Germany Full Rating Report Ratings Foreign Currency Long-Term IDR Short-Term IDR Support Rating 2 BBB F3 Sovereign Risk Foreign-Currency Long-Term IDR AAA Outlooks Foreign-Currency Long-Term IDR Negative Sovereign Foreign-Currency Long- Stable Term IDR Financial Data 31 Dec 15 31 Dec 14 Total assets (USDm) 5,197.9 5,293.6 Total assets (EURm) 4,774.3 4,360.3 Total equity (EURm) 531.3 382.3 Operating profit 72.6 58.9 (EURm) Published net income 49.0 40.1 (EURm) Operating ROAA (%) 1.5 1.6 Operating ROAE (%) 15.6 16.3 Internal capital 9.2 10.5 generation (%) Fitch Core Capital/risk 15.9 13.7 weighted assets (%) Impaired loans/gross loans (%) 0.0 0.0 Key Rating Drivers Support-Driven IDRs: s (AAG) ratings are equalised with those of its parent, Akbank T.A.S. (Akbank). The Negative Outlook on AAG s Long-Term IDR mirrors that on the parent. This reflects Fitch Ratings view that AAG is a core subsidiary of the Akbank group based on its 100% ownership, common branding, high level of integration with its parent, and the banks shared management/board members. In addition, a large portion of AAG s business is referred through its parent. In light of this, Fitch does not believe that AAG can be analysed on a standalone basis and no Viability Rating has been assigned. AAG accounted for 6% of group assets at end-2015 and 5% of consolidated net income. Focus on Turkish Corporates: At end-2015, 87% of loans were extended to companies located in Turkey. AAG estimates that 80%-85% of its loan book is to clients who are also on its parent s books. Concentrated Foreign-Currency Lending: AAG s corporate focus results in single-name borrower concentration, while credit risk is also heightened by the fact that loans are typically long-term and in foreign currency. However, the days to maturity of the loan portfolio declined substantially in 2015 to 413 days from 558 days at end-2014. At end-2015, the 25 largest loans represented 43% of the total loan book or 2.9x Fitch Core Capital (FCC). Mitigating the credit risk is the fact that the loans are primarily to Turkish blue-chip companies, while a third of gross loans were also cash collateralised at end-2015. AAG reports that it has not booked a single non-performing loan to date. Mainly Deposit Funded: AAG is largely funded by local deposits (80% of total liabilities at end-2015), which are fully covered by the German Deposit Guarantee Fund protection scheme. Concentration is high reflecting significant deposits from large state institutions funds, municipalities and associations with the top 20 depositors making up 57% of deposits at end- 2015. Retail deposits made up 14% of total deposits. Liquidity is supported by a EUR250m committed credit line from AAG s parent, which was almost fully unutilised at end-2015. Related Research Fitch Revises 18 Turkish Banks' Outlooks to Negative on Sovereign Change (August 2016) Akbank T.A.S. Full Rating Report (July 2016) Akbank T.A.S. Ratings Navigator (June 2016) Fitch Affirms 4 Large Privately-Owned Turkish Banks (June 2016) Turkey () Analysts Lindsey Liddell +44 20 3530 1008 lindsey.liddell@fitchratings.com Ahmet Kilinc +44 20 3530 1272 ahmet.kilinc@fitchratings.com Capital Support: AAG s capital base consists entirely of core Tier 1 capital. Fitch considers a FCC ratio of 15.85% at end-2015 to be adequate for the bank s risk profile particularly given its strong asset quality record. Akbank has provided regular capital support to fund AAG s growth (2015: EUR100m), and Fitch would expect further capital to be forthcoming if required. AAG has a zero dividend policy. Good Performance Metrics: AAG reported a 10.5% ROE at end-2015 (2014: 11.1%; 2013: 8.1%) despite a low net interest margin (NIM). Its performance is underpinned by its exceptional cost/income ratio (end-2015: 13.1%), resulting from its lean organisational structure, and by its sound asset quality. Rating Sensitivities Parental Support: AAG s ratings are sensitive to a change in Akbank s ratings or to a reduction in the parent s propensity to provide support, for example due to a change of strategy at Akbank that results in a diminution of AAG s strategic importance to the group. www.fitchratings.com 21
