RNS Number : 6421V
Turkiye Garanti Bankasi
31 January 2017
 

 

 

DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik AŞ

30 January 2017

This report contains "Independent Auditors' Report" comprising 2 pages and; "Consolidated Financial Statements and Related Disclosures and Footnotes"comprising 140  pages.

 

(Convenience Translation of Financial Statements and Related Disclosures and Footnotes

Originally Issued in Turkish)

Türkiye Garanti Bankası Anonim Şirketi

And Its Financial Affiliates

Consolidated Financial Statements

As of and For the Year Ended

31 December 2016

(Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish)

With Independent Auditors' Report Thereon

 


 

 

 

 

 

 

 

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of Türkiye Garanti Bankası A.Ş.

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Türkiye Garanti Bankası A.Ş. ("the Bank") and its consolidated financial affiliates (together will be referred as "the Group"), which comprise the consolidated balance sheet as at 31 December 2016, and the consolidated statement of income, consolidated statement of income and expense items under shareholders' equity, consolidated statement of changes in shareholders' equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

 

Management's Responsibility for the Consolidated Financial Statements

 The Bank Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with "the Banking Regulation and Supervision Agency ("BRSA") Accounting and Reporting Regulation" which includes the regulation on "The Procedures and Principles Regarding Banks' Accounting Practices and Maintaining Documents" published in the Official Gazette dated 1 November 2006 with No. 26333, and other regulations on accounting records of banks published by the Banking Regulation and Supervision Board and circulars and pronouncements published by the BRSA and Turkish Accounting Standards for the matters not regulated by the aforementioned legislations and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditors' Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the regulation on "Independent Auditing of Banks" published in the Official Gazette dated 2 April 2015 with No. 29314 and Independent Auditing Standards which is a part of Turkish Auditing Standards published by the Public Oversight Accounting and Auditing Standards Authority ("POA"). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

 

Basis for Qualified Opinion

Subsequent to the reversal of TL 42,000 thousands in the current period the accompanying consolidated financial statements include a general reserve amounting to TL 300,000 thousands as of the balance sheet date, provided by the Bank Management in prior periods in line with conservatism principle considering the circumstances which may arise from any changes in the economy or market conditions.

 

Qualified Opinion

In our opinion, except for the effect of the matter described in the basis for qualified opinion paragraph, the consolidated financial statements present fairly, in all material respects, the financial position of Türkiye Garanti Bankası A.Ş. and its consolidated financial affiliates as at 31 December 2016 and the results of its operations and its cash flows for the year ended in accordance with the BRSA Accounting and Reporting Regulations.

 

Report on Other Legal and Regulatory Requirements

In accordance with paragraph four of the Article 402 of the Turkish Commercial Code No. 6102 ("TCC"), nothing has come to our attention that may cause us to believe that the Bank's set of accounts for the period 1 January-31 December 2016 does not comply with TCC and the provisions of the Bank's articles of association in relation to financial reporting.

In accordance with paragraph four of the Article 402 of TCC, the Board of Directors provided us all the required information and documentation with respect to our audit.

Additional paragraph for English translation

       

The effect of the differences between the accounting principles summarized in Section 3 and the accounting principles generally accepted in countries in which the accompanying financial statements are to be distributed and International Financial Reporting Standards (IFRS) have not been quantified and reflected in the accompanying financial statements. The accounting principles used in the preparation of the accompanying financial statements differ materially from IFRS. Accordingly, the accompanying financial statements are not intended to present the Bank's financial position and results of its operations in accordance with accounting principles generally accepted in such countries of users of the financial statements and IFRS.

 

 

DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK AŞ

Member of DELOITTE TOUCHE TOHMATSU LIMITED

 

 

 

 

 

Müjde Şehsuvaroğlu

Partner

 

Istanbul, 30 January 2017

 



(Convenience Translation of Financial Statements and Related Disclosures and Footnotes

Originally Issued in Turkish)

 

 

 

 

TÜRKİYE GARANTİ BANKASI ANONİM ŞİRKETİ

AND ITS FINANCIAL AFFILIATES

CONSOLIDATED FINANCIAL REPORT

AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2016

 

Levent Nispetiye Mah.Aytar Cad.

     No:2 Beşiktaş 34340 Istanbul

Telephone: 212 318 18 18

     Fax: 212 216 64 22

www.garanti.com.tr

investorrelations@garanti.com.tr

 

The consolidated financial report for the year-end prepared in accordance with the communiqué of Financial Statements and Related Disclosures and Footnotes to be Announced to Public by Banks as regulated by Banking Regulation and Supervision Agency, is comprised of the following sections:

 

1. General Information about Parent Bank

2. Consolidated Financial Statements of Parent Bank

3. Accounting Policies

4. Consolidated Financial Position and Results of Operations, and Risk Management Applications of Group

5. Disclosures and Footnotes on Consolidated Financial Statements

6. Other Disclosures

7. Independent Auditors' Report

 

The consolidated affiliates and special purpose entities in the scope of this consolidated financial report are the followings:

 

Affiliates

1. 

Garanti Bank International NV

2.

Garanti Emeklilik ve Hayat AŞ

3. 

Garanti Holding BV

4.

Garanti Finansal Kiralama AŞ

5.

Garanti Faktoring AŞ

6.

Garanti Yatırım Menkul Kıymetler AŞ

7.

Garanti Portföy Yönetimi AŞ



     Special Purpose Entities

1.

Garanti Diversified Payment Rights Finance Company

2.

RPV Company

 

 

 

 

The consolidated financial statements and related disclosures and footnotes that were subject to independent audit, are prepared in accordance with the Regulation on Accounting Applications for Banks and Safeguarding of Documents, Turkish Accounting Standards, Turkish Financial Reporting Standards and the related statements and guidances and in compliance with the financial records of our Bank and, unless stated otherwise, presented in thousands of Turkish Lira (TL).

 

 

Ferit F. Şahenk

Ali Fuat Erbil

Aydın Güler

Aylin Aktürk

Board of Directors Chairman

General Manager

Executive Vice President Responsible of Financial Reporting

Coordinator

 

 

Javier Bernal Dionis

Jorge Saenz - Azcunaga

Carranza

Audit Committee Member

Audit Committee Member

 

 

 

The authorized contact person for questions on this financial report:

Name-Surname/Title: Handan SAYGIN/Senior Vice President of Investor Relations

Phone no: 90 212 318 23 50

Fax no:     90 212 216 59 02

 

 

 

SECTION ONE                                             Page No:

                                                                        General Information

I.             History of parent bank including its incorporation date, initial legal status, amendments to legal status                               1

II.            Parent bank's shareholder structure, management and internal audit, direct and indirect shareholders, change

in shareholder structure during the year and information on its risk group                                                                                        1

III.           Information on parent bank's board of directors chairman and members, audit committee members, chief

executive officer, executive vice presidents and their responsibilities and shareholdings in the bank                                                 2

IV.           Information on parent bank's qualified shareholders                                                                                                                          3

V.            Summary information on parent bank's activities and services                                                                                                          4

VI.           Information on application differences between consolidation practices as per the Regulation on Preparation of

Consolidated Financial Statements of Banks as per the Turkish Accounting Standards, and entities subject to full

or proportional consolidation or deducted from equity or not subject to any of these three methods                                              4

VII.          Current or likely actual or legal barriers to immediate transfer of equity or repayment of debts between parent

bank and its affiliates                                                                                                                                                                           4

SECTION TWO

                                                             Consolidated Financial Statements

I.             Consolidated balance sheet                                                                                                       5

II.            Consolidated off-balance sheet items                                                                                        7

III.           Consolidated income statement                                                                                                 8

IV.           Consolidated statement of income/expense items accounted under shareholders' equity               9

V.            Consolidated statement of changes in shareholders' equity                                                         10

VI.           Consolidated statement of cash flows                                                                                        11

SECTION THREE

                                                                            Accounting Policies

I.              Basis of presentation                                                                                                                   12

II.            Strategy for use of financial instruments and foreign currency transactions                                      12

III.           Information on consolidated affiliates                                                                                            13

IV.           Forwards, options and other derivative transactions                                                                     14

V.            Interest income and expenses                                                                                                      15

VI.           Fees and commissions                                                                                                                15

VII.          Financial assets                                                                                                                           15

VIII.        Impairment of financial assets                                                                                                       16

IX.           Netting and derecognition of financial instruments                                                                         17

X.            Repurchase and resale agreements and securities lending                                                              17

XI.           Assets held for sale, assets of discontinued operations and related liabilities                                   18

XII.         Goodwill and other intangible assets                                                                                              18

XIII.        Tangible assets                                                                                                                             19

XIV.        Leasing activities                                                                                                                          19

XV.         Provisions and contingent liabilities                                                                                               20

XVI.        Contingent assets                                                                                                                         20

XVII.       Liabilities for employee benefits                                                                                                    20

XVIII.     Taxation                                                                                                                                       22

XIX.        Funds borrowed                                                                                                                          24

XX.         Share issuances                                                                                                                            25

XXI.        Confirmed bills of exchange and acceptances                                                                                 25

XXII.      Government incentives                                                                                                                   25

XXIII.     Segment reporting                                                                                                                         25

XXIV.     Other disclosures                                                                                                                          27

SECTION FOUR

                                       Consolidated Financial Position and Results of Operations and Risk Management

I.              Consolidated capital                                                                                                                   28

II.            Consolidated credit risk                                                                                                              33

III.           Consolidated currency risk                                                                                                          44

IV.           Consolidated interest rate risk                                                                                                      46

V.            Consolidated position risk of equity securities                                                                                49

VI.           Consolidated liquidity risk                                                                                                             50

VII.          Consolidated  leverage ratio                                                                                                           57

VIII.        Fair values of financial assets and liabilities                                                                                       58

IX.           Transactions carried out on behalf of customers and items held in trust                                             59

X.            Risk management objectives and policies                                                                                        60

 

SECTION FIVE

Disclosures and Footnotes on Consolidated Financial Statements

I.              Consolidated assets                                                                                                                        78

II.            Consolidated liabilities                                                                                                                     107

III.           Consolidated off-balance sheet items                                                                                               117

IV.           Consolidated income statement                                                                                                       122

V.            Consolidated statement of changes in shareholders' equity                                                                129

VI.           Consolidated statement of cash flows                                                                                               130

VII.          Related party risks                                                                                                                           132

VIII.        Domestic, foreign and off-shore branches or equity investments, and foreign representative offices of parent bank                    134 

IX.           Matters arising subsequent to balance sheet date                                                                                136

 

SECTION SIX

                                                                            Other Disclosures on Activities

I.             Information on international risk ratings                                                                                 137

II.            Dividends                                                                                                                             139

III.           Other disclosures                                                                                                                 139                                                   

SECTION SEVEN

                                                                                 Independent Auditors' Report

I.             Disclosure on independent auditors' report                                                                                                   140

II.            Disclosures and footnotes prepared by independent auditors                                                                       140                             


1         General Information

1.1         History of parent bank including its incorporation date, initial legal status, amendments to legal status

Türkiye Garanti Bankası Anonim Şirketi (the Bank) was established by the decree of Council of Ministers numbered 3/4010 dated 11 April 1946 as a "private bank" and its "Articles of Association" was issued in the Official Gazette dated 25 April 1946.

Following the acquisition on 27 July 2015, Banco Bilbao Vizcaya Argentaria SA (BBVA)'s stake in the Bank has reached to 39.90% and BBVA has become the main shareholder. Accordingly, the Bank was moved to the "Foreign Deposit Banks" category from the "Private Deposit Bank" category by the Banking Regulation and Supervision Agency (the BRSA).

The Bank provides banking services through 959 domestic branches, nine foreign branches and three representative offices abroad. The Bank's head office is located in Istanbul.

1.2         Parent bank's shareholder structure, management and internal audit, direct and indirect shareholders, change in shareholder structure during period and information on its risk group

As of 31 December 2016, group of companies under BBVA that currently owns 39.90% shares of the Bank, is named the BBVA Group (the Group) and it is the main shareholder.

On 22 March 2011, BBVA had acquired; 78.120.000.000 shares of the Bank owned by GE Capital Corporation at a total nominal value of TL 781,200 thousands representing 18.60% ownership, and 26.418.840.000 shares of the Bank owned by Doğuş Holding AŞ at a total nominal value of TL 264,188 thousands representing 6.29% ownership.  BBVA, purchasing 24.89% shares of the Bank, had joint control on the Bank's management together with group of companies under Doğuş Holding AŞ (the Doğuş Group).

Subsequently, on 7 April 2011, BBVA had acquired 503.160.000 shares at  a nominal value of TL 5,032 thousands and increased its ownership in the Bank's share capital to 25.01%.

Finally, in accordance with the terms of the agreement between BBVA and the Doğuş Group which was previously disclosed on 19 November 2014, the sale of shares representing 14.89% of the share capital of the Bank with a face value of TL 625,380 thousands and 62,538,000,000 shares by the Doğuş Group to BBVA, has been completed on 27 July 2015. Following the acquisition, BBVA's stake in the Bank has reached to 39.90% and BBVA has become the main shareholder. The Bank was moved to "Foreign Deposit Banks" category from "Private Deposit Bank" category by the BRSA.

As of balance sheet date, the Doğuş Group's interest in the share capital of the Bank is at 10%.

BBVA Group

BBVA is operating for more than 150 years, providing variety of wide spread financial and non-financial services to over 47 million retail and commercial customers.

 The Group's headquarter is in Spain, where the Group has concrete leadership in retail and commercial markets. BBVA adopting innovative, and customer and community oriented management style, besides banking, operates in insurance sector in Europe and portfolio management, private banking and investment banking in global markets.

 BBVA that owns a bank being the largest financial institution in Mexico, the market leader in South America, and one of the largest 15 commercial banks in United States, operates in more than 30 countries with more than 100 thousand employees.



 

 

Doğuş Group

The Doğuş Group that was established in 1951 initially for investments in construction sector, operates in seven sectors namely financial services, automotive, construction, real estate, tourism, media and energy with 132 companies and more than 30  thousand employees. 

The major worldwide joint ventures of the Group are; Volkswagen AG and TÜVSÜD in automotive, CNBC, MSNBC and Condé Nast in media and, Hyatt International Ltd and HMS International Hotel GmbH (Maritim) in tourism. 

The major investments of the Doğuş Group in financial sector are; Türkiye Garanti Bankası AŞ, Garanti Bank International NV, Garanti Bank SA, Garanti Finansal Kiralama AŞ, Garanti Faktoring AŞ, Garanti Yatırım Menkul Kıymetler AŞ, Garanti Portföy Yönetimi AŞ, Garanti Emeklilik ve Hayat AŞ, Doğuş Gayrimenkul Yatırım Ortaklığı AŞ and Volkswagen Doğuş Tüketici Finansmanı AŞ.

1.3         Information on parent bank's board of directors chairman and members, audit committee members, chief executive officer, executive vice presidents and their responsibilities and shareholdings in the bank

  Board of Directors Chairman and Members: 

Name and Surname

Responsibility

Appointment Date

Education

Experience in Banking and Business Administration

Ferit Faik Şahenk

Chairman

18.04.2001

University

26 years

Süleyman Sözen

Vice Chairman

08.07.2003

University

34 years

Dr. Muammer Cüneyt Sezgin

Member

30.06.2004

PhD

28 years

Jorge Saenz Azcunaga Carranza

Independent Member of BOD and Audit Committee

31.03.2016

University

22 years

Jaime Saenz de Tejada Pulido

Member

02.10.2014

University

23 years

Maria Isabel Goiri Lartitegui

Member

27.07.2015

Master

26 years

Javier Bernal Dionis

Independent Member of BOD and Audit Committee

27.07.2015

Master

26 years

Inigo Echebarria Garate

Member

31.03.2016

Master

33 years

Belkıs Sema Yurdum

Independent Member

30.04.2013

University

36 years

Sait Ergun Özen

Member

14.05.2003

University

29 years

Ali Fuat Erbil

Member and CEO

02.09.2015

PhD

24 years

 



 

 

CEO and Executive Vice Presidents:

Name and Surname

Responsibility

Appointment Date

Education

Experience in Banking and Business Administration

Ali Fuat Erbil

CEO

02.09.2015

PhD

24 years

Gökhan Erün

EVP-Corporate Banking and Treasury

Deputy CEO

01.09.2005

Master

22 years

Onur Genç

EVP-Retail Banking

Deputy CEO

20.03.2012

Master

17 years

Faruk Nafiz Karadere

EVP-SME Banking

01.05.1999

University

34 years

Halil Hüsnü Erel

EVP-Technology, Operation Center, Marketing and Business Development

16.06.1997

University

41 years

Recep Baştuğ

EVP-Commercial Banking

01.01.2013

University

26 years

Avni Aydın Düren

EVP-Legal Services

01.02.2009

Master

22 years

Betül Ebru Edin

EVP-Project Finance

25.11.2009

University

22 years

Osman Nuri Tüzün

EVP- Human Resources and Support Services

19.08.2015

Master

24 years

Aydın Güler

EVP-Finance and Accounting

03.02.2016

University

26 years

Ali Temel

Head of Credit Risk Management

03.02.2016

University

26 years

Didem Başer

EVP-Digital Banking

20.03.2012

Master

21 years

Changes in the executive board as of 1 January 2017;

-    Nafiz Karadere resigned from his duty as EVP-SME Banking.

-    Onur Genç resigned from his duty as EVP-Retail Banking and Deputy CEO.

Changes in the executive board as of 17 January 2017;

-    Cemal Onaran is assigned as EVP-SME Banking.

-    Gökhan Erun is responsible EVP of Financial Institutions, Corporate Banking and Treasury.

-    Mahmut Akten is assigned as EVP-Retail Banking and is responsible for Retail Banking, Mass Retail Banking and Affluent Banking Marketing units.

-    Didem Dinçer is responsible EVP of Corporate Brand Management and Marketing Communications, Insurance and Pension Coordination, Call Center, Customer Experience and Satisfaction.

The top management listed above does not hold any unquoted shares of the Bank.

1.4         Information on parent bank's qualified shareholders

Company

Shares

Ownership

Paid-in Capital

Unpaid Portion

 Banco Bilbao Vizcaya Argentaria SA

1,675,800

39.9000%

1,675,800

-

 Doğuş Holding AŞ

259,846

6.1868%

259,846

-

According to the decision made at the "General Assembly of Founder Shares Owners" and the "Extraordinary General Shareholders" meetings held on 13 June 2008, the Bank repurchased all the 370 founder share-certificates issued in order to redeem and exterminate them, subsequent to the permissions obtained from the related legal authorities, at a value of TL 3,876 thousands each in accordance with the report prepared by the court expert and approved by the Istanbul 5th Commercial Court of First Instance. A total payment of TL 1,434,233 thousands has been made to the owners of 368 founder share-certificates from "extraordinary reserves", and the value of remaining 2 founder share-certificates has been blocked in the bank accounts.

Subsequent to these purchases, the clauses 15, 16 and 45 of the Articles of Association of the Bank have been revised accordingly.

 

1.5         Summary information on parent bank's activities and services

Activities of the Bank as stated at the third clause of its Articles of Association are as follows:

·      All banking operations,

·      Participating in, establishing, and trading the shares of enterprises at various sectors within the limits setforth by the Banking Law;

·      Providing attorneyship, insurance agency, brokerage and freight services in relation with banking activities,

·      Purchasing/selling debt securities, treasury bills, government bonds and other share certificates issued by Turkish government and other official and private institutions,

·      Developing economical and financial relations with foreign organizations,

·      Dealing with all economic operations in compliance with the Banking Law.

The Bank's activities are not limited to those disclosed in that third clause, but whenever the Board of Directors deems any operations other than those stated above to be of benefit to the Bank, it is recommended in the general meeting, and the launching of the related project depends on the decision taken during the General Assembly which results in a change in the Articles of Association and on the approval of this decision by the Ministry of Industry and Commerce. Accordingly, the approved decision is added to the Articles of Association.

The Bank is not a specialized bank but deals with all kinds of banking activities. Deposits are the main sources of the lendings to the customers. The Bank grants loans to companies operating in various sectors while aiming to maintain the required level of efficiency.

The Bank also grants non-cash loans to its customers; especially letters of guarantee, letters of credit and acceptance credits.

1.6         Information on application differences between consolidation practices as per the Regulation on Preparation of Consolidated Financial Statements of Banks and as per the Turkish Accounting Standards, and entities subject to full or proportional consolidation or deducted from equity or not subject to any of these three methods

              As per the Regulation on Preparation of Consolidated Financial Statements of Banks, the investments in financial affiliates are subject to consolidation whereas as per the Turkish Accounting Standards, the investments in both financial and non-financial subsidiries are subject to consolidation. There are no investments in entities subject to proportional consolidation or to deduction from equity.

1.7         Current or likely actual or legal barriers to immediate transfer of equity or repayment of debts between parent bank and its affiliates

None.

 



 


3          Accounting Policies

3.1          Basis of presentation

The Bank  prepares its consolidated financial statements in accordance with "the BRSA Accounting and Reporting Regulation" which includes the regulation on "The Procedures and Principles Regarding Banks' Accounting Practices and Maintaining Documents" published in the Official Gazette dated 1 November 2006 with No. 26333, and other regulations on accounting records of banks published by the Banking Regulation and Supervision Board and circulars and pronouncements published by the BRSA and Turkish Accounting Standards published by the Public Oversight Accounting and Auditing Standards Authority for the matters not regulated by the aforementioned legislations.

The accompanying consolidated financial statements are prepared in accordance with the historical cost basis except for financial instuments at fair value through profit or loss, financial assets available for sale, real estates and investments in associates and affiliates valued at equity basis of accounting or that are quoted on the stock exchanges which are presented on a fair value basis.

The accounting policies and the valuation principles applied in the preparation of the accompanying consolidated financial statements are explained in Notes 3.2 to 3.24.

3.2          Strategy for use of financial instruments and foreign currency transactions

 

3.2.1       Strategy for use of financial instruments

 

The liability side of the balance sheet is intensively composed of short-term deposits in line with the general trend in the banking sector. In addition to deposits, the Bank and its financial affiliates have access to longer-term borrowings via the borrowings from abroad.

In order to manage the interest rate risk arising from short-term deposits, the Bank and its financial affiliates are keen on maintaining floating rate instruments such as government bonds with quarterly coupon payments and instruments like credit cards and consumer loans providing regular cash inflows.

A portion of the fixed-rate securities and loans, and the bonds of the Bank are hedged under fair value hedges. The fair value risks of such fixed-rate assets and financial liabilities are hedged with interest rate swaps and cross currency swaps. The fair value changes of the hedged fixed-rate financial assets and financial liabilities together with the changes in the fair value of the hedging instruments, namely interest rate swaps and cross currency swaps, are accounted under net trading income/losses in the income statement. At the inception of the hedge and during the subsequent periods, the hedge is expected to achieve the offsetting of changes in fair value attributable to the hedged risk for which the hedge is designated, and accordingly, the hedge effectiveness tests are performed.

The Bank may classify its financial assets and liabilities as at fair value through profit or loss at the initial recognition in order to eliminate any accounting inconsistency.

The fundamental strategy to manage the liquidity risk that may incur due to short-term structure of funding, is to expand the deposit base through customer-oriented banking philosophy, and to increase customer transactions and retention rates. The widespread and effective branch network, advantage of primary dealership and strong market share in the treasury and capital markets, are the most effective tools in the realisation of this strategy. For this purpose, serving customers by introducing new products and services continuously and reaching the customers satisfaction are very important.

Another influential factor in the management of the interest and liquidity risk on balance sheet is product diversification both on asset and liability sides.

Exchange rate risk, interest rate risk and liquidity risk are controlled and measured by various risk management systems, and the balance sheet is managed under the limits set by these systems and the limits legally required. Asset-liability management and value at risk models, stress tests and scenario analysis are used for this purpose.

Purchase and sale of short and long-term financial instruments are allowed within the pre-determined limits to generate risk-free return on capital.

 

The foreign currency position is controlled by the equilibrium of a currency basket to eliminate the foreign exchange risk.

3.2.2       Foreign currency transactions

Foreign exchange gains and losses arising from foreign currency transactions are recorded at transaction dates. At the end of the periods, foreign currency assets and liabilities evaluated with the Bank's spot purchase rates for the parent Bank and with the Central Bank of Turkey's spot purchase rates for domestic financial affiliates, and the differences are recorded as foreign exchange gain or loss in the income statement.

During the consolidation of foreign affiliates, the assets and liabilities are translated into TL at exchange rates ruling at the balance sheet date, the income and expenses in income statement are translated into TL using monthly average exchange rates. Foreign exchange differences arising from the translation of income and expenses and other equity items, are recognized under other profit reserves of the shareholders' equity.

The foreign currency risk arising from net investments in foreign affiliates are hedged with long-term foreign currency borrowings and the currency translation differences arising from the conversion of net investments in foreign affiliates and long-term foreign currency borrowings into TL are accounted for other profit reserves and hedging reserves, respectively in equity.

3.3         Information on consolidated affiliates

As of 31 December 2016, Türkiye Garanti Bankası Anonim Şirketi and the following financial affiliates are consolidated in the accompanying consolidated financial statements; Garanti Bank International (GBI), Garanti Finansal Kiralama AŞ (Garanti Finansal Kiralama), Garanti Yatırım Menkul Kıymetler AŞ (Garanti Yatırım), Garanti Portföy Yönetimi AŞ (Garanti Portföy), Garanti Emeklilik ve Hayat AŞ (Garanti Emeklilik), Garanti Faktoring AŞ (Garanti Faktoring) and Garanti Holding BV (Garanti Holding).

Garanti Finansal Kiralama was established in 1990 to perform financial lease activities and all related transactions and contracts. The company's head office is in Istanbul. The Bank increased its shareholding to 100% through a further acquisition of 0.04% of the company's shares on 21 October 2014.

Garanti Faktoring was established in 1990 to perform import, export and domestic factoring activities. The company's head office is in Istanbul. The Bank owns 81.84% of Garanti Faktoring shares including the shares acquired in the market, T. İhracat Kredi Bankası AŞ owns 9.78% of the company's shares and the remaining 8.38% shares are held by public.

GBI was established in October 1990 to perform banking activities abroad. The head office of this bank is in Amsterdam. It is wholly owned by the Bank.

Garanti Yatırım was established in 1991 to perform brokerage activities for marketable securities, valuable papers and documents representing financial values or financial commitments of issuing parties other than securities. The company's head office is in Istanbul. It is wholly owned by the Bank. Garanti Yatırım Ortaklığı AŞ that Garanti Yatırım participated by 3.30%, has been consolidated in the accompanying consolidated financial statements due to the company's right to elect all the members of the board of directors as resulted from its privilege in election of board members.

In 1992, it was decided to operate life and health branches under a different company and accordingly Garanti Hayat Sigorta AŞ was established. Garanti Hayat Sigorta AŞ was converted into a private pension company in compliance with the legislation early in 2003 and its name was changed as Garanti Emeklilik ve Hayat AŞ. Following the sale transactions that took place on 21 June 2007, the Bank's ownership in Garanti Emeklilik decreased to 84.91%. The head office of this company is in Istanbul.

Garanti Portföy was established in June 1997 to manage the customer portfolios by using the capital market products in compliance with the principles and rules of the regulations regarding the company's purpose of establishment and the portfolio management agreements signed with the customers. The company's head office is in Istanbul. It is wholly owned by the Bank.

Garanti Holding was established in December 2007 in Amsterdam and all its shares was purchased by the Bank from Doğuş Holding AŞ in May 2010. As of 27 January 2011 the consolidated affiliate's legal named changed to Garanti Holding BV from D Netherlands BV.

The Bank has sold its 1729 shares representing 99.94% of the share capital of GarantiBank Moscow AO and 1 share belonging to a group affiliate Garanti Bilişim Teknolojisi ve Ticaret AŞ. to Sovcombank a bank operating in Russia for a purchase price of USD 38,412,834.

Garanti Diversified Payment Rights Finance Company and RPV Company are special purpose entities established for the parent Bank's securitization transactions, and consolidated in the accompanying consolidated financial statements. The Bank or any of its affiliates does not have any shareholding interests in these companies.

The Bank and its financial affiliates do not consider the bonus shares received through capital increases of their affiliates from their own equities as income in accordance with TAS 18, as such capital increases do not create any differences in the financial position or economic interest of the Bank or its financial affiliates and it is not certain that there is an economic benefit associated with such transactions that will flow to the Bank or its financial affiliates.

