Yapi ve Kredi Bankasi A.S. (YKBNK) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Constantino, your Chorus Call operator. Welcome, and thank you for joining the Yapi Kredi conference call and live webcast to present and discuss the Yapi Kredi 2025 Financial Results and 2026 Guidance Conference Call and Live Webcast. At this time, I would like to turn the conference over to Mr. Kursad Keteci, CSO; and Ms. Hilal Varol, Head of Investor Relations and Strategic Analysis. Mr. Keteci, you may now proceed.

Thank you. Good afternoon, and thank you all for joining our 2025 earnings and 2026 guidance call. Starting with the operating environment, 2025 was a year of rebalancing in Turkish economy. Tight monetary policy, coupled with ongoing macro prudential measures resulted with improvement in inflation. Last year, inflation realized below 31% compared to 65% in 2023. We expect this inflation trajectory to sustain in '26 also. Central Bank cut rates by a total of 950 bps in 2025, followed by a conservative 100 bps cut in the first MPC meeting of '26. Policy rate now stands at 37%, still providing a significant real return in compounded terms, 45% compound versus 31% of inflation. On the other hand, macro prudential measures continue to be tight, along with last week's additional regulations, mainly on the retail front. We anticipate that the tight monetary policy and improvements in fiscal policy will support the ongoing disinflation outlook. Equally important, Central Bank continued to build further reserves. Combined with the increase and changes in the gold versus U.S. dollars, as of now, gross reserves surpassed $218 billion and net reserves is around $95 billion. In this environment, as we always do, we are seizing opportunities, thanks to our best-in-class asset liability management, deposit pricing strategies as well as our strong customer base and network franchise. Now let's move on to our performance for '25, and I will proceed with the second page of our presentation. Our profit before tax, just shy of doubling, reached TRY 65 billion for 2025. Net profit went up by a hefty 79% increase to $52 billion, adjusted for the one-off tax regulation impact. The tax regulation impact, I mean, DTA adjustments happened at the last quarter of last year due to change in tax regulation. Reported growth was 62%. Tax impact adjusted ROE stood around 23.5%, which is in line with our full year guidance, which was mid-20s. Return on assets on the other hand, improved to 1.7%. As we have stated several times, we are best positioned bank for the rate cut cycle, and we delivered the highest ROE improvement among our peers announced so far for last year. Main driver of our strong pretax growth was our top line performance. Our core revenue margin improved 212 bps yearly and reached 6.7%. Net interest margin widened above 150 bps yearly by far the highest improvement and fee growth was at 50%, which resulted in a strong 81% increase in core revenues. Outstanding performance on the top line was further supported by resilient asset quality. We outperformed the market as well as our peer group throughout 2025. We had 32% lower net NPL inflows than our peers so far announced. And also with our strategic actions, top-notch underwriting standards and our -- with all those, our NPL market share improved by 274 bps for NPL outstanding amounts versus private banks and cost of risk realized at 1.67%. Several other factors contributing to our performance are -- as always, it has been our demand deposit share in total deposits continues to be best-in-class, further supporting cost of deposits and reflecting the effectiveness of our customer-oriented strategy. Turkish lira loan deposit spreads widened around 566 bps yearly. This demonstrates our active loan and effective deposit pricing strategies, again, thanks to our best-in-class service model and strong customer franchise. Additionally, this year, trading income increased as much as 67% yearly. This improvement is driven by significant increase in our customer transactions as well as increase in our treasury activities. This showcases our sustainable trading performance. Now I am handing the floor to Hilal, and she is going to provide details behind our performance.