Institutional Support Drives Ratings AAG is 100% owned by Akbank T.A.S., which has a track record of providing it with capital support. The banks share the same branding and AAG is closely integrated within the group in terms of risk management, reporting, board composition and client referrals. As a result, Fitch believes Akbank would be highly likely to provide support to AAG in case of need. In Fitch s view, a default of AAG would result in reputational risk for its parent. Operating Environment Despite being a German bank under the remit of the German banking regulator (BaFin) and the Bundesbank, AAG s exposure is primarily to Turkey. Around half of the bank s risk-weighted assets constitute direct Turkish risk (ie loans to corporates), excluding loans to multinationals doing business in Turkey. By borrower location, loans to Turkey made up 87% of loan volumes at end-2015 and loans to Germany only 7%. AAG s funding is sourced mainly from local German customer deposits. Consequently, AAG s business is heavily exposed to economic cycles in Turkey, while its interest-rate and liquidity exposure is mainly to the euro area and in particular Germany. The attempted coup in Turkey in July 2016 and the authorities reaction have highlighted political risks to the country s sovereign credit profile. Any ensuing deepening of political divisions or weakening institutional independence could undermine policy coherence and increase the risk of external financing stresses materialising. Together with a large external financing requirement, this continues to make the lira vulnerable to shifts in investor sentiment. Turkey s GDP growth made a solid start to 2016, driven by a 30% increase in the minimum wage and a growing migrant community. However, sharply lower receipts from tourism and a tough environment for exports mean that net trade will be a drag. Political uncertainty is also expected to constrain investment and potentially dent consumer confidence over the second half of the year. Fitch expects growth of 3.0%-3.5% a year to 2018. Company Profile AAG is fully owned by Akbank, the fourth-largest bank in Turkey. At end-2015, AAG accounted for 6% of group assets. AAG is the successor institution of Akbank s German branch. It received a full banking licence in April 1998 and was converted into a limited company in November 2005, before being transferred to Akbank N.V., a wholly owned subsidiary of Akbank, in 2007 and then merged along with the latter back into AAG in June 2012 following a strategic reorganisation of Akbank s European operations. AAG is a mid-size bank specialising in Turkish corporate and cross-border European (largely German) lending. The bank has a niche in providing mainly medium-term working-capital and trade finance facilities to Turkish companies (or their European subsidiaries) and international companies operating in Turkey (mainly import/export operations). In this respect, the bank benefits from Akbank s corporate client base in Turkey, where referrals make up 80%-85% of AAG s loan portfolio. AAG does not carry out retail or SME lending. AAG does not have any branches (deposits are collected via internet banking) but operates solely from its head office in Frankfurt. Consequently, its headcount (end-2015: 42 employees) and cost base are low. Related Criteria Global Bank Rating Criteria (July 2016) AAG is a member of the voluntary German deposit protection fund, which ensures that all deposits placed with the bank (not just retail ones) are insured up to a level of 20% of its equity for each depositor. This enables AAG to raise low-cost institutional deposits, which constitute its main funding source (end-2015: around 86% of deposits or 70% of total funding). As a German bank, AAG is eligible for ECB and Bundesbank funding. 2
Management and Strategy AAG and Akbank are closely integrated in terms of management. The chairman of AAG s supervisory board is Akbank s Executive Vice President in charge of Corporate and Investment Banking. A further five board members occupy key executive positions at Akbank. AAG has no independents on its board. AAG s strategy focuses primarily on the corporate segment and notably on trade finance operations. Since 2016, the bank has focused increasingly on factoring operations (mainly with German companies) (end-2016: EUR305m total factoring volumes budgeted; end-2015: EUR205m (actual), or 6% of total business volumes) in line with its strategy to grow shorterterm lending (ie under one year). Its reasonable performance and strong asset quality indicators to date benefit from group oversight, client referrals and the absence of any