3.4         Forwards, options and other derivative transactions

As per the Turkish Accounting Standard 39 (TAS 39) "Financial Instruments: Recognition and Measurement"; forward foreign currency purchases/sales, swaps, options and futures are classified as either "hedging purposes" or "trading purposes".

3.4.1      Derivative financial instruments held for trading

              The derivative transactions mainly consist of foreign currency and interest rate swaps, foreign currency options and forward foreign currency purchase/sale contacts. There are no embedded derivatives.

Derivatives are initially recorded in off-balance sheet accounts at their purchase costs including the transaction costs. Subsequently, derivative transactions are valued at their fair values and the changes in their fair values are recorded on balance sheet under "derivative financial assets held for trading" or "derivative financial liabilities held for trading", respectively depending on the fair values being positive or negative. Fair value changes for trading derivatives are recorded under income statement.

The spot legs of currency swap transactions are recorded on the balance sheet and the forward legs in the off-balance sheet accounts as commitment.

3.4.2      Derivative financial instruments held for risk management

The Bank and its consolidated financial affiliates enter into interest rate and cross currency swap transactions in order to hedge the changes in fair values of  fixed-rate financial instruments. While applying fair value hedge accounting, the changes in fair values of hedging instrument and hedged item are recognised in income statement. If the hedging is effective, the changes in fair value of the hedged item is presented in statement of financial position together with the fixed-rate loan, and in case of the fixed-rate financial assets available for sale, such changes are reclassified from shareholders' equity to income statement.

The Bank and its consolidated financial affiliates enter into interest rate and cross currency swap transactions in order to hedge the changes in cash flows of the floating-rate financial instruments. While applying cash flow hedge accounting, the effective portion of the changes in the fair value of the hedging instrument is accounted for under hedging reserves in shareholders' equity, and the ineffective portion is recognised in income statement. The changes recognized in shareholders' equity is removed and included in income statement in the same period when the hedged cash flows effect the income or loss.

Effectiveness tests are performed at the beginning of the hedge accounting period and at each reporting period. The effectiveness tests are carried out using the "Dollar off-set model" and the hedge accounting is applied as long as the test results are between the range of 80%-125% of effectiveness.

The hedge accounting is discontinued when the hedging instrument expires, is exercised, sold or no longer effective. When discontinuing fair value hedge accounting, the cumulative fair value changes in carrying value of the hedged item arising from the hedged risk are amortised to income statement over the life of the hedged item from that date of the hedge accounting is discontinued. While discontinuing cash flow hedge accounting, the cumulative gains/losses recognised in shareholders' equity and presented under hedging reserves are continued to be kept in this account. When the cash flows of hedged item are recognised in income statement, the gain/losses accounted for under shareholders' equity are recognised in income statement.

3.5         Interest income and expenses

General

Interest income and expenses are recorded according to the effective interest rate method (rate equal to the rate in calculation of present value of future cash flows of financial assets or liabilities) defined in the Turkish Accounting Standard 39 (TAS 39) "Financial Instruments: Recognition and Measurement".

In case an interest was accrued on a security before its acquisition, the collected interest is divided into two parts as interest before and after the acquisition and only the interest income of the period after the acquisition is recorded as interest income in the financial statements.

The accrued interest income on non-performing loans are reversed and subsequently recognised as interest income only when collected.

Financial lease operations

Total of minimum rental payments including interests and principals are recorded under "financial lease receivables" as gross. The difference, i.e. the interest, between the total of rental payments and the cost of the related tangible asset is recorded under "unearned income". When the rent payment incurs, the rent amount is deducted from "financial lease receivables"; and the interest portion is recorded as interest income in the income statement.

3.6          Fees and commissions 

Except for certain fees related with certain banking transactions and recognized when received, fees and commissions received or paid, and other fees and commissions paid to financial institutions are accounted under accrual basis of accounting. The income derived from agreements or asset purchases from real-person or corporate third parties are recognized as income when realized.

3.7          Financial assets

3.7.1       Financial assets at fair value through profit or loss

Financial assets valued at fair value through profit or loss are valued at their fair values and gain/loss arising on those assets is recorded in the income statement. Interest income earned on trading securities and the difference between their acquisition costs and amortized costs  are recorded as interest income in the income statement. The differences between the amortized costs and the fair values of such securities are recorded under trading account income/losses in the income statement. In cases where such securities are sold before their maturities, the gains/losses on such sales are recorded under trading account income/losses.

The Bank classifies certain loans and securities issued at their origination dates, as financial assets/liabilities at fair value through profit or loss in compliance with TAS 39. The interest income/expense earned and the difference between the acquisition costs and the amortized costs of financial instruments are recorded under interest income/expense in income statement, the difference between the amortized costs and the fair values of financial instruments are recorded under trading account income/losses in income statement.

3.7.2       Investments held-to-maturity, financial assets available-for-sale and loans and receivables

Financial assets are initially recorded at their purchase costs including the transaction costs.

Investments held-to-maturity are financial assets with fixed maturities and pre-determined payment schedules that the Bank and its financial affiliates have the intent and ability to hold until maturity, excluding originated loans and receivables.

There are no financial assets that are not allowed to be classified as investments held-to-maturity for two years due to the tainting rules applied for the breach of classification rules.

Investments held-to-maturity are measured at amortized costs using internal rate of return after deducting impairments, if any.

Financial assets available-for-sale, are financial assets other than assets held for trading purposes, investments held-to-maturity and originated loans and receivables.

Financial assets available-for-sale are measured at their fair values subsequently. However, assets for which fair values could not be determined reliably are valued at amortized costs by using the discounting method with internal rate of return for floating-rate securities; and by using valuation models or discounted cash flow techniques for fixed-rate securities. Unrecognised gain/losses derived from the difference between their fair value and the discounted values are recorded in "securities value increase fund" under the shareholders' equity. In case of sales, the the gain/losses arising from fair value measurement accumulated under shareholders' equity are recognized in income statement.

The Bank owns consumer price indexed government bonds (CPI) portfolio. CPI's are valued and accounted according to the effective interest rate method which is calculated according to the real coupon rate and the reference inflation index on the issue date. As it is mentioned in the Undersecretariat of Treasury's Investor Guide of CPI, the reference index used during the calculation of the actual coupon payment amount is the previous two months CPI's. The bank determines its expected inflation rates in compliance with this guide. The estimated inflation rate according to the Central Bank of Turkey and the Bank's expectations, is updated during the year when it is considered necessary.

Purchase and sale transactions of securities are accounted at delivery dates.

Loans and receivables are financial assets raised through providing money, commodity and services to debtors.

Loans are financial assets with fixed or determinable payments and not quoted in an active market.

Loans and receivables are recognized at cost and measured at amortized cost using the effective interest method. Duties paid, transaction costs and other similar expenses on assets received against such risks are considered as a part of transaction cost and charged to customers.

 

3.8          Impairment of financial assets

Financial asset or group of financial assets are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such indication exists, the Bank estimates the amount of impairment.

Impairment loss incurs if, and only if, there is an objective evidence that the expected future cash flows of financial asset or group of financial assets are adversely effected by an event(s) ("loss event(s)") incurred subsequent to recognition. The losses expected to incur due to future events are not recognized even if the probability of loss is high.

If there is an objective evidence that certain loans will not be collected, for such loans; the Bank makes reclassification and provides specific and general allowances in accordance with the Regulation on Identification of and Provision against Non-Performing Loans and Other Receivables (the Provisioning Regulation) published on the Official Gazette no.2633 dated 1 November 2006 and TAS. The allowances are recorded in the income statement of the related period.

Provisions made during the period are recorded under "provision for losses on loans and other receivables'. Provisions booked in the prior periods and relased in the current year are recorded under "other operating income."

 

3.9          Netting and derecognition of financial instruments

3.9.1       Netting of financial instruments

In cases where the fair values of trading securities, securities available-for-sale, securities quoted at the stock exchanges, associates and affiliates are less then their carrying values, a provision for impairment is allocated, and the net value is shown on the balance sheet.

Specific allowances for non-performing loan and other receivables are provided in accordance with the Regulation on Identification of and Provision against Non-Performing Loans and Other Receivables. Such allowances are deducted from loans under follow-up on the asset side.

Otherwise, the financial assets and liabilities are netted off only when there is a legal right to do so.

3.9.2       Derecognition of financial assets

A financial asset is derecognized only when the contractual rights to the cash flows from this asset expire, or when the financial asset and substantially all its risks and rewards of ownership are transferred to another party. If all the risks and rewards of ownership are neither transferred nor retained subtantially and the control of the transferred asset is maintained, the retained interest in asset and associated liability for amounts that may have to be paid, is recognized. If all the risks and rewards of ownership of a transferred financial asset is retained substantially the financial asset is continued to be recognized and a collateralized borrowing for the proceeds received is also recognized.

On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in the income statement.

In case an existing financial asset is replaced with another financial asset from the same counterparty where the terms on the initial financial asset are substantially modified, the existing financial asset is derecognized and a new financial asset is recognized.  The difference between the carrying values of the respective financial assets is recognized in the income statement.

3.10       Repurchase and resale agreements and securities lending

Securities sold under repurchase agreements are recorded on the balance sheet in compliance with the Uniform Chart of Accounts for Banks. Accordingly, government bonds and treasury bills sold to customers under repurchase agreements are classified as "Investments Subject to Repurchase Agreements" and valued based on the Bank management's future intentions, either at market prices or using discounting method with internal rate of return. Funds received through repurchase agreements are classified separately under liability accounts and the related interest expenses are accounted for on an accrual basis.

Securities purchased under resale agreements are classified under "interbank money markets" separately. An income accrual is accounted for the positive difference between the purchase and resale prices earned during the period.

3.11        Assets held for sale, assets of discontinued operations and related liabilities

A tangible asset (or a disposal group) classified as "asset held for sale" is measured at lower of carrying value or fair value less costs to sell. An asset (or a disposal group) is regarded as "asset held for sale" only when the sale is highly probable and the asset (disposal group) is available for immediate sale in its present condition. For a highly probable sale, there must be a valid plan prepared by the management for the sale of asset including identification of possible buyers and completion of sale process. Furthermore, the asset should be actively marketed at a price consistent with its fair value.

A discontinued operation is a part of the Bank's business classified as sold or held-for-sale. The operating results of the discontinued operations are disclosed separately in the income statement. The Bank or its financial affiliates have no discontinued operations.

3.12        Goodwill and other intangible assets

The intangible assets consist of goodwill, softwares, intangible rights and other intangible assets.

Goodwill and other intangible assets are recorded at cost in accordance with the Turkish Accounting Standard 38 (TAS 38) "Intangible Assets".

The costs of other intangible assets purchased before 31 December 2004 are restated from the purchasing dates to 31 December 2004, the date the hyperinflationary period is considered to be ended. The intangible assets purchased after this date are recorded at their initial purchase costs.

As per TAS 38, internally-generated softwares should be recognised as intangible assets if they meet the below listed criterias:

- The technical feasibility of completing the intangible asset so that it will be available for use,

- Availability of the Bank's intention to complete and use the intangible asset,

- The ability to use the intangible asset,

- Clarity in probable future economic benefits to be generated from the intangible asset,

- The availability of adequate technical, financial and other resources to complete the development phase and to start using the intangible asset,

- The availability to measure reliably the expenditure attributable to the intangible asset during the development phase.

The directly attributable development costs of intangible asset are included in the the cost of such assets, however the research costs are recognised as expense as incurred.

The intangible assets are amortised by the Bank over their estimated useful lives based on their inflation adjusted costs on a straight-line basis.

Goodwill represents the excess of the total acquisition costs over the shares owned in the net assets of the acquired company at the date of acquisition. The "net goodwill" resulted from the acquisition of the investment and to be included in the consolidated balance sheet, is calculated based on the financial statements of the investee company as adjusted according to the required accounting principles.

If any goodwill is computed at consolidation, it is recorded under intangible assets on the asset side of the consolidated balance sheet as an asset. It is assessed to identify whether there is any indication of impairment. If any such indication exists, the necessary provision is recorded as an expense in the income statement. The goodwill is not amortized.

Estimated useful lives of the intangible assets except for goodwill, are 3-15 years, and amortisation rates are 6.67-33.3%.

If there is objective evidence of impairment, the asset's recoverable amount is estimated in accordance with the Turkish Accounting Standard 36 (TAS 36) " Impairment of Assets" and if the recoverable amount is less then the carrying value of the related asset, a provision for impairment loss is provided.

3.13        Tangible assets

The cost of the tangible assets purchased before 31 December 2004 are restated from the purchasing dates to 31 December 2004, the date the hyperinflationary period is considered to be ended. The tangible assets purchased after this date are recorded at their historical costs.

As of 1 November 2015, changing the existing accounting policy, it has been decided to apply revaluation model for properties recorded under tangible assets instead of cost model in accordance with the Turkish Accounting Standard 16 (TAS 16) "Property, Plant and Equipment". Accordingly, for all real estates registered in the ledger, a valuation study was performed by independent expertise firms.

If there is objective evidence of impairment, the asset's recoverable amount is estimated in accordance with the Turkish Accounting Standard 36 (TAS 36) " Impairment of Assets" and if the recoverable amount is less than the carrying value of the related asset, a provision for impairment loss is provided.

Gains/losses arising from the disposal of the tangible assets are calculated as the difference between the net book value and the net sale price.

Maintenance and repair costs incurred for tangible assets, are recorded as expense.

There are no restrictions such as pledges, mortgages or any other restriction on tangible assets.

Depreciation rates and estimated useful lives of tangible assets are presented below. Depreciation method in use was not changed in the current period.

 

 

Tangible assets

Estimated Useful Lives (Years)

 

Depreciation Rates %

Buildings

50

2

Vaults

50

2

Motor Vehicles

5-7

15-20

Other Tangible Assets

4-20

5-25

The depreciation of an asset held for a period less than a full financial year is calculated as a proportion of the full year depreciation charge from the date of acquisition to the financial year end.

Useful lives of buildings are reviewed at least once a year and if current estimates are different than previous estimates, then the revised estimates are considered as accounting policy change in accordance with Turkish Accounting Standard 8 (TAS 8) "Accounting Policies, Changes in Accounting Estimates and Errors".

Investment properties

Land and buildings that are held to earn rentals or for capital appreciation or both rather than for use in production, supply of goods or services, administrative purposes or sale in the ordinary course of business are clasified as investment property. As of 1 November 2015, changing the existing accounting policy, it has been decided to apply fair value model for investment properties instead of cost model in accordance with the Turkish Accounting Standard 40 (TAS 40) "Investment Property" Accordingly, for all the investment properties registered in the ledger, a valuation study was performed by independent expertise firms. Fair value changes in investment properties were accounted in the income statement for the period they occurred.

Investment properties accounted at fair value are not depreciated.

3.14        Leasing activities

Leased assets are recognized by recording an asset or a liability. In the determination of the related asset and liability amounts, the lower of the fair value of the leased asset and the present value of leasing payments is considered. Financial costs on leasing agreements are expanded in lease periods at a fixed interest rate.



 

In cases where leased assets are impaired or the expected future benefits of the assets are less than their book values, the book values of such leased assets are reduced to their net realizable values. Depreciation for assets acquired through financial leases is calculated consistently with the same principle as for the tangible assets.

In operating leases, the rent payments are charged to the statement of operations in equal installments.

3.15        Provisions and contingent liabilities

In the financial statements, a provision is made for an existing commitment resulted from past events if it is probable that the commitment will be settled and a reliable estimate can be made of the amount of the obligation. Provisions are calculated based on the best estimates of management on the expenses to incur as of the balance sheet date and, if material, such expenses are discounted for their present values. If the amount is not reliably estimated and there is no probability of cash outflow from the Bank to settle the liability, the related liability is considered as "contingent" and disclosed in the notes to the financial statements.

3.16       Contingent assets

The contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the Bank or its financial affiliates. If an inflow of economic benefits has become probable, then the contingent asset is disclosed in the footnotes to the financial statements. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements of the period in which the change occurs.

 

3.17       Liabilities for employee benefits

Severance indemnities and short-term employee benefits

As per the existing labour law in Turkey, the entities are required to pay certain amounts to the employees retired or fired except for resignations or misbehaviours specified in the Turkish Labour Law.

Accordingly, the Bank and its financial affiliates subject to the labour law, reserved for employee severance indemnities in the accompanying financial statements using actuarial method in compliance with the Turkish Accounting Standard 19 (TAS 19) "Employee Benefits" for all its employees who retired or whose employment is terminated, called up for military service or died. The major actuarial assumptions used in the calculation of the total liability are as follows:


31 December 2016

31 December 2015

Net Effective Discount Rate

3.43%

2.99%

Discount Rate

11.50%

10.30%

Expected Rate of Salary Increase

9.30%

8.60%

Inflation Rate

7.80%

7.10%

             In the above table, the ranges of effective rates are presented for the Bank and its financial affiliates subject to the labour law, whereas the rates applied for the calculations differ according to the employee's years-in-service.

The Bank provided for undiscounted short-term employee benefits earned during the financial periods as per services rendered in compliance with TAS 19.

The actuarial gains/losses are recognised under shareholders' equity as per the revised TAS19.

Retirement benefit obligations

A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee and his/her dependents will receive on retirement.



 

The Bank's defined benefit plan (the "Plan") is managed by "Türkiye Garanti Bankası Anonim Şirketi Memur ve Müstahdemleri Emekli ve Yardım Sandığı Vakfı" (the Fund) established as per the provisional article 20 of the Social Security Law no.506 and the Bank's employees are the members of this Fund.

 

The Plan is funded through contributions of both by the employees and the employer as required by Social Security Law no. 506. These contributions are as follows:


31 December 2016


Employer

Employee

Pension contributions

15.5%

10.0%

Medical benefit contributions

6.0%

5.0%

The Plan is composed of a) the contractual benefits of the employees, which are subject to transfer to Social Security Foundation ("SSF") as per the Social Security Law no.5754 ("the Law"), and b) other social rights and medical benefits provided by the Bank but not transferable to SSF.

a)  Benefits transferable to SSF

The first paragraph of the provisional article 23 of Banking Law no. 5411, published in the Official Gazette on 1 November 2005, no. 25983, which requires the transfer of the members of the funds subject to the provisional article 20 of the Social Security Law no.506, and the persons who are paid under insurance coverage for disablement, old-age and mortality and their right-holders to the SSF within three years following the effective date of the related article was cancelled with the decision of the Constitutional Court dated 22 March 2007, no. 2007/33. The reasoned ruling regarding the cancellation of the Constitutional Court was published in the Official Gazette no. 26731, dated 15 December 2007. The Constitutional Court stated that the reason behind this cancellation was the possible loss of antecedent rights of the fund members.

Following the publication of the verdict, the Turkish Grand National Assembly ("Turkish Parliament") started to work on the new legal arrangements by taking the cancellation reasoning into account and the articles of the Law no.5754 regulating the principles related with such transfers were accepted and approved by Turkish Parliament on 17 April 2008, and enacted on 8 May 2008 after being published in the Official Gazette no.26870.

As per the Law, the present value of post-employment benefits as at the transfer date for the fund members to be transferred, are to be calculated by a commission composing from the representatives of the SSF, the Ministry of Finance, the Undersecretariat of Treasury, the Undersecretariat of State Planning Organisation, the BRSA, the Savings Deposit Insurance Fund, the banks and the funds, by using a technical discount rate of 9.80% taking into account the funds' income and expenses as per insurance classes and the transferable contributions and payments of the funds including any salary and income differences paid by the funds above the limits of SSF for such payments. The transfers are to take place within the three-year period starting from 1 January 2008. Subsequently, the transfer of the contributors and the persons receiving monthly or regular income and their right-holders from such funds established for employees of the banks, insurance and reinsurance companies, trade chambers, stock markets and unions that are part of these organizations subject to the provisional article 20 of the Social Security Law no.506 to the SSF, has been postponed for two years. The decision was made by the Council of Ministers on 14 March 2011 and published in the Official Gazette no. 27900 dated 9 April 2011 as per the decision of the Council of Ministers no. 2011/1559, and as per the letter no. 150 of the Ministry of Labor and Social Security dated 24 February 2011 and according to the provisional article 20 of the Social Security and Public Health Insurance Law no.5510.

On 19 June 2008, Cumhuriyet Halk Partisi ("CHP") had applied to the Constitutional Court for the cancellation of various articles of the Law including the first paragraph of the provisional Article 20. At the meeting of the Constitutional Court on 30 March 2011, it was decided that the article 73 and the first

paragraph of the provisional Article 20 added to the law no. 5510 are not contradictory to the Constitutional Law, and accordingly the dismissal of the cancellation request has been denied with the majority of votes.

Before the completion of two-years period set by the Council of Ministers on 14 March 2011 as explained above, as per the Article no. 51 of the law no. 6645, published in the Official Gazette no. 29335 dated 23 April 2015, the Article no. 20 of the law no. 5510 was amended giving the Council of Ministers the authority to determine the date of transfer without defining any timeline.

b) Other benefits not transferable to SSF

Other social rights and payments provided in the existing trust indenture but not covered through the transfer of the funds' members and their right-holders to the SSF, are to be covered by the funds and the institutions that employ the funds' members.

The actuarial gains/losses are recognised under shareholders' equity as per the revised TAS19.

The consolidated affiliates do not have retirement benefit plans for their employees. The retirement related benefits of the employees of the consolidated affiliates are subject to the Social Security Institution in case of domestic investees and to the legislations of the related countries in case of foreign investee companies. There are no obligations not reflected in the accompanying consolidated financial statements.

3.18        Taxation

3.18.1     Corporate tax

In Turkey, effective from 1 January 2006, statutory income is subject to corporate tax at 20%. This rate is applied to accounting income modified for certain exemptions (like dividend income) and deductions (like investment incentives), and additions for certain non-tax deductable expenses and allowances for tax purposes. If there is no dividend distribution planned, no further tax charges are made.

Dividends paid to the resident institutions and the institutions working through local offices or representatives in Turkey are not subject to withholding tax. As per the decisions no. 2009/14593 and 2009/14594 of the Council of Ministers published in the Official Gazette no. 27130 dated 3 February 2009, certain duty rates included in the articles no.15 and 30 of the new Corporate Tax Law no.5520 are revised. Accordingly, the withholding tax rate on the dividend payments other than the ones paid to the nonresident institutions generating income in Turkey through their operations or permanent representatives and the resident institutions is 15%. In applying the withholding tax rates on dividend payments to the nonresident institutions and the individuals, the withholding tax rates covered in the related Double Tax Treaty Agreements are taken into account. Appropriation of the retained earnings to capital is not considered as profit distribution and therefore is not subject to withholding tax.

The prepaid taxes are calculated and paid at the rates valid for the earnings of the related years. The prepayments can be deducted from the annual corporate tax calculated for the whole year earnings.

In accordance with the Turkish tax legislation, the tax losses can be carried forward to offset against future taxable income for up to five years. Tax losses cannot be carried back to offset profits from previous periods.

In Turkey, there is no procedure for a final and definite agreement on tax assessments. Companies file their tax returns with their tax offices by the end of 25th of the fourth month following the close of the accounting period to which they relate. Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings.



 

Tax applications for foreign branches

NORTHERN CYPRUS

According to the Corporate Tax Law of the Turkish Republic of Northern Cyprus no.41/1976 as amended, the corporate earnings (including foreign corporations) are subject to a 10% corporate tax and 15% income tax. This tax is calculated based on the income that the taxpayers earn in an accounting period. Tax base is determined by modifying accounting income for certain exclusions and allowances for tax purposes. The corporations cannot benefit from the rights of offsetting losses, investment incentives and amortisation unless they prepare and have certified their balance sheets, income statements and accounting records used for tax calculations by an auditor authorized by the Ministry of Finance. In cases where it is revealed that the earnings of a corporation were not subject to taxation in prior years or the tax paid on such earnings are understated, additional taxes can be charged in the next twelve years following that the related taxation period. The corporate tax returns are filed in the tax administration office in April after following the end of the accounting year to which they relate. The corporate taxes are paid in two equal installments in May and October.

MALTA

The corporate earnings are subject to a 35% corporate tax. This rate is determined by modifying accounting income for certain exclusions and allowances for tax purposes. The earnings of the foreign corporations' branches in Malta are also subject to the same tax rate that the resident corporations in Malta are subject to. The earnings of such branches that are transferred to their head offices are not subject to an additional tax. The taxes payable is calculated by the obligating firm and the calculation is shown at the tax declaration form that is due till the following year's September and the payment is done till this date.

LUXEMBOURG

The corporate earnings are subject to a 21% corporate tax. This rate is determined by modifying accounting income for certain exclusions and allowances for tax purposes. An additional 7% of the calculated corporate income tax is paid as a contribution to unemployment insurance fund. 3% of the taxable income is paid as municipality tax in addition to corporate tax. The municipalities have the right to increase this rate up to 200%-350%. The municipality commerce tax, which the Bank's Luxembourg branch subject to currently is applied as 7.50% of the taxable income. The tax returns do not include any tax amounts to be paid. The tax calculation is done by the tax office and the amount to be paid is declared to corporate through an official letter called Note. The amounts and the payment dates of prepaid taxes are determined and declared by the tax office at the beginning of the taxation period. The corporations whose head offices are outside Luxembourg, are allowed to transfer the rest of their net income after tax following the allocation of 5% of it for legal reserves, to their head offices.

Tax applications for foreign financial affiliates

THE NETHERLANDS

In the Netherlands, corporate income tax is levied at the rate of 20% for tax profits up to EUR 200,000 and 25% for the excess part over this amount on the worldwide income of resident companies, which is determined by modifying accounting income for certain exclusions and allowances for tax purposes for the related year. A unilateral decree for the avoidance of double taxation provides relief for resident companies from Dutch tax on income, such as foreign business profits derived through a permanent establishment abroad, if no tax treaty applies. In general, there is an additional dividend tax of 5% computed only on the amounts of dividend distribution at the time of such payments. Under the Dutch taxation system, tax losses can be carried forward to offset against future taxable income for nine years. Tax losses can be carried back to the prior year. Companies must file their tax returns within nine months following the end of the tax year to which they relate, unless the company applies for an extension (normally an additional nine months). Tax returns are open for five years from the date of final assessment of the tax return during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings. The corporate income tax for the Germany branch is 30%.

ROMANIA

The applicable corporate tax rate in Romania is 16%. The taxation system in Romania is continuously developing and is subject to varying interpretations and constant changes, which may become rarely retroactive. In Romania, tax periods remain open for tax audits for seven years. Tax losses can be carried forward to offset against future taxable income for seven years.

3.18.2     Deferred taxes

According to the Turkish Accounting Standard 12 (TAS 12) "Income Taxes"; deferred tax assets and liabilities are recognized, using the balance sheet method, on all taxable temporary differences arising between the carrying values of assets and liabilities in the financial statements and their corresponding balances considered in the calculation of the tax base, except for the differences not deductible for tax purposes and initial recognition of assets and liabilities which affect neither accounting nor taxable profit.

If transactions and events are recorded in the income statement, then the related tax effects are also recognized in the income statement. However, if transactions and events are recorded directly in the shareholders' equity, the related tax effects are also recognized directly in the shareholders' equity.

The deferred tax assets and liabilities of the Bank and its consolidated affiliates are reported as net in their individual financial statements.

In compliance with TAS 12, the deferred tax assets and liabilities of the consolidated affiliates are  presented on the asset and liability sides of financial statements separately, without any offsetting.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

3.18.3     Transfer pricing

The article no.13 of the Corporate Tax Law describes the issue of transfer pricing under the title of "Disguised Profit Distribution by Way of Transfer Pricing". "The General Communiqué on Disguised Profit Distribution by Way of Transfer Pricing" published at 18 November 2007, explains the application related issues on this topic.

According to this Communiqué, if the taxpayers conduct transactions like purchase and sale of goods or services with the related parties where the prices are not determined according to the arm's length principle, then it will be concluded that there is a disguised profit distribution by way of transfer pricing. Such disguised profit distributions will not be deducted from the corporate tax base for tax purposes.

As stated in the "7.1 Annual Documentation" section of this communiqué, the taxpayers are required to fill out the "Transfer Pricing, Controlled Foreign Entities and Thin Capitalization" form for the purchase and sale of goods or services conducted with their related parties in a taxation period, attach these forms to their corporate tax returns and submit to the tax offices.

