Şekerbank türk anonim Şirketi and its financial subsidiaries

Şekerbank

Türk Anonim Şirketi and

Its Financial Subsidiaries

Consolidated Financial Statements

As of and for the Three-Month Period Ended 31 March 2019

With Auditors’ Report Thereon

(Convenience Translation of Consolidated

Financial Statements and Related Disclosures and Footnotes

Originally Issued in Turkish)

LIMITED REVIEW REPORT

FOR THE INTERIM FINANCIAL INFORMATION

To the General Assembly of Şekerbank T.A.Ş.

Introduction

We have reviewed the accompanying consolidated balance sheet of Şekerbank T.A.Ş. (“the Bank”) and

its consolidated financial affiliates (together will be referred as “the Group”) as at 31 March 2019, 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 three-month period then ended, and a summary of significant accounting

policies and other explanatory notes. The Bank management is responsible for the preparation and fair

presentation of the accompanying interim financial information in accordance with “the Banking

Regulation and Supervision Agency (“BRSA”) Accounting and Reporting Regulations” including 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 Standard 34 “Interim

Financial Reporting” principles for the matters not legislated by the aforementioned regulations. Our

responsibility is to express a conclusion on this interim financial information based on our review.

Scope of Review

We conducted our review in accordance with the Independent Auditing Standard on Review Engagements

2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A

review of interim financial information consists of making inquiries, primarily of persons responsible for

financial reporting process, and applying analytical and other review procedures. A review of interim

financial information is substantially less in scope than an independent audit conducted in accordance with

Independent Auditing Standards and the objective of which is to express an opinion on the financial

statements. Consequently, a review of the interim financial information does not provide assurance that the

audit firm will be aware of all significant matters which would have been identified in an audit. Accordingly,

we do not express an audit opinion.

Basis for Qualified Conclusion

As of the balance sheet date, overdue 90 days cash and non-cash loans granted by the Parent Bank

amounting to TRL 587,908 thousand principal and TRL 87,782 thousands income accrual have not been

classified under "Non-performing Loans" in accordance with the Regulation on Procedures and Principles

for the Classification of Loans and the Provisions to be Provided for these Loans ("Regulation"). If the

Parent Bank had classified this portfolio as “Non-performing Loans”, non-performing loans would have

been TRL 587,908 thousands higher and expected credit loss would have been TRL 201,715 thousands

higher. On the other hand, the accompanying consolidated financial statements includes a general reserve

of total TRL 126,336 thousands of the Parent Bank for the possible effects of the negative circumstances

which may arise in economy of market conditions. As of the balance sheet date, if overdue 90 days loans

had been classified as non-performing loans with expected credit loss provisions provided and general

reserve had not been included, deferred tax asset would have been TRL 16,583 thousands higher and

current period net loss would have been TRL 58,796 thousands higher.

Qualified Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying

consolidated interim financial information does not present fairly, in all material respects, the financial

position of Şekerbank T.A.Ş. and its consolidated financial affiliates as at 31 March 2019, and of the

results of its operations and its cash flows for the three-month period then ended in accordance with the

BRSA Accounting and Reporting Regulations.

Report on Other Legal and Regulatory Requirements

Based on our review, nothing has come to our attention that causes us to believe that the interim financial

information provided in the Management’s interim report included in section seven of the accompanying

consolidated financial statements, is not presented fairly, in all material respects, and is not consistent with

the reviewed interim financial statements and the explanatory notes.

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

Yaman Polat

Partner

İstanbul, 17 May 2019

THE CONSOLIDATED FINANCIAL REPORT OF ŞEKERBANK T.A.Ş.

FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2019

The consolidated financial report the three-month period designed by the Banking Regulation and Supervision

Agency in line with Communiqué on Financial Statements to be Publicly Announced and the Related Policies and

Disclosures consists of the sections listed below:

GENERAL INFORMATION ABOUT THE PARENT BANK

CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF THE PARENT BANK

EXPLANATIONS ON THE CORRESPONDING ACCOUNTING POLICIES APPLIED

INFORMATION ON FINANCIAL POSITION AND RISK MANAGEMENT OF THE GROUP

WHICH IS UNDER CONSOLIDATION

EXPLANATORY DISCLOSURES AND FOOTNOTES ON CONSOLIDATED FINANCIAL

STATEMENTS

LIMITED REVIEW REPORT

INTERIM ACTIVITY REPORT

Subsidiaries whose financial statements have been consolidated in the consolidated financial report are as follows:

Subsidiaries

Şekerbank (Kıbrıs) Ltd.

Şekerbank International Banking Unit Ltd.

Şeker Faktoring A.Ş.

Şeker Yatırım Menkul Değerler A.Ş.

Şeker Finansal Kiralama A.Ş.

Şeker Finansman A.Ş.

Zahlungsdienste GmbH der Şekerbank T.A.Ş.

The consolidated financial statements for the three-month period and the explanatory footnotes and disclosures,

unless otherwise indicated, are prepared in Thousands of Turkish Lira, in accordance with the Communiqué on

Banks’ Accounting Practice and Maintaining Documents, Turkish Accounting Standards, Turkish Financial

Reporting Standards, related communiqués and the Banks’ records, have been independently reviewed and presented

as attached.

The consolidated 31 March 2019 financial statements are reviewed and they do not include any false explanation in

material subjects and absences that may result in misleading statements and fairly reflect the Bank’s financial

position, the risks faced and uncertainty.

Dr. Hasan Basri GÖKTAN

Erdal ERDEM Üzeyir BAYSAL

Chairman of The Board of

Directors

General Manager

Head of the Audit

Committee

Aidar RYSKULOV Çetin AYDIN Selim Güray ÇELİK Orhan ULUYOL

Member of the Audit

Committee

Member of the Audit

Committee

Executive Vice President

Group Head

Information related to responsible personnel for the questions about financial statements:

Name-Surname / Title : Oya SARI / Investor Relations and Structured Finance Manager

Address : Emniyet Evleri Mah. Eski Büyükdere Cad. No:1/1A

34415 Kağıthane / İstanbul

Telephone : (212) 319 70 00

Fax : (212) 319 73 79

Web Site : www.sekerbank.com.tr

E-mail Address : [email protected]

http://www.sekerbank.com.tr/

mailto:[email protected]

Telephone No : (212) 319 71 58

Fax No : (212) 319 71 62

INDEX

Page Number

SECTION ONE

General Information

I. Bank’s Incorporation Date, Beginning Status, History of the Bank Containing the Changes in the Mentioned Status 1

II. Explanations Regarding Parent Bank’s Shareholding Structure, Shareholders Holding Directly or Indirectly, Collectively or Individually, the

Managing and Controlling Power and Changes in Current Year, if any and Explanations on the Controlling Group of the Bank 1

III. Explanations Regarding the Chairman and the Members of Board of Directors, Audit Committee, General Manager and Executive Vice Presidents

and Their Shares and Their Rights of Responsibility in the Parent Bank 2

IV. Information about the person and institutions that have qualified shares in the Parent Bank 2

V. Summary on the Parent Bank’s Functions and Areas of Activity 3

VI. Differences Between The Communique On Preparation Of Consolidated Financial Statements Of Banks And Turkish Accounting Standards And Short

Explanatıon About The Institutions Subject To Line-By-Line Method Or Proportional Consolidation And Institutions Which Are Deducted From Equity

Or Not Included In These Three Methods 3

VII. The Existing Or Potential, Actual Or Legal Obstacles On The Transfer Of Shareholders’ Equity Between The Parent Bank And its Subsidiaries Or

The Reimbursement Of Liabilities 3

SECTION TWO

Consolidated Financial Statements

I. Consolidated Balance Sheet (Consolidated Statement of Financial Position) 5

II. Consolidated Statement of Off Balance Sheet Contingencies and Commitments 7

III. Consolidated Statement of Income 8

IV. Consolidated Statement of Profit Or Loss And Other Comprehensive Income 9

V. Consolidated Statement of Changes in Shareholders’ Equity 10

VI. Consolidated Statement of Cash Flows 11

SECTION THREE Accounting Principles

I. Basis of Presentation 12

II. Explanations on Usage Strategy of Financial Assets and Foreign Currency Transactions 12

III. Explanations on Associates and Consolidated Subsidiaries 13

IV. Explanations on Forward and Option Contracts and Derivative Instruments 14

V. Explanations on Interest Income and Expenses 15

VI. Explanations on Fees and Commission Income and Expenses 15

VII. Explanations on Financial Assets 16

VIII. Explanations on Impairment of Financial Assets 18

IX. Explanations on Offsetting of Financial Assets and Liabilities 19

X. Explanations on Sales and Repurchase Agreements and Lending of Securities 19

XI. Explanations on Assets Held For Sale and Discontinued Operations 20

XII. Explanations on Goodwill and Other Intangible Assets 20

XIII. Explanations on Tangible Fixed Assets 21

XIV. Explanations on Leasing Transactions 21

XV. Explanations on Provisions and Contingent Liabilities 22

XVI. Explanations on Liabilities Regarding Employee Benefits 22

XVII. Explanations on Taxation 24

XVIII. Additional Explanations on Borrowings 25

XIX. Explanations on Share Certificates 26

XX. Explanations on Independent Guarantees and Acceptances 26

XXI. Explanations on Government Incentives 26

XXII. Explanations on Segment Reporting 27

XXIII. Explanations on Other Matters 28

SECTION FOUR Information Related to Consolidated Financial Position and Risk Management of the Bank

I. Explanations Related to Consolidated Shareholders’ Equity 29

II. Explanations Related to Consolidated Currency Risk 40

III. Explanations Related to the Consolidated Interest Rate Risk 42

IV. Explanations Related to Equity Securities Position Risk of Equity Securities in Banking Book 45

V. Explanations Related to Consolidated Liquidity Risk Management and Consolidated Liquidity Coverage Ratio 46

VI. Explanations Related to Consolidated Leverage Ratio 53

VII. Explanations Related to Consolidated Risk Management 55

VIII. Explanations Related to Transactions Made on Behalf of Others and Transactions Based On Trust 55

SECTION FIVE Explanations and Disclosures on Consolidated Financial Statements

I. Explanations Related to the Consolidated Assets 56

II. Explanations Related to the Consolidated Liabilities 72

III. Explanations Related to the Consolidated Off-Balance Sheet Contingencies and Commitments 83

IV. Explanations Related to the Consolidated Statement of Income 87

V. Explanations on the Risk Group of the Parent Bank 92

VI. Explanations and Notes Related to Subsequent Events 94

SECTION SIX Auditors’ Review Report

I. Explanations on the Auditors’ Review Report 94

II. Other Footnotes and Explanations Prepared by the Independent Auditors 94

SECTION SEVEN Information on Interim Activity Report

I. Interim Period Reports Included the Board of Directors Chairman and General Manager’s

Assessments of the Bank for the Interim Activities 95

ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)

1

SECTION ONE

GENERAL INFORMATION

I. Bank’s Incorporation Date, Beginning Status, History of the Bank Containing the Changes in the

Mentioned Status

Şekerbank T.A.Ş. (“the Parent Bank”) founded as a Turkish bank by 14 partners started its operations in

1953 as Pancar Kooperatifleri Bankası A.Ş. in Eskişehir, and in 1956 the Bank changed its name to

Şekerbank T.A.Ş and moved its headquarters to Ankara in 1956. 15 % of the Parent Bank shares were offered

to public in 1997 and currently 34.19 % of the Parent Bank shares are publicly traded. The Parent Bank’s

one of the main shareholders, Şekerbank T.A.Ş. Personeli Munzam Sosyal Güvenlik ve Yardımlaşma

Sandığı Vakfı, provide its members with additional social rights and retirement guarantees within the social

security system. The Parent Bank has affiliates and subsidiaries in the finance, real estate and tourism sectors.

Business line of the Parent Bank covers extending all kinds of cash and non-cash loans in Turkish Lira and

foreign currency and carrying out capital market transactions, accepting deposits in TRL and FC and

providing other banking services.

II. Explanations Regarding The Parent Bank’s Shareholding Structure, Shareholders Holding

Directly or Indirectly, Collectively or Individually, the Managing and Controlling Power and

Changes in Current Year, if any and Explanations on the Controlling Group of the Parent

Bank

Name of Shareholders Amounts

of Share

Share

(%)

Paid in

Capital

Unpaid

Capital

Şekerbank T.A.Ş. Personeli

Munzam Sosyal Güvenlik ve

Yardımlaşma Sandığı Vakfı 410,389 35.44 410,389

-

- Samruk-Kazyna, the National

Welfare Fund of Kazakhstan 224,353 19.37 224,353 - Şekerbank T.A.Ş. 109,212 9.43 109,212 -

Others 18,092 1.57 18,092 -

Public offerings 395,954 34.19 395,954 -

Total 1,158,000 100.00 1,158,000 -

SECTION ONE (cont’d)




2

GENERAL INFORMATION (cont’d)

III. Explanations Regarding the Chairman and the Members of Board of Directors, Audit

Committee, General Manager and Executive Vice Presidents and Their Shares and Their

Rights of Responsibility in the Bank

Title Name and Surname Responsibility Areas

Chairman of the Board of Directors Dr.Hasan Basri Göktan

Chairman & Executive Board Member, Credit Committee,

Corporate Governance Committee, Remuneration Committee

General Manager Erdal Erdem (**)

Board Member, General Manager, Credit Committee,

Observer in the Remuneration Committee

Members of the Board of Directors Beibit Karymsakov Vice-Chairman, Remuneration Committee

Emin Erdem Executive Board Member, Credit Committee

Erdal Batmaz Executive Board Member

Nariman Zharkinbayev Executive Board Member, Credit Committee, Corporate Governance Committee

Üzeyir Baysal (*) Corporate Governance Committee, Audit Committee

Halit Haydar Yıldız Renumeration Committee

Aidar Ryskulov (*) Audit Committee

Almat Zhamiyev Corporate Governance Committee Çetin Aydın (*) Audit Committee

Mehmet Ayhan Altıntaş

Independent Member, Internal Systems, Corporate

Governance Committee

Executive Vice Presidents Hüseyin Üst Credit Monitoring & Follow-Up

Nihat Büyükbozkoyun Operations

Selim Güray Çelik

Financial Control, Reporting, Budget and Performance

Management, Corporate Governance Committee

Gökhan Ertürk Agricultural & Individual Banking Marketing

Umut Ülbegi Corporate and Commercial Banking Marketing

Salih Zeki Önder Financial Institutions

Ahmet Hakan Eken Credit Management

Aybala Şimşek Strategy and Human Resources

Aytay Tolga Şenefe Treasury

(*) According to Communiqué On Corporate Governance Principles of Capital Markets Board, No: II-17.1, Audit Committee members of the banks are accepted as independent members of the Board of Directors.

(**) General Manager Servet Taze has resigned from his duty as of 01 April 2019 and replaced by Erdal Erdem.

The Chairman of the Board of Directors Dr. Hasan Basri Göktan has total shares of 0.05 % in nominal, amounting

to TRL 577 Thousand; which is obtained from public offering.

IV. Information About the Persons and Institutions That Have Qualified Shares in the Parent

Bank:

Name/ Commercial Name

Amounts of

Share

TRL Thousand Share (%)

Paid in Capital

TRL Thousand Unpaid

Capital

Şekerbank T.A.Ş.

Personeli Munzam Sosyal Güvenlik ve Yardımlaşma Sandığı Vakfı 410,389 35.44 410,389 -

Samruk-Kazyna, the National Well-fare Fund of Kazakhstan 224,353 19.37 224,353 -




3

SECTION ONE (cont’d)

GENERAL INFORMATION (cont’d)

V. Summary on the Parent Bank’s Functions and Areas of Activity

Business line of the Parent Bank covers extending all kinds of cash and non-cash loans in Turkish Lira and foreign

currency and carrying out capital market transactions, accepting deposits in TRL and FC and providing other

banking services. As of 31 March 2019, the Parent Bank has 273 domestic branches (31 December 2018 - 273

domestic branches).

VI. Differences Between The Communiqué On Preparation Of Consolidated Financial

Statements Of Banks And Turkish Accounting Standards And Short Explanation About The

Institutions Subject To Line-By-Line Method Or Proportional Consolidation And

Institutions Which Are Deducted From Equity Or Not Included In These Three Methods

According to the Communique On Preparation Of Consolidated Financial Statements Of Banks, the Bank’s

subsidiaries Şekerbank (Kıbrıs) Ltd., Şeker Finansal Kiralama A.Ş., Şekerbank International Banking Unit Ltd.,

Şeker Yatırım Menkul Değerler A.Ş., Şeker Faktoring A.Ş., Şeker Finansman A.Ş. and Zahlungsdienste GmbH der

Şekerbank T.A.Ş. are included in the scope of consolidation by line-by-line method and Şeker Proje Geliştirme ve

Gayrimenkul Yatırım A.Ş. is not subject to consolidation as it is not a financial subsidiary.

Seltur Turistik İşletmeler Yatırım A.Ş. is not consolidated in the financial statements since the Parent Bank has no

control and it is not a financial subsidiary.

According to Turkish Accounting Standards, all financial and non-financial subsidiaries are consolidated.

VII. The Existing Or Potential, Actual Or Legal Obstacles On The Transfer Of Shareholders'

Equity Between The Parent Bank And its Subsidiaries Or The Reimbursement Of

Liabilities

There is no immediate transfer of the shareholders’ equity between the Parent Bank and its subsidiaries. Dividend

distribution from shareholders’ equity is done according to related regulations. There is no existing or potential,

actual or legal obstacle to the repayment of liabilities between the Parent Bank and its subsidiaries.

4

SECTION TWO

CONSOLIDATED FINANCIAL STATEMENTS

I. Consolidated Balance Sheet (Consolidated Statement of Financial Position)

II. Consolidated Statement of Off Balance Sheet Contingencies and Commitments

III. Consolidated Statement of Income

IV. Consolidated Statement of Profıt Or Loss And Other Comprehensive Income

V. Consolidated Statement of Changes in Shareholders’ Equity

VI. Consolidated Statement of Cash Flows

The accompanying explanations and notes form an integral part of these financial statements.

5

ŞEKERBANK T.A.Ş. CONSOLIDATED BALANCE SHEET (STATEMENT OF FINANCIAL POSITION)

TRL THOUSAND

Reviewed Audited

CURRENT PERIOD PRIOR PERIOD

ASSETS Note 31.03.2019 31.12.2018

Ref. TRL FC Total TRL FC Total

I. FINANCIAL ASSETS (Net) 1,655,381 3,965,244 5,620,625 2,029,685 3,106,942 5,136,627

1.1 Cash and Cash Equivalents 702,345 3,837,757 4,540,102 1,002,175 2,866,083 3,868,258

1.1.1 Cash and Balances with Central Bank (1) 447,257 3,369,754 3,817,011 930,193 2,689,044 3,619,237

1.1.2 Banks (3) 230,529 467,169 697,698 34,699 171,320 206,019

1.1.3 Money Market Placements 27,099 844 27,943 53,365 5,827 59,192

1.1.4 Expected Losses (-) (2,540) (10) (2,550) (16,082) (108) (16,190)

1.2 Financial Assets at Fair Value Through Profit and Loss (2) 280,467 9,708 290,175 297,944 9,524 307,468

1.2.1 Public Sector Debt Securities 17,994 9,708 27,702 16,048 9,524 25,572

1.2.2 Equity Securities - - - - - -

1.2.3 Other Financial Assets 262,473 - 262,473 281,896 - 281,896

1.3 Financial Assets at Fair Value Through Comprehensive Income (4) 505,092 19,305 524,397 562,381 15,301 577,682

1.3.1 Public Sector Debt Securities 497,515 - 497,515 554,804 - 554,804

1.3.2 Equity Securities 7,577 19,305 26,882 7,577 15,301 22,878

1.3.3 Other Financial Assets - - - - - -

1.4 Derivative Financial Assets (2),(11) 167,477 98,474 265,951 167,185 216,034 383,219

1.4.1

Derivative Financial Assets Measured at Fair Value Through Profit

and Loss 167,477 98,474 265,951 167,185 216,034 383,219

1.4.2

Derivative Financial Assets Measured at Fair Value Through

Comprehensive Income - - - - - -

II. FINANCIAL ASSETS AT AMORTISED COST (NET) 17,172,250 8,086,975 25,259,225 17,075,998 8,087,659 25,163,657

2.1 Loans (5) 16,381,392 6,736,913 23,118,305 15,601,077 6,807,102 22,408,179

2.2 Leasing Receivables (10) 189,105 320,599 509,704 194,366 313,846 508,212

2.3 Factoring Receivables 424,224 - 424,224 443,913 - 443,913

2.4 Financial Assets at Amortised Cost (6) 1,956,864 1,039,898 2,996,762 2,452,249 976,473 3,428,722

2.4.1 Public Sector Debt Securities 1,952,278 307,737 2,260,015 2,447,744 293,076 2,740,820

2.4.2 Other Financial Assets 4,586 732,161 736,747 4,505 683,397 687,902

2.5 Expected Losses (-) (1,779,335) (10,435) (1,789,770) (1,615,607) (9,762) (1,625,369)

III. ASSETS HELD FOR SALE AND DISCONTINUED

OPERATIONS (Net) (16) 393,289 - 393,289 320,984 - 320,984

3.1 Held for sale 393,289 - 393,289 320,984 - 320,984

3.2 Discontinued operations - - - - - -

IV. OWNERSHIP INVESTMENTS (Net) 612,829 - 612,829 612,829 - 612,829

4.1 Associates (Net) (7) 4,236 - 4,236 4,236 - 4,236

4.1.1 Associates Consolidated Under Equity Accounting - - - - - -

4.1.2 Unconsolidated Associates 4,236 - 4,236 4,236 - 4,236

4.2 Subsidiaries (Net) (8) 608,593 - 608,593 608,593 - 608,593

4.2.1 Unconsolidated Financial Investments in Subsidiaries - - - - - -

4.2.2 Unconsolidated Non-Financial Investments in Subsidiaries 608,593 - 608,593 608,593 - 608,593

4.3 Joint Ventures (Net) (9) - - - - - -

4.3.1 Joint-Ventures Consolidated Under Equity Accounting - - - - - -

4.3.2 Unconsolidated Joint-Ventures - - - - - -

V. TANGIBLE ASSETS (Net) (12) 895,314 3,752 899,066 708,376 3,456 711,832

VI. INTANGIBLE ASSETS (Net) (13) 110,088 - 110,088 94,111 - 94,111

6.1 Goodwill - - - - - -

6.2 Other 110,088 - 110,088 94,111 - 94,111

VII. INVESTMENT PROPERTY (Net) (14) 61,125 - 61,125 61,125 - 61,125

VIII. CURRENT TAX ASSET 5,225 - 5,225 5,369 - 5,369

IX. DEFERRED TAX ASSET (15) 204,728 - 204,728 173,996 - 173,996

X. OTHER ASSETS (Net) (17) 453,218 314,567 767,785 492,004 192,250 684,254

TOTAL ASSETS 21,563,447 12,370,538 33,933,985 21,574,477 11,390,307 32,964,784


6

ŞEKERBANK T.A.Ş. CONSOLIDATED BALANCE SHEET (STATEMENT OF FINANCIAL POSITION)

TRL THOUSAND

Reviewed Audited


LIABILITIES Note 31.03.2019 31.12.2018


I. DEPOSITS (1) 13,271,059 11,295,787 24,566,846 12,835,889 10,104,968 22,940,857

II. FUNDS BORROWED (3) 503,218 2,696,234 3,199,452 473,392 3,126,688 3,600,080

III. MONEY MARKET BALANCES (4) 494,906 - 494,906 192,096 - 192,096

IV. MARKETABLE SECURITIES ISSUED (Net) (5) 889,970 - 889,970 1,243,684 - 1,243,684

4.1 Bills 490,646 - 490,646 516,302 - 516,302

4.2 Asset backed securities 381,727 - 381,727 701,850 - 701,850

4.3 Bonds 17,597 - 17,597 25,532 - 25,532

V. FUNDS - - - - - -

5.1 Borrower funds - - - - - -

5.2 Other - - - - - -

VI.

FINANCIAL LIABILITIES MEASURED AT FAIR VALUE

THROUGH PROFIT AND LOSS - - - - - -

VII. DERIVATIVE FINANCIAL LIABILITIES (2),(8) 6,013 71,596 77,609 30,261 91,824 122,085

7.1

Derivative Financial Liabilities Measured at Fair Value Through

Profit and Loss 6,013 71,596 77,609 30,261 91,824 122,085

7.2

Derivative Financial Liabilities Measured at Fair Value Through

Comprehensive Income - - - - - -

VIII. FACTORING PAYABLES 7,123 - 7,123 554 - 554

IX. FINANCE LEASE PAYABLES (Net) (7) 205,983 15,295 221,278 12,363 12,744 25,107

X. PROVISIONS (9) 496,120 2,323 498,443 486,646 4,236 490,882

10.1 Restructuring provisions - - - - - -

10.2 Reserve for employee benefits 95,383 569 95,952 87,508 533 88,041

10.3 Insurance technical provisions (Net) - - - - - -

10.4 Other provisions 400,737 1,754 402,491 399,138 3,703 402,841

XI. CURRENT TAX LIABILITY (10) 79,310 41 79,351 63,038 45 63,083

XII. DEFERRED TAX LIABILITY (10) 1,925 - 1,925 1,532 - 1,532

XIII.

PAYABLES RELATED TO ASSETS HELD FOR SALE AND

DISCONTINUED OPERATIONS (Net) (11)

- - - - - -

13.1 Held for sale - - - - - -

13.2 Discontinued operations - - - - - -

XIV. SUBORDINATED DEBTS (12) 452,175 492,305 944,480 452,571 451,050 903,621

14.1 Loans - - - - - -

14.2 Other Debt Instruments 452,175 492,305 944,480 452,571 451,050 903,621

XV. OTHER LIABILITIES (6) 316,519 270,989 587,508 505,778 422,595 928,373

XVI. SHAREHOLDERS' EQUITY (13) 2,330,903 34,191 2,365,094 2,423,436 29,394 2,452,830

16.1 Paid-in capital 1,158,000 - 1,158,000 1,158,000 - 1,158,000

16.2 Capital Reserves (164,083) - (164,083) (164,083) - (164,083)

16.2.1 Share Premium 1,835 - 1,835 1,835 - 1,835

16.2.2 Share Cancellation Profits - - - - - -

16.2.3 Other Capital Reserves (165,918) - (165,918) (165,918) - (165,918)

16.3

Other Comprehensive Income/Expense Items not to be Recycled to

Profit or Loss 68,744 - 68,744 68,744 - 68,744

16.4

Other Comprehensive Income/Expense Items to be Recycled to

Profit or Loss (12,317) 29,136 16,819 (9,167) 24,511 15,344

16.5 Profit Reserves 1,368,413 4,146 1,372,559 1,758,536 4,146 1,762,682

16.5.1 Legal Reserves 301,279 4,220 305,499 296,784 4,220 301,004

16.5.2 Status Reserves - - - - - -

16.5.3 Extraordinary Reserves 980,731 - 980,731 1,375,349 - 1,375,349

16.5.4 Other Profit Reserves 86,403 (74) 86,329 86,403 (74) 86,329

16.6 Profit or Loss (130,922) (706) (131,628) (427,440) (766) (428,206)

16.6.1 Prior Years’ Income/ (Loss) (36,962) (1,121) (38,083) (515,982) (1,622) (517,604)

16.6.2 Current Year Income/ (Loss) (93,960) 415 (93,545) 88,542 856 89,398

16.7 Minority Shares 43,068 1,615 44,683 38,846 1,503 40,349

TOTAL LIABILITIES 19,055,224 14,878,761 33,933,985 18,721,240 14,243,544 32,964,784


7

ŞEKERBANK T.A.Ş. CONSOLIDATED OFF-BALANCE SHEET CONTINGENCIES AND COMMITMENTS

TRL THOUSAND

Reviewed Audited


Note 31.03.2019 31.12.2018


A. OFF BALANCE SHEET CONTINGENCIES AND COMMITMENTS (I+II+III) 9,227,677 11,722,641 20,950,318 11,200,444 10,906,698 22,107,142