real competitors in AAG s lending space. AAG s role in servicing multinational business flows between Turkey and one of its largest trading partners, Germany, underpins a certain level of revenue generation at the bank. AAG targets approximately 15% loan growth in 2016, which we consider challenging in the wake of recent developments in Turkey. The loan book remained flat in 1H16. Risk Appetite According to German banking law, banks must demonstrate that they are capable of making credit decisions independently. A significant portion of AAG s business is sourced through its parent but it operates its own credit analysis function. Loans are largely approved by AAG s credit committee; only exposures over EUR50m require board approval. AAG does not typically co-lend with its parent, although the banks can have common exposures in their portfolios. AAG s risk limits are fully consolidated into those of the Akbank group. AAG s risk management structure and policies are integrated with Akbank s, and AAG is closely supervised by Akbank. In 2015, the Credit Department concluded the project phase of its new internal rating model. AAG targets loan growth of approximately 15% in 2016 following growth of just 7% in 2015. Slower loan growth in 2015 reflected the cautious approach to loan growth taken by the bank in light of lower borrowing appetite in Turkey and the depreciation of the TRY. The bank s loan book grew rapidly between 2012 and 2014, but growth was from a relatively low base. Interest rate risk in the banking book is moderate. It is tested daily by an internal model (stress test) against changes in the term structure of interest rates for a +200bp shock in hard and a +600bp shock in soft currencies, and a change in the spreads for transactions that depend on Turkey of +200bp. The limit is set at 20% of shareholders equity (end-1q16: around 10% (actual)). AAG s policy is to hedge structural foreign-currency risk. It sets a limit of just EUR2m on its net open foreign-currency position. Financial Profile Asset Quality Key Loan-Quality Indicators (%) 2015 2014 2013 2012 Growth of gross loans 6.6 28.2 24.6 111.0 Impaired loans/gross loans 0 0 0 0 Loan impairment charges/average gross loans -0.2-0.1 0.2 0.2 Source: Company data, Fitch 3
Lending is highly concentrated due to the bank s relatively small size. At end-2015, the largest 25 loan customers represented 43% of the total loan book and 2.9x FCC. The loans are typically structured as bullet repayment loans with original maturities of one year or longer. The high proportion of EUR and USD lending (around 97% of gross loans) heightens credit risk. Mitigating this risk is the fact that AAG targets prime Turkish borrowers with access to foreign-currency revenues or whose operations are foreign-currency indexed through export operations, for example. Nevertheless, not all exposures will be fully hedged or they may only be weakly hedged, in Fitch s view. AAG has a very strong asset quality track record, as evidenced by the absence of nonperforming loans in its history. The bank s policy is to not restructure loans and it has had no cases of this in the past five years, Fitch understands. However, the high level of foreigncurrency loans in the portfolio and the typically quarterly or semi-annual repayment structures mean that any asset quality problems would feed through only gradually. The bank sets aside general provisions for country risk (EUR45m at end-2015) below the maximum levels recommended by the authorities on the basis that management is able to with to recognise negative developments early, thanks to its participation in a large Turkish banking group. The loan book is fairly concentrated by sector. However, real estate lending (28% of gross loans) is 95% cash collateralised, and loans to the manufacturing sector (25%) are spread across a large number of sub-sectors (eg auto, metalwork, textile, food and chemical industry, etc). Financial activities (15%) consist of factoring (generally with 60-120 days maturity, a EUR205m business volume and an average transaction size of EUR5m), loan syndications and discounted letters of credit. Energy exposures are limited and consist mainly of medium-term loans to hydro and coal companies (average maturity of 2.5 to 3 years). The bank does not carry out any project finance. In construction, AAG mainly finances Turkish operations; exposures to German operations