3.19        Funds borrowed

The Bank, whenever required, generates funds from domestic and foreign sources in the form of borrowings, syndications, securitizations, and bill and bond issuances in the local and international markets.The funds borrowed are recorded at their purchase costs and valued at amortised costs using the effective interest method.

In cases where such funds are valued at their amortised costs and such application results in measurement or accounting inconsistencies due to having the relevant financial instruments valued using different methods or the related gains or losses are recorded differently, such fundings are valued and recorded at their fair values as per TAS 39 in order to minimise or prevent such inconsistencies.

3.20        Shares and share issuances

None.

3.21        Confirmed bills of exchange and acceptances

Confirmed bills of exchange and acceptances are realized simultaneously with the customer payments and recorded in off-balance sheet accounts as possible debt and commitment, if any.  

3.22        Government incentives

As of 31 December 2016, the Bank or its financial affiliates do not have any government incentives or grants.

3.23       Segment reporting

The Bank operates in corporate, commercial, retail and investment banking. Accordingly, the banking products served to customers are; custody services, time and demand deposits, accumulating deposit accounts, repos, overdraft facilities, spot loans, foreign currency indexed loans, consumer loans, automobile and housing loans, working capital loans, discounted bills, gold loans, foreign currency loans, Eximbank loans, pre-export loans, ECA covered financing, letters of guarantee, letters of credit, export factoring, acceptance credits, draft facilities, forfaiting, leasing, insurance, forward, futures, salary payments, investment account (ELMA), cheques, safety boxes, bill payments, tax collections, payment orders. GarantiCard, BonusCard, Miles&Smiles Card, FlexiCard, MoneyCard, BusinessCard under the brand name of Visa and Mastercard, virtual cards and also American Express credit cards and "Paracard" debit cards with Maestro, Electron, Visa and Mastercard brand names, are available.

The Bank provides service packages to its corporate, commercial and retail customers including deposit, loans, foreign trade transactions, investment products, cash management, leasing, factoring, insurance, credit cards, and other banking products. A customer-oriented branch network has been built in order to serve customers' needs effectively and efficiently. The Bank also utilizes alternative delivery channels intensively.

The Bank provides corporate banking products to international and national holdings in Turkey by coordinating regional offices, suppliers and intermediaries, utilizing cross-selling techniques. Mainly, it provides services through its commercial and mixed type of branches to export-revenue earning sectors like tourism and textile and exporters of Turkey's traditional agricultural products.

Additionally, the Bank provides banking services to enterprises and their employees working in retail and service sectors through product packages including overdraft accounts, POS machines, credit cards, cheque books, Turkish Lira and foreign currency deposits, investment accounts, internet banking and call-center, debit cards and bill payment modules.



 

Retail banking customers form a wide-spread and sustainable deposit base for the Bank. Individual customers' needs are met by diversified consumer banking products through branches and alternative delivery channels.

Information on the business segments on a consolidated basis is as follows:

Current Period

Retail 

Banking

Corporate / Commercial Banking

Investment Banking

Other

Total Operations

Total Operating Profit

6,448,700

5,414,154

1,054,411

3,984,081

16,901,346

Other

-

-

-

-

-

Total Operating Profit

6,448,700

5,414,154

1,054,411

3,984,081

16,901,346

Net Operating Profit

2,692,970

1,925,929

708,983

1,153,980

6,481,862

Income from Associates and Affiliates

-

-

-

9,088

9,088

Net Operating Profit

2,692,970

1,925,929

708,983

1,163,068

6,490,950

Provision for Taxes

-

-

-

1,343,191

1,343,191

Net Profit

2,692,970

1,925,929

708,983

(180,123)

5,147,759







  Segment Assets

61,499,413

140,924,123

80,712,705

28,832,579

311,968,820

  Investments in Associates and Affiliates

-

-

-

153,119

153,119

Total Assets

61,499,413

140,924,123

80,712,705

28,985,698

312,121,939

  Segment Liabilities

116,243,213

67,671,139

74,092,285

18,319,395

276,326,032

  Shareholders' Equity

-

-

-

35,795,907

35,795,907

Total Liabilities and Shareholders' Equity

116,243,213

67,671,139

74,092,285

54,115,302

312,121,939

 

Prior Period

Retail 

Banking

Corporate / Commercial Banking

Investment Banking

Other

Total Operations

Total Operating Profit

4,908,424

4,544,172

1,342,593

3,106,481

13,901,670

Other

-

-

-

-

-

Total Operating Profit

4,908,424

4,544,172

1,342,593

3,106,481

13,901,670

Net Operating Profit

(191,414)

2,103,688

1,005,203

1,736,611

4,654,088

Income from Associates and Affiliates

-

-

-

5,399

5,399

Net Operating Profit

(191,414)

2,103,688

1,005,203

1,742,010

4,659,487

Provision for Taxes

-

-

-

1,044,373

1,044,373

Net Profit

(191,414)

2,103,688

1,005,203

697,637

3,615,114







  Segment Assets

54,964,113

115,782,773

79,127,377

29,620,252

279,494,515

  Investments in Associates and Affiliates

-

-

-

152,663

152,663

Total Assets

54,964,113

115,782,773

79,127,377

29,772,915

279,647,178

 Segment Liabilities

99,097,088

57,963,972

71,210,474

20,171,888

248,443,422

 Shareholders' Equity

-

-

-

31,203,756

31,203,756

Total Liabilities and Shareholders' Equity

99,097,088

57,963,972

71,210,474

51,375,644

279,647,178

 



 

3.24       Other disclosures

None.



 

4          Consolidated Financial Position and Results of Operations and Risk Management

4.1         Consolidated total capital

The consolidated capital items calculated as per the "Regulation on Equities of Banks" published on 5 September 2013, are presented below:

4.1.1      Components of consolidated total capital


Amount

Amount as per the regulation before

1/1/2014 (*)

COMMON EQUITY TIER I CAPITAL



Paid-in Capital to be Entitled for Compensation after All Creditors

4,972,554


Share Premium

11,880


Reserves

23,704,951


Other Comprehensive Income according to TAS

3,090,208


Profit

5,114,182


      Current Period Profit

5,114,182


      Prior Period Profit

-


Bonus Shares from Associates, Affiliates and Joint-Ventures not Accounted in Current Period's Profit

947


Minority Interest

52,513


Common Equity Tier I Capital Before Deductions

36,947,235


Deductions From Common Equity Tier I Capital



Valuation adjustments calculated as per the article 9. (i) of the Regulation on Bank Capital

-

-

Current and Prior Periods' Losses not Covered by Reserves, and Losses Accounted under Equity according to TAS (-)

1,429,152

-

Leasehold Improvements on Operational Leases (-)

116,307

-

Goodwill Netted with Deferred Tax Liabilities

3,833

6,388

Other Intangible Assets Netted with Deferred Tax Liabilities Except Mortgage Servicing Rights

156,911

261,520

Net Deferred Tax Asset/Liability (-)

7,129

11,881

Differences arise when assets and liabilities not held at fair value, are subjected to cash flow hedge accounting

-

-

Total credit losses that  exceed total expected loss calculated according to the Regulation on Calculation of Credit Risk by Internal Ratings Based Approach

-

-

Securitization gains

-

-

Unrealized gains and losses from changes in bank's liabilities' fair values due to changes in creditworthiness

-

-

Net amount of defined benefit plans

-

-

Direct and Indirect Investments of the Bank on its own Tier I Capital (-)

1,730

-

Shares Obtained against Article 56, Paragraph 4 of the Banking Law (-)

-

-

Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital (-)

-

-

Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or more of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital (-)

-

-

Mortgage Servicing Rights Exceeding the 10% Threshold of Tier I Capital (-)

-

-

Net Deferred Tax Assets arising from Temporary Differences Exceeding the10% Threshold of Tier I Capital (-)

-

-

Amount Exceeding the 15% Threshold of Tier I Capital as per the Article 2, Clause 2 of the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks (-)

-

-



 

 

 

 

 

 

 

Amount

Amount as per the regulation before

1/1/2014 (*)

The Portion of Net Long Position of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or more of the Issued Share Capital not deducted from Tier I Capital (-)

-

-

Excess Amount arising from Deferred Tax Assets from Temporary Differences (-)

-

-

Other items to be Defined by the BRSA (-)

-

-

Deductions from Tier I Capital in cases where there are no adequate Additional Tier I or Tier II Capitals (-)

-


Total Deductions from Common Equity Tier I Capital

1,715,062


Total Common Equity Tier I Capital

35,232,173


ADDITIONAL TIER I CAPITAL



Preferred Stock not Included in Common Equity Tier I Capital and the Related Share Premiums

-


Debt Instruments and the Related Issuance Premiums Defined by the BRSA

-


Debt Instruments and the Related Issuance Premiums Defined by the BRSA (Covered by Temporary Article 4)

-


Shares of Third Parties in Additional Tier I Capital



Shares of Third Parties in Additional Tier I Capital (Covered by Temporary Article 3)

-


Additional Tier I Capital before Deductions

-


Deductions from Additional Tier I Capital



Direct and Indirect Investments of the Bank on its own Additional Tier I Capital (-)

-

-

Investments in Equity Instruments Issued by Banks or Financial Institutions Invested in Bank's Additional Tier I Capital and Having Conditions Stated in the Article 7 of the Regulation

-

-

Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital (-)

-

-

The Total of Net Long Position of the Direct or Indirect Investments in Additional Tier I Capital of Unconsolidated Banks and Financial Institutions where the Bank Owns more than 10% of the Issued Share Capital (-)

-

-

Other items to be defined by the BRSA (-)

-

-

Items to be Deducted from Tier I Capital During the Transition Period



Goodwill and Other Intangible Assets and Related Deferred Taxes not deducted from Tier I Capital as per the Temporary Article 2, Clause 1 of the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks (-)

107,163

-

Net Deferred Tax Asset/Liability not deducted from Tier I Capital as per the Temporary Article 2, Clause 1 of the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks (-)

4,752

-

Deduction from Additional Tier I Capital when there is not enough Tier II Capital (-)

-

-

Total Deductions from Additional Tier I Capital

-

-

Total Additional Tier I Capital

-

-

Total Tier I Capital (Tier I Capital= Common Equity Tier I Capital + Additional Tier I Capital)

35,120,258


TIER II CAPITAL



Debt Instruments and the Related Issuance Premiums Defined by the BRSA

-


Debt Instruments and the Related Issuance Premiums Defined by the BRSA (Covered by Temporary Article 4)

-


Provisions (Amounts explained in the first paragraph of the article 8 of the Regulation on Bank Capital)

2,889,903


Total Deductions from Tier II Capital

2,889,903


Deductions from Tier II Capital



Direct and Indirect Investments of the Bank on its own Tier II Capital (-)

-

-

Investments in equity instruments issued by Banks and Financial Institutions Invested in Bank's Tier II Capital and having conditions stated in the Article 8 of the Regulation

-

-



 


Amount

Amount as per the regulation before

1/1/2014 (*)

Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital (-)

-

-

Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or more of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital (-)

-

-

The Total of Net Long Position of the Direct or Indirect Investments in Additional Tier I Capital and Tier II Capital of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or more of the Issued Share Capital Exceeding the 10% Threshold of Tier I Capital (-)

-

-

Other items to be defined by the BRSA (-)

-

-

Total Deductions from Tier II Capital

-

-

Total Tier II Capital

2,889,903


Total Equity (Total Tier I and Tier II Capital)

38,010,161


Total Tier I Capital and Tier II Capital ( Total Equity)



Loans Granted against the Articles 50 and 51 of the Banking Law (-)

31


Net Book Values of Movables and Immovables Exceeding the Limit Defined in the Article 57, Clause 1 of the Banking Law and the Assets Acquired against Overdue Receivables and Held for Sale but Retained more than Five Years (-)

56,325


Other items to be Defined by the BRSA (-)

36,994


Items to be Deducted from the Sum of Tier I and Tier II Capital (Capital) during the Transition Period



The Portion of Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital not deducted from Tier I Capital, Additional Tier I Capital or Tier II Capital as per the Temporary Article 2, Clause 1 of the Regulation (-)

-

-

The Portion of Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns more than 10% of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital not deducted from Additional Tier I Capital or Tier II Capital as per the Temporary Article 2, Clause 1 of the Regulation (-)

-

-

The Portion of Net Long Position of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or more of the Issued Share Capital, of the Net Deferred Tax Assets arising from Temporary Differences and of the Mortgage Servicing Rights not deducted from Tier I Capital as per the Temporary Article 2, Clause 2, Paragraph (1) and (2) and Temporary Article 2, Clause 1 of the Regulation (-)

-

-

CAPITAL



Total Capital (Total of Tier I Capital and Tier II Capital)

37,916,811

-

Total Risk Weighted Assets

258,425,540

-

CAPITAL ADEQUACY RATIOS



Consolidated CET1 Capital Ratio (%)

13.63

-

Consolidated Tier I Capital Ratio (%)

13.59

-

Consolidated Capital Adequacy Ratio (%)

14.67

-

BUFFERS



Bank-specific total CET1 Capital Ratio (%)

5.658

-

Capital Conservation Buffer Ratio (%)

0.625

-

Bank-specific Counter-Cyclical Capital Buffer Ratio (%)

0.533

-

Additional CET1 Capital Over Total Risk Weighted Assets Ratio Calculated According to the Article 4 of Capital Conservation and Counter-Cyclical Capital Buffers Regulation (%)

6.672

-

Amounts Lower Than Excesses as per Deduction Rules



Remaining Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or less of the Issued Share Capital

-

-



 


Amount

Amount as per the regulation before

1/1/2014 (*)

Remaining Total of Net Long Positions of the Investments in Tier I Capital of Unconsolidated Banks and Financial Institutions where the Bank Owns more than 10% or less of the Issued Share Capital (**)

1,125,107

-

Remaining Mortgage Servicing Rights

-

-

Net Deferred Tax Assets arising from Temporary Differences

245,522

-

Limits for Provisions Used in Tier II Capital Calculation



General Loan Provisions for Exposures in Standard Approach (before limit of one hundred and twenty five per ten thousand)

3,215,533

-

General Loan Provisions for Exposures in Standard Approach Limited by 1.25% of  Risk Weighted Assets

2,889,903

-

Total Loan Provision that Exceeds Total Expected Loss Calculated According to Communiqu on Calculation of Credit Risk by Internal Ratings Based Approach

-

-

Total Loan Provision that Exceeds Total Expected Loss Calculated According to Communiqu on Calculation of Credit Risk by Internal Ratings Based Approach, Limited by 0.6% Risk Weighted Assets

-

-

Debt Instruments Covered by Temporary Article 4 (effective between 1.1.2018-1.1.2022)



Upper Limit for Additional Tier I Capital Items subject to Temporary Article 4

-

-

Amount of Additional Tier I Capital Items Subject to Temporary Article 4 that Exceeds Upper Limit

-

-

Upper Limit for Additional Tier II Capital Items subject to Temporary Article 4

-

-

Amount of Additional Tier II Capital Items Subject to Temporary Article 4 that Exceeds Upper Limit

-

-

(*)      Under this item fully loaded amounts were reported for items that are subject to phasing in according to "Bank Capital Regulation" dated 1 January 2014.

(**)     250% risk weight is applied to TL 1,125,107 thousands according to Regulation on "Capital Adequacy Ratio" Annex-1 Paragraph 73, which is not deducted from Common Equity Tier 1 Capital.

The Bank plans its Common Equity Tier 1 (CET1) Capital by considering 10% as the minimum target while considering its additional CET 1 requirements during the phase-in period due to aforementioned regulations.

4.1.2      Items included in capital calculation

              None.



 

4.1.3      Reconciliation of capital items to balance sheet

Current Period

Carrying value

Amount of correction

Value of the capital report (*)

Explanation of the differences

Paid-in Capital

4,200,000

772,554

4,972,554

Inflation adjustments included in Paid-in Capital according to  Regulation's Temporary Article 1

Capital Reserves

1,474,369

(878,442)

595,927

Adjustment effect required by the Regulation on "Bank Capital" Article 10 Paragraph 4 (*) 

Other Comprehensive Income According to TAS

1,461,542

(878,442)

583,100

Adjustment effect required by the Regulation on "Bank Capital" Article 10 Paragraph 4 (*) 

  Securities Value Increase Fund

(543,625)

9,161

(534,464)

Adjustment effect required by the Regulation on "Bank Capital" Article 10 Paragraph 4 (*) 

  Revaluation Surplus on Tangible

  Assets

1,691,062

(36,807)

1,654,255

Adjustment effect required by the Regulation on "Bank Capital" Article 10 Paragraph 4 (*) 

  Revaluation Surplus on Intangible

  Assets

-

-

-


  Revaluation Surplus on Investment

  Property

-

-

-


  Hedging Reserves (Effective

  Portion)

(353,676)

(78,370)

(432,046)

Items not included in the calculation as per Regulation's Article 9-1-f

  Revaluation Surplus on Assets Held

  for Sale and Assets of Discontinued

  Operations

-

-

-


  Other Capital Reserves

667,781

(772,426)

(104,645)

Adjustment effect required by the Regulation on "Bank Capital" Article 10 Paragraph 4 (*); and

Inflation adjustments included in Paid-in Capital according to  Regulation's Temporary Article 1

Bonus Shares of Associates, Affiliates and Joint-Ventures

947

-

947


Share Premium

11,880

-

11,880


Profit Reserves

24,748,439

34,468

24,782,907

Adjustment effect required by the Regulation on "Bank Capital" Article 10 Paragraph 4 (*) 

Profit or Loss

5,105,291

8,891

5,114,182

Adjustment effect required by the Regulation on "Bank Capital" Article 10 Paragraph 4 (*) 

  Prior Periods Profit/Loss

-

-

-


  Current Period Net Profit/Loss

5,105,291

8,891

5,114,182

Adjustment effect required by the Regulation on "Bank Capital" Article 10 Paragraph 4 (*) 

Minority Interest

267,808

(215,295)

52,513

Adjustment effect required by the Regulation on "Bank Capital" Article 10 Paragraph 4 (*) 

Deductions from Common Equity Tier I Capital (-)

-


285,910

Deductions from Common Equity Tier 1 Capital as per the Regulation

Common Equity Tier I Capital

35,795,907


35,232,173




 

Current Period

Carrying value

Amount of correction

Value of the capital report (*)

Explanation of the differences

Subordinated Debts



-


Deductions from Tier I Capital (-)



111,915

Deductions from Tier I Capital as per the Regulation

Tier I Capital



35,120,258


Subordinated Debts



-


General Provisions



2,889,903

General Loan Provision added to Tier II Capital as per the Regulation's Article 8

Deductions from Tier II Capital (-)



-

Deductions from Tier II Capital as per the Regulation

Tier II Capital



2,889,903


Deductions from Total Capital (-)



93,350

Deductions from Capital as per the Regulation

Total



37,916,811


(*)   According to "Bank Capital Regulation" article 10 paragraph 4, which published on Official Gazette dated 5th September 2013 and numbered 28756, banks calculated their consolidated capital with their consolidated insurance company investments as unconsolidated financial institutions if 9th article's 4th paragraph's (c) and (ç) items apply. Lesser of consolidated capital calculated according to 1st and 4th paragraphs is considered the consolidated capital according to this regulation. As the consolidated capital calculated without including insurance subsidiary is lesser than the consolidated capital calculated with including insurance subsidiary, when proceeding from consolidated financial statements to consolidated capital report there is an adjustment for excluding insurance company from consolidation.

4.2         Consolidated credit risk

Credit risk is defined as risks and losses that may occur if the counterparty that the Bank or its consolidated financial affiliates work with, fails to comply with the agreement's requirements and cannot perform its obligations partially or completely on the terms set. In compliance with the legislation, the credit limits are set for the financial position and credit requirements of customers within the authorization limits assigned for Branches, Lending Departments, Executive Vice President responsible of Lending, General Manager, Credit Committee and Board of Directors. The limits are subject to revision if necessary.

The debtors or group of debtors are subject to credit risk limits. Sectoral risk concentrations are reviewed on a monthly basis.

Credit worthiness of debtors is reviewed periodically in compliance with the legislation by the internal risk rating models. The credit limits are revised and further collateral is required if the risk level of debtor deteriorates. For unsecured loans, the necessary documentation is gathered in compliance with the legislation.

Geographical concentration of credit customers is reviewed monthly. This is in line with the concentration of industrial and commercial activities in Turkey.

In accordance with the lending policies, the debtor's creditworthiness is analysed and the adequate collateral is obtained based on the financial position of the company and the type of loan; like cash collateral, bank guarantees, mortgages, pledges, bills and personal or corporate guarantees.

There are control limits on the position held through forwards, options and other similar agreements. Credit risk of such instruments is managed together with the risk from market fluctuations. The risk arising from such instruments are followed up and when necessary, the actions to decrease it are taken.

The liquidated non-cash loans are subject to the same risk weight with the overdue loans.

Foreign trade finance and other interbank credit transactions are performed through widespread correspondents network. Accordingly, limits are assigned to domestic and foreign banks and other financial institutions based on review of their credit worthiness, periodically.

The Bank developed a statistical-based internal risk rating model for its credit portfolio of corporate/commercial/medium-size companies. This internal risk rating model has been in use for customer credibility assessment since 2003. Risk rating has become a requirement for loan applications, and ratings are used both to determine branch managers' credit authorization limits and in credit assessment process.

The concentration table of the cash and non-cash loans for the Bank according to the risk rating system for its customers defined as corporate, commercial and medium-size enterprises is presented below:


Current Period

Prior Period

%

%

Above Avarage

40.20

39.60

Average

47.99

50.04

Below Average

11.81

10.36

Total

100.00

100.00

Total amount of exposures after offsetting transactions but before applying credit risk mitigations and the average exposure amounts that are classified in different risk groups and types, are disclosed below for the relevant period:

Exposure Categories

Current Period (*)

Average (**)

Conditional and unconditional exposures to central governments or central banks

67,305,286

73,988,899

Conditional and unconditional exposures to regional governments or local authorities

132,655

92,560

Conditional and unconditional exposures to administrative bodies and non-commercial undertakings

64,343

65,561

Conditional and unconditional exposures to multilateral development banks

1,443,371

1,139,231

Conditional and unconditional exposures to international organisations

-

-

Conditional and unconditional exposures to banks and brokerage houses

45,659,651

41,464,066

Conditional and unconditional exposures to corporates

136,683,596

131,475,572

Conditional and unconditional retail exposures

66,769,991

59,081,330

Conditional and unconditional exposures secured by real estate property

36,698,091

30,988,810

Past due items

1,065,374

973,536

Items in regulatory high-risk categories

2,308,629

4,654,614

Exposures in the form of bonds secured by mortgages

-

-

Securitisation positions

-

-

Short term exposures to banks, brokerage houses and corporates

-

-

Exposures in the form of collective investment undertakings

-

-

Shares

218,992

637,245

Other items

9,494,987

8,377,418

(*)     Includes total risk amounts before the effect of credit risk mitigation but after credit conversions.

(**)   Average risk amounts are the arithmetical averages of the amounts in monthly reports prepared as per the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks.



 

Exposure Categories

Prior Period (*)

Average (**)

Conditional and unconditional exposures to central governments or central banks

70,609,578

67,653,950

Conditional and unconditional exposures to regional governments or local authorities

81,536

86,096

Conditional and unconditional exposures to administrative bodies and non-commercial undertakings

76,402

73,306

Conditional and unconditional exposures to multilateral development banks

1,095,933

558,742

Conditional and unconditional exposures to international organisations

-

-

Conditional and unconditional exposures to banks and brokerage houses

45,958,857

43,104,083

Conditional and unconditional exposures to corporates

122,002,761

117,659,287

Conditional and unconditional retail exposures

46,270,013

44,971,714

Conditional and unconditional exposures secured by real estate property

28,757,418

26,368,855

Past due items

921,533

802,981

Items in regulatory high-risk categories

18,201,102

18,229,194

Exposures in the form of bonds secured by mortgages

-

-

Securitisation positions

-

-

Short term exposures to banks, brokerage houses and corporates

-

-

Other items (***)

8,687,865

6,620,326

(*)         Includes total risk amounts before the effect of credit risk mitigation but after credit conversions.

(**)       Average risk amounts are the arithmetical averages of the amounts in quarterly reports prepared as per the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks".

(***)     Shares are reported under "other items" in the prior period.

The parent Bank and its financial affiliates' largest 100 and 200 cash loan customers compose 24.42% (31 December 2015: 23.57%) and 31.27% (31 December 2015: 30.59%) of the total cash loan portfolio, respectively.

The parent Bank and its financial affiliates' largest 100  and 200 non-cash loan customers compose 51.42% (31 December 2015: 54.19%) and 61.15% (31 December 2015: 63.20%) of the total non-cash loan portfolio, respectively.

The parent Bank and its financial affiliates' largest 100 ve 200 cash and non-cash loan customers represent 8.69% (31 December 2015: 8.46%) and 11.24% (31 December 2015: 10.87%) of the total "on and off balance sheet" assets, respectively.

The general provision for consolidated credit risk amounts to TL 3,215,533 thousands (31 December 2015: TL 3,027,976 thousands).



 

4.2.1      Profile of significant exposures in major regions


Exposure Categories(*)

 

Current Period (****)

Conditional and unconditional exposures to central governments or central banks

Conditional and unconditional exposures to banks and brokerage houses

Conditional and unconditional exposures to corporates

Conditional and unconditional retail exposures

Conditional and unconditional exposures secured by real estate property

Items in regulatory high-risk categories

Other

Total


Domestic

62,213,592

13,280,397

117,348,484

63,961,399

35,871,303

791,687

10,339,411

303,806,273

European Union (EU) Countries

4,605,824

30,261,053

10,436,611

2,418,906

796,302

334,866

2,007,318

50,860,880

OECD Countries(**)

95

593,111

3,963,959

3,070

5,675

17

30,898

4,596,825

Off-Shore Banking Regions

-

3,063

773,608

1,290

580

13,700

1

792,242

USA, Canada

1,131

1,076,577

2,452,419

8,313

3,283

9,325

3,003

3,554,051

Other Countries

484,644

369,005

1,705,225

377,013

20,948

33,927

27,169

3,017,931

Associates, Subsidiaries and Joint -Ventures

-

76,445

3,290

-

-

1,125,107

11,922

1,216,764

Unallocated Assets/Liabilities (***)

-

-

-

-

-

-

-

-

Total

67,305,286

45,659,651

136,683,596

66,769,991

36,698,091

2,308,629

12,419,722

367,844,966

 


Exposure Categories(*)

 

Prior Period (****)

Conditional and unconditional exposures to central governments or central banks

Conditional and unconditional exposures to banks and brokerage houses

Conditional and unconditional exposures to corporates

Conditional and unconditional retail exposures

Conditional and unconditional exposures secured by real estate property

Items in regulatory high-risk categories

Other

Total


Domestic

64,918,516

15,656,354

107,599,284

45,171,400

27,313,408

16,588,646

8,803,337

286,050,945

European Union (EU) Countries

5,125,240

26,689,507

7,314,859

893,674

1,422,581

1,407,526

1,642,582

44,495,969

OECD Countries(**)

45

303,900

2,874,992

5,001

3,301

13,380

21,496

3,222,115

Off-Shore Banking Regions

-

2,483

356,369

1,882

-

54,060

5,830

420,624

USA, Canada

726

1,814,080

2,061,866

2,523

6,666

2,512

9,472

3,897,845

Other Countries

565,051

1,477,488

1,774,067

195,533

11,462

134,978

369,085

4,527,664

Associates, Subsidiaries and Joint -Ventures

-

15,045

21,324

-

-

-

11,467

47,836

Unallocated Assets/Liabilities (***)

-

-

-

-

-

-

-

-

Total

70,609,578

45,958,857

122,002,761

46,270,013

28,757,418

18,201,102

10,863,269

342,662,998

(*)      Exposure categories are as per the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks.

(**)     Includes OECD countries other than EU countries, USA and Canada.

(***)   Includes asset  and liability items that can not be allocated on a consistent basis.

(****)  Includes risk amounts before the effect of credit risk mitigation but after the credit conversions.


