Good morning to you all. Welcome, and thank you for joining us today for Albaraka Türk 2025 fourth quarter financial results call. I am Seyfullah Demirlek, Head of Investor Relations and Sustainability at Albaraka Türk. Ömer Emeç, our Assistant General Manager and Chief Economist of the bank, is also with me today. He will start with his assessment of the macroeconomic environments and provide an overview of the banking sector. He will also walk you through our 2025 year-end target realization. Following his remarks, I will present the details of our financial performance and key developments during the year. At the end of my presentation, before moving on to the Q&A session, we will cover our 2026 guidance. To present our expectations and targets for 2026, I will hand over to Ömer Emeç. After the presentation, we will be happy to take your questions.
You may just raise your hands or type your questions into the chat box. Without further ado, I would like to hand over to Ömer Emeç. Ömer Emeç, the floor is yours.
Thank you, Seyfullah. Hello, everyone, and welcome to our 2025 year-end financial results and 2026 guidance meeting. Thank you for joining us. I will start with an overview of the macro backdrop on slide 3. Global manufacturing PMI improving modestly worldwide and production expanding in a growing number of countries. This is a sign of growth but moderate industrial activity. However, cost pressures remain elevated, and growth momentum is uneven across regions. Global inflation is expected to ease overall in 2026, with headline inflation to forecast to fall as price pressures moderate gradually, supported by lower energy costs and slowing wage growth in many countries. Global conditions remain positive but fragile, with trade uncertainties, tariff effects, and geopolitical tensions continuing to pose downside risks. While advanced and emerging markets showed resilience, uneven growth patterns and supply-side pressures create potential volatility ahead.
Turkey's economy has shown resilience in 2025 despite the tight financial conditions. Currently, we expect economic growth to be around 4% for 2026. Inflation data came lower than expectation in last quarter of 2025, and the year-end figure was 30.9%. Despite this moderation, inflation still remains elevated. At the beginning of 2026, inflation showed another increase, particularly due to the pressure on food prices. Our inflation expectation for end of the year for 2026 is between low to mid-20s range. Taking inflation risk into account, CBRT delivered a smaller rate cut in January, lowering deposit rate to 37% from 38%. We expect CBRT to maintain this cautious approach and further easing to be depending on incoming data and broader macro foundations. Our year-end policy rate expectation stands at 29% for 2026. Next, I will highlight key developments in the Turkish banking sector on slide four.
In 2025, Turkish banking sector continued to grow strongly, expanding by 43.7%. Participation banks, however, outpaced the overall sector with a growth rate of 62.7%, increasing their share in the sector to reach 9.32%. According to the upper right corner of the slide, share of local currency funded credits slightly decreased 63% in the banking sector and 55% in participation banks. Although still at historically low levels, the NPL ratio rose from 1.7% to 2.4% in the banking sector. NPL ratio in the participation banks remained lower than the sector average at 1.8%. Profitability in nominal terms remained solid. By year-end, total profit in the banking sector increased by 40.4% to TRY 940 billion . While profit growth in the participation bank was slightly lower at 35.2%. In profitability ratios, the sector showed a mild improvement while participation banks recorded some moderation compared to same period of 2024.
The sector's return on assets increased from 2.3 to 2.4, whereas the ROE of participation banks declined from 2.7% to 2.5%. I will now move to slide five to share the highlights of Albaraka Türk for year-end 2025 financial performance. In 2025, we delivered a strong profitability performance, and our solo-based net profit reached TRY 13.2 billion . This figure was supported by TRY 7 billion reversal of free provisions, which is booked in previous periods. Adjusted by one of this item, our underlying profit stood at 6.2 billion, corresponding to a 43.3% year-on-year increase, which is outperforming both the sectors and participation banking average. Including the provision reversal, the year-on-year growth in reported net profit amounted to 206%. In terms of profitability metrics, our return indicators remained robust in 2025.
Excluding the free provision reversal, return on average equity was realized at 29.9%, while return on average assets stood at 1.6%. When the provision reverse is including in the bottom line, this ratio increased to 63.9% and return on average equity, 3.44 return on average assets. Compared to 2024, collected funds grew by 35.8%, while performing funded credits increased by 58.9%. Asset quality remained resilient despite tight monetary environment and heightened market volatility. Our NPL ratio increased from 1.386% at the end of 2024 to 1.7%, remaining both below sector average and participation banking average. In addition, our provision levels remain among the strongest in the sector, with a stage 3 provision rate of 80.7%, and stage 2 provision rate is 13.8%. Right now, let me briefly talk about our year-end financial results compared with our guidance.
