Şekerbank türk anonim Şirketi
TRANSCRIPT
Şekerbank
Türk Anonim Şirketi
Unconsolidated Interim Financial Statements
For the Nine-month Period Ended 30 September 2016
With Auditor’s Review Report Thereon
(Convenience Translation of Unconsolidated
Financial Statements and Related Disclosures and Footnotes
Originally Issued in Turkish)
8 November 2016
This report consists of 2 pages Auditors’ Review
Report and 90 pages of financial statements and
related disclosures and footnotes.
With Independent Auditors’ Review Report Thereon
With Independent Auditors’ Report Thereon Akis Bağımsız
Denetim ve Serbest
Muhasebeci Mali Müşavirlik
Convenience Translation of the Independent Auditors’ Review Report Originally Prepared and Issued in Turkish to English (See Note I in Section Three)
To the Board of Directors of Şekerbank T.A.Ş.;
Introduction
We have reviewed the unconsolidated balance sheet of Şekerbank T.A.Ş. (“the
Bank”) at 30 September 2016 and the related unconsolidated statement of income,
unconsolidated statement of income and expense items under shareholders’ equity,
unconsolidated statement of changes in shareholders’ equity, unconsolidated
statement of cash flows and a summary of significant accounting policies and other
explanatory notes to the unconsolidated financial statements for the nine-month-
period then ended. The Bank Management is responsible for the preparation and
fair presentation of interim financial statements in accordance with the
“Regulation on Accounting Applications for Banks and Safeguarding of Documents”
published in the Official Gazette no.26333 dated 1 November 2006, and other
regulations on accounting records of Banks published by Banking Regulation and
Supervision Agency and circulars and interpretations published by Banking
Regulation and Supervision Authority, (together referred as “BRSA Accounting and
Reporting Legislation”) and Turkish Accounting Standard 34 “Interim Financial
Reporting” for those matters not regulated by BRSA Accounting and Reporting
Legislation. Our responsibility is to express a conclusion on these interim financial
information based on our review.
Scope of Review
We conducted our review in accordance with the Standard on Review
Engagements (SRE) 2410, “Limited 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 performed in accordance with the 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.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying unconsolidated financial information does not give a true view of the financial position of the Bank at 30 September 2016 and of the results of its operations and its cash flows for the nine-month period then ended in all aspects in accordance with the BRSA Accounting and Reporting Legislation.
Report on other regulatory requirements arising from legislation
Based on our review, nothing has come to our attention that causes us to believe that the
financial information provided in the accompanying interim activity report in Section
VII, is not consistent with the unconsolidated financial statements and disclosures in all
material respects.
Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of KPMG International Cooperative Orhan Akova Partner, SMMM 8 November 2016 İstanbul, Turkey
Additional paragraph for convenience translation to English:
The accounting principles summarized in Note I Section Three, differ from the accounting principles generally accepted in countries in which the accompanying unconsolidated financial statements are to be distributed and International Financial Reporting Standards (“IFRS”). Accordingly, the accompanying financial statements are not intended to present the financial position and results of operations in accordance with accounting principles generally accepted in such countries of users of the unconsolidated financial statements and IFRS.
THE UNCONSOLIDATED FINANCIAL REPORT OF ŞEKERBANK T.A.Ş.
FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016
The unconsolidated financial report 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 BANK
UNCONSOLIDATED FINANCIAL STATEMENTS OF THE BANK
EXPLANATIONS ON THE CORRESPONDING ACCOUNTING POLICIES APPLIED IN
THE RELATED PERIOD
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT OF
THE BANK
EXPLANATORY DISCLOSURES AND FOOTNOTES ON UNCONSOLIDATED FINANCIAL
STATEMENTS
LIMITED REVIEW REPORT
INTERIM ACTIVITY REPORT
The unconsolidated financial statements 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 audited and presented as
attached.
The 30 September 2016 financial tables are audited 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 Servet TAZE Murat ISHMUKHAMEDOV
Chairman of The Board of
Directors
General Manager
Member of the Audit Committee
Victor ROMANYUK
Selim Güray ÇELİK Orhan ULUYOL
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
Telephone No : (212) 319 71 58
Fax No : (212) 319 71 62
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
:
INDEX
Page Number
SECTION ONE
General Information
I. Bank‟s Incorporation Date, Beginning Statue, Changes in the Existing Statue 1
II. Explanations Regarding 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 in the Bank 2
IV. Information about the person and institutions that have qualified shares 2
V. Summary on the Bank‟s Functions and Areas of Activity 3
VI. 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
Unconsolidated Financial Statements
I. Balance Sheet (Statement of Financial Position) 5
II. Statement of Off Balance Sheet Contingencies and Commitments 7
III. Statement of Income 8
IV. Statement of Profit and Loss Accounted for Under Equity 9
V. Statement of Changes in Shareholders‟ Equity 10
VI. 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 Foreign Currency Transactions 12
IV. Explanations on Associates and Subsidiaries 12
V. Explanations on Forward and Option Contracts and Derivative Instruments 13
VI. Explanations on Interest Income and Expenses 13
VII. Explanations on Fees and Commission Income and Expenses 13
VIII. Explanations on Financial Assets 13
IX. Explanations on Impairment on Financial Assets 16
X. Explanations on Offsetting of Financial Assets and Liabilities 17
XI. Explanations on Sales and Repurchase Agreements and Lending of Securities 17
XII. Explanations on Assets Held For Sale and Discontinued Operations 17
XIII. Explanations on Goodwill and Other Intangible Assets 17
XIV. Explanations on Tangible Fixed Assets 17
XV. Explanations on Leasing Transactions 18
XVI. Explanations on Provisions and Contingent Liabilities 18
XVII. Explanations on Liabilities Regarding Employee Benefits 18
XVIII. Explanations on Taxation 20
XIX. Additional Explanations on Borrowings 21
XX. Explanations on Share Certificates 21
XXI. Explanations on Acceptances 21
XXII. Explanations on Government Incentives 21
XXIII. Explanations on Segment Reporting 22
XXIV. Explanations on Other Matters 22
SECTION FOUR
Information Related to Financial Position and Risk Management of the Bank
I. Explanations Related to Equity 23
II. Explanations Related to Currency Risk 31
III. Explanations Related to Interest Rate Risk 33
IV. Explanations Related to Equity Securities Position Risk 37
V. Explanations Related to Liquidity Risk Management and Liquidity Coverage Ratio 37
VI. Explanations Related to Leverage Ratio 45
VII. Explanations Related to Risk Management 45
VIII. Explanations Related to Transactions Made on Behalf of Others and Transactions Based On Trust 46
SECTION FIVE
Explanations and Disclosures on Unconsolidated Financial Statements
I. Explanations Related to the Assets 47
II. Explanations Related to the Liabilities 63
III. Explanations Related to the Off-Balance Sheet Contingencies and Commitments 75
IV. Explanations Related to the Income Statement 80
V. Explanations on the Risk Group of the Bank 85
VI. Explanations and notes related to subsequent events 87
SECTION SIX
Auditor‟s Review Report
I. Explanations on the Auditor‟s Review Report 87
II. Other Footnotes and Explanations Prepared by the Auditors 87
SECTION SEVEN
Information on Interim Activity Report
I. Board of Directors Chairman‟s Assesments on Interim Report 88
II. General Manager‟s Assesments on Interim Report 89
III. Şekerbank by Numbers 90
IV. Financial Standing, Profitability, and Solvency 90
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
1
SECTION ONE
GENERAL INFORMATION
I. Bank’s Incorporation Date, Beginning Statue, Changes in the Existing Statue
Şekerbank T.A.Ş. („the Bank‟) was founded in 1953 as a Turkish bank with 14 partners in Eskişehir and
started its operations under Pancar Kooperatifleri Bankası A.Ş. in Eskişehir and changed the name to
Şekerbank T.A.Ş. by moving headquarters to Ankara in 1956. 15 % of the Bank shares were offered to
public in 1997 and currently 34.19 % of the Bank shares are publicly traded. The Bank‟s one of the main
shareholders, Şekerbank T.A.Ş. Personeli Munzam Sosyal Güvenlik ve Yardımlaşma Sandığı Vakfı, gives
its members additional social rights and retirement guarantees in the social security system. The Bank has
affiliates and subsidiaries in the finance and tourism sectors.
Business line of the 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 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
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 35.4395 410,389
-
- Samruk-Kazyna, the National
Wel-fare Fund of Kazakhstan 224,353 19.3742 224,353 - Şekerbank T.A.Ş. 109,212 9.4311 109,212 -
BTA Securities JSC 17,083 1.4752 17,083 - Public offerings 395,954 34.1928 395,954 - Others 1,009 0.0872 1,009 -
Total 1,158,000 100.0000 1,158,000 -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
2
III. Explanations Regarding the Chairman and the Members of Board of Directors, Audit
Committee, General Manager and Executive Vice Presidents and Their Shares 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 Servet Taze Board Member, General Manager, Credit Committee
Members of the Board of Directors Victor Romanyuk (*) Vice-Chairman, Remuneration Committee, Audit Committee
Emin Erdem Executive Board Member, Credit Committee
Erdal Batmaz Executive Board Member
Nariman Zharkinbayev Executive Board Member, Credit Committee
Halil Can Yeşilada Corporate Governance Committee, Internal Systems
Üzeyir Baysal Independent Director, Remuneration Committee
Khosrow Kashani Zamani Corporate Governance Committee
Murat Ishmukhamedov (*) Corporate Governance Committee, Audit Committee
Halit Haydar Yıldız -
Zhanibek Saurbek -
Executive Vice Presidents Ali Güray Demir Credit Legal and Administrative Follow -up
Fatin Rüştü Karakaş Audit
Nihat Büyükbozkoyun Operations
Selim Güray Çelik
Financial Control, Budgeting and Strategic Planning,
Corporate Governance Committee
Gökhan Ertürk Retail Banking Marketing
Umut Ülbegi Corporate and Commercial Banking Marketing
Salih Zeki Önder Financial Institutions
Ahmet İlerigelen Credit Management
Aybala Şimşek Strategy and Corporate Communication
Murat Sabaz Small Enterprises and Agricultural Banking Marketing
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. Murat Ishmukhamedov and Victor Romanyuk are Audit
Committee Members of the Bank.
The Chairman of the Board of Directors Dr. Hasan Basri Göktan has total shares of 0.05 % in nominal,
amounting to TRL 577 Thousand, Khosrow Kashani Zamani who is the Board of Directors Member has total
shares of 0.013 % in nominal, amounting to TRL 148 Thousand which they obtained from public offering.
IV. Information About the Persons and Institutions That Have Qualified Shares in the 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 35.4395 410,389 - Samruk-Kazyna, the National Well-fare Fund of
Kazakhstan 224,353 19.3742 224,353 -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
3
V. Summary on the Bank’s Functions and Areas of Activity
Business line of the 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 30 September 2016, the Bank has 273 domestic branches (31 December 2015 – 301
domestic branches).