Thank you very much, Kursad, and I thank you all for joining our call today. I will start with Page 3. Throughout 2025, we continued our prudent and lucrative lending strategies, increasing 10% quarterly Turkish lira loans went up by 43%, higher than our initial guidance of below average inflation increase. We also continue to see the lucrative growth availability on the foreign currency side, as we always mentioned throughout the year. Our foreign currency loans increased 23% annually and again, a bit higher than our initial guidance. Thanks to the focus on higher-yielding products, our loan yields adjusted for credit cards continues to improve. With a 275 basis points improvement, our loan yield went up to 48%, both the improvement and the level is best-in-class. In line with the regulations, we target 30% increase in Turkish lira loans and single-digit increase in foreign currency. And we are and we will be continuing our selective and lucrative lending strategy, which will continue to support our spreads. We will continue to act in an agile manner as always. Now moving to deposits. We are on Page 4. Customers are in the center of our strategies, which is continuously paying off, increasing 8% quarter-on-quarter, Turkish lira deposit growth reached 33% in 2025. Turkish lira demand deposit increase sustained in the last quarter, reaching a strong 35% annual increase. We gained 45 basis points market share in the year. This is among price banks, and our market share reached to 17.2% and once again, [ showing ] our leadership position. Turkish lira demand deposit share stood at 28%. This is, again, the highest level among peers. Foreign currency deposits, on the other hand, increased 7% quarterly, up 31% annually, and this is mainly due to the increase in gold prices as well as deductions from the FX protected deposit scheme. Foreign currency demand deposits were also up 8% quarter-on-quarter and 28% year-over-year. All in all, our demand deposit share in total, further improved and is very strong at 48%. This is the highest level among the peer group, also the total. So also supporting our cost of deposits, small ticket deposit base continues to increase, going up by more than 6 percentage points, sticky and low-cost small ticket deposit share in total reached to 80% levels. Thanks to this strong deposit performance and our agile pricing strategies, Turkish lira deposit costs came down 291 basis points annually. And again, this is by far the highest improvement among the peer group. While maintaining below the market deposit rate, so we can control it, we will go through the details. We will gradually increase the share of deposits in the funding sources going forward and once again, small ticket focus. Now I'm moving into the details of our profits, starting with the top line. We have best-in-class core revenue margin improvement fueling our revenue growth alongside support from now we can say it's proven sustainable income generation through our treasury activities. Our revenues increased 78% in 2025, reaching to TRY 218 billion. This is thanks to the strength in core revenues, which improved hefty 81%, supported by the improvement in the net interest margin and strong fee income. So the core revenue margin was up by 212 basis points to 6.7% on a bank-only basis. As we have stated in our previous calls, strong trading income is sustainable and support is going up. This is thanks to the increase in customer activities supported by our data analytics as well as time actions taken by our treasury on our securities portfolio. In the following pages, we will dig into the details. Net interest margin improving with ongoing rate cuts and also definitely our superior asset liability management with strategically balance sheet is helping us. Net interest margin widened 55 basis points quarter-on-quarter to 2.6% in the fourth quarter, carrying up the cumulative net interest margin to 2.4%, which is up by 151 basis points year-over-year, highest expansion among the peer group, and this is definitely supported by the core net interest margin. Our loan deposit spread contribution to the NIM is improving and further improved to 4.1%. This is significantly above peers, and it continues to be higher than the peers, and this is showing the room for further improvement in our net interest margin. Now moving to the next page. We are on Page 6 on the fee performance. It's