Based on the realization of our year-end financial figures versus revised guidance table, our bank delivered a strong performance in 2025. Achieving results that were broadly in line with or above our updated targets across key metrics. Let me go detail one by one. On credit growth, while our revised guidance implied credit growth at approximately 50%, our bank achieved 59.5% credit growth by year-end of 2025. Credit expansion across the sector limited by regulatory growth caps. Participation banks benefited from leasing credits, which are exempt from credit growth caps, supporting stronger credit growth versus overall banking sector. This outperformance also reflects our selective and disciplined growth approach as we continue to expand our balance sheet while maintaining prudent underwriting credit standards. On NPL side, our guidance was set at below 2% by end of 2026 in the past.
Our NPL ratio realized at 1.7%, which is below our NPL guidance. This outcome confirms that our asset quality remains resilient, and our bank outperformed both the sector and participation banking average. On special provision ratio, our special provision ratios stood at 80.7% at the end of 2025, one of the highest ratio across the sector. Accordingly, our special provision ratio was realized at a level of close to our target 85 in 2025, which underlines our conservative provisioning policy and strong risk management framework. On net profit share margin, our guidance for net profit share margin was 2.5, whereas margin realized 3.4 for 2025. This stronger than expected performance was supported by lower funding costs and positive impact of both market dynamics, tight monetary policy, and the decreasing rates plus valuation gains attainment by year end.
On return on equity, our revised guidance for return on equity range was between 25%-30%, and our bank achieved 29.8%, which is very close to the upper end of our guidance. Additionally, ROE reached 63.9% when including the one-off impact of free provision reversal. In addition to all these guidance and our positive delivery in compared to our guidance, we booked TRY 1.6 billion free provision in the last quarter of 2025, bringing our total free provisions to TRY 1.85 billion. Overall, our bank closed 2025 with a strong delivery in line with our guidance, resilient asset quality and solid profitability, while at the same time maintaining one of the most robust provisioning buffers in the sector. Right now, I will hand over to Seyfullah to provide details of that financial performance. Seyfullah, the floor is yours.
Thank you, Ömer Bey. I am now moving to page eight, where I will walk you through our asset structure and margin developments. As highlighted in the title, we delivered robust asset growth in 2025, while net profit share income margin recovery accelerated in last quarter. Starting with total assets, we recorded a 50% year-on-year increase. Despite regulatory constraints and tight monetary conditions, we maintained disciplined and balanced growth. Looking at the asset composition, the share of funded credits increased from 46.4% at the year end of 2024 to 49.5% at year end 2025. The securities portfolio declined gradually from 21.4% at year end 2024 to around 19% by year end 2025, fluctuating in line with market conditions throughout the year. Similar to the broader sector, we adjusted our positioning in response to the evolving rate environments.
Cash and equivalents increased from 24.6% in the third quarter of 2025 to about 26% in the fourth quarter of last year. Throughout 2025, this ratio moved within the 26%-28.5% range. This level primarily reflects high reserve requirements set by the Central Bank. In terms of currency breakdown, Turkish lira assets stood at 51.7% at year-end 2025, compared to 53.3% a year earlier. There is no material shift in composition, actually. We can say that the transition out of foreign currency protected deposits was managed smoothly without creating volatility in our balance sheet structure. Now moving to net profit share margin. On a swap-adjusted basis, net profit share margin increased significantly from 1.2% at year-end 2024 to 3.4% at the year-end of last year, exceeding our 2.5% year-end guidance.
The key driver of this improvement was the income generated from profit and votes projects in the last quarter, which amounted to approximately TRY 4.6 billion. As is the case for previous years, the contribution from these projects has always come in the fourth quarter. If we include investment funds backed by our securitized assets, whose returns are recorded under the net trading income rather than net profit share income, the margin increases from 4% to 4.7% year-on-year. Beyond the fourth quarter effect, margin improvements were also supported by lower funding costs following the rate cuts. Going forward, we expect further normalization in core banking margins as the easing cycle continues in line with the disinflation path. Overall, 2025 reflects disciplined asset allocation, stable balance sheet composition, and a clear recovery in margins, especially in the last quarter. I am now moving to page nine.
