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Our Material Matters,
Stakeholder Engagement,
Risks And Opportunities

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Our Material Matters

As always, our aim with this integrated report is to provide a coherent story of our activities. The basis of this story is the materiality analysis which enables us to identify the most relevant and important topics for Garanti BBVA and its stakeholders, the material topics. Material topics are mainly determined based on dialogue with all internal and external stakeholders and are then plotted in the materiality matrix. The topics defined within the materiality matrix form the basis of this report, as described in the ‘About This Report’ section.

We performed our first materiality analysis in 2013. As we want to make sure that we are always in line with the needs of our stakeholders and that the identified material issues are still the most important, we perform an update of our materiality analysis approximately once in every two years. The revision in the first quarter of 2017 formed the basis for our 2017 and 2018 reports, whereas the revision in 2019 made the basis of our 2019 report. The last revision was finalized in 2020. As we brought our new analysis to completion, we once again listened to our internal and external stakeholders, and reviewed the connection between our corporate strategy and global trends which impact the banking sector.

MATERIAL TOPICS FOR GARANTI BBVA AND ITS STAKEHOLDERS

SUSTAINABLE DEVELOPMENT GOALS AND
GARANTI BBVA

Stakeholder Engagement

 
CUSTOMERS

Issue

  • Post-pandemic increased need for borrowing, debt deferral/restructuring, free-of-charge transacting in connection with growing need for financial support
  • Increasing expectations for faster service, less waiting time and better experience especially in branches
  • The need for precautions to prevent COVID-19 infection at touchpoints of customers with our Bank
  • The need for customers to stand in line outside the branches and to shorten waiting times in order to comply with the social distancing and maximum number of people allowed in enclosed spaces rules
  • The need for sustaining communication uninterruptedly through different channels following reduced vis-a-vis contact
  • Decreased number of customers receiving service from branches and the increased need for non-branch channel use such as digital banking and ATMs
  • Increasing need for being informed about the regulatory changes surrounding FX loans and foreign trade

Material
Topic Relevanc

  • Responsible Use of Data (data privacy, responsible AI
  • Easy, Fast & DIY
  • Solvency and Financial Performance
  • Business Ethics, Culture and Customer Protection
  • Human Rights
  • Easy, Fast & DI

What Do We Do About It?

  • Questionnaires were administered with the customers to understand their expectations and needs reshaped by the pandemic. In the questionnaire, 1 out of every 3 customers said they are in need of financial support. To satisfy customers’ financial needs, Garanti BBVA extended various supports.
  • Under the Central Customer Services Representative (C-CSR) Project, operational transactions were performed by a central team, thus alleviating the operational workload on SME portfolios in branches. Thus, portfolios were supported to allocate more time to customer relationship management. At present, 209 C-CSRs are offering service to 757 branches in total, including all branches having an SME portfolio.
  • With the outbreak of the pandemic, the need for taking the necessary hygiene and prevention measures at the customers’ touchpoints with the Bank came to the fore. Numerous measures were adopted at the branches and ATMs from the start of the pandemic in order to prevent transmission of the virus. During the process, customers receiving service from our branches conveyed their contentment both with the service we have rendered and the measures we have adopted. 97% of branch customers commented that the measures taken are adequate.
  • In this framework, all Garanti BBVA locations implemented increased cautionary practices including face mask/disinfectant usage, body temperature measurement, and social distancing.
  • As customers began to stand in line outside the branches waiting for their turns, some of them conveyed their discomfort with the practice. In questionnaires administered for branches, customers commented that they do not want to wait outside/want to wait for shorter periods of time. This was more strongly expressed particularly in hot weather.
  • Hence, Gmatik algorithm was reformatted on first come, first served basis and priority was given to customers over 60.
  • The number of customers coming to the branches decreased due to the pandemic. Therefore, face-to-face communication between employees and customers was restricted. Uninterrupted communication and service expectation of customers, on the other hand, remained unchanged.
  • In order to deliver uninterrupted communication, branch employees and central teams called our customers and kept fulfilling their needs.
  • Customer representatives continued to offer teleservice from their homes. Our agents called our customers, inquired after their health and needs, and produced the solutions that best fit their new needs. They brought offers such as credit/debt deferral and the like for our customers who were financially affected by the pandemic.
  • Our employees more intensely encouraged customers to use digital channels in order to protect community health and prevent the spread of the illness.
  • Actions were taken for execution of transactions by customers from ATMs in addition to digital channels, instead of branches. Accordingly, cash withdrawal limits were increased and customers were provided the opportunity to withdraw money from other banks’ ATM networks free-of-charge.
  • Services offered to SME customers through mobile and Internet channels were redesigned to let them easily track critical products and accounts, as well as their cash flows and account statements.
  • In 2020, chatbot and KoBilge applications went live to let our SME portfolios reach information and service our customers more quickly with the right information. With nearly 100 questions in KoBilge content, users were able to easily and instantly reach the answers they are searching. Our constantly evolving KoBilge application keeps supporting our portfolios for a better customer experience.
 
