Şekerbank T.A.Ş. Investor Presentation IFRS 9 Consolidated Accounts as of 30.06.2018
Table of content 1. Focus on Şekerbank 2 2. Balance Sheet 8 3. Income Statement 15 8 4. 14 Asset Quality, Liquidity and Solvency 20 30 1
Focus on Şekerbank
Key Highlights Strong Underlying Business Core business continues to increase total revenues as well as net interest income Local Banking Competency with Unique SMEs Positioning Loyal and Solid Customer Funding Base Continuous Focus on NPLs Reduction and Increasing Collateral Access to Diversified Sources of Funding Constant Focus on Financial Innovation and Social Responsibility Well-established geographic coverage provides a competitive edge with SMEs (48% of total loans) and agriculture businesses based in peripheral towns Focus on SMEs allowing for higher NIM vs. Turkish Banking Sector Over 60-year loyal relationships with clients lead to a solid, stable and granular deposit base, given high deposits rollover ratio Introduced new credit scoring method, centralized credit approvals and a material effort to increase collateral Balanced mix between retail and institutional funding through covered bonds, loans from IFIs, subordinated loans, trade finance and syndicated borrowing First-time milestones include: first energy efficiency loan EKOKredi; first covered bond backed by SME loans; first institution to offer credit cards to farmers; first Turkish bank to obtain Corporate Governance rating, first Turkish bank to launch Family Farming Banking program; first bank to implement cash flow-based micro business lending 3
Sekerbank at a glance Sekerbank is a publicly listed commercial bank focused on its domestic market Principal shareholders are Bank s pension fund, Samruk-Kazyna and the IFC Overview Sekerbank was founded in 1953 with current HQ in Istanbul, Turkey Listed on Istanbul Stock Exchange since 1997 and Rated B3 by Moody s and B+ by Fitch Shareholder Base Business focused primarily on Small and Medium Enterprises ( SMEs ) Sekerbank has 273 branches in Turkey, 2 regional offices in Istanbul and 7 regional offices throughout Anatolia (1) Sekerbank has 3,597 employees Free Floats 34,2% Other 1,6% Şekerbank T.A.Ş. Voluntary Pension Fund 35.4% (TRY MM) Total Assets Key Financial Highlights Consolidated 34.420 Bank-Only 32.581 Şekerbank T.A.Ş. 9,4% Samruk-Kazyna 19,4% Net Loans 23.278 21.896 Deposits 21.525 21.376 Shareholders Equity 2.405 2.356 Net Profit 71 71 NPL Ratio 4,93% 4,63% NPL Coverage Ratio 74,71% 74,46% Tier 1 10,25 % 10,80 % CAR 13,53% 14,33% 4
Attractive Franchise with over 60 years of History Founded as the Sugar Beet Cooperative Bank in Eskişehir Initial Public Offering First Bank to receive Corporate Governance Rating in Turkey Transfer of BTA Group shares to Samruk Kazyna, the Sovereign Wealth Fund of Kazakhstan Turkey s first 5-year syndicated loan facility Signed the Declaration on Sustainable Finance İssued a 10-year, variablerate, lira-denominated domestic subordinated (Tier II) debt security Finalised Tier II transaction of 85 million USD 1953 1956 1997 2002 2007 2010 2011 2011-12 2014 2015 2016 2017 Moved to Ankara and renamed as Şekerbank Initiation of Restructuring: Change from a traditional commercial bank to a multi channel, diversified financial institution based on customer and segment focused practices Partnership with international investor: (BTA Group, Kazakhstan became 33.9% shareholder) Equity investment of IFC: Personnel Social Security Foundation of Şekerbank and IFC signed an option agreement for IFC purchasing Şekerbank shares up to 5% First SME backed Covered Bond issuance in the world Launched Family Farming Banking Wins Leaders in Water Management Award Given the Best Syndication Loan Supporting Energy Efficiency prize 5