On the performance credit side, we delivered an almost 60% year-on-year increase despite the regulatory lending limitations in place. Looking at the portfolio quality, stage 1 credits remained broadly stable at 87.7%, compared to 87.9% last year. Stage 2 credits were almost unchanged at 5.6%. Stage 3 credits increased moderately from 1.4% to 1.7%, in line with the macro environment. Overall, the composition confirms that asset quality remains resilient. Turning to performing credits, growth was again close to 59% year-on-year. In terms of currency breakdown, the share of Turkish lira credits stood at 55%, compared to 57% previous years. Turkish lira credits increased by 54.6%, while foreign currency credits increased by around 35% in U.S. dollar terms. The currency mix, therefore, remains balanced. Looking at segment distribution, corporates account for 52% of the portfolio, SMEs 38%, and retail 10%.
This composition reflects a prudent approach under current monetary conditions and supports stable portfolio performance. Within retail, mortgages account for 75%, followed by credit cards at 12%, general purpose credits at 6%, and vehicle credits at 4%. The dominance of secured lending continued to support prudent risk management. We are now on page 10. Asset quality remains strong with the NPL ratio below the sector average and in line with our guidance of below 2%. Looking at NPL developments, the balance increased from TRY 2 billion at year-end 2024 to TRY 4 billion at year-end 2025. During the year, we recorded TRY 3.2 billion of new inflows, around TRY 500 million of collections, and TRY 7 million of write-offs. As a result, the NPL ratio moved from 1.36% to 1.7%. Net NPL ratio increased from 0.17% to 0.33%.
Despite this increase, the level remains manageable and below our guidance. Provisioning ratios remain solid and above sector averages. The Stage 3 coverage ratio declined from 87.7% to 80.7%, while Stage 2 coverage decreased from 25.6% at year-end 2024 to 13.7% by the end of last year. As you may recall, the higher Stage 2 provisioning at year-end of 2024 was not driven by a specific deterioration. It reflected our prudent stance, supported by strong profitability to strengthen buffers in a tight monetary environment. Therefore, Stage 2 coverage is still at comfortable levels compared to the sector averages. When we look at the cost of risk, it remains broadly stable at around 2%, almost unchanged compared to year-end 2024. As in previous years, strong profitability toward year-end allowed us to prioritize provisioning and maintain a conservative risk profile.
Overall, asset quality indicators continue to reflect disciplined credit underwriting and proactive risk management. I am now moving to page 11. Our securities portfolio remains aligned with market dynamics and increased by 33.8% year-on-year, and reached almost TRY 90 billion. Looking at the composition, we gradually rebalanced the book in response to rate movements and valuation effects. The share of held-to-maturity securities declined from 40.3% in the last quarter of 2024 to 35.5% by year-end 2025. Marketable securities decreased from 32.8% to 29.6% over the same period. In contrast, available-for-sale securities increased from 26.9% to 34.9%. This shift reflects our active balance sheet management under changing market conditions. On the currency side, the share of Turkish lira securities increased notably, reaching 62.8% at year-end, compared to 49% a year earlier. Within Turkish lira securities, CPI linkers account for 11.6% of the total Turkish lira portfolio.
Turning to yields, the total securities yield improved to 15.5% in the last quarter of 2025, compared to 14.1% in the last quarter of 2024. Turkish lira securities yield remains broadly stable throughout the year, ending at 25.7%, while foreign currency securities yields increased from 5.4% to 7.2%, supporting overall portfolio return. As a final point in the slides, profit share income from the securities portfolio increased by 33.6% year-on-year, broadly in line with portfolio growth. Overall, the securities book continued to provide a stable and supportive contribution to profitability. We are now on page 12. Our funding mix remains well-diversified, supporting cost optimization and balance sheet flexibility. Starting with total liabilities, as of year-end 2025, current accounts and participation accounts continue to represent the core of our funding base, accounting for around 60% of total liabilities, 32.5% current accounts, and 27.1% participation accounts.
Borrowings increased significantly during the year, mainly due to the reclassification of the $205 million Tier 1 Sukuk in the first quarter of 2025 from equity to borrowings. As a result, the share of borrowings in total liabilities increased from 16.2% at year-end 2024 to 25.7% by year-end 2025. Looking specifically at borrowings, annual growth was 115.8%. The main driver, as mentioned, was the Tier 1 Sukuk reclassification. Alongside continued access to diversified funding instruments throughout the year. Collected funds increased by 35.8% year-on-year. The currency breakdown remains stable, with the share of Turkish lira funds at 46.4%, almost unchanged from 46.3% a year earlier. Foreign currency-protected accounts declined from 6.4% to near zero by year-end of 2025, and this transition was managed smoothly. In terms of maturity composition, the share of demand accounts increased from 49.6% to 54.5%, strengthening our low-cost funding base.
