Ladies and gentlemen, welcome to İşbank First Quarter 2026 Financial Results Audio Webcast. Today our presenters shall be Ms. Ebru Özşuca, Deputy Chief Executive, Mr. Mehmet Türk, CFO, Ms. Nilgün Osman, Head of IR and Sustainability. The presentation will be followed by a Q&A session. If you wish to ask a question, please raise your hand or type in in the Q&A box. Now, I hand over to our presenters.
Good evening. Welcome to our First Quarter Earnings Presentation. This is Ebru speaking. We appreciate you joining us today. Before we go into the details, I want to provide a high-level summary of the macro environment and our performance during the period. In March and April, after the rise in geopolitical uncertainties and higher energy prices, year-end inflation and GDP growth expectations have slightly shifted. The monthly inflation in March became the lowest March figure recorded in the last five years, partly due to the support of the sliding scale system in easing the upward impact on energy prices. However, inflation in April, as announced yesterday, was realized higher than expectations, confirming short-term pressures mainly driven by the increased energy costs.
As a natural consequence of the global environment, there was some initial FX demand mainly coming from offshore participants, which put some pressure on FX reserves. Subsequently, as of April, foreign residents portfolio inflows resumed, which supported the recovery in the central bank's reserve position. With the escalation of geopolitical tension, CBRT immediately suspended one-week repo transactions and moved the effective funding rate to 40%, which is the upper band of the interest rate corridor. Given that the duration and permanence of these developments on the economies globally remain unclear, in March and April meetings, CBRT kept the policy rate unchanged, treating the current situation as potentially exceptional and temporary in nature.
The Central Bank adopted a precautionary stance throughout this period and actively sterilized the excess liquidity out of the market, which was reflected in higher funding costs and a pickup in Turkish lira bond yields.
As conditions began to stabilize, the Central Bank gradually reopened swap channels. Taken together, this episode looks more like a temporary adjustment to an extraordinary set of circumstances rather than a structural shift in the monetary policy framework. The Central Bank's immediate precautionary steps have effectively reinforced the tight monetary policy stance, which also sustained the real appreciation of Turkish lira. The pace and timing of the easing in geopolitical tensions will be among the key factors shaping developments in both the global and Turkish economy in the coming period. However, should there be decline in geopolitical risks, we expect the Central Bank to initially normalize its funding stance, which would also give room to resume rate cut cycle in the second half of the year.
In this regard, our initial expectation of around 30% year-end interest rate level might be realized at higher levels.
While the macro outlook suggests the postponement of the easing to the second half of the year, we remain focused on positioning the balance sheet accordingly, where we are committed to value-added growth. With that context in mind, now let me briefly touch upon the key highlights of the quarter. This quarter, driven by the effective balance sheet management and the proactive approach to shifting market dynamics, we successfully defended our core spreads and swap adjusted net interest margin despite higher funding costs in March. Our fee and commission income continues to serve as a high quality pillar of our profitability. By diversifying our revenue streams, we have built a business model that remains resilient even when margins face cyclical pressure. We have entered 2026 with a cautious approach across both retail and commercial segments, where we are carrying that same approach forward.
Underwriting remains selective, collection performance is holding up well, and our provisioning buffers leave us comfortably positioned. On that basis, we are still comfortable with our full year asset quality guidance. Our capital and liquidity metrics remain strong, providing us with ample flexibility to support future growth opportunities. Turning to major profit and loss items, despite the headwinds encountered toward the end of the quarter, we achieved an 8% quarterly increase in swap adjusted net interest income, which represents more than a threefold increase year-over-year. Non-interest revenue continues to be fueled by strong fee generation, which grew 41% annually in line with our guidance. We are particularly seeing the positive impact of our early investments in credit card business, which constitutes 66% of our fee base, indicating the highest portion. The consistent improvement in our rankings and market share clearly demonstrates the success of our long-term approach.