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
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 Mortgage Finansman A.Ş.
and Zahlungsdienste GmbH der Şekerbank T.A.Ş. are included in the scope of consolidation by line-by-line
method.
Seltur Turistik İşletmeler Yatırım A.Ş. is not consolidated in the financial statements and is recorded at cost
since the Bank has no control and it is not a financial subsidiary.
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 transfer of the shareholders‟ equity between the 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 payback of liabilities between the Bank and its subsidiaries.
SECTION TWO
UNCONSOLIDATED FINANCIAL STATEMENTS
I. Balance Sheet (Statement of Financial Position)
II. Statement of Off Balance Sheet Contingencies and Commitments
III. Statement of Income
IV. Statement of Profit and Loss Accounted for Under Equity
V. Statement of Changes in Shareholders‟ Equity
VI.
Statement of Cash Flows
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
12
SECTION THREE
ACCOUNTING PRINCIPLES
I. Basis of Presentation
The Bank prepares financial statements and notes according to 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) and 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”).
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 of the Banking Law 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 unconsolidated financial statements.
Accordingly, the accompanying unconsolidated 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 Bank aims to keep up its activities in every line of banking.
The Bank shapes its strategies for financial instruments depending on the source of funds, which mainly consists
of deposits. Investment instruments are selected among liquid instruments. A level of liquidity which allows for
covering obligations is kept.
The Bank controls risk by managing currency 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
Bank tries to close by carrying out counter-transactions.
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. Budget contains limits on maturity basis and
distributions of assets items are defined.
The Bank‟s off-balance sheet term transactions are managed by including such transactions in the Bank‟s total
currency and interest positions. Term 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 Bank‟s currency cash flow without causing currency and interest risks.
The 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.
III. Explanations on Foreign Currency Transactions
The foreign currency monetary assets and liabilities followed under balance sheet are converted into Turkish Lira
at exchange rate at the balance sheet date. The non-monetary accounts carried at fair value are converted from the
exchange rates at the time the fair value was determined. Exchange rate differences arising from monetary items
conversion is stated under the income statement.
IV. Explanations on Associates and Subsidiaries
Associates and subsidiaries are recorded at the cost of acquisition and provision is provided for any impairment in
value.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
13
V. Explanations on Forward and Option Contracts and Derivative Instruments The Bank‟s derivative instruments 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 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. Some of the derivative
instruments, although made for economical hedging purposes, are accounted as trading transactions since they are
not qualified to be a hedging instrument as per “Financial Instruments: Recognition and Measurement” (“TAS
39”). Realized gains or losses on these derivative instruments are reflected in the statement of income.
VI. 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).
According to the related legislation, interest accruals and discounts on loans and other receivables which become
doubtful are cancelled and such amounts are recorded as interest income when they are collected.
VII. 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 then 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.
VIII. Explanations on Financial Assets
Financial instruments comprise financial assets, financial liabilities and derivative instruments. Financial
instruments form a significant part of the Bank‟s operations. Financial instruments affect liquidity, market, and
credit risks on the Bank‟s balance sheet in all respects. The Bank trades these instruments on behalf of its
customers and on its own behalf.
Financial instruments expose, affect credit and interest risks and diminish the liquidity 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 Bank. Settlement date accounting requires (a) accounting of the asset when
acquired by the institution and (b) disposing of the asset out of the balance sheet on the date settled by the
institution; 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, available for sale financial assets and securities held for
trading, the Bank 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 for in the same way
as the acquired assets. Fair value differences are not accounted for assets presented at cost or amortized cost; gain
or loss of financial assets at fair value through profit and loss are reflected in the statement of income; gain or loss
of available for sale assets are accounted for in the shareholders‟ equity.
The financial instruments are mentioned below with regard to their accounts classified in the financial statements
and their valuations according to these classifications.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
14
VIII. Explanations on Financial Assets (cont’d)
Cash, Banks and Other Financial Institutions
Cash and cash equivalents comprise cash on hand, demand deposits, and highly liquid short-term investments
with maturity of 3 months or less following the purchase date, not bearing risk of significant value change, and
these investments that are readily convertible to a known amount of cash. The book values of these assets
approximate their fair values.
Financial Assets at Fair Value Through Profit and Loss Trading securities are securities which were either acquired to generate a profit from short-term fluctuations in
price or dealer‟s margin, or they are the securities included in a portfolio with a pattern of short-term profit
taking.
Trading securities are initially recognized at cost. Transaction costs of the related securities are included in the
initial cost. The positive difference between the cost and fair value of such securities is accounted for as interest
and income accrual, and the negative difference is accounted for as “Impairment Provision on Marketable
Securities”.
As well as customer deposits, the Bank is funding its growing long term and fixed interest rate TRL loan
portfolio through long term floating interest rate foreign currency resources provided from international markets.
The Bank transforms the foreign currency liquidity which is created by funds provided from international markets
to TRL liquidity through long term swap contracts, as a result of this situation the Bank can both provide TRL
funds for the long term fixed rate loans and provide protection against interest rate risk.
The Bank reflects swaps, used for funding long term and fixed interest rate TRL loan portfolio, with fair value in
the financial statements. The Bank has initially classified these long term and fixed interest rate TRL loan
portfolio funded through swaps as “financial assets at fair value through profit and loss” and follows them at fair
value in the financial statements.
TRL 8,235 Thousand of the housing, commercial instalment, consumer, vehicle and finance lendings‟ principal
amounts are classified as under the account of financial asset at fair value through profit and loss (31 December
2015 - TRL 11,657 Thousand).
Held to Maturity Investments, Financial Assets Available for Sale and Loans Investments held to maturity include securities with fixed or determinable payments and fixed maturity where
there is an intention of holding till maturity and the relevant conditions for fulfilment of such intention, including
the funding ability and excluding loans and receivables.
Available for sale financial assets include all securities other than loans and receivables, securities held to
maturity and securities held for trading.
The securities are initially recognized at cost including the transaction costs.
After the initial recognition, available-for-sale securities are measured at fair value and the unrealized gain/loss
originating from the difference between the amortized cost and the fair value is recorded in “Marketable
Securities Value Increase Fund” under the equity. Fair values of debt securities that are traded in an active market
are determined based on quoted prices or current market prices. In the absence of prices formed in an active
market, fair values of these securities are determined using the Official Gazette prices or other valuation methods
stated in TAS. In case there is no market price in an active market, the other methods explained in TAS 39 are
used for determination of the fair value.
The real coupon rates for government bonds indexed to consumer price index are fixed throughout maturities. As
per the statements made by the Turkish Treasury on the dates of issuance, such securities are valued taking into
account the difference between the reference index at the issue date and the reference index at the balance sheet
date to reflect the effects of inflation.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
15
VIII. Explanations on Financial Assets (cont’d)
Held to Maturity Investments, Financial Assets Available for Sale and Loans (cont‟d)
Loans and receivables are financial assets raised by the Bank providing money to debtors, other than assets held
for trading purposes or for the purpose of selling in the short-term.
After initial recognition held to maturity investments are measured at amortized cost by using effective interest
rate less impairment losses, if any.
The interests received from held-to-maturity investments are recorded as interest income.
There are no financial assets that have been previously classified as held-to-maturity investments but cannot be
currently classified as held-to-maturity for two years due to “tainting” rules.
The Bank classifies its securities as referred to above at the acquisition date of related assets.
Shares unquoted on the stock exchange amounting to TRL 9,639 Thousand are classified under “Other
Marketable Securities” of Financial Assets Available for Sale in the current period (31 December 2015 - TRL
7,236 Thousand).
Loans and Provisions for Impairment
Loans and receivables are initially recognized at cost according to their original balances, after the initial
recognition, they are accounted at amortized cost by using effective interest rate as stated in the TAS 39.
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.
Provision is set for the doubtful loans and the amount is charged in the current period income statement. The
provisioning amount for non-performing loans are determined by the Bank‟s management for compensating the
probable losses of the doubtful loan portfolio, by evaluating the quality of loan portfolio, risk factors and
considering the economy conditions, other facts and related regulations.
The Bank Management applies provision policy for the “non-performing loans” in accordance with the
requirements of the Turkish banking regulation adopted by the BRSA.
The provisions are reflected in the income statement under “Provision and Impairment Expenses - Specific
Provision Expense”. The collections made regarding these loans are first deducted from the principal amount of
the loan and the remaining collections are deducted from interest receivables.
The collections related to loans for which provision is made in the current period are reversed from the
“Provision for Loans and Other Receivables” account in the income statement. The collections related to loans
written off or provisioned in prior years are recorded to “Collections Related to the Prior Period Expenses” under
“Other Operating Income” account and related interest income is credited to the “Interest Received from Non-
performing Loans” account.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
16
VIII. Explanations on Financial Assets (cont’d)
Loans and Provisions for Impairment (cont’d)
Within the framework of the regulation and principles referred to in explanations above, in addition to specific
loan loss provisions; the Bank records general loan loss provisions for loans and other receivables. Subsequent to
the change in the regulation on “Change in the Methods and Principles for the Determination of Loans and Other
Receivables to be Reserved for and Allocation of Reserves” published in the Official Gazette No. 26779 dated 6
February 2008; for the watch list loans the provision rate has been changed to 2 % for cash loans and 0.4 % for
non-cash loans. The Bank, as a consequence of the regulation published in the Official Gazette No. 27119 dated
23 January 2009 amending the “Regulation of Methods and Principles for the Determination of Loans and Other
Receivables to be Reserved for and Allocation of Reserves”, payment obligation arising from the Law No. 3167,
“Arrangements of the Payments Made Through Cheque and Protection of the Cheque Holders” and other related
regulations, applies one fourth of the related provision group rate for each leaf of the cheques given to loan
customers whose loans are in third, fourth or fifth groups, and for those cheques which were delivered at least
five years before the reporting period.
As a consequence of the regulation published in the Official Gazette No. 28789 dated 8 October 2013 amending
the “Change in the Methods and Principles for the Determination of Loans and Other Receivables to be Reserved
for and Allocation of Reserves” general loan provision ratio for export cash and non-cash loans followed under
standard loans is 0 % and general loan provision ratio for SME cash loans is 0.5 % and for non-cash SME loans
the ratio is 0.1 %.
IX. Explanations on Impairment of Financial Assets
At each balance sheet date, the Bank evaluates the carrying amounts of a financial asset or a group of financial
assets to determine whether there is an objective indication that those assets have suffered an impairment loss. If
any such indication exists, the Bank determines the related impairment.
A financial asset or a financial asset group incurs impairment loss only if there is an objective indicator related to
the occurrence (or non-occurrence) of one or more than one event (“loss event”) after the recognition of that
asset; and such loss event (or events) causes, an impairment as a result of the effect on the reliable estimate of the
expected future cash flows of the related financial asset and asset group. Irrespective of high probability, the
expected losses caused by the future events are not recorded.
X. Explanations on Offsetting of Financial Assets and Liabilities
Financial assets and liabilities are offset when the Bank 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.
XI. 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 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 securities held for trading, available for sale and held to maturity 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.