One-month maturities declined from 22.6% to 15.2%, while up to three-month accounts increased slightly to 19.6%. Accounts with maturities up to one year increased from 3.9% to 6.3%, and those above one year declined 5.7% to 4.3%. Overall, our funding structure remains stable and supportive of margin management in a transitioning rate environment. We are now on page 13. This slide shows the efficiency of our deposit structure and its impact on funding cost. Starting with current accounts, Turkish lira accounts increased by 26.3% year-on-year. Foreign currency current accounts increased by around 28% in U.S. dollar terms, corresponding to slightly above 56% increase in Turkish lira terms. In participation accounts, Turkish lira accounts increased by almost 18%, while foreign currency participation accounts increased by around 17% in U.S. dollar terms or 43% in Turkish lira terms.
Turning to funding cost, the cost of participation accounts moved from 27% at year-end 2024 to 33% by year-end 2025. This increase was gradual throughout the year. However, when we include current accounts in the denominator, total cost of collected funds remains significantly lower. It moved from 14.2% at year-end 2024 to 16.3% by year-end 2025. This clearly demonstrates the structural advantage provided by our high share of current accounts, which continues to support cost optimization and balance sheet flexibility. I am now moving to page 14. This slide shows the evolution of our income and cost structure in 2025. Total income increased by around 80% year-on-year, while total cost increased by 41.4%. This reflects positive operating leverage. However, the composition of income is important to understand. Net profit share income increased by 41%, from TRY 7.5 billion to TRY 10.6 billion.
Although funding cost remained high for most of the year, the Central Bank's rate cuts toward year-end and fourth quarter profit and loss project income drove the improvement. Net trading income increased by 19%, from TRY 4.3 billion to TRY 5.1 billion, supported by valuation gains from investment funds and relatively lower swap costs compared to 2024. Net fees and commission income increased strongly by 48%, from TRY 3.4 billion to TRY 5 billion, remaining a core contributor to our income base. Other income increased sharply from TRY 3.3 billion to TRY 12.4 billion. This figure includes a TRY 7 billion credit provision reversal, which is a one-off item. Excluding this effect, the income growth would have been more aligned with our core banking operating performance.
On the cost side, provisions increased by 22%, from TRY 5.8 billion to TRY 7.1 billion. However, their share in total cost declined from 41.2% to 35.5%, indicating an improved cost composition. Employee expenses increased by 51%, from TRY 4.5 billion to TRY 6.8 billion. Mainly driven by inflation, while headcount remains broadly flat. Their share within total cost increased moderately from 31.8% to 34.3%. Other operating expenses increased by 62%, from TRY 3.7 billion to TRY 6 billion, largely reflecting the high inflation environment. Tax expenses remained broadly flat year-on-year. Looking at the cost-to-income ratio, it moved from 44.5% in the last part of 2024 to 38.8% by year-end 2025. Although there were quarterly fluctuations during the year, the overall level reflects disciplined cost management. We are now on page 15, where we summarize the key developments in our income statement.
Net profit share income increased by 43% year-on-year and by around 430% quarter-on-quarter. This quarterly acceleration was primarily supported by mark-to-market project gains and improving funding cost dynamics towards year-end. Net fees and commission income increased by 48% year-on-year and 9% quarter-on-quarter in 2025, reflecting sustained growth above inflation and continued strength in transactional banking. Net trading income increased by 20% year-on-year and by above 500% quarter-on-quarter in 2025, mainly driven by investment fund valuation gains recorded during the quarter. Other income increased by 280% year-on-year, largely driven by the fee provision reversal and asset sale gains recorded earlier in the year. On a quarterly basis, this change remains limited at 3%, indicating that the major one-off effects were already recognized in previous quarters. On the cost side, provision expenses increased by 25% year-on-year and by over 3,000% quarter-on-quarter in 2025.