very robust. We have increased our fee base by 50% annually, beating our guidance of above equal to 40%. We are continuously leveraging on customer franchise as well as sustaining diversification efforts. Our payment system business, definitely supporting our fees increased 54% year-over-year. But on the other hand, number and amount of transactions are increasing and very strong support to the fee transactions increasing 56% annually. Bancassurance up 69%, Investment products up 51%. So we are seeing a very well-diversified support. Once again, our strong customer franchise will continue to support our already high level of fee generation. Moving to OpEx. We are on Page 7. As a result of our IT investments for technological transformation and human capital investments, OpEx increase stood at 53% as expected. Our fee coverage of OpEx stood at 94%, and this is allowing us navigating through cost increase like IT investments, business goals, human capital and cost to average assets are at 4.1%. These investments will allow us to improve our operational excellence and create further efficiency. Now moving to our other strength, asset quality, we are now on Page 8. Our prudent lending strategies, time and strategic actions supported our asset quality in a year of deterioration, mainly through this came from unsecured consumer loans for the system. This performance is thanks to our active and timely management once again through data analytics and AI. And looking at the quarterly average, NPL formation stood at TRY 15.9 billion when collections continue to be strong at 6.5%. As a result, net NPL inflows were at TRY 9.4 billion, significantly 25% below the peer average, and we are diverting positively. That being said, we continue our uncompromised prudency in provisioning. Quarterly average net NPL inflows from consumer loans stood at TRY 2.5 billion, and this was slightly better than what we had in 2024 and TRY 3 billion lower than the peer average. Credit card NPL inflows, they increased from 2024 levels, but still 35% lower than the peer average. NPL inflows from the SME side increasing from the very low base, and we are prudently increasing the provisioning levels. Also, please note that the share of SME loans in our total portfolio is around 8%, so it's limited. Also, we are always selective in lending with high level of collaterals. In 2026, our main focus will continue to be collections. This time, SMEs will be our main focus. Now moving to Page 9. For the fifth consecutive quarter, we are losing market share in NPLs. That means we are performing better. As Kursad stated, after 227 basis points better NPL performance in the last quarter of 2024, our market share improved by further 275 basis points in 2025. Our coverage level showing no compromise from prudent provisioning increased further to 3.7%. And if we adjust the NPL sales, 4.3%. All in all, our cost of risk stood at 167 basis points as of 2025, and this is in line with our guidance, 150 to 175 basis points. So we will keep our focus on asset quality and recoveries with sustained prudency. Now I'm moving to the solvency. We are comfortable with our buffers under stricter IRB standards during the economic volatility. And our Tier 1 ratio stands at 11.8%, 223 basis points buffer, capital adequacy ratio improved to 14.8%, and the buffer is 280. And our successful and time capital issuances are definitely also supporting our capital. And I would also like to emphasize that we had the first signals of internal capital generation in 4Q despite the tax impact on profit and showing the start of the cycle. The sensitivities are very limited. So 10% depreciation has 29 basis points impact on CET1, no impact on capital. The breakeven levels are very high in dollar Turkish lira and 100 basis points, [indiscernible] in the Turkish lira yield curve is also very limited, close to 15 basis points. So all incorporated, we are comfortable with our capital levels today. So on Page 11 is the summary of our guidance versus the realization in 2025. Adjusted for the tax impact, which was last minute and one-off, our RoTE will be at 23.5% and in line with our guidance. The slightly lower than targeted net interest margin was compensated by our stronger fee and better trading performance. Now I'm leaving the floor to Kursad for 2026 outlook and our guidance, and then we will be taking your questions. Kursad?