Business Structure and Focus Sekerbank s strategic focus on SMEs allows for exposure to one of the fastest growing segments in the Turkish Banking Industry Efficiency improvement initiatives with branches decreasing from 312 in 2014 to 273 in 2018 Business Segments SME and Agricultural Banking: Focused on segments with annual sales of up to TRY 40 million; especially on micro and small businesses including farmers Corporate Structure Sekerbank Bank Only Represents 95% of Consolidated Group Corporate and Commercial Banking: Services clients with revenues above TRY 40 million offering product development, cash management, trade and project finance Şeker Leasing Şeker Factoring Şekerbank (Kıbrıs) Şekerbank International Banking Unit Retail Banking: Provides a broad range of products including deposits, loans, credit and debit cards, investment accounts, utility payment services, gold accounts and payroll services Şeker Finance Zahlungsdienste GmbH Şeker Securities Broad-based Branch Network (Turkey) >10 Branches 6-10 Branches Istanbul 273 Branches in 71 cities and 97 rural districts 2-5 Branches Single Branch No Branch Izmir Ankara 70% of branches are located outside the three big cities 9 regional offices Antalya 6
Ratings 11/09/2018 28/08/2018 Outlook NEGATIVE Outlook NEGATIVE Long-term Foreign Currency IDR Short-term Foreign Currency National Long-term Rating Long-term Local Currency IDR Short-term Local Currency B B BBB (tur) B B Long-term Bank Deposits Local & Foreign Currency NSR Bank Deposits LT / ST Baseline Credit Assessment Adjusted Baseline Credit Assessment Caa1 Ba3.tr / TR-4 caa1 caa1 Viability Rating b Counterparty Risk Assessment LT / ST B3 (cr) 27/09/2018 Outlook Long-term National Scale Short-term National Scale Long-term International Foreign Currency and Local Currency Short-term International Foreign Currency and Local Currency Long-term International Local Currency NEGATIVE AA- (Trk) A -1+ (Trk) BBB- BBB- BBB- (Trk) Corporate Governance Rating (%) 2007 2008 2009 2010 2011 2012 2012 2013 2014 2015 2016 2017 70.16 81.36 86.64 87.60 88.21 90.95 90.74 90.91 91.10 91.70 91.90 92.70 7
Balance Sheet
Balance Sheet Analysis Total Assets Liabilities and Equity Total Assets (TRY MM) Liabilities and Equity (TRY MM) 34.420 Loans Breakdown (1) 34.420 Deposits Breakdown 6,4% 3,7% 5,9% 3,1% 7,0% 11,2% 10,3% 11,9% 47,9% 46,2% 27,4% 88,8% 67,6% Corporate + Commercial SME Retail 62,5% Time Demand 2018 Q2 2018 Q2 Loans Deposits Cash Borrowing Securities and Derivatives Money Market Placements Other Equity Other 1. Includes leasing and factoring receivables 9
Loan Structure Loan Type Evolution (TRY MM) Steady Loan Growth 22.063 22.615 23.278 with Focus on SME & Corporates Cash Loan Breakdown by Segments (%) 7,1% 6,2% 5,9% 5.324 6.026 6.324 46,1% 47,6% 47,9% 46,8% 46,2% 46,2% 94,1% Cash Non-Cash Corporate + Commercial SME Retail Highly Diversified Loan Book Cash Loans Breakdown by Sector (%) 4% 3% 3% Other 20% Manufact. Industry 8% Wholesale & Retail Trade Construction 11% Agriculture 18% Tourism Health & Social Serv. 16% Transport. & Comm. 17% Financial Institutions Loans per Branch Evolution (TRY MM/#Branch) Loans per Branch (TRY MM) 85 83 81 10
Funding Overview Diversified Funding Source Base Total Liabilities Evolution (TRY MM ) 2.791 2.367 2.405 873 1.044 1.311 Healthy Growth of Deposits Deposit Evolution (TRY MM / %) 19.884 20.486 21.525 10,7% 10,6% 11,2% 9.582 8.281 9.179 89,3% 89,4% 88,8% Time Demand Borrowings Breakdown Borrowings Breakdown (%) 19.884 20.486 21.525 7,0% 9,2% Funds borrowed 7,6% 46,7% Money market balances Local bonds Deposits Borrowings Other Liabilities Total Equity 29,4% SME-backed covered bond Subordinated loans 11
