turkish banking sector and turkish banks november 2008

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Turkish Banking Sector and Turkish Banks November 2008 Sadrettin Bagci Tel : +90 212 336 7277 Fax: +90 212 282 2256 [email protected]

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Turkish Banking Sector and Turkish Banks November 2008. Sadrettin Bagci Tel : +90 212 336 72 77 Fax: +90 212 282 2256 sadrettin.bagci @finansinvest.com. TURKISH BANKING SECTOR Past Performance Recent Trends Outlook. BANKING SECTOR – Continous Growth since 2002. CAGR: 20.9%. - PowerPoint PPT Presentation

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Page 1: Turkish Banking Sector and Turkish Banks November 2008

Turkish Banking Sector and Turkish Banks

November 2008 Sadrettin Bagci

Tel : +90 212 336 7277Fax: +90 212 282 2256

[email protected]

Page 2: Turkish Banking Sector and Turkish Banks November 2008

2

TURKISH BANKING SECTOR

Past Performance

Recent Trends

Outlook

Page 3: Turkish Banking Sector and Turkish Banks November 2008

3

BANKING SECTOR – Continous Growth since 2002

Source: The Banks Association of Turkey

Loans, TRY Billion

56 70103

153

218

280

337

0

50

100

150

200

250

300

350

2002 2003 2004 2005 2006 2007 1H08

Deposits, TRY Billion

142 161197

254

313357

405

0

50

100

150

200

250

300

350

400

450

2002 2003 2004 2005 2006 2007 1H08

Equity, TRY Billion

26

36

4654

58

73 74

0

10

20

30

40

50

60

70

80

2002 2003 2004 2005 2006 2007 1H08

Assets, TRY Billion

213250

306

397

485561

633

0

100

200

300

400

500

600

700

2002 2003 2004 2005 2006 2007 1H08

CAGR: 38.4%

CAGR: 20.9%

CAGR: 21.2%CAGR: 21.9%

1

Page 4: Turkish Banking Sector and Turkish Banks November 2008

4

BANKING SECTOR – Penetration Improved as well

Source: The Banks Association of Turkey and the Central Bank of Turkey

Loans to GDP

16% 15%18%

24%

29%33%

37%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2002 2003 2004 2005 2006 2007 1H08

Deposits to GDP

41%35% 35%

39% 41% 42% 44%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2002 2003 2004 2005 2006 2007 1H08

Equity to GDP

7%

8%

8% 8%

8%

9%

8%

7%

7%

8%

8%

9%

9%

2002 2003 2004 2005 2006 2007 1H08

Assets to GDP

61%55% 55%

61% 64% 66% 69%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2002 2003 2004 2005 2006 2007 1H08

• Significant growth performance over the last six years, beating the 19.2% CAGR in Nominal GDP

2

Page 5: Turkish Banking Sector and Turkish Banks November 2008

5

BANKING SECTOR – Main Drivers of the Loan Growth post 2002

Source: The Banks Association of Turkey and the State Planning Organization

While

• Pent-up demand during the crisis period in 2001 and

• Gradual decline in interest rates

have helped for increasing loan demand after 2002,

• Easing public sector borrowing requirement due to falling domestic debt stock

has enabled banks to shift their focus from domestic borrowing instruments to loans

20%

25%

30%

35%

40%

45%

50%

55%

12 02 06 03 12 03 06 04 12 04 06 05 12 05 06 06 12 06 06 07 12 07 06 08

Loans to Assets

Security Portfolio to Assets

0%

10%

20%

30%

40%

50%

60%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

-5%

0%

5%

10%

15%

20%Domestic Debt Stock / GDP -left scale

Public Sector Borrowing Requirement -right scale

3

Page 6: Turkish Banking Sector and Turkish Banks November 2008

6

BANKING SECTOR – Share of Foreign Banks has Increased

Meanwhile the Turkish Banking Sector has attracted the interest of foreing banks thanks to the

• Strong growth potential backed by the favorable population dynamics, strengthening economic activity and of course with the EU accession progress.

• The share of foreign banks in the Turkish Banking Sector has significantly increased from a mere 3% at end 2002 to around 26% as of June 2008.