Performance in fee income generation is the outcome of a long-term strategy to deepen customer relationships through comprehensive product offerings, wealth management, and transactional services. This recurring revenue provides us with a stable ground for our earnings, ensuring consistent delivery regardless of the prevailing interest rate environment. Quarterly OpEx growth, adjusted for pension fund provisions, was around 14%, largely driven by period-specific factors. We expect the growth in OpEx to converge to our guided levels by the year-end. All in all, our net profit increased 64% annually, delivering a return on equity of 19.2% and return on tangible equity of 23.1%, which are aligned with our quarterly projections. Now, I leave the floor to Nilgün for the details of the bank's performance.
Thank you, Ebru. Welcome all, and thank you for joining the webcast. Turning to our asset composition, our mix remains driven by loans, which represent 50% of our total assets. Our securities portfolio, mainly consisting of Turkish government bonds, represented around 17% of total assets. Within our loan book, the TL-FX composition reflects a steady approach. We have prioritized TL lending while carefully managing our FX exposure. In the first quarter, share of TL loans stood at 64%, while share of FX loans was 36%. As for the securities portfolio, which we actively manage based on market conditions, share of TL is at 68%, while the share of FX is nearly 32%. While maintaining our prudent and selective approach, TL loans grew by 7.4% year to date. Growth was balanced across segments with retail loans increasing by 8.4% and non-retail loans by 6.2%.
As you can see, our TL loan portfolio is well-balanced and diversified. On the FX side, loans grew by 3% quarterly on a dollar basis. Our commitment to being the main bank of our customers provides a strong anchor for the consistency of our lending portfolio, while our strategy remains disciplined and steady across the cycles. In line with this approach, we continue to grow selectively in productive segments, leveraging our deep expertise and offering customized solutions. It goes without saying that sustainability considerations are becoming increasingly embedded in our lending practices. The change in TL securities portfolio is the outcome of the redemption of the CPI linkers within the quarter and the new positionings. We continue to execute strategic portfolio adjustments and actively manage the securities portfolio.
In periods marked by elevated geopolitical uncertainty, we adopted an active management approach, successfully navigating market volatility through disciplined trading.
Furthermore, the sustained strength in securities trading volumes continue to provide solid support to the trading income. We will continue our adaptive and well-diversified portfolio management with proactive positioning in the securities market, while balancing yield enhancement with prudent risk controls in a dynamic interest rate environment. When we look at the funding mix, our TL and FX liquidity management is shaped by a holistic approach, guided by the fundamental objective of building a sustainable funding composition through diversification while carefully balancing cost and maturity considerations. Deposits remain our primary source of funding, accounting for 66% of the total as of the end of the first quarter. Flexibility continues to guide the management of our funding base, with our broad deposit franchise serving as the backbone of this approach. Beyond deposits, we aim to strengthen our capital markets presence through bond issuances in both domestic and international markets.
We also utilized alternative external funding opportunities, extended our FX short-term borrowings to longer maturities, and successfully completed a $500 million, 11 non-call, six Tier 2 issuance in January. We continue to advance our sustainable finance agenda by issuing our first Blue Bond. The $50 million five-year issuance with proceeds allocated to biodiversity protection, sustainable water, and wastewater management, and climate change adaptation represents an important step in diversifying our sustainable funding sources and reinforcing our role as a pioneer in sustainability. We maintained our concentration on widespread granular core deposit base. There was around 3% quarterly growth in TL deposits. Growth in FX deposits was around 5%, which was mainly due to gold price increase related parity impact. We maintained the largest demand deposit base among private banks.
As of the end of first quarter, 44% of our deposit base is comprised of demand deposits, providing substantial support to our funding cost base. This quarter's performance demonstrates our ability to maintain a strong resilience against interest rate volatility. Despite the upward pressure on interest rates toward the end of the period, we preserved our core spread. This was supported by a multi-layered strategy focused on loan portfolio and disciplined funding management. The impact of the late quarter funding rate increase on our total deposit cost was limited. Overall, our swap adjusted net interest income increased 8% quarterly, and 218% annually. On the net interest margin front, the positive trajectory we established last year carried into the first quarter.