The quarterly increase reflects TRY 2.1 billion of ECL provisions and TRY 1.6 billion of free provisions set aside during the last quarter. As of year-end 2025, total free provisions amounted to TRY 1.85 billion. Employee expenses were stable quarter-on-quarter and increased by 52% year-on-year. As no mid-year wage adjustment was implemented, the increase remains relatively moderate compared to the sector. Other operating expenses increased by 11% quarter-on-quarter and 62% year-on-year, mainly reflecting the high inflation environment. Overall, the fourth quarter reflects stronger revenue generation alongside prudent provisioning, supporting profitability and balance sheet strength. We are now on the capital adequacy page. Our capital ratios strengthened further in 2025, supported by strong internal capital generation. Total capital adequacy ratio increased from 17.2% at year-end 2024 to 19% at year-end 2025. Principal capital adequacy ratio increased from 11.4% to 14.1%.
Core capital adequacy ratio declined from 10.9% to 10.3%, mainly due to the reclassification of the $205 million Tier 1 Sukuk from equity to borrowings in the first quarter of 2025. As previously explained, this instrument was originally recognized under equity in Turkish lira terms. Following the reclassification, it has been accounted for under borrowings in its original U.S. dollar terms. Lastly, if we were to include the TRY 1.85 billion provisions in our capital, core capital adequacy ratio would be 11%, principal capital adequacy ratio 14.8%, and total capital adequacy ratio would be 19.7%, implying an additional buffer of around 70-80 basis points. Looking at the waterfall analysis of capital adequacy ratio developments, Tier 1 capital contributed 977 basis points. Tier 2 capital contributed 147 basis points. Credit risk impact was -621 basis points. Market risk impact was -247 basis points, and operational risk impact was -73 basis points.
Despite the increase in risk-weighted assets, capital generation more than offset these effects. Overall, our capital position remains strong, well above regulatory requirements, and continues to support our growth strategy. This concludes my part of the presentation. This summary balance sheet and income statements are available in the appendix. Now, I would like to hand over to Ömer Bey to present our 2026 year-end expectations. Ömer Bey, the floor is yours.
Thank you, Seyfullah. While preparing our 2026 guidance and our budget plans, we expect a more normalized operating environment in macro policy mix. In this environment, as Albaraka Türk, we are committed to deliver a disciplined growth, prudent risk management, and sustainable profitability in 2026. Let me provide some key guidance for 2026. On credit growth, we guide for approximately 40% growth in 2026. This target implies a selective and balanced balance sheet expansion, consistent with our focus on asset quality and capital efficiency under evolving market conditions. We expect our NPL ratio to be below 2.5%. This guidance reflects our conservative underwriting and proactive risk monitoring standards. We guide for special provision ratio to be around 75%, which is aligned with a more normalized risk environment and our continued focus on maintaining strong coverage.
For 2026, we guide for a net profit margin of approximately 3.5% on swap base adjusted basis, supported by our expectation of a gradual decline in inflation and the policy interest rate path. These signals are expectation that profitability will remain strong and sustainable. Including investment fund income, we expect the margin to reach 4.5% for 2026. On return on equity side, for 2026, we maintained our ROE guidance at the range between 25%-30%, which is above 2026 inflation expectations. This reflects our continued commitment to deliver strong shareholder returns while balancing growth, risk, and capital discipline. Overall, our 2026 guidance reflects a year of controlled balance sheet expansion and sustainable profitability with a resilient asset quality, which is building on the strong foundations and financial turnaround we performed that have been started from 2022. We will be committed to our guidance throughout the year.
But if we see any significant divergence from the guidance, either positive or negative, we will keep market and our stakeholders updated by releasing KAP announcement and updates. Right now, we have done our guidance part. Seyfullah, floor is yours. But I think we can go on the part of Q&A session.
Yes. Thank you, Ömer Bey. This concludes our presentation. We are now ready to take your questions. Please feel free to raise your hand or type your questions into the chat box. So please feel free to raise your hands or just type your questions into the chat box. I think we have a question from Mark Ceylan.
Thank you very much for the presentation, and congrats on the strong results. According to your macro assumptions, how is your net profit share margin trajectory for the upcoming quarters? When we will expect to see the net profit share margin and at which level? There was a deterioration in the NPL flows in the last quarter. Do you expect the same trends for 2026?
Let me give details one by one. First of all, regarding net profit share margin side. As we provided our guidance for 2026, our swap-adjusted net profit share margin expectation is 3.5 for end of 2026. As we discussed in the past, we have our own investment funds, which is valuation gain goes through under trading income side. Including that effects, these are kind of due to the accounting principles. If we include that under the net profit share margin side, our expectation for 2026 would be around 4.5%. As we see in the market, in Turkey, we are in a disinflation path. Disinflation path, yes. We observe a kind of sticky inflation in the market. Latest inflation report was announced by governor of Central Bank of the Republic of Türkiye. He also emphasized the pace of rate cut has been calibrated due to the recent development on inflation data.