Thank you, Hilal. Before going to details of our '26 guidance, I would like to mention a couple of our competitive advantages, starting with Page 12. And these advances are helping us to feel comfortable about our 2026 operating plan. Firstly, our strong customer franchise. We have around 18 million active customers, of which more than 8 million we acquired in the last 5 years. These new customers were mainly bankable customers with a sizable AUMs rather than penetrating to unbankable population. This strategy resulted to create a strong deposit base as well as loan growth in widespread retail products with a better asset quality. As a result of this strong customer franchise, our Turkish lira deposit costs are being supported. We have increased number of transactions, which at the end results a better fee performance. Second important competitive advantage, I would like to say, our fast repricing funding mix. As we have been stating over the last year, our funding mix is creating an advantage for us during this rate cut environment. We have the highest short-term nondeposit funding share, which is 33% of funding base, excluding equity. This supports our net interest margin, going to support our net interest margin. Also it's going to boost our repricing capacity with this funding mix. The third important competitive advantage I would like to mention is our security portfolio. With our agile asset liability management, leading to changing the mix of our security portfolio to fixed rate. As you all know, we have heavily invested before the inflation period to CPI linkers and we benefited. What you are seeing and what you are going to see more, we have been investing to high-yielding fixed rate securities with 45% year-on-year growth this year. And this is going to support our trading gains as well as our net interest margin. And additionally, it is going to impact an improvement in our book value through mark-to-market valuation, unrealized gains under equity. And lastly, our sound asset quality. And with all these customer acquisition, increasing number of transactions, these are also helping us to have a better asset quality due to our customer acquisition strategy. What we have been acquiring as a customer, salary customers and pensioners, their PDs are much lower than a normal retail clients. And we have been giving our GPL -- more than 65% of our GPL to salary customers. And at the end, our NPL ratio, our NPL inflow are better than our peers and the market as a result of this mainly customer acquisition strategy. On top of customer acquisition strategy, active management through data analytics and AI, our underwriting policies, I would say, state-of-the-art technology based and fully machine learning activities without any human interactions. Moving to Page 13, where I would like to comment some words on the technological investments and our capacity, which is going to create operational efficiency and productivity for upcoming years. And regarding to our technology transformation, our IT system, we are the only Turkish bank who completed next-generation banking architecture. It was a project we did between 2020 to this year. And this infrastructure update is helping us to have a micro service architecture and the platforms, all the platforms, banking system, core banking system platforms are modular rather than one single platform, everything is on it. And also especially data connection between all these models are helping us to make easy updates, quicker updates and as well as if there is any problems to solve it without interrupting any kind of banking activities through our channels. This is the result of close to $200 million, more than $175 million investment specifically to this transformation. And this is going to help us to create this technology advantage. And also, it's going to help us to build up AI-based IT structure on the modular platforms and micro service architecture. Just a note, without having a modular structure, modular platforms and the micro service architecture, building up an AI technology on it is impossible. Therefore, we have already done this transformation. How it is impacting our customers from the customer front? I will summarize it as a journey to hyper-personalization. And what we are doing as a hyper-personalization activities, first of all, next best action is creating estimation models for our customer needs. But what is different for us, it works with the real-time data and together with the generative AI facilities, which is supporting our relationship managers. And it helps them to increase their sales conversion pace also enhance customer experience as well as operational efficiency and productivity. Another example for hyper-personalization, I would like to say, we have a customized pricing and offers for each customers, personalized time deposit pricing as well as personalized FX spread pricing, also sector asset estimation to increase our AUM-based deposit base for individuals for customers who are not keeping their balances with us, and we have those estimation models, again, helping our relationship managers to easily access to new customer base. As a result of it, we are reaching this low-cost Turkish lira time deposit base compared to our peers. Regardless to say, and mainly the machine learning and AI technology are the core for our risk management with data analytics and AI in risk management, we are able to get early warnings for any asset quality deterioration and took related actions. Income prediction models updated by itself automatically and also collection estimation model is helping us first the NPL inflows to get smaller as well as collection capacity to get higher and higher. With some of our competitive advantages for 2026, our operating plan is as follows: For Turkish lira loan growth, we estimate to have more than 30% growth in line with the regulatory cap. And also for FX loan growth, we believe we can grow low single digit due to regulation activities. Just a note. And behind this operating model, our inflation expectation is around 23%, 24% levels. And also, we assume that real Turkish lira interest rate to reduce compared to 2025, and which means the policy rate something close to 30% levels, 29% levels is our main assumption. On top of these macro assumptions, we also keep all macro prudential measures to sustain throughout the year. Therefore, some part of our guidance could be some a bit conservative, but we would like to stay on the conservative side. If anything comes better than that, we will seize those opportunities. Accordingly, the net interest margin growth yearly, we have an estimation and budget to have an improvement more than 100 bps for net interest margin, also fee growth in line with inflation levels. Negatively impacted due to lower merchant commissions, which is going to be offset by diversification and increase in number of transactions. Cost growth, we would like to put some efficiency actions starting from this year. Therefore, we are targeting less than 35% cost growth. And also for the asset quality, we believe we can keep our existing performance and 150 to 175 bps cost of risk. As a result of those metrics, we target to have an ROE high 20s, I would say, which means minimum 5% higher than the inflation levels. And these are all for our presentation, and then we can take your questions. Floor is yours.