I. GUARANTEES AND SURETIES (1) 3,473,141 2,547,175 6,020,316 3,399,645 2,519,339 5,918,984

1.1. Letters of guarantee 3,464,554 996,658 4,461,212 3,392,210 993,034 4,385,244

1.1.1. Guarantees subject to State Tender Law 164,174 4,444 168,618 148,504 3,772 152,276

1.1.2. Guarantees given for foreign trade operations - - - - - -

1.1.3. Other letters of guarantee 3,300,380 992,214 4,292,594 3,243,706 989,262 4,232,968

1.2. Bank loans - 132,898 132,898 - 132,949 132,949

1.2.1. Import letter of acceptance - 132,898 132,898 - 132,949 132,949

1.2.2. Other bank acceptances - - - - - -

1.3. Letters of credit 1,976 266,179 268,155 1,976 260,858 262,834

1.3.1. Documentary letters of credit 1,976 266,179 268,155 1,976 260,858 262,834

1.3.2. Other letters of credit - - - - - -

1.4. Prefinancing given as guarantee - - - - - -

1.5. Endorsements - 268,066 268,066 - 174,680 174,680

1.5.1. Endorsements to the Central Bank of Turkey - 268,066 268,066 - 174,680 174,680

1.5.2. Other endorsements - - - - - -

1.6. Purchase guarantees for securities issued - - - - - -

1.7. Factoring guarantees - - - - - -

1.8. Other guarantees 6,611 883,374 889,985 5,459 957,818 963,277

1.9. Other sureties - - - - - -

II. COMMITMENTS (1) 2,821,094 547,595 3,368,689 2,587,245 86,990 2,674,235

2.1. Irrevocable commitments 2,312,362 545,426 2,857,788 2,050,562 84,759 2,135,321

2.1.1. Forward asset purchase commitments 133,851 534,109 667,960 22,231 73,933 96,164

2.1.2. Forward deposit purchase and sales commitments - - - - - -

2.1.3. Share capital commitment to associates and subsidiaries - - - - - -

2.1.4. Loan granting commitments 1,028,268 11,317 1,039,585 976,300 10,826 987,126

2.1.5. Securities underwriting commitments - - - - - -

2.1.6. Commitments for reserve deposit requirements - - - - - -

2.1.7. Payment commitment for checks 413,204 - 413,204 341,685 - 341,685

2.1.8. Tax and fund liabilities from export commitments 10,925 - 10,925 10,032 - 10,032

2.1.9. Commitments for credit card expenditure limits 504,503 - 504,503 473,944 - 473,944

2.1.10. Commitments for promotions related with credit cards and banking activities 493 - 493 501 - 501

2.1.11. Receivables from short sale commitments on securities - - - - - -

2.1.12. Payables for short sale commitments on securities - - - - - -

2.1.13. Other irrevocable commitments 221,118 - 221,118 225,869 - 225,869

2.2. Revocable commitments (4) 508,732 2,169 510,901 536,683 2,231 538,914

2.2.1. Revocable loan granting commitments 508,229 - 508,229 535,704 - 535,704

2.2.2. Other revocable commitments 503 2,169 2,672 979 2,231 3,210

III. DERIVATIVE FINANCIAL INSTRUMENTS (2) 2,933,442 8,627,871 11,561,313 5,213,554 8,300,369 13,513,923

3.1 Derivative financial instruments for hedging purposes 936,000 - 936,000 936,000 - 936,000

3.1.1 Fair value hedge 936,000 - 936,000 936,000 - 936,000

3.1.2 Cash flow hedge - - - - - -

3.1.3 Hedge of net investment in foreign operations - - - - - -

3.2 Held for trading transactions 1,997,442 8,627,871 10,625,313 4,277,554 8,300,369 12,577,923

3.2.1 Forward foreign currency buy/sell transactions 276,799 460,712 737,511 447,560 672,968 1,120,528

3.2.1.1 Forward foreign currency transactions-buy 188,297 182,613 370,910 231,148 332,755 563,903

3.2.1.2 Forward foreign currency transactions-sell 88,502 278,099 366,601 216,412 340,213 556,625

3.2.2 Swap transactions related to f.c. and interest rates 1,592,019 7,281,898 8,873,917 3,371,929 6,908,365 10,280,294

3.2.2.1 Foreign currency swap-buy 40,269 3,883,655 3,923,924 693,999 3,847,410 4,541,409

3.2.2.2 Foreign currency swap-sell 1,501,750 2,147,787 3,649,537 2,327,930 1,865,237 4,193,167

3.2.2.3 Interest rate swaps-buy 25,000 625,228 650,228 175,000 597,859 772,859

3.2.2.4 Interest rate swaps-sell 25,000 625,228 650,228 175,000 597,859 772,859

3.2.3 Foreign currency, interest rate and securities options 128,624 757,780 886,404 458,065 610,742 1,068,807

3.2.3.1 Foreign currency options-buy 27,608 416,913 444,521 234,015 289,080 523,095

3.2.3.2 Foreign currency options-sell 101,016 340,867 441,883 224,050 321,662 545,712

3.2.3.3 Interest rate options-buy - - - - - -

3.2.3.4 Interest rate options-sell - - - - - -

3.2.3.5 Securities options-buy - - - - - -

3.2.3.6 Securities options-sell - - - - - -

3.2.4 Foreign currency futures - - - - - -

3.2.4.1 Foreign currency futures-buy - - - - - -

3.2.4.2 Foreign currency futures-sell - - - - - -

3.2.5 Interest rate futures - - - - - -

3.2.5.1 Interest rate futures-buy - - - - - -

3.2.5.2 Interest rate futures-sell - - - - - -

3.2.6 Other - 127,481 127,481 - 108,294 108,294

B. CUSTODY AND PLEDGED ITEMS (IV+V+VI) 444,688,050 239,481,917 684,169,967 436,117,794 224,698,837 660,816,631

IV. ITEMS HELD IN CUSTODY 4,244,245 1,751,287 5,995,532 4,261,936 1,578,609 5,840,545

4.1. Customer fund and portfolio balances - - - - - -

4.2. Investment securities held in custody 539,539 480,357 1,019,896 513,304 436,509 949,813

4.3. Checks received for collection 1,825,607 122,098 1,947,705 1,807,316 135,081 1,942,397

4.4. Commercial notes received for collection 69,716 250,943 320,659 64,174 158,429 222,603

4.5. Other assets received for collection 3,340 720,187 723,527 2,124 682,216 684,340

4.6. Assets received for public offering - - - - - -

4.7. Other items under custody 1,806,042 177,702 1,983,744 1,875,017 166,374 2,041,391

4.8. Custodians 1 - 1 1 - 1

V. PLEDGED ITEMS 435,842,456 236,371,681 672,214,137 427,323,477 221,791,699 649,115,176

5.1. Marketable securities 22,000 63 22,063 22,000 59 22,059

5.2. Guarantee notes 102,707,235 41,323,856 144,031,091 100,340,591 38,821,464 139,162,055

5.3. Commodity - - - - - -

5.4. Warranty - - - - - -

5.5. Properties 29,266,782 12,496,954 41,763,736 29,033,655 12,149,563 41,183,218

5.6. Other pledged items 302,613,552 182,477,101 485,090,653 296,771,411 170,744,419 467,515,830

5.7. Pledged items-depository 1,232,887 73,707 1,306,594 1,155,820 76,194 1,232,014

VI. ACCEPTED INDEPENDENT GUARANTEES AND WARRANTIES 4,601,349 1,358,949 5,960,298 4,532,381 1,328,529 5,860,910

TOTAL OFF BALANCE SHEET ACCOUNTS (A+B) 453,915,727 251,204,558 705,120,285 447,318,238 235,605,535 682,923,773


8


9

ŞEKERBANK T.A.Ş. CONSOLIDATED STATEMENT OF INCOME

TRL THOUSAND

Reviewed Reviewed

INCOME STATEMENT Note CURRENT PERIOD PRIOR PERIOD

Ref. 01.01.2019 -31.03.2019 01.01.2018 -31.03.2018

I. INTEREST INCOME (1) 1,079,847 905,803

1.1 Interest on Loans 944,637 764,926 1.2 Interest Received From Reserve Deposits 14,135 8,830 1.3 Interest Received From Banks 9,714 6,589 1.4 Interest Received From Money Market Placements 1,850 17,682 1.5 Interest Received From Marketable Securities Portfolio 85,534 91,102 1.5.1 Financial Assets at Fair Value Through Profit and Loss 1,869 1,401 1.5.2 Financial Assets at Fair Value Through Comperehensive Income 24,181 7,010 1.5.3 Financial Assets at Amortised Cost 59,484 82,691 1.6 Financial Leasing Income 13,171 12,427 1.7 Other Interest Income 10,806 4,247 II. INTEREST EXPENSE (-) (2) 866,286 549,216

2.1 Interest on Deposits 636,796 388,547 2.2 Interest on Funds Borrowed 53,871 40,060 2.3 Interest on Money Market Transactions 57,090 42,287 2.4 Interest on Securities Issued 82,160 63,941

2.5 Leasing Interest Expense 10,704 957 2.6 Other Interest Expense 25,665 13,424

III. NET INTEREST/INCOME (I - II) 213,561 356,587

IV. NET FEES AND COMMISSIONS INCOME 98,433 93,181 4.1 Fees and Commissions Received 127,667 113,461 4.1.1 Non-cash Loans 19,629 18,766 4.1.2 Other 108,038 94,695 4.2 Fees and Commissions Paid 29,234 20,280 4.2.1 Non-cash Loans 506 249 4.2.2 Other 28,728 20,031 V. DIVIDEND INCOME (3) 21 -

VI. NET TRADING INCOME/LOSSES (NET) (4) 15,666 (50,014)

6.1 Trading gains/ (losses) on securities (32,922) 3,129 6.2 Gains/(loses) on derivative financial transactions 158,380 44,793 6.3 Foreign exchange gains/ (losses) (109,792) (97,936) VII. OTHER OPERATING INCOME (5) 30,409 18,933

VIII. TOTAL OPERATING PROFIT (III+IV+V+VI+VII) 358,090 418,687

IX. EXPECTED LOSSES PROVISIONS (-) (6) 183,316 87,827

X. OTHER PROVISIONS (-) (6) 2,353 46,822

XI. PERSONNEL EXPENSES (-) 133,953 103,769

XII. OTHER OPERATING EXPENSES (-) (7) 145,668 156,105

XIII. NET OPERATING INCOME/(LOSS) (VIII-IX-X-XI-XII) (107,200) 24,164

XIV.

AMOUNT IN EXCESS RECORDED AS GAIN AFTER

MERGER - -

XV. GAIN / (LOSS) ON EQUITY METHOD - -

XVI. GAIN / (LOSS) ON NET MONETARY POSITION - -

XVII.

PROFIT/(LOSS) FROM CONTINUED OPERATIONS

BEFORE TAXES (XIII+...+XVI) (8) (107,200) 24,164

XVIII. TAX PROVISION FOR CONTINUED OPERATIONS (±) (9) 17,892 4,761

18.1 Current tax charge (12,260) (1,018) 18.2 Deferred tax charge (+) (41,743) (26,964) 18.3 Deferred tax credit (-) 71,895 32,743

XIX.

NET PROFIT/(LOSS) FROM CONTINUED

OPERATIONS(XVII±XVIII) (10) (89,308) 28,925

XX. INCOME ON DISCONTINUED OPERATIONS - -

20.1 Income on assets held for sale - -

20.2

Income on sale of associates, subsidiaries and jointly controlled

entities (Joint vent.) - - 20.3 Income on other discontinued operations - - XXI. LOSS FROM DISCONTINUED OPERATIONS (-) - - 21.1 Loss from assets held for sale - -

21.2 Loss on sale of associates, subsidiaries and jointly controlled entities (Joint vent.) - -

21.3 Loss from other discontinued operations - -

XXII.

PROFIT / (LOSS) ON DISCONTINUED OPERATIONS

BEFORE TAXES (XX-XXI) (8) - -

XXIII.

TAX PROVISION FOR DISCONTINUED OPERATIONS

(±) (9) - - 23.1 Current tax charge - - 23.2 Deferred tax charge (+) - - 23.3 Deferred tax credit (-) - -

XXIV.

NET PROFIT/LOSS FROM DISCONTINUED

OPERATIONS (XXII±XXIII) (10) - -

XXV. NET PROFIT/LOSS (XIX+XXIV) (11) (89,308) 28,925

25.1 Group’s profit/loss (93,545) 28,931

25.2 Non-controlling interest 4,237 (6) Earnings per share (0.077) 0.025


10

ŞEKERBANK T.A.Ş. CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPEREHENSIVE INCOME

TRL THOUSAND

Reviewed Reviewed


01.01.2019-31.03.2019 01.01.2018-31.03.2018

I. PROFIT/LOSS FOR THE PERIOD (89,308) 28,925

II. OTHER COMREHENSIVE INCOME 1,572 (2,506)

2.1 Other Income/Expense Items not to be Recycled to Profit or Loss - -

2.1.1 Revaluation Surplus on Tangible Assets - -

2.1.2 Revaluation Surplus on Intangible Assets - -

2.1.3 Defined Benefit Plans' Actuarial Gains/Losses - -

2.1.4 Other Income/Expense Items not to be Recycled to Profit or Loss - -

2.1.5 Deferred Taxes on Other Comprehensive Income not to be Recycled to Profit or Loss - -

2.2 Other Income/Expense Items to be Recycled to Profit or Loss 1,572 (2,506)

2.2.1 Translation Differences 2,418 1,220

2.2.2 Income/Expenses from Valuation and/or Reclassification of Financial Assets Measured at

FVOCI

(1,064) (4,710)

2.2.3 Gains/losses from Cash Flow Hedges - -

2.2.4 Gains/Losses on Hedges of Net Investments in Foreign Operations - -

2.2.5 Other Income/Expense Items to be Recycled to Profit or Loss - -

2.2.6 Deferred Taxes on Other Comprehensive Income to be Recycled to Profit or Loss 218 984

III. TOTAL COMPREHENSIVE INCOME (I+II) (87,736) 26,419


11

ŞEKERBANK T.A.Ş. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

TRL THOUSAND

Other Comprehensive Income/Expense

Items not to be Recycled to Profit or

Loss

Other Comprehensive Income/Expense Items

to be Recycled to Profit or Loss

CHANGES IN SHAREHOLDERS’ EQUITY Note

Paid-in

Capital

Share

Premium

Share

Certificate

Cancellation

Profits

Other

Capital

Reserves

Accumulated

Revaluation

Increase/

Decrease of

Fixed Asset

Accumulated

Remeasurement

Gain/Loss of

Defined Benefit

Pension Plan

Other

Foreign

Currency

Translation

Differences

Accumulated

Revaluation and/or

Remeasurement

Gain/Loss of the

Financial Assets at

Fair Value Through

Other Comprehensive

Income

Profit

Reserves

Prior

Period

Profit/

(Loss)

Current

Period

Profit/

(Loss)

Total

Equity

Before

Minority

Shares

Non-

controlling

Interest

Total

Equity Ref. Other

Reviewed

PRIOR PERIOD

01.01.2018 - 31.03.2018

I. Balances at Beginning of Period 1,158,000 1,834 - (165,654) 62,153 (13,199) - 10,219 (54,199) - 1,403,852 346,670 - 2,749,676 40,870 2,790,546

II. Correction Made as Per TAS 8 - - - - - - - - 60,152 - - (504,313) - (444,161) (5,006) (449,167)

2.1 Effect of Corrections - - - - - - - - - - - - - - - -

2.2 Effect of Changes in Accounting Policies - - - - - - - - 60,152 - - (504,313) - (444,161) (5,006) (449,167)

III. Adjusted Balances at the Beginning of the Period (I+II) (13) 1,158,000 1,834 - (165,654) 62,153 (13,199) - 10,219 5,953 - 1,403,852 (157,643) - 2,305,515 35,864 2,341,379

IV. Total Comprehensive Income - - - - - - - - - - - - 28,931 28,931 (6) 28,925

V. Capital Inrease in Cash - - - - - - - - - - - - - - - -

VI. Capital Inrease in Internal Sources - - - - - - - - - - - - - - - -

VII. Inflation Adjustment to Paid-in Capital - - - - - - - - - - - - - - - -

VIII. Convertible Bonds - - - - - - - - - - - - - - - -

IX. Subordinated Debt Instruments - - - - - - - - - - - - - - - -

X. Increase/ Decrease due to Other Changes - - - 76 - - - 1,220 (3,726) - (128) - - (2,558) (229) (2,787)

XI. Profit Distribution - - - - - - - - - - 358,200 (359,200) - (1,000) - (1,000)

11.1 Dividends Paid - - - - - - - - - - - (1,000) - (1,000) - (1,000)

11.2 Transfers to Reserves - - - - - - - - - - 358,200 (358,200) - - - -

11.3 Other - - - - - - - - - - - - - - - -

-

Balances at end of the period (III+IV…+X+XI) 1,158,000 1,834 - (165,578) 62,153 (13,199) - 11,439 2,227 - 1,761,924 (516,843) 28,931 2,330,888 35,629 2,366,517

Reviewed

CURRENT PERIOD

01.01.2019 - 31.03.2019

I. Balances at Beginning of Period 1,158,000 1,835 - (165,918) 78,122 (9,378) - 20,464 (5,120) - 1,762,682 (428,206) - 2,412,481 40,349 2,452,830

II. Correction Made as Per TAS 8 - - - - - - - - - - - - - - - -

2.1 Effect of Corrections - - - - - - - - - - - - - - - -

2.2 Effect of Changes in Accounting Policies - - - - - - - - - - - - - - - -

III. Adjusted Balances at the Beginning of the Period (I+II) (13) 1,158,000 1,835 - (165,918) 78,122 (9,378) - 20,464 (5,120) - 1,762,682 (428,206) - 2,412,481 40,349 2,452,830

IV. Total Comprehensive Income - - - - - - - - - - - - (93,545) (93,545) 4,237 (89,308)

V. Capital Inrease in Cash - - - - - - - - - - - - - - - -

VI. Capital Inrease in Internal Sources - - - - - - - - - - - - - - - -

VII. Inflation Adjustment to Paid-in Capital - - - - - - - - - - - - - - - -

VIII. Convertible Bonds - - - - - - - - - - - - - - - -

IX. Subordinated Debt Instruments - - - - - - - - - - - - - - - -

X. Increase/ Decrease due to Other Changes - - - - - - - 2,321 (846) - - - - 1,475 97 1,572

XI. Profit Distribution - - - - - - - - - - (390,123) 390,123 - - - -

11.1 Dividends Paid - - - - - - - - - - - - - - - -

11.2 Transfers to Reserves - - - - - - - - - - (390,123) 390,123 - - - -

11.3 Other - - - - - - - - - - - - - - - -

-

Balances at end of the period (III+IV…+X+XI) 1,158,000 1,835 - (165,918) 78,122 (9,378) - 22,785 (5,966) - 1,372,559 (38,083) (93,545) 2,320,411 44,683 2,365,094

12

ŞEKERBANK T.A.Ş. CONSOLIDATED STATEMENT OF CASH FLOWS

TRL THOUSAND

Reviewed Reviewed

Note CURRENT PERIOD PRIOR PERIOD

Ref. 01.01.2019 - 31.03.2019 01.01.2018 - 31.03.2018

A. CASH FLOWS FROM BANKING OPERATIONS 1.1 Operating Profit Before Changes in Operating Assets and Liabilities (434,983) (406,666)

1.1.1 Interest Received 1,331,486 735,197

1.1.2 Interest Paid (877,641) (544,733)

1.1.3 Dividend Received 21 -

1.1.4 Fees and Commissions Received 127,667 113,461

1.1.5 Other Income 247,573 13,543

1.1.6 Collections From Previously Written Off Loans 102,377 77,606

1.1.7 Payments to Personnel and Service Suppliers (134,809) (132,909)

1.1.8 Taxes Paid (5,088) (15,567)

1.1.9 Others (1,226,569) (653,264)

1.2 Changes in Operating Assets and Liabilities 819,210 (1,911,987)

1.2.1 Net (Increase) Decrease in Financial Assets at Fair Value Through Profit or Loss (7,882) (28,586)

1.2.2 Net (Increase) Decrease in Due From Banks 6,551 (395)

1.2.3 Net (Increase) Decrease in Loans (671,450) (986,670)

1.2.4 Net (Increase) Decrease in Other Assets 38,397 (347,741)

1.2.5 Net Increase (Decrease) in Bank Deposits 504,140 (1,706,327)

1.2.6 Net Increase (Decrease) in Other Deposits 1,450,459 491,433

1.2.7 Net Increase (Decrease) in Financial Liabilities at Fair Value Through Profit or Loss - -

1.2.8 Net Increase (Decrease) in Funds Borrowed (188,907) 489,283

1.2.9 Net Increase (Decrease) in Matured Payables - -

1.2.10 Net Increase (Decrease) in Other Liabilities (312,098) 177,016

I. Net Cash Provided From Banking Operations 384,227 (2,318,653)

B. CASH FLOWS FROM INVESTING ACTIVITIES II. Net Cash Flow Provided From Investing Activities 538,401 132,502

2.1 Cash Paid for Purchase of Entities Under Common Control, Associates and Subsidiaries - -

2.2 Cash Obtained From Sale of Entities Under Common Control, Associates and Subsidiaries - -

2.3 Purchases of Tangible Assets (3,742) (9,055)

2.4 Sales of Tangible Assets 8,630 29,650

2.5 Purchase of Financial Assets at Fair Value Through Comprehensive Income (23,288) (513,874)

2.6 Sale of Financial Assets at Fair Value Through Comprehensive Income 27,207 767,219

2.7 Purchase of Financial Assets at Amortised Cost - (166,526)

2.8 Sale of Financial Assets at Amortised Cost 555,809 40,502

2.9 Others (26,215) (15,414)

C. CASH FLOWS FROM FINANCING ACTIVITIES III. Net Cash Provided from Financing Activities (77,885) 121,895

3.1 Cash Obtained from Funds Borrowed and Securities Issued 383,114 479,759

3.2 Cash Used for Repayment of Funds Borrowed and Securities Issued (439,330) (354,273)

3.3 Equity Instruments Issued - -

3.4 Dividends Paid - (1,000)

3.5 Payments for Leases (21,669) (2,591)

3.6 Others - -

IV. Effect of Change in Foreign Exchange Rate on Cash and Cash Equivalents 39,460 29,924

V. Net Increase in Cash and Cash Equivalents 884,203 (2,034,332)

VI. Cash and Cash Equivalents at Beginning of the Period 2,044,583 3,889,468

VII. Cash and Cash Equivalents at End, of the Period 2,928,786 1,855,136




13

SECTION THREE

ACCOUNTING PRINCIPLES

I. Basis of Presentation

The Parent Bank prepares financial statements and notes in accordance with the Turkish Accounting Standards

(TAS) and the Turkish Financial Reporting Standards (TFRS) and the related statements and guidances announced

by the Public Oversight, Accounting and Auditing Standards Authority (“POA”) and the Communiqué on Banks’

Accounting Practice and Maintaining Documents, other regulations, communiqués and circulars in respect of

accounting and financial reporting and pronouncements issued by the Banking Regulation and Supervision Agency

(BRSA).

In accordance with the “Communique amending the Communique on the Financial Statements and Related

Disclosures and Footnotes to be Announced to Public by Banks” published in the Official Gazette dated 1 February

2019 with No. 30673, the accompanying previous period financial statements were made compatible with the new

financial statement formats.

Under the TFRS 16 Leases standard, published in the Official Gazette dated 16 April 2018 and numbered 30393,

operating leases are accounted in similar manner with the financial leasing transactions starting from 1 January

2019. According to this standard; leasing transactions are included in the balance sheet as Right-of-use Assets and

leasing liabilities. In accordance with the transition requiremnets of TFRS 16, prior period financial statements

and footnotes have not been restated. Implementation and impacts related to the transition of TFRS 16 are

explained in Note XXIII of Section Three.

Accounting policies and valuation principles applied in the preparation of financial statements are disclosed in the

footnotes below.

Additional paragraph for convenience translation to English

The effects of differences between accounting principles and standards set out by regulations in conformity with

Article 37 and Article 38 of the Banking Act No. 5411, accounting principles generally accepted in countries in

which the accompanying consolidated financial statements are to be distributed and the International Financial

Reporting Standards (“IFRS”) have not been quantified in the accompanying consolidated financial statements.

Accordingly, the accompanying consolidated financial statements are not intended to present the financial position,

results of operations and changes in financial position and cash flows in accordance with the accounting principles

generally accepted in such countries and IFRS.

II. Explanations on Usage Strategy of Financial Assets and Foreign Currency Transactions

The Parent Bank aims to keep up its activities in every line of banking.

The Parent Bank shapes its strategies for financial instruments depending on the source of funds, which mainly

consists of deposits. Investment instruments are usually choosen from liquid instruments. A level of liquidity which

allows covering obligations of the Group is secured.

The Group controls risk by managing positions in harmony with market movements on the strength of short-term

strategies instead of carrying long-term currency positions in big amounts, in order to avoid risks which might arise

from floating currency (exchange rate) regime. A currency risk arising from customer transactions, the Group tries

to close by carrying out counter-transactions. Within the budget, limits are set in terms of maturity and distribution

of assets is determined.

Yield (return) and risk analyses are made in regard of maturity structure of balance sheet items, re-pricing periods

and interest rates, and appropriate investment decisions are made.

The Group off-balance sheet derivative transactions are managed by including such transactions in the total

currency and interest positions. Derivative transactions to be made by customers are carried out within loan and

risk limits established on customer basis. Currency swaps, in particular, being a larger part of the off-balance sheet

transactions, are carried out to manage the currency cash flow without causing currency and interest risks.

The Parent Bank aims to get longer-term funds (resources) in order to be able to hedge itself against risks arising

from short-term character of deposits, while trying to increase the share of floating interest rate items in its assets.

SECTION THREE (cont’d)




14

ACCOUNTING PRINCIPLES (cont’d)

II. Explanations on Usage Strategy of Financial Assets and Foreign Currency Transactions

(cont’d)

Gains or loss arising from foreign currency transactions are reflected to the statement of income as they are realized

during the year. Foreign currency assets and liabilities at each period-end are translated into Turkish lira at the

period-end foreign exchange buying rates announced by the Parent Bank and the resulting foreign exchange gains

or losses are recorded in the statement of income as foreign exchange gain or loss. As of 31 March 2019 the Parent

Bank translates its foreign currency transactions with the Parent Bank’s exchange rates and subsidiaries of the

Parent Bank translate their foreign currency transactions with the Central Bank’s exchange rates.

There are no capitalized foreign exchange differences.

The information regarding the principles of foreign currency risk management is stated in the Section Four, Note

III. Foreign exchange gains and losses arising from translating monetary financial assets are reflected to “Foreign

Exchange Gains / Losses” in the statement of income.

The foreign currency net investment in consolidated foreign subsidiaries are translated into Turkish Lira using the

Parent Bank’s exchange rate prevailing at the balance sheet date for their assets and liabilities and annual average

exchange rate for their statement of income items. The currency translation derived from the consolidated

subsidiaries’ currency translation differences amounting to TRL 2,321 Thousand gain (31 December 2018 - TRL

10,245 Thousand gain) has been recorded in “Other Comprehensive Income/Expense Items to be Reclassified to

Profit or Loss” under shareholders’ equity.

III. Information on Consolidated Subsidiaries

The accompanying consolidated financial statements are prepared in accordance with “Communiqué on

Preparation of Consolidated Financial Statements of Banks” published in the Official Gazette dated 8 November

2006 numbered 26340. The Parent Bank and the subsidiaries included in the consolidation are referred to as “the

Group” in this report.

The financial statements of the subsidiaries, which were prepared in accordance with the prevailing principles and

rules regarding financial accounting and reporting standards in their respective country of incorporation and the

Turkish Commercial Code, Financial Leasing, Factoring and Financing Companies Law, communiqués of the

Capital Market Board and the BRSA, are duly adjusted in order to present their financial statements in accordance

with the accounting policies of the Parent Bank.

Explanations on Consolidation Method and Scope

The commercial names of the entities included in consolidation and the locations of the head offices of these

institutions are:

Commercial Name Head Office Consolidation Method

Şekerbank (Kıbrıs) Ltd. Nicosia/TRNC full consolidation

Şeker Finansal Kiralama A.Ş. Istanbul/Turkey full consolidation

Şekerbank International Banking Unit Ltd. Nicosia / TRNC full consolidation

Şeker Yatırım Menkul Değerler A.Ş. Istanbul/Turkey full consolidation

Şeker Faktoring A.Ş. Istanbul/Turkey full consolidation

Şeker Finansman A.Ş. Istanbul/Turkey full consolidation

Zahlungsdienste GmbH der Şekerbank T.A.Ş. Cologne/Germany full consolidation

When there are differences between the accounting policies of the subsidiaries and the Parent Bank, the financial

statements are adjusted in accordance with the principle of materiality. The financial statements of the subsidiaries

are prepared as of 31 March 2019.

The transactions and balances between the consolidated financial subsidiaries and the Parent Bank are blaterally

eliminated.




15



IV. Explanations on Forward and Option Contracts and Derivative Instruments

The Group’s derivative instruments mainly consist of foreign currency swaps, interest swaps, option and forward

foreign currency buy/sell transactions. Fair values of foreign currency forward and swap transactions are

determined by comparing the period end foreign exchange rates and current market foreign exchange rates at the

balance sheet date. The resulting gain or loss is reflected in the statement of income. In calculation of fair values

of the interest swap contracts, interest amounts to be paid or received upon the fixed interest rate in the contract

and interest amounts to be received or paid upon the floating interest rates in the contracts have been recalculated

and discounted in accordance to valid interest rates in the current market and the differences have been reflected

to the current term statement of income. Discounted values calculated using the interest rates between the

transaction date and repricing date and are used in determination of the fair values of interest rate swaps.

While some derivative transactions provide economic hedging, these transactions are subject to hedge accounting.

The purpose of hedge accounting; is to present the effect of the risk management activities using appropriate

financial instruments to manage certain risks that may affect profit or loss in the financial statements. For the

purpose of hedging the fair value of a portfolio of financial assets or financial liabilities, the Parent Bank may

apply the provisions of TFRS 9 or TAS 39. In this context, the Parent Bank has chosen to apply TFRS 9 for hedge

accounting.

The Parent Bank enters into interest rate 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 statement of income. The change in the fair value of the hedged item

of the fixed rate financial asset is shown in the financial statements together with the related asset as long as the

hedge is effective. If the hedged item is a fixed rate financial asset at fair value through profit or loss, then any loss

or gain on hedged risk is recognized in the income statement.

Hedge accounting applies to hedging only when all the following criteria are met:

The hedging relationship only includes suitable hedging instruments and hedged items.

At the beginning of the hedging relationship, there is a formal identification and certification of the risk

management objective and strategy that leads to the hedging relationship. This certification includes the

assessment of the Parent Bank on the hedging instrument, the hedged item and the structure of the hedged

risk, and whether the hedging relationship will provide an effective protection against the hedged risk

(including analysis of inefficiency resources in the hedging process and how the hedging rate is

determined).

The hedging relationship meets all of the following provisions for the effectiveness of the hedging.

There is an economic relationship between the hedged item and the hedging tool.

The credit risk effect is not dominated by changes in value arising from this economic relationship, and

the hedging rate in the hedging relationship is equal to the amount of the item that the entity actually

hedges and the amount calculated according to the amount of hedging that the entity actually uses to

hedge this item. However, the hedging shall not reflect an imbalance between the hedged item and the

hedging instrument’s weights, which is not consistent with the objectives of hedge accounting and will

result in hedging ineffectiveness.




16



IV. Explanations on Forward and Option Contracts and Derivative Instruments (cont’d)

The effect of fair value hedge accounting is shown in the table below:

Type of Hedging

İnstrument

Hedged Item(asset and

liability) Hedged Risks

Fair Value

Difference of

Hedged Item

Net Fair Value of the Hedging

Instrument

Net

Gain/(Loss) Recognised in

the Statement

of Income

Asset Liability

Interest Rate Swaps

Fixed interest commercial loans with installment

Fixed interest rate risk (1,727) 3,390 1,138 (467)

Constant Maturity

Swap

Fixed interest government

bonds

Fixed interest

rate risk (31,361) 21,186 - (46,033)

The Parent Bank terminates hedge accounting forward only if the hedging relationship (or part of it) no longer

meets the required criteria (after considering rebalancing). This also applies if the hedging item is expired or sold,

terminated or used.

V. Explanations on Interest Income and Expenses

The interest income and expenses are accounted by accrual basis of accounting using the effective interest rate

(the ratio that equalizes the future cash flow of financial assets and liabilities to the current net book value).

Starting from 1 January 2018, the Group has started accruing interest income on non-performing loans. The non-

performing loans are rediscounted at the effective interest rate on the net book value and the related amount is

classified between the “Expected Loss Provisions” account and the “Interest on Loans” account in the income

statement.

VI. Explanations on Fees and Commission Income and Expenses

Fees for various banking services are recorded as income when collected and prepaid commission income on cash

loans using the effective interest rate method and recorded as income in the related period.

Fees and commissions for funds borrowed paid to other financial institutions, as part of the transaction costs, are

recorded as prepaid expenses and using the effective interest rate expensed within the related periods.

The dividend income is reflected in the financial statements on a cash basis when the profit distribution is realized

by the associates and subsidiaries.




17



VII. Explanations on Financial Assets

In the framework of “TFRS 9 Financial Instruments”, which was effective as of 1 January 2018, the Group

classifies its financial assets as “Financial assets at fair value through profit or loss”, “Financial assets at fair value

through other comprehensive income” or “Financial assets at amortised cost”. This classification is made during

initial recognition based on the contractual cash flow characteristics with the business model of the financial assets

determined by management.