are small. AAG s securities portfolio (almost entirely classified as held to maturity) accounted for 13% of the balance sheet at end-2015. It consisted 50% of Turkish corporate and financial sector bonds. AAG does not hold Turkish government debt. At end-2015, 42% of securities were eligible as collateral for repo with the Bundesbank. Of the portfolio, 13% (or a moderate 0.3x FCC) was sub-investment grade, consisting of German and Italian corporate bond exposures. Earnings and Profitability Key Performance Indicators (%) 2015 2014 2013 2012 Net interest income/average earning assets 1.6 1.7 1.6 1.7 Non-interest expense/gross revenues 13.1 13.0 15.7 25.1 Loans and securities impairment charges/ -11.5-6.1 14.1 10.3 pre-impairment operating profit Operating profit/average total assets 1.5 1.6 1.2 1.3 Operating profit/risk-weighted assets 2.2 2.1 1.8 1.3 Net income/average equity 10.5 11.1 8.1 6.9 Source: Fitch AAG s revenue generation is highly dependent on leveraging off its parent s franchise to attract clients. Its solid profitability and efficiency ratios are supported by its exceptional cost efficiency, the result of its lean organisational structure in the absence of a branch network and limited headcount (cost/income of just 13.1% in 2015) and strong asset quality, despite the bank s low NIM (due to its focus on the low-yielding corporate segment). 4
However, the bank relies on net interest income and the NIM declined in 2015 due to pricing pressure and growth in shorter-term loans, despite funding cost-optimisation efforts. AAG is forecasting its NIM to remain relatively flat in 2016 (or increase very slightly) on the back of a further decline in the cost of funding. Net fee and commission income is very low (3.5% of gross revenues in 2015) and unlikely to increase significantly given the bank s corporate focus. Capitalisation and Leverage Key Capitalisation Indicators (%) 2015 2014 2013 2012 Fitch Core Capital/weighted risks 15.9 13.7 17.7 13.0 Fitch eligible capital/weighted risks n.a. n.a. n.a. n.a. Tangible common equity/tangible assets 11.1 8.8 10.6 9.9 Core Tier 1 regulatory capital ratio 14.4 12.3 16.5 13.0 Internal capital generation 9.2 10.5 6.9 6.9 Source: Fitch Fitch considers AAG s capital ratios to be reasonable for the bank s risk profile considering its reasonable internal capital generation, albeit below targeted loan growth, and the absence of non-performing loans. AAG is fully compliant with Basel III requirements. Capital is also good quality (entirely core Tier 1), and the bank is comfortably above its 12% minimum total capital requirement. Its FCC ratio rose to 15.9% at end-2015, boosted by a EUR100m capital injection (June 2015) from Akbank. Retained earnings from 2015 were included in regulatory capital only as of 1H16, providing a further 145bp uplift to the capital adequacy ratio. The bank s core Tier 1 regulatory ratio stood at 15.72% at end-1h16. Funding and Liquidity Key Funding and Liquidity Indicators (%) 2015 2014 2013 2012 Loans/customer deposits 104.7 104.3 99.9 140.1 Interbank assets/interbank liabilities 53.7 76.9 48.9 51.7 Customer deposits/total funding (excluding derivatives) 81.5 82.1 89.7 61.0 Source: Fitch AAG is largely funded by euro deposits (80% of total liabilities at end-2015). Retail deposits (average size: around EUR15,000; average maturity: around 135 days) make up only a small portion of the total (14% at end-2015). AAG is typically a secondary bank for retail customers, attracting such deposits through competitive pricing. Non-retail customer deposits accounted for 52% of the total at end-2015, while 34% of total customer deposits were made up of cash collateral pledged against loans granted by AAG. 5
The bank s focus on institutional deposits results in high single-name concentration: at end- 2015, the top 20 depositors (all German clients, namely large state institutions funds, municipalities and associations) made up 57% of the deposit base. Assisting liquidity management is the fact that term deposits cannot be withdrawn prior to maturity except in the case of a force majeure. Stability among depositors is also underpinned by cover of retail and institutional deposits up to 20% of the bank s equity under the German deposit insurance scheme in addition to a EUR100,000 guarantee per client under the statutory scheme. Deposits grew by nearly 6% in 2015, and the bank is targeting 15% growth in 