Turkish Banks with Foreing PartnersTurkish Party Foreing Party

Akbank CitibankDenizbank DexiaFortis Bank Fortis Now BNP ParibasSekerbank Bank Turan AlemTEB BNP ParibasGaranti Bank GECFYapi Kredi Bank UnicreditFinans Bank NBG

Foreign Banks in Turkey

ABN AMRO Bank N.V.Arap Turk BankBank MellatCitibankDeutsche BankEurobank TekfenHSBCING BankJPMorgan Chase BankMillennium BankSociéte GénéraleSource: Banks Association of Turkey

Share of Foreign Banks in Turkish Banking Sector

3.1%

26.0%

0%

5%

10%

15%

20%

25%

30%

2002 1H08

Source: Banking Regulation and Supervision Agency

4

Page 7: Turkish Banking Sector and Turkish Banks November 2008

7

BANKING SECTOR – Players w.r.to Ownership

PLAYERS w.r.to OWNERSHIPAs of August 2008 # of Banks # of Branches # of StaffSector 50 8,875 179,746

Deposit Banks 33 8,343 163,662Public 4 2,357 41,751Private 11 4,062 81,299Foreign 18 1,924 40,612

Participation Banks 4 483 10,701Investment & Development Banks 13 49 5,383

Source: Banks Association of Turkey

SIZE of the SECTOR w.r.to OWNERSHIPAs of August 2008, TRY Million Assets Loans Deposits EquitySector 648 347 398 83

Deposit Banks 605 320 381 69Public 184 77 136 17Private 323 181 192 39Foreign 97 62 53 13

Participation Banks 22 17 17 3Investment & Development Banks 21 10 0 10

Source: Banks Association of Turkey

MARKET SHARES w.r.to OWNERSHIPAs of August 2008 Assets Loans Deposits Equity

Deposit Banks 93% 92% 96% 84%Public 28% 22% 34% 21%Private 50% 52% 48% 47%Foreign 15% 18% 13% 16%

Participation Banks 3% 5% 4% 4%Investment & Development Banks 3% 3% 0% 12%

Source: Banks Association of Turkey

5

Page 8: Turkish Banking Sector and Turkish Banks November 2008

8

BANKING SECTOR – Recent Growth Trends

6

TRY mn 2005 2006 Oct.07 2007 Oct.08 YoY Growth YtD GrowthDeposits 251,869 308,396 329,283 350,609 425,501 29.2% 21.4%Bank Deposits 8,709 11,581 7,203 10,444 12,625 75.3% 20.9%Customer Deposits 243,160 296,815 322,080 340,165 412,876 28.2% 21.4%

LC 153,995 181,532 208,257 221,384 268,640 29.0% 21.3%FC 89,165 115,283 113,823 118,781 144,236 26.7% 21.4%FC, US$ mn 66,452 82,017 96,005 101,984 92,441 -3.7% -9.4%

Customer Time Deposits 194,304 243,933 270,180 285,364 355,876 31.7% 24.7%Customer Demand Deposits 48,857 52,882 51,900 54,801 57,000 9.8% 4.0%Demand Deposit Ratio 20.1% 17.8% 16.1% 16.1% 13.8%Source: BRSA Weekly Data

TRY mn 2005 2006 Oct.07 2007 Oct.08 YoY Growth YtD Growth

Loans 153,101 214,998 250,161 271,865 360,005 43.9% 32.4%Performing Loans 152,265 214,250 249,109 270,758 357,946 43.7% 32.2%Non-Performing Loans 7,486 8,127 9,420 9,776 11,251 19.4% 15.1%NPL Provisioning 6,650 7,379 8,368 8,669 9,192 9.8% 6.0%

NPL Ratio 4.7% 3.7% 3.6% 3.5% 3.0%NPL Provisioning Ratio 88.8% 90.8% 88.8% 88.7% 81.7%

LC Loans 108,101 156,467 188,144 202,696 252,694 34.3% 24.7%FC Loans 45,001 58,531 62,016 69,169 107,311 73.0% 55.1%FC Loans, US$mn 33,538 41,641 52,308 59,388 68,776 31.5% 15.8%

Corporate & Commercial Loans 107,457 147,888 166,242 180,052 244,302 47.0% 35.7%Retail Loans 45,644 67,110 83,919 91,813 115,703 37.9% 26.0%

Consumer Loans 28,618 45,931 59,595 65,813 83,343 39.8% 26.6%Housing Loans 12,405 22,165 28,392 30,898 38,305 34.9% 24.0%Auto Loans 6,146 6,405 5,766 5,928 5,802 0.6% -2.1%General Purpose Loans 10,066 17,362 25,436 28,987 39,235 54.2% 35.4%