4.2.2    Risk profile by sectors or counterparties


Exposure Categories (*)

Current Period (**)

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

TL

FC

Total

Agriculture

-

508

-

-

-

-

1,086,624

568,984

434,471

56,205

10,025

-

-

-

-

-

1,199,007

957,810

2,156,817

Farming and Stockbreeding

-

-

-

-

-

-

895,354

510,611

396,966

55,612

8,681

-

-

-

-

-

1,124,319

742,905

1,867,224

Forestry

-

508

-

-

-

-

100,633

36,041

28,790

485

280

-

-

-

-

-

33,380

133,357

166,737

Fishery

-

-

-

-

-

-

90,637

22,332

8,715

108

1,064

-

-

-

-

-

41,308

81,548

122,856

Manufacturing

5

-

-

-

-

128,678

56,420,611

6,446,944

7,157,929

268,142

253,201

-

-

-

19,801

-

20,828,288

49,867,023

70,695,311

Mining and Quarrying

-

-

-

-

-

-

2,630,693

279,321

117,122

16,431

8,520

-

-

-

-

-

800,030

2,252,057

3,052,087

Production

-

-

-

-

-

-

31,166,478

6,043,707

4,299,810

212,869

203,126

-

-

-

19,801

-

16,711,133

25,234,658

41,945,791

Electricity, Gas and Water

5

-

-

-

-

128,678

22,623,440

123,916

2,740,997

38,842

41,555

-

-

-

-

-

3,317,125

22,380,308

25,697,433

Construction

-

4

173

-

-

-

7,584,160

3,131,638

2,395,650

118,651

79,043

-

-

-

-

-

7,488,021

5,821,298

13,309,319

Services

489

523

17,668

1,443,371

-

44,605,066

60,326,969

14,211,299

9,551,382

498,490

448,194

-

-

-

55,693

-

83,034,202

48,124,942

131,159,144

Wholesale and Retail Trade

-

-

268

-

-

-

25,684,402

10,716,937

4,983,071

210,956

134,354

-

-

-

-

-

24,339,788

17,390,200

41,729,988

Accomodation and Dining

-

-

13

-

-

-

3,517,892

819,381

2,697,010

91,466

17,250

-

-

-

-

-

1,874,952

5,268,060

7,143,012

Transportation and Telecommunication

-

120

10

-

-

-

14,572,019

1,823,151

607,756

146,933

26,777

-

-

-

-

-

3,231,372

13,945,394

17,176,766

Financial Institutions

-

-

-

1,443,371

-

44,605,066

7,997,755

105,864

65,700

2,358

244,473

-

-

-

55,693

-

50,503,300

4,016,980

54,520,280

Real Estate and Rental Services

-

-

-

-

-

-

5,535,000

211,973

623,968

12,629

5,078

-

-

-

-

-

1,404,116

4,984,532

6,388,648

Professional Services

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Educational Services

1

403

17,377

-

-

-

274,015

146,151

353,374

24,986

12,209

-

-

-

-

-

674,972

153,544

828,516

Health and Social Services

488

-

-

-

-

-

2,745,886

387,842

220,503

9,162

8,053

-

-

-

-

-

1,005,702

2,366,232

3,371,934

Others

67,304,792

131,620

46,502

-

-

925,907

11,265,232

42,411,126

17,158,659

123,886

1,518,166

-

-

-

143,498

9,494,987

73,371,764

77,152,611

150,524,375

Total

67,305,286

132,655

64,343

1,443,371

-

45,659,651

136,683,596

66,769,991

36,698,091

1,065,374

2,308,629

-

-

-

218,992

9,494,987

185,921,282

181,923,684

367,844,966

 (*)  Exposure categories are as per the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks.

(**) Includes risk amounts before the effect of credit risk mitigation but after the credit conversions.

  1- Conditional and unconditional exposures to central governments or central banks

  2- Conditional and unconditional exposures to regional governments or local authorities

  3- Conditional and unconditional exposures to administrative bodies and non-commercial undertakings

  4- Conditional and unconditional exposures to multilateral development banks

  5- Conditional and unconditional exposures to international organisations

  6- Conditional and unconditional exposures to banks and brokerage houses

  7- Conditional and unconditional exposures to corporates

  8- Conditional and unconditional retail exposures

  9- Conditional and unconditional exposures secured by real estate property 

10- Past due receivables

11- Receivables in regulatory high-risk categories 

12- Exposures in the form of bonds secured by mortgages

13- Securitisation positions

14- Short term exposures to banks, brokerage houses and corporates

15- Shares

16- Other receivables




Exposure Categories (*)

Prior Period (**)

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

TL

FC

Total

Agriculture

-

7,835

-

-

-

-

782,937

464,363

390,236

39,906

73,510

-

-

-

-

1,097,788

660,999

1,758,787

Farming and Stockbreeding

-

-

-

-

-

-

646,516

410,751

359,198

39,575

67,386

-

-

-

-

1,012,149

511,277

1,523,426

Forestry

-

7,835

-

-

-

-

34,614

33,426

18,643

113

774

-

-

-

-

29,214

66,191

95,405

Fishery

-

-

-

-

-

-

101,807

20,186

12,395

218

5,350

-

-

-

-

56,425

83,531

139,956

Manufacturing

5

-

4

-

-

-

51,086,181

4,426,128

3,830,229

320,016

394,744

-

-

-

-

16,055,855

44,001,452

60,057,307

Mining and Quarrying

-

-

-

-

-

-

1,671,336

191,110

134,900

53,229

16,480

-

-

-

-

573,579

1,493,476

2,067,055

Production

-


3

-

-

-

26,895,150

4,161,823

3,561,264

236,006

373,747

-

-

-

-

13,539,294

21,688,699

35,227,993

Electricity, Gas and Water

5

-

1

-

-

-

22,519,695

73,195

134,065

30,781

4,517

-

-

-

-

1,942,982

20,819,277

22,762,259

Construction

-

40

209

-

-

-

6,968,450

1,906,155

2,869,988

73,910

184,239

-

-

-

-

6,283,384

5,719,607

12,002,991

Services

405

211

25,989

1,095,933

-

45,129,339

51,898,265

10,685,498

10,627,059

345,416

1,289,151

-

-

-

50,773

49,608,331

71,539,708

121,148,039

Wholesale and Retail Trade

366

-

319

-

-

-

24,707,308

8,174,887

5,246,480

225,190

608,593

-

-

-

-

21,410,618

17,552,525

38,963,143

Accomodation and Dining

-

-

298

-

-

-

3,568,482

543,114

2,332,252

49,259

80,657

-

-

-

-

1,857,626

4,716,436

6,574,062

Transportation and Telecommunication

-

211

4

-

-

-

10,435,918

1,387,036

854,310

35,635

97,271

-

-

-

-

3,223,989

9,586,396

12,810,385

Financial Institutions

-

-

-

1,095,933

-

45,129,339

7,080,746

76,859

59,425

8,373

446,408

-

-

-

50,773

20,297,583

33,650,273

53,947,856

Real Estate and Rental Services

-

-

-

-

-

-

4,026,164

140,476

1,632,391

6,531

13,395

-

-

-

-

1,212,179

4,606,778

5,818,957

Professional Services

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Educational Services

2

-

25,085

-

-

-

437,330

85,278

200,020

8,863

11,054

-

-

-

-

599,075

168,557

767,632

Health and Social Services

37

-

283

-

-

-

1,642,317

277,848

302,181

11,565

31,773

-

-

-

-

1,007,261

1,258,743

2,266,004

Others

70,609,168

73,450

50,200

-

-

829,518

11,266,928

28,787,869

11,039,906

142,285

16,259,458

-

-

-

8,637,092

102,203,336

45,492,538

147,695,874

Total

70,609,578

81,536

76,402

1,095,933

-

45,958,857

122,002,761

46,270,013

28,757,418

921,533

18,201,102

-

-

-

8,687,865

175,248,694

167,414,304

342,662,998

 (*)  Exposure categories are as per the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks.

(**) Includes risk amounts before the effect of credit risk mitigation but after the credit conversions.

  1- Conditional and unconditional exposures to central governments or central banks

  2- Conditional and unconditional exposures to regional governments or local authorities

  3- Conditional and unconditional exposures to administrative bodies and non-commercial undertakings

  4- Conditional and unconditional exposures to multilateral development banks

  5- Conditional and unconditional exposures to international organisations

  6- Conditional and unconditional exposures to banks and brokerage houses

  7- Conditional and unconditional exposures to corporates

  8- Conditional and unconditional retail exposures

  9- Conditional and unconditional exposures secured by real estate property 

10- Past due receivables

11- Receivables in regulatory high-risk categories 

12- Exposures in the form of bonds secured by mortgages

13- Securitisation positions

14- Short term exposures to banks, brokerage houses and corporates

15- Other receivables

4      


 

4.2.3      Analysis of maturity-bearing exposures according to remaining maturities

Current Period

Term To Maturity



Exposure Categories (*)

Up to 1 Month

1-3 Months

3-6 Months

6-12 Months

 

Over 1 Year

 

Demand

 

Total

 1

Conditional and unconditional exposures to central governments or central banks

6,877,124

14,069,704

87,825

5,445

38,718,233

7,546,955

67,305,286

 2

Conditional and unconditional exposures to regional governments or local authorities

2,575

253

1,217

2,081

126,040

489

132,655

 3

Conditional and unconditional exposures to administrative bodies and non-commercial undertakings

394

106

1,572

234

59,343

2,694

64,343

 4

Conditional and unconditional exposures to multilateral development banks

-

-

-

6,379

1,436,992

-

1,443,371

 5

Conditional and unconditional exposures to international organisations

-

-

-

-

-

-

-

 6

Conditional and unconditional exposures to banks and brokerage houses

13,919,811

2,744,333

2,312,751

3,003,511

22,680,507

998,738

45,659,651

 7

Conditional and unconditional exposures to corporates

9,374,574

11,462,845

12,423,601

18,147,263

80,021,580

5,253,733

136,683,596

 8

Conditional and unconditional retail exposures

13,654,414

7,649,530

2,535,461

4,972,916

31,815,225

6,142,445

66,769,991

 9

Conditional and unconditional exposures secured by real estate property

227,305

476,200

785,913

1,842,293

31,356,990

2,009,390

36,698,091

10

Past due items

-

-

-

-

-

1,065,374

1,065,374

11

Items in regulatory high-risk categories

304,970

233,797

13,009

28,980

213,055

1,514,818

2,308,629

12

Exposures in the form of bonds secured by mortgages

-

-

-

-

-

-

-

13

Securitisation positions

-

-

-

-

-

-

-

14

Short term exposures to banks, brokerage houses and corporates

-

-

-

-

-

-

-

15

Exposures in the form of collective investment undertakings

-

-

-

-

-

-

-

16

Shares

-

-

-

-

-

218,992

218,992

17

Other items

646,707

-

-

-

-

8,848,280

9,494,987


Total

45,007,874

36,636,768

18,161,349

28,009,102

206,427,965

33,601,908

367,844,966

(*)     Includes risk amounts before the effect of credit risk mitigation but after the credit conversions. 



 

 

Prior Period

Term To Maturity



Exposure Categories (*)

Up to 1 Month

1-3 Months

3-6 Months

6-12 Months

 

Over 1 Year

 

Demand

 

Total

 

 1

Conditional and unconditional exposures to central governments or central banks

6,881,816

20,527,333

223,550

3,497,122

34,014,294

5,465,463

70,609,578

 

 2

Conditional and unconditional exposures to regional governments or local authorities

4,299

15

1,186

733

74,954

349

81,536

 

 3

Conditional and unconditional exposures to administrative bodies and non-commercial undertakings

1,315

2,349

1,761

41,811

28,404

762

76,402

 

 4

Conditional and unconditional exposures to multilateral development banks

-

-

-

-

1,095,933

-

1,095,933

 

 5

Conditional and unconditional exposures to international organisations

-

-

-

-

-

-

-

 

 6

Conditional and unconditional exposures to banks and brokerage houses

14,445,998

2,951,136

3,435,926

3,655,692

20,789,596

680,509

45,958,857

 7

Conditional and unconditional exposures to corporates

9,813,989

10,419,058

11,392,679

21,222,867

68,054,577

1,099,591

122,002,761

 8

Conditional and unconditional retail exposures

10,842,651

4,230,092

6,257,224

4,131,880

14,600,094

6,208,072

46,270,013

 

 9

Conditional and unconditional exposures secured by real estate property

702,404

1,333,229

1,844,071

2,644,252

22,181,094

52,368

28,757,418

10

Past due items

-

-

-

-

-

921,533

921,533

11

Items in regulatory high-risk categories

224,368

476,605

6,363

1,031,201

16,187,077

275,488

18,201,102

12

Exposures in the form of bonds secured by mortgages

-

-

-

-

-

-

-

13

Securitisation positions

-

-

-

-

-

-

-

 

14

Short term exposures to banks, brokerage houses and corporates

-

-

-

-

-

-

-

15

Other items

-

-

-

-

-

8,687,865

8,687,865


Total

42,916,840

39,939,817

23,162,760

36,225,558

177,026,023

23,392,000

342,662,998

(*)     Includes risk amounts before the effect of credit risk mitigation but after the credit conversions. 

4.2.4      Exposure categories

An international rating firm, Fitch Ratings' external risk ratings are used to determine the risk weigths of the risk categories as per the Article 6 of the "Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks".

The international risk ratings are used for the exposures to central governments and central banks, whereas for central governments and central banks that are not rated by Fitch Ratings, the published country ratings as announced by the Organisation for Economic Cooperation and Development (OECD) are used.

According to the regulation on capital adequacy, external risk ratings are used only for the exposures to banks and brokerage houses and to corporates where the counterparties are resident in abroad, to determine their risk weights. Where the counterparties are domestic, the related exposures are included in the calculation of capital adequcy as unrated.



 

 

In the determination of risk weights for items that are not included in trading book; if a relevant rating is available then such rating, but if it is an unrated exposure then the rating available for the issuer is used.

Fitch Ratings' risk ratings as per the credit quality grades and the risk weights according to exposure categories are presented below:

Credit 

Quality Grade

Fitch Ratings Long Term Credit Rating

Exposure Categories

Exposures to Central Governments or  Central Banks

Exposures to Banks and   Brokerage Houses

Exposures to Corporates

Exposures with Original Maturities Less Than 3 Months

Exposures with Original Maturities More Than 3 Months

1

AAA to AA-

0%

20%

20%

20%

2

A+ to A-

20%

20%

50%

50%

3

BBB+ to BBB-

50%

20%

50%

100%

4

BB+ to BB-

100%

50%

100%

100%

5

B+ to B-

100%

50%

100%

150%

6

CCC+ and below

150%

150%

150%

150%

4.2.5      Exposures by risk weights

The total amount of exposures corresponding to each class of risk weight before and after credit risk mitigation and the deductions from equity as defined in the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks Appendix-1 are presented below:

Current Period

0%

10%

20%

35%

50%

75%

100%

150%

200%

250%

Deductions from Equity

Risk Weights












Exposures before Credit Risk Mitigation

47,225,556

-

11,824,122

19,397,663

65,531,157

71,641,730

150,011,841

844,891

 

-

 

1,368,006

528,632

Exposures after Credit Risk Mitigation

42,562,410

-

8,339,872

19,391,219

62,853,998

66,169,176

135,104,549

824,973

-

 

1,368,006

528,632

 

Prior Period

0%

10%

20%

35%

50%

75%

100%

150%

200%

250%

Deductions from Equity

Risk Weights












Exposures before Credit Risk Mitigation

66,022,413

-

19,754,057

-

63,019,892

40,582,050

135,167,182

6,807,219

10,510,399

799,786

1,191,520

Exposures after Credit Risk Mitigation

59,223,592

-

12,186,170

-

54,233,496

40,283,953

122,578,041

6,754,537

10,450,895

799,786

1,191,520

 

 



 

 

4.2.6      Information by major sectors and type of counterparties

As per the TAS and TFRS;

Impaired Credits; are the credits that either overdue more than 90 days as of the reporting date or are treated as impaired due to their creditworthiness. For such credits, "specific provisons" are allocated as per the Provisioning Regulation.

Past Due Credits; are the credits that overdue upto 90 days but not impaired. For such credits, "general provisions" are allocated as per the Provisioning Regulation.

 

Current Period

Credit Risks

Major Sectors/Counterparties

Impaired

Credits

Past Due

Credits

Value

Adjustments

Specific

Provisions

Agriculture

180,128

18,513

509

114,186

Farming and Stockbreeding

174,721

15,170

475

110,949

Forestry

2,930

1,645

14

1,996

Fishery

2,477

1,698

20

1,241

Manufacturing

1,085,513

707,172

16,311

689,413

Mining and Quarrying

77,108

16,291

114

56,503

Production

857,375

602,410

9,254

562,448

Electricity, Gas and Water

151,030

88,471

6,943

70,462

Construction

577,223

272,042

4,593

358,482

Services

2,042,009

4,139,420

60,341

1,158,689

Wholesale and Retail Trade

1,142,765

407,516

15,039

624,623

Accomodation and Dining

197,617

133,809

3,417

77,717

Transportation and Telecommunication

540,862

3,464,249

39,641

361,261

Financial Institutions

22,488

1,343

43

19,801

Real Estate and Rental Services

39,633

58,346

1,081

18,832

Professional Services

197

122

-

197

Educational Services

60,745

11,957

172

32,036

Health and Social Services

37,702

62,078

948

24,222

Others

3,381,821

4,103,598

93,102

2,948,899

Total

7,266,694

9,240,745

174,856

5,269,669

 



 

 

Prior Period

Credit Risks

Major Sectors/Counterparties

Impaired

Credits

Past Due

Credits

Value

Adjustments

Specific

Provisions

Agriculture

162,877

19,405

336

82,426

Farming and Stockbreeding

155,940

15,102

318

80,775

Forestry

1,391

3,877

10

986

Fishery

5,546

426

8

665

Manufacturing

1,291,030

381,753

1,203

776,092

Mining and Quarrying

186,656

14,860

43

122,345

Production

953,722

363,375

1,126

535,138

Electricity, Gas and Water

150,652

3,518

34

118,609

Construction

366,991

211,757

1,213

177,843

Services

1,575,966

752,466

7,036

934,594

Wholesale and Retail Trade

1,003,876

447,330

2,418

568,179

Accomodation and Dining

213,135

97,933

466

117,046

Transportation and Telecommunication

255,542

141,892

3,963

195,881

Financial Institutions

32,396

2,926

12

19,465

Real Estate and Rental Services

25,267

14,867

35

11,064

Professional Services

11

-

-

11

Educational Services

18,101

20,692

40

6,375

Health and Social Services

27,638

26,826

102

16,573

Others

3,007,290

3,160,820

134,043

2,675,031

Total

6,404,154

4,526,201

143,831

4,645,986

4.2.7      Movements in value adjustments and provisions


Current Period

Opening Balance

Provision for Period

Provision Reversals

Other Adjustments(*)

Closing Balance

1

 Specific Provisions

4,645,986

3,318,987

2,826,234

130,930

5,269,669

,6693,215,533

2

 General Provisions

3,027,976

213,321

47,251

21,487

3,215,533

 


Prior Period

Opening Balance

Provision for Period

Provision Reversals

Other Adjustments(*)

Closing Balance

1

 Specific Provisions

3,597,081

2,307,222

1,243,523

(14,794)

4,645,986

2

 General Provisions

2,457,552

597,780

31,956

4,600

3,027,976

(*) Includes foreign exchange differences, mergers, acquisitions and disposals of subsidiaries.



 

 

4.2.8      Exposures subject to countercyclical capital buffer

Country

Banking Book

Trading Book

Total

Turkey

181,046,373

391,744

181,438,117

Romania

4,800,305

-

4,800,305

the Netherlands

2,857,402

-

2,857,402

Malta

1,547,367

-

1,547,367

Switzerland

1,500,666

73

1,500,739

United Kingdom

1,298,948

-

1,298,948

United States of America

782,401

-

782,401

Germany

738,573

-

738,573

NCTR

568,039

-

568,039

Belgium

358,115

-

358,115

Other

2,376,743

4

2,376,747

Total

197,874,932

391,821

198,266,753

 

4.3         Consolidated currency risk

Foreign currency open position limit is set in compliance with the legal standard ratio of net foreign currency position. As of 31 Aralık 2016, the Bank and its financial affiliates' net 'on balance sheet' foreign currency short position amounts to TL 16,885,902 thousands (31 December 2015: TL 7,939,559 thousands), net 'off-balance sheet' foreign currency long position amounts to TL 18,057,131 thousands (31 December 2015: TL 9,437,913 thousands), while net foreign currency long open position amounts to TL 1,171,229 thousands (31 December 2015: TL 1,498,354 thousands).

The foreign currency position risk is measured by "standard method" and "value-at-risk (VaR) model". Measurements by standard method are carried out monthly, whereas measurements by "VaR" are done daily for the Bank. The foreign currency exchange risk is managed through transaction, dealer, desk and stop-loss limits approved by the board of directors for the trading portfolio beside the foreign currency net position standard ratio and the VaR limit.

The Bank's effective exchange rates at the date of balance sheet and for the last five working days of the period announced by the Bank in TL are as follows:


USD

EUR

The Bank's foreign currency purchase rate at balance sheet date

3.5130

3.7020

Foreign currency rates for the days before balance sheet date;



Day 1

3.5130

3.7020

Day 2

3.5250

3.6863

Day 3

3.5370

3.6776

Day 4

3.5170

3.6756

Day 5

3.5020

3.6610




Last 30-days arithmetical average rate

3.4955

3.6814

 



 

 

The Bank's consolidated currency risk



EUR

USD

Other FCs

Total

Current Period





Assets





 Cash (Cash on Hand, Money in Transit,

  Purchased Cheques) and Balances with the

  Central Bank of Turkey

5,193,774

10,590,972

1,443,016

17,227,762

 Banks

6,766,453

7,645,367

1,254,715

15,666,535

 Financial Assets at Fair Value through

  Profit/Loss

88,320

367,780

14,424

470,524

 Interbank Money Market Placements

351,691

-

-

351,691

 Financial Assets Available-for-Sale

2,611,436

2,871,273

3,458

5,486,167

 Loans (*)

35,532,360

49,123,510

3,164,110

87,819,980

 Investments in Associates, Affiliates and

  Joint-Ventures

1,051

-

574

1,625

 Investments Held-to-Maturity

129,789

10,840,784

-

10,970,573

 Derivative Financial Assets Held for Risk

  Management

46,884

95,692

-

142,576

 Tangible Assets

84,999

266

53,892

139,157

 Intangible Assets

-

-

-

-

 Other Assets  (**)

4,053,901

2,194,545

105,143

6,353,589

Total Assets

54,860,658

83,730,189

6,039,332

144,630,179






Liabilities





 Bank Deposits

2,124,101

1,311,897

288,730

3,724,728

 Foreign Currency Deposits

32,535,601

58,876,377

5,500,763

96,912,741

 Interbank Money Market Takings

259,140

266,941

87

526,168

 Other Fundings

12,510,806

30,796,534

146,834

43,454,174

 Securities Issued

2,192,240

8,690,657

991,105

11,874,002

 Miscellaneous Payables

129,755

905,722

44,183

1,079,660

 Derivative Financial Liabilities Held for Risk

  Management

75,226

76,888

-

152,114

 Other Liabilities (***)

561,579

1,112,989

2,117,926

3,792,494

Total Liabilities

50,388,448

102,038,005

9,089,628

161,516,081






Net 'On Balance Sheet' Position

4,472,210

(18,307,816)

(3,050,296)

(16,885,902)

Net 'Off-Balance Sheet' Position

(3,601,299)

18,158,120

3,500,310

18,057,131

 Derivative Assets

18,444,171

61,491,621

6,826,814

86,762,606

 Derivative Liabilities

(22,045,470)

(43,333,501)

(3,326,504)

(68,705,475)

 Non-Cash Loans

-

-

-

-






Prior Period





Total Assets

42,557,470

85,807,550

8,192,768

136,557,788

Total Liabilities

44,136,917

92,755,644

7,604,786

144,497,347

Net 'On Balance Sheet' Position

(1,579,447)

(6,948,094)

587,982

(7,939,559)

Net 'Off-Balance Sheet' Position

2,017,703

7,542,704

(122,494)

9,437,913

 Derivative Assets

18,087,595

48,947,401

8,290,949

75,325,945

 Derivative Liabilities

(16,069,892)

(41,404,697)

(8,413,443)

(65,888,032)

 Non-Cash Loans

-

-

-

-

(*)      The foreign currency-indexed loans amounting TL 6,396,564 thousands included under TL loans in the accompanying consolidated financial statements are presented above under the related foreign currency code.

(**)     The foreign currency indexed factoring receivables amounting TL 324,421 thousands included under TL assets in the accompanying consolidated financial statements are presented above under the related foreign currency code.

(***)   The gold deposits of TL 2,026,567 thousands included under deposits in the accompanying consolidated financial statements are presented above under other liabilities.

 

 

 

 

 

 

4.4          Consolidated interest rate risk

The interest rate risk resulting from balance sheet maturity mismatch presents the possible losses that may arise due to the changes in interest rates of interest sensitive assets and liabilities in the on- and off-balance sheet. Interest sensitivity of assets, liabilities and off-balance sheet items is evaluated during the Weekly Assesment Commitee and Assets-Liabilities Committee meetings taking into consideration the developments in market conditions.

The Bank's interest rate risk is measured by using, economic value, economic capital, net interest income, income at risk, market price sensitivity of marketable securities portfolio, duration-gap and sensitivity analysis.

The results are supported by the sensitivity and scenario analysis performed periodically due to the possible instabilities in the markets. Furthermore, the interest rate risk is monitored according to the limits approved by the board of directors.

4.4.1      Interest rate sensitivity of assets, liabilities and off balance sheet items (based on repricing dates)

Current Period

Up to 1 Month

1-3 Months

3-12 Months

1-5 Years

5 Years

and  Over

Non-Interest Bearing (*)

Total

Assets








 Cash (Cash on Hand, Money in Transit,

  Purchased Cheques) and Balances with

  the Central Bank of Turkey

17,892,432

-

-

-

-

6,059,042

23,951,474

 Banks

6,642,107

2,287,260

3,103,033

21,108

-

4,827,536

16,881,044

 Financial Assets at Fair Value through

  Profit/Loss

63,776

34,448

17,241

43,336

44,247

3,602,493

3,805,541

 Interbank Money Market Placements

373,860

-

-

-

-

11

373,871

 Financial Assets Available-for-Sale

2,613,361

5,753,708

5,630,419

3,956,191

4,512,684

1,517,085

23,983,448

 Loans

49,351,478

25,521,684

59,026,227

50,347,703

12,807,805

4,354,199

201,409,096

 Investments Held-to-Maturity

499,275

2,002,859

5,554,835

5,329,013

7,297,741

2,425,973

23,109,696

 Other Assets

1,296,742

1,263,427

2,189,367

2,932,780

300,882

10,624,571

18,607,769

 Total Assets

78,733,031

36,863,386

75,521,122

62,630,131

24,963,359

33,410,910

312,121,939









Liabilities








 Bank Deposits

1,253,814

94,014

322,916

-

-

2,817,202

4,487,946

 Other Deposits

98,198,502

22,668,701

13,539,995

1,640,164

13,467

38,141,038

174,201,867

 Interbank Money Market Takings

10,487,135

207,001

218,766

259,140

47,531

10,620

11,230,193

 Miscellaneous Payables 

-

-

-

-

-

9,339,748

9,339,748

 Securities Issued 

676,307

1,760,759

5,012,872

7,843,021

2,098,303

354,386

17,745,648

 Other Fundings

14,334,313

17,633,891

8,921,661

5,207,247

179,075

305,666

46,581,853

 Other Liabilities

4,296

5,577

11,463

-

-

48,513,348

48,534,684

Total Liabilities

124,954,367

42,369,943

28,027,673

14,949,572

2,338,376

99,482,008

312,121,939









On Balance Sheet Long Position

-

-

47,493,449

47,680,559

22,624,983

-

117,798,991

On Balance Sheet Short Position

(46,221,336)

(5,506,557)

-

-

-

(66,071,098)

(117,798,991)

Off-Balance Sheet Long Position

8,702,855

11,799,365

12,492,698

5,452,678

4,244,593

-

42,692,189

Off-Balance Sheet Short Position

(2,015,891)

(6,163,621)

(9,696,072)

(13,715,662)

(11,205,806)

-

(42,797,052)

Total Position

(39,534,372)

129,187

50,290,075

39,417,575

15,663,770

(66,071,098)

(104,863)

(*)      Interest accruals are included in non-interest bearing column.