2016 (1H16: flat) to fund targeted loan growth. AAG s loans/deposits ratio was an acceptable 105% at end-2015. Deposits are longer term than in the Turkish market. At end-2015, 28% of deposits had contractual maturities over one year. 10% were sight deposits, which constitute a cheap source of funding. At end-2015, wholesale funding (mainly in euros) from international banks amounted to 19% of non-equity funding. Liabilities to banks were EUR770m and included: EUR160m of borrowed funds from Deutsche Bundesbank under the LTRO programme (maturing in 2018); EUR266m of short-term repo funding (three- to six-month maturity) with European banks undertaken for liquidity management purposes; and a USD205m one-year dual-tranche syndication loan (maturity in July 2016), which the bank has decided not to roll over. AAG swaps euro to fund US dollar lending, the counterparties for which are mainly European banks. Parental funding is insignificant, but AAG has a EUR250m committed credit line for liquidity management purposes. AAG regularly conducts liquidity stress tests and reports its liquidity position to its parent on a daily basis. Short-term assets are required to fully cover short-term liabilities up to 30 days (end-2015: 215% liquidity coverage ratio). It also reports ICAAP (capital and liquidity) annually to the German regulators. 6
Income Statement 31 Dec 2015 31 Dec 2014 31 Dec 2013 Year End Year End As % of Year End As % of Year End As % of USDm EURm EURm EURm Audited - Unqualified Audited - Unqualified Earning Assets Audited - Unqualified Earning Assets Audited - Unqualified Earning Assets 1. Interest Income on Loans 143.6 131.9 2.88 113.1 2.64 97.4 3.17 2. Other Interest Income 10.8 9.9 0.22 7.0 0.16 7.3 0.24 3. Dividend Income n.a. n.a. - 0.0 0.00 0.0 0.00 4. Gross Interest and Dividend Income 154.4 141.8 3.10 120.1 2.81 104.7 3.41 5. Interest Expense on Customer Deposits n.a. n.a. - 0.0 0.00 0.0 0.00 6. Other Interest Expense 75.7 69.5 1.52 59.2 1.38 58.7 1.91 7. Total Interest Expense 75.7 69.5 1.52 59.2 1.38 58.7 1.91 8. Net Interest Income 78.7 72.3 1.58 60.9 1.42 46.0 1.50 9. Net Gains (Losses) on Trading and Derivatives n.a. n.a. - 0.0 0.00 0.0 0.00 10. Net Gains (Losses) on Other Securities n.a. n.a. - 0.0 0.00 0.0 0.00 11. Net Gains (Losses) on Assets at FV through Income Statement n.a. n.a. - 0.0 0.00 0.0 0.00 12. Net Insurance Income n.a. n.a. - 0.0 0.00 0.0 0.00 13. Net Fees and Commissions 2.5 2.3 0.05 2.5 0.06 1.7 0.06 14. Other Operating Income 0.3 0.3 0.01 0.4 0.01 0.1 0.00 15. Total Non-Interest Operating Income 2.8 2.6 0.06 2.9 0.07 1.8 0.06 16. Personnel Expenses 4.5 4.1 0.09 3.9 0.09 3.4 0.11 17. Other Operating Expenses 6.2 5.7 0.12 4.4 0.10 4.1 0.13 18. Total Non-Interest Expenses 10.7 9.8 0.21 8.3 0.19 7.5 0.24 19. Equity-accounted Profit/ Loss - Operating n.a. n.a. - 0.0 0.00 0.0 0.00 20. Pre-Impairment Operating Profit 70.9 65.1 1.42 55.5 1.30 40.3 1.31 21. Loan Impairment Charge (6.0) (5.5) (0.12) (3.4) (0.08) 5.7 0.19 22. Securities and Other Credit Impairment Charges (2.2) (2.0) (0.04) 0.0 0.00 0.0 0.00 23. Operating Profit 79.0 72.6 1.59 58.9 1.38 34.6 1.13 24. Equity-accounted Profit/ Loss - Non-operating n.a. n.a. - 0.0 0.00 0.0 0.00 25. Non-recurring Income n.a. n.a. - 0.0 0.00 0.0 0.00 26. Non-recurring Expense n.a. n.a. - 0.0 0.00 0.0 0.00 27. Change in Fair Value of Ow n Debt n.a. n.a. - 0.0 0.00 0.0 0.00 28. Other Non-operating Income and Expenses n.a. n.a. - 0.0 0.00 0.0 0.00 29. Pre-tax Profit 79.0 72.6 1.59 58.9 1.38 34.6 1.13 30. Tax expense 25.7 23.6 0.52 18.8 0.44 11.0 0.36 31. Profit/Loss from Discontinued Operations n.a. n.a. - 0.0 0.00 0.0 0.00 32. Net Income 53.3 49.0 1.07 40.1 0.94 23.6 0.77 33. Change in Value of AFS Investments n.a. n.a. - 0.0 0.00 0.0 0.00 34. Revaluation of Fixed Assets n.a. n.a. - 0.0 0.00 0.0 0.00 35. Currency Translation Differences n.a. n.a. - 0.0 0.00 0.0 0.00 36. Remaining OCI Gains/(losses) n.a. n.a. - 0.0 0.00 0.0 0.00 37. Fitch Comprehensive Income 53.3 49.0 1.07 40.1 0.94 23.6 0.77 38. Memo: Profit Allocation to Non-controlling Interests n.a. n.a. - 0.0 0.00 0.0 0.00 39. Memo: Net Income after Allocation to Non-controlling Interests 53.3 49.0 1.07 40.1 0.94 23.6 0.77 40. Memo: Common Dividends Relating to the Period n.a. n.a. - 0.0 0.00 0.0 0.00 41. Memo: Preferred Dividends Related to the Period n.a. n.a. - 0.0 0.00 0.0 0.00 Exchange rate USD1 = EUR0.91850 USD1 = EUR0.82370 USD1 = EUR0.72510 7