We can take the questions now.

The first question comes from the line of Nellis Simon, with Citibank.

I have 3 questions. I guess the first one is just around the sharp increase in NPLs over the quarter. Could you just provide a little more clarity on what was going on? And what's your outlook for NPL inflow this year? My second question would be about the tax rate. What effective tax rate should we use for 2026 and going forward given the recent tax changes? And I had one more, but I forgot. Let's leave it there for now. Yes. And then the associates income in the bank-only income statement, what's the outlook for growth there this year?

Thank you, Simon. And for quarterly NPL increase is coming from company loans, as we have been telling for us, retail NPL inflow peaked during the year, and we see a better performance on the retail part. And this is coming from the company side. But also, I would like to say the collection performance is also quite good, which is offsetting this gross NPL flow and which has been the case throughout the quarters, better collection performance. In terms of outlook in '26, our assumption for NPL flow to continue for SMEs -- and we see that worsening for the SMEs, and it is continuing. That's why the cost of risk trend and also NPL inflow is going to be impacted by SME-related NPL flows rather than the retail, we start seeing retail in a decreasing trend. And for this SME increase, the precautionary actions are restructuring actions in place, also better underwriting performance we are setting. And what could go wrong for the asset quality in 2026 is this rate cut trajectory. If the rate cut trajectory is not going to happen in line with all expectations, than net interest margin impact for sure, but the asset quality impact will be quite more important for all sectors. That's why the SME lending in our -- is in our focus. And your second question, tax rate for '26 effective tax rate, I will choose 28%, around 25% to 28% for effective tax rate '26 because what happened last quarter was reversal of the regulation for the first 9 months in a single quarter, which resulted in a very high effective tax rate. There is nothing left like this adjustment for '26. Therefore, you can use 25% to 28% effective tax rate.

Just one comment on that. Please note that on the unconsolidated one when you're calculating the tax rate, you need to take out subsidiaries income to reach more stable tax rate because they are setting aside different type of taxes and which is not included in our bank-only tax rate.

And for our subsidiaries income, your last question, I would say when the core bank's profitability increase, subsidiary incomes in total share, you will see a decrease. But what I could say to you for subsidiary income increase, we are assuming more than 40%, 45% yearly earnings growth.

The next question comes from the line of Taranto David with Bank of America.

I have 4, please. Could you walk us through the key macro assumptions underpinning your guidance? I'm particularly interested in your inflation and year-end policy rate assumptions, please. I might have missed this at the presentation, sorry if that's the case. Second question is on NIM. How conservative is your NIM outlook? Could you elaborate on the main drivers here, how you expect deposit pricing to evolve? And when do you anticipate NIM to peak this year, please? Third one is on asset quality. your cost of risk guidance appears more favorable than peers. You already touched upon this at the presentation, but could you discuss the main factors supporting this expected outperformance in asset quality? And does your assumptions include an acceleration in retail loan restructuring? Or would this pose an upside risk to what you have at the guidance? And finally, as the IRB Bank in Turkey, could you share your expectations regarding the Basel IV implementation and how its impact may differ relative to the standard approach?

Thank you, David. Your first question, our macro assumptions, inflation around 23%, 24% level. And with regards on top of inflation, we assume for the year-end around 5% real interest rate, which means 28%, 29% levels of policy rate. But for this macro assumption, we assume that the acceleration for the rate cuts or the decrease in the real interest rate NPL mostly happened in the second half of the year. And this is something about your second question, again, how conservative our net interest margin. And also for the macro assumption, I would add the macro prudential measures to stay for reserve requirements as well as growth cap and also deposit share in Turkish lira. And with all this assumption, our NIM, how conservative, I would say, if the deposit cost is getting aligned with policy rate. It is a quite important upside, which is happening also on the first month of the year, we have observed with the latest regulation change of the Central Bank. Therefore, there is a little bit upside coming from deposit pricing. We have budgeted that deposit pricing to be higher than the policy rate. Now it is getting aligned with the policy rate. It is an important event. And the peak you mentioned based on our budget and based on our assumption, it is happening around Q3, end of Q3, beginning of Q4. And with this conservative approach, I will say. But if the macro happening, macro assumptions are getting better earlier, then this Q3 can go to end of Q2. But for the -- for your second question, how conservative, I will say there is an upside, due to what we have seen as of January. I hope it will continue like that. Our January results, our management result we see is quite better than our budget. And your third question, cost of risk guidance and the main factors. And for the cost of risk, again, we feel comfortable for the retail lending part because we have a very quite aggressive restructuring on the retail part and also the underwriting policies and our retail lending mainly to our salary customers is limiting NPL flows for the retail side. And also being a credit card bank for the last 35 years, we have quite an experience on those and our credit card NPL ratio has always been lower. That's why we are not hit by credit cards as the market or as other banks are being hit. It is the main factors. The negative is coming from the SMEs I mentioned. Therefore, on the top of retail, SME worsening is going to be quite important. And one -- another parameter for our cost of risk assumption is the collection activities to sustain. And these collection activities, you remember from 2018, '19, restructured big conglomerates. And we have been observing a collection -- a good collection performance from those and the budget includes these collections to stay. And lastly, for Basel IV implementation, as you mentioned, we are the only IRB bank and being an IRB bank is helping us to get benefit from Basel IV. What we have been seeing initially, our Basel IV impact is going to be positive around 40, 50 basis points. This 40, 50 basis points compared with the other banks, there is a big question mark about credit card unused limits application for RWAs. We have been already providing RWA for this credit card unused limits, which is around 100, 120 bps impacting our capital calculation as of today. Standard banks are not making any kind of this calculation. If Basel IV includes this minus for the already standard methods, which we expect, then our advantage versus the market will be much better. I would like to mention that specifically. I hope this for all answered your questions or if any missed, [indiscernible].