Deposit Structure SME banking franchise with high deposits rollover ratio allows for a stable and granular source of funding Total Loans / Deposits Ratio Total Loans / Total Deposits (%) TRY Loans / Deposits Ratio TRY Loans / TRY Deposits (%) FC Loans / Deposits Ratio FC Loans / FC Deposits (%) 111,0% 110,4% 108,1% 134,8% 145,3% 143,2% 71,1% 64,6% 65,7% 104,8% 104,2% 102,4% 127,7% 138,0% 136,1% 66,6% 60,2% 61,6% Bank-Only Consolidated Bank-Only Consolidated Bank-Only Consolidated Deposits by Currency (%) Deposits by Currency (Consolidated - %) 62,5% 56,7% 54,8% Constantly Increasing Branch Activity Deposits per Branch (Consolidated TRY MM / # of Branch) 75 73 79 37,5% 43,3% 45,2% Foreign Currency Local Currency 12
Borrowings Balanced mix between retail and institutional funding through covered bonds, loans from IFIs, subordinated loans, trade finance and syndicated borrowings Proven Access to Diversified Sources of Funding Recent Issuances Summary June 2017: USD 85MM Tier 2 Private Placement December 2017: TRY 300MM Tier 2 Domestic Issuance December 2017: TRY 192MM SME Backed Covered Bond transaction with FMO May 2018: TRY 150MM Tier 2 Domestic Issuance Covered Bond Program Highlights The first ever Turkish covered bond transaction The first SME backed covered bond in the world The highest rating ever assigned to any Turkish transaction to date (Baa1) (International Scale Rating from Moody s) Designed as a program to create a sustainable longer term funding source for the SME portfolio Foreign Borrowings Breakdown Rating Agency SKBNK Covered Bond Programme Turkey Sovereign Şekerbank Ratings Overview Borrowings Breakdown by Purpose Ba1 Ba3 Caa1 Foreign Borrowings Bank Only (USD) Borrowings Breakdown by Purpose - Bank Only (%) Type of Funding Outstanding Amount Covered Bond (EIB, IFC, FMO) 151.599.535 Tier 2 Bond 85.000.000 15% 3% Foreign Trade Syndication 141.122.488 International Trade 233.890.807 IFI's (AFD, EBRD, ETDB, IFC, OeEB) 163.627.906 48% Micro + SME Finance Energy Efficiency Funds (GCPF) 30.000.000 34% Women in Business TOTAL 805.240.737 13
Borrowing Structure Well Diversified Borrowing Base Borrowings Breakdown (TRY MM / %) 9.449 8.281 9.179 6,8% 8,0% 9,2% 5,6% 7,8% 7,0% 7,4% 8,5% 7,6% Borrowings (TRY MM) Funds borrowed 3.516 4.028 4.290 43,0% 27,0% 29,4% Money market balances 4.064 2.235 2.703 SME-backed covered bond 701 703 702 Local bonds 526 650 643 37,2% 48,6% 46,7% Subordinated loans 641 666 842 Total 9.449 8.281 9.179 Funds borrowed SME-backed covered bond Subordinated loans Money market balances Local bonds 14
Income Statement
Profit and Loss TRY MM 2018 Q1 2018 Q2 Change (%) Interest Income 906 1.884 Interest Expense 549 1.129 Net Interest Income 357 754 111,6% Net fees and Commisions Income 93 177 Personnel Expenses 104 221 Dividend Income 0 1 Net Trading Income/Loss (50) (82) Other Operating Income 19 41 Total Operating Profit 315 672 113,3% Expected Credit Losses 135 286 Other Operating Expenses 156 305 Net Operating Income 24 80 230,8% Tax Provisions 5 (9) Net Income 29 71 144,5% 16
Revenues in Detail Stable Net Interest Income / Margin Net Interest Income (TRY MM) 3.007 Net Interest Margin (Bank-only - %) 1.330 906 357 1.884 754 5,7% 5,4% 5,8% -549-1.129-1.677 Interest Income Interest Expense Net Interest Income Leading in Fee Revenues with Strong and Consistent Growth 590 Fees and commissions received (TRY MM) 246 344 112 19 93 219 41 177 17 Banking Services Non-Banking Services