Balance Sheet Assets A. Loans 31 Dec 2015 31 Dec 2014 31 Dec 2013 Year End Year End As % of Year End As % of Year End As % of USDm EURm Assets EURm Assets EURm Assets 1. Residential Mortgage Loans n.a. n.a. - 0.0 0.00 0.0 0.00 2. Other Mortgage Loans n.a. n.a. - 0.0 0.00 0.0 0.00 3. Other Consumer/ Retail Loans n.a. n.a. - 0.0 0.00 0.0 0.00 4. Corporate & Commercial Loans n.a. n.a. - 3,321.2 76.17 2,590.9 80.00 5. Other Loans 3,853.6 3,539.5 74.14 0.0 0.00 0.0 0.00 6. Less: Reserves for Impaired Loans n.a. n.a. - 0.0 0.00 0.0 0.00 7. Net Loans 3,853.6 3,539.5 74.14 3,321.2 76.17 2,590.9 80.00 8. Gross Loans 3,853.6 3,539.5 74.14 3,321.2 76.17 2,590.9 80.00 9. Memo: Impaired Loans included above n.a. n.a. - 0.0 0.00 0.0 0.00 10. Memo: Loans at Fair Value included above n.a. n.a. - 0.0 0.00 0.0 0.00 B. Other Earning Assets 1. Loans and Advances to Banks 450.4 413.7 8.67 533.0 12.22 145.1 4.48 2. Reverse Repos and Cash Collateral n.a. n.a. - 0.0 0.00 0.0 0.00 3. Trading Securities and at FV through Income n.a. n.a. - 0.0 0.00 0.0 0.00 4. Derivatives n.a. n.a. - 0.0 0.00 0.0 0.00 5. Available for Sale Securities n.a. n.a. - 0.0 0.00 0.0 0.00 6. Held to Maturity Securities 682.6 627.0 13.13 422.4 9.69 334.4 10.33 7. Equity Investments in Associates n.a. n.a. - 0.0 0.00 0.0 0.00 8. Other Securities 0.0 0.0 0.00 0.0 0.00 0.0 0.00 9. Total Securities 682.6 627.0 13.13 422.4 9.69 334.4 10.33 10. Memo: Government Securities included Above n.a. n.a. - 0.0 0.00 0.0 0.00 11. Memo: Total Securities Pledged n.a. n.a. - 0.0 0.00 0.0 0.00 12. Investments in Property n.a. n.a. - 0.0 0.00 0.0 0.00 13. Insurance Assets n.a. n.a. - 0.0 0.00 0.0 0.00 14. Other Earning Assets n.a. n.a. - 0.0 0.00 0.0 0.00 15. Total Earning Assets 4,986.6 4,580.2 95.93 4,276.6 98.08 3,070.4 94.81 C. Non-Earning Assets 1. Cash and Due From Banks 205.4 188.7 3.95 80.4 1.84 138.5 4.28 2. Memo: Mandatory Reserves included above n.a. n.a. - 0.0 0.00 0.0 0.00 3. Foreclosed Real Estate n.a. n.a. - 0.0 0.00 0.0 0.00 4. Fixed Assets 0.2 0.2 0.00 0.3 0.01 0.3 0.01 5. Goodw ill n.a. n.a. - 0.0 0.00 0.0 0.00 6. Other Intangibles 0.2 0.2 0.00 0.2 0.00 0.2 0.01 7. Current Tax Assets n.a. n.a. - 0.0 0.00 0.0 0.00 8. Deferred Tax Assets n.a. n.a. - 0.0 0.00 0.7 0.02 9. Discontinued Operations n.a. n.a. - 0.0 0.00 0.0 0.00 10. Other Assets 5.4 5.0 0.10 2.8 0.06 28.5 0.88 11. Total Assets 5,197.9 4,774.3 100.00 4,360.3 100.00 3,238.6 100.00 Liabilities and Equity D. Interest-Bearing Liabilities 1. Customer Deposits - Current 356.3 327.3 6.86 321.6 7.38 392.7 12.13 2. Customer Deposits - Savings n.a. n.a. - 0.0 0.00 0.0 0.00 3. Customer Deposits - Term 3,324.7 3,053.7 63.96 2,863.9 65.68 2,201.5 67.98 4. Total Customer Deposits 3,681.0 3,381.0 70.82 3,185.5 73.06 2,594.2 80.10 5. Deposits from Banks 838.2 769.9 16.13 693.6 15.91 296.5 9.16 6. Repos and Cash Collateral n.a. n.a. - 0.0 0.00 0.0 0.00 7. Commercial Paper and Short-term Borrowings n.a. n.a. - 0.0 0.00 0.0 0.00 8. Total Money Market and Short-term Funding 4,519.2 4,150.9 86.94 3,879.1 88.96 2,890.7 89.26 9. Senior Unsecured Debt (original maturity > 1 year) n.a. n.a. - 0.0 0.00 0.0 0.00 10. Subordinated Borrow ing n.a. n.a. - 0.0 0.00 0.0 0.00 11. Covered Bonds n.a. n.a. - n.a. - n.a. - 12. Other Long-term Funding n.a. n.a. - 0.0 0.00 0.0 0.00 13. Total LT Funding (original maturity > 1 year) n.a. n.a. - n.a. - n.a. - 14. Derivatives n.a. n.a. - 0.0 0.00 0.0 0.00 15. Trading Liabilities n.a. n.a. - 0.0 0.00 0.0 0.00 16. Total Funding 4,519.2 4,150.9 86.94 3,879.1 88.96 2,890.7 89.26 E. Non-Interest Bearing Liabilities 1. Fair Value Portion of Debt n.a. n.a. - 0.0 0.00 0.0 0.00 2. Credit impairment reserves n.a. n.a. - 0.0 0.00 0.0 0.00 3. Reserves for Pensions and Other 1.6 1.5 0.03 1.6 0.04 1.1 0.03 4. Current Tax Liabilities 0.0 0.0 0.00 1.6 0.04 0.0 0.00 5. Deferred Tax Liabilities 8.1 7.4 0.15 1.7 0.04 0.0 0.00 6. Other Deferred Liabilities 1.0 0.9 0.02 1.0 0.02 2.3 0.07 7. Discontinued Operations n.a. n.a. - 0.0 0.00 0.0 0.00 8. Insurance Liabilities n.a. n.a. - 0.0 0.00 0.0 0.00 9. Other Liabilities 89.6 82.3 1.72 93.0 2.13 2.3 0.07 10. Total Liabilities 4,619.5 4,243.0 88.87 3,978.0 91.23 2,896.4 89.43 F. Hybrid Capital 1. Pref. Shares and Hybrid Capital accounted for as Debt n.a. n.a. - 0.0 0.00 0.0 0.00 2. Pref. Shares and Hybrid Capital accounted for as Equity n.a. n.a. - 0.0 0.00 0.0 0.00 G. Equity 1. Common Equity 578.4 531.3 11.13 382.3 8.77 342.2 10.57 2. Non-controlling Interest n.a. n.a. - 0.0 0.00 0.0 0.00 3. Securities Revaluation Reserves n.a. n.a. - 0.0 0.00 0.0 0.00 4. Foreign Exchange Revaluation Reserves n.a. n.a. - 0.0 0.00 0.0 0.00 5. Fixed Asset Revaluations and Other Accumulated OCI n.a. n.a. - 0.0 0.00 0.0 0.00 6. Total Equity 578.4 531.3 11.13 382.3 8.77 342.2 10.57 7. Total Liabilities and Equity 5,197.9 4,774.3 100.00 4,360.3 100.00 3,238.6 100.00 8. Memo: Fitch Core Capital 578.2 531.1 11.12 382.1 8.76 342.0 10.56 Exchange rate USD1 = EUR0.91850 USD1 = EUR0.82370 USD1 = EUR0.72510 8