There was some pressure towards the end of the quarter as the rate environment tightened. Our swap-adjusted NIM still improved by 10 basis points quarter on quarter, reaching to 3.8%. CBRT's tighter monetary policy stance, bringing the effective funding rate to the upper band of the interest rate corridor in response to geopolitical developments, has led to an increase in Turkish lira funding costs. In fact, this approach provides flexibility for funding conditions to normalize once temporary and extraordinary market pressures subside. The rise in funding costs, primarily reflected in March and at the beginning of the second quarter, has now been largely absorbed. As of today, we are nearing a plateau with respect to TL deposit rates.
On the other hand, taking into account the ongoing repricing of the loan book, the pressure has already been started to be contained, providing support for spread preservation. Looking further ahead, the likely resumption of the rate cut cycle would set the stage for the NIM expansion trend to continue throughout the year with a delay. In this regard, we are maintaining our cautiously constructive view on the full-year margin outlook, and keeping our guidance levels for the time being.
Moving on with net fees and commissions. In the first quarter of the year, fee income increased 41% annually, which is in line with our guidance, registering TRY 38 billion into our P&L. The momentum in fee and commission income remains robust and sustainable.
As we always share, this is the outcome of years of investment in digital capabilities, product development, and operational efficiency, all of which are now feeding through as steady recurring fee streams that hold up well regardless of where we are in the rate cycle. We are eager to sustain the strong momentum in fee generation capabilities by leveraging our digital channels and upgrading overall customer experience, and to further optimize our efficiency metrics. In recent years, efficiency and cost management have become increasingly important in an inflationary environment. As you know, we have been taking solid steps to transform our business model in line with our digitalization strategy, which continues to deliver meaningful efficiency gains. As a result, over the last few years, we outperformed our peers in this area. In this quarter, we observed a 14% quarterly increase in OpEx on an adjusted basis.
On the HR side, we concluded a new two-year collective bargaining agreement at the beginning of the year. Apart from that, as we have already communicated, 2026 was planned to be a more active year on the business development front, and the first quarter reflected that. With our budget being deployed across card promotions, salary campaigns, and customer acquisition initiatives as planned. Depending on how the macroeconomic outlook evolves through the year, there is room for us to recalibrate some of the OpEx items going forward. Having said that, we still find it strategically important to accelerate our business development expenses as the market begins to normalize. As we move through the year, we would expect the uncertainties to fade out, bringing us closer to our full-year guidance level.
Turning to asset quality indicators, the metrics we are reporting this quarter reflect the approach we have been taking on loan discipline and portfolio management over the past several years. In a changing macro environment, our portfolio has held up well, which we attribute to our selective underwriting standards and the ongoing monitoring of loan quality across segments. Our focus on maintaining a high-quality loan book is something we have been consistent about, and that consistency is showing through in the stability of our key indicators this quarter. Our NPL ratios stood at 3.5% at the end of March, a figure that remains within our guided range. On the net NPL formation side, new inflows were moderating through the quarter while collections have continued to perform strongly.
Obviously, we are monitoring the Stage 2 portfolio closely as well, and we are comfortable with what we are seeing so far in terms of migration dynamics across the book. The increase in the share of Stage 2 in the first quarter resulted from the transfer of a big-ticket file which we do not anticipate to migrate to NPL as things stand. Let me remind that cost of risk in the last quarter of 2025 constituted an elevated base due to a one-off item. In this regard, 205 basis points cost of risk that has been realized in the first quarter is a better indicator of general trend. Furthermore, as part of our cautious approach, our NPL coverage ratios stood at 61%, while total coverage is at 3.8% still constitutes a comfortable buffer.
Relying on our strengths and expertise with regards to customer relations, underwriting, credit modeling, and collections, we are committed to maintain sound asset quality metrics. Our capital ratios remained at solid levels at the end of March. CAR adequacy ratios stood at 15.2%, while Common Equity Tier 1 was at 11.7%. We believe that our capital ratios are strong enough to sustain the growth whenever it is deemed favorable. Sensitivity of our capital adequacy ratio to 10% depreciation in TL is around 30 basis points, while sensitivity to 100 basis points increase in TL interest rates is around eight basis points. I would now like to hand over to Ebru.