EMPLOYEES

Issue

  • Increasing employees’ focus on, and satisfaction with, the Bank’s practices; ensuring employee representation in HR processes and decision mechanisms existing within the employee journey

Material
Topic Relevancy

  • Solvency and Financial Performance
  • Responsible Use of Data (data privacy, responsible AI)
  • Easy, Fast & DIY
  • Corporate Governance and Strong Management of All Risks
  • Business Ethics, Culture and Customer Protection

What Do We Do About It?

  • Garanti BBVA makes available structured training for idea conception to its employees, while offering them the necessary infrastructure and technical capabilities for developing feasible ideas and for thinking big and taking innovative steps.
  • In 2020, a wide variety of topics were addressed on idea and opinion development platforms, Önersen, GONG, Atölye and Ask/Share.
  • Since 2007, more than 25,000 ideas and suggestions were conveyed through the Önersen platform. 18 ideas were suggested via GONG for 4 different projects. The highlights included the mobile application that will be launched for the use of employees in 2021 and increasing the effectiveness of digital learning programs particularly after COVID-19.
  • During the idea workshop intended to build on corporate values in the last quarter of 2020, more than 2500 employees developed ideas that will more efficiently capture the values and strategic priorities, employing the design thinking technique. As a result of the workshops, over 250 ideas were conveyed for consideration by the BBVA Group
  • Agile project methodologies launched in Head Office units in 2019 and expanded across different units in 2020 contributed to business development by employees based on shared wisdom in improvement areas, and to presentation of their projects to the committees
  • The annual BBVA Group Employee Engagement Survey and Employee Satisfaction Survey were conducted also in 2020. Additionally, a questionnaire was administered to understand the effects of the remote and alternating working model upon employees enforced due to COVID-19, and several practices were put into implementation in line with employees’ feedbacks.
 
SHAREHOLDERS AND INVESTORS

Issue

  • Communication of macroeconomic indicators with increased volatility during the pandemic
  • Expecting greater transparency on the following issues:- Actions taken by the Bank during the pandemic and their operational and financial impact Extent of asset quality deterioration due to rapidly changing market conditions and specific sectors - New regulatory framework affecting the banking sector and their implications - Currency Volatility - Interest Rates - Repayment deferrals and repayment performance of these loans
  • Expectation for comparable and easily accessible data in the areas of Environmental, Social and Governance

Material
Topic Relevancy

  • Solvency and Financial Performance
  • Corporate Governance and Strong Management of All Risks
  • Climate Change: Opportunities & Risk
  • Cybersecurity (cyber-attacks, data theft, fraud…)/ Responsible Use of Data (data privacy, responsible AI)
  • Business Ethics, Culture and Customer Protection
  • Financial Health and Advice

What Do We Do About It?