Financial assets are recognized or derecognized according to the provision ‘Taking into Financial Statements and

Excluding the Financial Statements’ of section three of TFRS 9.

Financial instruments have the feature of detecting, affecting and diminishing liquidity, credit and interest risks in

the financial statements. All regular way purchases and sales of financial assets are recognized on the settlement

date i.e. the date that the asset is delivered to or by the Group. Settlement date accounting requires (a) accounting

of the asset when acquired by the Group and (b) disposing of the asset out of the balance sheet on the date settled

by the Group; and accounting of gain or loss upon disposal. In case of application of settlement date accounting,

for the financial assets at fair value through profit and loss and financial assets at fair value through other

comprehensive income the Group accounts for the changes that occur in the fair value of the asset in the period

between trade transaction date and settlement date.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the

time frame generally established by regulation or convention in the market place. Changes in fair value of assets

to be received during the period between the trade date and the settlement date are accounted in the same way as

the acquired assets. Fair value differences are not accounted for financial assets presented at amortized cost; gain

or loss of financial assets at fair value through profit and loss is reflected in the statement of income; gain or loss

of financial assets at fair value through other comprehensive income is accounted for in the other comprehensive

income.

The following are details of the financial instruments that are classified in the financial statements.

Financial Assets at Fair Value Through Profit and Loss Financial assets at fair value through profit and loss are financial assets other than the ones that are managed with

business model that aims to hold assets to collect contractual cash flows or to collect cash flows that are solely

payments of principal and interest on the principal outstanding amount; and that are either acquired for generating

a profit from short-term fluctuations in prices or are financial assets included in a portfolio aiming to short-term

profit taking.

The fair value of financial assets at fair value thourgh profit and loss, which are traded in active markets, is

determined according to the price of the stock exchange and in the case that the stock market price is not available,

according to the price in the Official Gazette. Where there is no quoted price in an active market, the fair value is

determined by using other methods specified in TFRS 13.

Financial assets at the fair value through profit or loss are initially recognized at fair value. The positive difference

between the cost and fair value of such securities is accounted as interest and income accrual, and the negative

difference between the cost and fair value is accounted as loss accrual in the profit and loss.




18



VII. Explanations on Financial Assets (cont’d)

Financial Assets at Fair Value Through Other Comprehensive Income The financial assets, which are acquired with the aim to collect the contractual cash flows and to sell the financial

asset in future, are classified as financial assets at fair value through other comprehensive income.

The Bank’s management may retain both the contractual cash flows as well as the portfolio for sale, in order to

meet daily liquidity needs, maintain a certain level of interest income and align the maturity of financial assets

with the valuation of the financial liabilities for funding purposes.

Financial assets at fair value through other comprehensive income are initially recognized at fair value including

transaction costs.

The results of the subsequent changes in the fair value of financial assets at fair value through other comprehensive

income, namely unrealized gain or loss are recorded in “Other Comprehensive Income/Expense Items to be

Reclassified to Profit or Loss”. Accumulated fair value gain or loss, reflected in equity, is recorded to the income

statement when the said financial assets are disposed.

The fair value of financial assets at fair value through other comprehensive income, which are traded in active

markets is determined according to the price of the stock exchange and in the case that the stock market price is

not available, according to the price in the Official Gazette. Where there is no quoted price in an active market,

the fair value is determined by using other methods specified in TFRS 13. The financial assets at Fair Value

Through Other Comprehensive Income, that are unquoted on the stock exchange, amount to TRL 26,882 Thousand

(31 December 2018 - TRL 22,878 Thousand) and are classified under “Equity securities” in the current period.

Financial Assets at Amortised Cost

A financial asset is classified as a financial asset measured at amortized cost, if the financial asset is held within

the scope of a business model for the collection of contractual cash flows and the contractual terms of the financial

asset result in cash flows that include payments arising only from principal and interest on the principal amounts

on specific dates.

After the initial recognition, provision for impairment to be deducted, if any, financial assets at amortized cost are

measured at discounted value using effective interest method (internal rate of return).

Interest earned from financial assets measured at amortized cost is recorded as interest income.

The Group classifies financial assets in accordance with the classifications explained above during the acquisition

of the mentioned assets.

In the securities portfolio of the Parent Bank, consumer prices (CPI) indexed bonds are available. These securities

are valued and accounted using the effective interest rate method based on the real coupon rates of the CPI -

indexed government bonds and the reference inflation index at the issue date and the estimated inflation rate. As

stated in the Treasury and Finance Ministry's CPI Indexed Bonds Investor Guide, the reference indices used in the

calculation of the actual coupon and redemption amounts of these securities are calculated by interpolation with

the CPI of two months prior and the CPI of three months prior. The Parent Bank has started to determine the

estimated inflation rate accordingly. The inflation rate estimated by the Central Bank and the Parent Bank will be

updated when necessary. Accounting of coupon and redemption payments are made by considering the real

inflation indices.As of balance sheet date, the estimated inflation rate of consumer prices (CPI) indexed bonds had

a positive effect on the period loss amounting to TRL 45,926 Thousand.





19


VII. Explanations on Financial Assets (cont’d)

Loans

Loans, other than those with intention to be sold, are the financial assets , the contractual terms of which result in

cash flows that include payments arising only from principal and interest on the principal amounts on specific

dates.

The Group initially recognises loans at the cost of the acquisition and accounts for at the amortized cost using the

effective interest method in subsequent periods besides Group reflects swaps, used for funding of long term fixed

interest rate TRL loan portfolio, with fair value in the financial statements. The Group has initially classified the

long term fixed interest rate TRL loan portfolio funded through swaps as “Loans at Fair Value Through Profit and

Loss” and follows it at fair value in the financial statements.

As of 31 March 2019, the fair value of these loans is TRL 215,011 Thousand and is shown under Financial Assets

at Fair Value Through Profit and Loss Other Financial Assets line in the balance sheet (31 December 2018 - TRL

221,879 Thousand) .

Foreign currency-indexed individual and commercial loans are shown under Turkish Currency (“TRL”) accounts

after having been converted into Turkish Lira at exchange rate at transaction date. Repayments are calculated at

exchange rate at date of payment and exchange rate differences encountered are reflected in profit and loss

accounts. Net foreign exchange gains of the foreign currency indexed loans are presented under foreign exchange

gain/loss.

VIII. Explanations on Impairment of Financial Assets

Expected Loss Provision

Starting from 1 January 2018, the Group recognizes the impairment in accordance with the TFRS 9 “Regulation

on the Procedures and Principles for Classification of Loans by Banks and Provisions to be set aside” published in

the Official Gazette No. 29750 dated 22 June 2016.

Within this framework, evaluation of the expected loss provisions is applied for the financial lease recievables,

contractual assets, credit commitments and financial guarantee contracts that are not measured at fair value through

profit or loss, financial assets measured at amortized cost and fair value through other comprehensive income.

The expected loss provisions measured and recorded at the initial recognition of the financial asset and updated

according to the rate of the impairment on the credit risk in accordance with measurement performed at each

reporting date to reflect changes in credit risk.

The basic principle of the expected credit loss model is to reflect the deterioration or improvement in credit risk to

the general pattern. The expected loss measurement is aimed to identify the degree of credit deterioration at the

first issuance of the loan and to reflect the changes in the expected credit loss during the lifetime of the related

loan.

Financial assets are classified into the following three categories based on the degree of the credit risks observed

at the initial recognition of financial assets:

12 Months Expected Loss Provision (First Stage):

For the financial assets at initial recognition or that do not have a significant increase in credit risk since initial

recognition, the expected credit loan loss provision is calculated for 12 months.




20



VIII. Explanations on Impairment of Financial Assets (cont’d)

Significant Increase in Credit Risk (Second Stage):

In the event of a significant increase in credit risk since initial recognition, the financial asset is transferred to Stage

2. Expected credit loss provision is determined by the expected credit loss for the life-time of the related financial

asset.

The main reasons for the significant increase in the credit risk and its transfer to the second stage are as follows:

Number of overdue loan dates exceeding 30 days.

The presence of loans under restructuring due to financial difficulties.

Suggesting to ‘Liquidate Risk’ to the customers by the Bank's early warning system.

Default (Third Stage):

The Parent Bank takes into account the following criteria for the classification of a financial asset as a default;

Overdue by more than 90 days

The Group’s observation that the debtor cannot fulfill his / her debts related to the loan although it is not

more than 90 days.

Includes financial assets that have objective evidence of impairment as of the reporting date. Life expectancy for

these assets is recorded as credit loss.

The Parent Bank measures the expected loss provisions for a financial asset to reflect the following:

A weighted and unbiased amount of loss based on probabilities of default determined taking into account

possible outcomes,

Time value of money,

Reasonable and supportable information on estimates of past events, current conditions, and future

economic conditions without undue cost or effort as of the reporting date.

IX. IX. Explanations on Offsetting of Financial Assets and Liabilities

Financial assets and liabilities are offset when the Group has a legally enforceable right to set off, and the intention

of collecting or paying the net amount of related assets and liabilities or the right to offset the assets and liabilities

simultaneously.

X. Explanations on Sales and Repurchase Agreements and Lending of Securities

The sales and purchase of government securities under repurchase agreements made with the customers are being

recorded in the balance sheet accounts in accordance with the Uniform Chart of Accounts. Accordingly in the

financial statements, the government bonds and treasury bills sold to customers under repurchase agreements are

classified under Financial Assets at Fair Value Through Profit and Loss, Financial Assets at Fair Value Through

Other Comprehensive Income and Financial assets at amortised cost depending on the portfolio they are originally

included in and are valued according to the valuation principles of the related portfolios. Funds obtained from

repurchase agreements are classified as a separate sub-account under money market borrowings account in the

liabilities.

The income and expenses from these transactions are reflected in the “Interest Income on Marketable Securities”

and “Interest Expense on Money Market Borrowings” accounts in the statement of income.

As of 31 March 2019, the Group has no reverse repo transactions (31 December 2018 – None).

As of 31 March 2019 , the Group does not have marketable securities lending transactions (31 December 2018 -

None).




21



XI. Explanations on Assets Held for Sale and Discontinued Operations

Assets held for sale are those assets or group of assets, which will be disposed under a plan prepared by the

management regarding the sale of those asset or the group of assets that have high probability of sale together with

an active program for determination of buyers and plan completion date. Those assets (or else the group of assets)

are marketed in conformity with its fair value. On the other hand, the mentioned sale is expected to be recorded at

the completed sale within one year after the classification date; and the necessary transactions and procedures to

complete the plan should demonstrate the fact that the possibility of making significant changes or cancelling the

plan is low.

As of 31 March 2019, the Group has TRL 393,289 Thousand assets held for sale (31 December 2018 - TRL

320,984 Thousand).

A discontinued operation is a division of a Group that is either disposed or held for sale. Results of discontinued

operations are included in the statement of income separately.

The Group does not have any discontinued operations.

XII. Explanations on Goodwill and Other Intangible Assets

There is no goodwill regarding the investments in associates and subsidiaries.

Intangible assets are accounted for at restated cost until 31 December 2004 in accordance with inflation accounting

and are amortized with straight-line method. After 31 December 2004 the cost of assets subject to amortization is

restated as the acquisition cost and any other costs incurred in order to make the intangible asset ready for use less

reserve for impairment, if any, are amortized on a straight-line method. The cost of assets subject to amortization

is restated after deducting the exchange differences, capitalized financial expenses and revaluation increases, if

any, from the cost of the assets.

Those items classified as intangible assets mainly consist of software. These items are determined to have 5 years

of amortization. Software is mainly outsourced and the related expenses are not capitalized.

There are no anticipated changes in the accounting estimates about the amortization rate and method and residual

values that would have a significant impact in the current and future periods.

The Group has no written-off intangible fixed assets, in the current period (31 December 2018 - None).




22



XIII. Explanations on Tangible Fixed Assets

The cost of the Parent Bank’s immovables has been adjusted for inflation until 31 December 2004. As of 31

December 2006, the Parent Bank changed its accounting policy and adopted revaluation method on annual basis

under scope of Standard on Tangible Fixed Assets (TAS 16) with respect to valuation of immovables included in

its tangible fixed assets. Tangible Fixed Assets’ appraisal valuation was conducted by an independent valuation

company as of 31 December 2018 and reflected in the financial statements, accordingly. The valuation difference

of immovables under equity as of 31 March 2019 is TRL 98,195 Thousand gross (after net off deferred tax, net

amount is TRL 82,569 Thousand) (31 December 2018 - TRL 98,195 Thousand gross, net-off deferred tax amount

TRL 82,569 Thousand).

Other tangible fixed assets were accounted at their restated costs in line with inflation accounting until 31

December 2004; afterwards the acquisition cost and any other cost incurred to prepare the fixed asset for usage

are reflected less reserve for impairment, if any, and depreciated on a straight-line method. Depreciation of assets

held less than one year as of the balance sheet date is accounted for proportionately. There is no change in

amortization method in current period and the annual rates used, which approximate rates based on the estimated

economic useful lives of the related assets, are as follows:

%

Buildings 2

Motor vehicles 20

Furniture, fixtures and office equipment and others 2 – 33

Leasehold improvements During Leasehold

Gain or loss resulting from disposals of the tangible fixed assets is reflected to the statement of income as the

difference between the net proceeds and net book value.

Maintenance costs of tangible fixed assets are capitalized if they extend the economic useful life of related assets.

Other maintenance costs are expensed. There are no pledges, mortgages or other restrictions on the tangible fixed

assets.

There is no purchase commitments related to the tangible fixed assets.

The Group reviews the residual value and the useful life of buildings at each financial year-end and, if expectations

differ from previous estimates, the adjustments are accounted as a change in an accounting estimate in accordance

with TAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

The Group has no written-off tangible fixed assets in the current period (31 December 2018 - None).

XIV. Explanations on Leasing Transactions

Fixed assets acquired through financial leasing are recorded as assets in the assets of the Group and liabilities from

leasing transactions in liabilities. In accordance with this standard, the leasing transactions, which consist of

foreign currency liabilities, are translated to Turkish Lira with the exchange rates prevailing at the transaction dates

and they are recorded as an asset or a liability. The foreign currency liabilities are translated to Turkish Lira with

the Parent Bank’s period end exchange rates. Subsidiaries’ foreign currency liabilities are translated to Turkish

Lira wih the Central Bank of the Republic of Turkey’s exchange rates. The increases/decreases resulting from the

differences in the foreign exchange rates are recorded as expense/income in the relevant period. The financing cost

resulting from leasing is distributed through the lease period to form a fixed interest rate.

In addition to the interest expense, the Group records depreciation expense for the depreciable leased assets in

each period. The depreciation rate is determined in accordance with TAS 16 “Accounting Standard for Tangible

Fixed Assets” and the depreciation rate of these assets is 20 %.




23



XIV. Explanations on Leasing Transactions (cont’d)

With the “TFRS 16 Leases” standard which became effective as of 1 January 2019, the difference between the

operating lease and financial lease was removed and the lease transactions were started to be recognised under

“Tangible Fixed Assets” as an asset (tenure) and under “Liabilities from Leasing” as a liability. Impact and

application of TFRS 16 concerning the transition were explained in Section three, footnote XXIII.

The gross lease receivables including interest and principal amounts regarding the Group’s financial leasing

activities conducted by Şeker Finansal Kiralama A.Ş. as “Lessor” are stated under the receivables from the

financial leasing activities. The difference between the total of rent payments and the cost of the related fixed

assets are reflected to the “unearned income” account. The interest income is calculated and recorded to create a

constant rate of return over the lessor’s net investment on the leased item

XV. Explanations on Provisions and Contingent Liabilities

Provisions are recognized when there is a present obligation, it is probable that an outflow of resources embodying

economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of

the obligation. Provisions are determined by using the Group’s best expectation of expenses in fulfilling the

obligation, and discounted to present value if material.

XVI. Explanations on Liabilities Regarding Employee Benefits

Defined Benefit Plans

In accordance with existing social legislation in Turkey, the Group is required to make lump-sum termination

indemnities over a 30 day salary for each employee who has completed over one year of service, whose

employment is terminated due to retirement or for reasons other than resignation or misconduct. The Group is also

required to make a payment for the period of notice calculated over each service year of the employee whose

employment is terminated for reasons other than resignation or misconduct. Total benefit is calculated in

accordance with TAS 19 “Turkish Accounting Standard on Employee Benefits”.

Such benefit plans are unfunded since there is no funding requirement in Turkey. The cost of providing benefits

to the employees for the services rendered by them under the defined benefit plan is determined by independent

actuaries annually using the projected unit credit method.

In calculating the related liability to be recorded in the financial statements for these defined benefit plans, the

Group uses independent actuaries and also makes assumptions and estimation relating to the discount rate to be

used, turnover of employees, future change in salaries/limits, etc. These estimations are reviewed annually.

According to revised TAS 19 effective from 1 January 2013, actuarial gain/losses are recorded under equity. As

of 31 March 2019, the carrying value of employee benefit provisions is TRL 95,952 Thousand that consists of

employee termination benefit provisions amounting to TRL 85,089 Thousand and employee vacation pay

provisions amounting to TRL 10,863 Thousand (31 December 2018 - total employee benefit provision was TRL

88,041 Thousand, employee termination benefit provisions was TRL 79,953 Thousand and employee vacation pay

provisions was TRL 8,088 Thousand).




24



XVI. Explanations on Liabilities Regarding Employee Benefits (cont’d)

Defined Contribution Plans

Şekerbank T.A.Ş. Pension Fund, of which most of the Parent Bank’s employees are members, is established in

accordance with the provisional Article 20 of the Social Security Act No: 506. As per the provisional article No:

23 of the Banking Law No: 5411, the Bank pension funds, which were established within the framework of Social

Security Institution Law, should be transferred to the Social Security Institution within 3 years after the issuance

of the related law. Methods and principles related to the transfer have been determined as per the Cabinet decision

no: 2006/11345 made on 30 November 2006. However, the related article of the act has been cancelled upon the

President’s application filed on 2 November 2005 by the Supreme Court’s order no: E.2005/39, K.2007/33 issued

on 22 March 2007, which was published in the Official Gazette No: 26479 on 31 March 2007 and the execution

of the decision was ceased as of the issuance date of the order.

After the justified decree related to cancelling the provisional article 23 of the Banking Law was announced by

the Constitutional Court in the Official Gazette dated 15 December 2007 and numbered 26731, the Turkish Grand

National Assembly started to work on establishing new legal regulations, and after it was approved at the General

Assembly of the TGNA, the Law numbered 5754 “Emendating Social Security and General Health Insurance Act

and Certain Laws and Decree Laws”, which was published in the Official Gazette dated 8 May 2008 and numbered

26870, came into effect. The new law decrees that the contributors of the Banks’ pension funds, the ones who

receive salaries or income from these funds and their rightful beneficiaries will be transferred to the Social Security

Institution and will be subject to this Law within 3 years after the release date of the related article, without any

need for further operation. The three year transfer period can be prolonged for maximum 2 years by the Cabinet

decision. However, related transfer period has been prolonged for 2 years by the Cabinet decision dated 14 March

2011, which was published in the Official Gazette dated 9 April 2011 and numbered 27900.

In addition, by the Law “Emendating Social Security and General Health Insurance Act”, which was published in

the Official Gazette dated 8 March 2012 and numbered 28227, this period of 2 years has been raised to 4 years

after that related transfer period has been prolonged for one more year by the Cabinet decision dated 08 April

2013, which was published in the Official Gazette dated 3 May 2013 and numbered 28636 also this period has

revalidated one more year by the Cabinet decision dated 24 February 2014, which was published in the Official

Gazette dated 30 April 2014 and numbered 28987. The Council of Ministers has been lastly authorized to

determine the transfer date in accordance with the last amendment in the first paragraph of the 20th provisional

article of Law No.5510 implemented by the Law No. 6645 on Amendment of the “Occupational Health and Safety

Law and Other Laws and Decree Laws” published in the Official Gazette dated 23 April 2015 and numbered

29335. This authority was transferred to the President with the delegated legislation No.703 which was published

in the repetitive Official Gazette No. 30473 dated 9 July 2018.

The above mentioned law also includes the following:

Through a commission constituted by the attendance of one representative separately from the Social

Security Institution, the Presidency Ministry of Treasury and Finance, State Planning Organization,

Banking Regulation and Supervision Agency, Savings Deposit Insurance Fund, one from each pension

fund, and one representative from the organization employing pension fund contributors, related to the

transferred persons, the cash value of the liabilities of the pension fund as of the transfer date will be

calculated by considering their income and expenses in terms of the lines of insurance within the context

of the related Law, and technical interest rate of 9.80% will be used in the actuarial calculation of the

value in cash,

And that after the transfer of the pension fund contributors, the ones who receive salaries or income from

these funds and their rightful beneficiaries to the Social Security Institution, these persons’ uncovered

social rights and payments, despite being included in the trust indenture that they are subject to, will be

continued to be covered by the pension funds and the employers of pension fund contributors.





25


XVI. Explanations on Liabilities Regarding Employee Benefits (cont’d)

On the other hand, the application made on 19 June 2008 by the Republican People’s Party to the Constitutional

Court for the annulment and motion for stay of some articles, including the first paragraph of the provisional article

20 of the Law, which covers provisions on transfers, was rejected in accordance with the decision taken at the

meeting of the afore-mentioned court on 30 March 2011.

The technical financial statements of the Pension Fund are reviewed by an actuary registered audit company in

accordance with the Article 21 of the Insurance Law numbered 5684 and the requirements of the “Actuary

Regulations”. There was TRL 159,499 Thousand actuarial deficit in the actuary report which was prepared using

a technical interest rate rate of 9.80 % in accordance with the basis set out in the Council of Ministers decision no:

26377 on 15 December 2006 (31 December 2018 - TRL 159,499 Thousand actuarial deficit).

As of 31 March 2019, TRL 159,499 Thousand provision is recorded in the financial statements (31 December

2018 - TRL 159,499 Thousand).

XVII. Explanations on Taxation

Corporate tax

According to the Article 37 of the Corporate Tax Law, starting from 1 January 2006 earnings of companies will

be taxed by %20. In accordance with the regulation numbered 7061, “Amendments to Certain Tax Laws and Other

Certain Other Laws”, the tax rate has been set as 22 % for 2018, 2019 and 2020. The Council of Ministers is

authorized to reduce this rate up to 20% anytime.

The tax legislation requires advance tax payment to be calculated and paid based on earnings generated for each

quarter. The amounts thus calculated and paid are offset against the final tax liability for the year .

Annual tax returns are required to be filed between the first and twenty fifth day of the fourth month following the

balance sheet date and paid in one installment until the end of the related month.

Tax provision related with items that are credited or charged directly to equity are charged or credited to equity.

According to the Corporate Tax Law, tax losses can be carried forward for a maximum period of five years

following the year in which the losses are incurred. Tax authorities can inspect tax returns and the related

accounting records for a retrospective maximum period of five years.

Deferred Tax Liability / Asset

The Group calculates and reflects deferred tax asset or liability on timing differences which will result in taxable

or deductible amounts in determining taxable profit of future periods.

In accordance with TAS 12 “Turkish Accounting Standard on Income Taxes” and the changes in the circular of

the BRSA numbered BDDK.DZM.2/13/1-a-3 dated 8 December 2004, the Group calculated deferred tax asset on

all deductible temporary differences, if sufficient taxable profit in future periods to recover such amounts is

probable; as well as deferred tax liability on all taxable temporary differences. Deferred tax assets and liabilities

calculated for the subsidiaries subject to consolidation are shown netted in their financial statements. In accordance

with TAS 12, deferred tax assets and liabilities arising from the different subsidiaries subject to consolidation are

presented separately in the financial statements on a consolidated basis, without netting. The net deferred tax asset is reflected under the deferred tax asset and the net deferred tax liability is reflected

under the deferred tax liability in the balance sheet. The deferred tax benefit of TRL 71,895 Thousand (31 March

2018 – TRL 32,743 Thousand) is stated under the tax provision line in the income statement, the deferred tax

expense of TRL 41,743 Thousand is presented in the deferred tax expense effect line in the income statement (31

March 2018 - TRL 26,964 Thousand).

Furthermore, as per the above circular of the BRSA, deferred tax benefit balance resulting from netting of deferred

tax assets and liabilities should not be used in dividend distribution and capital increase.

Effective from 1 January 2018, deferred tax assets have started to be calculated over the expected losses that are

temporary differences according to TFRS 9.




26



XVIII. Additional Explanations on Borrowings

The borrowing costs related to purchase, production, or construction of qualifying assets that require significant

time to be prepared for use and sale are included in the cost of assets until the relevant assets become ready to be

used or to be sold. Financial investment income obtained by temporary placement of undisbursed investment loan

in financial investments is offset against borrowing costs qualified for capitalization.

All other borrowing costs are recorded to the statement of income in the period they are incurred.

As of 31 March 2019 outstanding issued bonds amount of the Group is TRL 490,646 Thousand (31 December

2018 – TRL 516,302 Thousand).

Issuer Issuance Date Issuance Amount Maturity

Şekerbank T.A.Ş. 08.02.2019 50,000 77 days


Şeker Finansal Kiralama A.Ş. 17.04.2018 15,205 350 days








Şeker Faktoring A.Ş. 24.05.2018 25,891 364 days



Şeker Yatırım Menkul Değerler A.Ş. 06.03.2019 16,580 98 days


As of 31 March 2019 outstanding issued marketable securities amount of the Group is TRL 17,597 Thousand and

details are shown the in table below (31 December 2018 – TRL 25,532 Thousand).








27



XVIII. Additional Explanations on Borrowings (cont’d)

The Parent Bank issued Asset Covered Bond amounting to TRL 1,500,000 Thousand and details are shown in the

table below. Among the institutions and organizations investing up to this time are International Finance

Corporation (IFC), Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V. (FMO), UniCredit

Bank AG, European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD), KfW

Bankengruppe and qualified institutional investors. The transactions were conducted in line with the related

Capital Market Board regulation and the Parent Bank’s SME loans were used as collateral.

Issue Date Series Investors Amount

Remaining Principal

Amount Currency Maturity

25 November 2016 2016-1 IFC 180,000 180,000 TRL 13.09.2021

19 December 2017 2017-1 FMO 192,000 192,000 TRL 22.12.2020

As of 31 March 2019 the Group has the Asset Covered Bonds amounting to TRL 381,727 Thousand (31 December

2018 - TRL 701,850 Thousand).

The Group has not issued convertible bonds.

XIX. Explanations on Share Certificates

None.

XX. Explanations on Independent Guarantees and Acceptances

Acceptances are realized simultaneously with the payment dates of the customers and they are presented as

probable commitments in off-balance sheet accounts.

XXI. Explanations on Government Incentives

The Parent Bank’s subsidiary Şeker Finansal Kiralama A.Ş. has TRL 58,297 Thousand of unused investment

incentives as of 31 March 2019 (31 December 2018 – TRL 53,265 Thousand).




28



XXII. Explanations on Segment Reporting

The Group primarily deals with and engages in corporate, retail and SME finance in line with its strategy.

Current Period

Corporate SME

Retail

Other

Total

Net Interest Income 93,908 160,008 98,634 (138,989) 213,561

Net Fees and Commission Income and Other Operating Income 32,352 65,859 11,380 19,251 128,842

Personnel Expenses (6,416) - (787) (126,750) (133,953)

Dividend Income - - - 21 21

Trading Profit/(Loss) 10,364 - (162) 5,464 15,666

Expected Loss Provisions (81,602) (97,639) (974) (3,101) (183,316)

Other Provision Expenses - - - (2,353) (2,353)

Other Operating Expenses (6,240) (27) (693) (138,708) (145,668)

Profit/(Loss) before taxes 42,366 128,201 107,398 (385,165) (107,200)

Taxation - - - - 17,892

Net Profit for the Period (89,308)

Current Period Commercial SME Retail

Treasury

/Investment Undistributed Total

Assets 7,943,326 13,232,333 1,316,044 8,911,147 2,531,135 33,933,985

Liabilities 5,128,647 2,344,651 17,093,548 5,606,417 3,760,722 33,933,985

Prior Period

Corporate SME

Retail

Other

Total

Net Interest Income 56,802 108,750 66,585 124,450 356,587

Net Fees and Commission Income and Other Operating Income 32,959 61,778 11,563 5,814 112,114

Personnel Expenses - - - (103,769) (103,769)

Dividend Income - - - - -

Trading Profit/(Loss) 4,844 - (187) (54,671) (50,014)

Expected Loss Provisions (40,387) (46,740) (571) (129) (87,827)

Other Provision Expenses - - - (46,822) (46,822)

Other Operating Expenses (8,393) (1,244) (458) (146,010) (156,105)

Profit/(Loss) before taxes 45,825 122,544 76,932 (221,137) 24,164

Taxation - - - - 4,761

Net Profit for the Period 28,925

Prior Period Commercial SME Retail

Treasury

/Investment Undistributed Total

Assets 8,452,154 12,183,332 1,321,375 8,343,423 2,664,500 32,964,784

Liabilities 4,206,451 2,139,806 16,594,600 6,061,566 3,962,361 32,964,784




29



XXIII. Explanations on Other Matters

Explanations on IFRS 16 Leases Standard

With the “TFRS 16 Leases” standard which became effective as of 1 January 2019, the difference between the

operating lease and financial lease was removed and the lease transactions were started by lessees to be recognised

as “Right-of-use Assets” and “Liabilities from Leasing”. Impact and application of TFRS 16 concerning the

transition were explained in Section three, footnote XXIX.

The Group has accounted for its leasing payments as of 1 January 2019 for the operational leases in the transition

to the first application with the present value discounted with the alternative borrowing interest rate on the Bank's

first application date as “Assets with Right to Use” and Liabilities from “Leasing Operations” as liabilities.

The lease agreements for short-term lease agreements with 1 year and less than 1 year and the ATMs determined

by the Parent Bank as low value are considered within the scope of the exemption granted by the standard and the

payments related to these agreements are continued to be accounted for under “Other Operating Expenses” in the

period that they occur. In this context, TRL 1,920 Thousand payment was made in the related period.

The details of theaccounted Right-of-use of the Assets are recognized as follows by basis of the asset:

1 January 2019 31 March 2019

Right-of-use of the Assets 188,553 179,848

Right-of-use of the Vehicles 12,089 13,095

Total 200,642 192,943

Depreciation expenses related to the asset usage right recognized are as follows:

31 March 2019

Right-of-use of the Real Estates 13,118

Right-of-use of the Vehicles 1,578

Total 14,696

The classification and adjustment effects of the first application of TFRS 16 Leases on 1 January 2019 are given

in the following tables.

31 December 2018

TFRS 16

Classification Effect

TFRS 16

Transition Effect 1 January 2019

Tangible Fixed Assets (Net) 711,832 1,114 199,528 912,474

Other Assets (Net) 684,254 (1,114) - 683,140

Leases (Net) 25,107 - 198,547 223,654

(*) In accordance with TFRS 16, the Bank recognised prepaid rent payments amounting to TRL 1,114 Thousands under tangible assets as

right-of-use which were previously classified under other assets.