 

 



 

 

Prior Period

Up to 1 Month

1-3 Months

3-12 Months

1-5 Years

5 Years

and  Over

Non-Interest Bearing (*)

Total

Assets








 Cash (Cash on Hand, Money in Transit,

   Purchased Cheques) and Balances

   with the Central Bank of Turkey

237,533

-

-

-

-

25,049,104

25,286,637

 Banks

7,922,534

2,103,704

2,260,840

8,924

-

4,010,164

16,306,166

 Financial Assets at Fair Value through

   Profit/Loss (**)

12,065

62,686

34,492

64,627

34,813

1,740,714

1,949,397

 Interbank Money Market Placements

80,360

-

-

-

-

6

80,366

 Financial Assets Available-for-Sale

1,064,920

8,307,301

5,615,120

4,521,806

3,910,727

1,335,896

24,755,770

 Loans (**)

41,509,895

23,332,111

49,834,084

42,221,450

11,525,190

3,530,571

171,953,301

 Investments Held-to-Maturity

878,945

1,839,476

5,475,789

4,164,735

7,166,113

1,792,188

21,317,246

 Other Assets

1,133,112

1,547,350

1,871,848

2,719,019

323,575

10,403,391

17,998,295

Total Assets

52,839,364

37,192,628

65,092,173

53,700,561

22,960,418

47,862,034

279,647,178









Liabilities








 Bank Deposits

3,493,949

1,433,808

253,033

-

-

1,779,391

6,960,181

 Other Deposits

76,676,068

24,774,342

15,012,882

1,221,025

5,862

31,484,071

149,174,250

 Interbank Money Market Takings

13,576,686

221,243

2,520,164

190,026

39,310

20,367

16,567,796

 Miscellaneous Payables 

-

-

-

-

-

8,580,022

8,580,022

 Securities Issued 

1,272,460

1,431,663

2,416,522

6,933,473

3,117,821

339,658

15,511,597

 Other Fundings

14,293,797

14,500,177

4,855,756

5,461,252

185,718

222,987

39,519,687

 Other Liabilities

2,596

40,791

9,322

-

-

43,280,936

43,333,645

Total Liabilities

109,315,556

42,402,024

25,067,679

13,805,776

3,348,711

85,707,432

279,647,178









On Balance Sheet Long Position

-

-

40,024,494

39,894,785

19,611,707

-

99,530,986

On Balance Sheet Short Position

(56,476,192)

(5,209,396)

-

-

-

(37,845,398)

(99,530,986)

Off-Balance Sheet Long Position

5,715,518

8,832,982

11,606,458

5,418,346

2,626,080

-

34,199,384

Off-Balance Sheet Short Position

(1,973,392)

(5,600,588)

(9,071,991)

(10,429,335)

(7,396,845)

-

(34,472,151)

Total Position

(52,734,066)

(1,977,002)

42,558,961

34,883,796

14,840,942

(37,845,398)

(272,767)

(*)      Interest accruals are included in non-interest bearing column.

(**)       Loans amounting to TL 198,118 thousands included under Financial Assets at Fair Value through Profit/Loss in the accompanying consolidated financial statements are presented above under Loans.

 

 



 

4.4.2       Average interest rates on monetary financial instruments (%)

Current Period

EUR

USD

JPY

TL

Assets





 Cash (Cash on Hand, Money in Transit,

   Purchased Cheques) and Balances with the

   Central Bank of Turkey

-

0.52

-

4.22

 Banks

(0.35)-2.00

0.66-3.65

-

9.09-12.00

 Financial Assets at Fair Value through

   Profit/Loss

2.18

5.77

-

7.16-14.56

 Interbank Money Market Placements

0.05

-

-

8.33-8.43

 Financial Assets Available-for-Sale

0.65-4.88

3.24-11.88

-

9.89-14.47

 Loans

0.21-13.00

1.16-10.35

3.41

10.25-15.26

 Investments Held-to-Maturity

0.19

5.53

-

10.22

Liabilities





 Bank Deposits

0.20-0.42

0.80-1.60

-

9.39-9.58

 Other Deposits

0.01-6.70

0.01-2.31

1.22

7.00-15.00

 Interbank Money Market Takings

-

2.05-2.62

-

5.00-11.20

 Miscellaneous Payables 

-

-

-

-

 Securities Issued 

3.48

5.13

0.64

10.09-11.24

 Other Fundings

0.25-4.55

1.15-4.86

-

10.19-25.00

 

Prior Period

EUR

USD

JPY

TL

Assets





 Cash (Cash on Hand, Money in Transit,

   Purchased Cheques) and Balances with the

   Central Bank of Turkey

-

0.35

-

2.90

 Banks

0.13-1.75

0.05-7.53

-

10.05-14.70

 Financial Assets at Fair Value through

   Profit/Loss

4.66

4.64

-

7.07-14.56

 Interbank Money Market Placements

-

0.55-2.25

-

10.00-10.29

 Financial Assets Available-for-Sale

0.46-5.50

2.79-11.88

-

9.89-14.47

 Loans

0.20-14.00

0.67-11.00

3.04

10.00-15.85

 Investments Held-to-Maturity

0.19

5.49

-

10.76

Liabilities





 Bank Deposits

0.10-1.13

0.35-1.37

-

10.69-10.80

 Other Deposits

0.95-9.00

1.43-3.75

1.19

7.00-11.41

 Interbank Money Market Takings

0.05-0.15

0.75-2.75

1.49

6.00-13.72

 Miscellaneous Payables 

-

-

-

-

 Securities Issued 

3.42

4.83

1.01

9.94-11.92

 Other Fundings

0.25-6.25

0.90-5.44

1.50

11.06-15.75

 



 

 

4.5         Consolidated position risk of equity securities

4.5.1      Equity shares in associates and affiliates

Accounting policies for equity shares in associates and affiliates are disclosed in Note 3.3.

4.5.2      Comparison of carrying, fair and market values of equity shares

Current Period

Comparison

Equity Securities (shares)

Carrying Value

Fair Value

Market Value 

1

Investment in Shares- Grade A

124,138

-

-


Quoted Securities

-

-

-

2

Investment in Shares- Grade B

27,097

-

-


Quoted Securities

-

-

-

3

Investment in Shares- Grade C

822

-

-


Quoted Securities

-

-

-

4

Investment in Shares- Grade D

-

-

-


Quoted Securities

-

-

-

5

Investment in Shares- Grade E

1,014

-

-


Quoted Securities

-

-

-

6

Investment in Shares- Grade F

48

-

-


Quoted Securities

-

-

-

 

Prior Period

Comparison

Equity Securities (shares)

Carrying Value

Fair Value

Market Value 

1

Investment in Shares- Grade A

123,682

-

-


Quoted Securities

-

-

-

2

Investment in Shares- Grade B

27,097

-

-


Quoted Securities

-

-

-

3

Investment in Shares- Grade C

822

-

-


Quoted Securities

-

-

-

4

Investment in Shares- Grade D

-

-

-


Quoted Securities

-

-

-

5

Investment in Shares- Grade E

1,014

-

-


Quoted Securities

-

-

-

6

Investment in Shares- Grade F

48

-

-


Quoted Securities

-

-

-

4.5.3      Realised gains/losses, revaluation surpluses and unrealised gains/losses on equity securities and results included in core and supplementary capitals

Current Period

Gains/Losses in Current Period

Revaluation Surpluses

Unrealized Gains and Losses

 

Portfolio

Total

Amount in

Tier I Capital

Total

Amount in Core Capital

Amount in

Tier I

Capital

1

Private Equity Investments

-

-

-

-

-

-

2

Quoted Shares

 

-

 

-

 

-

13,997

 

-

13,997

3

Other Shares

-

7,080

7,080

-

-

-


Total

-

7,080

7,080

13,997

-

13,997

 



 

 

Prior Period

Gains/Losses in Current Period

Revaluation Surpluses

Unrealized Gains and Losses

 

Portfolio

Total

Amount in

Tier I Capital

Total

Amount in Core Capital

Amount in

Tier I

Capital

1

Private Equity Investments

-

-

-

-

-

-

2

Quoted Shares

-

-

-

11,203

-

11,203

3

Other Shares

-

213,303

213,303

-

-

-


Total

-

213,303

213,303

11,203

-

11,203

4.5.4      Capital requirement as per equity shares


Current Period


Portfolio

Carrying Value

RWA Total

Minimum Capital Requirement

1

Private Equity Investments

-

-

-

2

Quoted Shares

-

-

-

3

Other Shares

153,120

152,857

12,229


Total

153,120

152,857

12,229

 


Prior Period


Portfolio

Carrying Value

RWA Total

Minimum Capital Requirement

1

Private Equity Investments

-

-

-

2

Quoted Shares

-

-

-

3

Other Shares

152,663

152,400

12,192


Total

152,663

152,400

12,192

(*)     Additional to total RWA as of 31 December 2016, 250% risk weight is applied to TL 1,125,107 thousands according to Regulation on "Capital Adequacy Ratio" Annex-1 Paragraph 73 and Regulation on "Bank Capital" Article 9 Paragraph 4 (ç), which is not deducted from Common Equity Tier 1 Capital.

4.6         Consolidated liquidity risk

Liquidity risk is managed by asset and liability management department (ALMD) and asset and liability Committee (ALCO) in line with liquidity and funding policies and risk appetite approved by the board of directors in order to take the necessary measures in a timely and correct manner against possible liquidity shortages that may result from market conditions and balance sheet structure. Under stressed conditions, liquidity risk is managed within the contingency funding plan framework.

The board of directors reviews the liquidity risk management policy and approves the liquidity and funding policies, ensures the effective of practice of policies and integrations with the Bank's risk management system. The Board of Directors determines the basic metrics in liquidity risk measurement and monitoring. The Board of Directors establishes risk appetite of the Bank in liquidity risk management and identifies the risk limits in accordance with the risk appetite and reviews it regularly.

ALCO takes necessary decisions which will be executed by related departments by assessing the liquidity risk that the Bank is exposed to and considering the Bank's strategy and conditions of competition and pursues the implementations.

ALMD, performs daily liquidity management by ensuring compliance with regulatory and internal liquidity limits and monitoring related early warning indicators in case of probable liquidity squeezes. The medium and long term liquidity and funding management is performed by ALMD in accordance with ALCO decisions.



 

 

Risk management head defines the Bank's liquidity risk,  measures and monitors the risks with liquidity risk measurement methods that are in compliance with international standards, presents measurement results periodically to related departments, committees and senior management. Risk management department coordinates related parties in order to ensure compliance of risk management process in accordance with the Bank's risk profile, operation environment and strategic plan with regulations. Risk management department analyses, develops and revises relevant liquidity risk measurement in accordance with changing market conditions and the Bank's structure. Risk management department reviews assumptions and parameters used in liquidity risk analysis.

The liquidity risk analysis and the important liquidity indicators are reported monthly to related senior management. Additionally, analysis and monitored internal ratios related to liquidity risk are presented in ALCO report. Internal liquidity metrics are monitored with limit and alert levels approved by the board of directors and reported regularly to related parties. 

Decentralized management approach is adopted in the Bank's liquidity management. Each subsidiary controlled by the Bank performs daily, medium and long term liquidity management independently from the Bank by the authorities in each subsidiary responsible for managing liquidity risk. In addition, within the scope of consolidated risk management, liquidity and funding risk of each subsidiary in control are monitored via the liquidity risk management methods identified by the Bank by considering the operations, risk profile and regulations of the related subsidiary.

The Bank's funding management is carried out in compliance with the ALCO decisions. Funding and placement strategies are developed by assessing liquidity of the Bank.

In liquidity risk management actions that will be taken and procedures are determined by considering normal economic conditions and stress conditions.

Diversification of assets and liabilities is assured so as to be able to continuously meet the obligations, also taking into account the relevant currencies. Funding sources are monitored actively during identification of concentration risk related to funding. The Bank's funding base of customer deposits, interbank and other borrowing transactions are diversified in order to prevent the concentration of a particular funding source. Factors that could trigger the sudden and significant run off in funds or impair the accessibility of the funding sources are analyzed. Additionally, securities which are eligible as collateral at CBRT issued by Republic of Turkey Treasury and have active secondary market are comprised in the Bank's assets.

In the context of TL and foreign currencies liquidity management, the cash flows regarding assets and liabilities are monitored and the required liquidity in future periods is forecasted. In cash flow analysis, stress is applied to items that affect the liquidity by volume and rate of change from a liquidity management point of view.

Liquidity risk exposed by the Bank is managed by establishing risk appetite, risk mitigation according to the liquidity and funding  policies (diversification of funding sources, holding high quality liquid assets reserve) and effective control environment and closely monitoring by limits. For those risks that cannot be reduced, the adoption of the current level of risk, reduction or  termination of the activities that cause the risk is considered.

In liquidity risk stress testing framework, the level of the Bank's ability to cover cash outflows in liquidity crisis scenario based on the Bank's current cash flow structure, by high quality liquid assets is calculated. Scenario analysis are performed by assessing changing balance sheet structure, liquidity requirements and market conditions.

The results of liquidity risk stress testing are taken into consideration in the assessment of liquidity adequacy and identification of policy regarding liquidity risk and contingency funding plan is prepared within this framework.



 

 

There exists "Liquidity Emergency Plan" in the Bank including mechanisms to prevent increase in liquidity risk scenarios for different conditions and levels. Available liquidity sources are  determined by considering the liquidity squeezes. Within the framework of this plan, the Bank  monitors liquidity risk in terms of early warning indicators, and probable scenarios where liquidity risk crisis.

Bank's liabilities consist of TL and foreign currency funding, of which a large portion is USD/EUR. Deposits and capital constitute most of TL funding. For the reasons like real person customers can not use foreign currency credit but are able to deposit foreign currency funds, TL and foreign currency deposit and credit amount may differ. Long term funding obtained from foreign banks and creditors are mainly in foreign currency. For these reasons overall foreign currency liabilities are usually more than foreign currency liabilities. Unused portion of USD and EUR foreign currency funding is turned to TL via currency swap transactions and used in TL funding. Lines extended by CBRT and BİST aren't used to full extent, unused limits and high quality liquid asset stock is held is kept to use in the case of a liquidity scarcity in market. Also T.C. Eurobonds aren't used to secure funding and kept as reserve to use in the case of a foreign currency liquidity scarcity in market. In TL and foreign currency liquidity management, regulatory ratios, internally set warnings, limits and other liquidity and funding metrics are monitored.

4.6.1       Liquidity coverage ratio

Liquidity Coverage Ratio (LCR), aims for the banks having the ability to cover 30 days of liquidity needs with their own cash and high quality liquid assets that are easy to convert to cash during liquidity shortages in the markets. With that perspective and according to "Regulation for Banks' Liquidity Coverage Ratio Calculations" (the Regulation) terms LCR ratio is calculated by having high quality liquid assets divided by net cash outflows. After a transition period that will end by 1 January 2019, in both bank-only and consolidated basis, LCR ratio should be at least 80% for foreign currency and 100% for total.

Items in balance sheet and off balance sheet items are taken into account after being multiplied by the coefficients advised in the Regulation. In both bank-only and consolidated LCR calculations cash inflows are limited by 75% of cash outflows and cash inflows from high quality liquid assets aren't included.

High quality liquid assets consist of cash, deposits in central banks and securities considered as high quality liquid assets. Reserve deposits are included in high quality liquid assets, limited by the amount that is allowed by central bank to use in liquidity shortages. As of the reporting date, high quality liquid assets are composed of 4.97% cash, 47.12% deposits in central banks and 47.91% securities considered as high quality liquid assets.

The Bank's main funding sources are deposits, funds borrowed, money market borrowings and securities issued. Consolidated funding source composition as of report date is 67.79% deposits, 21.93% funds borrowed and money market borrowings and 6.73% securities issued.

In consolidated LCR calculations, cash outflows are mainly consist of deposits, secured and unsecured borrowings, securities issued and off balace sheet items.

The cash flows from derivative financial instruments are included in consolidated LCR calculations according to the Regulation's terms. The Bank also considers changes in fair value of the liabilities that result in margin calls when calculating cash outflows.



 

 

There was an increase in high quality liquid assets in items included in LCR calculations during the period.

 

Current Period

Total Unweighted Value (Average) (*)

Total Weighted Value (Average) (*)


TL+FC

FC

TL+FC

FC

High-Quality Liquid Assets



45,090,574

22,119,347

1

Total high-quality liquid assets (HQLA)



45,090,574

22,119,347

Cash Outflows





 

2

Retail deposits and deposits from small business customers, of which:

116,761,030

56,119,861

10,456,146

5,602,111

3

  Stable deposits

24,399,138

197,514

1,219,957

9,876

4

  Less stable deposits

92,361,892

55,922,347

9,236,189

5,592,235

5

Unsecured wholesale funding, of which:

52,366,443

31,129,537

30,831,694

17,157,234

6

  Operational deposits

-

-

-

-

7

  Non-operational deposits

37,094,336

24,296,740

18,652,878

12,182,976

8

  Unsecured funding

15,272,107

6,832,797

12,178,816

4,974,258

9

Secured wholesale funding



367,422

367,422

10

Other cash outflows of which:

51,791,461

15,362,666

12,104,797

11,314,382

 

11

  Outflows related to derivative exposures and

  other collateral requirements

9,048,417

10,460,072

9,048,417

10,460,072

12

  Outflows related to restructured financial

   instruments

-

-

-

-

13

  Payment commitments and other off-balance

  sheet commitments granted for debts to

  financial markets

42,743,044

4,902,594

3,056,380

854,310

14

Other revocable off-balance sheet commitments and contractual obligations

2,145,910

2,004,151

107,296

100,208

15

Other irrevocable or conditionally revocable off-balance sheet obligations

55,273,763

38,426,973

2,763,688

1,921,349

16

Total Cash Outflows



56,631,043

36,462,706

Cash Inflows





17

Secured receivables

19,528

-

-

-

18

Unsecured receivables

20,265,164

7,568,440

13,532,742

5,254,539

19

Other cash inflows

1,744,748

5,749,639

1,738,284

5,743,356

20

Total Cash Inflows

22,029,440

13,318,079

15,271,026

10,997,895





Total Adjusted Values

21

Total HQLA



45,090,574

22,119,347

22

Total Net Cash Outflows



41,360,017

25,464,811

23

Liquidity Coverage Ratio (%)



108.97

86.72

(*)   The average of last three month's month-end consolidated liquidity ratios.

The table below presents the last three months' consolidated liquidity ratios:

Period

TL+FC

        FC

31 October 2016

109.44%

83.64%

30 November 2016

112.29%

95.90%

31 December 2016

105.17%

80.63%



 

 

 

Prior Period

Total Unweighted Value (Average) (*)

Total Weighted Value (Average) (*)


TL+FC

FC

TL+FC

FC

High-Quality Liquid Assets



39,416,728

27,406,063

1

Total high-quality liquid assets (HQLA)



39,416,728

27,406,063

Cash Outflows





 

2

Retail deposits and deposits from small business customers, of which:

100,556,598

48,941,016

8,499,088

4,340,569

3

  Stable deposits

31,131,436

11,070,653

1,556,572

553,533

4

  Less stable deposits

69,425,162

37,870,363

6,942,516

3,787,036

5

Unsecured wholesale funding, of which:

48,665,532

29,472,577

29,276,756

16,915,052

6

  Operational deposits

-

-

-

-

7

  Non-operational deposits

35,289,145

23,871,372

18,171,273

12,386,455

8

  Unsecured funding

13,376,387

5,601,205

11,105,483

4,528,597

9

Secured wholesale funding



288,203

288,203

10

Other cash outflows of which:

51,403,023

14,852,599

9,692,156

7,208,597

 

11

  Outflows related to derivative exposures and

  other collateral requirements

6,497,322

6,094,576

6,497,322

6,422,203

12

  Outflows related to restructured financial

   instruments

-

-

-

-

13

  Payment commitments and other off-balance

  sheet commitments granted for debts to

  financial markets

44,905,701

8,758,023

3,194,834

786,394

14

Other revocable off-balance sheet commitments and contractual obligations

16,748,440

11,718,247

837,422

585,912

15

Other irrevocable or conditionally revocable off-balance sheet obligations

32,151,508

22,252,881

1,607,575

1,112,644

16

Total Cash Outflows



50,201,200

30,450,977

Cash Inflows





17

Secured receivables

19,618

194

194

194

18

Unsecured receivables

21,630,616

8,738,676

15,428,076

6,814,208

19

Other cash inflows

751,334

290,107

744,547

286,962

20

Total Cash Inflows

22,401,568

9,028,977

16,172,817

7,101,364





Total Adjusted Values

21

Total HQLA



39,416,728

27,406,063

22

Total Net Cash Outflows



34,028,384

23,349,613

23

Liquidity Coverage Ratio (%)



116.04

118.08

(*)   The average of last three months' month-end consolidated liquidity ratios.

 

Period

TL+FC

FC

31 October 2015

104.50%

108.78%

30 November 2015

123.34%

115.35%

31 December 2015

120.27%

130.13%

             

 

 



 

 

4.6.2      Maturity analysis of assets and liabilities according to remaining maturities


Demand

 

Up to 1 Month

1-3

Months

3-12

Months

1-5 Years

5 Years

and  Over

 

Undistributed (*)

 

Total

Current Period









Assets









 Cash (Cash on Hand, Money in

  Transit, Purchased Cheques)

  And Balances with the

  Central Bank  

  of Turkey

8,451,124

15,500,350

-

-

-

-

-

23,951,474

 Banks

6,568,580

3,128,098

1,600,736

1,993,801

3,589,829

-

-

16,881,044

 Financial Assets at Fair Value

  through Profit/Loss (**)

39,242

988,141

751,345

1,315,803

387,478

323,532

-

3,805,541

 Interbank Money Market   

   Placements

-

373,871

-

-

-

-

-

373,871

 Financial Assets Available-for- 

  Sale

218,812

23,065

34,141

498,172

11,326,666

11,882,592

-

23,983,448

 Loans (**)

419,535

33,315,960

16,942,938

48,906,728

73,225,524

24,329,134

4,269,277

201,409,096

 Investments Held-to-Maturity

-

139,741

452,201

181,994

9,023,268

13,312,492

-

23,109,696

 Other Assets

1,965,205

2,556,581

1,347,542

1,952,874

3,672,114

537,820

6,575,633

18,607,769

Total Assets

17,662,498

56,025,807

21,128,903

54,849,372

101,224,879

50,385,570

10,844,910

312,121,939










Liabilities









 Bank Deposits

2,912,446

1,154,085

94,146

327,269

-

-

-

4,487,946

 Other Deposits

43,835,833

92,200,862

22,784,118

13,614,639

1,744,211

22,204

-

174,201,867

 Other Fundings

-

2,215,433

1,937,295

20,049,594

15,892,027

6,487,504

-

46,581,853

 Interbank Money Market 

 Takings

87

10,496,626

207,399

218,895

259,140

48,046

-

11,230,193

 Securities Issued 

-

649,855

1,689,466

5,053,039

8,223,299

2,129,989

-

17,745,648

 Miscellaneous Payables 

1,156,028

8,135,691

13,512

33,689

-

317

511

9,339,748

 Other Liabilities (***)

1,800,785

1,327,477

913,491

1,227,256

700,949

660,205

41,904,521

48,534,684

Total Liabilities

49,705,179

116,180,029

27,639,427

40,524,381

26,819,626

9,348,265

41,905,032

312,121,939










Liquidity Gap

(32,042,681)

(60,154,222)

(6,510,524)

14,324,991

74,405,253

41,037,305

(31,060,122)

-

Net Off-Balance Sheet Position

-

526,190

(104,836)

547,096

5,636

87,715

-

1,061,801

 Derivative Financial Assets

-

60,394,076

27,198,909

34,159,810

9,584,052

1,610,733

-

132,947,580

 Derivative Financial Liabilities

-

59,867,886

27,303,745

33,612,714

9,578,416

1,523,018

-

131,885,779

Non-Cash Loans

-

4,255,623

4,910,315

6,374,916

1,089,367

223,599

89,084,131

105,937,951

Prior Period









Total Assets

14,502,821

58,138,733

17,791,403

49,866,067

84,702,069

45,508,194

9,137,891

279,647,178

Total Liabilities

42,572,000

98,859,842

30,284,090

36,940,489

25,072,261

9,049,355

36,869,141

279,647,178










Liquidity Gap

(28,069,179)

(40,721,109)

(12,492,687)

12,925,578

59,629,808

36,458,839

(27,731,250)

-

Net Off-Balance Sheet Position

-

(9,927)

(59,699)

(650,163)

32,032

87,117

-

(600,640)

 Derivative Financial Assets

-

46,286,344

20,165,592

38,984,741

12,510,105

1,344,295

-

119,291,077

 Derivative Financial Liabilities

-

46,296,271

20,225,291

39,634,904

12,478,073

1,257,178

-

119,891,717

Non-Cash Loans

-

4,256,442

1,122,260

8,073,184

1,221,929

126,820

83,888,837

98,689,472

(*)         Certain assets on the balance sheet that are necessary for the banking operations but not convertable into cash in short period such as tangible assets, investments in associates and affiliates, stationary supplies, prepaid expenses and loans under follow-up, are included in this column.

(**)        As of 31 December 2015, loans amounting to TL 198,118 thousands (31 December 2016: -) included under Financial Assets at Fair Value through Profit/Loss in the accompanying consolidated financial statements are presented above under Loans.

(***)       Shareholders' Equity is included in "Other liabilities" line under "Undistributed" column.

 

 

Contractual maturity analysis of liabilities according to remaining maturities

The remaining maturities table of the contractual liabilities includes the undiscounted future cash outflows for the principal amounts of the Bank and its financial affiliates' financial liabilities as per their earliest likely contractual maturities.

 

 

Current Period

 

Carrying Value

Nominal

Principal

Outflow

Demand

 

Up to 1 Month

1-3

Months

3-12

Months

1-5 Years

5 Years

and  Over

Bank Deposits

4,487,946

4,480,851

2,912,318

1,151,604

94,010

322,919

-

-

Other Deposits

174,201,867

173,564,384

43,812,427

91,883,002

22,654,467

13,465,056

1,727,342

22,090

Other Fundings

46,581,853

46,289,185

-

2,081,588

1,886,656

20,007,331

15,873,073

6,440,537

Interbank Money Market Takings

11,230,193

11,219,662

87

10,487,138

207,000

218,766

259,140

47,531

Securities Issued

17,745,648

17,391,262

-

641,177

1,683,472

5,012,872

7,955,438

2,098,303

Total

254,247,507

252,945,344

46,724,832

106,244,509

26,525,605

39,026,944

25,814,993

8,608,461

 

Prior Period

 

Carrying Value

Nominal

Principal

Outflow

Demand

 

Up to 1 Month

1-3

Months

3-12

Months

1-5 Years

5 Years

and  Over

Bank Deposits

6,960,181

6,954,324

1,824,605

3,442,881

1,433,805

253,033

-

-

Other Deposits

149,174,250

148,600,117

36,490,362

71,075,634

24,708,119

14,905,302

1,404,773

15,927

Other Fundings

39,519,687

39,396,379

-

2,002,970

1,828,112

14,413,379

15,627,055

5,524,863

Interbank Money Market Takings

16,567,796

16,547,426

-

13,576,686

221,241

2,520,164

190,025

39,310

Securities Issued

15,511,597

15,171,939

-

331,132

1,353,146

3,343,310

7,026,530

3,117,821

Total

227,733,511

226,670,185

38,314,967

90,429,303

29,544,423

35,435,188

24,248,383

8,697,921

 



 

 

4.7         Consolidated leverage ratio

The leverage ratio table prepared in accordance with the communiqué "Regulation on Measurement and Assessment of Leverage Ratios of Banks" published in the Official Gazette no. 28812 dated 5 November 2013 is presented below:

The Bank's consolidated leverage ratio calculated by taking average of end of month leverage ratios for the last three-month period is 8.23% (31 December 2015: 7.85%). Main reason for the variance compared to prior period is the increase in capital higher than other items. While the capital increased by 15.08% as a result of increase in net profits, the balance sheet exposure increased by 11.23% and off balance sheet exposure increased by 4.29%. Therefore, the current period leverage ratio increased by 38 basis points compared to prior period.