Credit Card Loans 17,026 21,179 24,324 26,000 32,360 33.0% 24.5%Source: BRSA Weekly Data

Page 9: Turkish Banking Sector and Turkish Banks November 2008

9

BANKING SECTOR – Recent Growth Trends

6

TRY MillionLoans 374,690 378,044 366,221

-TRY Loans 268,142 269,903 273,941 -FX Loans 106,548 108,141 92,280 -FX Loans, $ 70,287 72,113 74,927Non-Performing Loans (Net) 2,546 2,444 2,328

Non-Performing Loans (Gross) 12,278 12,069 11,399 Provision for NPL's 9,746 9,625 9,071Total Deposits and Funds (3) 442,674 444,284 432,737

-Time Deposits and Participation Accounts 383,128 381,137 364,824 -Demand Deposits and Special Current Accounts 59,546 63,147 67,913 -Savings Deposits-TRY 173,444 172,938 165,511 -FX Deposits (Natural Persons) 83,820 83,970 82,594 -FX Deposits (Natural Persons), $ 55,294 55,995 67,062 -Other Deposits (Commercial Deposits included) 166,832 168,593 166,911 - TRY 100,127 101,531 108,081 - FX 66,705 67,062 58,830 - FX, $ 44,004 44,720 47,767 -Deposits Under Insurance 124,286 123,925 121,592Source: BRSA Daily Banking Data

NPL Ratio 3.17% 3.09% 3.02%NPL Coverage Ratio 79.38% 79.75% 79.58%Demand Deposit Ratio 13.5% 14.2% 15.7%Guaranteed Deposits / Total Deposits 28.1% 27.9% 28.1%

10.11.08 31.10.08 29.09.08

Page 10: Turkish Banking Sector and Turkish Banks November 2008

10

BANKING SECTOR – Composition of Assets & Funding

Tangible Assets3%

Other Assets5%

Liquid Assets12%

Securities27%

Loans, Net53%

External Borrowing

14%

Short Term Funds

5%

Other Liabilities7%

Shareholders' Equity13%

Deposits61%

Source: Banking Regulation and Supervision Agency

• While loans are the main placement item with 53% share in total assets as of August 2008,

• The funding side is mainly composed of deposits with 61% share

7

Page 11: Turkish Banking Sector and Turkish Banks November 2008

11

BANKING SECTOR – Composition of Loans

Source: The Central Bank of Turkey

Breakdown of Retail Loans, TRY Million

0

20,000

40,000

60,000

80,000

100,000

120,000

10

02

02

03

06

03

10

03

02

04

06

04

10

04

02

05

06

05

10

05

02

06

06

06

10

06

02

07

06

07

10

07

02

08

06

08

10

08

Credit Card Loans

Other Consumer Loans

Auto Loans

Housing Loans

8

Breakdown of Loans 2005 2006 Oct.07 2007 Oct.08

LC Loans 70.6% 72.8% 75.2% 74.6% 70.2%FC Loans 29.4% 27.2% 24.8% 25.4% 29.8%Corporate & Commercial Loans 70.2% 68.8% 66.5% 66.2% 67.9%Retail Loans 29.8% 31.2% 33.5% 33.8% 32.1%

Consumer Loans 18.7% 21.4% 23.8% 24.2% 23.2%Housing Loans 8.1% 10.3% 11.3% 11.4% 10.6%Auto Loans 4.0% 3.0% 2.3% 2.2% 1.6%General Purpose Loans 6.6% 8.1% 10.2% 10.7% 10.9%