30

SECTION FOUR

INFORMATION RELATED TO CONSOLIDATED FINANCIAL POSITION AND RISK

MANAGEMENT

I. Explanations Related to the Shareholders’ Equity

The method used for risk measurement in determining capital adequacy standard ratio; capital adequacy standard

ratio is calculated in accordance with the Communiqué on “Measurement and Assessment of Capital Adequacy of

Banks”, which was published on 23 October 2015 in the Official Gazette numbered 29511 and effective since 31

March 2016 and Communiqué on “Banks’ Equity” which was published on 5 September 2013 and in the Official

Gazette numbered 28756. The Group’s consolidated capital adequacy ratio in accordance with the related

communiqués is 12.65 % (31 December 2018 – 14.33 %).

In the computation of capital adequacy standard ratio, data prepared in accordance with statutory accounting

requirements are used. Additionally, the market risk exposure as well as the operational risk exposure are

calculated in accordance with the communiqué on the Communiqué on “Measurement and Assessment of Capital

Adequacy of Banks” and is taken into consideration in the capital adequacy standard ratio calculation.

The values deducted from the capital base in the shareholders’ equity computation are excluded while calculating

risk-weighted assets. Assets subject to depreciation and impairment among risk-weighted assets are included in

the calculations over their net book values after deducting the relative depreciations and provisions.

In the calculation process of credit risk, risk types are classified based on “Measurement and Assessment of Capital

Adequacy of Banks-Appendix 1” and financial collaterals taken into account according to the credit risk mitigation

techniques communiqué and classified in the related risk weight. According to the credit risk mitigation techniques

communiqué while simple approach is taken into account for banking book items, the Group uses comprehensive

approach for trading book items in the credit mitigation process

While calculating the basis of non-cash loans subject to credit risk, the net receivable amount from the counter

parties net of provision amount set in accordance with the “Communiqué on Methods and Principles for the

Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves” is multiplied by

the loan conversion rates presented in the Article 5 and related clauses of the Communiqué on “Measurement and

Assessment of Capital Adequacy of Banks”, and calculated by applying the risk weights presented in the Capital

Adequacy Analysis Form.

In the calculation of counterparty credit risk, the current exposure method is used according to the Communiqué

on “Measurement and Assessment of Capital Adequacy of Banks” the Article 21 and Appendix 2.




31

SECTION FOUR (cont’d)


MANAGEMENT (cont’d)

I. Explanations Related to Consolidated Shareholders’ Equity (cont’d)

Current Period

Amounts related to

treatment before

1/1/2014(*)

COMMON EQUITY TIER 1 CAPITAL

Paid-in capital following all debts in terms of claim in liquidation of the Bank 1,158,000 -

Share issue premiums 1,835 -

Reserves 1,586,192 -

Gains recognized in equity as per TAS 70,219 -

Profit - -

Current Period Profit - -

Prior Period Profit - -

Shares acquired free of charge from subsidiaries, affiliates and jointly controlled partnerships and cannot be

recognised within profit for the period - -

Minorities’ Share 35,879 -

Common Equity Tier 1 Capital Before Deductions 2,852,125 -

Deductions from Common Equity Tier 1 Capital

Common Equity as per the 1st clause of Provisional Article 9 of the Regulation on the Equity of Banks - -

Portion of the current and prior periods’ losses which cannot be covered through reserves and losses reflected in equity in accordance with TAS 15,344 -

Improvement costs for operating leasing 68,632 -

Goodwill (net of related deferred tax liability) 110,088 -

Other intangibles other than mortgage-servicing rights (net of related deferred tax liability) - -

Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related deferred tax liability) 52,146 -

Differences are not recognized at the fair value of assets and liabilities subject to hedge of cash flow risk - -

Communiqué Related to Principles of the amount credit risk calculated with the Internal Ratings Based

Approach, total expected loss amount exceeds the total provison - -

Gains arising from securitization transactions - -

Unrealized gains and losses due to changes in own credit risk on fair valued liabilities - -

Defined-benefit pension fund net assets - -

Direct and indirect investments of the Bank in its own Common Equity 175,996 -

Shares obtained contrary to the 4th clause of the 56th Article of the Law - -

Portion of the total of net long positions of investments made in equity items of banks and financial institutions outside the scope of consolidation where the Bank owns 10% or less of the issued common share

capital exceeding 10% of Common Equity of the Bank - -

Portion of the total of net long positions of investments made in equity items of banks and financial

institutions outside the scope of consolidation where the Bank owns 10% or more of the issued common share capital exceeding 10% of Common Equity of the Bank - -

Portion of mortgage servicing rights exceeding 10% of the Common Equity - -

Portion of deferred tax assets based on temporary differences exceeding 10% of the Common Equity - -

Amount exceeding 15% of the common equity as per the 2nd clause of the Provisional Article 2 of the

Regulation on the Equity of Banks - -

Excess amount arising from the net long positions of investments in common equity items of banks and

financial institutions outside the scope of consolidation where the Bank owns 10% or more of the issued

common share capital 101,456 -

Excess amount arising from mortgage servicing rights - -

Excess amount arising from deferred tax assets based on temporary differences - -

Other items to be defined by the BRSA - -

Deductions to be made from common equity due to insufficient Additional Tier I Capital or Tier II Capital - -

Total Deductions From Common Equity Tier 1 Capital 422,206 -

Total Common Equity Tier 1 Capital 2,429,919 -

ADDITIONAL TIER I CAPITAL -

Preferred Stock not Included in Common Equity and the Related Share Premiums - -

Debt instruments and premiums approved by BRSA - -




32

Debt instruments and premiums approved by BRSA(Temporary Article 4) - -

Third parties’ share in the Additional Tier I capital - -

Third parties’ share in the Additional Tier I capital (Temporary Article 3) - -

Additional Tier I Capital before Deductions - -

Deductions from Additional Tier I Capital - -

Direct and indirect investments of the Bank in its own Additional Tier I Capital - -

Investments of Bank to Banks that invest in Bank's additional equity and components of equity issued by

financial institutions with compatible with Article 7. - -

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 - -


Transition from the Core Capital to Continue to deduce Components - -

Goodwill and other intangible assets and related deferred tax liabilities which will not deducted from

Common Eguity Tier 1 capital for the purposes of the first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds (-) - -

Net deferred tax asset/liability which is not deducted from Common Eguity Tier 1 capital for the purposes of

the sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds (-) - -

Deductions to be made from Tier I Capital in the case that adequate Additional Tier II Capital or is not

available (-) - -

Total Deductions From Additional Tier I Capital - -

Total Additional Tier I Capital - -

Total Tier I Capital (Tier I Capital=Common Equity+Additional Tier I Capital) 2,429,919 -

TIER II CAPITAL

Debt instruments and share issue premiums deemed suitable by the BRSA 928,414 -

Debt instruments and share issue premiums deemed suitable by BRSA (Temporary Article 4) - -

Third parties’ share in the Tier II Capital - -

Third parties’ share in the Tier II Capital (Temporary Article 3) - -

Provisions (Article 8 of the Regulation on the Equity of Banks) 29,916 -

Tier II Capital Before Deductions 958,330 -

Deductions From Tier II Capital

Direct and indirect investments of the Bank on its own Tier II Capital (-) - -

Investments of Bank to Banks that invest on Bank's Tier 2 and components of equity issued by financial institutions with the conditions - -


institutions outside the scope of consolidation where the Bank owns 10% or less of the issued common share

capital exceeding 10% of Common Equity of the Bank (-) - -

Portion of the total of net long positions of investments made in Additional Tier I Capital item of banks and

financial institutions outside the scope of consolidation where the Bank owns 10% or more of the issued common share capital exceeding 10% of Common Equity of the Bank - -

Other items to be defined by the BRSA (-) - -

Total Deductions from Tier II Capital - -

Total Tier II Capital 958,330 -

Total Capital (The sum of Tier I Capital and Tier II Capital) 3,388,248 -

Deductions from Total Capital - -

Deductions from Capital Loans granted contrary to the 50th and 51th Article of the Law - -

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 - -

Other items to be defined by the BRSA 6,912 -

In transition from Total Core Capital and Supplementary Capital (the capital) to Continue to

Deduction Components

The Sum of net long positions of investments (the portion which exceeds the 10% of Banks Common Equity)

in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued common share capital of the entity

which will not deducted from Common Equity Tier 1 capital, Additional Tier 1 capital, Tier 2 capital for the

purposes of the first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds - -




33

The Sum of net long positions of investments in the Additional Tier 1 capital and Tier 2 capital of banking,

financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued common share capital of the entity which will not deducted from Common

Equity Tier 1 cap7ital, Additional Tier 1 capital, Tier 2 capital for the purposes of the first sub-paragraph of

the Provisional Article 2 of the Regulation on Banks’ Own Funds - -

The Sum of net long positions of investments in the common stock of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of

the issued common share capital of the entity, mortgage servicing rights, deferred tax assets arising from

temporary differences which will not deducted from Common Eguity Tier 1 capital for the purposes of the first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds - -

TOTAL CAPITAL


Total risk weighted amounts 26,726,927 -

CAPITAL ADEQUACY RATIOS

Core Capital Adequacy Ratio (%) 9.09 -

Tier 1 Capital Adequacy Ratio (%) 9.09 -

Capital Adequacy Ratio (%) 12.65

BUFFERS

Total additional Common Equity Tier 1 Capital requirement ratio (a+b+c) 2.56 -

a) Bank specific total common equity tier 1 capital ratio 2.50 -

b) Capital conservation buffer requirement 0.06 -

c) Systemically important bank buffer ratio (**) 0.00 -

The ratio of Additional Common Equity Tier 1 capital which will be calculated by the first paragraph of the

Article 4 of Regulation on Capital Conservation and Countercyclical Capital buffers to Risk Weighted Assets 3.09 -

Amounts below the Excess Limits as per the Deduction Principles

Portion of the total of net long positions of 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 - -

Portion of the total of 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 - -

Amount arising from deferred tax assets based on temporary differences - -

Limits related to provisions considered in Tier II calculation - -

Limits related to provisions considered in Tier II calculation

General provisions for standard based receivables (before limit of one hundred and twenty five

per ten Thousand) 29,916 -

Up to 1.25% of total risk-weighted amount of general reserves for receivables where the standard approach used - -

Excess amount of total provision amount to credit risk Amount of the Internal Ratings Based Approach in

accordance with the Communiqué on the Calculation - -

Excess amount of total provision amount to 0,6% of risk weighted receivables of credit risk Amount of the

Internal Ratings Based Approach in accordance with the Communiqué on the Calculation - -

Debt instruments subjected to Article 4

(to be implemented between 1 January 2018 and 1 January 2022)

Upper limit for Additional Tier I Capital subjected to temprorary Article 4 - -

Amounts Excess the Limits of Additional Tier I Capital subjected to temprorary Article 4 - -

Upper limit for Additional Tier II Capital subjected to temprorary Article 4 - -

Amounts Excess the Limits of Additional Tier II Capital subjected to temprorary Article 4 - -

(*) Amounts in this column represent the amounts of items that are subject to transition provisions in accordance with the provisional Articles

of “Regulations regarding to changes on Regulation on Equity of Banks” effectuated on 1/1/2014 and taken into consideration at the end of transition process.

(**) According to the paragraph 4 of the Article 4 of the Regulation on Systemically Important Banks only Systematically Important Bank,

which are not obligated to prepare consolidated financial statements, shall calculate this ratio and the rest banks shall report it as zero.




34





Prior Period Amounts related to treatment before

1/1/2014 (*)

COMMON EQUITY TIER 1 CAPITAL

Paid-in capital following all debts in terms of claim in liquidation of the Bank 1,158,000 -

Share issue premiums 1,835 -

Reserves 1,705,427 -

Gains recognized in equity as per TAS 69,591 -

Profit 89,398 -

Current Period Profit 89,398 -

Prior Period Profit - -

Shares acquired free of charge from subsidiaries, affiliates and jointly controlled partnerships and cannot be recognised within profit for the period - -

Minorities’ Share 29,315 -

Common Equity Tier 1 Capital Before Deductions 3,053,566 -

Deductions from Common Equity Tier 1 Capital

Common Equity as per the 1st clause of Provisional Article 9 of the Regulation on the Equity of Banks - -

Portion of the current and prior periods’ losses which cannot be covered through reserves and losses reflected

in equity in accordance with TAS (14,498) -

Improvement costs for operating leasing 70,935 -

Goodwill (net of related tax liability) 94,111 -

Other intangibles other than mortgage-servicing rights (net of related tax liability) - -

Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of

related tax liability) 69,529 -

Differences are not recognized at the fair value of assets and liabilities subject to hedge of cash flow risk - -

Communiqué Related to Principles of the amount credit risk calculated with the Internal Ratings Based Approach, total expected loss amount exceeds the total provison - -

Gains arising from securitization transactions - -

Unrealized gains and losses due to changes in own credit risk on fair valued liabilities - -

Defined-benefit pension fund net assets - -

Direct and indirect investments of the Bank in its own Common Equity 175,996 -

Shares obtained contrary to the 4th clause of the 56th Article of the Law - -


institutions outside the scope of consolidation where the Bank owns 10% or less of the issued common share capital exceeding 10% of Common Equity of the Bank - -


institutions outside the scope of consolidation where the Bank owns 10% or more of the issued common

share capital exceeding 10% of Common Equity of the Bank - -

Portion of mortgage servicing rights exceeding 10% of the Common Equity - -

Portion of deferred tax assets based on temporary differences exceeding 10% of the Common Equity - -

Amount exceeding 15% of the common equity as per the 2nd clause of the Provisional Article 2 of the Regulation on the Equity of Banks - -

Excess amount arising from the net long positions of investments in common equity items of banks and financial institutions outside the scope of consolidation where the Bank owns 10% or more of the issued

common share capital 66,028 -

Excess amount arising from mortgage servicing rights - -

Excess amount arising from deferred tax assets based on temporary differences - -


Deductions to be made from common equity due to insufficient Additional Tier I Capital or Tier II Capital - -

Total Deductions From Common Equity Tier 1 Capital 396,073 -

Total Common Equity Tier 1 Capital 2,657,493 -

ADDITIONAL TIER I CAPITAL

Preferred Stock not Included in Common Equity and the Related Share Premiums - -

Debt instruments and premiums approved by BRSA -

-

Debt instruments and premiums approved by BRSA(Temporary Article 4) - -

Third parties’ share in the Additional Tier I capital - -




35

Third parties’ share in the Additional Tier I capital (Temporary Article 3) - -

Additional Tier I Capital before Deductions - -

Deductions from Additional Tier I Capital

Direct and indirect investments of the Bank in its own Additional Tier I Capital - -

Investments of Bank to Banks that invest in Bank's additional equity and components of equity issued by

financial institutions with compatible with Article 7. - -

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 - -


Transition from the Core Capital to Continue to deduce Components

Goodwill and other intangible assets and related deferred tax liabilities which will not deducted from

Common Eguity Tier 1 capital for the purposes of the first sub-paragraph of the Provisional Article 2 of the

Regulation on Banks’ Own Funds (-) - -

Net deferred tax asset/liability which is not deducted from Common Eguity Tier 1 capital for the purposes of

the sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds (-) - -

Deductions to be made from Tier I Capital in the case that adequate Additional Tier II Capital or is not

available (-) - -

Total Deductions From Additional Tier I Capital - -

Total Additional Tier I Capital - -

Total Tier I Capital (Tier I Capital=Common Equity+Additional Tier I Capital) 2,657,493 -

TIER II CAPITAL

Debt instruments and share issue premiums deemed suitable by the BRSA 898,885 -

Debt instruments and share issue premiums deemed suitable by BRSA (Temporary Article 4) - -

Third parties’ share in the Tier II Capital - -

Third parties’ share in the Tier II Capital (Temporary Article 3) - -

Provisions (Article 8 of the Regulation on the Equity of Banks) - -

Tier II Capital Before Deductions 898,885 -

Deductions From Tier II Capital

Direct and indirect investments of the Bank on its own Tier II Capital (-) - -

Investments of Bank to Banks that invest on Bank's Tier 2 and components of equity issued by financial institutions with the conditions - -


institutions outside the scope of consolidation where the Bank owns 10% or less of the issued common share

capital exceeding 10% of Common Equity of the Bank (-) - -

Portion of the total of net long positions of investments made in Additional Tier I Capital item of banks and financial institutions outside the scope of consolidation where the Bank owns 10% or more of the issued

common share capital exceeding 10% of Common Equity of the Bank - -

Other items to be defined by the BRSA (-) - -

Total Deductions from Tier II Capital - -

Total Tier II Capital 898,885 -


Deductions from Total Capital - -

Deductions from Capital Loans granted contrary to the 50th and 51th Article of the Law - -

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 - -

Other items to be defined by the BRSA 5,780 -

In transition from Total Core Capital and Supplementary Capital (the capital) to Continue to

Deduction Components

The Sum of net long positions of investments (the portion which exceeds the 10% of Banks Common Equity) in the capital of banking, financial and insurance entities that are outside the scope of regulatory

consolidation, where the bank does not own more than 10% of the issued common share capital of the entity

which will not deducted from Common Equity Tier 1 capital, Additional Tier 1 capital, Tier 2 capital for the purposes of the first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds - -

The Sum of net long positions of investments in the Additional Tier 1 capital and Tier 2 capital of banking,

financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not

own more than 10% of the issued common share capital of the entity which will not deducted from Common Equity Tier 1 capital, Additional Tier 1 capital, Tier 2 capital for the purposes of the first sub-paragraph of the

Provisional Article 2 of the Regulation on Banks’ Own Funds - -




36

The Sum of net long positions of investments in the common stock of banking, financial and insurance

entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued common share capital of the entity, mortgage servicing rights, deferred tax assets arising from

temporary differences which will not deducted from Common Eguity Tier 1 capital for the purposes of the

first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds - -

TOTAL CAPITAL


Total risk weighted amounts 24,785,039 -


Core Capital Adequacy Ratio (%) 10.72 -

Tier 1 Capital Adequacy Ratio (%) 10.72 -

Capital Adequacy Ratio (%) 14.33

BUFFERS

Total additional Common Equity Tier 1 Capital requirement ratio (a+b+c) 1.933 -

a) Bank specific total common equity tier 1 capital ratio 1.875 -

b) Capital conservation buffer requirement 0.058 -

c) Systemically important bank buffer ratio (**) 0.000 -

The ratio of Additional Common Equity Tier 1 capital which will be calculated by the first paragraph of the

Article 4 of Regulation on Capital Conservation and Countercyclical Capital buffers to Risk Weighted Assets 4.72 -

Amounts below the Excess Limits as per the Deduction Principles

Portion of the total of net long positions of 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 - -

Portion of the total of 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 - -

Amount arising from deferred tax assets based on temporary differences - -

Limits related to provisions considered in Tier II calculation - -

Limits related to provisions considered in Tier II calculation

General provisions for standard based receivables (before limit of one hundred and twenty five per ten Thousand) - -

Up to 1.25% of total risk-weighted amount of general reserves for receivables where the standard approach

used - -

Excess amount of total provision amount to credit risk Amount of the Internal Ratings Based Approach in

accordance with the Communiqué on the Calculation - -

Excess amount of total provision amount to 0,6% of risk weighted receivables of credit risk Amount of the Internal Ratings Based Approach in accordance with the Communiqué on the Calculation - -

Debt instruments subjected to Article 4

(to be implemented between 1 January 2018 and 1 January 2022)

Upper limit for Additional Tier I Capital subjected to temprorary Article 4 - -

Amounts Excess the Limits of Additional Tier I Capital subjected to temprorary Article 4 - -

Upper limit for Additional Tier II Capital subjected to temprorary Article 4 - -

Amounts Excess the Limits of Additional Tier II Capital subjected to temprorary Article 4 - -

(*) Amounts in this column represent the amounts of items that are subject to transition provisions in accordance with the provisional Articles of “Regulations regarding to changes on Regulation on Equity of Banks” effectuated on 1/1/2014 and taken into consideration at

the end of transition process.

(**) According to the paragraph 4 of the Article 4 of the Regulation on Systemically Important Banks only Systematically Important Bank, which are not obligated to prepare consolidated financial statements, shall calculate this ratio and the rest banks shall report it as zero.




37





Information on borrowing instruments to be included in the equity calculation:

Current Period

Issuer ŞEKERBANK T.A.Ş ŞEKERBANK T.A.Ş ŞEKERBANK T.A.Ş

Unique identifier (eg CUSIP, ISIN or

Bloomberg identifier

for private placement) TRSSKBK52818 XS1626188491 TRSSKBKA2716

Governing law(s) of the

instrument

Subject to Turkish Regulations. It is issued within the scope of the Debt

Instruments Disclosure of the Capital

Markets Board and the Regulation on Equities of Banks of the BRSA.

Subject to Turkish Regulations. It is issued within the scope of the

Debt Instruments Disclosure of the

Capital Markets Board and the Regulation on Equities of Banks of

the BRSA.

Subject to Turkish Regulations. It is issued within the scope of the Debt

Instruments Disclosure of the Capital

Markets Board and the Regulation on Equities of Banks of the BRSA.

Regulatory treatment

Subject to 10% deduction as of

1/1/2015 No No No

Eligible on

Unconsolidated/

consolidated / both unconsolidated and

consolidated

Valid on Consolidated and

Unconsolidated Basis





Instrument type Subordinated Liabilities (Securities)

Subordinated Liabilities

(Securities)

Subordinated Liabilities (Securities)

Amount recognised in regulatory capital

(Currency in million

TRL, as of most recent reporting date) 150 478.4 300

Par value of instrument

(Million TRL) 150 478.4 300

Accounting

classification 346 347 346

Original date of

issuance 24.05.2018 12.06.2017 22.12.2017

Demand or time Maturity Maturity Maturity

Original maturity date 11.05.2028 12.06.2027 10.12.2027

Issuer call subject to

prior supervisory

approval Yes Yes Yes

Optional call date, contingent call dates

and redemption amount

17 May 2023, TRL 150 Million (10

year maturity with early redemption option in the 5th year, subject to

BRSA approval)

13 June 2022, USD 85 Million (10

year maturity with early redemption option in the 5th year,

subject to BRSA approval)

16 December 2022, TRL 300 Million (10

year maturity with early redemption option in the 5th year, subject to BRSA

approval)

Subsequent call dates,

if applicable - - -

Coupons / dividends

Fixed or floating dividend/coupon

Variable interest (The Borrowing

instrument will make coupon payments from the beginning of the

maturity to the date of redemption

(including the redemption date) once a month (variable days).) Fixed

Variable interest (The Borrowing

instrument will make coupon payments from the beginning of the maturity to the

date of redemption (including the

redemption date) once a month (variable days).)

Coupon rate and any

related index

5 Years Term Indicator + 475 bps on

government securities 9.75% p.a.

5 Years Term Indicator + 475 bps on

government securities

Existence of a dividend

stopper - - -




38

Fully discretionary,

partially discretionary or

mandatory Mandatory Mandatory Mandatory

Existence of step up or

other incentive to redeem - - -

Noncumulative or cumulative Noncumulative Noncumulative Noncumulative

Convertible or non-convertible

If convertible,

conversion trigger (s) - - -

If convertible, fully or

partially - - -

If convertible,

conversion rate - - -

If convertible, mandatory or optional

conversion - - -

If convertible, specify

instrument type convertible into - - -

If convertible, specify

issuer of instrument it

converts int - - -

Write-down feature

If write-down, write-

down trigger(s)

According to the Article 8 (2) (ğ) of

the Regulation on Equities of Banks,

the bonds have a write-off option. If, in accordance with the related

regulation, there is a possibility of

abolishing the bank's operating permit

or transferring it to the SDIF in the

framework of the Article 71 of the Banking Law due to the losses it

incurs, The Bank can write down

these bonds from the related financial records with the decision of the

BRSA, in the event of the bankruptcy

Due to the losses incurred, in the

framework of Article 71 of the

Banking Law that: (1) the removal and liquidation of the Bank's

operating permit or (2) the rights

of all its shareholders (except to

dividends), and the management

and supervision of the Bank, are to be transferred to the SDIF on the

condition that losses are deducted

from the capital of existing shareholders , the bonds can be

written-down.

According to the Article 8 (2) (ğ) of the

Regulation on Equities of Banks, the bonds have a write-off option. If, in

accordance with the related regulation,

there is a possibility of abolishing the

bank's operating permit or transferring it

to the SDIF in the framework of the Article 71 of the Banking Law due to the

losses it incurs, The Bank can write down

these bonds from the related financial records with the decision of the BRSA, in

the event of the bankruptcy

If write-down, full or

partial Partially or fully Partially or fully Partially or fully

If write-down,

permanent or temporary Continuously Continuously Continuously

If temporary write-down, description of

write-up mechanism - - -

Position in

subordination hierarchy in liquidation (specify

instrument type

immediately senior to instrument)

In priority of debt and comes after deposits and all other receivables

In priority of receivables, it comes

after the debt instruments which are nonsubordinated loans

In priority of debt and comes after deposits and all other receivables

Whether conditions

which stands in article

of 7 and 8 of Banks’ shareholder equity law

are possessed or not

The instrument is in compliance with

article number 8.

The instrument is in compliance

with article number 8.

The instrument is in compliance with

article number 8.

According to article 7

and 8 of Banks’ shareholders equity law

that are not possessed

The instrument is not in compliant

with article numbered 7.

The instrument is not in compliant

with article numbered 7.

The instrument is not in compliant with

article numbered 7.




39


I INFORMATION RELATED TO CONSOLIDATED FINANCIAL POSITION AND RISK



Information on borrowing instruments to be included in the equity calculation (cont’d):

The Group, within the framework of its capital adequacy assessment process, determines limits for risks (credit

risk, market risk and operational risk) covered under the Capital Adequacy calculations as well as for risks

(concentration risk, interest rate risk in the banking book, liquidity risk, etc.) which are not covered under these

calculations. Thus, the Parent Bank determines its “Risk Limits” and with the help of these limits and by means

of applying stress tests and scenario analyses, it evaluates the adequacy of its capital level against a background of

its current and also projected activities.

The Group determines “Key Risk Indicators” as “early warning signals” within the context of the “Risk Limits”.

Both the “Risk Limits” and “Key Risk Indicators” are determined by taking into consideration the annual budget

and strategy; its risk appetite; the volume, qualifications and complexity of its products/services; its experience

and prior performance as well as the market conditions. The “Risk Limits” and “Key Risk Indicators” are

determined through risk based amounts and nominal amounts. In this scope, regulatory limits and applications,

Basel Committee applications, international best practices, concentrations and tolerance levels as well as criteria

based on the Group’s capital levels are used. In any case, the “Risk Limits” and “Key Risk Indicators” cannot

violate the Banking Law and related regulations.

The “Risk Limits” and “Key Risk Indicators” are reviewed and revised at least annually by the senior management

with respect to market conditions and changes in the Group’s strategies. The review process aims to determine

whether the current “Risk Limits” and “Key Risk Indicators” are meaningful and sufficient enough compared to

the risk appetite. The revised “Risk Limits” and “Key Risk Indicators” become effective upon the approval of the

Boards of Directors.

Reconciliation of capital items to balance sheet

The difference between Total Capital and Equity in the balance sheet mainly arises from expected credit loss

provisions arising from loans classified under stage 1 and stage 2 and subordinated loans. In the calculation of

Total Capital, up to 1.25% of the expected credit loss provision from stage 1 and stage 2 over the credit risk

amount and subordinated loans are taken into consideration as Tier II Capital. On the other hand, in the calculation

of the Total Capital, improvement costs for operating leases followed under tangible assets in the balance sheet,

intangible assets and related deferred tax liabilities, other items defined by the regulator are taken into

consideration as amounts deducted from Total Capital.




40





Information on borrowing instruments to be included in the equity calculation (cont’d):

T T-1 T-2 T-3 T-4

TOTAL CAPITAL

Common Equity Tier 1 Capital 2,429,919 2,332,214 2,234,509 2,136,804 2,429,919

Transition Process Not Applied Common Equity Tier 1 Capital (*) 2,136,804 2,136,804 2,136,804 2,136,804 2,136,804

Tier I Capital 2,429,919 2,332,214 2,234,509 2,136,804 2,429,919

Transition Process Not Applied Tier I Capital (**) 2,136,804 2,136,804 2,136,804 2,136,804 2,136,804

Total Capital 3,381,337 3,370,544 3,359,750 3,348,956 3,381,337

Transition Process Not Applied Total Capital (***) 3,348,956 3,348,956 3,348,956 3,348,956 3,348,956

TOTAL RISK WEIGHTED AMOUNTS

Total risk weighted amounts 26,726,927 26,726,927 26,726,927 26,726,927 26,726,927


Common Equity Tier 1 Capital Adequacy Ratio (%) 9.09 8.73 8.36 8.00 9.09

Transition Process Not Applied Common Equity Tier 1 Capital

Adequacy Ratio (%) (****) 8.00 8.00 8.00 8.00 8.00

Tier 1 Capital Adequacy Ratio (%) 9.09 8.73 8.36 8.00 9.09

Transition Process Not Applied Tier 1 Capital Adequacy Ratio (%)

(****) 8.00 8.00 8.00 8.00 8.00

Capital Adequacy Ratio (%) 12.65 12.61 12.57 12.53 12.65

Transition Process Not Applied Capital Adequacy Ratio (%) (****) 12.53 12.53 12.53 12.53 12.53

LEVERAGE RATIO

Leverage ratio total risk amount 42,286,897 42,286,897 42,286,897 42,286,897 42,286,897

Leverage ratio 5.75 5.52 5.28 5.05 5.75

Transition Process Not Applied Leverage ratio (%) (*****) 5.05 5.05 5.05 5.05 5.05

(*) Amount of Common Equity Tier 1 Capital in case of non-application of Provisional Article 5 of the Regulation on Equities of Banks.

(**)Amount of Tier I Capital in case of non-application of Provisional Article 5 of the Regulation on Equities of Banks.

(***)Amount of Total Capital in case of non-application of Provisional Article 5 of the Regulation on Equities of Banks. (****)Amount of capital adequacy ratios calculated with equity componentsin case of non-application of Provisional Article 5 of the

Regulation on Equities of Banks.

(*****)Amount of leverage ratio calculated with equity components in case of non-application of Provisional Article 5 of the Regulation on Equities of Banks.




41




II. Explanations Related to Consolidated Currency Risk

Currency risk is the possibility of loss that the Group may face, in its total on- and off-balance sheet accounts and

positions in foreign currencies, arising from changes in exchange rates.

The Parent Bank’s policies and procedures related to currency risk are in line with the “Regulation on Internal

Systems and Internal Capital Adequacy Asessment Process” and the “Regulation on Measurement and Evaluation

of the Capital Adequacy of Banks” and approved by the Parent Bank’s Board of Directors.