Right now, considering the market inflation, as we are expecting a low to mid-20s inflation data by 2026. Roughly speaking, around 8%-10% decrease in inflation would be actually reasonable expectation by 2026. Of course, this actually inflation decrease will be affecting Central Bank of the Republic of Türkiye rate cuts. We also can expect, roughly speaking, 8%-10% decrease in interest rates. Of course, these will be more dependent on how inflation data will be throughout the year. But we can say that this actually decrease in the interest rate will be with us throughout 2026. Of course, this path will be supporting our net profit share margin. As we actually guiding, our net profit share margin would be 3.5 for the excluding investment funds.
If you are including investment funds, this will be 4.55, which will be very actually in line with the market and will be supporting our sustainable profitability in coming period for 2026. The next question was regarding.
NPL trends.
NPL. Yes. NPL side, as we discussed the numbers, our NPL ratio is very below the market, both participation banking sector average and banking sector average. Yes. Actually, normal path we can expect if you are in a tight monetary policy. Yes, NPL would be actually negatively affected, and NPL ratio will be going up. This is normal actually path. As we discussed in the past. But this ratio deterioration in the market is not to signal that couldn't be handled and that couldn't be managed in the banking sector. Yes, we are expecting since this tight monetary policy will be with us throughout 2026. We can expect banking sector and participation banking sector NPL will be going up in the coming period. Of course, we are expecting a kind of increase in NPL, which will be below 2.5% in 2026.
We are actually comfortably, we can think that we can be in line with our guidance. As we discussed, our segment composition, which Seyfullah gave some details on that side. Just 10% is on the retail, and most of, let's say 80%-90% of our retail credits are collateral-based credits, like mortgage, like vehicles. That is a factor. The sensitive and most fragile segment on the retail for NPL side, as you know, is credit card and consumer. On credit concentration side, we are very limited on that side. We are not seeing any big effect that will be coming on that side. The other element that would importantly affect us, NPL will be slightly going up throughout 2026. The important element will be whether you are collateralized or not.
Looking at our collateralization, our collateralization is very supportive in terms of, yes, NPL will be slightly going up, but wouldn't be affecting our net cost of risk in that sense. That is for 2026.
Thank you, Ömer Bey. We have a question from Bulut Şengül from İş Yatırım. He says, "Does your 2026 guidance include any free provision release? Can you also give some color on fee and OPEX growth targets in 2026, given the coverage targets? Is it safe to assume a cost of risk below 200 basis points in 2026?
Actually, fee and commission sides, it will be way above on inflation data. I can say it like that. Fee side, we are actually more trying to increase, not in terms of actually just one segment. We are trying to increase our product mix that can increase our fee and commissions, especially on some services like investment, actually products like banking services, that is coming from that side. Especially payment system is supporting that fee, actually commission. On OPEX side, of course, OPEX expectation more or less will be in line with the inflation of 2025. As you know, your salary adjustments, some OPEX that is coming in, mostly dependent on the last year inflation data. Latest data for inflation for 2025 was above 30%. It will be more than 30%. Let me put it like that way.
And for actually coverage targets, as you correctly mentioned, we are only in a position we can say that we can actually comfortably manage a slight. Actually, we are expecting a slight increase in NPL side. We can say that we can comfortably manage that net cost of risk effect. The net cost of risk effect is very limited with collateral, as you know. Collateralization rate is very supportive in that sense. Right now, these free provisions, we do not have any specific plan, to be honest. Actually, our ROE was very in line with our guidance, including free provision reversal. By the way, on consolidated basis, our net profit is TRY 15 billion. Solo basis, TRY 13.2 billion, which is our ROE was at above 60%. We set aside these free provisions. We can perceive these like profit reserves. We see like that.
There is not any specific plan for actually how to use that. It was an approach to be more cautious and see that figures as profit reserve for 2026.
Thank you, Ömer Emeç. We have a question from Ozan Altan from Yapı Kredi Yatırım . Ozan Bey, please go ahead.
Thank you for the presentation. What are your capital ratios when we exclude the BRSA forbearances?
Just a second. I think we can-
Can you hear me?