Summary Analytics 31 Dec 2015 31 Dec 2014 31 Dec 2013 Year End Year End Year End A. Interest Ratios 1. Interest Income on Loans/ Average Gross Loans 3.73 3.80 4.16 2. Interest Expense on Customer Deposits/ Average Customer Deposits n.a. n.a. n.a. 3. Interest Income/ Average Earning Assets 3.07 3.27 3.64 4. Interest Expense/ Average Interest-bearing Liabilities 1.67 1.74 2.20 5. Net Interest Income/ Average Earning Assets 1.57 1.66 1.60 6. Net Int. Inc Less Loan Impairment Charges/ Av. Earning Assets 1.69 1.75 1.40 7. Net Interest Inc Less Preferred Stock Dividend/ Average Earning Assets 1.57 1.66 1.60 B. Other Operating Profitability Ratios 1. Non-Interest Income/ Gross Revenues 3.47 4.55 3.77 2. Non-Interest Expense/ Gross Revenues 13.08 13.01 15.69 3. Non-Interest Expense/ Average Assets 0.21 0.22 0.25 4. Pre-impairment Op. Profit/ Average Equity 13.99 15.39 13.79 5. Pre-impairment Op. Profit/ Average Total Assets 1.37 1.46 1.36 6. Loans and securities impairment charges/ Pre-impairment Op. Profit (11.52) (6.13) 14.14 7. Operating Profit/ Average Equity 15.60 16.33 11.84 8. Operating Profit/ Average Total Assets 1.53 1.55 1.16 9. Operating Profit / Risk Weighted Assets 2.17 2.12 1.79 C. Other Profitability Ratios 1. Net Income/ Average Total Equity 10.53 11.12 8.08 2. Net Income/ Average Total Assets 1.03 1.06 0.79 3. Fitch Comprehensive Income/ Average Total Equity 10.53 11.12 8.08 4. Fitch Comprehensive Income/ Average Total Assets 1.03 1.06 0.79 5. Taxes/ Pre-tax Profit 32.51 31.92 31.79 6. Net Income/ Risk Weighted Assets 1.46 1.44 1.22 D. Capitalization 1. FCC/FCC-Adjusted Risk Weighted Assets 15.85 13.73 17.72 2. Tangible Common Equity/ Tangible Assets 11.12 8.76 10.56 3. Tier 1 Regulatory Capital Ratio 14.38 12.29 16.47 4. Total Regulatory Capital Ratio 14.38 12.29 16.47 5. Common Equity Tier 1 Capital Ratio 14.38 12.29 16.47 6. Equity/ Total Assets 11.13 8.77 10.57 7. Cash Dividends Paid & Declared/ Net Income n.a. n.a. n.a. 8. Internal Capital Generation 9.22 10.49 6.90 E. Loan Quality 1. Grow th of Total Assets 9.49 34.64 19.36 2. Grow th of Gross Loans 6.57 28.19 24.56 3. Impaired Loans/ Gross Loans n.a. n.a. n.a. 4. Reserves for Impaired Loans/ Gross Loans n.a. n.a. n.a. 5. Reserves for Impaired Loans/ Impaired Loans n.a. n.a. n.a. 6. Impaired loans less Reserves for Impaired Loans/ Fitch Core Capital n.a. n.a. n.a. 7. Impaired Loans less Reserves for Impaired Loans/ Equity n.a. n.a. n.a. 8. Loan Impairment Charges/ Average Gross Loans (0.16) (0.11) 0.24 9. Net Charge-offs/ Average Gross Loans n.a. n.a. n.a. 10. Impaired Loans + Foreclosed Assets/ Gross Loans + Foreclosed Assets n.a. n.a. n.a. F. Funding and Liquidity 1. Loans/ Customer Deposits 104.69 104.26 99.87 2. Interbank Assets/ Interbank Liabilities 53.73 76.85 48.94 3. Customer Deposits/ Total Funding (excluding derivatives) 81.45 82.12 89.74 4. Liquidity Coverage Ratio 214.60 361.70 176.70 5. Net Stable Funding Ratio n.a. n.a. n.a. 9
Reference Data 31 Dec 2015 31 Dec 2014 31 Dec 2013 Year End Year End As % of Year End As % of Year End As % of USDm EURm Assets EURm Assets EURm Assets A. Off-Balance Sheet Items 1. Managed Securitized Assets Reported Off-Balance Sheet n.a. n.a. - 0.0 0.00 0.0 0.00 2. Other off-balance sheet exposure to securitizations n.a. n.a. - 0.0 0.00 0.0 0.00 3. Guarantees 18.4 16.9 0.35 19.0 0.44 18.0 0.56 4. Acceptances and documentary credits reported off-balance sheet n.a. n.a. - 0.0 0.00 0.0 0.00 5. Committed Credit Lines 15.0 13.8 0.29 24.7 0.57 34.9 1.08 6. Other Contingent Liabilities n.a. n.a. - 0.0 0.00 0.0 0.00 7. Total Assets under Management n.a. n.a. - 0.0 0.00 0.0 0.00 B. Average Balance Sheet Average Loans 3,845.7 3,532.3 73.99 2,977.3 68.28 2,340.9 72.28 Average Earning Assets 5,022.4 4,613.1 96.62 3,674.0 84.26 2,875.8 88.80 Average Assets 5,175.6 4,753.8 99.57 