The Boards of Directors has approved limits (position limits, stop-loss limits) compliant with the regulatory

“Foreign Exchange Net General Position / Equity Standard Ratio” and based on the Group’s capital. These limits

are monitored on a daily basis and reviewed and revised at least once a year, with respect to market conditions and

changes in the Group’s strategies.

Within the context of Capital Adequacy, the Group’s currency risk within the market risk exposure is calculated

through the use of the “Standard Method” in line with the legislation. In these calculations, the Group’s foreign

currency assets and foreign currency liabilities together with the forward transactions and gold position are all

taken into consideration.

Within the Group, currency risk exposure is measured, monitored and reported on a daily basis. In this context,

“Value-at-Risk (VaR) Methods” are applied as internal model. Among these methods, the “Parametric Method”

that is also called as ‘’Variance Covariance Method’’ is used among the VaR Methods; while the “Historical

Simulation” and the “Monte Carlo Simulation” methods, on the other hand, are used for comparison, in times

when volatility increases to a great extent. VaR measurements are based on an observation period covering the

last 252 workdays and a 99 % confidence level. In “Economic Capital” measurements based on VaR, a 10-day

holding period is applied.

Additionally, stress tests and scenario analyses are applied in order to measure and monitor the impact of adverse

movements in the markets, while the effectiveness of the Parent Bank’s internal model is tested by using

retroperspective tests on a daily basis.

As of 31 March 2019, the Group’s balance sheet short position is TRL 1,329,782 Thousand (31 December 2018 –

TRL 1,649,176 Thousand short) and long position on the off balance sheet amounting to TRL 1,624,484 Thousand

(31 December 2018 - TRL 1,861,972 Thousand long), resulting in total net long position of TRL 294,702 Thousand

(31 December 2018 - TRL 212,796 Thousand total net long).

The announced current foreign exchange buying rates of the Parent Bank at 31 March 2019 and the previous five

working days in full TRL are as follows:

22.03.2019 25.03.2019 26.03.2019 27.03.2019 28.03.2019 29.03.2019

USD 5.5274 5.6458 5.4945 5.3307 5.5423 5.6284

CHF 5.5458 5.6667 5.5193 5.3489 5.5538 5.6393

GBP 7.2457 7.4321 7.2467 7.0259 7.2780 7.3354

100 JPY 4.9872 5.1152 4.9707 4.8130 5.0149 5.0704

EURO 6.2630 6.3858 6.2162 6.0091 6.2335 6.3188

The simple arithmetic averages of the major current foreign exchange buying rates of the Parent Bank for the thirty

days before 31 March 2019 are as follows:

Monthly Average

Foreign Exchange Rate

USD 5.4649

CHF 5.4495

GBP 7.1849

100 JPY 4.9039

EURO 6.1768




42




II. Explanations Related to Consolidated Currency Risk (cont’d)

Information on the foreign currency risk of the Group:

EUR USD Other FC Total

Current Period

Assets

Cash (Cash in Vault, Foreign Currency Cash, Money in Transit,

Cheques Purchased) and Balances with the Central Bank of Turkey 1,510,289 1,332,275 527,190 3,369,754

Banks 206,852 197,905 62,412 467,169

Financial Assets at Fair Value Through Profit and Loss 2,970 6,738 - 9,708

Money Market Placements 844 - - 844

Financial Assets at Fair Value Through Other Comprehensive Income - 19,305 - 19,305

Loans (*) 5,534,713 2,660,411 71,010 8,266,134

Subsidiaries, Associates and Entities Under Common Control - - - -

Financial Assets at Amortised Cost - 1,039,524 374 1,039,898

Derivative Financial Assets For Hedging Purposes - - -

Tangible Assets - 3,752 - 3,752

Intangible Assets - - - -

Other Assets 27,286 249,824 11,732 288,842

Total Assets 7,282,954 5,509,734 672,718 13,465,406

Liabilities

Bank Deposits 64,421 138,403 119 202,943

Foreign Currency Deposits 4,770,162 5,737,022 585,660 11,092,844

Money Market Borrowings - - - -

Funds Provided From Other Financial Institutions 526,160 2,189,705 2,583 2,718,448

Securities Issued (**) - 492,305 - 492,305

Sundry Creditors 220,393 (98,556) 132,469 254,306

Other Liabilities 23,104 10,905 333 34,342

Total Liabilities 5,604,240 8,469,784 721,164 14,795,188

Net Balance Sheet Position 1,678,714 (2,960,050) (48,446) (1,329,782)

Net Off-Balance Sheet Position (1,787,161) 3,346,048 65,597 1,624,484

Financial Derivative Assets 1,113,136 4,023,003 257,093 5,393,232

Financial Derivative Liabilities 2,900,297 676,955 191,496 3,768,748

Non-Cash Loans 1,383,187 1,158,768 5,220 2,547,175

Prior Period

Total Assets 5,715,911 6,210,696 567,948 12,494,555

Total Liabilities 5,141,463 8,357,149 645,119 14,143,731

Net Balance Sheet Position 574,448 (2,146,453) (77,171) (1,649,176)

Net Off-Balance Sheet Position (573,274) 2,344,141 91,105 1,861,972

Financial Derivative Assets 1,297,444 3,612,606 207,991 5,118,041

Financial Derivative Liabilities 1,870,718 1,268,465 116,886 3,256,069

Non-Cash Loans 1,236,975 1,281,615 749 2,519,339

About Currency Risk Table as of 31 March 2019;

The principal amount of currency indexed loans amounting TRL 668,173 Thousand and accruals amounting TRL 540,449 Thousand are shown under loans.

The principal amount of currency indexed funds borrowed amounting to TRL 22,116 Thousand and accruals amounting TRL 98 Thousand are shown in the Funds Provided From Other

Financial Institutions line.

According to the regulation about Foreign Currency Net General Position / Equity Standard Ratio Calculation, Foreign Currency amounts that are not shown in the present currency risk

table are as follows: Derivative Financial Assets Held-for-Trading: TRL 98,474 Thousand

Prepaid expenses: TRL 19,425 Thousand .Derivative Financial Liabilities Held-for-Trading: TRL 71,596 Thousand

Unearned income from installment sale of assets: TRL 4,145 Thousand, Receivables from foreign currency in equity: TRL 29,136 Thousand

Financial Derivative Asset amount includes TRL 319,132 Thousand forward asset purchase commitment and TRL 382,604 Thousand option contracts.

Financial Derivative Liabilities amount includes TRL 214,977 Thousand forward asset selling commitment and TRL 375,176 Thousand option contracts.

(**) Securities Issued includes also the issuances of subordinated debts amounting to TRL 492,305 Thousand which are shown under subordinated loans line in the balance sheet

About Currency Risk Table as of 31 December 2018;

The principal amount of currency indexed loans amounting TRL 758,949 Thousand and accruals amounting TRL 549,655 Thousand are shown under loans.

The principal amount of currency indexed funds borrowed amounting to TRL 21,098 Thousand and accruals amounting TRL 307 Thousand are shown in the Funds Provided From Other

Financial Institutions line. According to the regulation about Foreign Currency Net General Position / Equity Standard Ratio Calculation, Foreign Currency amounts that are not shown in

the present currency risk table are as follows: Derivative Financial Assets Held-for-Trading: TRL 383,219 Thousand

Marketable securities value increase fund: TRL 4,047 Thousand Prepaid expenses: TRL 19,287 Thousand .Derivative Financial Liabilities Held-for-Trading: TRL 91,824 Thousand

Unearned income from installment sale of assets: TRL 3,965 Thousand, Receivables from foreign currency in equity: TRL 24,511 Thousand

Financial Derivative Asset amount includes TRL 34,411 Thousand forward asset purchase commitment and TRL 305,606 Thousand option contracts.

Financial Derivative Liabilities amount includes TRL 39,522 Thousand forward asset selling commitment and TRL 305,136 Thousand option contracts.

(**) Securities Issued includes also the issuances of subordinated debts amounting to TRL 451,050 Thousand which are shown under subordinated loans line in the balance sheet




43




III. Explanations Related to Consolidated Interest Rate Risk

Interest rate risk is the possibility of loss that the Group may face, in relation to its structural position arising from

adverse movements in interest rates.

The Parent Bank’s policies and procedures related to interest rate risk are in line with the “Regulation on Internal

Systems and Internal Capital Adequacy Asessment Process” and the “Regulation on Measurement and Evaluation

of the Capital Adequacy of Banks” and approved by the Board of Directors.

Within the context of Capital Adequacy, the Group’s interest rate risk within the market risk exposure is calculated

through the use of the “Standard Method” in line with the legislation.

The Group takes interest rate risk positions in both the trading book and banking book. The interest rate risk arising

from the trading book is evaluated within the scope of market risk, and thus, measured, monitored, and managed

in line with market risk policies and procedures.

Within the Parent Bank, interest rate risk exposure is measured, monitored and reported on a daily basis. In this

context, “Value-at-Risk (VaR) Methods” are applied as internal model.

Among these methods, the “Parametric Method” that is also called as ‘’Variance Covariance Method’’ is used

among the VaR Methods; while the “Historical Simulation” and the “Monte Carlo Simulation” methods, on the

other hand, are used for comparison, in times when volatility increases to a great extent.

VaR measurements are based on an observation period covering the last 252 workdays and a 99 % confidence

level. In “Economic Capital” measurements based on VaR, a 10-day holding period is applied.

Additionally, stress tests and scenario analyses are applied in order to measure and monitor the impact of adverse

movements in the markets, while the effectiveness of the Parent Bank’s internal model is tested by using back tests

on a daily basis.

The interest rate risk arising from the Group’s banking accounts is measured, monitored and managed within the

scope of assets and liabilities risk. In this context, gap analyses, duration and economic value analyses as well as

sensitivity analyses are evaluated on a weekly basis by the Parent Bank’s Asset Liability Committee. Simulations

on net interest income are performed according to macroeconomic indicator estimations in the Parent Bank’s

budget targets, while the potential negative impact of adverse movements in market interest rates on the financial

position and cash flows is minimized through target revisions. The Group management monitors the market

interest rates on a daily basis, and is able to change the interest rates applied by the Group whenever it is necessary

by ALCO decisions.




44




III. Explanations Related to Consolidated Interest Rate Risk (cont’d)

Average interest rates applied to monetary financial instruments

EUR USD JPY TRL

Current Period (*)

Assets

Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques

Purchased) and Balances with the Central Bank of Turkey - - - -

Banks 0.01 2.35 0.52 25.74

Financial Assets at Fair Value Through Profit and Loss 2.68 5.39 - 7.64

Money Market Placements - - - 27.30

Financial Assets at Fair Value Through Other Comprehensive Income - - - 16.48

Loans 6.66 9.35 2.80 21.29

Financial Assets at Amortised Cost - 5.05 - 4.75

Liabilities

Bank Deposits 1.04 2.57 - 25.04

Other Deposits 1.94 3.81 0.91 20.43

Money Market Borrowings - - - 24.45

Sundry Creditors 0.36 2.35 - -

Securities Issued - 6.82 - 8.27

Funds Provided From Other Financial Institutions 1.48 4.17 - 10.82

(*) Interest rates belong to the Parent Bank.

(*) Interest rates belong to the Parent Bank.

EUR USD JPY TRL

Prior Period (*)

Assets

Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey - - - -

Due From Other Banks and Financial Institutions 0.01 2.19 0.50 13.50

Financial Assets at Fair Value Through Profit and Loss 2.12 5.33 - 10.97

Money Market Placements - - - 15.25

Financial Assets Available-for-Sale - 4.40 - 11.62

Loans 6.07 8.65 3.53 19.24

Held-to-Maturity Investments - 5.06 - 3.96

Liabilities

Bank Deposits 1.35 3.88 - 18.00

Other Deposits 1.98 4.18 0.80 17.94

Money Market Borrowings - 2.00 - 16.78

Sundry Creditors 0.33 1.98 - -

Securities Issued - 6.82 - 13.03

Funds Provided From Other Financial Institutions 1.30 3.64 - 9.49




45





Information related to the interest rate sensitivity of assets, liabilities and off-balance sheet items (based on

repricing dates)

(*) The subordinated debt instruments in balance sheet also includes the TRL 944,480 Thousand bonds issued as subordinated loans.

(**) TRL 215,011 Thousand of loans is shown under Financial Assets at Fair Value through Profit and Loss in the financial statements.

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 in Vault, Foreign Currency

Cash, Money in Transit, Cheques

Purchased) and Balances with the Central Bank of Turkey 959,631 - - - - 2,857,380 3,817,011

Banks 563,304 10,010 - 612 - 123,772 697,698

Financial Assets at Fair Value Through Profit and Loss 24,484 10,345 25,147 2,434 9,890 2,864 75,164

Money Market Placements 27,943 - - - - - 27,943

Financial Assets at Fair Value Through Other Comprehensive Income - 64,936 3,226 429,353 19,305 7,577 524,397

Loans(**) 7,196,788 2,791,351 5,305,771 7,034,326 615,973 1,323,035 24,267,244

Financial Assets at Amortised Cost 697,279 646,146 497,306 649,572 506,459 - 2,996,762

Other Assets 478,540 22,542 50,406 153,123 4,560 818,595 1,527,766

Total Assets 9,947,969 3,545,330 5,881,856 8,269,420 1,156,187 5,133,223 33,933,985

Liabilities

Bank Deposits 528,414 - 15,533 118 - 223,444 767,509

Other Deposits 15,045,869 3,261,893 2,206,719 67,922 - 3,216,934 23,799,337

Money Market Borrowings 494,906 - - - - - 494,906

Sundry Creditors 14,269 64,361 - 2,805 - 364,341 445,776

Securities Issued (*) 629,840 945,550 259,060 - - - 1,834,450

Funds Provided From Other Financial Institutions 500,728 1,138,692 720,482 211,728 406,426 221,396 3,199,452

Other Liabilities 101,094 - 72,926 244,687 92,034 2,881,814 3,392,555

Total Liabilities 17,315,120 5,410,496 3,274,720 527,260 498,460 6,907,929 33,933,985

Balance Sheet Long Position - - 2,607,136 7,742,160 657,727 - 11,007,023

Balance Sheet Short Position (7,367,151) (1,865,166) - - - (1,774,706) (11,007,023)

Off-Balance Sheet Long Position - 58,000 10,000 450,000 625,228 - 1,143,228

Off-Balance Sheet Short Position - (30,000) (20,000) (468,000) (625,228) - (1,143,228)

Total Position (7,367,151) (1,837,166) 2,597,136 7,724,160 657,727 (1,774,706) -




46





Information related to the interest rate sensitivity of assets, liabilities and off-balance sheet items (based on

repricing dates) (cont’d)

(*) The subordinated debt instruments in balance sheet also includes the TRL 903,621 Thousand bonds issued as subordinated loans.

(**) TRL 221,879 Thousand of loans is shown under Financial Assets at Fair Value through Profit and Loss in the financial statements.

IV. Explanations Related to Consolidated Position Risk of Equity Securities in Banking Book

Consolidated Position Risk of Equity Securities in Banking Book: None

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 in Vault, Foreign Currency

Cash, Money in Transit, Cheques Purchased) and Balances with the Central

Bank of Turkey 362,591 - - - - 3,256,646 3,619,237

Due From Other Banks and Financial Institutions 96,086 120 - 7,163 - 102,650 206,019

Financial Assets at Fair Value Through Profit and Loss (**) 8,720 14,134 45,849 4,305 9,716 2,865 85,589

Money Market Placements 59,192 - - - - - 59,192

Financial Assets Available-for-Sale - 51 62,638 484,897 22,679 7,417 577,682

Loans (*)(**) 8,117,661 2,787,656 3,664,133 7,146,503 600,578 1,265,652 23,582,183

Held-to-Maturity Investments 378 862,475 1,470,553 614,070 481,246 - 3,428,722

Other Assets 583,236 23,675 75,869 106,364 4,106 612,910 1,406,160

Total Assets 9,227,864 3,688,111 5,319,042 8,363,302 1,118,325 5,248,140 32,964,784

Liabilities

Bank Deposits 291,011 60,429 14,606 10,183 - 189,527 565,756

Other Deposits 12,480,853 4,552,006 2,612,359 78,245 - 2,651,638 22,375,101

Money Market Borrowings 192,096 - - - - - 192,096

Sundry Creditors 144,603 44,888 - 3,138 - 359,183 551,812

Securities Issued (*) 653,529 812,299 681,477 - - - 2,147,305

Funds Provided From Other Financial Institutions 476,886 1,053,366 830,539 639,584 379,276 220,429 3,600,080

Other Liabilities 332,016 - 90,725 129,134 2,041 2,978,718 3,532,634

Total Liabilities 14,570,994 6,522,988 4,229,706 860,284 381,317 6,399,495 32,964,784

Balance Sheet Long Position - - 1,089,336 7,503,018 737,008 - 9,329,362

Balance Sheet Short Position (5,343,130) (2,834,877) - - - (1,151,355) (9,329,362)

Off-Balance Sheet Long Position 50,000 100,000 50,000 468,000 597,859 - 1,265,859

Off-Balance Sheet Short Position (50,000) (100,000) (50,000) (468,000) (597,859) - (1,265,859)

Total Position (5,343,130) (2,834,877) 1,089,336 7,503,018 737,008 (1,151,355) -




47




V. Explanations Related to Consolidated Liquidity Risk Management and Consolidated

Liquidity Coverage Ratio

Liquidity risk refers the incapability of the Group to have cash or cash inflow at a level that will cover the cash

outflow fully and in a timely fashion, due to the instability in cash flow.

The Group may be exposed to liquidity risk due to the below factors:

Funding related liquidity risk due to the Group’s inability to meet the anticipated and unforeseen

existing and potential cash flow and collateral requirements properly, without affecting its daily

operations or financial structure,

The liquidity risk arising from the the lack of required depth in the markets or excessive volatility

owing to the inability of the Group’s to balance or close any position over market prices.

a) Information on risk capacity of the Group, responsibilities and structure of liquidity risk management,

the Group’s internal liquidity risk reporting, communication between the Board of Directors and

business lines on liquidity risk strategy, policy and application:

The main policy of the Group is to maintain an asset structure that it will be sufficient to fulfill all its obligations

through the use of liquid sources in time and in a sound manner.

The objective of the liquidity risk management is to maintain the Group’s financial stability by means of

maintaining the Group’s liquidity risk exposure at measurable and tolerable levels. Thus, it is also the objective to

protect the shareholders from any potential loss that might arise from adverse movements in the Group’s liquidity

position.

The Group’s policies and procedures related to the liquidity risk are approved by the Group’s Board of Directors.

The major factors mentioned below are addressed in those policies and procedures:

The Oversight of the Board of Directors:

- The Board of Directors approves policies and procedures related to the liquidity risk, all in line with the Parent

Bank’s annual budget and the growth strategies for medium and long term.

- The Board of Directors plans the capital structure to cover the Parent Bank’s liquidity risk profile, all in line

with the Parent Bank’s annual budget and the growth strategies for medium and long term.

- The Board of Directors segregates the duties, authorities and responsibilities related to measuring, monitoring,

controlling, auditing and management of the liquidity risk, through internal regulations on related committies

and units.

The Oversight of the Senior Management:

- The Parent Bank’s senior management implements systems and standards related to measuring, monitoring,

controling, auditing and management of the liquidity risk, with respect to its duties, authorities, and

responsibility areas.

- The Parent Bank’s senior management takes measures to ensure the development of technical konwledge and

competencies of human resources as well as information systems infrastructure so that the measuring,

monitoring, controling and auditing of the liquidity risk, are all executed in a sound manner.

- The Parent Bank’s senior management analyses potential liquidity risk which may arise from the new banking

products and services which the Bank plans to implement.




48





Liquidity Coverage Ratio (cont’d)

The Parent Bank’s Board of Directors and senior management segregate the responsibilities within the scope of

the liquidity risk management among the Asset Liability Committee, Treasury Department and Risk Management

Unit.

Accordingly, the Parent Bank’s Board of Directors set the Asset Liability Committee (ALCO) as the senior

management committee responsible for management of the Group’s balance sheet, usage of funds, and financial

management. ALCO sets the strategies for management of the balance sheet, funding, source planning and

liquidity as well as conducting stress tests and scenario analyses. The Treasury Unit implement these strategies in

order to manage liquidity.

The Boards of Directors have approved “Risk Limits” and “Key Risk Indicators” as part of the policies and

procedures related to the liquidity risk. The compliance with these limits are monitored on a regular basis; all of

which are reviewed and revised (if deemed necessary) at least once a year, with respect to the market conditions

and changes in the strategies.

The compliance with the “Risk Limits” is a mandatory agenda item in the regular monthly meetings of the Boards

of Directors.

The liquidity risk profile is analysed, monitored, and assessed by the Risk Management Unit of the Parent Bank.

The said Unit presents its findings through those assessments as well as the compliance with the “Risk Limits” to

ALCO on a weekly basis and to the Board of Directors of the Parent Bank on a monthly basis.

b) Information on the centralization degree of liquidity management and funding strategy and the

functioning between the Parent Bank and the Parent Bank’s subsidiaries:

The management of liquidity has a decentralised structure. In this context, each subsidiary executes its liquidity

management function by its own units/departments/services responsible for carrying out the function of the

financial management. Besides, the Parent Bank provides funding to its subsidiaries in line with the regulatory

limits while also considering the market conditions.

The Parent Bank’s liquidity management is carried out in line with budgeted growth strategies and taking into

account the legal requirements, as well as current market conditions and expectations regarding economic and

financial conjuncture.

In liquidity management, liquidity planning is realized by predicting the effects of global conditions both on the

country and on the sector.

In liquidity management policy, the stable core deposit base is determined as the Parent Bank’s main funding

resources. In order to increase the diversity of funding resources, domestic and foreign capital markets are utilized

for medium and long-term funding sources. To prevent the concentration risk of liquidity obligations, the

concentration limits for deposit and non-deposit indebtment is closely monitored. Liquidity ratios (LCR, NSFR)

are followed and liquidity projections are performed within the scope of Basel III.

c) Information on the Parent Bank’s funding strategy including the policies on funding types and variety of

maturities:

- Liquidity refers to the capability of the Group to fund its asset growth and obligations without being

subject to unacceptable loss in a timely fashion.

- The factors assessed in the Group’s liquidity management are the predicted asset quality projection for

the current and the future period, funding requirement projection for the current and future period,

creating easily liquidated assets, creating assets which have regular cash flow, diversification of fund

resources and preventing concentration.

- Deposits are the foundation of the Group’s liquidity. Maintaining a deposit structure with low cost that

shows stable growth is essential. To that end, an interest rate policy compatible with annual budget is

applied for liquidity management.




49






In order to meet the liquidity requirements that may arise due to market fluctations, special attention is paid to

ensure availability of sufficient liquidity based on the continious projections made for Turkish Lira and Foreign

Currency cash flows. Based on cash flow projections, price is differentiated for different maturity buckets, and

measures to meet liqudity requirements are taken accordingly. Moreover, potential alternative sources of liqudity

are determined to be used in case of emergency.

In order to ensure effectiveness and sustainability of liquidity management, funding sources for the subsidiaries

that are subject toconsalidation and the diversification possibilities are evaluated taking into consideration markets,

instruments and funds providers. The liquidity position of the subsidiaries that are subject to consolidation is

continuously monitored by the Parent Bank.

d) Information on liquidity management on the basis of currencies constituting a minimum of five percent

of the Parent Bank’s total liabilities:

In order to measure and monitor the impact of the liquidity risk, the Parent Bank uses cash flow gap analyses

indicating both current and future transactions. The Parent Bank, uses Board of Director’s approved maturity

projections for off-balance sheet items as base in these analyses. Within these projections, the behavioral analyses

are used for debtor current accounts, overdraft accounts, demand deposit accounts and time deposit accounts.

In the cashflow gap analyses:

- Aggregate, Turkish Lira and foreign currency items are tabulated seperately;

- Calculation for currency items that exceed 5 % of the Parent Bank’s total assets (USD, EUR, etc. items) are

done seperately;

- Currency items that do not exceed 5 % of the Parent Bank’s total assets are aggregated with the EUR items.

e) Information on liquidity risk mitigation techniques:

Within the liquidity reduction techniques, concentrating on a regular cash flow structure in its assets, establishing

a broadly-based structure in its liabilities, regularly issuing bank securities as an altenative funding source,

diversifying the sources of funding by concentrating long-term finance resources from the financial institutions

such as covered bonds, syndications and others and maintaining the liquidity buffer takes place.

f) Information on the use of stress tests:

With the liquidity stress tests, both the amount and cost of the liquidity requirement are assessed. In this way,

within the context of ICAAP , the levels to be occurred as a result of probable fluctuations in the Liquity Coverage

Ratio and the probable maturity liquidity ratios cash flows, collateral liabilities and funding facilities

approximately for the next 3-year horizon are assessed.




50




V. Explanations Related to Consolidated Liquidity Risk Management and Consolidated Liquidity

Coverage Ratio (cont’d)

g) General information on urgent and unexpected liquidity situation plans:

The Group’s O/N repo limits in the Central Bank of the Turkish Republic and Borsa Istanbul Stock Exchange as

well as unutilised limits are also regularly monitored. As a precaution for a worst-case scenario such as the

withdrawal of all demand deposits, it is essential to keep limits unused equal to the amount of current demand

deposits. Within this scope, the Parent Bank’s ALCO set the alternative liquidity strategies with regards to the

current market environment.

“Liquidity Management Urgent Action Plan” was set, which defines the level of coverage, implementation

guidelines, possible scenarios, emergency action plan, available funding sources, and the obstacles to be addressed.

Consolidated Liquidity Coverage Ratio:

The liquidity ratio which is calculated pursuant to BRSA's "Regulation on Calculation of Banks' Liquidity

Coverage Ratio" in order to make ensure that the Group has high-quality liquidity asset stock sufficient to cover

the net cash outflows in order to identify the Bank's minimum liquidity level.

These ratios are effected by the levels of a Group’s liquid assets which can be liquidified easily and the cash in-

flows as well as the cash out-flows arising from a Group’s assets, liabilities and also off balance sheet items.

In the first quarter of 2019, the average total liquidity coverage ratio decreased compared to previous quarter’s

average. The average total liquidity coverage ratio, which was 180.2 in the previous quarter and decreased to 163.4

with the decrease in the net cash outflow level. The ratio of FX liquidity coverage on average has decreased to

244.7 in comparison to the previous quarter. Both of the ratios are still above the minimum level predicted by the

legislation.

The Group’s “high quality liquid assets” comprise of cash and the balance sheet items held within the Central

Bank of the Turkish Republic as well as borrowing instruments issued by the Turkish Treasury, which are not

subject to repurchase agreements or not pledged as collateral. The high quality liquid assets are represented by

cash (7.08%), balances with the central banks (74.10%) and first quality liquid borrowing instruments (18.82%).

Items that represent the cash outflows used in the calculation of liquidity coverage ratio include mainly the deposit

base, secured and unsecured borrowings, the securities issued and off balance sheet transactions. Main items of

the cash inflows iclude secured and unsecured receivables and other cash inflows. Other cash inflows and outflows

derive from derivative transactions and the cash flows of the derivative financial instruments are included in the

calculation.

While the effect of derivative transactions on the net cash outflow is limited, the fluctuations in the volume of

foreign currency derivatives can effect FC liquidity coverage ratio.




51






Consolidated Liquidity Coverage Ratio (cont’d):

The major funding source for the Group is the deposit bases. In addition to the deposits, the another main sources

of funding include funds received through REPO transactions, issued securities, long-term recources obatined from

the financial institutions (Covered Bonds, syndications, and other).

Current Period Total Unweighted

Value

(Average) (*)

Total Weighted Value

(Average) (*)

TRL+FC FC TRL+FC FC

HIGH QUALITY LIQUID ASSETS

1 Total high-quality liquid assets (HQLA) 6,169,944 3,018,848

CASH OUTFLOW

2

Retail deposits and deposits from small

business customers, of which: 18,026,100 7,510,040 1,554,076 751,004

3 Stable deposits 4,970,680 - 248,534 -

4 Less stable deposits 13,055,420 7,510,040 1,305,542 751,004

5 Unsecured wholesale funding, of which: 6,280,364 3,715,350 3,942,290 2,043,040

6 Operational deposits 848,440 651,168 212,110 162,792

7 Non-operational deposits 3,771,024 2,423,608 2,069,280 1,239,674

8 Unsecured funding 1,660,900 640,574 1,660,900 640,574

9 Secured wholesale funding - -

10 Other cash outflows of which: 1,201,509 433,873 1,201,509 433,873

11

Outflows related to derivative exposures and

other collateral requirements 1,090,264 322,628 1,090,264 322,628

12 Outflows related to restructured financial instruments - - - -

13

Payment commitments and other off-balance

sheet commitments granted for debts to financial markets 111,245 111,245 111,245 111,245

14

Other revocable off-balance sheet

commitments and contractual obligations 168,740 171,780 8,437 8,589

15 Other irrevocable or conditionally revocable off-balance sheet obligations 3,999,672 625,502 714,370 86,589

16 TOTAL CASH OUTFLOWS 7,420,682 3,323,095

17 Secured receivables - - - 4,076

18 Unsecured receivables 3,552,769 1,507,972 2,487,865 1,280,781

19 Other cash inflows 1,156,284 804,394 1,156,284 804,394

20 TOTAL CASH INFLOWS 4,709,053 2,312,366 3,644,149 2,089,251

Total Adjusted

Value

21 TOTAL HQLA 6,169,944 3,018,848

22 TOTAL NET CASH OUTFLOWS 3,776,533 1,233,844

23 LIQUIDITY COVERAGE RATIO (%) 163.38 244.67

(*) The average of last three months’ liquidity coverage ratio calculated based on monthly simple averages.




52






Consolidated Liquidity Coverage Ratio (cont’d):

Prior Period Total Unweighted

Value

(Average) (*)

Total Weighted Value

(Average) (*)

TRL+FC FC TRL+FC FC

HIGH QUALITY LIQUID ASSETS

1 Total high-quality liquid assets (HQLA) 5,734,703 2,327,557

CASH OUTFLOW

2 Retail deposits and deposits from small business customers, of which: 17,732,290 6,893,820 1,521,103 689,382

3 Stable deposits 5,042,520 - 252,126 -

4 Less stable deposits 12,689,770 6,893,820 1,268,977 689,382

5 Unsecured wholesale funding, of which: 6,438,294 3,557,557 3,988,098 1,988,633

6 Operational deposits 808,592 612,308 202,148 153,077

7 Non-operational deposits 4,202,747 2,406,010 2,358,995 1,296,317

8 Unsecured funding 1,426,955 539,239 1,426,955 539,239

9 Secured wholesale funding - -

10 Other cash outflows of which: 1,137,811 496,268 1,137,811 496,268

11

Outflows related to derivative exposures and

other collateral requirements 1,039,235 397,692 1,039,235 397,692

12 Outflows related to restructured financial instruments - - - -

13

Payment commitments and other off-balance sheet commitments granted

for debts to financial markets 98,576 98,576 98,576 98,576

14 Other revocable off-balance sheet commitments and contractual obligations 140,120 142,540 7,006 7,127

15

Other irrevocable or conditionally revocable

off-balance sheet obligations 4,154,370 638,136 733,751 94,131

16 TOTAL CASH OUTFLOWS 7,387,769 3,275,541

17 Secured receivables - - - 9,993

18 Unsecured receivables 117,415,690 38,688,001 3,007,364 1,673,286

19 Other cash inflows 1,107,055 697,459 1,197,582 697,459

20 TOTAL CASH INFLOWS 118,522,745 39,385,460 4,204,946 2,380,738

Total Adjusted

Value

21 TOTAL HQLA 5,734,703 2,327,557

22 TOTAL NET CASH OUTFLOWS 3,182,823 894,803

23 LIQUIDITY COVERAGE RATIO (%) 180.18 260.12

(*) The average of last three months’ liquidity coverage ratio calculated based on monthly simple averages.

