Subject
Application of Participation Banking System Regulatory and Supervisory Authorities (BRSA, CMC, CB, SDIF) Profit is genereted from Islamic Finance Products Deposit Collection Process Resources Participants Deposits Current Accounts Participation Accounts Equity Islamic Syndication Loans Participation Bank Basic Principles of Participation Banking Deposits are being utilized through the methods based on tradership and partnership Pool Resource Usage Process Profit Finance Individuals and Institutions Fund Usage Methods Murabaha (Mark up Trading) Mudarabah (Trust Financing) Musharakah (P.ship Financing) Selem (Future Sale) Istisna (Procurement) Ijarah (Forward Lease) Sukuk
Islamic and Conventional Banks Partnership
Islamic and Conventional Banks Partnership
Kuwait Turk Overview Financial Snapshot Kuveyt Türk Participation Bank began operations in 1989. Rated BB- by Fitch A network of 407 branches spread across strategic locations, with over 5,689 employees Kuveyt Türk provides services to its international clients through a network of: A wholesale banking branch in the Kingdom of Bahrain TRY mm Dec 2015 Dec 2016 Dec 2017 Jun 2018 Asset size 41,760 48,407 57,123 68,130 Shareholder s Equity 3,448 4,003 4,591 5,086 Net Income 425 579 673 527 NPL 1.66% 2.43% 1.98% 1.81% ROAE 13.08% 15.49% 15.85% 21.62% Capital Adequacy Ratio 14.20% 18.51% 17.66% 16.09% Source: S&P Database, KT Consolidated Figures Ownership Structure: Kuveyt Türk A full fledged banking subsidiary in Germany As of end of June 2018, We are the largest participation bank in Turkey with 36.2% market share 9,0% 18,7% 9,0% 62,2% Kuwait Finance House Republic of Turkey General Directorate of Foundations Islamic Development Bank Kuwait Public Institution for Social Security Other real and legal shareholders Source: Fitch and Bloomberg Source: Kuveyt Türk website
Strong Shareholders Kuwait Finance House, Kuwait ( KFH ) KFH is the second largest Islamic Bank in the World, It was established in Kuwait in 1977 KFH is currently rated A1/A-/A+ by Moody s, S&P and Fitch respectively KFH has consistently demonstrated tangible support for Kuveyt Türk including participating in all the share capital increases conducted so far General Directorate for Foundations, Turkey ( GDF ) The GDF was established in 1924 as a state entity to administer, manage and regulate existing and future Turkish charitable foundations and reports directly to the Turkish Prime Minister Public Institution for Social Security, Kuwait ( PIFSS ) PIFSS was founded in 1976, to implement the Kuwaiti social security PIFSS is a major investor on the Kuwait Stock Exchange and in other Arab and Islamic countries Islamic Development Bank ( IDB ) The IDB is a multinational development bank established in 1973 The IDB currently has 57 member states, Turkey is a founding member and owns 6.45% the shares of IDB Rated by S&P (AAA), Moody s (Aaa), and Fitch (AAA)
How Can We Support You? Strong Financials KTPB s slogan has always been SOUND BANKING We differentiate ourselves with sound financials. Int. Presence&Knowlegde KTPB has a wholesale Banking branch in Bahrain and a subsidiary in Germany. We have more than 1500 correspondent banks all over the World. KFH is a prominent player in Gulf Region. Diverse Loan book We offer different solutions for each segments. Individuals, SMEs and Commercial Clients Leader Islamic Lender KTPB has TRY 47 bn (USD 10.2 bn) loan book in 2018 Q2. USD 759 mm in Project Financing alone
Kuveyt Diverse Türk Loan Strategy Book & Key Achievements Key Achievements Results Retail Banking First mover among Participation Banks in the retail sector Innovative product development - Gold First participation bank to segment its client base Focus on building long-term client relationships Strong brand name and strong retail base 38,1% market share in retail loans among participation banks Offers one of the widest range of products amongst participation banks SME Banking Increased focus on SMEs High customer service levels Higher margin business and reduced risk profile via collateralized loan portfolio Increased quantity and quality of clients and improved profit per client Corporate & Commercial Banking Development of portfolio management system Increased focus on letters of guarantee Strong presence in trade financing Higher margin business and reduced risk profile Increased quantity and quality of clients and improved profit per client Enhanced quality control delivering better returns Larger proportion of non-cash loans International Banking First and most advanced international banking propositions Dynamic participation bank funding structure Development of international network (branches & correspondent banks) The first international Murabaha syndication among participation banks (USD 200 mm) in 2006 Issued the first Bank Sukuk in Turkey and Europe with amount of USD 100 mm in 2010 Issued the largest Tier-2 Sukuk out of Turkey with amount of USD 350 mm at February 2016 Total 9.5 billion TL domestic issuances so far.