Thank you, Nilgun. Before Q&A session, let me summarize our position with regard to year-end guidance levels. As our first quarter results is largely aligned with first quarter projections, and the implications of recent geopolitical developments are not yet fully visible, and as it is still relatively early in the year, we are not revisiting our year-end guidance at this stage. All in all, with respect to Turkish long growth, mid-thirties stands as achievable. On the net interest margin side, the guidance level 5% is targeted, although we acknowledge that there are some downside risks. Any change, if needed, will be dependent on the duration of recent tightening. For the fee income, 40% growth is still attainable. Due to seasonal factors, the OpEx growth will be smoothened out throughout the year, and our guidance of mid-forties is reachable. We are comfortable about our asset quality metrics.
For return on equity and tangible equity, our guidance levels remains in place. Of course, the pace of net interest margin improvement and the inflation backdrop may result in a somewhat more modest real return than initially envisaged. However, we continue to target our return objectives in nominal terms within the dynamics of our balance sheet. This concludes our presentation. Now we can open the floor for your questions.
As far as I can see at this time, there are no audio questions. We have written questions from Valentina Stoykova, Barclays, though. I'll be reading the questions. The first one is: Can you please walk us through your NIM and core loan deposit dynamics in Q1, and how do you see the NIM shaping up in Q2 and for the rest of the year? The 2nd one of her question is: Can you also elaborate on whether you see asset quality pressures on SMEs and corporates, and which sectors are most affected?
Thank you, Valentina. First, I will answer the question on the NIM evolution side. Of course, margin management has once again became the topic that requires the most attention in this quarter. The recent spike in oil prices, driven by the geopolitical backdrop, has led the Central Bank to suspend rate cut cycle for the time being, and in fact, increase the average cost of funding by 300 basis points. The direct pass through to domestic inflation is, in fact, relatively contained given the sliding scale mechanisms in place for fuel prices. The Central Bank is taking a cautious stance with a broader view in mind, namely safeguarding the stability of the financial system as a whole in a period of heightened external volatility.
This naturally, has put some pressure on the pace of NIM improvement we had been planning for. Now, you know, if we are just, you know, more clarify the issues, we were assuming at the beginning of the year, we were assuming a measured pace of rate cuts, namely 200 basis points in each quarter. However, just 100 basis points rate cut came in January, and afterwards, although the post rate has been kept stable, the cost of funding has been brought up by 300 basis points to 40%. The current setup is, in many ways I can say that, reminiscent of what we went through in the first half of 2025, and how we manage, it will also be broadly similar.
We are focused on defending our spreads and doing this primarily through the disciplined pricing on the asset side. As you would recall, you know, in the current regulatory environment where credit growth is subject to caps, loan yields tend to be relatively resilient and do not move down in lockstep with post-rate cuts. By the same logic, when funding costs came under pressure on the upside, we have a degree of room to manage the asset side accordingly. That is the lever we are actively using at the moment, and our spread evolution through the first quarter reflects this approach, I could admit. Of course, you know, what is going on the funding side and the whole picture is more challenging at the moment.
Because there are still, for the marginal deposits, we are bind with the macroprudential framework, and therefore, our cost of deposits were also high, you know, because of those macroprudential measures in place. However, we are, through our diversified funding mix and our strong demand deposit franchise, we are trying to manage it in properly, and our composition is a advantage, I can say, from our side. At the moment, what we are seeing is that there are, of course, we are keeping in mind many alternative scenarios with the probable interest rate outcomes. We still see that our swap-adjusted net interest margin will evolve and expand quarterly throughout the year, mainly in the second half of the year.