Credit Card Loans 11.1% 9.9% 9.7% 9.6% 9.0%Source: BRSA Weekly Data

Page 12: Turkish Banking Sector and Turkish Banks November 2008

12

BANKING SECTOR – Interest Rates

Source: The Central Bank of Turkey and Istanbul Stock Exchange

0

100

200

300

400

500

600

700

04

06

07

06

10

06

01

07

04

07

07

07

10

07

01

08

04

08

07

08

10

08

10.00

12.00

14.00

16.00

18.00

20.00

22.00

24.00

Duration

Interest Rates in theTreasury Auctions

12.00

14.00

16.00

18.00

20.00

22.00

24.00

04

06

07

06

10

06

01

07

04

07

07

07

10

07

01

08

04

08

07

08

10

08

Interest Rates in the Treasury Auctions

Policy Rate Compound

Source: The Turkish Treasury and the Central Bank of Turkey

9

Benchmark Interest Rate vs. CBRT's Policy Rate, %

12.00

14.00

16.00

18.00

20.00

22.00

24.00

26.00

28.00

11 0

5

01 0

6

03 0

6

05 0

6

07 0

6

09 0

6

11 0

6

01 0

7

03 0

7

05 0

7

07 0

7

09 0

7

11 0

7

01 0

8

03 0

8

05 0

8

07 0

8

09 0

8

Benchmark Bond Compound Interest Rate

CBRT Compound Policy Rate

Page 13: Turkish Banking Sector and Turkish Banks November 2008

13

BANKING SECTOR – Liquidity Ratios have Diminished but Still at Comfortable Levels

1.00

1.20

1.40

1.60

1.80

2.00

2.20

2.40

2.60

2.80

08 07 09 07 10 07 11 07 12 07 01 08 02 08 03 08 04 08 05 08 06 08 07 08 08 08

1 Week

1Month

Source: Banking Regulation and Supervision Agency – Monthly Bulletin

• Compared to a year ago the 1 Week and 1 Month Liquidity ratios have been following a declining path, but we believe these levels are still strong for our banking sector

10

Page 14: Turkish Banking Sector and Turkish Banks November 2008

14

BANKING SECTOR – Capital Strength is Fair Enough

Source: Banking Regulation and Supervision Agency – Monthly Bulletin

• The sector’s Capital Adequacy Ratio (CAR) stood at 17.7% in August 2008, indicating a 123bps decline with respect to December 2007 and a 96bps decline from August 2007. The inclusion of operational risk since June 2007 and the increasing risk weighting of non-cash loans since January 2008 all played a role in the decline in CAR rates in 2008.

10%

12%

14%

16%

18%

20%

08 07 09 07 10 07 11 07 12 07 01 08 02 08 03 08 04 08 05 08 06 08 07 08 08 08

CAR

Equity / Assets

11

Page 15: Turkish Banking Sector and Turkish Banks November 2008

15

BANKING SECTOR – Comparison of Capital Strength

Source: IMF Global Financial Stability Report – October 2008

Bank Capital to Assets

0.02.04.06.08.0

10.012.014.016.018.020.0

Albania

Czech

Rep

ublic

Hunga

ry

Roman

ia

Lithu

ania

Poland

Bulgar

iaLa

tvia

Mon

tene

gro

Israe

l

Estonia

Slovak

Rep

ublic

Croat

ia

Ukrain

e

Turk

ey

Bosnia

and

Her

zego

vina

Russia

Belaru

s

Serbia

Mold

ova

CAR

0

5

10

15

20

25

30

35

Israe

l

Lithu

ania

Hunga

ry

Latv

ia

Czech

Rep

ublic

Poland

Slovak

Rep

ublic

Roman

ia

Bulgar

ia

Ukrain

e

Estonia

Russia

Croat

ia

Albania

Bosnia

and

Her

zego

vina

Mon

tene

gro

Mac

edon

ia

Turk

ey

Belaru

s

Serbia

Mold

ova

12

Page 16: Turkish Banking Sector and Turkish Banks November 2008

16

BANKING SECTOR – Comparison of NPLs may become a Major Problem

Source: Banking Regulation and Supervision Agency – Monthly Bulletin

• Though we still feel confident about the NPL ratio of the sector, which is 3.2% as end of August 2008, the possibility of further slow-down in Euro Zone economy may pave for a rise.

• Given that our exports to Euro Zone constitutes almost half of the total exports of Turkey, the importance of the Euro area economic growth becomes more significant.