Strong Financials KTPB's Comp. With 15 Largest TR Banks* 2017-2018 Q2 KTPB Largest 15 Banks Assets Growth 17.8% 12% Profit Growth 37.5% 10.6% NPL 1.84% 3.75% ROAE 18.96% 15.49% While growing stedialy, we do not compromise our asset quality and profitability. KTPB s total asset growth CAGR is 19.26% in the last 4 yearss. KTPB s Net Income grew 37.5% compared to 2017 year end. We have the second least NPL ratio in Turkish Market. Our NPL Coverage ratio is also 129% and well above market average 72%. Between 2017&2018 Q2 Unconlolidated Figures
International Presence & Knowledge Sample Project Finance Transactions Concluded by KFH Project Name Year Purpose Project Size($000) Debt ($000) Islamic Trance($000) Equate Petrochemical 1996/2001/2004 Perto.Extraction 2.000.000 1.200.000 200.00 Shuweihat W&P 2002 Water and Power 1.600.000 1.285.000 250.00 Umm Al-Nar Power 2004 Water and Power 2.100.000 1.777.000 250.00 Qatar Gas II 2004 Natural Gas Extraction 7.300.000 5.000.000 530.00 Kuwait Paraxelene 2007 Paralexece&Benzene 2.000.000 1.400.000 347.00 KFH Group has $58 bn total assets and $6.5 bn total equity and s $31.5 bn loan book Above some samples of KFH s successful Corporation in Project Financing with Conventional Banks As KTPB we have a wholesale branch in Bahrain and a Subsidiary in Germany, KT AG. We also have more than 1500 correspondents all over the world
Leader Islamic Lender-Kuveyt Turk Project Finance 2017 Q4 2018 Q2 Cash Exposure (USD) 633,221,032 700,560,914 Non-Cash Exposure (USD) 306,154,821 45,739,364 NPL % 0.00 0.00 Project Type Installed Power as of 2018 Q2 (MW) Solar Power 495,04 Hydroelectric 299,14 Wind Power 79,40 Bio-Gas 9,01 Total 882,64 As a whole, our total Loan book corresponds to 35.5% of the total Participation Banking Sector Our exposure in Project Finance is USD 746 MM as of 2018 Q2 We are the leading participation lender in the Project Financing.
Leader Islamic Lender II Project Details as of 2018 Q2 Project Type Cash Exposure Non-Cash Exposure Project Number(s) Bio-Gas 5,013,390 249,774 2 Solar Power 381,374,636 2,927,295 129 Hydroelectric Power 236,221,370 2,452,684 7 Wind Power 31,236,374 2,075,771 2 Privatization - 38,033,840 1 Corporate Syndication 22,328,267-2 Construction Development 24,386,877-2 Total 700,560,914 45,739,364 145 Project Name Project Details after 2018 Q2 Amount (USD) Bilkent CCN Labs (ISTISNA) 103,857,289 Reasons for favoring Solar Power: More predictable energy production, Easier to build and operate Results: 10% market share in Un-Licenced SolarPower 46% market share in Licenced Solar Power Gallipoli 1915 Bridge (MRBH) 179,577,465 Niğde-Ankara Highway (MRBH) 124,287,398 Total 407,722,152
Analysis&Findings Country Name Conventional Volume Islamic Volume Total Volume Share in Total Amount Islamic Share in Country's Volume Islamic Share in Islamic Loans Saudi Arabia 95,967,485,516 18,659,397,880 114,626,883,396 27.89% 4.54% 59.41% United Arab Emirates 84,645,559,653 5,107,727,582 89,753,287,236 21.84% 1.24% 16.26% Turkey 60,435,342,033 350,000,000 60,785,342,033 14.79% 0.09% 1.11% Qatar 42,255,621,011 2,416,500,005 44,672,121,016 10.87% 0.59% 7.69% Oman 25,705,261,181 2,400,000,000 28,105,261,181 6.84% 0.58% 7.64% Egypt 24,837,865,974 674,999,994 25,512,865,967 6.21% 0.16% 2.15% Kuwait 13,146,744,000 1,053,000,000 14,199,744,000 3.46% 0.26% 3.35% Bahrain 11,622,176,000 618,000,000 12,240,176,000 2.98% 0.15% 1.97% Israel 9,456,174,002-9,456,174,002 2.30% 0.00% 0.00% Jordan 6,462,876,373 126,000,000 6,588,876,373 1.60% 0.03% 0.40% Iran 1,745,000,000-1,745,000,000 0.42% 0.00% 0.00% Yemen 1,680,000,000-1,680,000,000 0.41% 0.00% 0.00% Iraq 784,548,933-784,548,933 0.19% 0.00% 0.00% Syria 721,000,000-721,000,000 0.18% 0.00% 0.00% Palestine 93,000,000-93,000,000 0.02% 0.00% 0.00% Grand Total 379,558,654,676 31,405,625,461 410,964,280,137 100.00% 7.64% 100.00% Project Finance Share in the Middle East 30,00% 27,89% 25,00% 21,84% 20,00% 15,00% 14,79% 10,87% 10,00% 6,84% 6,21% 5,00% 3,46% 2,98% 2,30% 1,60% 0,42% 0,41% 0,19% 0,18% 0,02% 0,00% Saudi Arabia United Arab Emirates Turkey Qatar Oman Egypt Kuwait Bahrain Israel Jordan Iran Yemen Iraq Syria Palestine Reuters
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ISTISNA STRUCTURE Participating Banks EPC Consortium 4. Transfer of title upon completion of construction 3. EPC Contract Stage Payments Stage Payments / Profit Payments / Instalments 1. Facility/Investment Agency Agreement Cashflow Finance Document Transfer of Rights / Assets Project Company (as Istisna Agent) 4. Constructed Project Assets are Delivered to Project Company on behalf of Facility Agent Stage Payments 3. Istisna Agnecy Agreement Profit Payments / Instalments Islamic Facility Agent 2. Istisna Agreement Project Company (as Obligor) PPP Concession Agreement Turkish Treasury/MoF
Commodity Murabaha Structure Participating Banks EPC Contract Cashflow Finance Document Transfer of Rights / Assets 4. Commodity Sale Agreement EPC Consortium Project Company (as Obligor / as a Purchaser) Commodity Broker B Stage Payments Stage Payments (Netting Arrangement will apply) 3. Master Murabaha Agreement Profit Payments/Instalments/Deferred Payment Price Stage Payments/ Profit Payments/ Instalments KFH as an Islamic Facility Agent / Investment Agent (as a Seller) Commodity Broker A 1. Facility/ Investment Agency Agreement 2.Commodity Purchase Agreement