We should be opening that. Ozan Bey, sorry, can you repeat your question, please?
Sure. Thank you for the presentation. What are your capital ratios if we exclude the BRSA forbearances? What will be the Basel IV impact on your capital ratios? Thank you very much.
Ozan Bey, actually, these forbearance will be not with us for 2026. We can say that for capital ratio. By the way, effect has been negligible for the last years. It was not like in the past. It will be affecting that side. Basel IV, our teams are looking for that. We are right now in a position, I couldn't say that this is difficult, but the things I can say that these both affects, our teams are looking at the details, and these levels are not levels we couldn't manage. We could comfortably manage that side. Also, we can actually say that we are not actually allocating that free provision for that reasons, but we can say that if these would be some effect on that side, we have around TRY 1.85 billion of profit that can be used to support our capital increase ratio.
As I already mentioned, these numbers are like profit reserves we can use for any kind of development in coming period.
Thank you, Ahmet. We have a question from Sadrettin Bağcı from PhillipCapital. He says, "Thank you for the presentation. Loan growth target seems a bit higher than other banks' guidance, given the regulatory caps. How do you plan to achieve these targets?
Yeah, actually, just not for 2026, Sadrettin Bey. For 2025, our banks, you are looking at our credit growth. Credit growth is higher than banking sector average. We are in a position that credit actually growth would still be higher than the market for 2026. Our actual motivation is like, as we know, interest rate is coming down. The more credit growth in that environment actually will be supporting us in terms of net profit share margin actually trajectory in coming period. How this is possible? Actually, answer to your question. First of all, actually leasing are exempt from that growth caps, as you know. As participation banks, we have permission to do financial leasing actually in our own bank facilities. Yes, you know other banks through their subsidiary are doing that. But as participation banks, we are allowed to do financial leasing services and facilities.
For 2025, by the way, most of that growth divergence has been supported by that financial leasing credits. First item will be in that support coming from financial leasing. The second, there are some exemptions like investment, like some sectors, some regions. We are actually more focused on that side. We think that we will comfortably tap our 40% target once we are coming by year-end. So the support will be coming from financial leasing first, the second, selective credits.
Thank you, Ömer. We have another question from Suha Nevini. If I pronounce your name, please accept my apologies.
That is okay.
Please go ahead.
Yeah, that is true. Thank you so much. My name is Suha. I am from Investment Banking in Israr Capital. Well, first of all, I would like to congratulate Albaraka Türk for its solid performance and continuous progress. As part of Albaraka Türk financial audit discussion and the capital breakdowns, could you please, Mr. Ömer or Mr. Seyfullah, could you elaborate further on the borrowing side, particularly regarding the Sukuk issuer. In your view, which Sukuk transaction undertaken by Albaraka Türk has contributed to the most of strengthening of the bank capital adequacy ratio? And what were the key factors that you think that is behind its impact? Thank you so much.
Thank you very much for your question. As far as I understood from your question, your question is regarding the Tier 1 Sukuk issuance and contribution
Exactly
to debt issuance from our parent company, right?
Yes, that is true.
Yeah. In fact, we cannot give the exact share of the portion but Tier 1 Sukuk largely financed by our parent, actually. So we can say their contribution is quite high in Tier 1 Sukuk.
Yes. Is there any other detail you want to cover?
Yeah. Which are the key factors behind its impact that you feel like it helps the capital adequacy ratio to be raised and to be in the best it can be?
Sure. Actually, the original currency of the Tier 1 Sukuk is U.S dollar terms. But by the guidance of BRSA and our audit firm, at that time it was around 2018, it was booked under equity in Turkish lira terms.
Okay.
When we came to 2026, actually, we saw booking the Tier 1 Sukuk in Turkish lira terms disadvantages for the bank because for the Turkish lira depreciations, we cannot use the original currency of Tier 1 actually. Because of that, we moved the Tier 1 Sukuk to under borrowings in its original currency. By doing this, it provides a natural hedge against Turkish lira depreciations actually.
Okay. Thank you so much. As I said before, congratulations, Albaraka Türk for its performance and for its continued progress. Thank you so much.
Thank you.
Thank you very much. If you have any further question, please just raise your hand or just type your question into the chat box. I think there is no more question. If there are no further questions, this concludes our call. Thank you for your participation and for your continued interest in Albaraka Türk. We look forward to speaking with you again next quarter. Thank you.
Thank you.