These transactions are short-term and consist of domestic public sector debt securities.
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 income statement.
As of 30 September 2016, the Bank has no reverse repo transactions (31 December 2015 - None).
As of 30 September 2016, the Bank does not have marketable securities lending transactions (31 December 2015
- None).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
17
XII. 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 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 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 30 September 2016, the Bank has TRL 78,600 Thousand assets held for sale (31 December 2015 - TRL
123,300 Thousand).
A discontinued operation is a division of a bank that is either disposed or held for sale. Results of discontinued
operations are included in the statement of income separately.
The Bank does not have any discontinued operations.
XIII. 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. As being different from determination of
other intangible assets‟ amortization periods, 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 Bank has no written off intangible fixed assets, which are fully amortized, in the current period (31
December 2015- None).
XIV. Explanations on Tangible Fixed Assets
Cost of the Bank‟s immovables has been adjusted for inflation until 31 December 2004. As of 31 December
2006, the 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
at 31 December 2015 reflected in the financial statements, accordingly. The difference between expertise value
and cost of immovables as of 30 September 2016 is TRL 186,569 Thousand gross (after net off deferred tax, net
amount is TRL 149,255 Thousand) (31 December 2015 gross: TRL 298,218 Thousand, net-off deferred tax
amount TRL 238,574 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 – 20
Leasehold improvements During the lease agreement
Gain or loss resulting from disposals of the tangible fixed assets is reflected to the income statement as the
difference between the net proceeds and net book value.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
18
XIV. Explanations on Tangible Fixed Assets (cont’d)
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 Bank reviews the residual value and the useful life of buildings at least at each financial year-end and, if
expectations differ from previous estimates, the changes accounted for as a change in an accounting estimate in
accordance with TAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
The Bank has no written off other fixed assets in the current period (31 December 2015 - TRL 1,751 Thousand).
XV. Explanations on Leasing Transactions
Tangible fixed assets acquired by financial leases are accounted for in accordance with TAS 17 “Leases”. 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 Bank‟s period end 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 Bank 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 %.
Operating lease payments are recognized as expenses in the income statement on a straight line basis over the
lease term.
The Bank does not have any leasing transactions as lessor.
XVI. 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 Bank‟s best expectation of expenses in fulfilling
the obligation, and discounted to present value if material.
XVII. Explanations on Liabilities Regarding Employee Benefits
Defined Benefit Plans
In accordance with existing social legislation in Turkey, the Bank 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 Bank 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 No: 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
Bank 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 published as at 1 January 2013, actuarial gain/losses are recorded under equity. As
of 30 September 2016 , the carrying value of employee benefit provisions is TRL 66,040 Thousand that consists
of employee termination benefit provisions amounting to TRL 61,554 Thousand and employee vacation pay
provisions amounting to TRL 4,486 Thousand (31 December 2015 - employee termination benefit provisions
was TRL 53,380 Thousand and employee vacation benefit provisions was TRL 3,959 Thousand).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
19
XVII. Explanations on Liabilities Regarding Employee Benefits (cont’d)
Defined Contribution Plans
Şekerbank T.A.Ş. Pension Fund, of which most of the 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, 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 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. 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.
The above mentioned law also includes the following:
Through a commission constituted by the attendance of one representative separately from the Social
Security Institution, Ministry of Finance, Turkish Treasury, 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 9.8% 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
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 31 March 2011.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
20
XVII. Explanations on Liabilities Regarding Employee Benefits (cont’d)
Defined Contribution Plans (cont’d)
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 7,941 Thousand actuarial deficit in the actuary
report dated January 2016 which was prepared using a technical interest rate of 9.80 % in accordance with the
basis set out in the Council of Ministers decision no: 2006/11345 on 30 November 2006 (31 December 2015 -
TRL 7,941 Thousand deficit).
As of 30 September 2016, TRL 7,941 Thousand provision is recorded in the financial statements of the Bank (31
December 2015 - TRL 7,941 Thousand).
XVIII. Explanations on Taxation
Corporate tax
According to the Article 32 of the Corporate Tax Law No. 5520, accepted in the meeting of the Turkish Grand
National Assembly of Turkey on 13 June 2006 and announced in the Official Gazette dated 21 June 2006, the
corporate tax rate has been decreased from 30 % to 20 %, effective from 1 January 2006 as per the Article 37 of
the Corporate Tax Law.
The tax legislation requires advance tax payment of 20 % 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 (31
December 2015 - 20 %).
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 instalment 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 Bank 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.
As of 30 September 2016 and 31 December 2015, 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 Bank calculated deferred tax asset on all deductible temporary differences except for general
loan reserves, 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 are shown in the
accompanying financial statements on a net basis.
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 8,974 Thousand is stated
under the tax provision line in the income statement (30 September 2015 – TRL 13,109 Thousand deferred tax
benefit). The deferred tax liability of TRL 43,191 Thousand (31 December 2015 – TRL 42,522 Thousand
deferred tax liability) resulting from differences related to items that are debited or charged directly to equity is
netted with the related equity accounts.
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.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
21
XIX. 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 income statement in the period they are incurred.
The Bank‟s issued bills amount is TRL 66,814 Thousand as of 30 September 2016 (31 December 2015- TRL
425,588 Thousand).
The Bank issued Asset Covered Bond amounting to TRL 1,500,000 Thousand and details are shown in the table
below. The investors 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 Bank‟s SME loans
were used as collateral. Outstanding Asset Covered Bond amount is TRL 684,589 Thousand as of 30 September
2016 (31 December 2015 – TRL 764,218 Thousand).
Issue Date Series Investors Amount Outstanding Amount (*) Currency Maturity
27 February 2014 2014-1 Qualified Institutional
Investors 361,846 361,846 TRL 13.03.2017
18 December 2015 2015-1 EIB 319,400 319,400 TRL 12.03.2019
(*) Outstanding amounts do not include accruals.
The Bank has not issued convertible bonds.
XX. Explanations on Share Certificates
There are no share certificates issued by the Bank.
XXI. Explanations on Acceptances
Acceptances are realized simultaneously with the payment dates of the customers and they are presented as
probable commitments in off-balance sheet accounts.
XXII. Explanations on Government Incentives
There are no government incentives utilized by the Bank.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
22
XXIII. Explanations on Segment Reporting
The Bank primarily deals with and engages in corporate, retail and SME banking in line with its strategy.
Current Period
Corporate SME
Retail
Other
Total
Net Interest Income 146,687 365,960 140,099 159,212 811,958
Net Fees and Commission Income and Other Operating Income 68,315 214,031 33,255 90,705 406,306
Dividend Income - - - 5,001 5,001
Trading Profit/(Loss) - - - (96,722) (96,722)
Impairment provision for loans and other
receivables (58,308) (281,984) (31,729) (23,638) (395,659)
Other Operating Expenses - - - (662,524) (662,524)
Profit/(Loss) before taxes 156,694 298,007 141,625 (527,966) 68,360
Taxation - - - - (14,425)
Net Profit for the Period - - - - 53,935
Prior Period
Corporate SME
Retail
Other
Total
Net Interest Income 196,286 272,899 126,848 163,200 759,233
Net Fees and Commission Income and Other
Operating Income 103,370 153,546 36,038 94,989 387,943
Dividend Income - - - 7,350 7,350
Trading Profit/(Loss) - - - (163,665) (163,665)
Impairment provision for loans and other receivables (48,383) (191,131) (41,151) (36,168) (316,833)
Other Operating Expenses - - - (613,965) (613,965)
Profit/(Loss) before taxes 251,273 235,314 121,735 (548,259) 60,063
Taxation - - - - 10,153
Net Profit for the Period - - - - 70,216
Current Period Commercial SME Retail
Treasury
/Investment Undistributed Total
Assets 6,025,881 8,745,560 1,497,452 4,703,044 1,874,116 22,846,053
Liabilities 4,592,178 2,059,063 8,191,425 4,585,121 3,418,266 22,846,053
Prior Period Commercial SME Retail
Treasury
/Investment Undistributed Total
Assets 9,214,596 5,832,582 1,690,387 5,953,574 1,724,827 24,415,966
Liabilities 4,827,402 1,212,826 8,827,405 6,060,690 3,487,643 24,415,966
XXIV. Explanations on Other Matters
None.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
23
SECTION FOUR
INFORMATION RELATED TO FINANCIAL POSITION AND RISK
MANAGEMENT
I. Explanations Related to 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 effective since 1 January 2014. The Bank‟s unconsolidated capital adequacy
ratio in accordance with the related communiqués is 12.92 % (31 December 2015 – 13.66 %).