Ladies and gentlemen, there are no further audio questions at this time. I will now pass the floor over to management to accommodate any webcast questions. Thank you.

So we have several questions written. We answered some of them, but one is from Valentina, says despite significant revenue growth in 4Q, your CET1 is still below 10% and buffer below 200 basis points, which has been your target for a while. How comfortable you feel at these levels? And what CET1 ratio and buffer do you expect to see this year?

And Valentina, regarding the capital, I just want to add our CET1 buffer close to 180 bps. The discrepancy I mentioned being an IRB bank, now we are penalized around 100 to 125 bps just only for this credit card unused limits. Therefore, our normal buffer commitment was around 200 bps. Including this discrepancy, we are already above, which we are telling to all you. And having 180 bps buffer in terms of IRB means quite important buffer compared to any buffering in standard methods. Therefore, we are quite comfortable with current conditions, I would say. And regarding to your movement you mentioned for the CET1, as you know, due to net profitability ROE below inflation, and internal capital generation is not happening as we all would like to see. Starting with '26 ROE levels above inflation, then we are going to see every -- each and every quarter internal capital generation to support capital levels. This could be the last quarter we have seen for the internal capital generation missing. In upcoming quarters, we are going to see internal capital generation.

And a follow-up, I will be saying the operational risk, it has around 28 basis points impact. And can you please update us on the issuance plans? Again, we will be opportunistic on the issuance plans for this year. We do not have anything maturing. And so it will depend on the market on the pricing. As always, we can say we will be opportunistic. So from Goldman Sachs, we have three questions answered. In medium, long-term scenario, mid-teens inflation, if we say, what do you think is a sustainable net interest margin and ROE?

And sustainable net interest margin for 15% of inflation is around 4.2%, 4.3% net interest margin. And real ROE is around 10% higher than the inflation, which results mid-20s again, if we assume inflation to stay at 15%. And about the cost of risk, unfortunately, since this IFRS 9 implementation, we haven't seen a normalized cost of risk, but I would assume it's going to be 100, 125 bps again.

How is your net interest margin sensitive to 100 bps lower faster rate cuts? So it is around 20 bps impact on net interest margin and around 120, 125 basis points on return on tangible equity, I would say. So from Tomas, could you quantify your investments in technology, AI in terms of dollars or percentage of total expenses? How you measure return on investment on tech investments? Do you expect to see impact more on cost or revenue? Are you able to quantify?

Tomas, regarding our technology and AI investments in terms of dollar terms, including with our running costs, we are talking about every year around -- with the running cost. What I mean by the running cost, maintenance, HR, our IT people costs, we have more than $125 million, $130 million per year. And how we are measuring return on investment, each and every project, it's quite detailed, but I will try to give a summary. Each and every projects are being oversee through feasibility. And each project have a feasibility and NPV, and we have some NPV and return on investment thresholds. If the project delivering are above threshold levels, then we start applying implementing this project. And the impact, what we are going to see more is going to be on the revenue and productivity, firstly. And on the cost part, we will follow later, but the productivity is going to be the main impact.

We have a couple of questions from [ Hakanaigan]. I have a couple of questions on net interest margin evolution in the last 2 quarters and your guidance for 2026. Despite your supporting funding base, your net interest funding expansion was not so strong in the second half when compared to peers. In addition, you also have a moderate NIM expansion guidance for 2026. What was the reason behind?