The information on the highest and the lowest weekly liquidity coverage ratio during the last three months of 2018

and first three months of 2019 is presented below.

Current Period

TRL+FC FC

January 166.64 198.63

February 157.35 228.73

March 165.43 340.81

Prior Period

TRL+FC FC

October 191.52 215.98




53

November 154.95 229.94

December 181.25 243.57






Presentation of assets and liabilities according to their 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 in Vault, Foreign

Currency Cash, Money in Transit, Cheques Purchased) and Balances

with the Central Bank of Turkey 1,595,104 2,221,907 - - - - - 3,817,011

Banks 123,772 563,307 10,007 - 612 - - 697,698

Financial Assets at Fair Value

Through Profit and Loss - 24,024 10,025 25,147 3,058 10,046 2,864 75,164

Money Market Placements - 27,943 - - - - - 27,943

Financial Assets at Fair Value Through Other Comprehensive

Income 7,418 1,027 3,226 2,917 490,344 19,465 - 524,397

Loans (**)(****) 224,784 2,475,800 4,104,880 3,319,433 11,349,566 1,500,599 1,292,182 24,267,244

Financial Assets at Amortised Cost - - - 163,700 1,807,283 1,025,779 - 2,996,762

Other Assets 197,135 455,105 22,594 50,470 153,006 4,560 644,896 1,527,766

Total Assets 2,148,213 5,769,113 4,150,732 3,561,667 13,803,869 2,560,449 1,939,942 33,933,985

Liabilities

Bank Deposits 223,444 528,414 - 15,533 118 - - 767,509

Other Deposits 3,216,934 15,045,560 3,261,238 2,201,103 74,499 3 - 23,799,337

Funds Provided From Other Financial

Institutions 855 451,203 572,375 513,770 615,941 1,045,308 - 3,199,452

Money Market Borrowings - 494,906 - - - - - 494,906

Securities Issued (***) - 177,665 252,454 78,124 381,727 944,480 - 1,834,450

Sundry Creditors 361,719 14,052 64,694 1,482 3,091 - 738 445,776

Other Liabilities 344,185 101,689 161,931 90,302 235,012 94,342 2,365,094 3,392,555

Total Liabilities 4,147,137 16,813,489 4,312,692 2,900,314 1,310,388 2,084,133 2,365,832 33,933,985

Liquidity Gap (1,998,924) (11,044,376) (161,960) 661,353 12,493,481 476,316 (425,890) -

Net Off-Balance Sheet Position - 35,486 (7,489) (45,660) (108,272) - - (125,935)

Derivative Financial Assets - 4,149,492 125,689 465,217 686,043 625,228 - 6,051,669

Derivative Financial Liabilities - 4,114,006 133,178 510,877 794,315 625,228 - 6,177,604

Non-Cash Loans 2,144,111 112,520 755,078 2,378,125 531,870 98,612 - 6,020,316

Prior Period

Total Assets 2,752,242 4,120,483 4,941,674 2,931,775 12,569,415 3,443,927 2,205,268 32,964,784

Total Liabilities 3,627,831 14,000,573 5,928,681 3,779,231 1,278,667 1,896,971 2,452,830 32,964,784

Liquidity Gap (875,589) (9,880,090) (987,007) (847,456) 11,290,748 1,546,956 (247,562) -

Net Off-Balance Sheet Position - 95,732 (5,459) 10,214 (88,428) - - 12,059

Derivative Financial Assets - 4,455,567 587,339 489,237 681,071 597,859 - 6,811,073

Derivative Financial Liabilities - 4,359,835 592,798 479,023 769,499 597,859 - 6,799,014

Non-Cash Loans 2,082,767 238,777 560,449 2,200,668 737,914 98,410 - 5,918,985

(*) Those assets such as tangible assets, investments in subsidiaries and associates, office supply inventory, prepaid expenses and non-performing loans,

which are necessary for continuation of banking activities, unavailable for conversion into cash in a short term and other assets account and equity accounts are classified under “Undistributed”.

(**) Overdraft Loans are presented in 1-3 months period.

(***) The subordinated loans in balance sheet also includes the TRL 944,480 Thousand bonds issued as subordinated loans.




54

(****) TRL 215,011 Thousand of loans is shown under Financial Assets at Fair Value through Profit and Loss in the financial statements.




55




VI. Explanations Related to Consolidated Leverage Ratio

a. Information on subjects that causes difference in leverage ratio between current and prior

periods

The Group’s consolidated leverage ratio calculated according to “Regulation on Measurement and Assessment of

Leverage Ratios of Banks” is 5.78 % (31 December 2018 – 6.27 %). Change in the leverage ratio is mainly due to

the increase of the on balance sheet assets. The minimum leverage ratio set by the above mentioned regulation is

3 %.

b. Comparison table of total assets and total risk amounts in the financial statements

prepared in accordance with TAS :

Current Period (**) Prior Period (**)

Total assets in the consolidated financial statements prepared in accordance with TAS (*) 33,028,923 34,496,650

Differences between the total assets in the consolidated financial statements

prepared in accordance with TAS and the total assets in the consolidated financial statements prepared in accordance with Communique on Preparation of

Consolidated Financial Statements of the Banks 221,563 76,512

Differences between the balances of derivative financial instruments and the

credit derivatives in the consolidated financial statements prepared in accordance

with the Communique on Preparation of Consolidated Financial Statements of the

Banks and their risk exposures (114,847) (262,411)

Differences between the balances of securities financing transactions in the consolidated financial statements prepared in accordance with the Communique

on Preparation of Consolidated Financial Statements of the Banks and their risk

exposures 52,180 4,380

Differences between off- balance sheet itmes in the consolidated financial statements prepared in accordance with the Communique on Preparation of

Consolidated Financial Statements of the Banks and their risk exposures 2,854,549 2,881,188

Other differences in the consolidated financial statements prepared in accordance with the Communique on Preparation of Consolidated Financial Statements of the

Banks and their risk exposures - -

Total Risk 42,286,897 42,062,407

(*) The consolidated financial statements as of 31 December 2018 in current period and 31 December 2017 in prior period prepared in

accordance with the sixth paragraph of the Article 5 of the Communique on Preparation of Consolidated Financial Statements of the Banks.

(**) The arithmetic average of the last 3 months in the related periods.




56




VI. Explanations Related to Consolidated Leverage Ratio (cont’d)

c. Disclosure of Leverage Ratio template

On-balance sheet assets Current Period (*) Prior Period (*)

1

On-balance sheet items (excluding derivative financial instruments

and credit derivatives but including collateral) 33,382,828 33,435,723

2 (Assets deducted in determining Tier 1 capital) (418,260) (410,250)

3 Total on-balance sheet risks (sum of lines 1 and 2) 32,964,568 33,025,473

Derivative financial instruments and credit derivatives

4

Replacement cost associated with all derivative instruments and

credit derivatives 210,838 502,592

5 Add-on amounts for PFE associated with all derivative instruments and credit derivatives 78,122 90,884

6

Total risks of derivative financial instruments and credit derivatives

(sum of lines 4 to 5) 288,960 593,476

Securities or commodity financing transactions (SCFT)

7 Risks from SCFT assets - -

8 Risks from brokerage activities related exposures 52,180 4,380

9

Total risks related with securities or commodity financing

transactions (sum of lines 7 to 8) 52,180 4,380

Other off-balance sheet transactions

10 Gross notional amounts of off-balance sheet transactions 9,462,803 8,923,422

11 (Adjustments for conversion to credit equivalent amounts) (481,614) (484,344)

12 Total risks of off-balance sheet items (sum of lines 10 and 11) 8,981,189 8,439,078

Capital and total risks

13 Tier 1 capital 2,444,147 2,636,681

14 Total risks (sum of lines 3, 6, 9 and 12) 42,286,897 42,062,407

Leverage ratio

15 Leverage ratio 5.78 6.27

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




57




VII. Explanations Related to Consolidated Risk Management

Notes and explanations in this section have been prepared in accordance with the Communiqué on ‘‘Disclosures

about Risk Management to Be Announced to Public by Banks’’ that have been published in the Official Gazette

no. 29511 on 23 October 2015.

a. Risk Management Approach and Risk Weighted Amounts

a.1. Overview of Risk Weighted Amount

a b c

Risk Weighted Amount

Minimum

capital

requirement

Current Period Prior Period Current Period

1 Credit risk (excluding counterparty credit risk) (CCR) 23,044,816 21,508,128 1,843,585

2 Standardised approach (SA) 23,044,816 21,508,128 1,843,585

3 Internal rating-based (IRB) approach - - -

4 Counterparty credit risk 207,087 272,700 16,567

5 Standardised approach for counterparty credit risk (SA-CCR) 207,087 272,700 16,567

6 Internal model method (IMM) - - -

7

Basic risk weight approach to internal models equity position in the banking

account - - - 8 Investments made in collective investment companies – look-through approach - - -

9 Investments made in collective investment companies – mandate-based approach - - -

10

Investments made in collective investment companies – 1250% weighted risk

approach - - -

11 Settlement risk - - -

12 Securitization positions in banking accounts - - -

13 IRB ratings-based approach (RBA) - - -

14 IRB Supervisory Formula Approach (SFA) - - -

15 SA/simplified supervisory formula approach (SSFA) - - -

16 Market risk 609,413 458,013 48,753

17 Standardised approach (SA) 609,413 458,013 48,753

18 Internal model approaches (IMM) - - -

19 Operational Risk 2,865,611 2,546,198 229,249

20 Basic Indicator Approach 2,865,611 2,546,198 229,249

21 Standart Approach - - -

22 Advanced measurement approach - - -

23 The amount of the discount threshold under the equity (subject to a 250% risk weight) - - -

24 Floor adjustment - - -

25 Total (1+4+7+8+9+10+11+12+16+19+23+24) 26,726,927 24,785,039 2,138,154

VIII. Explanations Related to Transactions Made on Behalf of Others and Transactions Based

On Trust

The Parent Bank performs securities buying and selling transactions, brokerage and custody services on behalf of

customers. There are no transactions made with other financial institutions under the trust transaction contract and direct

financial services provided within this scope.




58

SECTION FIVE

EXPLANATIONS AND DISCLOSURES ON THE

FINANCIAL STATEMENTS

I. Explanations Related to the Consolidated Assets

1. Information related to cash equivalents and the account of the Central Bank of the Republic of

Turkey (the “CBRT”) :

a) Information on Cash and Balances with the Central Bank of Turkey:

Current Period Prior Period

TRL FC TRL FC

Cash in TRL/Foreign Currency 109,782 171,506 133,420 392,847

Balances with the Central Bank of Turkey 337,475 3,198,241 796,773 2,296,190

Other - 7 - 7

Total 447,257 3,369,754 930,193 2,689,044

b) Information related to the account of the Central Bank of Turkey:


TRL FC TRL FC

Unrestricted demand deposit 337,475 2,300,099 796,773 1,978,035

Unrestricted time deposit - 4 - 2

Restricted time deposit - 898,138 - 318,153

Total 337,475 3,198,241 796,773 2,296,190

The reserve deposits include TRL 1,272,972 Thousand of FC unrestricted demand deposit (31 December 2018 – TRL 1,034,773 Thousand)

and TRL 335,001 Thousand (31 December 2018 – TRL 793,416 Thousand) of the TRL unrestricted demand deposit. TRL unrestricted

demand deposit includes the reserve deposit amount that is held in the Central Bank of the Turkish Republic on average.

CBRT amounts include the funds of Şekerbank (Kıbrıs) Ltd. held with the Central Bank of Turkish Republic of Northern Cyprus. The Central

Bank of Turkish Republic of Northern Cyprus amount is TRL 59,143 Thousand and it includes TRL 18,477 Thousand reserve deposit amount

(31 December 2018 – TRL 41,932 Thousand Central Bank amount and it includes TRL 17,047 Thousand reserve deposit amount).

In accordance with the principles of the Communiqué numbered 2013/15 of The Central Bank of Turkey on "Required Reserves” the required

reserve ratios to be held in the Central Bank of Turkey vary according to the currency denomination and term of the liabilities subject to the

reserve requirements. Thus, the reserve requirement rate range between 1% - 7% (31 December 2018 – -1.5% - 8%) is applied for TRL

deposits, participation funds and other liabilities and 4% - 20% (31 December 2018 – 4% – 20%) for FX deposits, participation funds and other liabilities.

The Central Bank of the Turkish Republic of Northern Cyprus, with the decision of the Board of Directors numbered 2018/1005, Legal

Reserves Ratiosubjected to separation According to the Deposit Maturity Group,TRL and FC deposits and other liabilities are applied in

the range of 4% - 7%.

2. Information on financial assets at fair value through profit and loss (net):

i. Information on financial assets at fair value through profit and loss given as collateral or blocked:

None (31 December 2018 – None).

ii. Financial assets at fair value through profit and loss subject to repurchase agreements:

Net book value of unrestricted financial assets at fair value through profit and loss is TRL 75,164 Thousand

(31 December 2018 – TRL 85,589 Thousand).

iii. Positive differences related to derivative financial assets held-for-trading:

Derivative financial assets held for trading are classified in the financial statements as Fair Value of

Derivative financial assets through profit and loss.

Derivatives Held for Trading


TRL FC TRL FC

Forward Transactions - 46,481 - 53,261

Swap Transactions 142,882 42,213 160,213 152,620

Futures Transactions - - - -

Options 19 9,780 106 10,153

Other - - - -

Total 142,901 98,474 160,319 216,034




59

SECTION FIVE (cont’d)

EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)

I. Explanations Related to the Consolidated Assets (cont’d)

iv. Loans at fair value through profit and loss:


Opening Balance 221,879 266,683

Additions (+) 7,796 16,239

Change in Interest Rates (*) (45,798) (15,056)

Change in Credit Risk (**) 53,759 (3,369)

Impairment Provision (628) (152)

Collections (-) (21,997) (42,466)

Net Balance 215,011 221,879

(*) Change in interest rates shows the effect of TRLIBOR (basic interest rate) difference on loans at fair value through profit and loss between

two periods.

(**) Change in credit risk shows the effect of the difference of basic interest rates and similar loans interest rates on loans at fair value through profit and loss.

As of 31 March 2019, the value of the loans amounting to TRL 215,011 Thousand (31 December 2018 – TRL

221,879 Thousand) and classified as Financial assets at Fair Value Throught Profit and Loss discounted using the

effective interest rate method is TRL 252,703 Thousand (31 December 2018 – TRL 235,302 Thousand).

3. Information on banks:

Information on banks account:


TRL FC TRL FC

Banks 230,529 467,169 34,699 171,320

Domestic 230,527 329,724 34,676 64,767

Foreign 2 137,445 23 106,553

Branches and head office abroad - - - -

Total 230,529 467,169 34,699 171,320

4. Information on Financial Assets at Fair Value Through Other Comprehensive Income:

a.1. Information on financial assets at fair value through other comprehensive income given as collateral or

blocked: None (31 December 2018 - 171,631).

a.2. Financial assets at fair value through other comprehensive income subject to repurchase agreements:

None (31 December 2018 - None).

Net book value of unrestricted financial assets at fair value through other comprehensive income is TRL 524,397

Thousand (31 December 2018 - TRL 406,051 Thousand).

b. Information on financial assets at fair value through other comprehensive income portfolio:


Debt securities 541,679 563,641

Quoted on a stock exchange 541,519 563,481

Not quoted on a stock exchange 160 160

Share certificates 28,704 24,700

Quoted on a stock exchange - -

Not quoted on a stock exchange 28,704 24,700

Impairment provision(-) (45,986) (10,659)

Total 524,397 577,682




60




5. Information on loans:

a. Information on all types of loans and advances given to shareholders and employees of the Group:


Cash Loans Non-Cash Loans Cash Loans Non-Cash Loans

Direct loans granted to shareholders 435 7 447 11

Corporate shareholders - - - -

Individual shareholders 435 7 447 11

Indirect loans granted to shareholders 406,115 17,676 898,986 18,697

Loans granted to employees 22,234 47 21,760 46

Total 428,784 17,730 921,193 18,754




61




5. Information on loans(cont’d):

b. Information on standart loans and restructured loans under close monitoring: (*)

Cash loans Standard loans

Loans

under close monitoring

Out of the scope of Restructuring

Restructured

Amendment of Contract

Conditions

Refinanced

Non-specialized loans 17,124,914 1,814,029 511,655 1,161,504

Corporation loans 106,113 - 5,706 4,913

Export loans 4,874,741 102,772 - 18,349

Import loans 9,484 807 - 879

Loans given to

financial sector 88,907 187 - -

Consumer loans 833,310 55,502 4,898 9,074

Credit cards 235,816 12,181 - -

Other 10,976,543 1,642,580 501,051 1,128,289

Specialized loans 1,932,002 221,707 - 78,073

Other receivables 593 18,277 - -

Total 19,057,509 2,054,013 511,655 1,239,577

(*) TRL 203,836 Thousand of loans is shown under Financial Assets at Fair Value through Profit and Loss in the financial statements.


Standard loans

Loans

under close

monitoring

Standard loans

Loans

under close monitoring

12 Months Expected Loss Provision 132,508 - 112,960 -

Significant Increase in Credit Risk - 585,885 - 529,518

c. Loans and other receivables according to their maturity structure:

Standard Loans

Loans

Under Close Monitoring

Out of the Scope of

Restructuring Restructured

Short-term loans and other receivables 7,074,993 380,631 183,757

Medium and Long-term loans 11,982,516 1,673,382 1,567,475

Total 19,057,509 2,054,013 1,751,232

(*) TRL 203,836 Thousand of loans is shown under Financial Assets at Fair Value through Profit and Loss in the financial statements.




62




5. Information on loans (cont’d):

d. Information on consumer loans, individual credit cards, personnel loans and credit cards given to personnel:

Short Term Medium and Long Term

Total

Consumer Loans-TRL 16,166 743,054 759,220

Housing Loans - 240,064 240,064

Car Loans 377 9,018 9,395

General Purpose Loans 15,785 468,989 484,774

Other 4 24,983 24,987

Consumer Loans –Indexed to FC - 241 241

Housing Loans - 241 241

Car Loans - - -

General Purpose Loans - - -

Other - - -

Consumer Loans-FC 5 33,420 33,425

Housing Loans - 27,006 27,006

Car Loans 5 1,132 1,137

General Purpose Loans - 5,282 5,282

Other - - -

Individual Credit Cards-TRL 150,354 - 150,354

With Installments 39,843 - 39,843

Without Installments 110,511 - 110,511

Individual Credit Cards-FC 174 - 174

With Installments - - -

Without Installments 174 - 174

Personnel Loans-TRL 686 8,786 9,472

Housing Loans - 46 46

Car Loans - 12 12

General Purpose Loans 686 7,348 8,034

Other - 1,380 1,380

Personnel Loans- Indexed to FC - - -

Housing Loans - - -

Car Loans - - -

General Purpose Loans - - -

Other - - -

Personnel Loans-FC - 1,987 1,987

Housing Loans - 1,598 1,598

Car Loans - - -

General Purpose Loans - 389 389

Other - - -

Personnel Credit Cards-TRL 6,850 - 6,850



Personnel Credit Cards-FC 8 - 8



Overdraft Accounts-TRL(Real Person) (*) 95,303 3,136 98,439

Overdraft Accounts-FC (Real Person) - - -

Total 269,546 790,624 1,060,170

(*) As of 31 March 2019, overdraft accounts for real persons include TRL 4,352 Thousand personnel overdraft account.




63





e. Information on commercial loans with installments and corporate credit cards:

Short Term Medium and Long Term

Total

Commercial loans with installment facility-TRL 397,316 4,925,530 5,322,846

Business Loans - 10,922 10,922

Car Loans 2,237 42,949 45,186

General Purpose Loans 378,534 4,871,659 5,250,193

Other 16,545 - 16,545

Commercial loans with installment facility - Indexed to FC - 1,021,719 1,021,719

Business Loans - 1,632 1,632

Car Loans - 34,985 34,985

General Purpose Loans - 985,102 985,102

Other - - -

Commercial loans with installment facility –FC 52,151 1,020,405 1,072,556

Business Loans - - -

Car Loans - 703 703

General Purpose Loans 9,045 1,019,702 1,028,747

Other 43,106 - 43,106

Corporate Credit Cards-TRL 90,602 - 90,602



Corporate Credit Cards-FC 9 - 9



Overdraft Accounts-TRL (Legal Entity) 124,884 - 124,884

Overdraft Accounts-FC (Legal Entity) - - -

Total 664,962 6,967,654 7,632,616

f. Loans according to borrowers:


Public 65,970 56,303

Private 22,796,784 22,183,841

Total 22,862,754 22,240,144

(*) TRL 203,836 Thousand of loans is shown under Financial Assets at Fair Value through Profit and Loss in the financial statements (31 December 2018 – TRL 211,520 Thousand).

g. Domestic and foreign loans:


Domestic loans 22,808,822 22,186,916

Foreign loans 53,932 53,228

Total 22,862,754 22,240,144

(*) TRL 203,836 Thousand of loans is shown under Financial Assets at Fair Value through Profit and Loss in the financial statements(31

December 2018 – TRL 211,520 Thousand).

h. Loans granted to subsidiaries and associates: None (31 December 2018 - None).




64





i. Impaired Loans (Stage 3) provisions provided against loans:


Loans with limited collectability 25,728 40,689

Loans with doubtful collectability 146,331 125,649

Uncollectible loans 889,355 820,144

Total 1,061,414 986,482

j. Information on non-performing loans (Net):

j.1. Information on non-performing loans and restructured loans:

III. Group: IV. Group: V. Group

Loans with limited collectability

Loans with doubtful collectability

Uncollectable loans

Current Period

Gross amounts before Provisions(*) 70,312 267,049 1,071,395

Loans which are restructured 7,231 25,002 22,192

Prior Period

Gross amounts before Provisions(*) 99,764 230,961 1,014,952

Loans which are restructured 6,189 27,250 22,699

j.2. The movement of non-performing loans:

III. Group IV. Group V. Group

Loans with

limited

collectability

Loans with doubtful

collectability

Uncollectable loans

Prior period end balance 99,764 230,961 1,014,952

Additions (+) 114,393 36,011 15,052

Transfers from other categories of non-performing loans (+) - 124,442 83,244

Transfers to other categories of non-performing loans (-) (124,442) (83,244) -

Collections (-) (19,403) (41,121) (41,853)

Write-off (-) - - -

Sold (-) - - -

Corporate and commercial loans - - -

Retail loans - - -

Credit cards - - -

Current period end balance (*) 70,312 267,049 1,071,395

Provision (-) (*) 25,728 146,331 889,355

Net Balances on Balance Sheet 44,584 120,718 182,040

(*) TRL 11,175 Thousand (31 December 2018- TRL 10,359 Thousand ) net non-performing loans have been classified under “Financial Assets at Fair Value through Profit and Loss”have been made.




65





j.3. Informations on non-performing loans and other receivables in foreign currency: In the current period

the Group has TRL 9,825 Thousand non-performing foreign currency loans and specific provision

for these loans amounting to TRL 9,825 Thousand (31 December 2018- TRL 9,219 Thousand non-

performing foreign currency loans and TRL 9,219 Thousand specific provision).

j.4. Information regarding gross and net amounts of non-performing loans with respect to user groups:

III. Group IV. Group V. Group

Loans with limited

collectability

Loans with doubtful

collectability

Uncollectable loans

Current Period (Net) (*)

Loans to Real Persons and Legal Entities (Gross) 70,312 267,049 1,071,395

Provision (-) 25,728 146,331 889,355

Loans to Real Persons and Legal Entities (Net) 44,584 120,718 182,040

Banks (Gross) - - -

Provision (-) - - -

Banks (Net) - - -

Other Loans (Gross) - - -

Provision (-) - - -

Other Loans (Net) - - -

Prior Period (Net) (*)

Loans to Real Persons and Legal Entities (Gross) 99,764 230,961 1,014,952

Provision (-) 40,689 125,649 820,144

Loans to Real Persons and Legal Entities (Net) 59,075 105,312 194,808

Banks (Gross) - - -

Provision (-) - - -

Banks (Net) - - -

Other Loans (Gross) - - -

Provision (-) - - -

Other Loans (Net) - - -

j.5. Information on interest accruals for non-performing loans, rediscounts and valuation differences and

their provisions regarding the banks that allocate expected loan loss provisions according to TFRS

9:

III. Grup IV. Grup V. Grup

Loans with limited

collectability

Loans with doubtful

collectability

Uncollectable loans

Current Period (Net)

Interest accruals, rediscounts and valuation differences 8,538 24,751 7,488

Provisions (-) 8,538 24,751 7,488

Prior Period (Net)

Interest accruals, rediscounts and valuation differences 6,812 15,415 2,449

Provisions (-) 6,812 15,415 2,449

k. Main principles of uncollectable loans and receivables:

The Parent Bank Management applies provision policy for the “non-performing loans” in accordance with

the requirements of the Turkish banking regulation adopted by the BRSA.




66





l. Explanations on write-off policy:

None. (31 December 2018 - The Parent Bank sold uncollectable non-performing loans amounting to

TRL 92,492 Thousand for total cash amount of TRL 2,150 Thousand to Birleşim Varlık Yönetim A.Ş.

As of 28 November 2018, Şeker Faktoring A.Ş sold its receivables amounting to TRL 10,013 Thousand

through its revenue share agreement for total cash amount of TRL 64 Thousand to Sümer Varlık Yönetim

A.Ş. On 26 September 2018, Şeker Faktoring A.Ş. liquidated TRL 52 Thousand from its non-performing

receivables in accordance with the decision of the Board of Directors).

6. Information on Financial Assets at Amortised Cost:

a.1. Information on investments at amortised cost given as collateral or blocked:


Treasury Bill - -

Bond and Similar Securities 880,300 957,904

Other - -

Total 880,300 957,904

a.2. Financial assets at amortised cost subject to repurchase agreements are TRL 476,636 Thousand (31

December 2018 - TRL 131,270 Thousand).

b. Information on public sector debt investments at amortised cost:


Government Bonds 1,952,278 2,447,744

Treasury Bills 307,737 293,076

Other Public Sector Debt Securities - -

Total 2,260,015 2,740,820

Net book value of unrestricted financial assets at amortised cost is TRL 1,639,826 Thousand (31 December 2018

- TRL 2,339,548 Thousand).




67




6. Information on Financial Assets at Amortised Cost (cont’d):

c. Information on financial assets at amortised costs:


Debt Securities 3,014,072 3,435,585

Quoted on a stock exchange 2,278,530 2,749,702

Not quoted on a stock exchange 735,542 685,883

Impairment Provision (-) (17,310) (6,863)

Total 2,996,762 3,428,722

d. Movement of financial assets at amortised costs:


Beginning Balance 3,428,722 1,355,739

TFRS 9 Impact - 1,136,612

Foreign Exchange Differences in Monetary Assets 64,360 215,449

Purchases during the year - 367,015

Disposals through Sales and Amortisation (368,455) (3,686)

Provision reversal / Impairment provision (-) (10,447) (3,552)

Revaluation Effect (117,418) 361,145

Total 2,996,762 3,428,722

7. Information on unconsolidated associates (Net):

a) Information on associates:

Seltur Turistik İşletmeler Yatırım A.Ş. is not consolidated since the Bank does not have control power and

it is not a financial entity.

Description Address (City/ Country)

Bank’s Share

Percentage-If Different Voting Percentage (%)

Bank’s Risk Group Share Percentage (%)

Seltur Turistik İşletmeler Yatırım A.Ş.(*) Muğla/Turkey 11.32 11.43

(*) Unaudited financial information of the associate as of 31 December 2018 is stated below.

Total

Asset

Shareholders’

Equity Tangible Assets

Interest

Income

Income from

Marketable Securities Portfolio

Current

Period Profit/Loss

Prior Period

Profit/Loss Fair Value

43,903 35,154 36,791 214 - 2,657 (39,341) 296,942

b) Information on consolidated associates: None.

c) Information on associates: There is no consolidated associate.

d) Measurement of associates: Measured with cost amounts.

e) Sectoral information and the related carrying amounts on consolidated associates: None.

f) Associates quoted to stock exchange: None.

g) Information on associates which are sold in the current period: None.

h) Information on associates purchased in the current period: None.




68




8. Information on subsidiaries (Net):

a. Information related to consolidated equity components of subsidiaries (*):

The Parent Bank does not have any capital requirements arising from subsidiaries that are included in the

consolidated capital adequacy standard ratio. The capital information of the significant subsidiaries is

presented in the following table.

Şekerbank

Kıbrıs

Ltd.

Şeker

Finansal

Kiralama

A.Ş.

Şekerbank

International

Banking

Unit Ltd.

Şeker

Yatırım

Menkul

Değerler A.Ş.

Şeker

Faktoring

A.Ş.

Şeker

Finansman

A.Ş.

Zahlungsdienste

GmbH Der

Şekerbank T.A.Ş.

