corporate payments infrastructure, especially and we enhanced the user experience. Now the customers can set alarms, name their payments, track them, view them, manage their expenses with various actions. Another significant development is on Akbank investors app. We renewed the experience. Also, this can be accessed by Akbank Mobile app as users can track the stock exchange, derivatives market, warrant, fund, foreign exchange markets by entering the same application as they're accustomed to with their Akbank Mobile log-in information, and they can easily perform their investment transaction in the [indiscernible] with instant data. We created a new menu. This is also a big step and insurance menu in Akbank Mobile. We moved a new structure in insurance products. Now all product applications and aftersales services are offered holistically in this menu. You know we had made conversations with you about our corporate digitalization program. In that sense, in this program, we had a major breakthrough as well. We totally renewed corporate Internet brands and corporate mobile channels in this year. This has been, for us, a landmark investment in corporate digitalization. And thanks to our -- for your service, for your business service, we now will enable our company spend more time on their core business with new functionalities in Akbank Mobile and Akbank corporate Internet branch. We've implemented features where users can analyze their cash flow graphically with user-friendly panels, follow their income and expenses on a category based, they can conduct financial analysis, and they can keep up with their financial calendar. We all offer these functions to our customers. Ebru, we will continue to offer not only additional banking products, but also nonbanking value-added services for the needs of our semi-customers, especially who buy POS, commercial credit cards or commercial loans via Akbank Mobile. So these are all our, let's say, new -- big new things on digitalization efforts.

This is quite a comprehensive list I must say. Each of them actually could be a discussion topic for future fireside chat. I guess one topic we haven't actually touched upon is our bank-agnostic digital wallet Juzdan. It would be great if you could actually share some details on this as well?

Of course, Ebru. Juzdan, as you said, is our next-gen bank-agnostic payments and loyalty platform. We launched it last year. It's a platform both for consumers and for merchants as well. In the fourth quarter of this year, we focused on improving the features and also accessibility of Juzdan. You know debit and credit cards for all banks operating in Turkey can be stored in Juzdan and can be used for online shopping and paying Juzdan merchants. This is a wallet for non-Akbank customers as well as for Akbank customers. We have been expanding due to this accessibility target of us. We have been expanding the merchant network of payment Juzdan continuously. We've increased the lump integrations in the first quarter this year. It's increased by more than 20% since year-end of last year. We also on consumer side, see a 60% increase in active user base year-on-year. For our merchants, we proposed high conversion rate to sales, brand and platform campaigns, customer loyalty programs and a payment platform with card on cloud solutions, Ebru, on Juzdan.

It's really important actually for everyone to understand how the visionary approach of Akbank will drive sustainable revenues. And quite exciting, especially take into consideration the young demographics of the country as well as high mobile penetration. So maybe before concluding our conversation, Burcu, could you just touch upon like Akbank Mobile and open banking, especially the opportunities and obviously, challenges as well of open banking?

Sure, sure. At Akbank, we constantly seek to build our business model with a creative mindset and we try to go beyond the boundaries of traditional banking. That's why we've also said just the idea that we see open banking as a toolkit for us to create the business models we aspire. We believe, Ebru, there's a certain fact, no institution, even a large bank as we are, can meet consumer demands and needs now on its own. We can only achieve this via platforms and on collaborations, collaborations that we will create or we will be part of. We have to establish a maintainable financial ecosystem that responds quickly to consumer needs. And I guess, more importantly, at mass scale. Preparations for open banking started back in 2015 at our bank. We took global innovative practices as role model for ourselves. And we brought new growth among banks in Turkey, and we were the first to launch an API portal in 2016. Since then, we've offered up on APIs, and we've established business partnerships with leading companies in different sectors in e-commerce, in oil and gas, ERP, you name it. Recently, in Turkey under the leadership of the Central Bank, banks and license payments and e-money companies coordinated by Turkey's Entire Bank Card BKM have been working on open banking for more than 2 years now. The first phase of the initiative was completed in the first quarter of this year. And 2 payment services are now being offered under this umbrella account information and payment initiation services. This is quite in parallel with PSD2. As of the end of first quarter, banks were integrated into the system. And as Akbank, we became among the first banks to offer services, solving both of these roles. With the access permission, our customers grant, of course, they have to give us permission. Our customers now can view their -- all their TL demand deposit foreign currency and commodity accounts at other banks on a single menu, it's Akbank Mobile. With our open banking service, we enable our customers to facilitate their financial status follow-up, manage their accounts from a single application that they are used to namely Akbank Mobile. Our customers can, Ebru, also initiate money transfers from these accounts through Akbank Mobile as well. We designed our open banking experience in an integrated manner, and we definitely maintain the existing fleet customer experience in our digital channels. And since the launch, many of our customers, both from the retail and non-retail segment started to grant access their accounts in other banks with a rapidly increasing adoption. Ebru, this, of course, is very new in the payments landscape of the country, but we believe -- we strongly believe it will definitely be adopted by Turkish customers who are really very quick in adapting to innovation. And therefore, those institutions with significant number of digital customers and strong engagement with their mobile customer base will have a new lever for further improving customer loyalty and engagement, I believe.

Thank you very much, Burcu, for your valuable insight. A lot to follow going forward, definitely. And thank you for all of those who are joining us today. Should you require any further information, please do not hesitate to contact Akbank Investor Relations, and obviously, stay tuned for more and bye for now.