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 are 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, non-cash loans and contingent liabilities. 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. While simple approach is taken into
account for banking book items, the Bank 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.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
24
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
I. Explanations Related to 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 1,278 - Reserves 1,197,572 - Gains recognized in equity as per TAS 210,475 - Profit 91,256 - Current Period Profit 53,935 - Prior Period Profit 37,321 - Shares acquired free of charge from subsidiaries, affiliates and jointly controlled partnerships and cannot be
recognised within profit for the period 0 - Common Equity Tier 1 Capital Before Deductions 2,658,581 -
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 37,070 - Improvement costs for operating leasing 33,820 - Goodwill (net of related tax liability) 57,036 - 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) 437 - 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 - - 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 304,359 - Total Common Equity Tier 1 Capital 2,354,222 -
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) - - Additional Tier I Capital before Deductions - -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
25
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 - - Other items to be defined by the BRSA - -
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 (-) 38,024 - 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 (-) 292 - Deductions to be made from common equity in the case that adequate Additional Tier I Capital or Tier II
Capital 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) 2,315,906 -
TIER II CAPITAL Debt instruments and share issue premiums deemed suitable by the BRSA - - Debt instruments and share issue premiums deemed suitable by BRSA (Temporary Article 4) 1,126 - Debt instruments and share issue premiums deemed suitable by the BRSA 149,648 - Tier II Capital Before Deductions 150,774 -
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 - - 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 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 150,774 - Total Capital (The sum of Tier I Capital and Tier II Capital) - - 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 8,017 - Other items to be defined by the BRSA (-) 11,381 -
In transition from Total Core Capital and Supplementary Capital (the capital) to Continue to
Download 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 - - 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 - -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
26
TOTAL CAPITAL Total Capital (The sum of Tier I Capital and Tier II Capital) 2,447,282 - Total risk weighted amounts 18,935,445 -
CAPITAL ADEQUACY RATIOS Core Capital Adequacy Ratio (%) 12.43 - Tier 1 Capital Adequacy Ratio (%) 12.23 - Capital Adequacy Ratio (%) 12.92 -
BUFFERS Bank specific total Common Equity Tier 1 Capital requirement (%) 0.007 - Capital conservation buffer requirement (%) 0.006 - Bank specific counter-cyclical buffer requirement (%) 0.001 - 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
(%) - 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 - - Remaining Mortgage Servicing Rights - - Amount arising from deferred tax assets based on temporary differences - -
Limits related to provisions considered in Tier II calculation General provisions for standard based receivables (before tenthousandtwentyfive limitation) - - Up to 1.25% of total risk-weighted amount of general reserves for receivables where the standard approach used 149,648 - 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 January 1, 2018 and January 1, 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” and taken into consideration at the end of transition process.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
27
Prior Period
COMMON EQUITY TIER I CAPITAL
Paid-in Capital to be Entitled for Compensation after All Creditors 1,158,000
Share Premium 1,278
Share Cancellation Profits -
Legal Reserves 1,090,958
Other Comprehensive Income according to TAS 240,331
Profit 106,614
Net Current Period Profit 102,649
Prior Period Profit 3,965
Provisions for Possible Losses -
Bonus Shares from Associates, Subsidiaries and Joint-Ventures not Accounted in Current Period‟s
Profit -
Common Equity Tier I Capital Before Deductions 2,597,181
Deductions From Common Equity Tier I Capital
Current and Prior Periods' Losses not Covered by Reserves, and Losses Accounted under Equity
according to TAS (-) 70,239
Leasehold Improvements on Operational Leases (-) 34,287
Goodwill and Intangible Assets and Related Deferred Tax Liabilities (-) 39,036
Net Deferred tax assets / liabilities (-) -
Shares Obtained against Article 56, Paragraph 4 of the Banking Law (-) -
Investments in own common equity (-) -
Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and
FinancialInstitutions where the Bank does not own 10% or less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital (-) -
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 (-) -
Mortgage Servicing Rights Exceeding the 10% Threshold of Tier I Capital (-) -
Net Deferred Tax Assets arising from Temporary Differences Exceeding the10% Threshold of Tier I
Capital (-) -
Amount Exceeding the 15% Threshold of Tier I Capital as per the Article 2, Clause 2 of the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks (-) -
The Portion of Net Long Position of the Investments in Equity Items of Unconsolidated Banks and
Financial Institutions where the Bank Owns 10% or more of the Issued Share Capital not deducted from Tier I Capital (-) -
Mortgage Servicing Rights not deducted (-) -
Excess Amount arising from Deferred Tax Assets from Temporary Differences (-) -
Other items to be Defined by the BRSA (-) -
Deductions from Tier I Capital in cases where there are no adequate Additional Tier I or Tier II Capitals (-) -
Total Deductions from Common Equity Tier I Capital 143,562
Total Common Equity Tier I Capital 2,453,619
ADDITIONAL TIER I CAPITAL
Preferred Stock not Included in Tier I Capital and the Related Share Premiums -
Debt Instruments and the Related Issuance Premiums Defined by the BRSA (Issued or Obtained after 1.1.2014) -
Debt Instruments and the Related Issuance Premiums Defined by the BRSA (Issued or Obtained before
1.1.2014) -
Additional Tier I Capital before Deductions -
Deductions from Additional Tier I Capital
Direct and Indirect Investments of the Bank on its own Additional Core Capital (-) -
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 (-) -
Other items to be Defined by the BRSA (-) -
Deductions from Additional Core Capital in cases where there are no adequate Tier II Capital (-) -
Total Deductions from Additional Tier I Capital -
Total Additional Tier I Capital -
Deductions from Tier I Capital
Goodwill and Other Intangible Assets and Related Deferred Taxes not deducted from Tier I Capital as
per the Temporary Article 2, Clause 1 of the Regulation on Measurement and Assessment of Capital
Adequacy Ratios of Banks (-) 58,554
Net Deferred Tax Asset/Liability not deducted from Tier I Capital as per the Temporary Article 2, Clause 1 of the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks (-) -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
28
Total Tier I Capital 2,395,065
TIER II CAPITAL
Debt Instruments and the Related Issuance Premiums Defined by the BRSA (Issued or Obtained after
1.1.2014) -
Debt Instruments and the Related Issuance Premiums Defined by the BRSA (Issued or Obtained before
1.1.2014) 356,475
Pledged Assets of the Shareholders to be used for the Bank's Capital Increases -
General Provisions 177,980
Tier II Capital before Deductions 534,455
Deductions from Tier II Capital
Direct and Indirect Investments of the Bank on its own Tier II Capital (-) -
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 Core Capital and Tier II Capital of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or more
of the Issued Share Capital Exceeding the 10% Threshold of Tier I Capital (-) -
Other items to be Defined by the BRSA (-) -
Total Deductions from Tier II Capital -
Total Tier II Capital 534,455
CAPITAL
Loans Granted against the Articles 50 and 51 of the Banking 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 (-) 8,006
Loans to Banks, Financial Institutions (domestic/foreign) or Qualified Shareholders in the form of
Subordinated Debts or Debt Instruments Purchased from Such Parties and Qualified as Subordinated
Debts (-) 23,088
Deductions as per the Article 20, Clause 2 of the Regulation on Measurement and Assessment of
Capital Adequacy Ratios of Banks (-) -
Other items to be Defined by the BRSA (-) 7,800
The Portion of 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 not deducted from Tier I Capital, Additional
Core Capital or Tier II Capital as per the Temporary Article 2, Clause 1 of the Regulation (-) -
The Portion of Total of Net Long Positions of the Investments in Equity Items of Unconsolidated
Banks and Financial Institutions where the Bank Owns more than 10% of the Issued Share Capital
Exceeding the 10% Threshold of above Tier I Capital not deducted from Additional Core Capital or Tier II Capital as per the Temporary Article 2, Clause 1 of the Regulation (-) -
The Portion of Net Long Position of the Investments in Equity Items of Unconsolidated Banks and
Financial Institutions where the Bank Owns 10% or more of the Issued Share Capital, of the Net
Deferred Tax Assets arising from Temporary Differences and of the Mortgage Servicing Rights not deducted from Tier I Capital as per the temporary Article 2, Clause 2, Paragraph (1) and (2) and
Temporary Article 2, Clause 1 of the Regulation (-) -
EQUITY 2,890,626
Amounts lower than Excesses as per Deduction Rules
Remaining 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 -
Remaining Total of Net Long Positions of the Investments in Tier I Capital of Unconsolidated Banks
and Financial Institutions where the Bank Owns more than 10% or less of the Tier I Capital -
Remaining Mortgage Servicing Rights -
Net Deferred Tax Assets arising from Temporary Differences -
Components of items of shareholders’ equity subject to temporary applications
Amount Included in Equity
Calculation Total Amount
Debt Instruments and the Related Issuance Premiums Defined by
the BRSA (Issued before 1.1.2014) 1,126 12,836
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
29
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
I. Explanations Related to Equity (cont’d)
Details on Subordinated Liabilities:
Current Period
Issuer KFW (KREDİTANSTALT FÜR WİEDERAUFBAU)
Unique identifier
(eg CUSIP, ISIN or Bloomberg identifier for private placement) -
Governing law(s) of the instrument
Regulation on Equity of Banks (Published in the Official Gazette
Nr. 26333 dated 1 November 2006) Regulatory treatment
Subject to 10% deduction as of 1/1/2015 Yes
Eligible on Unconsolidated/ consolidated / both unconsolidated and
consolidated Valid on Consolidated and Unconsolidated Basis
Instrument type Subordinated Loan
Amount recognised in regulatory capital (Currency in million TRL, as
of most recent reporting date) 1.13
Par value of instrument (Million TRL) 12.83
Accounting classification 347
Original date of issuance 30.06.2008
Demand or time Time
Original maturity date 25.06.2018
Issuer call subject to prior supervisory approval Yes
Optional call date, contingent call dates and redemption amount 4,000
Subsequent call dates, if applicable 23.06.2015
Coupons / dividends
Fixed or floating dividend/coupon Fixed
Coupon rate and any related index 2% p.a.
Existence of a dividend stopper -
Fully discretionary, partially
discretionary or mandatory Mandatory
Existence of step up or other incentive to redeem -
Noncumulative or cumulative 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) -
If write-down, full or partial -
If write-down, permanent or temporary -
If temporary write-down, description of write-up mechanism -
Position in subordination hierarchy in liquidation (specify instrument
type immediately senior to instrument) Before core capital, after all creditors
Whether conditions which stands in article of 7 and 8 of Banks‟
shareholder equity law are possessed or not Yes
According to article 7 and 8 of Banks' shareholders equity law that are not possessed 8-2-(a), (ç), ( e), (ğ)
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
30
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
I. Explanations Related to Equity (cont’d)
The Bank, 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 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 Bank 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 Bank‟s 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 Bank‟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 Bank‟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
Bank‟s risk appetite. The revised “Risk Limits” and “Key Risk Indicators” all take effect upon the approval of the
Board of Directors.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
31
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
II. Explanations Related to Currency Risk
Currency risk is the possibility of loss that the Bank may face, in its total on- and off-balance sheet accounts and
positions in foreign currencies, arising from changes in exchange rates.
The 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 Bank‟s Board of Directors.
The Board 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 Bank‟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 Bank‟s strategies.
Within the context of Capital Adequacy, the Bank‟s currency risk exposure is calculated through the use of the
“Standard Method” in line with the legislation. In these calculations, the Bank‟s foreign currency assets and foreign
currency liabilities together with the forward transactions and gold position are all taken into consideration.
Within the Bank, 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 “Variance Covariance Method” also known as the “Parametric Method” is used in
reporting, while the “Historical Simulation” and the “Monte Carlo Simulation” methods, on the other hand, are used
for comparison, in times when volatility increases a great extent. VaR measurements are based on an observation
period covering the last 250 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 Bank‟s internal model is tested by using back tests on a
daily basis.
As of 30 September 2016, the Bank's balance sheet short position is TRL 1,464,072 Thousand (31 December 2015 –
TRL 2,487,802 Thousand short) and the long off balance sheet position amounts to TRL 1,273,076 Thousand (31
December 2015 - TRL 2,475,373 Thousand long), resulting in total net short position of TRL 190,996 Thousand (31
December 2015 - TRL 12,429 Thousand total net short).