Thank you for the question. For 2025, we have the highest net interest margin expansion versus our peers, what we are following. Therefore, we believe we performed in terms of change, we performed better. And on the second half versus the first half, first half, we saw more rate cuts. And also, as you remember, during the first half -- during the end of first quarter and second quarter, there has been a volatility due to internal things, local things happened. It was the reason to start a bit behind for all the sector in the third quarter. But in overall, what we see, we can discuss with you separately, what we see a better performance in terms of net interest margin. And about 2026, I tried to mention that we are -- we would like to start a conservative approach for net interest margin. I think having this conservative approach shows the reason behind the rate cut happened 100 bps rather than 150 bps expectation. Therefore, we will stay at this conservative side. And our main target is not to beat our peers in terms of guidance. Our main target is to reach our guidance and beat our guidance.

Second question, you had mentioned that your NPL flows came below sector average, thanks to your restructuring efforts before your peers. However, this quarter, you have a relatively higher NPL formation than peers. Is that a temporary development? What is upside risk to your cost of risk guidance for 2026?

And [ Hakan, ] again, during the fourth quarter, NPL formation growth, I think you mean one of the peers announced is lower than us. But when you include the collection in terms of net NPL flow, we are better. That's why I'm trying to specifically add the collection performance for our NPL formation. And the upside risk for cost of risk guidance, again, is going to be the rate cut trajectory. If there is a delay in rate cuts and the availability of funding for these SMEs, then we can see an upside risk for cost of risk.

One on OpEx guidance. Do you see any upside risk to your OpEx guidance, especially if there is a strong competition for payroll accounts, as mentioned by one of your competitors?

And for OpEx, I think we have a quite tight guidance below 35%. And on top of this, again, the only thing could impact a much higher inflation than expected, but this is a remote risk, I would say. For the payroll accounts, when we look at the payroll customer base, and we have the highest payroll payment in terms of number. And therefore, any competition, we are able to reply back in terms of the data we have. And accordingly, for some of the payroll customer acquisition, we know what kind of customers is bringing what amount of revenue with our strong database. Therefore, we are pricing accordingly. We are not pricing in payroll customers in order to get a number or in order to get a customer acquisition. We are pricing with data available and with the profitability. Therefore, if you see that we are letting go some payroll customers, then it means that the payroll customers is not profitable. It could only be the reason that we will be leaving those payroll customers.

Last question from [ Hakanaigan ]. We have hear from others about potential dividend distribution from your earnings, can you elaborate it for us?

And I can, let's see the regulators' opinion on those. I'm not -- I don't have the liberty to give any info about it.

From Tomas, can you comment on deposit pricing trends? Also recent -- I think you looked at the sector data, some volatility on the lending rates. How do you think?

Tomas, the lending rate volatility is due to loan caps. Some of the banks are making a quick lending activities just at the start of the period, loan cap period, and you see lower rates and higher lending activities. And then what you see through at the end of the period due to filling up the loan growth cap, banks are increasing their prices and they are selling less in terms of volume. But then you see the available pricing, you see some volatility. This is the main reason behind. For the deposit rates, what we are seeing also for the market, is getting closer to policy rate levels due to actions taken by Central Bank on the market retention measures for the deposits. But for our case, we are already there in terms of policy rates.

So one question. What is your guidance on the NPL ratio for 2026? There are lots of components of NPL ratio. So we are providing guidance more on the NPL inflows. But what we can say it will be definitely lower than 4% levels for 2026. So from Tomas, again, it is great to see AI and tech modernization. But still branch network is relatively big. How shall we think about future efficiencies from all AI investments if your network remains same size and competitive dynamics would it change like Rev [indiscernible] and entrance in Turkey took place?

Tomas, if you don't mind, let us make a separate call specifically for these AI investments we have for the network activities. It could go align hand-to- hand for a couple of years because what is important, again, the productivity rather than the first efficiency and efficiency could follow up. And for the Rev specific, we can discuss later with you.

So one question on the liquidity. Our FX liquidity is around $11 billion, short-term maturing $7.5 billion, total is $15 billion. And $2 billion of the syndication is short term. Also, we have this year 2 and 3-year tranches on the syndications first time. And in total, we have $2.5 billion syndications, no upcoming AT1, Tier 2 capital instruments or senior maturing this year. I think we covered it all. So I'm not seeing any further questions. So I thank you all for joining the call. So you can reach us any time when you have a question. Thank you. Bye-bye.

Thank you. Bye.