Of course, the timing and the steepness of that expansion will inevitably depend on when the rate cut cycle resumes, I can say. Therefore, it would be, you know, under our current baseline scenario, with approximately, you know, assuming around 200 basis point consequent cuts in the third and the fourth quarters each, we could assume a transition in our quarterly NIM levels and expectations. Again, you know, I can say that the current pause does not change our destination in our NIM trajectory, but it will, and probably shift, slightly affect the path we that we will take to get there.
As the rate cut resumes in the second half of the year, we would expect the margin recovery to regain momentum, broadly in line with what we have observed last year following the suspension in the first half of the year. Therefore, you know, I can say that there are still many uncertainties for the outlook. Therefore, we believe that it is still too early to make a revision in our NIM guidance levels, but we are factoring the probability of a delay of around at least one quarter to reach that level. I think that this is, you know, as a general framework in that sense. Again, I can say that from bank side, we still expect to sustain our progress relative to our peers in year 2026.
On the asset quality side, what we are observing through the first quarter is a gradual normalization in flow trends, particularly on the retail side, but also on the SMEs and corporates that you are asking. The portfolio is behaving in line with our expectations across segments. There's nothing in the current dynamics that's raise a flag for us. The regional tensions, the Middle East tensions are naturally something we are continuously assessing. When we look at the composition of our exposures, we do not see a meaningful concentration in any particular area that would leave us vulnerable to a direct impact. However, going forward, if the tensions extend throughout and to the end of the year or to the next year, we might see some sectors being impacted, though we have no direct impact from those.
We have a quite diversified portfolio as we see. While indirect effects, of course, through the broader micro channels cannot be entirely ruled out, we do not expect the situation to translate into a material shift in our asset quality metrics. On the SME side, flows are continuing at a certain pace. More importantly, we are not observing a widespread or intense restructuring demand across the segment. The NPL ratios specifically for the SMEs are at 3.3% below our headline numbers, and also for commercials it's around 3%. I think that might answer your question.
We have another written question. I'll be reading. It's from Alexander Vayanos. Is it correct that on a consolidated basis, your capital adequacy ratio dropped by three points to 14%? Is the Tier 2 $500 million bond issue already considered in the capital adequacy ratio of 14%? What is the reason for this drop, apart from the termination of forbearance measures?
Maybe first, I should clarify one issue, you know, on the question. The capital ratio that was 17.1% at the year-end was with forbearance. Actually, without the impact of the BRSA forbearance measures, it was 14.9%, which we now see it at for 14% level on a consolidated basis.
If I, you know, we just, if I walk through the impact by the sub items, I can say that, you know, in January, we had issued a Tier 2 capital, for of $500 million which had an impact of around 70 basis points. And impact of net profit generation was around 60 basis points. From the other side, on the negative side, business growth, excluding currency impact, had a negative 90 basis points effect, and the mark-to-market impact was again, you know, around 20-25 basis points, I can say. And also, we had the impact of the dividend payouts, you know. It is around, again, 40%. I think it answers the question. Thank you.
We have an audio question from David Taranto, Bank of America. David, you can unmute yourself and proceed with your question. Thank you.
Good afternoon. Thank you for the presentation. Two questions, please. On fees, you're targeting around 40% year-on-year growth. Based on the first quarter base, this would imply fee growth of at least 15% on a quarter-on-quarter basis until the year-end. Could you comment on how comfortable you are with this trajectory, and which drivers you see as most important to support the acceleration from here? Second question, your book value declined in the first quarter due to mark-to-market adjustments. How is the securities positioning today, and should we expect some reversal in the second quarter given the current bond yield levels? Thank you.
Thank you, David, for the questions. Let me start by the fee growth projections. Our guidance of approximately 40% growth in fee and commission income for the year stands, and that the first quarter has been constant with that trajectory as it seems. The composition of our fee base continues to evolve in the constructive direction as of April as well, and that is really the headline here. The payment systems, which is the largest contributor of around 6% of fee income, supported by healthy volume growth and our continued push in the credit card business, and we have been investing as a result of our increased OpEx on the business side. We are reaching the market leadership, and that is our clear priority with the fully budgeted initiatives behind it.