  • In Macro Talks video series featuring our Chief Economist and Principal Economist broadcast on Garanti BBVA TV, comments on current macroeconomic developments were shared with the investors.
  • The situation we are in and the precautions taken during the pandemic were communicated in detail and transparently in financial result presentations.
  • Transparency in financial result presentations was increased: detailed sectoral breakdown of the loan book, and the implications of regulatory changes during the pandemic were communicated.
  • Detailed explanation about the differentiated and prudent staging as well as the coverage details were communicated.
  • Additional TL2.15bn free provisions were set aside in 2020 on the back of sustainable revenue generation capacity. Total free provisions in the balance sheet reached TL 4.65 billion.
  • In 2020 characterized by rapidly changing market dynamics triggered by the pandemic, the IR team kept coming together with investors via video conferences and conference calls.
  • High share of CPI-linkers in TL securities serves as a hedge against volatility in interest rates & inflation
  • Information was provided about the high margin and profitability that the Bank successfully preserved over the years despite volatile macro indicators
  • Information was shared regarding the Bank’s action plans against actual and potential regulatory implications
  • To bolster effective communication with shareholders and investors, the IR website was revamped to offer a better user experience and an Environmental, Social and Governance Information Document was added to the website.
  • Garanti BBVA has been responding to CDP Climate Change since 2009 and CDP Water since 2015. The Bank makes all of its reports public on its website. In addition to the CDP programs, the Bank is also among the first supporters of the TCFD Recommendations. In this year’s Integrated Annual Report, as it does every year, the Bank disclosed the ratio of its loans extended to companies with carbon-related risks and total financing mobilized to low-carbon investments in Project Finance.
  • In this year’s Integrated Annual Report, Garanti BBVA, for the first time, shared its Impact Report with the stakeholders in line with the UNEP FI Principles for Responsible Banking launched in 2019 which Garanti BBVA was among the 30 banks invited around the world for the development of Principles as only company from Turkey.
 
FINANCIAL INSTITUTIONS

Issue

  • Credit ratings of debt instruments were lowered by some rating agencies during the year

Material
Topic Relevancy

  • Solid and Sustainable Financial Performance
  • Human Rights
  • Business Ethics and Customer Protection
  • Environmental Impact and Climate Change
  • Diversity and Work-Life Balance
  • Corporate Governance

What Do We Do About It?

  • Negotiations and amendments to relevant clauses in existing and new agreements have been made throughout the year.
  • The Global Compact Turkey Sustainable Finance WG co-headed by the Bank expanded the scope of the Sustainable Finance Declaration to include a decrease in investment amount limit and some provisions to ensure better control of banks on the impact of projects financed by them, and provide guidance for the management of environmental and social risks.
  • A series of stakeholder feedback meetings were organized with other banks and international financial institutions for the final version of the UNEP FI Principles for Responsible Banking. The Principles were launched on 22 September 2019 during the UN General Assembly meeting in New York City. Garanti BBVA was among the banks pledging to implement the UN Principles for Responsible Banking, together with six other banks from Turkey
  • UNEP FI Impact Analysis WG organized a series of feedback meetings to work on the portfolio impact analysis methodology in the finance sector.
 
GOVERNMENT AGENCIES AND REGULATORY AUTHORITIES

Issue

  • TBB (The Banks Association of Turkey) Role of the Financial Sector in Sustainable Growth Working Group
  • PMR (Partnership for Market Readiness PMR Turkey Initiative)
  • CMB Sustainability Principles Compliance Report
  • Borsa İstanbul Sustainability Guide for Companies: Surviving in the Future
  • CBRT Instant and Continuous Transfer of Funds (FAST) Project and BKM (Interbank Card Center) Easy Address Project Work
  • Remote onboarding arrangements enabling becoming a Bank customer through digital channels eliminating the need to face-to-face authentication, using wet signatures and hard-copy agreements.
  • Open banking arrangements giving authorized third party service providers access to data in the financial system via standard APIs in accordance with predetermined regulations.

Material
Topic Relevancy

  • Climate Change: Opportunities & Risks
  • Easy, Fast & DIY
  • Inclusive Growth (contribution to society, entrepreneurship, financial inclusion, financial education)

What Do We Do About It?