2.7%

2.8%

2.9%

3.0%

3.1%

3.2%

3.3%

3.4%

3.5%

3.6%

3.7%

08 07 09 07 10 07 11 07 12 07 01 08 02 08 03 08 04 08 05 08 06 08 07 08 08 08

76%

78%

80%

82%

84%

86%

88%

90%

NPL Ratio

NPL Provisioning

13

Page 17: Turkish Banking Sector and Turkish Banks November 2008

17

BANKING SECTOR – Comparison of NPLsNPL Provisioning

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

Roman

ia

Ukrain

e

Czech

Rep

ublic

Israe

l

Belaru

s

Croat

ia

Mon

tene

gro

Turk

ey

Slovak

Rep

ublic

Mold

ova

Latv

ia

Russia

NPL Ratio

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Latv

ia

Estonia

Belaru

s

Lithu

ania

Hunga

ry

Bulgar

iaIsr

ael

Russia

Slovak

Rep

ublic

Czech

Rep

ublic

Bosnia

and

Her

zego

vina

Poland

Mon

tene

gro

Albania

Turk

ey

Mold

ova

Serbia

Croat

ia

Mac

edon

ia

Roman

ia

Ukrain

e

Source: IMF Global Financial Stability Report – October 2008

14

Page 18: Turkish Banking Sector and Turkish Banks November 2008

18

BANKING SECTOR – Short FX Positions were Cut Recently

Source: Banking Regulation and Supervision Agency – Weekly Bulletin

• We had observed that banks reduced their on balance short FX positions from over US$14bn in mid August 2008 to around US$5.2bn by end of October 2008. Although the on balance short FX positions are mostly hedged (net short FX position of the system is US$1.3bn as of 31 October 2008), we still harbour some doubts regarding the quality of the hedging.

15

-20,000

-15,000

-10,000

-5,000

0

5,000

10,000

15,000

20,000

10

05

12

05

02

06

04

06

06

06

08

06

10

06

12

06

02

07

04

07

06

07

08

07

10

07

12

07

02

08

04

08

06

08

08

08

10

08

Net FX PositionOn BalanceOff Balance

Page 19: Turkish Banking Sector and Turkish Banks November 2008

19

BANKING SECTOR – Profitability has slowed down

Source: Banking Regulation and Supervision Agency – Monthly Bulletin

• We haven’t observed that a severe deterioration in the top-line growth yet but especially the increasing provisioning and the higher OPEX growth compared to the overall revenue growth, we face with a decline in the profitability ratios.

• We are almost sure that the economic imbalances will result in a further slow down in the profitability ratios in the following three to nine months time.

17%

18%

19%

20%

21%

22%

23%

08 07 09 07 10 07 11 07 12 07 01 08 02 08 03 08 04 08 05 08 06 08 07 08 08 08

2.2%

2.3%

2.4%

2.5%

2.6%

2.7%

2.8%

2.9%

3.0%

RoAE -left scale

RoAA -right scale

17

Page 20: Turkish Banking Sector and Turkish Banks November 2008

20

BANKING SECTOR – Satisfactory Top-Line Growth

Source: Banking Regulation and Supervision Agency – Monthly Bulletin

• As Spread and Net Interest Margin (NIM), we have observed a slow-down in the pace of top-line (Net Interest Income) growth. It is lightly above 20% YoY, but the growth level was higher in early 2008.

• Although we think the growth pace is adequate at the moment, due to the sudden jump in the interest rates started late in September 2008 is expected to further put pressure on spread and margins.

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

08 07 09 07 10 07 11 07 12 07 01 08 02 08 03 08 04 08 05 08 06 08 07 08 08 08

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

NII Growth

SpreadNIM

18

Page 21: Turkish Banking Sector and Turkish Banks November 2008

21

BANKING SECTOR – Comparison of Profitability

RoAE

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Mon

tene

gro

Bosnia

and

Her

zego

vina

Serbia

Croat

ia

Roman

ia

Ukrain

e

Belaru

s

Mac

edon

ia

Slovak

Rep

ublic

Israe

l

Turk

ey

Albania

Hunga

ry

Russia

Poland

Latv

ia

Mold

ova

Czech

Rep

ublic

Bulgar

ia

Lithu

ania

Estonia

Source: IMF Global Financial Stability Report – October 2008

19

Page 22: Turkish Banking Sector and Turkish Banks November 2008

22

BANKING SECTOR – Consumer Confidence

Source: The Central Bank of Turkey

• The latest survey is as of September 2008, a lot has changed since then.

• But we belive the consumer confidence should be knocked-out for the time being, given the strong relationship between the exchange rate and the consumer confidence.

• On top of that the ongoing interest rates in the market limits the borrowing possibility.