And also, asset management is an area where we expect strong contribution, and our leading position in assets under management puts us in a natural place to deliver that. Besides those, bank assurance continues to build. Non-cash lending remains a steady contributor. Money transfers, which we are below our peers, is also offering a further room to grow as our customer relations deepen. The broader point is that growth is coming through across the board rather than being carried out by a single line. The current interest rate environment will also support our fee incomes in the coming months. It will, as it seems currently. Thank you.
Maybe I can go through the effect of the securities yield curve, the movement there. At the moment, I can say that, you know, by the end of April, it is the half of the negative impact has been come back, you know, under our equities. Of course, you know, from now on, there is still way to go.
Thank you very much.
Thank you.
Thank you.
Okay. We have a lot of written questions. I will try and group them if I can. Basically, Valentina has another mark-to-market security impact question. I believe this has been answered by now. Let us look at HPT from Goldman Sachs. Thank you for the presentation. Can you please give some color on the OpEx growth dynamics seen in 1Q, and why you expect that to normalize? His second question: How many rate cuts do you expect in 2026? When do you expect this cutting to start? What is your inflation expectation by year-end?
His last question, how has market share dynamics evolved for İşbank during 1Q and into the second quarter so far? I'm handing over to presenters.
Thank you, Ashwat, for the questions. Let me start by the OpEx question. You are asking for the color on the OpEx growth dynamics in the first quarter. As you know, our first quarter's OpEx growth has come in as 69%, which is in line. Our expectation was mid-40s for OpEx growth for the whole year. While this is above our full year guidance of mid-40s, it is in line with what we had projected with the start of the year for the first quarter in our budgeting process. The main driver behind the elevated figure is on the non-HR side. Whereas during the presentation we mentioned that we are investing in salary campaigns, card promotions, and other customer acquisition related expenses, which are concentrated in the renewal of certain recurring agreements, as we touched upon previously.
As we have communicated, we had planned to be active on the business development front this year, and the first quarter budget was deployed accordingly. This is also visible in the composition of our OpEx if you look at the slides, where the share of the business development expenses increased by 3 percentage points to 26% in the first quarter. On the HR side, also this is another factor, we concluded the collective bargaining agreement covering the next two years earlier in the quarter, and the associated personal co-cost impact was reflected in the first quarter figures. As we go into the year, we expect the seasonal effects observed in the first quarter to smooth out and for OpEx growth to converge towards our full year guidance level. This also applies, the same logic applies to the cost income ratio.
The first quarter reading is naturally elevated given the cost dynamics we just described. As expenses moderate and the income side strengthens, particularly through the more visible contribution of net interest income, we expect the ratio to settle around mid-40s level, which we have guided for the full year. Also, besides these, the geopolitical picture has introduced a degree of caution into the broader operating backdrop, and that also feeds into our how aggressively we execute on these items. We are not pulling back on our strategic priorities, but there's a natural calibration which takes place when the macro picture becomes less predictable, of course.
Certain initiatives are being faced differently, certain spending decisions are taken out, and the result is that we see some more room to come in below our original OpEx guidance without compromising on the areas that matter for our medium-term targets and franchise-building initiatives.
I think also Ashwat had a question on the inflation expectation and rate cut cycle. I can say that, you know, at the beginning of the year, you would remember that we had shared with you that our inflation year-end inflation expectation was 25%. At the moment, you know, seeing the current uncertainties in the market, we think that it could be somehow around 3% or 3%-4% higher than percentage points, higher than that level. Of course, there are still risks that we have to monitor, but for now it seems 20%-29%. For the rate cut cycle, from now on, including the June meeting, Central Bank has five meetings.
We think that first, there will be a normalization, you know, after the Central Bank will have to normalize it is funding, average funding levels. Probably the rate cut cycle could be started by the 2nd half of the year, the year starting from the July meeting onwards. Of course, everything is just, you know, we have to monitor the developments in the market. And I think there was another question, you know, asking, you know, the market share dynamics evolved for İşbank during the first and into, and into the second quarter so far. I think they are all, you know, in place. We are not seeing any change in our market share and our place in the market.