The announced current foreign exchange buying rates of the Bank at 30 September 2016 and the previous five
working days in full TRL are as follows:
23.09.2016 26.09.2016 27.09.2016 28.09.2016 29.09.2016 30.09.2016
USD 2.9474 2.9846 2.9709 2.9764 2.9959 3.0004
CHF 3.0303 3.0734 3.0591 3.0562 3.0785 3.0839
GBP 3.8258 3.8536 3.8462 3.8654 3.8909 3.8817
100 JPY 2.9146 2.9606 2.9489 2.9493 2.9451 2.9617
EURO 3.3044 3.3546 3.3401 3.3362 3.3608 3.3548
The simple arithmetic averages of the major current foreign exchange buying rates of the Bank for the thirty days
before 30 September 2016 are as follows:
Monthly Average
Foreign Exchange Rate
USD 2.9602
CHF 3.0319
GBP 3.8924
100 JPY 2.8960
EURO 3.3211
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
32
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
II. Explanations Related to Currency Risk (cont’d)
Information on the foreign currency risk of the Bank: Foreign Currencies
EUR USD Other Total
Current Period
Assets
Cash (Cash in Vault, Foreign Currency Cash, Money in Transit,
Cheques Purchased) and Balances with the Central Bank of Turkey 311,055 315,221 335,232 961,508
Due From Other Banks and Financial Institutions 33,707 77,544 19,550 130,801
Financial Assets at Fair Value Through Profit and Loss 1,558 5,811 - 7,369
Money Market Placements - - - -
Financial Assets Available-For-Sale - 58,087 - 58,087
Loans 1,110,658 2,461,697 1,183 3,573,538
Subsidiaries, Associates and Entities Under Common Control 7,668 - 7,668
Held-To-Maturity Investments - 418 - 418
Tangible Assets - - - -
Intangible Assets - - - -
Other Assets 169,532 62,594 5,551 237,677
Total Assets 1,626,510 2,989,040 361,516 4,977,066
Liabilities
Bank Deposits 1,500 26,933 268 28,701
Foreign Currency Deposits 2,245,364 1,598,712 199,155 4,043,231
Money Market Borrowings - - - -
Funds Provided From Other Financial Institutions 744,670 1,419,324 - 2,163,994
Securities Issued - - - -
Sundry Creditors 61,594 7,191 122,317 191,102
Other Liabilities 4,190 9,841 79 14,110
Total Liabilities 3,057,318 3,062,001 321,819 6,441,138
Net Balance Sheet Position (1,430,808) (72,961) 39,697 (1,464,072)
Net Off-Balance Sheet Position 1,426,804 (111,953) (41,775) 1,273,076
Financial Derivative Assets 2,301,425 2,092,392 196,430 4,590,247
Financial Derivative Liabilities 874,621 2,204,345 238,205 3,317,171
Non-Cash Loans 486,899 1,115,916 149 1,602,964
Prior Period
Total Assets 1,548,704 4,069,139 480,264 6,098,107
Total Liabilities 3,543,224 4,721,990 320,695 8,585,909
Net Balance Sheet Position (1,994,520) (652,851) 159,569 (2,487,802)
Net Off-Balance Sheet Position 1,993,177 638,084 (155,888) 2,475,373
Financial Derivative Assets 2,818,608 2,470,221 183,753 5,472,582
Financial Derivative Liabilities 825,431 1,832,137 339,641 2,997,209
Non-Cash Loans 580,764 1,408,108 278 1,989,150 About Currency Risk Table as of 30 September 2016;
The principal amount of currency indexed loans amounting TRL 796,017 Thousand and accruals amounting TRL 144,856 Thousand are shown under loans.
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 32,772 Thousand
Unearned income from instalment sale of assets: TRL 1,671 Thousand.
Prepaid expenses: TRL 26,844 Thousand
Derivative Financial Liabilities Held-for-Trading: TRL 23,861 Thousand
Marketable securities value increase fund: TRL 638 Thousand
Financial Derivative Asset amount includes TRL 80,056 Thousand forward asset purchase commitment and TRL 317,825 Thousand option contracts.
Financial Derivative Liabilities amount includes TRL 42,570 Thousand forward asset selling commitment and TRL 521,797 Thousand option contracts.
About Currency Risk Table as of 31 December 2015;
The principal amount of currency indexed loans amounting TRL 849,568 Thousand and accruals amounting TRL 142,735 Thousand are shown under loans.
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 45,285 Thousand
Unearned income from instalment sale of assets: TRL 1,984 Thousand.
Prepaid expenses: TRL 32,250 Thousand
Derivative Financial Liabilities Held-for-Trading: TRL 35,662 Thousand
Financial Derivative Asset amount includes TRL 53,908 Thousand forward asset purchase commitment and TRL 37,756 Thousand option contracts.
Financial Derivative Liabilities amount includes TRL 29,988 Thousand forward asset selling commitment and TRL 37,533 Thousand option contracts.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
33
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
III. Explanations Related to Interest Rate Risk
Interest rate risk is the possibility of loss that the Bank may face, in relation to its structural position arising from
adverse movements in interest rates.
The Bank‟s policies and procedures related to interest rate risk are in line with the “Regulation on Internal Systems
of Banks” and the “Regulation on Measurement and Evaluation of the Capital Adequacy of Banks” and approved by
the Bank‟s Board of Directors.
Within the context of Capital Adequacy, the Bank‟s interest rate risk exposure is calculated through the use of the
“Standard Method” in line with the legislation.
The Bank 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 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 “Variance Covariance Method” also known as the “Parametric Method” is used in
reporting, while the “Historical Simulation” and the “Monte Carlo Simulation” methods, on the other hand, are used
for comparison, in times when volatility increases a great extent.
VaR measurements are based on an observation period covering the last 250 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 Bank‟s internal model is tested by using back tests on a
daily basis.
It is the priority of the Asset Liability Management to provide protection against adverse movements in market
interest rates. In this context, gap analyses, duration and economic value analyses as well as sensitivity analyses are
evaluated on a weekly basis by Bank‟s Asset Liability Committee. Simulations on net interest income are performed
according to macroeconomic indicator estimations in the 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 Bank management monitors the market interest rates on a daily basis, and is able to change the
interest rates applied by the Bank whenever it is necessary.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
34
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
III. Explanations Related to 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 - - - -
Due From Other Banks and Financial Institutions 0.03 0.43 - 9.17
Financial Assets at Fair Value Through Profit and Loss 1.82 4.47 - 6.23
Money Market Placements - - - 8.78
Financial Assets Available-for-Sale - 4.36 - 4.85
Loans 4.74 6.25 3.31 15.62
Held-to-Maturity Investments - 8.08 - 5.99
Liabilities
Bank Deposits 1.15 1.05 - 11.22
Other Deposits 1.59 1.9 0.99 11.38
Money Market Borrowings - - - 8.92
Sundry Creditors 0.01 0.4 - -
Securities Issued - - - 11.73
Funds Provided From Other Financial Institutions 1.51 3.05 - 8.49
Average interest rates applied to monetary financial instruments
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 0.04 0.23 - 11.55
Financial Assets at Fair Value Through Profit and Loss 2.33 5.00 - 6.07
Money Market Placements - - - 9.35
Financial Assets Available-for-Sale - - - 4.49
Loans 4.96 5.96 5.28 14.71
Held-to-Maturity Investments - 8.08 - 5.06
Liabilities
Bank Deposits 1.45 0.85 - 11.55
Other Deposits 1.89 1.89 - 10.63
Money Market Borrowings - - - 9.53
Sundry Creditors 0.01 0.13 -
Securities Issued - - - 11.16
Funds Provided From Other Financial Institutions 1.54 2.75 - 7.14
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
35
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
III. Explanations Related to Interest Rate Risk (cont’d)
Information related to the interest rate sensitivity of assets, liabilities and off-balance sheet items (based on
repricing dates)
(*) The Bank classified Loans and Receivables amounting to TRL 8,235 Thousand, under financial assets at fair value through profit and loss. Non
performing loans classified as “Financial assets at fair value through profit and loss”amount to TRL 1,266 Thousand and Specific provision amounts
to TRL 647 Thousand.
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 - - - - - 2,056,979 2,056,979
Due From Other Banks and Financial
Institutions 90,639 - - - - 40,436 131,075
Financial Assets at Fair Value Through Profit and Loss 21,160 8,466 57,608 12,926 4,885 2,236 107,281
Money Market Placements - - - - - - -
Financial Assets Available-for-Sale 228,373 350,239 508,780 253,084 61,952 9,639 1,412,067
Loans (*) 6,520,540 1,156,658 2,768,301 4,920,434 331,927 - 15,697,860
Held-to-Maturity Investments 566,665 148,166 344,539 - 418 - 1,059,788
Other Assets 280,928 3,767 - 125 - 2,096,183 2,381,003
Total Assets 7,708,305 1,667,296 3,679,228 5,186,569 399,182 4,205,473 22,846,053
Liabilities
Bank Deposits 593,508 2,024 - - - 45,219 640,751
Other Deposits 7,932,343 3,482,619 1,202,532 29,958 - 1,554,463 14,201,915
Money Market Borrowings 1,432,909 - - - - - 1,432,909
Sundry Creditors - - - - - 288,693 288,693
Securities Issued - 430,528 - 320,875 - - 751,403
Funds Provided From Other Financial
Institutions 130,451 1,175,250 802,544 91,988 37,005 40,799 2,278,037
Other Liabilities 289,448 37,726 95,346 14,352 - 2,815,473 3,252,345
Total Liabilities 10,378,659 5,128,147 2,100,422 457,173 37,005 4,744,647 22,846,053
Balance Sheet Long Position - - 1,578,806 4,729,396 362,177 - 6,670,379
Balance Sheet Short Position (2,670,354) (3,460,851) - - - (539,174) (6,670,379)
Off-Balance Sheet Long Position - - - - - - -
Off-Balance Sheet Short Position - - - - - - -
Total Position (2,670,354) (3,460,851) 1,578,806 4,729,396 362,177 (539,174) -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
36
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
III. Explanations Related to Interest Rate Risk (cont’d)
Information related to the interest rate sensitivity of assets, liabilities and off-balance sheet items (based on
repricing dates) (cont’d):
(*) The Bank classified Loans and Receivables amounting to TRL 11,657 Thousand, under financial assets at fair value through profit and loss. Non performing loans classified as “Financial assets at fair value through profit and loss”amount to TRL 2,209 Thousand and Specific provision amounts
to TRL 1,274 Thousand.
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 154,954 - - - - 2,626,222 2,781,176
Due From Other Banks and Financial
Institutions 42,518 - - - - 44,088 86,606
Financial Assets at Fair Value Through
Profit and Loss 36,212 14,743 36,489 55,989 4,722 79 148,234
Money Market Placements - - - - - - -
Financial Assets Available-for-Sale 207,355 473,501 479,880 361,105 194,691 7,236 1,723,768
Loans (*) 6,559,294 1,363,679 2,628,601 5,349,790 370,527 - 16,271,891
Held-to-Maturity Investments 206,332 264,961 796,597 - 413 - 1,268,303
Other Assets 249,194 4,399 - 2,294 - 1,880,101 2,135,988
Total Assets 7,455,859 2,121,283 3,941,567 5,769,178 570,353 4,557,726 24,415,966
Liabilities
Bank Deposits 950,374 61,992 5,431 - - 440,889 1,458,686
Other Deposits 7,570,252 2,959,097 1,179,930 16,128 - 1,683,540 13,408,947
Money Market Borrowings 2,006,320 6,379 - - - - 2,012,699
Sundry Creditors - - - - - 325,729 325,729
Securities Issued - 698,744 170,293 320,769 - - 1,189,806
Funds Provided From Other Financial
Institutions 216,986 476,192 1,939,853 85,375 179 - 2,718,585
Other Liabilities 234,912 61,000 26,570 80,560 - 2,898,472 3,301,514
Total Liabilities 10,978,844 4,263,404 3,322,077 502,832 179 5,348,630 24,415,966
Balance Sheet Long Position - - 619,490 5,266,346 570,174 - 6,456,010
Balance Sheet Short Position (3,522,985) (2,142,121) - - - (790,904) (6,456,010)
Off-Balance Sheet Long Position - - - - - - -
Off-Balance Sheet Short Position - - - - - - -
Total Position (3,522,985) (2,142,121) 619,490 5,266,346 570,174 (790,904) -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
37
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
IV. Explanations Related to Equity Securities Position Risk
Associates and subsidiaries are recorded at the cost of acquisition in the financial statements.