CORE CAPITAL Paid in Capital 28,554 66,808 28,142 31,195 81,041 26,000 1,580

Share Premiums - 1,208 - - - - -

Other Comprehensive

Income/Expense Items not to be

Reclassified to Profit or Loss - - 5,150 (822) - - (326)

Legal Reserves 1,910 7,822 4,793 2,308 2,059 614 -

Extraordinary Reserves 1 10,021 - 4,991 4,913 (17,208) -

Other Comprehensive

Income/Expense Items to be Reclassified to Profit or Loss - 12,730 - (205) 7,891 (41) -

Other capital reserves - (4,344) - - 12,901 - -

Other Income Reserves - - - - - - -

Profit/Loss (3,250) (27,434) 372 (4,845) (33,219) 9,136 (192)

Prior Years’ Profits and

Losses (2,427) (29,699) (24) (1,719) (31,701) - (228)

Current Year’s Profit ans

Losses (823) 2,265 396 (3,126) (1,518) 9,136 36

Total Core Capital 27,215 66,811 38,457 32,622 75,586 18,501 1,062

SUPPLEMENTARY

CAPITAL - - - - - - -

CAPITAL 27,215 66,811 38,457 32,622 75,586 18,501 1,062

NET AVAILABLE EQUITY 27,215 66,811 38,457 32,622 75,586 18,501 1,062

(*)Financial information is audited as of 31 March 2019.

b. Information on the unconsolidated subsidiaries:

Description Address (City/

Country)

The Parent Bank’s Share Percentage-If

Different Voting

Percentage (%)

The Parent Bank’s Risk

Group Share

Percentage (%)

Sekar Oto Filo Yönetim Hizmetleri ve Ticaret A.Ş. Istanbul/Turkey - 99

Şeker Proje Geliştirme ve Gayrimenkul Yatırım A.Ş Istanbul/Turkey 100 100

Total

Assets

Shareholders’

Equity

Tangible

Assets

Interest

Income

Income from

Marketable Securities

Portfolio

Current Period

Profit/Loss

Prior Period

Profit/Loss

Fair

Value

Amount of Equity

Needed

95,138 8,598 51,727 1 - (133) 1,038 74,871 -

588,608 (588,045) 585,156 125 - (1,287) (14,159) - -

Şeker Proje Geliştirme ve Gayrimenkul Yatırım A.Ş. has not been included for the consolidataion as it is not a

financial subsidiary and it is accounted with the cost method.




69




8. Information on subsidiaries (Net) (cont’d):

c. Information on the consolidated subsidiaries:

Description Address (City/

Country)

Bank’s Share Percentage-If

Different Voting Percentage (%)

Bank’s Risk Group

Share Percentage (%)

Şekerbank Kıbrıs Ltd. Nicosia/TRNC 97.93 97.93

Şeker Finansal Kiralama A.Ş. Istanbul/ Turkey 54.13 64.95

Şekerbank International Banking Unit Ltd. Nicosia/TRNC 95.79 95.79

Şeker Yatırım Menkul Değerler A.Ş. Istanbul/ Turkey 99.04 100.00

Şeker Faktoring A.Ş. Istanbul/ Turkey 99.99 100.00

Şeker Finansman A.Ş. Istanbul/ Turkey 62.31 62.31

Zahlungsdienste GmbH Der Şekerbank T.A.Ş. Cologne/Germany 100.00 100.00

“Zahlungsdienste GMBH Der Şekerbank T.A.Ş.” (Zahlungsdienste)’s payment services activities as a

financial services branch in order to comply with the Payment Services Supervision Act (ZAG) have been

stopped and liquidation procedures are in progress.

d. Information on the consolidated subsidiaries with the order as presented in the table above:

Total Assets Shareholders’

Equity

Tangible

Assets

Interest

Income

Income from Marketable Securities

Portfolio

Current Period

Profit/Loss

Prior Period

Profit/Loss

Fair Value

(*)

326,869 27,215 5,497 8,693 109 (823) (2,427) 13,555

551,216 66,811 43,251 13,422 - 2,265 (29,699) 53,054

44,468 38,457 3,752 710 - 396 (24) 19,554

248,975 32,622 20,860 7,469 1,166 (3,126) (1,719) 37,708

491,903 75,586 75,910 24,357 - (1,518) (31,701) 81,436

1,022,923 18,501 1,226 10,636 - 9,136 - 32,245

1,828 1,062 - - - 36 (228) -

(*)Fair values of the related subsidiaries are stated as of 31 December 2018.




70




8. Information on subsidiaries (Net) (cont’d):

e. Movement of consolidated subsidiaries:


Balance at the beginning of the period 188,824 172,831

Movement during the period 44 15,993

Purchases 44 16,474

Bonus shares obtained - -

Share in the current year income - -

Sales - -

Revaluation increase - -

Provision reversal / Provision of Impairment (-) - (481)

Balance at the end of the period 188,868 188,824

Capital Commitment - -

Share percentage at the end of the period (%) 100 100

f. Measurement of consolidated subsidiaries:


Measured with cost 188,868 188,824

Measured with fair value - -

Measured with equity method - -

g. Sectoral information and the related carrying amounts on consolidated subsidiaries:

Subsidiaries Current Period Prior Period

Banks 20,077 20,077

Insurance Companies - -

Factoring Companies 81,427 81,427

Leasing Companies 37,368 37,324

Finance Companies 16,658 16,658

Other Financial Subsidiaries 33,338 33,338

h. Subsidiaries Quoted to Stock Exchange:


Quoted to Domestic Stock Exchange 37,368 37,324

Quoted to Foreign Stock Exchange - -

i. Information on Subsidiaries which are sold in the Current Period: None.

j. Information on Subsidiaries Purchased in the Current Period: None.




71




9. Information on entities under common control: None (31 December 2018 – None).

10. Information on finance lease receivables (Net):


Gross Leasing Investment 560,772 559,326

Unearned Financial Profit from Leasing (-) (112,461) (112,473)

Cancelled Leasing Amounts (-) - -

Net Leasing Investment 448,311 446,853

(*) Includes TRL 61,393 Thousand non-performing loans shown under Leasing Receivables on balance sheet (31 December2018 – 61,359).

11. Information on derivative financial assets for hedging purposes:

Derivative financial assets for hedging purposes are classified in the financial statement Derivative

Financial Assets at Fair Value Through Profit and Loss.

Derıvative Financial Assets For Hedging Purposes Current Period Prior Period

TRL FC TRL FC

Fair Value Hedge 24,576 - 6,866 -

Cashflow Hedge - - - -

Hedge of net investment risks in foreign operations - - - -

Total 24,576 - 6,866 -

12. Information on tangible assets:

a. If impairment amount on individual asset recorded or reversed in the current period is material for the

overall financial statements:

a.1. Events and conditions for recording or reversing impairment: None.

a.2. Amount of recorded or reversed impairment in the financial statements: None. (31 December 2018

- TRL 18,612 Thousand)

b. The impairment provision set or cancelled in the current period according to the asset groups not

individually significant but materially effecting the overall financial statements, and the reason and

conditions for this: None.

c. Pledges, mortgages and other restrictions on the tangible fixed assets, expenses arising from the

construction for tangible fixed assets, commitments given for the purchases of tangible fixed assets: None.

13. Information on intangible assets:

The useful lives of the intangible fixed assets, which are amortized with straight-line amortization method,

are averagely 5 years.

a. Disclosures for book value, description and remaining depreciation time for a specific intangible fixed asset

that is material to the financial statements: None.

b. Disclosure for intangible fixed assets acquired through government grants and accounted for at fair value

at initial recognition: None.

c. The method of subsequent measurement for intangible fixed assets that are acquired through government

incentives and recorded at fair value at the initial recognition: None.

d. The book value of intangible fixed assets that are pledged or restricted for use: None.

e. Amount of purchase commitments for intangible fixed assets: None.




72



I. Explanations Related to the Assets (cont’d)

13. Information on intangible assets (cont’d):

f. Amount of total research and development expenses recorded in statement of income within the period if

any: None.

g. Information on goodwill: None.

h. Movements on goodwill in the current period: None.

i. Information on revalued intangible assets according to their types: None.

14. Information on investment property:

As of 31 March 2019, the Group has TRL 61,125 Thousand of investment property. (31 December 2018- TRL

61,125 Thousand)

Investment Properties Current Period Prior Period

Cost

Opening Balance, 1 January 2019 61,125 -

Additions - 12,292

Write off - -

Transfer - 23,075

Disposals (-) - -

Revaluation value increase/(decrease) - 25,758

Impairment Provision/Reversal - -

Closing Balance, 31 March 2019 61,125 61,125

15. Explanations on deferred tax asset:

a. As of 31 March 2019, deferred tax asset computed on the financial losses is TRL 202,803 Thousand (31

December 2018 - TRL 172,464 Thousand). Carried forward tax losses over which deferred tax asset

computed is TRL 34,684 Thousand (31 December 2018 - TRL 33,614 Thousand).


Tangible Assets Base Differences (15,920) (15,261)

Provisions (*) 253,276 237,215

Valuation of Financial Assets (81,435) (94,296)

Investment Incentive 7,790 6,784

Tax Deductions and Exceptions 4,408 4,408

Financial Losses 34,684 33,614

Net Deferred Tax Assets/(Liabilities) 202,803 172,464

(*) Provisions include employee benefit liabilities, credit card bonuses provisions, legal case provisions, employee termination benefit

provisions, retirement fund provision, SDIF premium provision, expected credit loss provisions and other provisions.




73




15. Explanations on deferred tax asset (cont’d):

b. Temporary differences over which deferred tax asset is not computed and recorded in the balance sheet in

prior periods: None (31 December 2018 – None).

c. Allowance for deferred tax and deferred tax assets from reversal of allowance: None (31 December 2018 –

None).

d. Movement of deferred tax asset/(liability):

Deferred tax assets and liabilities for the current and previous periods are as follows:


Deferred Tax (Net), Beginning of the Period 172,464 84,801

Current Period (Expense)/Income 30,152 (683)

Deferred Tax Classified under Equity 187 (1,987)

TFRS 9 Impact - 90,333

Deferred Tax Asset (Liability), End of the Period 202,803 172,464

Şeker Finansal Kiralama A.Ş. recognized deferred tax asset amounting to TRL 7,790 Thousand (31 December

2018 - TRL 6,784 Thousand) as of 31 March 2019 financial statements assuming that it will take advantage of the

unused investment incentive in the subsequent periods.

16. Information on assets held for sale and discontinued operations:


Cost

Opening Balance, 1 January 2019 320,984 266,025

Additions 81,003 157,719

Write off - -

Transfer - -

Disposals (-) (8,698) (100,420)

Revaluation value increase/(decrease) - (2,599)

Impairment Provision/Reversal - 259

Closing Balance, 31 March 2019 393,289 320,984

17. Information on other assets:

Other assets do not exceed 10 % of the total balance sheet (excluding off balance sheet commitments).




74



II. Explanations Related to the Consolidated Liabilities

1. Information on Maturity Structure Of Deposits

a) Information on maturity structure of deposits:

Current Period

Demand

7 Day Call

Accounts

Up to 1

Month

1-3

Month

3-6

Month

6 Month - 1

Year

1 Year

and Over

Accumulated

Deposits

Total

Saving deposits 395,561 - 1,135,129 6,371,178 476,074 337,682 501,374 6,176 9,223,174

Foreign currency

deposits 1,245,598 - 1,114,408 5,806,251 555,551 501,350 1,497,297 466 10,720,921

Residents in Turkey 1,147,018 - 847,636 5,267,465 393,897 248,465 304,040 436 8,208,957

Residents abroad 98,580 - 266,772 538,786 161,654 252,885 1,193,257 30 2,511,964

Public sector deposits 65,065 - 549 13,069 34,368 974 1,032 - 115,057

Commercial deposits 1,165,365 - 291,037 1,379,553 14,644 8,032 7,324 13 2,865,968

Other institutions

deposits 39,695 - 19,262 434,673 5,251 2,816 597 - 502,294

Precious metals deposits 305,650 - - - 48,132 3,454 14,687 - 371,923

Interbank deposits 223,444 - 523,341 5,074 - 8,880 6,770 - 767,509

Central Bank of

Turkey - - - - - - - - -

Domestic Banks 833 - 520,764 - - 8,880 6,652 - 537,129

Foreign Banks 5,960 - 2,577 5,074 - - 118 - 13,729

Participation Banks 216,651 - - - - - - - 216,651

Other - - - - - - - - -

Total 3,440,378 - 3,083,726 14,009,798 1,134,020 863,188 2,029,081 6,655 24,566,846

Prior Period

Demand

7 Day Call

Accounts

Up to 1

Month

1-3

Month

3-6

Month

6 Month - 1

Year

1 Year

and Over

Accumulated

Deposits

Total

Saving deposits 356,638 - 1,073,162 4,123,806 3,459,931 401,567 490,684 5,394 9,911,182

Foreign currency

deposits 1,155,303 - 388,206 4,521,926 1,415,426 505,156 1,433,973 391 9,420,381

Residents in Turkey 1,063,701 - 347,251 4,021,564 1,095,800 244,807 284,183 364 7,057,670

Residents abroad 91,602 - 40,955 500,362 319,626 260,349 1,149,790 27 2,362,711

Public sector deposits 79,143 - 1,796 9,481 21,080 941 992 - 113,433

Commercial deposits 771,126 - 443,895 917,236 127,087 11,915 7,013 11 2,278,283

Other institutions

deposits 43,153 - 24,169 227,185 53,035 3,371 515 - 351,428

Precious metals deposits 246,275 - - - 37,725 3,031 13,363 - 300,394

Interbank deposits 189,527 - 255,602 95,838 - 8,348 16,441 - 565,756

Central Bank of

Turkey - - - - - - - - -

Domestic Banks 4,273 - 149,590 (3,545) - 8,348 6,258 - 164,924

Foreign Banks (1,191) - 106,012 99,383 - - 10,183 - 214,387

Participation Banks 186,445 - - - - - - - 186,445

Other - - - - - - - - -

Total 2,841,165 - 2,186,830 9,895,472 5,114,284 934,329 1,962,981 5,796 22,940,857




75



II. Explanations Related to the Consolidated Liabilities (cont’d)

1. Information on Maturity Structure Of Deposits

b) Information on saving deposits under the guarantee of saving deposit insurance and exceeding the

limit of saving deposit insurance:

Saving Deposits

Under the guarantee

of insurance (*)

Exceeding the limit

of insurance

Under the guarantee

of insurance (*)

Exceeding the limit

of insurance

Current Period Prior Period Current Period Prior Period

Saving deposits 4,755,900 5,111,823 4,483,835 1,752,827

Foreign currency saving deposits 2,404,281 1,975,908 5,477,967 739,974

Other deposits in the form of saving deposits - - - -

Branches’ deposits under foreign

authorities' insurance - - - -

Off-shore banking regions’ deposits under foreign authorities' insurance - - - -

Total 7,160,181 7,087,731 9,961,802 2,492,801

(*) According to the BRSA’s circular no 1584 dated 23 February 2005, accruals are included in the saving deposit amounts.

c) Information on the saving deposits of the Parent Bank with head office abroad, if the saving deposits

in the branches of the bank located in Turkey are under the guarantee of saving deposit insurance

in that country abroad:

Headquarter of the Parent Bank is in Turkey and the Parent Bank is under the coverage of saving deposit insurance.

d) Saving deposits not guaranteed by insurance:

Deposit of real persons not under the guarantee of saving deposit insurance:


Deposits and other accounts in branches abroad - -

Deposits and other accounts of ultimate shareholders and their Mother, Father, Spouse, Dependent Children - -

Deposits and other accounts of chairman and members of

the Board of Directors and their Mother, Father, Spouse, Dependent Children 10,664 9,347

Deposits and other accounts obtained through illegal acts

defined in the 282nd Article of the 5237 numbered Turkish

Criminal Code dated 26 September 2004. - -

Saving deposits in banks established in Turkey

exclusively for off shore banking activities - -




76




2. Information on derivative financial liabilities:

Negative differences table related to derivative financial liabilities held-for-trading:

Derivative financial liabilities held-for-trading are classified in the financial statement as Derivative

Financial liabilities at Fair Value Through Profit and Loss.

Liabilities due to held for trading derivatives Current Period Prior Period

TRL FC TRL FC

Forward Transactions - 59,001 - 59,314

Swap Transactions 4,850 2,637 13,509 19,186

Futures Transactions - - - -

Options 25 9,958 160 11,441

Other - - - 1,883

Total 4,875 71,596 13,669 91,824

3. Information on banks and other financial institutions:

a. Information on banks and other financial institutions:


TRL FC TRL FC

Loans from Central Bank of Turkey - - - -

From Domestic Banks and Institutions 463,012 246,735 444,168 316,788

From Foreign Banks, Institutions and Funds 40,206 2,449,499 29,224 2,809,900

Total 503,218 2,696,234 473,392 3,126,688

b. Maturity analysis of borrowings:


TRL FC TRL FC

Short-term 470,869 207,249 443,047 281,131

Medium and long-term 32,349 2,488,985 30,345 2,845,557

Total 503,218 2,696,234 473,392 3,126,688

Due to the loan used from the Overseas Private Investment Corporation “OPIC”, Şeker Finansman A.Ş.’ shares,

one of the subsidiaries of the Parent Bank, have been pledged to the OPIC according to the “share pledge and share

lien” agreement between the OPIC and the Company which is valid for current debt relationship and recorded to

share ledger.

c. Additional explanation related to the concentrations of the Group’s major liabilities:

Within the scope of normal banking activities, the Group’s funding sources are deposits, funds

borrowed, marketable securities issued and money market balances. The Group’s deposit structure

shows a balanced distribution in TRL and FC terms. The funds borrowed mainly consist of foreign

currency denominated syndicated loans, in TRL denominated funds provided from repurchase

agreement transactions and marketable securities denominated in TRL and foreign currency.




77




4. Information on Money market borrowings:


TRL FC TRL FC

Interbank money market takings 4,000 - 3,000 - Istanbul Stock Exchange money market takings - - - - Borsa Istanbul Debts to Money Markets 66,244 - 64,500 - Funds Provided Through Repo Transactions 424,662 - 124,596 - Total 494,906 - 192,096 -

5. Marketable Securities Issued:

As of 31 March 2019 outstanding issued bonds amount of the Group is TRL 490,646 Thousand (31 December

2018 - TRL 516,302 Thousand).

















As of 31 March 2019 outstanding issued marketable securities amount of the Group is TRL 17,597 Thousand and

details are shown the table below (31 December 2018 - TRL 25,532 Thousand).








78




5. Marketable Securities Issued (cont’d):

The Parent Bank issued Asset Covered Bond amounting to TRL 1,500,000 Thousand and details are shown in the

table below. Among the institutions and organizations investing up to this time are International Finance

Corporation (IFC), Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V. (FMO), UniCredit

Bank AG, European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD), KfW

Bankengruppe and qualified institutional investors. The transactions were conducted in line with the related

Capital Market Board regulation and the Parent Bank’s SME loans were used as collateral.

Issue Date Series Investors Amount

Remaining Principal

Amount Currency Maturity

25 November 2016 2016-1 IFC 180,000 180,000 TRL 13.09.2021

19 December 2017 2017-1 FMO 192,000 192,000 TRL 22.12.2020

As of 31 March 2019 the Group has the Asset Covered Bonds amounting to TRL 381,727 Thousand (31 December

2018 - TRL 701,850 Thousand).


TRL FC TRL FC

Bills 490,646 - 516,302 -

Asset Backed Securities 381,727 - 701,850 -

Bonds 17,597 - 25,532 -

Total 889,970 - 1,243,684 -

6. Other liabilities which exceed 10 % of the balance sheet total (excluding off-balance sheet

commitments) and the breakdown of these which constitute at least 20 % of grand total :

Other liabilities do not exceed 10 % of the balance sheet total.

7. Explanations on lease obligations (Net):


Gross Net Gross Net

Less than 1 Year 15,557 13,128 15,521 12,741

1-4 Years 338,271 207,440 13,605 12,366

More than 4 Years 1,910 710 - -

Total 355,738 221,278 29,126 25,107

8. Information on derivative financial liabilities for hedging purposes:

Derıvative Financial Assets For Hedging

Purposes


TRL FC TRL FC

Fair Value Hedge 1,138 - 16,592 -

Cashflow Hedge - - - -

Hedge of net investment risks in foreign operations - - - -

Total 1,138 - 16,592 -




79




9. Information on provisions:

a) Foreign exchange losses on the foreign currency indexed loans and finance lease receivables: None.

b) The specific provisions provided for unindemnified non-cash loans or expected loss provisions of non-cash

loans amount to TRL 78,899 Thousand (31 December 2018 - TRL 67,045 Thousand).

c) Information on employee termination benefits and unused vacation accrual:

The Group has calculated reserve for employee termination benefits by using actuarial valuations as set out in the

TAS 19 and reflected this in the financial statements.

Main actuarial assumptions used for calculation of employment termination benefit are as follows:

- Discount rate for the current period is 16%, inflation rate is 11.30%.

- TRL 5,434.42 (full TRL) of maximum wage amount which was in effect was taken as maximum amount

for the calculation.

- It was assumed that maximum wage would be increased in inflation rate for every consecutive year.

- CSO 1980 table was used for mortality averages of females and males.

As of 31 March 2019, the Group has recorded in the financial statements TRL 85,089 Thousand reserve for

employee termination benefits (31 December 2018 - TRL 79,953 Thousand).

As of 31 March 2019, the Group allocated a reserve of TRL 10,863 Thousand for the unused vacations, which is

classified under reserve for employee benefits provisions in the financial statements (31 December 2018 - TRL

8,088 Thousand).

c.1) Movement of employee termination benefits:


As of 1 January 79,953 75,411

Cost Service 5,102 10,931

Interest Cost 3,117 8,483

Actuarial Loss/(Gain) - (4,747)

Indemnity Paid During the Term (3,083) (10,125)

Total 85,089 79,953

d) Information on other provisions:

d.1) Provisions for possible losses: None.

d.2) The breakdown of the of provisions:


Unindemnified Non-Cash Loans 78,899 67,045

Credit Card Liquid Point Promotion Provisions 425 432

Retirement Fund Provisions 159,499 159,499

Legal Case Provisions 25,767 21,987

SDIF Premium Provision 5,152 6,984

Other Provisions 132,749 146,894

Total 402,491 402,841




80




9. Information on provisions (cont’d):

e) Liabilities on pension rights:

e.1) Liabilities for pension funds established in accordance with “Social Security Institution”:

Şekerbank T.A.Ş. Pension Fund, of which most of the Parent Bank’s employees are members, is established in

accordance with the provisional Article 20 of the Social Security Act No: 506. As per the provisional article No:

23 of the Banking Law No: 5411, the Bank pension funds, which were established within the framework of Social

Security Institution Law, should be transferred to the Social Security Institution within 3 years after the issuance

of the related law. Methods and principles related to the transfer have been determined as per the Cabinet decision

no: 2006/11345 made on 30 November 2006. However, the related article of the act has been cancelled upon the

President’s application filed on 2 November 2005 by the Supreme Court’s order no: E.2005/39, K.2007/33 issued

on 22 March 2007, which was published in the Official Gazette No: 26479 on 31 March 2007 and the execution

of the decision was ceased as of the issuance date of the order.

Following the issuance of the justified order in relation to the annulment of the provisional Article 23 of the

Banking Law by the Constitutional Court in the Official Gazette No: 26731 on 15 December 2007, TBMM started

to work on establishing new legal regulations, the Law No: 5754 “Amendments to the Social Security and General

Health Insurance Act Including Certain Laws and Decrees”, which was published in the Official Gazette No:

26870 on 8 May 2008 has become effective following the approval of the General Assembly of the TBMM. The

new law decrees that the contributors of the bank pension funds, the ones who receive salaries or income from

these funds and their rightful beneficiaries will be transferred to the Social Security Institution and will be subject

to this Law within 3 years after the release date of the related article, without any need for further operation, and

that the three-year transfer period can be prolonged for maximum 2 years by the Cabinet decision. However,

related transfer period has been prolonged for 2 years by the Cabinet decision dated 14 March 2011, which was

published in the Official Gazette dated 9 April 2011 and numbered 27900.

In addition, by the Law numbered 6283 “Emendating Social Security and General Health Insurance Act”, which

was published in the Official Gazette dated 8 March 2012 and numbered 28227, this period of 2 years has been

raised to 4 years. Further the transfer period has been prolonged for one more year by the Cabinet decision dated

08 April 2013, which was published in the Official Gazette, dated 3 May 2013 and numbered 28636. The

prolongation for another one year has been taken by the Cabinet on 24 February 2014, and has been published in

the Official Gazette dated 30 April 2014 and numbered 28987. The Council of Ministers has been lastly authorized

to determine the transfer date in accordance with the last amendment in the first paragraph of the 20th provisional

article of Law No.5510 implemented by the Law No. 6645 on Amendment of the “Occupational Health and Safety

Law and Other Laws and Decree Laws” published in the Official Gazette dated 23 April 2015 and numbered

29335. transferred to the President with the delegated legislation No.703 which was published in the repetitive

Official Gazette No. 30473 dated 9 July 2018.

The above mentioned law also includes the following:

Through a commission constituted by the attendance of one representative separately from the Social

Security Institution, the Presidency Ministry of Treasury and Finance, State Planning Organization,

Banking Regulation and Supervision Agency, Savings Deposit Insurance Fund, one from each pension

fund, and one representative from the organization employing pension fund contributors, related to the

transferred persons, the cash value of the liabilities of the pension fund as of the transfer date will be

calculated by considering their income and expenses in terms of the lines of insurance within the context

of the related Law, and technical interest rate of 9.80% will be used in the actuarial calculation of the

value in cash

And that after the transfer of the pension fund contributors, the ones who receive salaries or income from

these funds and their rightful beneficiaries to the Social Security Institution, these persons’ uncovered

social rights and payments, despite being included in the trust indenture that they are subject to, will be

continued to be covered by the pension funds and the employers of pension fund contributors.




81




9. Information on provisions (cont’d):

e) Liabilities on pension rights (cont’d):

e.1) Liabilities for pension funds established in accordance with “Social Security Institution” (cont’d):

On the other hand, the application made on 19 June 2008 by the Republican People’s Party to the Constitutional

Court for the annulment and motion for stay of some articles, including the first paragraph of the provisional article

20 of the Law, which covers provisions on transfers, was rejected in accordance with the decision taken at the

meeting of the afore-mentioned court on 30 March 2011.

The technical financial statements of the Pension Fund are reviewed by an actuary registered audit company in

accordance with the Article 21 of the Insurance Law numbered 5684 and the requirements of the “Actuary

Regulations” issued based on the Article 38. There was TRL 159,499 Thousand actuarial deficit (31 December

2018 - TRL 159,499 Thousand actuarial deficit) in the actuary report which was prepared using a technical interest

rate of 9.80 % in accordance with the basis set out in the Council of Ministers published on 15 December 2006

and no 26377. As of 31 March 2019, TRL 159,499 Thousand provision (31 December 2018 - TRL 159,499

Thousand).

The actuarial audit described above, which has been carried out in accordance with the related law, measures the

present value of the liability as of 31 December 2018, in other words, the estimated payment amount to be made

to the Social Security Institution by the Parent Bank is measured by the actuary audit. In actuarial calculations,

CSO 1980 mortality table, 9.80% technical interest rate and 34.50% premium rate were taken into account.

Present values of bonuses and salaries payments taking into account the health expenditures in the scope of Social

Security Institution are shown in the following table in as of 31 December 2018.

31.12.2018

Reserve of Probable Retirement Pensions (153,436)

Reserve of Probable Widow and Orphant (133,359)

Reserve of Liability Items (1,028,626)

Reserve for Salary Portions to be Given to Social Insurance Institution for those who leave the Pension

Fund (254,790)

Health and Funeral Expenses Reserve (152,739)

Assets (*) 315,700

Cash Value of the Premiums of the Active Members 1,123,687

Reserve of Common Members’ Salary Proportion Receivables from other social insurance institutions. 124,064

Actual and Technical Surplus / (Deficit) Amount (159,499)

(*) The Pension Fund records the assets by their fair value and these fair values were considered for the actuarial work.

Assets of the Pension Fund consist of following items:

31.12.2018

Banks and Other Financial Investments 238,816

Associates 125,757

Immovable 4,103

Other (52,976)

Total 315,700

e.2. Liabilities resulting from all kinds of pension funds, foundations etc., which provide post-retirement

benefits for the employees: See footnote, f.1 II/9 of Section Five.




82




10. Explanations on taxes payable (cont’d):

a. Information on current tax liability:

a.1. Information on tax provision: Group had TRL 11,218 Thousand corporate tax to be paid as of 31

March 2019 (31 December 2018 - TRL 505 Thousand corporate tax to be paid).

a.2 Information on taxes payable:


Corporate Tax 11,218 505

Taxation on Securities 27,821 17,247

Capital Gains Tax on Property 753 610

Banking Insurance Transaction Tax (BITT) 28,891 30,925

Foreign Exchange Tax - -

Value Added Tax Payable 892 1,408

Other 8,380 11,167

Total 77,955 61,862

a.3 Information on premiums:


Social Security Premiums-Employee 510 430

Social Security Premiums-Employer 826 705

Bank Social Aid Pension Fund Premiums-

Employee - 3

Bank Social Aid Pension Fund Premiums-

Employer - 4

Pension Fund Membership Fees and

Provisions-Employee - 16

Pension Fund Membership Fees and

Provisions-Employer - 23

Unemployment insurance-Employee 19 4

Unemployment insurance-Employer 40 26

Other 1 10

Total 1,396 1,221

b. Explanations on deferred tax liabilities, if any:

As of 31 March 2019, the Group has TRL 1,925 Thousand deferred tax liability (31 December 2018 - TRL

1,532 Thousand deferred tax liability) as mentioned in the Section V. Note I.15

11. Information on liabilities regarding assets held for sale and discontinued operations: None.




83




12. Explanations on the maturity, interest rate and the number of subordinated debt

instruments the Parent Bank had, institution that is the creditor of the debt instrument, and

conversion option, if any:

Information on subordinated borrowing instruments is included in the footnote 4.1. Information on

borrowing instruments to be included in the equity calculation.


TRL FC TRL FC

Borrowing Instruments Included in Additional Tier I Capital Calculation - - - -

Subordinated Loans - - - -

Subordinated Debt Instruments - - - -

Borrowing Instruments Included in Tier II Calculation 452,175 492,305 452,571 451,050

Subordinated Loans - - - -

Subordinated Debt Instruments 452,175 492,305 452,571 451,050

Total 452,175 492,305 452,571 451,050

13. Information on Shareholders’ Equity:

a) Presentation of Paid-in capital:


Common stock (*) 1,158,000 1,158,000

Preferred stock - -

(*) Nominal Capital

b) Paid-in capital amount, explanation as to whether the registered share capital system is applicable at the Parent

Bank and if so amount of registered share capital ceiling:

Share capital system is applied in the Bank.

c) Information on share capital increases and their sources; other information on increased capital shares in current

period: None.

d) Information on share capital increases from capital reserves: None.

e) Capital commitments in the last fiscal year and at the end of the following period, the general purpose of these

commitments and projected resources required to meet these commitments: None.

f) Indicators of the Parent Bank’s income, profitability and liquidity for the previous periods and possible effects

of these future assumptions on the Parent Bank’s equity due to the uncertainty of these indicators:

Retained and current year income, profitability and liquidity of the Parent Bank are closely monitored, reported

by the Financial Control, Reporting, Budget and Performance Management Department to the Board of

Directors and Asset and Liability Committee of the Parent Bank. This department prognoses the effects of

interest, currency and maturity fluctuations with static and dynamic scenario analysis. Net asset value, which

is defined as the difference of fair values of assets and liabilities, is measured. Prognoses are made for the

Parent Bank’s future interest income via simulations of net interest income and scenario analysis.

g) Information on preferred shares: None.