Going through the remaining questions. Jihan Sarolo from HSBC has a question on capital adequacy ratio. I believe this has been answered. Mustafa Kemal Karakose from BNP has questions about OPEX, NIM evolution, and I believe one more, again, on NIM evolution. I guess this has been answered as well. Moving on, we have a question from Andres Clark. I'm gonna be reading this. Thanks for the presentation. Can you give some information about loan restructuring, rescheduling, and NPL sale dynamics?
Sure. As you might recall, our NPL ratio guidance for 2026 was around 4%, including sales, while we projected net cost of risk to stand below 250 basis points. I try to answer this Valentina's question as well. The first quarter involved broadly in line with the projections we built into our budget on both the inflow and the collection side, with realizations coming in slightly better than planned. Stage 2 also tells a similar story, with the trajectories tracking closely to what we have mapped out this at the start of the year. As we have shared during the presentation, the increase in the share of Stage 2 was mainly a result of a big tickets file transfer, indicating a one-off impact.
Accordingly, our NPL ratio at the end of the quarter was 3.5%, including the sale of an NPL portfolio amounting to TRY 3.8 million. If this sale wasn't taken into account, it would be around 3.6%. On the other hand, cost of risk stood at 205 basis points, which is below our guidance for the whole year. The Middle East conflict was obviously not part of our baseline, but even when we factor in the potential implications, we do not see a reason to think differently about where asset quality will land for the full year, as our assumptions for were already underpinning a conservative perspective to begin with, as we can observe from the first quarter net cost of risk evaluation.
We are, of course, watching the portfolio very carefully for any conflict-related effects, and so far we have not observed any worsening in the trends or the conditions. The important factor is, here is the well-diversified structure of our portfolio mitigates any risk that might arise from the particular sector or particular country. On the restructuring trends, since the end of last year, we have seen a fairly active restructuring environment on the retail side, largely shaped by the framework introduced by the BRSA. The bulk of this activity has been concentrated in credit cards, where restructuring volumes have been particularly meaningful, and we have also seen a certain volume coming through on general purpose loans. Our read on these programs so far is positive, with customer behavior evolving in line with what we had anticipated when these schemes were rolled out.
When we look at the NPL flow dynamics, the picture is broadly constant with this. Retail flows have started to trend downwards from March onwards, which we view as an encouraging signal. I hope that answers your question.
As far as I can see, the last written questions are from Hakan Akgün, Ak Yatırım. I'm reading Hakan's questions. At present, you assume a total of 400 basis points policy rate cuts by the end of the year. Can you confirm this? How do you see the loan growth prospects after first quarter 2026? Assuming that there would be some delay in your initial rate cut trajectory, do you see an upside to your fee growth guidance at the beginning of the year?
Thank you. At the moment, yes, I can say that our, in our baseline scenario, we could assume a rate cut of 400 basis points, which would be more depending on the developments globally. Still it is seems as a alternative on the table. For the loan growth prospects, we are maintaining our loan growth expectation for the year. Of course, there is a some kind of mostly on the commercial side, it is the, at the moment, the demand is seeing a demand in largely working capital on the working capital side. Of course, for the new investments and so on, the demand is quite remained limited during this period.
If the tension will begin to ease in the second half of the year, there will be a more supportive environment for the for lending. For the also the rates coming down, we could see a more in demand picking up in the remainder of the year. For the fee growth guidance, you know, we it is as we said that, you know, on the fee growth side, you know, we have our we know the capabilities, what we can do, and we have invested, you know, to that area. You know, depending on the market conditions, you know, we could have a potential, you know, in that area.
I believe that is all. Thank you everyone for joining. I am now leaving the floor to our presenters for closing remarks.
Thank you very much for your participation. We believe today we have disclosed another strong set of results, indicating our expertise in changing operating environments. Regarding the details, let's be in touch. Looking forward to see you all in person soon. Good night. Have a nice day. Thank you.