Stock Investment
Comparison
Balance Sheet Value Fair Value Market Value
Stock Investment Group A - - -
Stock Exchange Securities - - -
Stock Investment Group B 25,888 26,273 28,742
Stock Exchange Securities 25,888 26,273 28,742
Stock Investment Group C - - -
Stock Exchange Securities - - -
1) Types and amounts of positions traded at the exchange and sufficiently diversified private capital portfolios
and other exposures: None
2) Cumulative realized gains or losses arising from the sale or liquidation during the period: None
3) Total unrealized gains or losses, revaluation increases of total supplementary and core capital: None
4) The breakdown of equity investments on the basis of the amount of capital requirement
Equity Investments
Balance Sheet Value Total RWA Minimum Capital
Requirement
Stock Exchange Securities 25,888 25,888 2,071
V. Explanations Related to Liquidity Risk Management and Liquidity Coverage Ratio
Liquidity risk is the possibility of a loss that the Bank may face, when there is not sufficient cash or cash inflow to
meet the cash outflow in full and also in time.
Liquidity risk may also occur when the market penetration is not adequate, when open positions cannot be closed in
time, at suitable prices and at sufficient amounts, due to some barriers and some break-ups in the markets.
a) Information on risk capacity of the Bank, responsibilities and structure of liquidity risk management, the
Bank’s internal liquidity risk reporting, communication between the Board of Directors and business lines
on liquidity risk strategy, policy and application:
The major policy of the Bank 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 Bank‟s financial stability by means of maintaining
the Bank‟s liquidity risk exposure at measurable and tolerable levels. Thus, it is also the objective to protect the
Bank‟s shareholders from any potential loss that might arise from adverse movements in the Bank‟s liquidity
position.
The Bank‟s policies and procedures related to the liquidity risk are approved by the Bank‟s Board of Directors.
The major factors mentioned below are addressed in those policies and procedures:
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
38
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
V. Explanations Related to Liquidity Risk Management and Liquidity Coverage Ratio (cont’d)
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 Bank‟s
annual budget and the growth strategies for medium and long term.
- The Board of Directors determines the capital structure to cover the Bank‟s liquidity risk profile, all in line with
the 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 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 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 Bank‟s senior management analyses potential liquidity risk which may arise from the new banking products
and services which the Bank plans to implement.
The Board of Directors and senior management segregate the responsibilities within the scope of the liquidity risk
management among the Asset Liability Committee, Treasury and Risk Management Units.
Accordingly, the Board of Directors set the Asset Liability Committee (ALCO) as the senior management
committee responsible for management of the Bank‟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. Treasury implements these strategies in order to manage liquidity.
The Board of Directors has accepted “Risk Limits” as part of the Bank‟s 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 Bank‟s
strategies.
The compliance with the “Risk Limits” is a mandatory agenda item in the regular monthly meetings of the Board of
Directors.
The liquidity risk profile is analysed, monitored, and assessed by the Risk Management Unit. 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 on a monthly basis.
b) Information on the centralization degree of liquidity management and funding strategy and the
functioning between the Bank and the 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 Bank provides funding to its subsidiaries in line with the regulatory limits while
also taking the market conditions into consideration.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
39
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
V. Explanations Related to Liquidity Risk Management and Liquidity Coverage Ratio (cont’d)
c) Information on the Bank’s funding strategy including the policies on funding types and variety of
maturities:
Liquidity is accepted as the ability of a bank to fund increases in its assets and meet its obligations as they come due,
without incurring unacceptable losses.
In management of the Bank‟s liquidity, the following factors are taken into consideration:
- Current and foreseen asset quality for the coming period,
- Current and foreseen funding requirements for the coming period,
- Creation of assets that are easily liquidated in the markets,
- Creation of assets that have regular cash flows,
- Diversification of funding sources, prevention of concentration.
Deposits are the foundation of the Bank‟s liquidity. It is deemed essential to maintain a stable and cost-effective
deposit base.
The Bank acknowledges that the deposit structure in Turkish banking industry is generally short-term; that the time
deposits are rolled over frequently, and that their real maturities are much more longer than the contractual
maturities. It is thus a fundamental that roll-over rates of time deposits are monitored on a continuous basis.
The stickiness of the deposits are analysed in 2 separate ways:
- With regards to the time deposits: the objective is to determine the roll-over rates of those deposits.
- With regards to the sight deposits: the objective is to determine the overall volatiliy in those deposits in order to
further determine both the “core” and “volatile” sections as part of those deposits.
Both the time and sight deposits are also analysed based on currency types as well as such sub-classes as savings
deposits and commercial deposits.
As an indicator of the Bank‟s liquidity, the concentration in the Bank‟s deposit structure as well as the breakdowns
by retail/commercial deposits and by Turkish Lira/foreign currency deposits are all monitored.
As an indicator of the market liquidity, the spread between O/N repo rates and the average of those deposit rates of
the first 10 savings banks (classified by their asset size) is monitored.
d) Information on liquidity management on the basis of currencies constituting a minimum of five percent of
the Bank’s total liabilities:
In order to measure and monitor the impact of the liquidity risk, the Bank uses cash flow gap analyses indicating
both current and future transactions. In these analyses, it is evaluated for how long the mismatches in the maturities
of assets, liabilities and interest bearing off balance sheet items take, with respect to the maturity buckets.
In cash flow gap analyses:
- Aggregate, Turkish Lira and foreign currency items are tabulated seperately.
- Calculation for currency items that exceed 5 % of the Bank‟s total assets (USD, EUR, etc. items) are done
seperately.
- Currency items that do not exceed 5 % of the Bank‟s total assets are aggregated with the EUR items.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
40
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
V. Explanations Related to Liquidity Risk Management and Liquidity Coverage Ratio (cont’d)
e) Information on liquidity risk mitigation techniques:
The Bank, while monitoring its liquity position, thoroughly oversees its compliance with the regulatory liquidity
coverage ratios. The Bank‟s Board of Directors approved these regulatory limits as “Risk Limits” to be complied
with and additionally set “Key Risk Indicators”.
In addition to legal liquidity coverage ratios related with the liquidity risk, the Board of Directors has approved
“Risk Limits” associated with the net worth and set the limits for allowed possible liquidity mistmatch as percentage
to the net worth for the certain maturity buckets. 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 Bank‟s strategies.
The Bank‟s liqudity risk is also assessed through the following “Risk Limits”:
Liquidity Risk
Cash Loans with maturities longer than 1 year (as per cash flows) / Capital
Time Deposits higher than 1 million TRL / Total time deposits
In addition to these, the Bank applies liquidity risk mitigation techniques, among which are opting for loans with a
regular cash flow structure on the loan side; opting for a “granular” deposit base on the deposit side; and
diversifying the sources of funding by regularly executing the Bank‟s TRL bond issues and obtaining long-term
finance resources from the financial institutions (Covered Bonds, syndications, and other).
f) Information on the use of stress tests:
In terms of liquidity stress testing, the Bank opts for a “reverse stress testing” procedure, in order to measure the
risks arising from both the Bank‟s liquidity and the market liquidity. The use of such “reverse stress testing”
enables the Bank to determine the adverse conditions under which it might breach the liquidity coverage ratios.
Initially, it is simulated at which levels the liquidity coverage ratios will approximately be for the next 3-year
horizon. Then, the liquidity gaps pertaining to those ratios are compared to the liquidity gaps under which the Bank
might breach the said ratios and ALCO decides on the actions to be taken for the existing liquidity gaps based on
the results of such simulations.
g) General information on urgent and unexpected liquidity situation plans:
The Bank‟s O/N repo limits in Central Bank and 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 the total of demand
deposits, it is a principle that the Bank maintains an unutilised limit equal to the outstanding amount of its demand
deposits. Within this scope, the ALCO sets the alternative liquidity strategies with regards to the current market
environment.
Liquidity Coverage Ratio:
Liquidity coverage ratio is calculated by comparing the “high quality liquid assets” of the Bank to the net cash
outflow in the coming one month period, in line with the “Regulation on the Calculation of Banks‟ Liquidity
Coverage Ratios” issued by the Banking Regulation and Supervision Agency of Turkey.
Hence, these ratios are effected by the levels of a bank‟s liquid assets which can be liquidified easily and the cash in-
flows as well as the cash out-flows arising from a bank‟s assets, liabilities and also off balance sheet items.