84




13. Information on Shareholders’ Equity (cont’d) :

h) Information on marketable securities value increase fund:


TRL FC TRL FC

From Subsidiaries, Associations and Entities Under Common Control - - - -

Valuation Difference (14,293) 6,351 (9,167) 4,047

Foreign Exchange Difference - - - -

Total (14,293) 6,351 (9,167) 4,047

14. Information on legal reserves:


Legal reserves 119,512 115,016

Other legal reserves appropriated in accordance with

special legislation 185,987 185,988

Total 305,499 301,004

15. Information on extraordinary reserves:


Reserves appropriated by the General Assembly 976,194 1,370,812

Retained earnings 4,537 4,537

Accumulated losses - -

Foreign currency share capital exchange difference - -

Total 980,731 1,375,349

16. Other Information on Shareholders’ Equity:

Şeker Finansal Kiralama A.Ş., did not make a purchase of shares via Şeker Yatırım Menkul Değerler A.Ş.

in the current period and 4,297 shares in total were bought back.

17. Information on Minority Shares :

As of 31 March 2019 TRL 44,683 Thousand minority shares shown in the accompanying financial

statements (31 December 2018 - TRL 40,349 Thousand).




85



III. Explanations Related to the Consolidated Off-Balance Sheet Contingencies and

Commitments

1. Information on off-balance sheet liabilities:

a. Nature and amount of irrevocable loan commitments:


Forward Asset Purchase Commitments 667,960 96,164

Loan Granting Commitments 1,039,585 987,126

Payment Commitments for Cheques 413,204 341,685

Commitments for Credit Card Expenditure limits 504,503 473,944

Commitments for Promotions related with Credit Cards and Banking Transactions 493 501

Subsidiaries and Associates Capital Commitments - -

Tax and Fund Obligations for Export Commitments 10,925 10,032

Other Commitments 221,118 225,869

Total 2,857,788 2,135,321

b. Possible losses and commitments related to off-balance sheet items including items listed below:

The Group, within the context of banking activities, undertakes certain commitments, consisting of loan

commitments, letters of guarantee, acceptance credits and letters of credit.

b.1. Non-cash loans including guarantees, acceptances, financial guarantee and other letters of credits:

b.2. Guarantees, surety ships, and similar transactions:


Definite Letter of Guarantees 2,633,924 2,666,086

Temporary Letter of Guarantees 284,676 190,548

Surety ships and Similar Transactions - -

Other Letter of Guarantees 1,542,612 1,528,610

Total 4,461,212 4,385,244

c. Information on non-cash loans:

c.1. Total amount of non-cash loans:


Letters of Guarantees issued for cash loans 1,218,912 1,199,047

With maturity of 1 year or less than 1 year 738,135 746,485

With maturity of more than 1 year 480,777 452,562

Other non-cash loans 4,801,404 4,719,937

Total 6,020,316 5,918,984


Guarantees 889,985 963,277

Bank Loans 132,898 132,949

Letters of Credit 268,155 262,834

Endorsements 268,066 174,680

Total 1,559,104 1,533,740




86




Commitments (cont’d)

1. Information on off-balance sheet liabilities (cont’d):

c.2. Information on sectoral risk breakdown of non-cash loans:


TRL (%) FC (%) TRL (%) FC (%)

Agricultural 7,177 0.21 25,549 1.00 5,702 0.17 25,320 1.01

Farming and raising livestock 6,518 0.19 25,549 1.00 5,067 0.15 25,320 1.01

Forestry 570 0.02 - - 547 0.02 - -

Fishery 89 - - - 88 - - -

Manufacturing 277,891 8.01 1,251,283 49.12 283,063 8.33 1,240,193 49.23

Mining 29,455 0.85 110,913 4.35 30,920 0.91 106,051 4.21

Production 234,328 6.75 983,864 38.63 237,947 7.00 995,880 39.53

Electric, gas and water 14,108 0.41 156,506 6.14 14,196 0.42 138,262 5.49

Construction 1,060,356 30.53 535,835 21.04 1,028,496 30.25 551,680 21.90

Services 2,122,455 61.11 732,265 28.75 2,077,372 61.10 699,400 27.75

Wholesale and retail trade 531,707 15.31 131,067 5.15 506,845 14.91 152,502 6.05

Hotel, food and beverage

services 13,174 0.38 5,634 0.22 12,653 0.37 11,627 0.46

Transportation and telecommunication 67,275 1.94 314,941 12.36 80,718 2.37 291,043 11.55

Financial institutions 1,226,834 35.32 161,165 6.33 1,197,165 35.21 125,730 4.99

Real estate and renting services 233,041 6.71 114,205 4.48 227,052 6.68 108,151 4.29

Self-employment services 30 - - - 30 - - -

Education services 2,737 0.08 - - 2,679 0.08 - -

Health and social services 47,657 1.37 5,253 0.21 50,230 1.48 10,347 0.41

Other 5,262 0.14 2,243 0.09 5,012 0.15 2,746 0.11

Total 3,473,141 100.00 2,547,175 100.00 3,399,645 100 2,519,339 100

c.3. Information on I st and II nd Group non-cash loans:

Non-cash loans I. Group II. Group

TRL FC TRL FC

Letters of guarantee 3,165,888 811,591 210,772 163,810

Bank acceptances - 132,898 - -

Letters of credit 1,976 265,846 - -

Endorsements - 268,066 - -

Underwriting commitments - - - -

Guaranteed prefinancing credits - - - -

Other commitments and surety ships 5,351 883,374 1,260 -




87





2. Information related to derivative financial instruments:


Types of trading transactions

Foreign currency related derivative transactions (I) 9,197,376 10,923,911

Forward transactions 737,511 1,120,528

Swap transactions 7,573,461 8,734,576

Futures transactions - -

Option transactions 886,404 1,068,807

Interest related derivative transactions (II) 1,300,456 1,545,718

Forward rate transactions - -

Interest rate swap transactions 1,300,456 1,545,718

Interest option transactions - -

Futures interest transactions - -

Other trading derivative transactions (III) 127,481 108,294

A. Total trading derivative transactions (I+II+III) 10,625,313 12,577,923

Types of hedging transactions - -

Fair value hedges 936,000 936,000

Cash flow hedges - -

Net investment hedges - -

B.Total hedging related derivatives 936,000 936,000

Total Derivative Transactions (A+B) 11,561,313 13,513,923

Related to agreements of forward transactions and options; the information based on the type of forward and

options transactions are disclosed separately, specified with related amounts, type of agreement, purpose of

transaction, nature of risk, strategy of risk management, hedging relationship, possible effects on the Bank’s

financial position, timing of cash flows, reasons of unrealized transactions which previously projected to be

realized, income and expenses that could not be linked to statement of income in the current period because of the

agreements:

The Group’s derivative instruments mainly consist of foreign currency swaps, interest swaps, option and forward

buy/sell transactions. Fair values of foreign currency forward and swap transactions are determined by

comparing the Parent Bank’s period end foreign exchange rates and current market foreign exchange rates to the

balance sheet date. The resulting gain or loss is reflected in the income statement. In calculation of fair values of

the interest swap contracts, interest amounts to be paid or received upon the fixed interest rate in the contract and

interest amounts to be received or paid upon the floating interest rates in the contracts have been recalculated and

discounted in accordance to valid interest rates in the current market and the differences have been reflected to

the current term income statement. Discounted values calculated using the interest rates between the transaction

date and repricing date are used in determination of the fair values of interest rate swaps. While some derivative

transactions provide economic hedging, these transactions are subject to hedge accounting. The purpose of hedge

accounting; is to present the effect of the risk management activities using appropriate financial instruments to

manage certain risks that may affect profit or loss in the financial statements. For the purpose of hedging the fair

value of a portfolio of financial assets or financial liabilities, the Group may apply the provisions of TFRS 9 or

TAS 39. In this context, the Group has chosen to apply TFRS 9 for hedge accounting.




88





2. Information related to derivative financial instruments (cont’d):

As of 31 March 2019, breakdown of the Group’s foreign currency forward and swap transactions based on

currencies are disclosed below in their TRL equivalents:

Forward

Buy

Forward Sell

Swap Buy

Swap Sell Option

Buy

Option Sell

Futures

Buy

Futures

Sell

Current Period

TRL 188,297 88,502 558,269 1,994,750 27,608 101,016 - -

USD 41,897 75,558 3,673,320 231,449 206,995 119,641 - -

EURO 136,622 202,540 625,228 2,536,983 133,050 175,085 - -

OTHER 4,094 308 185,335 131,757 76,868 46,141 - -

Total 370,910 366,908 5,042,152 4,894,939 444,521 441,883 - -

Prior Period

TRL 220,477 208,108 1,361,999 2,970,930 234,015 224,050 - -

USD 178,439 145,008 3,117,322 824,528 264,011 299,591 - -

EURO 157,275 202,726 1,101,494 1,632,941 25,069 22,071 - -

OTHER 7,712 783 201,453 113,921 - - - -

Total 563,903 556,625 5,782,268 5,542,320 523,095 545,712 - -

As of 31 March 2019, the Group has fair value hedge with nominal amount of TRL 936,000 Thousand (31

December 2018 - TRL 936,000 Thousand).

As of 31 March 2019, the Group has no cash flow hedges.

As of 31 March 2019, the Group has no hedge of net investment in foreign operations.

3. Credit derivatives and risk exposures on credit derivatives: None.

4. Explanations on contingent liabilities and assets:

As of 31 March 2019, there are 709 continuing legal cases against the Group based on information received from

the Law Departments of the Group. The total amount of these cases is TRL 80,929 Thousand. Provision amount

for these cases is TRL 25,767 Thousand (31 December 2018 - 616 continuing legal cases against the Group based

on information received from the Law Departments of the Group. The total amount of these cases is TRL 76,228

Thousand. Provision amount for these cases is TRL 21,987 Thousand).

The Group has no contingent assets.

Explanations on revocable commitments: In the current period, the Group’s revocable commitments amount to

TRL 510,901 Thousand (31 December 2018 - TRL 538,914Thousand).

5. Custodian and intermediary services:

The Group provides buying and selling securities transacions, custody, brokerage and management on behalf of

customers.




89



IV. Explanations Related to the Consolidated Statement of Income

1. Information on interest income:

a. Information on interest income on loans:


TRL FC TRL FC

Interest on Loans (*) 810,147 134,490 672,064 92,862

Short Term Loans 479,268 13,786 307,242 7,439

Medium and Long Term Loans 305,855 120,696 352,813 85,422

Interest on Non-Performing Loans 25,024 8 12,009 1

Premiums received from Resource Utilization Support Fund - - - -

(*) Includes fees and commissions obtained from cash loans.

b. Information on interest received from banks:


TRL FC TRL FC

The Central Bank of Turkey 53 113 63 108

Domestic Banks 5,785 - 4,882 1,329

Foreign Banks 73 3,690 1 206

Branches and Head Office Abroad - - - -

Total 5,911 3,803 4,946 1,643

c. Interest income from marketable securities portfolio:


TRL FC TRL FC

Financial Assets At Fair Value Through Profit And Loss 1,654 215 1,233 168

Financial Assets At Fair Value Through Other Comprehensive Income 24,181 - 7,010 -

Financial Assets at Amortised Cost 46,787 12,697 70,976 11,715

Total 72,622 12,912 79,219 11,883

d. Information on interest income received from associates and subsidiaries:


Interest Income Received From Associates And Subsidiaries - 242




90



IV. Explanations Related to the Consolidated Statement of Income (cont’d)

2. Information on interest expense:

a. Information on interest expense on funds borrowed:


TRL FC TRL FC

Banks (*) 26,915 26,956 16,355 23,705

The Central Bank of Turkey - - - -

Domestic Banks 25,483 3,298 14,408 2,064

Foreign Banks 1,432 23,658 1,947 21,641

Branches and Head Office Abroad - - - -

Other Financial Institutions - - - -

Total 26,915 26,956 16,355 23,705

(*) Includes fees and commission expenses of cash loans.

b. Information on interest expense to associates and subsidiaries:


Interest Expense to Associates and Subsidiaries 127 60

c. Information on interest expense to marketable securities issued:


TRL FC TRL FC

Interest expense on securities issued 70,434 11,726 55,746 8,195

d. Distribution of interest expense on deposits based on maturity of deposits:

Current Period

Demand

Deposits

Time Deposits

Up to 1

Month

Up to 3

Months

Up to 6

Months

Up to 1

Year

More than

1 Year

Accumulated

Deposits

Total

TRL

Bank deposits 129 5,036 762 - - - - 5,927

Saving deposits 37 56,593 275,093 96,987 22,248 25,037 209 476,204

Public sector deposits - 35 522 703 41 44 - 1,345

Commercial deposits 8 14,042 49,499 3,704 506 307 1 68,067

Other deposits - 1,067 13,886 809 184 19 - 15,965

7 days call accounts - - - - - - - -

Precious metal deposits - - - - - - - -

Total 174 76,773 339,762 102,203 22,979 25,407 210 567,508

Foreign Currency -

Foreign currency

deposits 554 5,812 41,986 7,017 3,628 9,700 - 68,697

Bank deposits 334 39 46 - - - - 419

7 days call accounts - - - - - - - -

Precious metal

deposits 172 - - - - - - 172

Total 1,060 5,851 42,032 7,017 3,628 9,700 - 69,288

Grand Total 1,234 82,624 381,794 109,220 26,607 35,107 210 636,796




91




3. Information on dividend income :


Financial assets at fair value through profit and loss - -

Financial assets at fair value through other comprehensive income 21 -

Other - -

Total 21 -

4. Information on net trading income :


Income 5,450,270 2,828,435

Profit on capital market operations 54 4,127

Profit on derivative financial instruments 757,601 450,678

Foreign exchange gains 4,692,615 2,373,630

Losses (-) 5,434,604 2,878,449

Losses on capital market operations 32,976 998

Losses on derivative financial instruments 599,221 405,885

Foreign exchange losses 4,802,407 2,471,566

5. Information on other operating income :

The information on the factors affecting the Group’s income including new developments, and the explanation on

nature and amount of income earned from such items :

As of 31 March 2019, TRL 30,409 Thousand (31 March 2018 - TRL 18,933 Thousand) stated under other

operating income in the statement of income includes TRL 19,952 Thousand (31 March 2018 - TRL 7,243

Thousand) prior years’ provisions reversal income and TRL 10,457 Thousand (31 March 2018 - TRL 11,690 Thousand) other operating income.

As of 31 March 2019, prior years expense and provision reversal income include TRL 224 Thousand (31 March

2018 - TRL 2,562 Thousand) reversal of credit loss provisions due to collection of cash loans, TRL 179 Thousand

(31 March 2018 - TRL 1,956 Thousand) reversals of non-cash provisions, and TRL 19,549 Thousand (31 March

2018 - TRL 2,725 Thousand) reversal of legal case provision and other provisions.




92




6. Provision expenses of banks for loans and other receivables:


Expected Credit Losses 183,316 84,956

12-Month ECL (Stage 1) 26,955 3,065

Significant Increase in Credit Risk (Stage 2) 63,172 44,650

Impaired Credits (Stage 3) 93,189 37,241

Impairment Losses on Securities 1,960 1,416

Financial Assets Measured at Fair Value through Profit or Loss 138 114

Financial Assets Measured at Fair Value through Other Comprehensive Income 1,822 1,302

Impairment Losses on Associates, Subsidiaries and Joint-ventures - -

Associates - -

Subsidiaries - -

Joint-ventures (business partnership) - -

Other (*) 393 48,277

Total 185,669 134,649

(*) Other provisions also include provisions for non-cash loans.

7. Information on other operating expenses:


Reserve for employee termination benefits 5,136 4,177

Bank social aid provision fund deficit provision - -

Impairment losses on fixed assets - -

Depreciation expenses of fixed assets 23,346 7,521

Impairment losses on intangible assets - -

Goodwill impairment losses - -

Depreciation expenses of intangible assets 9,771 9,104

Impairment for investments accounted for under equity method - -

Impairment losses on assets held for resale - -

Depreciation expenses of assets held for resale - -

Impairment losses on assets held for sale - -

Other operating expenses 63,877 92,116

Lease Expenses Related to TFRS 16 Exemptions 1,920 19,082

Maintenance expenses 6,017 5,743

Advertisement expenses 641 1,722

Other expenses (**) 55,299 65,569

Loss on sales of assets 5 558

Other (*) 43,533 42,629

Total 145,668 156,105

(*) “Other” includes TRL 8,813 Thousand premiums paid to the Saving Deposit Insurance Fund, TRL 4,062 Thousand legal case provision (31 March 2018 - TRL 8,700 Thousand premiums paid to the Saving Deposit Insurance Fund, TRL 784 Thousand legal

case provision).

(**) Other expenses include TRL 4,194 Thousand communication expenses, TRL 8,649 Thousand computer usage expenses, TRL

2,666 Thousand promotion applications related with credit cards and banking services (31 March 2018 - TRL 4,540 Thousand communication expenses, TRL 11,894 Thousand computer usage expenses, TRL 2,626 Thousand promotion applications related with

credit cards and banking services).




93




8. Information on profit/ loss from continued and discontinued operations before taxes:

As of 31 March 2019, the Bank has TRL 107,200 Thousand loss before tax (31 March 2018 - TRL 24,164

Thousand profit before tax), TRL 358,090 Thousand (31 March 2018 - TRL 356,587 Thousand) of

operating income, TRL 98,433 Thousand (31 March 2018 - TRL 93,181 Thousand) of net fees and

commissions income, TRL 185,669 Thousand of provision expenses (31 March 2018 - TRL 134,649

Thousand), TRL 30,409 Thousand (31 March 2018 - TRL 18,933 Thousand) of other operating income and

TRL 145,668 Thousand (31 March 2018 - TRL 156,105 Thousand) of other operating expense.

9. Information on tax provision for continued and discontinued operations:

As of 31 March 2019, the Group has TRL 12,260 Thousand current tax charge (31 March 2018 – TRL

1,018 Thousand current tax charge)and deferred tax benefit on temporary differences is TRL 71,895

Thousand (31 March 2018 – TRL 32,743 Thousand deferred tax benefit), deferred tax charge is TRL 41,743

Thousand(31 March 2018 – TRL 26,964 Thousand deferred tax charge).

10. Information on net profit/ loss from continued and discontinued operations:

The net loss of the Group for the period ended 31 March 2019 is TRL 89,308 Thousand.

11. The explanations on net profit/loss for the period :

a) The nature and amount of certain income and expense items from ordinary operations is disclosed if the

disclosure for nature, amount and repetition rate of such items is required for the complete understanding of

the Group's performance for the period : None.

b) Effect of changes in accounting estimates on statement of income for the current and, if any, for subsequent

periods : None.

c) Profit or loss attributable to minority shares: Loss attributable to minority shares is TRL 4,237 Thousand (31

March 2018 – TRL 6 Thousand).

d) If the other items in the statement of income exceed 10 % of the statement of income total, accounts amounting

to at least 20 % of these items are shown below :

Other Fees and commissions received Current Period Prior Period

Banking Services Income 101,123 84,358

Other 6,915 10,337

Total 108,038 94,695

Other Fees and commissions given Current Period Prior Period

Fees and commissions given to Banks 6,920 5,247

Fees and commissions given for Credit Cards 14,465 7,079

Other 7,343 7,705

Total 28,728 20,031

e) Nature and amount of changes in accounting estimates, which have a material effect on current period or

expected to have a material effect on subsequent periods : None.




94



V. Explanations on the Risk Group of the Parent Bank

1. Volume of related party transactions, income and expense amounts involved and outstanding loan

and deposit balances:

a. Current Period:

Related Parties

Associates, Subsidiaries and Joint-

Ventures

Direct and Indirect

Shareholders of the Bank

Other Components in Risk

Group

Cash Non-Cash Cash Non-Cash Cash Non-Cash

Loans

Balance at beginning of period - - 898,986 18,697 - -

Balance at end of period - - 406,115 17,676 - -

Interest and commission income - - 6,751 49 - -

b. Prior Period:

Related Parties Subsidiaries and Associates

Direct and Indirect

Shareholders of the Bank

Other Entities Included

in the Risk Group

Cash Non-Cash Cash Non-Cash Cash Non-Cash

Loans

Balance at beginning of period - 11,754 575,004 16,912 - -

Balance at end of period - - 898,986 18,697 - -

Interest and commission income 242 18 17,843 42 - -

c.1. Information on related party deposits balances:

Related parties Associates, Subsidiaries and Joint-

Ventures Direct and Indirect

Shareholders of the Bank Other Components in Risk

Group

Deposits

Current

Period

Prior

Period

Current

Period

Prior

Period

Current

Period

Prior

Period

Balance at beginning of period 2,546 3,020 374,329 92,515 - -

Balance at end of period 2,888 2,546 310,714 374,329 - -

Interest on deposits 127 60 6,575 2,624 - -

c.2. Information on forward and option agreements and other similar agreements made with related parties:

None.




95



V. Explanations on the Risk Group of the Parent Bank (cont’d)

2. Disclosures for related parties:

a) The relations of the Parent Bank with the entities controlled by the Parent Bank and its related parties,

regardless of whether there are any transactions or not :

In the normal course of its banking activities, the Parent Bank conducted various business transactions with

related parties at commercial terms and at rates which approximate market rates. Any transaction among the

Group subsidiaries and/or related parties are executed on arm-lengths conditions.

b) Nature of the transactions amount and ratio to the total volume of transactions, amount of major items and ratio

to all items, pricing policies and other factors :

Amount Shares %

Cash loans 406,115 1.85

Non-cash loans 17,676 0.29

Deposits 313,602 1.28

These transactions are priced in accordance with the general pricing policies of the Parent Bank and are in line

with market rates .

c) In cases separate disclosure is not necessary, in order to present the total impact on the financial statements,

total of similar items : Explained in b.

d) Transactions accounted under the equity method : None.

e) Disclosures related to purchase and sale of real estate and other assets, services given/received, agency

contracts, leasing contracts, transferring information as a result of research and development, license contracts,

financing (including supports in the form of loans, capital in cash and capital in kind), guarantees, and

management contracts :

The Parent Bank enters into lease agreements with Şeker Finansal Kiralama A.Ş. As of 31 March 2019 there

is no leasing obligations related to those agreements (31 December 2018 - None). Additionally, the Parent

Bank provides agency services for Şeker Yatırım Menkul Değerler A.Ş., Şeker Faktoring A.Ş. and Şeker

Finansman A.Ş. through its branches.

Within the limits of the Banking Law, the Group renders cash and non-cash loans to its related parties and the

ratio of these loans to the Group’s total cash and non-cash loan portfolio is 1.52%. Details of these loans are

explained in the Section V, Note V-1a.

As of 31 March 2019 the Group has no purchases and sale of real estate and other assets, transfer of information

as a result of research and development, and management contracts with the related parties.

f) Benefits provided to the top management of the Group during current period amount to TRL 7,413 Thousand

(31 March 2018 - TRL 12,023 Thousand).




96



VI. Explanations and notes related to subsequent events:

On 22 April 2019, The Board of Directors has decided to appoint Erdal Erdem who is Deputy General Manager

as General Manager of the Bank, provided that the approval of the Banking Regulation and Supervision Agency.

SECTION SIX

AUDITORS’ REVIEW REPORT

I. Explanations on the Auditors’ Review Report :

The consolidated financial statements for three-month period ended 31 March 2019 were reviewed by DRT

Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik AŞ (Member of Deloitte Touche Tohmatsu) and

Auditors’ Review Report dated 17 May 2019 is presented in the introduction of this report.

II. Other Footnotes and Explanations Prepared by Independent Auditors :

None.




97

SECTION SEVEN

INFORMATION ON INTERIM ACTIVITY REPORT


Assessments of the Bank for the Interim Activities

1. Board of Directors Chairman’s Assesments on Interim Report

Esteemed Shareholders,

The strong growth performance attained in global economy in 2017 and in the first half of 2018 began to slow

down as of the second half of 2018, with factors that had an impact on developed economies in particular.

With respect to developed countries, while the US economy maintained a robust outlook, the global growth started

to weaken above the expectations as a result of the deteriorating confidence indices in the EU, concerns around

the Italian economy, the unclosed deal of Brexit, and the slowdown in net external demand in Asian economies.

Facing such economic outlook, the European Central Bank (ECB) stated in March that interest rates would be kept

at minimum levels at least until the end of 2019 in an attempt to rejuvenate economy. ECB also announced a new,

two-year Targeted Longer-Term Refinancing Operations (TLTRO-III) program, which will start in September

2019 and end in March 2021. As for developing countries, the growth in China –with the greatest contributions to

the global growth – slowed down because the expansionary policy steps by the Chinese government in order to

support the internal demand brought about expectations for greater fragility on the banking sector, along with the

escalating tension in the Chinese-US relations.

In the first quarter of 2019, uncertainties arising from trade wars did not only worsen producer and consumer

confidence but also impaired the outlook in financial markets. This all resulted in a restricted access to financial

sources and, unsurprisingly, a pressure on the growth for developing countries.

The overall weakness in growth pushed the growth expectations for 2019 and 2020 to be revised. The International

Monetary Fund (IMF) anticipates a 3.6% growth globally for 2018, declining to 3.3% in 2019 and attaining the

levels of 2018 – 3.6% – only in 2020, in its recent global outlook report. The Organization for Economic

Cooperation and Development (OECD) underscores the slowdown in China and Europe and the weaker global

trade as two factors that pose a risk for the global economy, while anticipating a 3.3% and 3.4% growth for 2019

and 2020, respectively.

Despite high risks in the global economy, Turkey closed 2018 with a growth of 2.6%, with precursors for a

recovery in economy thanks to the required structural transformations that were undertaken. Q1 2019 indicators

confirm our expectations for a new momentum in economy, in the aftermath of shrinkage in the fourth quarter of

2018.

The balancing period in economy helped achieve a considerable improvement in the balance of payments, and the

current deficit dropped from USD 47.3 billion to USD 20.72 billion in 2018. The moderate outlook in the balance

of payments is ongoing, supported by export figures in the first quarter of 2019.

The rising inflation caused by the disproportionate depreciation in Turkish Lira – much higher than what was

revealed by macroeconomic indicators in the second half of 2018 – started to decline thanks to economy

authorities’ determined stance focused on stability and reform and economic balancing. We firmly believe that

this determination will be maintained and reassuring steps will be taken as necessary if Turkish Lira is exposed to

unhealthy movements.

The banking sector played a defining role in keeping the wheels of economy turning. Having maintained its robust

structure, the sector continued to finance investments in the first quarter of the year.




98

SECTION SEVEN

INFORMATION ON INTERIM ACTIVITY REPORT (cont’d)


Assessments of the Bank for the Interim Activities (cont’d)

1. Board of Directors Chairman’s Assesments on Interim Report

Established 65 years ago in order to support agricultural industry, rural development and sustainable production,

Şekerbank has adopted the mission of responsible banking, a key theme for our sector. As required by this mission,

we have continued to support our customers during the times of economic fluctuations. In the first three months

of the year, accordingly, we have provided favorable financing facilities to SMEs and farmers in particular by

pushing our limits, and promoted the development journey of Turkey, just as we have done for 65 years.

Our Bank will keep expanding its broad customer base of farmers and SMEs, with whom it has been working for

generations, and continue unwaveringly to contribute to the Turkish economy through supporting production in

the upcoming period as well.

Kind regards,

Dr. Hasan Basri Göktan

Chairman of the Board of Directors




99

SECTION SEVEN (cont’d)




2. General Manager’s Assesments on Interim Report

Esteemed Stakeholders,

Our total credit volume reached TRL 24.3 billion, according to our Bank’s consolidated financial results dated 31

March 2019. In the first three months of 2019, we have continued to support our economy and provide funding to

production. We extended 59% of our loans to SMEs and farmers as of the end of March.

We increased our asset size by 5% year on year and reached TRL 33.9 billion as of 31 March 2019.

The unswerving destination of broad-based savings for 65 years, our Bank has seen a 20% year on year rise in the

size of deposits, attaining TRL 24.6 billion in the first three months of 2019.

We have cemented our brand recognition as a reliable bank through standing by our customers from all parts of

Turkey in good times and in bad times for 65 years. With the aim of carrying our deep-rooted customer base to

the future, we have expanded it and adopted a route of frontal thrusts comprising various end-to-end projects. We

have attained, and will further enrich, our broad-based balance sheet structure thanks to our well-established

network of branches, which remain where they are for a half century, and our human resources competent in local

banking. In the upcoming months, we are planning to take maiden steps into a new period during which we will

undertake a series of ‘firsts’ in our sector.

While carrying out our operations, we will keep making it a top priority to promote Turkey’s development journey

and enhance our people’s welfare, and standing by our SMEs and farmers as they are the backbones of production

and employment.

Kind regards,

Erdal Erdem

General Manager




100

SECTION SEVEN (cont’d)




3. Şekerbank by Numbers

The subsidiaries financial statements, which are consolidated within the framework of the reporting package, are

as follows.

Subsidiaries

(TRL Thousand)

Country

(Foundation/Operating)

Total Assets Equity Net Income

Income

Before Tax

TaxProvision

Şekerbank (Kıbrıs) Ltd. TRNC 326,869 27,215 (823) (976) 153

Şeker Finansal Kiralama A.Ş. Turkey 551,216 66,811 2,265 737 1,528

Şekerbank International Banking Unit Ltd. TRNC 44,468 38,457 396 396 -

Şeker Yatırım Menkul

Değerler A.Ş. Turkey 248,975 32,622 (3,126) (2,695) (431)

Şeker Faktoring A.Ş. Turkey 491,903 75,586 (1,518) (1,970) 452

Şeker Finansman A.Ş. Turkey 1,022,923 18,501 9,136 11,390 (2,254)

Zahlungsdienste GmbH der Şekerbank T.A.Ş. Germany 1,828 1,062 36 36 -

4. Consolidated Financial Highlights and Ratios

Financial Highlights (TRL Thousand) 31.03.2019 31.03.2018

Assets 33,933,985 32,178,024

Loans (Net) 22,491,703 22,614,713

Securities 3,596,323 2,937,311

Equity 2,365,094 2,366,517

Deposits 24,566,846 20,486,114

Net Profit ( Loss) (89,308) 28,925

Financial Ratios 31.03.2019 31.03.2018

Capital Adequacy Ratio 12.65 12.75

Securities / Assets 10.60 9.13

Loans (Net) / Assets 66.28 70.28

Deposits / Assets 72.40 63.66

5. Financial Standing, Profitability and Solvency

Total assets of the Group reached TRL 33,933,985 Thousand, loans reached TRL 22,491,703 Thousand and total

net worth reached TRL 2,365,094 Thousand as of 31 March 2019.

Loans compose 66.28 % of the total assets as of 31 March 2019. Consolidated securities portfolio has realized as

TRL 3,596,323 Thousands as of the reporting period. The share of deposits of the Group has reached 72.40% of

the total liabilities. The Group posted TRL 213,561 Thousand as consolidated net interest income and TRL 98,433

Thousand as consolidated net fee and commission income.