Current Period(***)

Prior Period(***)

1

Total assets in consolidated financial statements prepared in accordance with Turkish Accounting Standards (*) (**)

291,042,716

274,837,997

2

 

 

The difference between total assets prepared in accordance with Turkish Accounting Standards (*) and total assets in consolidated financial statements  prepared in accordance with the  communiqué "Preparation of Consolidated Financial Statements" (**)

4,087,480

4,809,181

3

The difference between the amounts of derivative financial instruments and credit derivatives in consolidated financial statements prepared in accordance with the   communiqué "Preparation of Consolidated Financial Statements"  and risk amounts of such instruments

(8,436,784)

(7,361,166)

4

The difference between the amounts of securities or commodity financing transactions in consolidated financial statements prepared in accordance with the  communiqué "Preparation of Consolidated Financial Statements"  and risk amounts of such intruments

14,523,665

13,578,561

5

The difference between the amounts of off-balance items in consolidated financial statements  prepared in accordance with the   communiqué "Preparation of Consolidated Financial Statements"  and risk amounts of such items

2,550,420

3,948

6

Other differences between the amounts  in consolidated financial statements prepared in accordance with the   communiqué "Preparation of Consolidated Financial Statements"  and risk amounts of such items

-

-

7

Total risk amount

423,189,090

385,659,874

 (*)     Consolidated financial statements prepared in compliance with the paragraph 6 of article 5 of the communiqué  "Preparation of Consolidated Financial Statements."

(**)     For the current period consolidated financial statements prepared in accordance with Turkish Accounting Standards as of 30 September 2016 and for the prior period consolidated financial statements prepared in accordance with Turkish Accounting Standards as of 31 December 2015 are used.

(***)   Amounts in the table are three-month average amounts.

 



 

 

 

Current Period(*)

Prior Period(*)

On-balance sheet assets



 

1

On-balance sheet items (excluding derivative financial instruments and credit derivatives but including collateral)

305,441,515

274,606,088

2

(Assets deducted in determining Tier I capital)

(380,379)

(299,347)

3

Total on-balance sheet risks (sum of lines 1 and 2)

305,061,136

274,306,741

Derivative financial instruments and credit derivatives



4

Replacement cost associated with all derivative financial instruments and credit derivatives

3,494,125

2,589,359

5

Add-on amounts for PFE associated with all derivative financial instruments and credit derivatives

8,482,319

7,379,472

6

Total risks of derivative financial instruments and credit derivatives (sum of lines 4 and 5)

11,976,444

9,968,831

Securities or commodity financing transactions (SCFT)



7

Risks from SCFT assets (excluding on-balance sheet)

1,645,458

1,173,806

8

Risks from brokerage activities related exposures

-

-

9

Total risks related with securities or commodity financing transactions (sum of lines 7 and 8)

1,645,458

1,173,806

Other off-balance sheet transactions



10

Gross notional amounts of off-balance sheet transactions

107,056,472

100,214,444

11

(Adjustments for conversion to credit equivalent amounts)

(2,550,420)

(3,948)

12

Total risks of off-balance sheet items (sum of lines 10 and 11)

104,506,052

100,210,496

Capital and total risks



13

Tier I capital

34,836,155

30,270,121

14

Total risks (sum of lines 3, 6, 9 and 12)

423,189,090

385,659,874

Leverage ratio



15

Leverage ratio

8.23%

7.85%

(*)       Amounts in the table are three-month average amounts.

4.8         Fair values of financial assets and liabilities


Carrying Value

Fair Value

Current Period

Prior Period

Current Period

Prior Period

Financial Assets

286,623,676

257,255,487

287,919,196

258,793,913

    Interbank Money Market Placements

373,871

80,366

373,871

80,366

    Banks (*)

37,747,565

39,148,804

37,747,565

39,148,804

    Financial Assets Available-for-Sale

23,983,448

24,755,770

23,983,448

24,755,770

    Investments Held-to-Maturity

23,109,696

21,317,246

22,799,307

21,467,440

    Loans (**)

201,409,096

171,953,301

203,015,005

173,341,533

Financial Liabilities

263,587,255

236,313,533

263,587,255

236,313,533

    Bank Deposits

4,487,946

6,960,181

4,487,946

6,960,181

    Other Deposits

174,201,867

149,174,250

174,201,867

149,174,250

    Other Fundings from Financial Institutions

57,812,046

56,087,483

57,812,046

56,087,483

    Securities Issued

17,745,648

15,511,597

17,745,648

15,511,597

    Miscellaneous Payables

9,339,748

8,580,022

9,339,748

8,580,022

(*)     Including the balances at the Central Bank of Turkey.

(**)   As of 31 December 2015, loans amounting to TL 198,118 thousands (31 December 2016: -) included under Financial Assets at Fair Value through Profit/Loss in the accompanying consolidated financial statements are presented above under "Loans".



 

 

Fair values of financial assets available-for-sale and investments held-to-maturity are derived from market prices or in case of absence of such prices, market prices of other securities quoted in similar qualified markets and having substantially similar characteristics in terms of interest, maturity and other conditions.

Fair values of loans are calculated discounting future cash flows at current market interest rates for fixed-rate loans. The carrying values of floating-rate loans are deemed an approximation for their fair values.

Fair values of other financial assets and liabilities represent the total acquisition costs and accrued interest.

The table below analyses the financial instruments carried at fair value, by valuation method:

Current Period

Level 1

Level 2

Level 3

Total

   Financial Assets Available-for-Sale

23,120,636

246,183

616,629

23,983,448

   Financial Assets Held for Trading

191,828

-

-

191,828

   Derivative Financial Assets Held for Trading

12,449

3,601,264

-

3,613,713

   Loans

-

-

-

-

   Derivative Financial Assets Held for Risk Management

-

666,295

-

666,295

Financial Assets at Fair Value

23,324,913

4,513,742

616,629

28,455,284

   Derivative Financial Liabilities Held for Trading

977

3,713,008

-

3,713,985

   Funds Borrowed

-

1,763,177

-

1,763,177

   Derivative Financial Liabilities Held for Risk Management

-

343,314

-

343,314

Financial Liabilities at Fair Value

977

5,819,499

-

5,820,476

 

Prior Period

Level 1

Level 2

Level 3

Total

   Financial Assets Available-for-Sale

18,457,898

5,724,174

573,698

24,755,770

   Financial Assets Held for Trading

192,976

31,325

-

224,301

   Derivative Financial Assets Held for Trading

285

1,724,811

-

1,725,096

   Loans

-

198,118

-

198,118

   Derivative Financial Assets Held for Risk Management

-

680,997

-

680,997

Financial Assets at Fair Value

18,651,159

8,359,425

573,698

27,584,282

   Derivative Financial Liabilities Held for Trading

3,617

2,618,986

-

2,622,603

   Funds Borrowed

-

5,688,704

-

5,688,704

   Derivative Financial Liabilities Held for Risk Management

-

250,491

-

250,491

Financial Liabilities at Fair Value

3,617

8,558,181

-

8,561,798

Level 1 : quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 : inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices)

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

4.9         Transactions carried out on behalf of customers and items held in trust

None.



 

 

4.10      Risk management objectives and policies

The notes under this caption are prepared as per the "Regulation on Calculation of Risk Management Disclosures" published in the Official Gazette no. 29511 dated 23 October 2015.

4.10.1    Risk management strategy and weighted amounts

4.10.1.1 Risk management strategy

The Bank's risk management strategy is to ensure that risk management culture is recognized and risk management principles are widely embraced throughout the Bank and its affiliates, an integrated risk management system is established which pursues risk-return-capital relationship. Essential principles are adopted in order to ensure that policies determined to assess and manage risks the Bank is exposed to, are kept updated, adapted to changing conditions, applied and managed.

It is the ultimate responsibility of the senior management to apply and improve risk management strategies, policies and procedures that are approved by the board of directors, inform the board of directors about the important risks the Bank is exposed to, assess internal control, internal audit and risk reports with regard to the Banks' departments and to eliminate the risks, deficiencies or defects identified in these departments or to take the necessary precautionary actions to prevent those risks, deficiencies and defects and participate in the determination of risk limits.

Policies and procedures regarding risk management are established for consolidated affiliates. Policies and procedures are prepared in compliance with applicable legislations that the affiliate subject to and the parent Bank's risk management strategy, reviewed regularly and revised if necessary. The parent Bank ensures that risk management system is applied in affiliates where  risks are defined, measured, monitored and controlled.

Risk management activities are structured under the responsibility of the board of directors. The Risk Committee composed of the members of the board is responsible to oversee the Bank's risk management policies and practices, including the alignment with its strategic objectives and management's ability to assess and manage the various risks present in its activities including capital adequacy and planning and liquidity adequacy, as well as all other risk management functions envisioned under the applicable laws and regulations. Upper level management is responsible against the board of directors for the monitoring and management of risks that their departments are exposed to. Accordingly, the Risk Management, which performs risk management functions, reports to the board of directors via the Risk Committee, whereas the Internal Audit Department, performing internal audit functions, the Internal Control Unit, performing internal control functions, and the Compliance Department, which implements compliance controls and performs activities to prevent laundering proceeds of crime, and financing of terrorism, report directly to the board of directors.

The Bank's main approach for the implementation of risk management model is establishing risk culture throughout the Bank, and aims that the importance of risk management for maintaining business operations is understood and risk awareness and sensitivity is ensured for decision making and implementation mechanisms process by all employees.

The Bank measures and monitors risks that exposed to, considering methods suitable with international standards, compliant with legislation. Risk measuring and reporting are performed via advanced methods and risk management softwares. Risk based detailed reports are prepared for management of significant risks, in order to determine strategies and take decisions, in this scope, periodic and non-periodic reports are prepared for board of directors, relevant committees and senoir management

The Bank's risk appetite framework determines the risk level that the board of directors is prepared to accept in order to accomplish the goals and strategies with due consideration to the capacity of the institution to safely absorbs those risks and the Bank monitors regularly risk appetite metrics regarding capital, liquidity, income recurrence and risk based limits. Risks that the Bank is exposed is managed by



 

 

providing effective control environment and monitoring limits. Unmitigated risks are either accepted with current risk levels or decreasing/ terminating the activity that causes the risk.

 

The Risk Management conducts the implementation of internal capital adequacy assessment report, to be sent to the BRSA by coordinating relevant parties. Stress test report is reported to the BRSA, which  evaluates how adverse effects on macroeconomic parameters, in the scope of determined scenarios, affect the Bank's three year budget plan and results, and certain ratios, including capital adequacy. 

Training programs for employees, risk reports to the board of directors, senior management and committees, risk appetite framework established by the Bank and internal capital adequacy assessment process generate significant inputs to ensure that risk management culture is widely embraced.

4.10.1.2 Risk weighted amounts


 

Risk Weighted Amounts

Minimum Capital Requirements


Current Period

Prior Period

Current Period

1

 Credit risk (excluding counterparty credit risk) (CCR) (*)

222,091,394

212,052,500

17,767,311

2

 Of which standardised approach (SA)

222,091,394

212,052,500

17,767,311

3

 Of which internal rating-based (IRB) approach

-

-

-

4

 Counterparty credit risk

5,680,859

2,769,808

454,469

5

 Of which standardised approach for counterpary credit

 risk (SA-CCR)

5,680,859

2,769,808

454,469

6

 Of which internal model method (IMM)

-

-

-

7

 Equity position in banking book under basic risk    

 weighting or internal rating-based

-

-

-

8

 Equity investments in funds - look-through approach

-

-

-

9

 Equity investments in funds - mandate-based approach

-

-

-

10

 Equity investments in funds - 1250% risk weighting

 approach

-

-

-

11

 Settlement risk

-

-

-

12

 Securitisation exposures in banking book

-

-

-

13

 Of which IRB ratings-based approach (RBA)

-

-

-

14

 Of which IRB supervisory formula approach (SFA)

-

-

-

15

 Of which SA/simplified supervisory formula

 approach  (SSFA)

-

-

-

16

 Market risk

6,136,375

6,826,925

490,910

17

 Of which standardised approach (SA)

6,136,375

6,826,925

490,910

18

 Of which internal model approaches (IMM)

-

-

-

19

 Operational risk

21,096,899

18,707,904

1,687,752

20

 Of which basic indicator approach

21,096,899

18,707,904

1,687,752

21

 Of which standardised approach

-

-

-

22

 Of which advanced measurement approach

-

-

-

23

 Amounts below the thresholds for deduction from capital (subject to 250% risk weight)

3,420,013

1,157,480

273,601

24

 Floor adjustment

-

-

-

25

 Total (1+4+7+8+9+10+11+12+16+19+23+24)

258,425,540

241,514,617

20,674,043

(*)   Excluding equity investments in funds and amounts below the thresholds for deductions from capital.



 

4.10.2    Linkages between financial statements and risk amounts

4.10.2.1 Differences and matching between asset and liabilities' carrying values in financial statements and risk amounts in capital adequacy calculation



Carrying values of items in accordance with Turkish Accounting Standards


Carrying values in financial statements prepared as per TAS (*)

Carrying values in consolidated financial statements prepared as per TAS but in compliance with the communiqué "Preparation of Consolidated Financial Statements"

 

 

 

Subject to credit risk

 

 

 

Subject to counterparty credit risk

 

 

 

Subject to market risk (**)

 

Not subject to capital requirements or subject to deduction from capital (***)

Assets







 

Cash (Cash on Hand, Money in Transit, Purchased Cheques) and Balances With Central Bank of Turkey

33,734,687

23,951,474

23,951,474 

-

-

Financial Assets Held for Trading

1,835,133

3,805,541

7,842 

3,577,256

1,491,646

-

Financial Assets at Fair Value Through Profit or Loss

-

-

-

-

-

-

Banks

11,877,548

16,881,044

16,112,947

-

-

1,540,185

Interbank Money Markets Placements

318,688

373,871

351,691

22,180

-

-

Financial Assets Available-for-Sale

23,179,823

23,983,448

22,878,689

5,699,440

1,081,227

23,532

Loans

182,659,386

201,409,096

201,372,108

-

-

36,994

Factoring Receivables

2,149,726

2,851,223

2,851,223

-

-

-

Investment Held-to-Maturity

21,306,528

23,109,696

23,109,696

8,308,738

-

-

Investment in Associates

37,261

37,261

36,998

-

-

263

Investment in Subsidiaries

4,125

115,858

1,240,965

-

-

-

Investment in Joint-Ventures

-

-

-

-

-

-

Lease Receivables

5,462,940

5,794,260

5,794,874

-

-

-

Derivative Financial Assets Held for Risk Management

283,059

666,295

-

666,295

-

-

Tangible Assets

4,567,214

3,680,621

3,473,471

-

-

123,614

Intangible Assets

106,340

327,653

25,670

-

-

301,983

Investment Property

537,494

543,825

630,270

-

-

-

Tax Asset

879,961

260,678

244,564

-

-

15,167

Assets Held for Sale and Assets of Discontinued Operations

490,659

605,015

548,690

-

-

56,325

Other Assets

1,612,144

3,725,080

3,644,832

-

-

125,041

Total Assets

291,042,716

312,121,939

306,276,004

18,273,909

2,572,873

2,223,104

Liabilities







Deposits

167,133,455

178,689,813

-

-

-

178,689,813

Derivative Financial Liabilities Held for Trading

1,812,567

3,713,985

-

-

-

3,713,985

Funds Borrowed

39,334,000

46,581,853

-

5,798,862

-

40,782,991

Interbank Money Markets

18,678,332

11,230,193

-

7,813,821

26,027

3,416,372



 

Securities Issued

15,128,623

17,745,648

-

-

-

17,745,648

Funds

-

-

-

-

-

-

Miscellaneous Payables

9,228,088

9,339,748

-

-

-

9,339,748

Other External Fundings Payable

1,472,437

3,170,339

-

-

21,136

3,149,203

Factoring Payables

-

-

-

-

-

-

Lease Payables

-

-

-

-

-

-

Derivative Financial Liabilities Held for Risk Management

514,247

343,314

-

-

-

343,314

Provisions

1,831,781

5,032,873

-

-

-

5,032,873

Tax Liability

171,439

478,266

-

-

-

478,266

Liabilities for Assets Held for Sale and Assets of Discontinued Operations

-

-

-

-

-

-

Subortinated Debts

-

-

-

-

-

-

Shareholders' Equity

35,737,747

35,795,907

-

-

-

35,795,907

Total Liabilities

291,042,716

312,121,939

-

13,612,683

47,163

298,488,120

(*)      As per financial statements prepared in compliance with the paragraph 6 of article 5 of the communiqué  "Preparation of Consolidated Financial Statements" as of  30 September 2016.

(**)     Disclosed based on gross position amounts subject to general market risk and specific risk.

(***)      According to the "Bank Capital Regulation" article 10 paragraph 4, which published on Official Gazette dated 5 September 2013 with no. 28756, the banks also calculate their consolidated capital as if their investments in insurance companies are not consolidated as per 9th article's 4th paragraph's (c) and (ç) items.

Lesser of consolidated capital calculated according to 1st and 4th paragraphs is considered the consolidated capital according to this regulation. The consolidated capital calculated without including insurance affiliate is less  than the consolidated capital calculated including insurance affiliate. Therefore, the carrying value of  the insurance company not subjected to regulatory consolidation is represented under the column "not subject to capital requirements or subject to deduction from capital".

4.10.2.2 Major items causing differences between assets and liabilities' carrying values in financial statements and risk amounts in capital adequacy calculation



Total

Credit risk

Counterparty credit risk

Market risk (*)

1

Carrying Value of Assets in Accordance with Communiqué  "Preparation of Consolidated Financial Statements"

295,871,173

292,248,342

4,246,247

2,572,873

2

Carrying Value of Debt Instruments Subject Counterparty Credit Risk in Accordance with Communiqué  "Preparation of Consolidated Financial Statements"

14,027,662

14,027,662

14,027,662

-

3

Carrying Value of  Liabilities Subject to Counterparty Credit Risk in Accordance with Communiqué  "Preparation of Consolidated Financial Statements"

13,612,683

-

13,612,683

-

4

Carrying Value of Other Liabilities in Accordance with Communiqué  "Preparation of Consolidated Financial Statements"

21,136

-

-

47,163

5

Total Net Amount Under Regulatory Consolidation

296,265,016

306,276,004

4,661,226

2,525,710

6

Off-balance Sheet Amounts (**)

265,731,181

41,073,373

1,802,817

165,812,704

7

Credit Risk Mitigation

-

(18,684,545)

(9,751)

-

8

Repurchase Transactions Valuation Adjustments

-

-

1,495,079

-

9

Risk Amounts

561,966,197

328,664,832

7,949,371

168,338,414

(*)      Disclosed based on gross position amounts subject to general market risk and specific risk.

(**)     The amounts present the balances of the off-balance sheet items subject to capital adequacy regulation.



 

 

4.10.2.3 Explanations on differences between carrying values in financial statements and risk amounts in capital adequacy calculation of assets and liabilities

There is no material differences between the carrying values in financial statements and the risk amounts in capital adequacy calculation of assets and liabilities.

4.10.3    Consolidated credit risk

4.10.3.1 General information on consolidated credit risk

4.10.3.1.1 General qualitative information on consolidated credit risk

The parent bank's credit risk management policies; under the relevant legislation in line with the bank's credit strategy approved by the Board are created based on the prudence, sustainability and customer's credit worthiness principles.

Diversification to avoid concentrations are performed while determining the Bank's credit risk profile. Credit portfolios are evaluated depending upon the credit type, managed aggregately during their life cycle. Customer selection is made in accordance with the policies and strategies, affordability of the borrower to fulfil on a timely basis all financial obligations with his expected cash flows from foreseeable specific transactions or from its regular operations; without depending upon guarantors, bails or pledged assets is predicated. Necessary risk rating/scoring models are developed for the different portfolios of the Bank. These models are created by ensuring the best separation of the customers in terms of their credibility and grading them using the objective criteria. The outputs of the internal rating and scoring models that developed based on the each portfolio, as well as an important part of the loan approval process, but also these models are used measuring the default risk of the customer and the portfolio, doing analysis regarding expected loss, internal capital and risk-based analyses.

The general risk policy including the risk appetite and indicators is determined by the board of directors. Risk management is handled, in order to reach the determined targets, by carrying out a continuous monitoring process with a proper classification of risks and customers in scope of the effective management mentality. The limit framework and delegation rules are specified by establishing proper decision systems in order to assess the risks correctly. Optimum limit levels are determined by taking into account the loss and returns during the limit setting process.

The security intelligence and analysis are done in order to measure the creditworthiness of the customer that will be entered in a credit relationship. Before the credit decisions, customer analysis is examined and evaluated by producing all factors (qualitative and quantitative data) that effected and will be effected the historical, current and future performance of the customer.

Credit risk management is a structured process where credit risks are consistently assessed, quantified and monitored. In order to take the right decision, during the credit process which begins with the application of the customer and includes the phases of determination of the customer's credibility, collateralization, loan configuration, approval and usage, monitoring and closing the exposure, all required information and documents intended to identify the customer are collected in a centralized database, with this information the customer's financial strength is analysed, credit risk analysis is done, are graded according to customer segment and activity fields and the information is kept updated by inquiring the customers. Before a loan is granted, it is ensured that risks are well-understood, sufficient evaluation has been done and after the loan is granted the loan is monitored, controlled and reported.

Credit risk is managed on a portfolio basis considering the risk/return balance and asset quality of the Bank in the scope of the principles specified in the credit risk policy documents. Furthermore, loan based assessment, allocation and monitoring are carried out within the framework of related processes by related units in the Credit Group. Credit proposals, on the basis of the determined amount and in the framework of levels of authority, are concluded after being evaluated by the Regional Offices, Loans units of Headquarter, if required by the credit committee and the board of directors. The credit approval authority can be transferred starting from the board of directors. The authorities of the Headquarter and Credit Regional Offices are notified in written and transfer of authority is done.



 

 

Each unit operating in credit risk management is responsible for identifying risks arising from its own process, activities and systems, informing senior management and taking necessary action to reduce risk level.

Risk management activities are conducted in accordance with the Bank's risk appetite and capacity by using risk measurement and management tools within the policies which is established by the board of directors.

In this context, organizational structure related to credit risk management and control functions are detailed below: Units within the scope of Credit Risk Management; Corporate and Special Loans, Commercial Loans, Featured Collections, Commercial Products Collection, Bank and Country Risk, Retail and SME Loans Risk Strategies, Retail and SME Loans Evaluation, Retail Products Collection, Risk Planning Monitoring and Reporting, Risk Analytics, Technology and Innovation, Market Risk and Credit Risk Control and Region Coordination.

In addition, decisions regarding the credit policy in the corporate governance framework are taken by the relevant committees. In this context, there are Corporate and Commercial Loans Risk Committee, Retail Loans Risk Committee, Risk Management Committee and Board of Risk Committee. Allocated limits and conditions that exceeding the limits with their usage, evaluations regarding major risks and non-performing loans with high risk, information regarding NPLs, the data regarding the portfolios of subsidiaries are reported to senior management on a regular basis.

The Risk Management measures, monitors and reports credit risks by using the Bank's probability of defaults obtained from the Bank's rating models, loss that is caused by defaulted customer and credit conversion factors. Bank's internal capital is calculated and adequacy is assesed by considering stress tests and scenario anaylsis. Also, the limits are determined for credit portfolios by considering optimum  risk return balance and credit concentrations are monitored.

For credit risk, on-site and centralized controls of guarantees and contract are carried out by employees of the Internal Control Center. In this context, it is implemented a strategy which covers all branches. Internal control activities are carried out under the control programs prepared for the designated checkpoints and methodologies.

4.10.3.1.2 Credit quality of consolidated assets



Gross carrying value in consolidated financial statements prepared as perTAS

Allowances/amortisation and impairments

Net values



Defaulted

Non-defaulted exposures

1

Loans

6,910,833

245,574,041

5,135,502

247,349,372

2

Debt securities

-

45,895,535

-

45,895,535

3

Off-balance sheet exposures

355,861

68,228,310

134,609

68,449,562

4

Total

7,266,694

359,697,886

5,270,111

361,694,469

4.10.3.1.3 Changes in stock of default loans and debt securities



Current Period

1

Defaulted loans and debt securities at end of the previous reporting period

6,090,168

2

Loans and debt securities defaulted since the last reporting period

4,227,196

3

Receivables back to non-defaulted status

-

4

Amounts written off

1,687,658

5

Other changes

1,718,873

6

Defaulted loans and debt securities at end of the reporting period

6,910,833

 



 

 

4.10.3.1.4 Additional information on credit quality of consolidated assets

4.10.3.1.4.1 Qualitative disclosures related to the credit quality of assets

Taking into consideration the general economic outlook, sector specific situations and possible regulation changes, the Bank determines the provision rates that will be applied and the collateral types that will be taken into account in the calculations; provided that those rates cannot be lower than what is determined in the related regulation. Related decisions are applied after the approval of the Bank's Risk Management Committee.   

A refinancing/restructuring refers to; extending a new loan for the purpose of repayment of a part or whole of the outstanding loans or related interest payments granted previously or, amending the conditions of such outstanding loans in order to facilitate the repayment capacity; due to current or foreseeable financial difficulties of the borrower or the related risk group.

4.10.3.1.4.2 Breakdown of exposures by geographical areas, industry and ageing

Disclosed under section 4.2 credit risk.

4.10.3.1.4.3     Exposures provisioned against by major regions and sectors

Current Period

Loans Under Follow-Up

Specific Provisions

Write-Offs

Domestic

5,699,448

4,437,990

1,078,118

European Union (EU) Countries

926,294

461,309

375,057

OECD Countries

108,053

75,525

7

Off-Shore Banking Regions

74,413

74,413

2,459

USA, Canada

26,114

20,446

6,800

Other Countries

76,511

65,819

225,217

Total

6,910,833

5,135,502

1,687,658

 

Current Period

Loans Under Follow-Up

Specific Provisions

Write-Offs

Agriculture

182,986

116,866

10,942

Farming and Stockbreeding

178,277

113,925

10,591

Forestry

2,340

1,728

205

Fishery

2,369

1,213

146

Manufacturing

1,086,460

710,335

413,201

Mining and Quarrying

76,432

56,906

122,351

Production

859,311

582,830

290,285

Electricity, Gas and Water

150,717

70,599

565

Construction

517,524

339,852

75,499

Services

2,054,471

1,222,595

346,090

Wholesale and Retail Trade

1,161,515

678,193

272,745

Accomodation and Dining

194,674

80,912

25,342

Transportation and Telecommunication

539,040

366,100

33,587

Financial Institutions

22,308

19,766

2,246

Real Estate and Rental Services

36,832

18,749

4,507

Professional Services

4,091

1,422

21

Educational Services

59,857

32,978

1,472

Health and Social Services

36,154

24,475

6,170

Others

3,069,392

2,745,854

841,926

Total

6,910,833

5,135,502

1,687,658

 



 

 

4.10.3.1.4.4 Ageing of past-due exposures

Current Period

Up to 3 Months

3-12 Months

1-3 Years

3-5 Years

5 Years and Over

Corporate and Commercial Loans

418,035

1,433,176

1,239,717

582,688

464,668

Retail Loans

260,473

516,265

562,037

149,034

196,804

Credit Cards

130,443

318,539

324,146

110,409

104,155

Others

3,942

27,888

55,434

10,334

2,646

Total

812,893

2,295,868

2,181,334

852,465

768,273

4.10.3.2 Consolidated credit risk mitigation

4.10.3.2.1 Qualitative disclosure on consolidated credit risk mitigation techniques

Parent bank assesses the cash flow of the activity or investment subject to credit as the primary repayment source during the credit assignment process.

Calculating the value of the collateral depends on margins determined according to market and FX risks. Standard margins in use throughout the Bank are specific to type of the collateral and changes  according to the currency of the collateral. 

If credit assignment is conditioned to a collateral extension, the data of the collaterals must be entered to the banking information system.  Operational transactions are handled by centralized Operation unit (ABACUS). During the credit utilization, compliance of all conditions between credit decision and credit utilization (such as collateral conditions) are controlled systematically.

The Bank monitors up to date value of the collaterals by type. Credit monitoring process involves the control of the balance between the value of the collateral and risk besides creditworthiness of the  customer.