The Bank‟s “high quality liquid assets” comprise of cash and the balance sheet items held within the Central Bank
as well as securities issued by the Turkish Treasury, which are not subject to repurchase agreements or not pledged
as collateral.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
41
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
V. Explanations Related to Liquidity Risk Management and Liquidity Coverage Ratio (cont’d)
Liquidity Coverage Ratio (cont’d):
The major funding source for the Bank is the deposits. In addition to the deposits, the other significant 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) 2,794,810 1,384,618
CASH OUTFLOW
2 Retail deposits and deposits from small business customers, of which: 11,117,850 3,699,040 934,956 369,904
3 Stable deposits 3,536,580 - 176,829 -
4 Less stable deposits 7,581,270 3,699,040 758,127 369,904
5 Unsecured wholesale funding, of which: 4,008,330 962,730 2,261,931 560,364
6 Operational deposits 297,316 121,028 74,329 30,257
7 Non-operational deposits 3,174,100 629,585 1,650,688 317,990
8 Unsecured funding 536,914 212,117 536,914 212,117
9 Secured wholesale funding - 571
10 Other cash outflows of which: 1,620,862 285,593 1,620,862 285,593
11
Outflows related to derivative exposures and
other collateral requirements 1,543,877 240,077 1,543,877 240,077
12
Outflows related to restructured financial
instruments 31,469 - 31,469 -
13
Payment commitments and other off-balance
sheet commitments granted for debts to
financial markets 45,516 45,516 45,516 45,516
14 Other revocable off-balance sheet commitments and contractual obligations 106,700 106,040 5,335 5,302
15
Other irrevocable or conditionally revocable
off-balance sheet obligations 3,800,126 417,265 462,872 61,881
16 TOTAL CASH OUTFLOWS 5,285,956 1,283,615
CASH INFLOWS
17 Secured receivables - - - -
18 Unsecured receivables 35,730,371 4,208,115 776,529 99,805
19 Other cash inflows 1,535,410 1,308,009 1,535,410 1,308,009
20 TOTAL CASH INFLOWS 37,265,781 5,516,124 2,311,939 1,407,814
Total Adjusted Value
21 TOTAL HQLA 2,794,810 1,384,618
22 TOTAL NET CASH OUTFLOWS 2,974,044 320,768
23 LIQUIDITY COVERAGE RATIO (%) 93.97 431.66
(*) The average of last three months’ liquidity coverage ratio calculated by monthly and weekly simple averages.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
42
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
V. Explanations Related to Liquidity Risk Management and 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) 2,829,271 1,748,312
CASH OUTFLOW
2
Retail deposits and deposits from small
business customers, of which: 10,892,080 4,298,250 838,859 352,701
3 Stable deposits 5,006,980 1,542,480 250,349 77,124
4 Less stable deposits 5,885,100 2,755,770 588,510 275,577
5 Unsecured wholesale funding, of which: 4,520,317 1,758,427 3,039,295 1,329,968
6 Operational deposits 284,808 152,316 71,202 38,079
7 Non-operational deposits 3,536,444 1,213,645 2,269,028 899,423
8 Unsecured funding 699,065 392,466 699,065 392,466
9 Secured wholesale funding - -
10 Other cash outflows of which: 3,185,536 976,243 3,185,536 976,243
11
Outflows related to derivative exposures and
other collateral requirements 3,134,968 930,232 3,134,968 930,232
12 Outflows related to restructured financial instruments 4,557 - 4,557 -
13
Payment commitments and other off-balance
sheet commitments granted for debts to financial markets 46,011 46,011 46,011 46,011
14
Other revocable off-balance sheet
commitments and contractual obligations 88,560 88,480 4,428 4,424
15
Other irrevocable or conditionally revocable
off-balance sheet obligations 4,120,831 557,288 569,577 91,986
16 TOTAL CASH OUTFLOWS 7,637,695 2,755,322
CASH INFLOWS
17 Secured receivables 5,758 - 2,879 -
18 Unsecured receivables 1,183,176 149,321 681,574 111,527
19 Other cash inflows 3,081,877 2,917,289 3,081,877 2,917,289
20 TOTAL CASH INFLOWS 4,270,811 3,066,610 3,766,330 3,028,816
Total Adjusted Value
21 TOTAL HQLA 2,829,271 1,748,312
22 TOTAL NET CASH OUTFLOWS 3,871,365 688,831
23 LIQUIDITY COVERAGE RATIO (%) 73.08 253.81
(*) The average of last three months’ liquidity coverage ratio calculated by monthly and weekly simple averages.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
43
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
V. Explanations Related to Liquidity Risk Management and Liquidity Coverage Ratio (cont’d)
The FC liquidity coverage ratio calculated from the average value for the third quarter of 2016 is 431.66, TRL + FC
liquidity coverage ratio is 93.97 and the same rates in the third quarter of 2015 are 287.5 and 80.66 respectively.
In accordance with the “Regulation on calculation of Bank‟s liquidity coverage ratio”, the weeks in which the
highest and the lowest liquidity coverage ratio is calculated over the last three months are presented below.
Date Maximum Date Minimum
TRL+FC 29.07.2016 106.22 01.07.2016 78.97
FC 15.07.2016 510.67 02.07.2016 273.87
Date Maximum Date Minimum
TRL+FC 25.12.2015 89.25 23.10.2015 63.42
FC 20.11.2015 283.72 23.10.2015 178.32
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
44
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
V. Explanations Related to Liquidity Risk Management and Liquidity Coverage Ratio (cont’d)
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 1,173,544 883,435 - - - - - 2,056,979
Due From Other Banks and Financial Institutions 40,436 90,639 - - - - - 131,075
Financial Assets at Fair Value
Through Profit and Loss 2,236 20,505 8,226 57,812 13,377 5,125 - 107,281
Money Market Placements - - - - - - - -
Financial Assets Available-for-Sale 9,639 - 5,772 213,318 628,123 555,215 - 1,412,067
Loans (**) (***) 79,901 1,557,569 4,624,930 1,972,563 5,879,795 1,583,102 - 15,697,860
Held-to-Maturity Investments - - - 202,418 812,437 44,933 - 1,059,788
Other Assets 314,740 280,928 3,767 - 125 - 1,781,443 2,381,003
Total Assets 1,620,496 2,833,076 4,642,695 2,446,111 7,333,857 2,188,375 1,781,443 22,846,053
Liabilities
Bank Deposits 45,219 593,508 2,024 - - - - 640,751
Other Deposits 1,554,463 7,932,311 3,482,481 1,201,586 31,068 6 - 14,201,915
Funds Provided From Other Financial
Institutions 84,540 42,339 265,404 703,218 946,352 236,184 - 2,278,037
Money Market Borrowings - 1,432,909 - - - - - 1,432,909
Securities Issued - - 66,814 363,714 320,875 - - 751,403
Sundry Creditors 288,693 - - - - - - 288,693
Other Liabilities 139,210 310,583 165,601 116,400 62,666 13,008 2,444,877 3,252,345
Total Liabilities 2,112,125 10,311,650 3,982,324 2,384,918 1,360,961 249,198 2,444,877 22,846,053
Liquidity Gap (491,629) (7,478,574) 660,371 61,193 5,972,896 1,939,177 (663,434) -
Net Off-Balance Sheet Position - 3,611 (698) (42,575) 34 - - (39,628)
Derivative Financial Assets - 3,561,794 429,074 1,430,584 257,897 - - 5,679,349
Derivative Financial Liabilities - 3,558,183 429,772 1,473,159 257,863 - - 5,718,977
Non-Cash Loans 1,628,131 124,307 444,423 1,482,042 881,845 89,421 - 4,650,169
Prior Period
Total Assets 1,234,404 3,270,406 5,247,444 2,332,864 8,172,631 2,580,848 1,577,369 24,415,966
Total Liabilities 2,574,977 10,993,972 3,689,513 2,207,082 1,652,071 771,409 2,526,942 24,415,966
Liquidity Gap (1,340,573) (7,723,566) 1,557,931 125,782 6,520,560 1,809,439 (949,573) -
Net Off-Balance Sheet Position - 2,003 (16,665) 13,699 (18,619) - - (19,582)
Derivative Financial Assets - 3,271,164 1,981,548 215,555 639,236 - - 6,107,503
Derivative Financial Liabilities - 3,269,161 1,998,213 201,856 657,855 - - 6,127,085
Non-Cash Loans 2,015,024 152,034 442,093 2,096,686 975,760 81,184 - 5,762,781
(*) 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 asset qualified accounts and equity
accounts are classified under undistributed.
(**) Overdraft Loans are presented in 1-3 months period.
(***) The Bank has classified Loans and Receivables amounted to TRL 8,235 Thousand, under financial assets at fair value through profit and loss in the
current period. Non performing loans classified as “Financial assets at fair value through profit and loss”amount to TRL 1,266 Thousand (31 December 2015 – TRL 2,209 Thousand) and Specific provision amount to TRL 647 Thousand (31 December 2015 – TRL 1,274 Thousand).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
45
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
VI. Explanations Related to Leverage Ratio
The Bank‟s unconsolidated leverage ratio calculated according to “Regulation on Measurement and Assessment of
Leverage Ratios of Banks” is 7.89 % (31 December 2015 – 7.37 %). Change in the leverage ratio is mainly due to
the increase in the amount of on balance sheet items. Regulation has set the minimum leverage ratio as 3 %.
On-balance sheet assets Current Period (*) Prior Period (*)
1
On-balance sheet items (excluding derivative financial instruments
and credit derivatives but including collateral) 22,325,354 23,748,170
2 (Assets deducted in determining Tier 1 capital) (339,912) (182,907)
3 Total on-balance sheet risks (sum of lines 1 and 2) 21,985,442 23,565,263
Derivative financial instruments and credit derivatives
4
Replacement cost associated with all derivative instruments and
credit derivatives 95,366 127,637
5 Add-on amounts for PFE associated with all derivative instruments and credit derivatives 86,112 99,474
6
Total risks of derivative financial instruments and credit derivatives
(sum of lines 4 to 5) 181,478 227,111
Securities or commodity financing transactions (SCFT)
7 Risks from SCFT assets - -
8 Risks from brokerage activities related exposures 22,093 51,466
9
Total risks related with securities or commodity financing
transactions (sum of lines 7 to 8) 22,093 51,466
Other off-balance sheet transactions
10 Gross notional amounts of off-balance sheet transactions 7,728,447 7,992,341
11 (Adjustments for conversion to credit equivalent amounts) (786,485) (241,618)
12 Total risks of off-balance sheet items (sum of lines 10 and 11) 6,941,962 7,750,723
Capital and total risks
13 Tier 1 capital 2,296,926 2,329,783
14 Total risks (sum of lines 3, 6, 9 and 12) 29,130,975 31,594,563
Leverage ratio
15 Leverage ratio 7.89 7.37
(*) Amounts in the table are three-month average amounts.
VII. Explanations Related to 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 and became effective as of 31 March 2016. Due to usage of standard approach for the
calculation of capital adequacy by the Bank, tables which have to be prepared within the scope of Internal rating
based approach, have not been presented as of 30 September 2016.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
46
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
VII. Explanations Related to Risk Management (cont’d)
a) Explanations on Risk Management and Risk Weighted Amount
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) 16,503,478 18,844,793 1,320,278
2 Standardised approach (SA) 16,503,478 18,844,793 1,320,278
3 Internal rating-based (IRB) approach - - -
4 Counterparty credit risk 162,409 1,238 12,993
5
Standardised approach for counterparty credit
risk (SA-CCR) 162,409 1,238 12,993
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 260,675 390,638 20,854
17 Standardised approach (SA) 260,675 390,638 20,854
18 Internal model approaches (IMM) - - -
19 Operational Risk 2,008,883 1,926,698 160,711
20 Basic Indicator Approach 2,008,883 1,926,698 160,711
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) 18,935,445 21,163,367 1,514,836
VIII. Explanations Related to Transactions Made on Behalf of Others and Transactions Based
On Trust
The Bank performs buying and selling transactions on behalf of customers, but does not provide custody,
administration and consultancy services. There are no transactions made with other financial institutions within trust transaction contract and direct financial services provided within this scope.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
47
SECTION FIVE
EXPLANATIONS AND DISCLOSURES ON
UNCONSOLIDATED FINANCIAL STATEMENTS
I. Explanations Related to the Assets
1.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 132,572 80,762 117,429 56,272
Balances with the Central Bank of Turkey 962,899 880,742 430,210 2,177,261
Other - 4 - 4
Total 1,095,471 961,508 547,639 2,233,537
b) Information related to the account of the Central Bank of Turkey:
Current Period Prior Period
TRL FC TRL FC
Unrestricted demand deposit 962,899 880,742 430,210 2,022,307
Unrestricted time deposit - - - 29,181
Restricted time deposit - - - 125,773
Total 962,899 880,742 430,210 2,177,261
The reserve deposits include TRL 875,599 Thousand of FC unrestricted demand deposit (31 December 2015 – TRL 1,814,028 Thousand) and TRL 954,903 Thousand of the TRL unrestricted demand deposit (31 December 2015 – TRL 430,149 Thousand). TRL unrestricted demand deposit
includes the reserve deposit amount that is held in the Central Bank of the Turkish Republic on average.