Costs in Detail Operating Costs Continuous Efficiency Improvement Operating Cost (TRY MM) 395 813 Number of Employees (#) 156 305 Number of Branches (#) 3.591 3.539 3.597 135 286 273 273 273 104 221 2018 Q1 2018 Q2 Personnel Expenses Expected Credit Losses Other Operating Expenses Cost to Income Ratio Cost / Income (%) 63,1% 49,6% 45,5% 18
Risk Management Provisions for loan losses and other receivables 867 911 528 552 2018 Q1 2018 Q2 General Provisions Specific Provisions Cost of Risk NPL Coverage Cost of Risk (%) Bank Only NPL Coverage (%) 73,8% 74,7% 1,44 1,35 2018 Q1 2018 Q2 2018 Q1 2018 Q2 19
Asset Quality, Liquidity and Solvency
Asset Quality NPL Exposure Maintained Stable Gross NPLs (TRY MM) Net NPLs / Total Assets (%) 1.048 1.175 1.219 3,7% 3,5% 3,2% Improving NPL Ratio NPLs Ratio (%) Bank Only 4,8% 4,6% 4,6% 21
Liquidity Overview Total Loan to Deposit Ratio Loan/Deposit (%) Liquidity Coverage Ratio Total (1)(2) Liqudity Coverage Ratio LC+FC Total (%) Liquidity Coverage Ratio FC (1)(2) Liqudity Coverage Ratio FC (%) 111,0% 110,4% 108,1% 103,7% 107,3% 111,5% 340,9% 340,4% @90 @90 @80 207,0% @60 @70 @70 Requirement 1. Liquidity Coverage Ratio has been enacted as of 01.01.2015 and the minimum required LCR limit or Total LCR was 60%, FC LCR was 40%, the minimum limit has been increased by 10% each year 2. The average of last three months liquidity coverage ratio calculated by monthly simple averages 22
Capital Adequacy Overview Bank-Only Consolidated Capital Adequacy Ratios (%) Capital Adequacy Ratios (%) 6,63% 6,46% 6,04% 6,39% 6,17% 5,84% 20.5 22.7 23.6 22.3 24.4 25.3 15,4% 12,1% 13,7% 14,3% 10,9% 10,8% Min 12% CAR Recommendation Min. 8% CAR Requirement 14,3% 11,2% 12,8% 13,5% 10,2% 10,3% Min 12% CAR Recommendation Min. 8% CAR Requirement Tier I Ratio Capital Adequacy Ratio Tier I Ratio Capital Adequacy Ratio Leverage Ratio (%) RWA (TRY Bn) 23
Contact Details Sekerbank T.A.Ş. Zeki Önder Executive Vice President Tel: +90 212 344 07 36 zeki.onder@sekerbank.com.tr Ali Kemal Küçükcan Head of Financial Institutions Tel: +90 212 319 71 59 ali.kucukcan@sekerbank.com.tr Berrak Baharoǧlu Senior Area Manager Tel: +90 212 319 73 08 berrak.baharoglu@sekerbank.com.tr Barış Sunat Area Manager Tel: +90 212 319 75 81 baris.sunat@sekerbank.com.tr Financial Institutions Structured Finance & Investor Relations Oya Sarı Head of Structured Finance and Investor Relations Tel: +90 212 319 71 58 oya.sari@sekerbank.com.tr İnci Kutsar Structured Finance and Investor Relations Junior Associate Tel: +90 212 319 71 57 inci.kutsar@sekerbank.com.tr 24
Legal Notice For Investors The information in this document has been obtained by Sekerbank T.A.Ş. ( Sekerbank ) from sources believed to be reliable. However, Sekerbank cannot guarantee the accuracy, completeness or correctness of such information. This document has been issued for information purposes only. The financial reports and statements announced by Sekerbank to the public and the relevant corporations are accepted to be the sole material. Sekerbank does not accept any liability whatsoever for any direct or consequential loss arising from any use of this document or its contents due to the misleading information in this document. All estimations contained in this document are the opinions of Sekerbank and can be subject to change without notice. This document can not be interpreted as an advice to the investors and Sekerbank can not be held responsible for the results of investment decisions made on account of this document. This document has been issued specially to the person, whom the document is concerned and may not be reproduced, distributed or shared with third parties for any purpose. 25