20

Consumer Confidence and Borrowing Possibility

75

80

85

90

95

100

105

09

05

12

05

03

06

06

06

09

06

12

06

03

07

06

07

09

07

12

07

03

08

06

08

09

08

25

27

29

31

33

35

37

Consumer Confidence Index -left scaleBorrowing Possibility (next 3 months) -right scale

Consumer Confidence vs. Inverse TRY/USD

75

80

85

90

95

100

105

110

09

04

12

04

03

05

06

05

09

05

12

05

03

06

06

06

09

06

12

06

03

07

06

07

09

07

12

07

03

08

06

08

09

08

0.60

0.65

0.70

0.75

0.80

0.85

0.90Consumer Confidence Index -left scaleInverse TRY/USD -right scale

Page 23: Turkish Banking Sector and Turkish Banks November 2008

23

BANKING SECTOR – Portfolio Preferences

• Foreign investors have more faith in the Turkish Capital Markets

Portfolio Preferences of Citizens, % Share

2004 2005 2006 2007 Sep.08FX Deposits 25.7 22.1 25.4 22.9 23.1TL Deposits 34.9 42.0 42.8 46.1 47.8Repo 0.6 0.4 0.6 0.6 0.5TL Domestic Borrowing Instruments 19.2 15.5 13.5 12.2 12.2FX Borrowing Instruments 0.9 0.5 0.4 0.3 0.2Eurobond 1.9 1.5 1.4 0.9 0.8Mutual Funds 8.3 8.5 5.8 5.8 5.1Participation Accounts 2.0 2.5 2.8 3.3 3.5Equity 5.7 6.6 6.6 6.9 5.7Pension Funds 0.1 0.4 0.7 1.0 1.2Source: State Planning Organization

Portfolio Preferences of Foreigners, % Share

2004 2005 2006 2007 Sep.08Equity 47.0 58.0 52.4 65.5 58.5T-Bills and Bonds 38.3 35.0 39.2 29.6 34.0Eurobond 3.5 1.1 0.8 0.3 0.8Deposits 11.3 5.9 7.6 4.6 6.8Source: State Planning Organization

21

Page 24: Turkish Banking Sector and Turkish Banks November 2008

24

BANKING SECTOR – Outlook

Short-Term Outlook

• Going forward we expect the high interest rate environment to prevail during the rest of 2008.

• Banks are likely to end up the year with around 35% YoY loan growth.

• We expect deposit growth to be around 25% YoY in 2008.

Long-Term Outlook

• Security portfolio build up will gain some pace and the structure of the securities is expected to turn out to be floating rate rather than fixed rate securities.

• We forecast the loan growth at 16% in 2009 and deposit growth at around 20%.

• Thanks to the postponement of Basel-II, which would be in effect starting from 2009 according to the previous plans, banks will be able to meet the necessary capital requirements.

• Syndication roll-overs will not be a major problem for Turkish banks in our view.

• We expect the banks providing the four main criteria to outperform the market going forward. These are:

Sufficient liquidity

Wide funding base

Strong capitalization

Low OPEX

22

Page 25: Turkish Banking Sector and Turkish Banks November 2008

25

BANKING SECTOR – ISE Total vs ISE Listed Banks

25.4%21.5%

26.0%29.1%

38.5% 36.5%40.2%

35.3%

26.9% 26.7%

30.7%

23.6%25.4%

33.2%

37.8%

51.6%

0%

10%

20%

30%

40%

50%

60%

2001 2002 2003 2004 2005 2006 2007 2008

Banks Market Capitalization / ISE Total

Trading Volume of Banks / ISE Total

Source: Istanbul Stock Exchange

• There are 17 banks listed on the ISE as of today with total market capitalization of TRY62bn (US$41bn)

• While banks constitute 35% of the total market capitalization of the ISE total, the trading volume of banks is more significant at slightly over 50% in 2008.

23

Page 26: Turkish Banking Sector and Turkish Banks November 2008

26

BANKING SECTOR – ISE Banks’ Performance in the last one year

Source: FinansInvest Research

• Banking sector index has fallen by almost 60% compared to a year ago.

• Banks have also underperformed the ISE-100 by 15% in the last one year.

24

0

20

40

60

80

100

120

11

07

12

07

01

08

02

08

03

08

04

08

05

08

06

08

07

08

08

08

09

08

10

08

11

08

0.75

0.80

0.85

0.90

0.95

1.00

Banking SectorIndex NominalPerformanceBanking SectorIndex RelativePerformance

Page 27: Turkish Banking Sector and Turkish Banks November 2008

27

BANKING SECTOR – Trading at their historical lows

Source: FinansInvest Research Forecasts

• The banks in our coverage are trading very close to their historical low P/E and P/BV multiples.

12-M FW Looking P/E and P/BV Ratios

0.00

5.00

10.00

15.00

20.00

25.00

2003 2004 2005 2006 2007 2008 2009

0.00

0.50

1.00

1.50

2.00

2.50P/E -left scale

P/BV -right scale

25