  • Garanti BBVA Sustainable Finance Team submitted its opinions regarding the National Energy Efficiency Action Plan 2017-2023 and the planned climate finance reporting to the BRSA.
  • Garanti BBVA Sustainable Finance Team participated in the 2. Implementation Phase information meetings held by the PMR Initiative, and presented opinions about the improvement of regulatory and institutional infrastructure of the Emissions Trading Scheme (ETS) pilot.
  • The Bank incorporated the Sustainability Principles Compliance Report published by the CMB within its 2020 Integrated Annual Report. Additionally, the business world was informed about the topic via the NGOs that the Bank belongs to. Executive Vice President (EVP) Ebru Dildar Edin delivered the inaugural speech at the related event organized by the ERTA (Integrated Reporting Turkey Network).
  • EVP Ebru Dildar Edin kept raising awareness of this field by referring to the guide prepared by the Istanbul Stock Exchange in reports in which she has taken part.
  • The money transfer system named FAST (Instant and Continuous Transfer of Funds) will allow the Bank’s customers to instantly transfer money within a certain limit 24/7 via the CBRT.
  • Under “Easy Address”, customers can match their IBAN with their mobile phone number, e-mail address, ID, tax or passport number via Garanti BBVA Mobile or Corporate BBVA Mobile branch to facilitate incoming money transfer. Similarly, senders can now make a money transfer by entering, for example, the mobile phone number instead of IBAN.
  • In a presentation to the BRSA, Garanti BBVA shared its research and activities related to practices in other countries, advancements in technology, risks considered in process design and risk mitigation methods.
  • The Bank took on an active role in The Banks Association of Turkey’s (TBB) working group in setting the implementation principles for execution of the remote onboarding process, maintaining the best possible balance between the security level and customer experience.
  • The Bank participated in training activities organized by the TBB and undertook joint assessments and research with the other sector players and the regulatory body.
  • The Bank presented its opinions regarding open banking arrangements in working groups with the CBRT.
  • Garanti BBVA assumed an active role in determining the principles for the execution of open banking in the most beneficial and secure manner.
 
NON-GOVERNMENTAL ORGANIZATIONS AND ASSOCIATIONS

Issue

  • Sharing our know-how and in-depth experience in ESG Management and Sustainable Finance
  • Aligning our portfolios with low carbon pathways

Material
Topic Relevancy

  • Diversity and Work-Life Balance
  • Corporate Governance and Strong Management of All Risks
  • Inclusive Growth (contribution to society, entrepreneurship, financial inclusion, financial education)
  • Solvency and Financial Performance
  • Human Rights
  • Business Ethics, Culture and Customer Protection

What Do We Do About It?

  • Garanti BBVA transformed its Sustainability Website launched in May 2018 into a living platform within the frame of stakeholders’ best practices, global trends and developments and continued to post relevant materials actively in the reporting period.
  • Garanti BBVA kept integrating the UNEP FI Principles for Responsible Banking, of which it has become a signatory in 2019, in its internal way of doing business. Defining the new role of the banking in the 21st century society and economy in compliance with the UN Sustainable Development Goals (SDGs) and the Paris Climate Agreement, the Principles aim to maximize the impact of the banking sector on achieving a sustainable, equal and prosperous future.
  • Since 2014, 100% of the total amount of financing to greenfield electricity generation investments in project finance activities has been allocated to renewable investments.
  • Owing to the importance it attaches to gender equality and diversity and to the steps it has taken in this area, Garanti BBVA qualified to be included once again in 2020 in the Bloomberg Gender Equality Index from Turkey. In the reporting period, the Bank continued to convey its initiatives and experiences in this area to all of its stakeholders via associations it chairs or belongs to.
 
TOP MANAGEMENT

Issue

  • Improving risk management
  • Constant improvement of customer experience and continued improvement efforts following the new service model
  • Provide the employees with flexible, safe and healthy working environment
  • Sustain projects at the same speed and effective use of resource
  • Active monitoring of the pandemic by top management

Material
Topic Relevancy

  • Solvency and Financial Performance
  • Employee Engagement and Talent Management
  • Corporate Governance and Strong Management of All Risks
  • Business Ethics and Customer Protection
  • Easy, Fast & DIY

What Do We Do About It?