The Bank's credit risk exposure and mitigation techniques used in order to reduce the exposure level are taken into account according to the principles stated in the related regulation. The Bank applies credit risk mitigation according to the comprehensive method that includes risk mitigation calculations considering the volatility-adjusted values of financial collaterals The standardized risk weights are applied to the rest of the loans and receivables that remained unprotected after credit risk mitigation techniques. Financial collaterals, that are composed of cash or similar assets and instruments of a high credit quality as well as real estate mortgages have been used in credit risk mitigation.

4.10.3.2.2 Consolidated credit risk mitigation techniques



Exposures unsecured: carrying amount as per TAS

Exposures secured by
collateral

Collateralized amount of exposures secured by collateral

Exposures secured by financial guarantees

Collateralized amount of exposures secured by financial guarantees

Exposures secured by credit derivatives

Collateralized amount of exposures secured by credit derivatives

1

Loans

195,545,999

51,803,373

42,649,778

-

-

-

-

2

Debt securities

 

45,895,535

 

-

 

-

 

-

 

-

 

-

 

-

3

Total

241,441,534

51,803,373

42,649,778

-

-

-

-

4

Of which defaulted

 

6,866,835

 

43,998

 

14,357

 

-

 

-

 

-

 

-

 



 

 

4.10.3.3 Consolidated credit risk under standardised approach

4.10.3.3.1 Qualitative disclosures on banks' use of external credit ratings under the standardised approach for credit risk

An international rating firm, Fitch Ratings' external risk ratings are used to determine the risk weights of the risk categories as per the Article 6 of the "Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks".

The international risk ratings are used for the exposures to central governments and central banks, whereas for central governments and central banks that are not rated by Fitch Ratings, the published country ratings as announced by the Organisation for Economic Cooperation and Development (OECD) are used.

According to the regulation on capital adequacy, external risk ratings are used only for the exposures to banks and brokerage houses and to corporates where the counterparties are resident in abroad, to determine their risk weights. Where the counterparties are domestic, the related exposures are included in the calculation of capital adequacy as unrated.

In the determination of risk weights; if a relevant rating is available then such rating, but if it is an unrated exposure then the rating available for the issuer is used.

Rating notes issued by Fitch Ratings are presented in the table below, as per credit quality levels and risk weights per risk classes:

Credit Quality Level

Fitch Ratings long term credit rating

 

Risk Classes

Exposures to

Central Governments or

Central Banks

Exposures to Banks and

Brokerage Houses

Exposures to

Corporates

Exposures with

Original

Maturities Less

Than 3 Months

Exposures with

Original

Maturities More

Than 3 Months

1

AAA to AA-

0%

20%

20%

20%

2

A+ to A-

20%

20%

50%

50%

3

BBB+ to BBB-

50%

20%

50%

100%

4

BB+ to BB-

100%

50%

100%

100%

5

B+ to B-

100%

50%

100%

150%

6

CCC+ and below

150%

150%

150%

150%

 



 

 

4.10.3.3.2 Consolidated credit risk exposure and credit risk mitigation techniques



Exposures before CCF and CRM

Exposures post-CCF and CRM

RWA and RWA density


Risk Classes

On-balance sheet amount

Off-balance sheet amount

On-balance sheet amount

Off-balance sheet amount

RWA

RWA density

1

Exposures to sovereigns and their central banks

62,991,190

978,372

62,991,190

312,694

12,214,626

19%

2

Exposures to regional and local governments

131,400

2,534

128,824

1,255

61,449

47%

3

Exposures to administrative bodies and non-commercial entities

62,244

5,646

62,244

1,884

64,128

100%

4

Exposures to multilateral development banks

190,237

-

190,237

-

55,402

29%

5

Exposures to international organizations

-

-

-

-

-

-

6

Exposures to banks and brokerage houses

22,550,426

14,968,656

18,321,242

2,249,912

8,408,466

41%

7

Exposures to corporates

109,256,649

53,142,207

107,264,656

21,288,372

125,080,583

97%

8

Retail exposures

62,900,760

41,762,190

62,488,339

3,636,124

49,592,183

75%

9

Exposures secured by residential property

19,318,279

151,697

19,313,597

77,622

6,786,927

35%

10

Exposures secured by commercial property

16,338,647

1,655,679

16,323,202

960,619

11,054,150

64%

11

Past-due items

1,065,373

1,363

1,064,645

-

884,208

83%

12

Exposures in high-risk categories

837,314

159,743

836,664

69,524

1,296,815

143%

13

Exposures in the form of bonds secured by mortgages

-

-

-

-

-

-

14

Short term exposures to banks, brokerage houses and corporates

-

-

-

-

-

-

15

Exposures in the form of collective investment undertakings

-

-

-

-

-

-

16

Shares

218,991

-

218,991

-

181,935

83%

17

Other exposures

9,494,987

-

9,494,987

-

6,410,522

68%

18

Total

305,356,497

112,828,087

298,698,818

28,598,006

222,091,394


 



 

 

4.10.3.3.3 Consolidated exposures by asset classes and risk weights


Regulatory portfolio

 

 

0%

 

 

10%

 

 

20%

35% secured by property mortgage

 

 

50%

 

 

75%

 

 

100%

 

 

150%

 

 

200%

 

 

Others

Total risk amount (post-CCF and CRM)

1

Exposures to sovereigns and their central banks

38,851,453

-

38,642

-

24,413,782

-

7

-

-

-

63,303,884

2

Exposures to regional and local government

-

-

11,970

-

118,109

-

-

-

-

-

130,079

3

Exposures to administrative bodies and non-commercial entities

-

-

-

-

-

-

64,128

-

-

-

64,128

4

Exposures to multilateral development banks

-

-

132,386

-

57,851

-

-

-

-

-

190,237

5

Exposures to international organizations

-

-

-

-

-

-

-

-

-

-

-

6

Exposures to banks and brokerage houses

-

-

6,476,701

-

13,962,653

-

131,800

-

-

-

20,571,154

7

Exposures to corporates

-

-

573,924

-

6,026,629

-

121,952,475

-

-

-

128,553,028

8

Retail exposures

-

-

630

-

3,265

66,120,568

-

-

-

-

66,124,463

9

Exposures secured by residential property

-

-

-

19,391,219

-

-

-

-

-

-

19,391,219

10

Exposures secured by commercial property

-

-

-

-

12,459,341

-

4,824,480

-

-

-

17,283,821

11

Past-due items

-

-

-

-

360,873

-

703,772

-

-

-

1,064,645

12

Exposures in high-risk categories

 

-

 

-

 

-

 

-

30,017

 

-

64,897

811,274

 

-

 

-

906,188

13

Exposures in the form of bonds secured by mortgages

-

-

-

-

-

-

-

-

-

-

-

14

Short term exposures to banks, brokerage houses and corporates

-

-

-

-

-

-

-

-

-

-

-

15

Exposures in the form of collective investment undertakings

-

-

-

-

-

-

-

-

-

-

-

16

Shares

37,057

-

-

-

-

-

181,934

-

-

-

218,991

17

Other exposures

3,082,509

-

2,444

-

-

-

6,410,034

-

-

-

9,494,987

18

Total

41,971,019

-

7,236,697

19,391,219

57,432,520

66,120,568

134,333,527

811,274

-

-

327,296,824

 



 

4.10.4    Consolidated counterparty credit risk

4.10.4.1 Qualitative disclosure on consolidated counterparty credit risk

Counterparty credit risk management policies include evaluating and monitoring risk developments, taking necessary measures, setting risk limits, ensuring that the risks remain within the limits, and establishing required reporting, control and audit mechanisms by using the methods aligned with both international standards and local regulations. The policies regarding counterparty credit risk measurement, monitoring, and limit settings are defined by the board of directors.

Counterparty credit risk arising from derivative transactions is periodically being monitored and reported by the Market Risk and Credit Risk Control units on product, country, counterparty and counterparty type basis.

International framework agreements (ISDA, CSA, GMRA, etc.) are being used through collateral and margin call mechanisms in order to mitigate the counterparty credit risk.

4.10.4.2 Consolidated counterparty credit risk (CCR) approach analysis



Replacement cost

Potential future exposure

EEPE(Effective Expected Positive Exposure)

Alpha used for computing regulatory EAD

EAD post-CRM

RWA

1

Standardised Approach -CCR (for derivatives)

4,220,220

1,802,817


1.4

6,013,287

3,165,331

2

Internal Model Method (for derivative financial instruments, repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions)



-

-

-

-

3

Simple Approach for credit risk mitigation (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions)





-

-

4

Comprehensive Approach for credit risk mitigation (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions)





1,936,086

594,068

5

Value-at-Risk (VaR) for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions





-

-

6

Total






3,759,399

 

 

 

4.10.4.3 Consolidated capital requirement for credit valuation adjustment (CVA)



 

EAD post-CRM

RWA


Total portfolios subject to the Advanced CVA capital obligation

-

-

1

(i) VaR component (including the 3×multiplier)


-

2

(ii) Stressed VaR component (including the 3×multiplier)


-

3

All portfolios subject to the Standardised CVA capital obligation

6,013,287

1,921,460

4

Total subject to the CVA capital obligation

6,013,287

1,921,460

 

4.10.4.4 Consolidated CCR exposures by risk class and risk weights

              Risk weight

 

 

Regulatory portfolio

0%

10%

20%

50%

75%

100%

150%

Other

Total credit exposure

Exposures to sovereigns and their central banks

177,436

-

-

-

-

-

-

-

177,436

Exposures to regional and local governments

-

-

-

-

-

-

-

-

-

Exposures to administrative bodies and non-commercial entities

-

-

-

-

-

4

-

-

4

Exposures to multilateral development banks

413,954

-

-

-

-

-

-

-

413,954

Exposures to international organizations

-

-

-

-

-

-

-

-

-

Exposures to banks and brokerage houses

-

-

1,102,626

5,400,596

-

1,116

-

-

6,504,338

Exposures to corporates

-

-

546

20,882

4

769,901

-

-

791,333

Retail exposures

-

-

-

-

48,608

-

-

-

48,608

Exposures secured by property mortgages

-

-

-

-

-

-

-

-

-

Past-due items

-

-

-

-

-

-

-

-

-

Exposures in high-risk categories

-

-

-

-

-

-

13,700

-

13,700

Exposures in the form of bonds secured by mortgages

-

-

-

-

-

-

-

-

-

Securitization positions

-

-

-

-

-

-

-

-

-

Short term exposures to banks, brokerage houses and corporates

-

-

-

-

-

-

-

-

-

Exposures in the form of collective investment undertakings

-

-

-

-

-

-

-

-

-

Shares

-

-

-

-

-

-

-

-

-

Other exposures

-

-

-

-

-

-

-

-

-

Other assets

-

-

-

-

-

-

-

-

-

Total

591,390

-

1,103,172

5,421,478

48,612

771,021

13,700

-

7,949,373

 

 



 

 

4.10.4.5 Collaterals for consolidated CCR


Collateral for derivative transactions

Collateral for other transactions


Fair value of collateral received

Fair value of collateral given

Fair value of collateral received

Fair value of collateral given


Segregated

Unsegregated

Segregated

Unsegregated

Cash-domestic currency

4,944

-

-

-

8,276,773

26,027

Cash-foreign currency

4,807

-

-

-

5,330,999

-

Domestic sovereign debts

-

-

-

-

26,027

13,342,612

Other sovereign debts

-

-

-

-

-

655,413

Government agency debts

-

-

-

-

-

-

Corporate debts

-

-

-

-

-

-

Equity securities

-

-

-

-

-

-

Other collateral

-

-

-

-

-

-

Total

9,751

-

-

-

13,633,799

14,024,052

4.10.4.6 Consolidated credit derivatives


Protection bought

Protection sold

Notionals



     Single-name credit default swaps

87,825

-

     Index credit default swaps

-

-

     Total return swaps

-

7,026,000

     Credit options

-

-

     Other credit derivatives

-

-

Total Notionals

87,825

7,026,000

Fair Values



     Positive fair values (asset)

215

6,677

     Negative fair values (liability)

-

(401,821)

4.10.5    Consolidated securitisations

None.

4.10.6    Consolidated market risk

4.10.6    Consolidated market risk

4.10.6.1 Qualitative disclosure on consolidated market risk

Market risk is managed in accordance with the strategics and policies defined by the Bank. The Bank takes economic climate, market and liquidity conditions and their effects on market risk, the structure of portfolio subject to market risk, the sufficiency of the Bank's definition, measurement, evaluation, monitoring, reporting, control and mitigation of market risk and the availability of the related processes into account while defining the market risk management. Market risk strategy and policies are reviewed by the board of directors and related top management by considering  financial performance, capital required for market risk, and the existing market developments. Market risk strategy for internal use, implementation fundamentals and procedures are being developed on bank-only and consolidated level in consideration of the size and complexity of the operations.

Market risk is managed through measuring the risks in parallel with the international standards, setting the limits, capital reserving and additionally through mitigating via hedging transactions.



 

 

Market Risk Function under Market Risk and Credit Risk Control Department monitors the activities of Treasury Department via risk reports and the limits approved by the board of directors.

Market Risk, which is defined as the risk arising from the price fluctuations in balance sheet and off-balance sheet  trading positions, is being calculated and reported daily via Value at Risk (VaR) Model.

4.10.6.2 Consolidated market risk under standardised approach

 

 

RWA



Current Period

Prior Period(*)


Outright products

5,698,712

4,368,788

1

          Interest rate risk (general and specific)

1,774,024

1,357,912

2

          Equity risk (general and specific)

144,125

150,338

3

          Foreign exchange risk

3,249,988

2,667,300

4

          Commodity risk

530,575

193,238


Options

437,663

2,458,138

5

          Simplified approach

-

-

6

          Delta-plus method

437,663

2,458,138

7

          Scenario approach

-

-

8

Securitisation

-

-

9

Total

6,136,375

6,826,926

(*)   Counterparty credit risk amounting to TL 601,737 thousands subject to market risk is not included.

4.10.7    Consolidated operational risk

The value at operational risk is calculated according to the basic indicator approach as per the Article 14 of "Regulation regarding Measurement and Assessment of Capital Adequacy Ratios of Banks".

The annual gross income is composed of net interest income and net non-interest income after deducting realised gains/losses from the sale of securities available-for-sale and held-to-maturity, extraordinary income and income derived from insurance claims at year-end.

Current Period

31 December

2013

31 December

2014

31 December

2015

Total/ No. of Years of Positive Gross Income

Rate (%)

Total

Gross Income

10,180,473

11,163,774

12,410,791

11,251,679

15

1,687,752

Value at Operational Risk   (Total x % 12.5)






21,096,899

 

Prior Period

31 December

2012

31 December

2013

31 December

2014

Total/ No. of Years of Positive Gross Income

Rate (%)

Total

Gross Income

8,588,400

10,180,473

11,163,774

9,977,549

15

1,496,632

Value at Operational Risk   (Total x % 12.5)






18,707,904

4.10.8    Consolidated banking book interest rate risk

4.10.8.1           Nature of interest rate risk resulting from banking book, major assumptions on early repayment of loans and movements in deposits other than term deposits and frequency of measuring interest rate risk

The interest rate risk resulting from the banking book is assessed in terms of repricing risk, yield-curve risk, base risk and option risk, measured as per international standards and managed through limitations and mitigations through hedging transactions.

The interest sensitivity of assets, liabilities and off balance-sheet items are evaluated at the Weekly Review Committee and Monthly Asset-Liability Committee meetings considering also the market developments.



 

The measurement process of interest rate risk resulting from the banking book, is designed and managed by the Bank on a bank-only basis to include the interest rate positions defined as banking book by the Bank and to consider the relevant repricing and maturity data.

Within the scope of monitoring the re-pricing risk arising from maturity mismatch, the sensitivity of the durations/gap, economic value, economic capital, net interest income, earnings at risk, market price of securities portfolio are measured and the internal early warning and limit levels in this context are monitored and reported regularly. Calculated risk metrics and generated reports are used in the management of the balance sheet interest risk under the supervision of the Asset and Liability Committee. In the said analyses, the present value and the net interest income are calculated over the cash flows of the sensitive assets and liability items by using the yield curves constructed by using the market interest rates. For non-matured products, maturity is determined based on interest rate determination frequency and customer behaviour. These results are supported by periodic sensitivities and scenario analyses against fluctuations that may be experienced in the markets.

The interest rate risk resulting from the banking book is measured legally as per the "Regulation on Measurement and Evaluation of Interest Rate Risk Resulting from the Banking Book as per Standard Shock Method" published in the Official Gazette no.28034 dated 23 August 2011, and the legal limit as per this measurement is monitored and reported monthly. The capital level is maintained considering the interest rate risk resulting from the banking book.

The interest rate risk on the interest-rate-sensitive financial instruments of the trading portfolio is evaluated as part of the market risk.

Branches and lines of business are eliminated from interest rate risk through the transfer pricing system and these risks are transferred to the Asset and Liability Management Department (ALM) and managed by ALM in a central structure.

4.10.8.2  Economic value differences resulted from interest rate instabilities calculated on a bank-only basis according to Regulation on Measurement and Evaluation of Interest Rate Risk Resulted from Banking Book as per Standard Shock Method

 

Current Period

Shocks Applied (+/- basis points)

Gains/Losses

Gains/Equity-Losses/Equity

 

Type of Currency

 

1

TL

(+) 500 bps

(4,209,703)

(11.18)%

 

2

TL

(-) 400 bps

4,052,171

10.76%

 

3

USD

(+) 200 bps

(810,330)

(2.15)%

 

4

USD

(-) 200 bps

1,055,840

2.80%

 

5

EUR

(+) 200 bps

(14,342)

(0.04)%

 

6

EUR

(-) 200 bps

(44,364)

(0.12)%

 


Total (of negative shocks) 

5,063,647

13.44%



Total (of positive shocks) 

(5,034,375)

(13.37)%


 

 

Prior Period

Shocks Applied (+/- basis points)

Gains/Losses

Gains/Equity-Losses/Equity

 

Type of Currency

 

1

TL

(+) 500 bps

(3,581,363)

%(10.83)

 

2

TL

(-) 400 bps

3,477,727

%10.51

 

3

USD

(+) 200 bps

(766,486)

%(2.32)

 

4

USD

(-) 200 bps

1,031,044

%3.12

 

5

EUR

(+) 200 bps

(52,426)

%(0.16)

 

6

EUR

(-) 200 bps

50,223

%0.15

 


Total (of negative shocks) 

4,558,994

%13.78



Total (of positive shocks) 

(4,400,275)

%(13.30)


 



 

4.10.9    Remuneration policy

4.10.9.1 Qualitative disclosures regarding remuneration policies

4.10.9.1.1 Disclosures related with Remuneration Committee

The Bank's Remuneration Committee is comprised of two non-executive directors. The committee has convened for once during the year. The duties and responsibilities of the Committee include the following:

·   To conduct the necessary monitoring and audit process in order to ensure that the remuneration policy and practices are implemented in accordance with the related laws and regulations and risk management principles;

·   To review and if necessary, revise the remuneration policy at least once a year in order to ensure its compliance with the laws and regulations or market practices in Turkey;

·   To determine and approve remuneration packages of the executive and non-executive Board of Directors, Chief Executive Officer and Executive Vice Presidents;

·   To follow up the revision requirements of the policies, procedures and regulations related with its areas of responsibility and to take actions in order to ensure that they are kept updated.

The Bank has received consultancy service from Willis Towers Watsons company within the framework of the activities for compliance with the Guidelines on Sound Remuneration Practices in Banks.

The fundamental principles of the remuneration policy are applicable for all bank employees.

The bank board members, senior management and the bank staff deemed to perform the functions having material impact on the bank's risk profile are considered as identified staff; and by the end of 2016, the number of identified staff is 29.

4.10.9.1.2 Information on the design and structure of remuneration process

The Bank relies on the following values while managing its Remuneration Policy. These values are considered in all compensation practices.

a.  Fair

b.  Transparent

c.  Based on measurable and balanced performance targets

d.  Encouraging sustainable success

e.  In line with the Bank Risk Management Principles

The main objective of the Remuneration Policy is to maintain the internal and external balances in the remuneration structure. Internal balance is ensured with the principles of "equal pay for equal work" and performance-based remuneration".  As for external balance, the data obtained from employee reward and benefit researches conducted by independent research organizations are taken into account.

In the meeting dated 14 December 2016, the Remuneration Committee evaluated its decisions previously taken with respect to remuneration of the senior managers and members of the board of directors considering the provisions of the Guidelines on Sound Remuneration Practices in Banks.

Increases in the remuneration of employees working in the units responsible for internal systems are determined depending on the basic rate of increase specified by the Bank and their personal performances. In the variable remuneration, only the performance criteria associated with their personal performance or the performance of the unit that they work in are taken into account independently of the performance of the business units that they control.



 

 

4.10.9.1.3 Evaluation about how the bank's remuneration processes take the current and future risks into account

The Bank follows the Risk Management Principles while implementing the remuneration processes. It adopts the remuneration policies that are in line with Bank's long-term objectives and risk management structures and avoiding excessive risk-taking. 

4.10.9.1.4 Evaluation about how the Bank associates variable remunerations with performance

In the association of variable remunerations with performance, various indicators considered among financial and non-financial performance criteria specified by the Bank such as return on regulatory capital, efficiency, profitability, customer satisfaction (NTS), digital sales are taken into account.

In the variable remuneration for the identified staff, personal performance criteria, the Bank's performance criteria and BBVA Group's performance criteria are collectively taken into account. The weightings of such performances taken into account as such may vary according to the position of the identified staff member.

In case of occurrence of risky situations regarding capital adequacy or if and when necessary, Bank may pursue a more conservative policy in relation to all remuneration issues, particularly regarding variable remunerations. In this context, methodological changes such as deferral, retention, malus and clawback may be applied in relation to variable remunerations in accordance with the principles set out by the applicable laws.

4.10.9.1.5 Evaluation about the bank's methods to adjust remunerations according to long-term performance

Regarding variable remunerations of identified staff, it has been adopted based on the principles in the "Guidelines on Sound Remuneration Practices in Banks" that 40% of variable remunerations will be deferred for at least 3 years and at least 50% of it will be paid in non-cash instruments.

The same rules apply for the ratios of deferral for all identified staff members regarding their variable remunerations. Remuneration Committee decided on that variable remuneration of identified staff is subject to cancellation and clawback.

4.10.9.1.6 Evaluation about the instruments used by the bank for variable remunerations and the purposes of use of such instruments

The variable remunerations of identified staff are paid using cash and share-linked non-cash instruments. Considering the principles in the "Guidelines on Sound Remuneration Practices in Banks" variable remunerations of identified staff are paid both with cash and non-cash(share-linked) instruments. Regarding variable remunerations of identified staff for the financial period of 2016,  Banco Bilbao Vizcaya Argentaria S.A. shares are taken as referance for payments based on non-cash instruments.

The type and weight of non-cash instruments used in payment of variable remuneration are same for all identified staff.



 

5         Disclosures and Footnotes on Consolidated Financial Statements

5.1         Consolidated assets

5.1.1      Cash and balances with Central Bank

         

Current Period

Prior Period


TL

FC

TL

FC

   Cash in TL/Foreign Currency

1,357,697

848,206

1,313,085

886,047

   Central Bank of Turkey

5,366,015

15,500,506

946,596

21,896,042

   Others

-

879,050

-

244,867

   Total

6,723,712

17,227,762

2,259,681

23,026,956

Balances with the Central Bank of Turkey


Current Period

Prior Period


TL

FC

TL

FC

   Unrestricted Demand Deposits

5,366,015

155

946,596

1,556,782

   Unrestricted Time Deposits

-

38

-

5

   Restricted Time Deposits

-

15,500,313

-

20,339,255

   Total

5,366,015

15,500,506

946,596

21,896,042

 

The reserve deposits kept as per the Communique no. 2005/1 "Reserve Deposits" of the Central Bank of Turkey in Turkish Lira, foreign currencies and gold, are included in the table above.

5.1.2      Financial assets at fair value through profit/loss

5.1.2.1   Financial assets at fair value through profit/loss subject to repurchase agreements and provided as collateral/blocked


Current Period

Prior Period

TL

FC

TL

FC

Collateralised/Blocked Assets

13,777

-

11,930

-

Assets Subject to Repurchase Agreements

3,983

-

8,814

-

Total

17,760

-

20,744

-

5.1.2.2   Positive differences on  derivative financial assets held for trading


Current Period

Prior Period

TL

FC

TL

FC

    Forward Transactions

249,419

51,101

242,997

45,551

    Swap Transactions

1,985,329

803,335

373,851

457,241

    Futures

3

1,097

126

34

    Options

426,836

92,514

442,563

106,896

    Others

-

4,079

35,576

20,261

    Total

2,661,587

952,126

1,095,113

629,983

5.1.2.3   Financial assets at fair value through profit/loss

None.



 

5.1.3      Banks

 

Current Period

Prior Period

TL

FC

TL

FC

   Banks





     Domestic banks

823,557

831,980

880,565

857,677

     Foreign banks

390,952

14,834,555

44,865

14,523,059

     Foreign headoffices and branches

-

-

-

-

   Total

1,214,509

15,666,535

925,430

15,380,736

Due from foreign banks


Unrestricted Balances

Restricted Balances

Current Period

Prior Period

Current Period

Prior Period

 EU Countries

6,369,548

5,362,730

7,046,561

7,174,776

 USA, Canada

638,547

1,341,532

415,053

314,902

 OECD Countries (1)

17,165

14,604

-

-

 Off-shore Banking Regions

570,815

222,589

96,147

65,058

 Others

71,671

71,733

-

-

 Total

7,667,746

7,013,188

7,557,761

7,554,736

(1)     OECD countries other than the EU countries, USA and Canada

The placements at foreign banks include blocked accounts amounting TL 7,557,761 thousands (31 December 2015: TL 7,554,736 thousands) of which TL 116,841 thousands (31 December 2015: TL 96,799 thousands) and TL 96,147 thousands (31 December 2015: TL 65,058 thousands) are kept at the central banks of Malta and Turkish Republic of Northern Cyprus, respectively as reserve deposits and TL 7,344,773 thousands (31 December 2015: TL 7,392,879 thousands) as collateral against funds borrowed at various banks.

Furthermore, there are restricted deposits at various domestic banks amounting TL 254,130 thousands (31 December 2015: TL 153,035 thousands) as required for insurance activities.

5.1.4      Financial assets available-for-sale

5.1.4.1             Financial assets subject to repurchase agreements and provided as collateral/blocked


Current Period

Prior Period

TL

FC

TL

FC

   Collateralised/Blocked Assets

2,976,848

21,803

2,170,335

30,909

   Assets subject to Repurchase Agreements

4,306,605

655,413

10,879,108

1,220,819

   Total

7,283,453

677,216

13,049,443

1,251,728

 

5.1.4.2   Details of financial assets available-for-sale 


Current Period

     Prior Period

Debt Securities

22,639,523

23,594,194

   Quoted at Stock Exchange

22,067,470

22,960,201

   Unquoted at Stock Exchange

572,053

633,993

Common Shares/Investment Fund

174,953

83,886

   Quoted at Stock Exchange

82,203

7,669

   Unquoted at Stock Exchange

92,750

76,217

Value Increase/Impairment Losses (-)

1,168,972

1,077,690

Total

23,983,448

24,755,770



 

5.1.5      Loans

5.1.5.1   Loans and advances to shareholders and employees of the Bank


Current Period

Prior Period

Cash Loans

Non-Cash Loans

Cash Loans

Non-Cash Loans

 Direct Lendings to Shareholders

-

168,241

146

408,529

     Corporates

-

168,241

146

408,529

     Real Persons

-

-

-

-

 Indirect Lendings to Shareholders

2,204,037

474,103

2,113,052

263,954

 Loans to Employees

293,178

146

250,323

88

 Total

2,497,215

642,490

2,363,521

672,571

5.1.5.2   Loans and other receivables classified in groups I and II including contracts with revised terms

 

Current Period

Performing Loans and Other Receivables

Loans and Other Receivables under Follow-Up

Loans and Other Receivables (Total) (*)

Loans and Receivables with Revised Contract Terms

Loans and Other Receivables (Total)

Loans and Receivables with Revised Contract Terms

 

Cash Loans

Extension of Repayment Plan

Other Changes

Extension of Repayment Plan

Other Changes

 Loans

190,302,117

3,654,915

535,712

9,773,607

4,228,489

909,186

     Working Capital Loans

25,036,594

475,760

31,611

1,188,910

512,795

175,499

     Export Loans

10,392,159

136,762

-

293,705

109,642

23,312

     Import Loans

273,584

-

-

83,269

-

-

     Loans to Financial Sector

6,324,341

14,517

-

48

-

-

     Consumer Loans

43,381,988

2,359,246

47,346

1,957,402

649,987

55,300

     Credit Cards

18,485,865

-

428,089

522,710

-

280,601

     Others

86,407,586

668,630

28,666

5,727,563

2,956,065

374,474

 Specialization Loans

-

1,252

12,739

-

-

-

 Other Receivables

-

-

-

-

-

-

 Total

190,302,117

3,656,167

548,451

9,773,607

4,228,489

909,186

(*)   The loans granted to the shareholder of a strategically important company operating in the telecommunication sector amounting to USD 951,407,360.63 and EUR 7,656,878 are classified under "Performing Loans and Other Receivables". Discusssions between the shareholders of the company, creditor banks and related sovereign institutions have started regarding restructuring of loans granted including a possible change in shareholder structure and a positive outcome of these discussions is expected.