3,800.3 87.16 2,970.0 91.71 Average Managed Securitized Assets (OBS) n.a. n.a. - 0.0 0.00 0.0 0.00 Average Interest-Bearing Liabilities 4,541.6 4,171.5 87.37 3,403.3 78.05 2,664.2 82.26 Average Common equity 506.7 465.4 9.75 360.6 8.27 292.2 9.02 Average Equity 506.7 465.4 9.75 360.6 8.27 292.2 9.02 Average Customer Deposits 3,831.7 3,519.4 73.72 2,888.3 66.24 2,222.5 68.63 C. Maturities Asset Maturities: Loans & Advances < 3 months 653.5 600.2 12.57 261.1 5.99 278.8 8.61 Loans & Advances 3-12 Months 1,434.0 1,317.1 27.59 380.9 8.74 220.7 6.81 Loans and Advances 1-5 Years 1,745.0 1,602.8 33.57 2,611.3 59.89 2,063.4 63.71 Loans & Advances > 5 years 21.1 19.4 0.41 67.9 1.56 28.0 0.86 Debt Securities < 3 Months 30.9 28.4 0.59 20.6 0.47 40.5 1.25 Debt Securities 3-12 Months 10.9 10.0 0.21 13.3 0.31 62.1 1.92 Debt Securities 1-5 Years 640.8 588.6 12.33 352.5 8.08 211.6 6.53 Debt Securities > 5 Years n.a. n.a. - 36.0 0.83 20.2 0.62 Loans & Advances to Banks < 3 Months 154.3 141.7 2.97 205.7 4.72 108.7 3.36 Loans & Advances to Banks 3-12 Months 261.8 240.5 5.04 315.2 7.23 33.4 1.03 Loans & Advances to Banks 1-5 Years 34.3 31.5 0.66 12.1 0.28 3.0 0.09 Loans & Advances to Banks > 5 Years n.a. n.a. - 0.0 0.00 0.0 0.00 Liability Maturities: Retail Deposits < 3 months 342.8 314.9 6.60 361.2 8.28 411.3 12.70 Retail Deposits 3-12 Months 86.0 79.0 1.65 110.8 2.54 69.3 2.14 Retail Deposits 1-5 Years 68.3 62.7 1.31 64.9 1.49 71.1 2.20 Retail Deposits > 5 Years 113.6 104.3 2.18 0.0 0.00 0.0 0.00 Other Deposits < 3 Months 595.9 547.3 11.46 407.1 9.34 300.1 9.27 Other Deposits 3-12 Months 1,645.5 1,511.4 31.66 878.9 20.16 367.6 11.35 Other Deposits 1-5 Years 830.3 762.6 15.97 1,269.4 29.11 1,293.6 39.94 Other Deposits > 5 Years 112.1 103.0 2.16 93.2 2.14 81.2 2.51 Deposits from Banks < 3 Months 417.3 383.3 8.03 543.6 12.47 146.1 4.51 Deposits from Banks 3-12 Months 203.3 186.7 3.91 140.3 3.22 109.7 3.39 Deposits from Banks 1-5 Years 217.6 199.9 4.19 9.7 0.22 40.7 1.26 Deposits from Banks > 5 Years n.a. n.a. - 0.0 0.00 0.0 0.00 Senior Debt Maturing < 3 months n.a. n.a. - 0.0 0.00 0.0 0.00 Senior Debt Maturing 3-12 Months n.a. n.a. - 0.0 0.00 0.0 0.00 Senior Debt Maturing 1-5 Years n.a. n.a. - 0.0 0.00 0.0 0.00 Senior Debt Maturing > 5 Years n.a. n.a. - 0.0 0.00 0.0 0.00 Total Senior Debt on Balance Sheet n.a. n.a. - n.a. - n.a. - Fair Value Portion of Senior Debt n.a. n.a. - 0.0 0.00 0.0 0.00 Subordinated Debt Maturing < 3 months n.a. n.a. - 0.0 0.00 0.0 0.00 Subordinated Debt Maturing 3-12 Months n.a. n.a. - 0.0 0.00 0.0 0.00 Subordinated Debt Maturing 1-5 Year n.a. n.a. - 0.0 0.00 0.0 0.00 Subordinated Debt Maturing > 5 Years n.a. n.a. - 0.0 0.00 0.0 0.00 Total Subordinated Debt on Balance Sheet n.a. n.a. - n.a. - n.a. - Fair Value Portion of Subordinated Debt n.a. n.a. - 0.0 0.00 0.0 0.00 D. Risk Weighted Assets 1. Risk Weighted Assets 3,649.0 3,351.6 70.20 2,783.5 63.84 1,930.2 59.60 2. Fitch Core Capital Adjustments for Insurance and Securitisation Risk Weighted Assets n.a. n.a. - n.a. - n.a. - 3. Fitch Core Capital Adjusted Risk Weighted Assets 3,649.0 3,351.6 70.20 2,783.5 63.84 1,930.2 59.60 4. Other Fitch Adjustments to Risk Weighted Assets n.a. n.a. - 0.0 0.00 0.0 0.00 5. Fitch Adjusted Risk Weighted Assets 3,649.0 3,351.6 70.20 2,783.5 63.84 1,930.2 59.60 E. Equity Reconciliation 1. Equity 578.4 531.3 11.13 382.3 8.77 342.2 10.57 2. Add: Pref. Shares and Hybrid Capital accounted for as Equity n.a. n.a. - n.a. - n.a. - 3. Add: Other Adjustments n.a. n.a. - 0.0 0.00 0.0 0.00 4. Published Equity 578.4 531.3 11.13 382.3 8.77 342.2 10.57 F. Fitch Core Capital Reconciliation 1. Total Equity as reported (including non-controlling interests) 578.4 531.3 11.13 382.3 8.77 342.2 10.57 2. Fair value effect incl in own debt/borrowings at fv on the B/S- CC only 0.0 0.0 0.00 0.0 0.00 0.0 0.00 3. Non-loss-absorbing non-controlling interests 0.0 0.0 0.00 0.0 0.00 0.0 0.00 4. Goodw ill 0.0 0.0 0.00 0.0 0.00 0.0 0.00 5. Other intangibles 0.2 0.2 0.00 0.2 0.00 0.2 0.01 6. Deferred tax assets deduction 0.0 0.0 0.00 0.0 0.00 0.0 0.00 7. Net asset value of insurance subsidiaries 0.0 0.0 0.00 0.0 0.00 0.0 0.00 8. First loss tranches of off-balance sheet securitizations 0.0 0.0 0.00 0.0 0.00 0.0 0.00 9. Fitch Core Capital 578.2 531.1 11.12 382.1 8.76 342.0 10.56 Exchange Rate USD1 = EUR0.91850 USD1 = EUR0.82370 USD1 = EUR0.72510 10
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