  • Due to the pandemic, the Bank’s focus on the part of risk management diverted to other issues such as the Bank’s credit deferrals, restructuring and the increase in provision amounts (as a result of prudent approach including regulatory changes). On the finance part, required asset ratio, compliance with other limits, credit deposit growth balance, liquidity management, interest rate and margin management have become the critical topics. In this scope, comprehensive reports were generated by related teams for monitoring with BBVA and for Top Management’s monitoring.
  • With the outbreak of the pandemic, momentum was given to steps taken to minimize operational workload on branches, digitization of processes and constantly enhancing service quality offered to customers.
  • On the HR front, the main agenda topics included employee health, disinfection, COVID-19 follow-up, remote working–office balance and return-to-work plans. Through active collaboration with the technology front, remote working was enabled for employees within the scope of employee satisfaction.
  • Speed of change in technological transformation is captured with agile approaches by quarterly dynamic management of investment budgets in compliance with the new strategy. In quarterly PSM (Project Setting Meetings), main priorities are reviewed and adapted according to new developments. Based on decisions taken in the meetings, and using effective prioritization processes, resource allocation is prioritized for projects that are utmost compliant with the Bank’s strategy and that will make the biggest impact.
  • At the initial phase of COVID-19, top management got together in daily meetings for several months. Agenda topics included COVID-19 precautions and employees’ situation, as well as close monitoring of critical metrics and financial position. These meetings now continue at weekly intervals.
 
 

Risks and Opportunities

2020 has turned out to be a severe test for the whole world. The COVID-19 pandemic is putting us through the biggest crisis after WW2. Perhaps the one and only positive outcome of the pandemic was our realization, yet again, that it is impossible to achieve sustainable development and growth with the existing order. We have seen once again how comprehensively companies must address risk and opportunity management.

Mega Trends and
Risk Drivers

BUSINESS (1)

  • Customer Empowerment
  • Remote Working
  • Competition for Talent
  • Transparency
  • Efficiency
  • Rapid Alignment
  • Gender Equality
  • Next-Gen Workforce
  • Social Media
  • Resilience
  • Agility
  • Occupational Health and Safety

ECONOMY (2)

  • Sustainable Finance
  • Green Recovery
  • Inclusive Capitalism
  • Financial Health and Inclusion
  • Sharing Economy
  • Circular Economy
  • Reduced Globalization

SOCIETY (3)

  • 21st Century Skills Gap
  • Sustainable Development
  • Growing Inequalities
  • Forced Migration
  • Food Security
  • Entrepreneurship
  • Pandemic
  • Rise of the Individual
  • Megacities
  • Prosumerism

ENVIRONMENT (4)

  • Climate Crisis
  • Extreme Weather Events & Natural Disasters
  • Resource Scarcity
  • Environmental Awareness
  • Biodiversity
  • Plastic Pollution
  • Water Scarcity

TECHNOLOGY (5)

  • Automation
  • Big Data, IoT & AI
  • Cloud
  • Cybersecurity
  • Blockchain and Cryptocurrencies
  • Data Privacy and Responsible Use of Data
  • Digitalization
  • Increased Connectedness and Decreasing Privacy
 
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Contents

 

INTRODUCTION

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ABOUT GARANTI BBVA

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GARANTI BBVA’S POSITION IN THE BUSINESS AREA

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GARANTI BBVA IN NUMBERS

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BOARD OF DIRECTORS

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SENIOR MANAGEMENT

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OUR MATERIAL MATTERS, STAKEHOLDER ENGAGEMENT, RISKS AND OPPORTUNITIES

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OUR STRATEGY

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OUR VALUE CREATION

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2020 KEY PERFORMANCE INDICATORS

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OUR 2020 MATERIAL ISSUE: COVID-19

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2020 PERFORMANCE IN STRATEGIC PRIORITIES AND OUTLOOK

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2020 PERFORMANCE IN STRATEGIC PRIORITIES AND OUTLOOK

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2020 PERFORMANCE IN STRATEGIC PRIORITIES AND OUTLOOK

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2020 PERFORMANCE IN STRATEGIC PRIORITIES AND OUTLOOK

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2020 PERFORMANCE IN STRATEGIC PRIORITIES AND OUTLOOK

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2020 PERFORMANCE IN STRATEGIC PRIORITIES AND OUTLOOK

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2020 PERFORMANCE IN STRATEGIC PRIORITIES AND OUTLOOK

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CORPORATE GOVERNANCE

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FINANCIAL REPORTS

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APPENDIX

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