 

Prior Period

Performing Loans and Other Receivables

Loans and Other Receivables under Follow-Up

Loans and Other Receivables (Total)

Loans and Receivables with Revised Contract Terms

Loans and Other Receivables (Total)

Loans and Receivables with Revised Contract Terms

 

Cash Loans

Extension of Repayment Plan

Other Changes

Extension of Repayment Plan

Other Changes

 Loans

162,686,478

2,291,261

276,436

7,919,477

3,230,745

629,728

     Working Capital Loans

17,872,912

180,074

247

946,741

358,070

85,849

     Export Loans

7,800,944

9,384

-

143,651

67,004

35,188

     Import Loans

556,941

-

-

-

-

-

     Loans to Financial Sector (*)

6,982,885

58,193

-

132

-

-

     Consumer Loans

37,734,044

1,646,397

41,238

1,785,596

625,868

54,626

     Credit Cards

16,489,862

-

233,976

590,080

-

406,106

     Others

75,248,890

397,213

975

4,453,277

2,179,803

47,959

 Specialization Loans

-

-

-

-

-

-

 Other Receivables

-

-

-

-

-

-

 Total

162,686,478

2,291,261

276,436

7,919,477

3,230,745

629,728

(*)   Loans amounting to TL 198,118 thousands included under Financial Assets at Fair Value through Profit/Loss in the accompanying consolidated financial statements are presented above under "Loans to Financial Sector".



 

As of 31 December 2016, loans amounting to TL 5,269,501 thousands (31 December 2015: TL 5,781,904 thousands) are benefited as collateral under funding transactions.

Collaterals received for loans under follow-up

 Current Period

Corporate / Commercial Loans

Consumer

Loans

Credit Cards

Total

 Loans Collateralized by Cash

47,618

4,620

-

52,238

 Loans Collateralized by Mortgages

4,322,929

974,409

-

5,297,338

 Loans Collateralized by Pledged Assets

1,043,152

69,944

-

1,113,096

 Loans Collateralized by Cheques and Notes

12,488

560,040

-

572,528

 Loans Collateralized by Other Collaterals

1,376,107

35,134

-

1,411,241

 Unsecured Loans

491,201

313,255

522,710

1,327,166

 Total

7,293,495

1,957,402

522,710

9,773,607

 

 Prior Period

Corporate / Commercial Loans

Consumer

Loans

Credit Cards

Total

 Loans Collateralized by Cash

17,538

2,356

-

19,894

 Loans Collateralized by Mortgages

2,863,780

690,628

-

3,554,408

 Loans Collateralized by Pledged Assets

779,317

59,788

-

839,105

 Loans Collateralized by Cheques and Notes

86,223

574,200

-

660,423

 Loans Collateralized by Other Collaterals

1,420,354

55,544

-

1,475,898

 Unsecured Loans

376,589

403,080

590,080

1,369,749

 Total

5,543,801

1,785,596

590,080

7,919,477

Delinquency periods of loans under follow-up

 Current Period

Corporate /

Commercial Loans

Consumer Loans

Credit Cards

Total

 31-60 days

598,949

745,107

194,622

1,538,678

 61-90 days

164,408

287,597

57,501

509,506

 Other

6,530,138

924,698

270,587

7,725,423

 Total

7,293,495

1,957,402

522,710

9,773,607

 

Prior Period

Corporate /

Commercial Loans

Consumer Loans

Credit Cards

Total

 31-60 days

205,542

638,582

152,905

997,029

 61-90 days

62,063

237,112

46,294

345,469

 Other

5,276,196

909,902

390,881

6,576,979

 Total

5,543,801

1,785,596

590,080

7,919,477

Loans and other receivables with extended payment plans

Current Period

Performing Loans and Other Receivables

Loans and Other Receivables under Follow-up

No. of Extensions

1 or 2 times

3,313,489

4,074,970

3, 4 or 5 times

108,157

115,311

Over 5 times

234,521

38,208

Total

3,656,167

4,228,489

 



 

 

Prior Period

Performing Loans and Other Receivables

Loans and Other Receivables under Follow-up

No. of Extensions

1 or 2 times

2,075,566

2,931,843

3, 4 or 5 times

113,500

282,995

Over 5 times

102,195

15,907

Total

2,291,261

3,230,745

 

Current Period

Performing Loans and Other Receivables

Loans and Other Receivables under Follow-up

Extention Periods

0 - 6 months

361,795

722,811

6 - 12 months

442,831

235,537

1 - 2 years

1,464,535

315,417

2 - 5 year

1,221,799

1,753,567

5 years and over

165,207

1,201,157

Total

3,656,167

4,228,489

 

Prior Period

Performing Loans and Other Receivables

Loans and Other Receivables under Follow-up

Extention Periods

0 - 6 months

415,294

568,609

6 - 12 months

384,555

149,541

1 - 2 years

906,567

393,138

2 - 5 year

518,517

1,595,093

5 years and over

66,328

524,364

Total

2,291,261

3,230,745

 

5.1.5.3   Maturity analysis of cash loans


Performing Loans and Other Receivables

Loans under Follow-Up and Other Receivables

 

 

 

Current Period

Loans and Other Receivables

Loans and Receivables with Revised Contract Terms

Loans and Other Receivables

Loans and Receivables with Revised Contract Terms

 Short-Term Loans

58,449,317

727,414

1,572,624

628,479

     Loans

58,449,317

727,414

1,572,624

628,479

     Specialization Loans

-

-

-

-

     Other Receivables

-

-

-

-

 Medium and Long-Term Loans

131,852,800

3,477,204

8,200,983

4,509,196

     Loans

131,852,800

3,477,204

8,200,983

4,509,196

     Specialization Loans

-

-

-

-

     Other Receivables

-

-

-

-

 Total

190,302,117

4,204,618

9,773,607

5,137,675

 

 

 

 

 

 

 

 

 


Performing Loans and Other Receivables

Loans under Follow-Up and Other Receivables

 

 

 

Prior Period

Loans and Other Receivables

Loans and Receivables with Revised Contract Terms

Loans and Other Receivables

Loans and Receivables with Revised Contract Terms

 Short-Term Loans

51,817,627

605,695

1,127,976

602,501

     Loans

51,817,627

605,695

1,127,976

602,501

     Specialization Loans

-

-

-

-

     Other Receivables

-

-

-

-

 Medium and Long-Term Loans

110,868,851

1,962,002

6,791,501

3,257,972

     Loans

110,868,851

1,962,002

6,791,501

3,257,972

     Specialization Loans

-

-

-

-

     Other Receivables

-

-

-

-

 Total

162,686,478

2,567,697

7,919,477

3,860,473

 

 



 

5.1.5.4   Consumer loans, retail credit cards, personnel loans and personnel credit cards

Current Period

Short-Term

Medium and Long-Term

Total

  Consumer Loans - TL

745,039

41,174,705

41,919,744

     Housing Loans

29,927

21,414,214

21,444,141

     Automobile Loans

66,063

2,133,790

2,199,853

     General Purpose Loans

649,049

17,626,701

18,275,750

     Others

-

-

-

  Consumer Loans - FC-indexed

188

172,014

172,202

     Housing Loans

188

171,585

171,773

     Automobile Loans

-

2

2

     General Purpose Loans

-

427

427

     Others

-

-

-

  Consumer Loans - FC

203,934

2,338,334

2,542,268

     Housing Loans

2,953

1,180,029

1,182,982

     Automobile Loans

117

12,158

12,275

     General Purpose Loans

8,745

838,004

846,749

     Others

192,119

308,143

500,262

  Retail Credit Cards - TL

15,172,949

775,677

15,948,626

     With Installment

7,403,316

775,677

8,178,993

     Without Installment

7,769,633

-

7,769,633

  Retail Credit Cards - FC

88,081

108,172

196,253

     With Installment

16

-

16

     Without Installment

88,065

108,172

196,237

  Personnel Loans - TL

21,508

91,980

113,488

     Housing Loan

-

1,165

1,165

     Automobile Loans

-

90

90

     General Purpose Loans

21,508

90,725

112,233

     Others

-

-

-

  Personnel Loans - FC-indexed

-

378

378

     Housing Loans

-

378

378

     Automobile Loans

-

-

-

     General Purpose Loans

-

-

-

     Others

-

-

-

  Personnel Loans - FC

1,347

66,774

68,121

     Housing Loans

75

27,834

27,909

     Automobile Loans

-

-

-

     General Purpose Loans

204

31,985

32,189

     Others

1,068

6,955

8,023

  Personnel Credit Cards - TL

106,354

1,060

107,414

     With Installment

43,217

1,060

44,277

     Without Installment

63,137

-

63,137

  Personnel Credit Cards - FC

1,727

2,052

3,779

     With Installment

-

-

-

     Without Installment

1,727

2,052

3,779

  Deposit Accounts- TL (Real Persons)

523,189

-

523,189

  Deposit Accounts- FC (Real Persons)

-

-

-

  Total

16,864,316

44,731,146

61,595,462

 



 

Prior Period

Short-Term

Medium and Long-Term

Total

  Consumer Loans - TL

686,529

36,127,574

36,814,103

     Housing Loans

25,062

18,582,778

18,607,840

     Automobile Loans

37,616

1,522,036

1,559,652

     General Purpose Loans

623,722

16,022,760

16,646,482

     Others

129

-

129

  Consumer Loans - FC-indexed

-

170,849

170,849

     Housing Loans

-

168,194

168,194

     Automobile Loans

-

2

2

     General Purpose Loans

-

2,653

2,653

     Others

-

-

-

  Consumer Loans - FC

240,634

1,642,295

1,882,929

     Housing Loans

2,222

767,902

770,124

     Automobile Loans

22

7,551

7,573

     General Purpose Loans

5,065

714,582

719,647

     Others

233,325

152,260

385,585

  Retail Credit Cards - TL

14,279,715

566,447

14,846,162

     With Installment

6,850,008

566,447

7,416,455

     Without Installment

7,429,707

-

7,429,707

  Retail Credit Cards - FC

65,391

97,835

163,226

     With Installment

2,685

-

2,685

     Without Installment

62,706

97,835

160,541

  Personnel Loans - TL

17,241

74,439

91,680

     Housing Loan

-

1,055

1,055

     Automobile Loans

-

86

86

     General Purpose Loans

17,241

73,298

90,539

     Others

-

-

-

  Personnel Loans - FC-indexed

141

330

471

     Housing Loans

-

330

330

     Automobile Loans

-

-

-

     General Purpose Loans

141

-

141

     Others

-

-

-

  Personnel Loans - FC

1,082

61,862

62,944

     Housing Loans

137

22,904

23,041

     Automobile Loans

-

-

-

     General Purpose Loans

238

32,620

32,858

     Others

707

6,338

7,045

  Personnel Credit Cards - TL

92,376

460

92,836

     With Installment

37,692

460

38,152

     Without Installment

54,684

-

54,684

  Personnel Credit Cards - FC

804

1,586

2,390

     With Installment

86

-

86

     Without Installment

718

1,586

2,304

  Deposit Accounts- TL (Real Persons)

496,664

-

496,664

  Deposit Accounts- FC (Real Persons)

-

-

-

  Total

15,880,577

38,743,677

54,624,254

 



 

 

5.1.5.5   Installment based commercial loans and corporate credit cards

Current Period

Short-Term

Medium and Long-Term

Total

  Installment-based Commercial Loans - TL

1,767,307

11,094,610

12,861,917

     Real Estate Loans

3,262

831,376

834,638

     Automobile Loans

107,647

2,174,041

2,281,688

     General Purpose Loans

1,656,398

8,089,193

9,745,591

     Others

-

-

-

  Installment-based Commercial Loans - FC-indexed

264,798

2,405,434

2,670,232

     Real Estate Loans

-

72,529

72,529

     Automobile Loans

8,927

730,518

739,445

     General Purpose Loans

255,871

1,602,387

1,858,258

     Others

-

-

-

  Installment-based Commercial Loans - FC

868,851

1,720,464

2,589,315

     Real Estate Loans

-

637

637

     Automobile Loans

42

14,356

14,398

     General Purpose Loans

668

71,464

72,132

     Others

868,141

1,634,007

2,502,148

  Corporate Credit Cards - TL

2,687,757

53,475

2,741,232

     With Installment

1,279,033

53,475

1,332,508

     Without Installment

1,408,724

-

1,408,724

  Corporate Credit Cards - FC

11,271

-

11,271

     With Installment

176

-

176

     Without Installment

11,095

-

11,095

  Deposit Accounts- TL (Corporates)

881,614

-

881,614

  Deposit Accounts- FC (Corporates)

-

-

-

  Total

6,481,598

15,273,983

21,755,581

 



 

 

Prior Period

Short-Term

Medium and Long-Term

Total

  Installment-based Commercial Loans - TL

1,335,639

9,681,444

11,017,083

     Real Estate Loans

3,237

725,187

728,424

     Automobile Loans

88,500

1,968,503

2,057,003

     General Purpose Loans

1,243,902

6,987,754

8,231,656

     Others

-

-

-

  Installment-based Commercial Loans - FC-indexed

160,480

1,885,722

2,046,202

     Real Estate Loans

369

53,546

53,915

     Automobile Loans

3,355

542,030

545,385

     General Purpose Loans

156,756

1,290,146

1,446,902

     Others

-

-

-

  Installment-based Commercial Loans - FC

785,391

1,455,176

2,240,567

     Real Estate Loans

-

925

925

     Automobile Loans

84

12,304

12,388

     General Purpose Loans

76

33,446

33,522

     Others

785,231

1,408,501

2,193,732

  Corporate Credit Cards - TL

1,963,886

3,750

1,967,636

     With Installment

953,402

3,750

957,152

     Without Installment

1,010,484

-

1,010,484

  Corporate Credit Cards - FC

7,692

-

7,692

     With Installment

61

-

61

     Without Installment

7,631

-

7,631

  Deposit Accounts- TL (Corporates)

831,746

-

831,746

  Deposit Accounts- FC (Corporates)

-

-

-

  Total

5,084,834

13,026,092

18,110,926

5.1.5.6   Allocation of loans by customers

            

Current Period

Prior Period

 Public Sector

792,965

866,521

 Private Sector (*)

199,282,759

169,739,434

 Total

200,075,724

170,605,955

(*)     As of 31 December 2015, loans amounting to TL 198,118  thousands (31 December 2016: -) included under Financial Assets at Fair Value through Profit/Loss in the accompanying consolidated financial statements are presented above under "Private Sector".

5.1.5.7    Allocation of domestic and foreign loans


Current Period

Prior Period

 Domestic Loans

185,557,687

159,973,425

 Foreign Loans (*)

14,518,037

10,632,530

 Total

200,075,724

170,605,955

(*)   As of 31 December 2015, loans amounting to TL 198,118  thousands (31 December 2016: -) included under Financial Assets at Fair Value through Profit/Loss in the accompanying consolidated financial statements are presented above under "Foreign Loans".



 

5.1.5.8    Loans to associates and affiliates


Current Period

Prior Period

 Direct Lending

13,289

200

 Indirect Lending

-

-

 Total

13,289

200

5.1.5.9    Specific provisions for loans

Specific Provisions

Current Period

Prior Period

 Substandard Loans and Receivables - Limited Collectibility  

522,689

687,181

 Doubtful Loans and Receivables

1,175,099

661,583

 Uncollectible Loans and Receivables

3,093,301

2,949,703

 Total

4,791,089

4,298,467

5.1.5.10  Non-performing loans (NPLs) (net)

Non-performing loans and other receivables restructured or rescheduled


Group III

Group IV

      Group V

 

Substandard Loans and Receivables

Doubtful Loans and Receivables

Uncollectible Loans and Receivables

 

Current Period




(Gross amounts before specific provisions)




   Restructured Loans and Receivables

296,602

722,845

873,501

   Rescheduled Loans and Receivables

4,364

5,992

88,658

Total

300,966

728,837

962,159





Prior Period




(Gross amounts before specific provisions)




   Restructured Loans and Receivables

369,957

237,457

668,876

   Rescheduled Loans and Receivables

8,678

2,694

33,007

Total

378,635

240,151

701,883

Movements in non-performing loan groups

 

 

Current Period

Group III

Group IV

      Group V

Substandard Loans and Receivables

Doubtful Loans and Receivables

Uncollectible Loans and Receivables

Balances at Beginning of Period

1,123,595

889,101

3,633,117

  Additions during the Period (+)

3,340,638

78,690

278,528

  Transfer from Other NPL Categories (+)

14,325

2,975,192

2,076,143

  Transfer to Other NPL Categories (-)

3,037,481

2,023,573

24,037

  Collections during the Period (-)

637,883

334,747

540,532

  Write-offs (-)(*)

20,361

13,526

1,652,728

      Corporate and Commercial Loans

19,315

5,709

887,358

      Retail Loans

753

5,013

473,297

      Credit Cards

293

2,804

292,073

      Others

-

-

-

Balances at End of Period

782,833

1,571,137

3,770,491

  Specific Provisions (-)

522,689

1,175,099

3,093,301

Net Balance on Balance Sheet

260,144

396,038

677,190

(*) Includes also the sale of non-performing loans.

 

 

 

 

 

Prior Period

Group III

Group IV

      Group V

Substandard Loans and Receivables

Doubtful Loans and Receivables

Uncollectible Loans and Receivables

Balances at Beginning of Period

675,966

919,137

2,790,951

  Additions during the Period (+)

2,586,434

179,228

210,323

  Transfer from Other NPL Categories (+)

25,850

1,610,011

1,585,241

  Transfer to Other NPL Categories (-)

1,637,208

1,568,587

15,308

  Collections during the Period (-)

454,957

247,350

578,638

  Write-offs (-) (*)

72,490

3,338

359,452

      Corporate and Commercial Loans

72,430

3,276

185,777

      Retail Loans

57

8

125,888

      Credit Cards

3

54

47,787

      Others

-

-

-

Balances at End of Period

1,123,595

889,101

3,633,117

  Specific Provisions (-)

687,181

661,583

2,949,703

Net Balance on Balance Sheet

436,414

227,518

683,414

(*) Includes also the sale of non-performing loans.

 

Movements in specific loan provisions

Current Period

Corporate / Commercial Loans

Consumer Loans

Credit Cards

Total

Balances at End of Prior Period

1,826,030

1,486,364

986,073

4,298,467

 Additions during the Period (+)

1,570,984

1,018,613

598,937

3,188,534

 Restructured/Rescheduled Loans (-)

-

-

-

-

 Collections during the Period (-) (*)

206,714

547,505

303,170

1,057,389

 Write-Offs (-) (**)

870,281

474,013

294,229

1,638,523

Balances at End of Period

2,320,019

1,483,459

987,611

4,791,089

 

Prior Period

Corporate / Commercial Loans

Consumer Loans

Credit Cards

Total

Balances at End of Prior Period

1,512,557

1,065,533

707,657

3,285,747

 Additions during the Period (+)

825,317

932,704

535,337

2,293,358

 Restructured/Rescheduled Loans (-)

-

-

-

-

 Collections during the Period (-) (*)

253,083

387,875

208,972

849,930

 Write-Offs (-) (**)

258,761

123,998

47,949

430,708

Balances at End of Period

1,826,030

1,486,364

986,073

4,298,467

(*)   Foreign affiliates' foreign exchange rate changes are included in the collections during the period line.

(**)  Includes also the sale of non-performing loans.

 

 



 

 

Non-performing loans in foreign currencies

         

Group III

Group IV

      Group V

Substandard Loans and Receivables

 

Doubtful Loans and Receivables

Uncollectible Loans and Receivables

Current Period




    Balance at End of Period

240,824

458,233

1,273,467

     Specific Provisions (-)

100,824

283,281

916,275

    Net Balance at Balance Sheet

140,000

174,952

357,192





Prior Period




    Balance at End of Period

518,143

170,186

1,307,310

     Specific Provisions (-)

226,212

92,719

982,861

    Net Balance at Balance Sheet

291,931

77,467

324,449

 

Gross and net non-performing loans and receivables as per customer categories

 

Group III

Group IV

      Group V

 

Substandard Loans and Receivables

Doubtful Loans and Receivables

Uncollectible Loans and Receivables

Current Period (Net)

260,146

396,036

677,190

Loans to Individuals and Corporates (Gross)

782,835

1,571,135

3,769,175

       Specific Provision (-)

522,689

1,175,099

3,091,985

Loans to Individuals and Corporates (Net)

260,146

396,036

677,190

Banks (Gross)

-

-

311

       Specific Provision (-)

-

-

311

Banks (Net)

-

-

-

Other Loans and Receivables (Gross)

-

-

1,005

       Specific Provision (-)

-

-

1,005

Other Loans and Receivables (Net)

-

-

-





Prior Period (Net)

436,414

227,518

683,414

Loans to Individuals and Corporates (Gross)

1,123,595

889,101

3,631,801

       Specific Provision (-)

687,181

661,583

2,948,387

Loans to Individuals and Corporates (Net)

436,414

227,518

683,414

Banks (Gross)

-

-

311

       Specific Provision (-)

-

-

311

Banks (Net)

-

-

-

Other Loans and Receivables (Gross)

-

-

1,005

       Specific Provision (-)

-

-

1,005

Other Loans and Receivables (Net)

-

-

-

 



Collaterals received for non-performing loans

 Current Period

Corporate/

Commercial Loans

Consumer Loans

Credit Cards

Total

 Loans Collateralized by Cash

3,016

184

-

3,200

 Loans Collateralized by Mortgages

1,524,646

142,402

-

1,667,048

 Loans Collateralized by

     Pledged Assets

440,060

47,119

-

487,179

 Loans Collateralized by Cheques and

      Notes

268,837

7,286

-

276,123

 Loans Collateralized by Other

     Collaterals

997,188

1,019,355

-

2,016,543

 Unsecured Loans

217,723

468,953

987,692

1,674,368

Total

3,451,470

1,685,299

987,692

6,124,461

 

 Prior Period

Corporate/

Commercial Loans

Consumer Loans

Credit Cards

Total

 Loans Collateralized by Cash

16,662

201

-

16,863

 Loans Collateralized by Mortgages

1,046,662

90,285

-

1,136,947

 Loans Collateralized by

     Pledged Assets

444,581

53,690

-

498,271

 Loans Collateralized by Cheques and

      Notes

369,173

9,390

-

378,563

 Loans Collateralized by Other

     Collaterals

641,807

1,072,225

-

1,714,032

 Unsecured Loans

459,543

453,027

988,567

1,901,137

Total

2,978,428

1,678,818

988,567

5,645,813

5.1.5.11  Liquidation policy for uncollectible loans and receivables

Such loans and receivables are collected through legal follow-up and liquidation of collaterals.

5.1.5.12  Write-off policy

The Bank's general policy for write-offs of loans and receivables under follow-up is to write of such loans and receivables that are proven to be uncollectible in legal follow-up process.

5.1.6       Factoring receivables


Current Period

Prior Period

TL

FC

TL

FC

 Short-Term

1,849,102

851,570

1,933,647

847,500

 Medium and Long-Term

63,026

87,525

15,138

87,322

 Total

1,912,128

939,095

1,948,785

934,822

 



 

 

5.1.7       Investments held-to-maturity

5.1.7.1              Investment subject to repurchase agreements and provided as collateral/blocked


Current Period

Prior Period

TL

FC

TL

FC

 Collateralised/Blocked Investments

5,793,705

4,341,183

4,956,015

2,108,752

 Investments subject to Repurchase Agreements

3,147,892

-

4,081,537

317,809

   Total

8,941,597

4,341,183

9,037,552

2,426,561

5.1.7.2    Government securities held-to-maturity


Current Period

Prior Period

 Government Bonds

19,108,804

17,776,978

 Treasury Bills

-

-

 Other Government Securities

-

-

 Total

19,108,804

17,776,978

5.1.7.3    Investments held-to-maturity


Current Period

Prior Period

 Debt Securities

20,705,624

19,522,643

  Quoted at Stock Exchange

20,462,344

19,106,455

  Unquoted at Stock Exchange

243,280

416,188

 Valuation Increase / (Decrease)

2,404,072

1,794,603

 Total

23,109,696

21,317,246

5.1.7.4    Movement of investments held-to-maturity


Current Period

Prior Period

 Balances at Beginning of Period

21,317,246

20,667,042

 Foreign Currency Differences on Monetary Assets

2,051,504

2,034,482

 Purchases during the Period

314,669

1,149,619

 Disposals through Sales/Redemptions (*)

(1,186,759)

(2,971,993)

 Valuation Effect

613,036

438,096

 Balances at End of Period

23,109,696

21,317,246

In the prior period,

(*)         As per the exceptions set out in the relevant accounting standards (TAS 39) for the sale or reclassification of investments, certain credit linked notes with a total face value of USD 300,000,000 were sold.

 

 



 

5.1.8       Investments in associates

5.1.8.1    Unconsolidated investments in associates


Associates

Address (City/ Country)

Parent Bank's Share - If Different, Voting Rights (%)

Bank Risk Group's Share (%)

1

Emeklilik Gözetim Merkezi AŞ

İstanbul/Turkey

-

5.26

2

Bankalararası Kart Merkezi AŞ (1)

İstanbul/Turkey

10.15

10.15

3

Yatırım Finansman Menkul Değerler AŞ (1)

İstanbul/Turkey

0.77

0.77

4

İstanbul Takas ve Saklama Bankası AŞ (1)

İstanbul/Turkey

5.25

5.28

5

Borsa İstanbul AŞ (1)

İstanbul/Turkey

0.30

0.34

6

KKB Kredi Kayıt Bürosu AŞ (1)

İstanbul/Turkey

9.09

9.09

7

Türkiye Cumhuriyet Merkez Bankası AŞ (2)

Ankara/ Turkey

2.48

2.48

8

Kredi Garanti Fonu AŞ (1)

Ankara/ Turkey

1.75

1.75

 


 

Total Assets

 

Shareholders' Equity

Total Fixed Assets (*)

 

Interest Income

Income on Securities Portfolio

Current Period Profit/Loss

Prior Period Profit/Loss

Company's Fair Value

1

13,824

7,310

1,982

803

4

122

383

-

2

75,434

44,177

48,085

672

-

14,517

9,605

-

3

885,750

70,170

3,534

12,885

1,102

(3,130)

(791)

-

4

7,494,521

994,440

98,224

216,309

5,881

162,178

132,453

-

5

1,084,281

1,043,795

211,102

27,176

979

223,697

289,559

-

6

185,448

129,648

135,578

2,817

90

16,458

26,782

-

7

450,139,064

54,629,350

684,192

6,120,123

2,238,649

20,736,851

8,529,957

-

8

324,489

298,991

7,562

12,390

-

17,738

19,899

-

(*)         Total fixed assets include tangible and intangible assets.

(1)      Financial information is as of 30 September 2016.

(2)      Financial information is as of 31 December 2015.

Unconsolidated investments in associates sold during the current period

None.

Unconsolidated investments in associates acquired during the current period

None.

5.1.8.2    Consolidated investments in associates


Associates

Address (City/ Country)

Parent Bank's Share - If Different, Voting Rights (%)

Bank Risk Group's Share (%)

1

Garanti Yatırım Ortaklığı AŞ

İstanbul / Turkey

-

3.30

 

 




 

 

 

Total Assets

 

Shareholders' Equity

Total Fixed Assets (*)

 

Interest Income

Income on Securities Portfolio

Current Period Profit/Loss

Prior Period Profit/Loss

Company's Fair Value

1

35,690

35,367

76

461

1,487

1,821

99

21,440