Starting from 09.09.2016, reserve deposit ratios for TRL deposits are regulated as follows: - Unrestricted, TRL deposit call accounts and special current accounts are 10.5%,
- Deposits up to one month (including one month) are 10.5%,
- Deposits up to three month (including three month) are 10.5%, - Deposits up to six month (including six month) are 7.5%
- Deposits up to one year are 5.5%,
- Deposits/participation accounts with 1-year and longer maturity and cumulative deposits/participation accounts are 4%, - Other TRL liabilities up to one year (including one year) are 10.5%,
- Other liabilities up to 3-year maturity (including 3-year) are 7%
- Other liabilities longer than 3-year maturity are 4%.
• Starting from 24.05.2013, reserve deposit ratios for the FC deposits and precious metal deposits are regulated as follows: - Unrestricted FC deposit call accounts, special current accounts and precious metal deposit accounts and deposits up to one month, up to three
month, up to six month, up to one year FC deposits, FC participate accounts and precious metal deposits are 13%,
- FC Deposits, precious metal deposit and FC participate accounts and FC accumulated accounts and FC participate accounts longer than one year (including one year) are 9%.
Starting from 09.10.2015, reserve deposit ratios for FC other liabilities are regulated as follows: - Other liabilities up to one year (including one year) are 25 %,
- Other liabilities up to two year (including two year) are 20 %,
- Other liabilities up to three year (including three year) are 15%, - Other liabilities up to five year (including five year) are 7 %,
- Other liabilities longer than five year are 5%.
Starting from 09.10.2015, reserve deposit ratios for FC other liabilities that will occur after 28.08.2015 are regulated as follows:
- Other liabilities up to one year (including one year) are 20 %,
- Other liabilities up to two year (including two year) are 14 %, - Other liabilities up to three year (including three year) are 8%,
- Other liabilities up to five year (including five year) are 7 %,
- Other liabilities longer than five year are 6 %.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
48
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
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 2015 - None).
ii. Financial assets at fair value through profit and loss subject to repurchase agreements:
None (31 December 2015 - None).
Net book value of unrestricted financial assets at fair value through profit and loss is TRL 12,280 Thousand
(31 December 2015 – TRL 9,970 Thousand).
iii. Positive differences related to derivative financial assets held-for-trading:
Derivatives Held for Trading
Current Period Prior Period
TRL FC TRL FC
Forward Transactions - 1,964 - 1,119
Swap Transactions 62,075 21,326 92,910 43,847
Futures Transactions - - - -
Options 154 9,482 69 319
Other - - - -
Total 62,229 32,772 92,979 45,285
iv. Loans at fair value through profit and loss
Current Period Prior Period
Opening Balance 11,657 22,229
Additions (+) - -
Change in Interest Rates (*) 215 (988)
Change in Credit Risk (**) 516 965
Impairment Provision (627) (1,097)
Collections (-) (3,526) (9,452)
Net Balance 8,235 11,657
(*) 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 30 September 2016, TRL 8,235 Thousand (31 December 2015 – TRL 11,657 Thousand) of loans which are
classified as Financial Assets at Fair Value Through Profit and Loss have amortised cost of TRL 7,954 Thousand
(31 December 2015 - TRL 11,852 Thousand).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
49
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
3. Information on banks:
Current Period Prior Period
TRL FC TRL FC
Banks 274 130,801 17,243 69,363
Domestic 273 90,975 17,225 25,471
Foreign 1 39,826 18 43,892
Branches and head office abroad - - - -
Total 274 130,801 17,243 69,363
4. Information on financial assets available-for-sale:
a.1) Information on financial assets available-for-sale given as collateral or blocked:
Current Period Prior Period
TRL FC TRL FC
Share certificates - - - -
Bonds, Treasury bills and similar investment
securities 380,959 - 68,384 -
Other - - - -
Total 380,959 - 68,384 -
a.2) Financial assets available-for-sale subject to repurchase agreements:
Current Period Prior Period
TRL FC TRL FC
Government bonds 474,022 - 1,119,230 -
Treasury bills - - - -
Other public sector debt securities - - - -
Bank bonds and bank guaranteed bonds - - - -
Asset backed securities - - - -
Other - - - -
Total 474,022 - 1,119,230 -
Net book value of unrestricted financial assets available-for-sale is TRL 557,086 Thousand (31 December 2015 -
TRL 536,154 Thousand).
b) Information on financial assets available for sale portfolio:
Current Period Prior Period
Debt securities 1,418,694 1,748,258
Quoted on a stock exchange 1,418,694 1,748,258
Not quoted on a stock exchange - -
Share certificates 11,621 9,218
Quoted on a stock exchange - -
Not quoted on a stock exchange 11,621 9,218
Impairment provision(-) (18,248) (33,708)
Total 1,412,067 1,723,768
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
50
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
5. Information on loans:
a) Information on all types of loans and advances given to shareholders and employees of the Bank:
Current Period Prior Period
Cash Loans Non-Cash Loans Cash Loans Non-Cash Loans
Direct loans granted to shareholders - - - -
Corporate shareholders - - - -
Real person shareholders - - - -
Indirect loans granted to shareholders 398,439 49,065 398,308 47,233
Loans granted to employees 20,147 - 23,028 -
Total 418,586 49,065 421,336 47,233
b) Information on the first and second group loans and other receivables including restructured or rescheduled
loans:
Cash loans (*)
Standard loans and
other receivables
Loans and other receivable
under close monitoring
Loans and other
receivables (Total)
Amendments on
Conditions of Contract
Loans and other
receivables (Total)
Amendments on
Conditions of Contract
Amendments
related to the
extension of the
payment plan
Other
Amendments
related to the
Extension of the
payment plan
Other
Non-specialized loans 11,386,376 362,122 - 1,959,453 794,825 -
Corporation loans - - - - - -
Export loans 1,484,276 2,242 - 342,142 88,246 -
Import loans - - - - - -
Loans given to
financial sector 15,744 - - 699 312 -
Consumer loans 1,158,168 10,787 - 121,615 10,135 -
Credit cards 257,963 - - 17,147 - -
Other 8,470,225 349,093 - 1,477,850 696,132 -
Specialized loans 2,194,183 93,783 - 157,848 33,488 -
Other receivables - - - - - -
Total 13,580,559 455,905 - 2,117,301 828,313 -
(*) The Bank has classified Loans and Receivables amount to TRL 8,235 Thousand, under financial assets at fair value through profit and loss in the current period.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
51
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
5. Information on loans (cont’d) :
Current Period Prior Period
Number of Amendments
Related to the Extension of
the Payment Plan
Standard loans and
other receivables
Loans and other
receivable
under close monitoring
Standard loans and
other receivables
Loans and other
receivable
under close monitoring
Extended for 1 or 2 times 403,582 828,313 384,449 658,641
Extended for 3,4 or 5 times 1 - 683 -
Extended for more than 5
times 52,322 - 5,037 -
Current Period Prior Period
The Time extended via the
Amendment on Payment
Plan
Standard loans and
other receivables
Loans and other
receivable
under close monitoring
Standard loans and
other receivables
Loans and other
receivable
under close monitoring
0-6 Months 21,873 48,887 30,636 38,242
6 Months- 12 Months 449 63,941 67,408 18,244
1-2 Years 3,254 131,633 15,978 113,240
2-5 Years 74,006 464,629 276,147 479,482
5 Years and More 356,323 119,223 - 9,433
c) Loans and other receivables according to their maturity structure:
Standard Loans and Other Receivables
Loans and Other Receivables Under Follow-Up
Loans and Other
Receivables (*)
Amendments on
Conditions of Contract
Loans and Other
Receivables (*)
Amendments on
Conditions of
Contract
Short-term loans and other receivables 6,474,734 77,100 282,568 35,342
Non-specialized loans 5,628,824 58,940 255,886 21,957
Specialized loans 845,910 18,160 26,682 13,385
Other receivables - - - -
Medium and Long-term loans 6,649,920 378,805 1,006,420 792,971
Non-specialized loans 5,395,430 303,182 908,742 772,868
Specialized loans 1,254,490 75,623 97,678 20,103
Other receivables - - - -
Total 13,124,654 455,905 1,288,988 828,313
(*) The Bank has classified Loans and Receivables amount to TRL 8,235 Thousand, under financial assets at fair value through profit and loss in the current period.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
52
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
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 15,118 1,201,001 1,216,119
Housing Loans 1,267 269,555 270,822
Car Loans 397 32,526 32,923
General Purpose Loans 13,454 898,920 912,374
Other - - -
Consumer Loans –Indexed to FC - 1,234 1,234
Housing Loans - 1,234 1,234
Car Loans - - -
General Purpose Loans - - -
Other - - -
Consumer Loans-FC - - -
Housing Loans - - -
Car Loans - - -
General Purpose Loans - - -
Other - - -
Individual Credit Cards-TRL 177,780 2 177,782
With Instalments 50,167 2 50,169
Without Instalments 127,613 - 127,613
Individual Credit Cards-FC 351 - 351
With Instalments 3 - 3
Without Instalments 348 - 348
Personnel Loans-TRL 570 9,283 9,853
Housing Loans - - -
Car Loans - 60 60
General Purpose Loans 570 9,223 9,793
Other - - -
Personnel Loans- Indexed to FC - - -
Housing Loans - - -
Car Loans - - -
General Purpose Loans - - -
Other - - -
Personnel Loans-FC - - -
Housing Loans - - -
Car Loans - - -
General Purpose Loans - - -
Other - - -
Personnel Credit Cards-TRL 6,840 - 6,840
With Instalments 2,159 - 2,159
Without Instalments 4,681 - 4,681
Personnel Credit Cards-FC 19 - 19
With Instalments - - -
Without Instalments 19 - 19
Overdraft Accounts-TRL(Real Person) (*) 39,621 - 39,621
Overdraft Accounts-FC (Real Person) - - -
Total 240,299 1,211,520 1,451,819
(*) As of 30 September 2016 , overdraft accounts for real persons include TRL 3,435 Thousand personnel overdraft account.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
53
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
5. Information on loans (cont’d):
e) Information on commercial loans with instalments and corporate credit cards:
Short Term Medium and Long Term
Total
Commercial loans with instalment facility-TRL 207,569 2,908,324 3,115,893
Business Loans 3,284 23,362 26,646
Car Loans 2,611 106,309 108,920
General Purpose Loans 201,674 2,747,535 2,949,209
Other - 31,118 31,118
Commercial loans with instalment facility - Indexed to FC 20,770 629,607 650,377
Business Loans - 4,551 4,551
Car Loans - 30,574 30,574
General Purpose Loans 20,770 594,482 615,252
Other - - -
Commercial loans with instalment facility –FC 676 435,808 436,484
Business Loans - - -
Car Loans - - -
General Purpose Loans 676 435,808 436,484
Other - - -
Corporate Credit Cards-TRL 85,166 - 85,166
With Instalments 20,582 - 20,582
Without Instalments 64,584 - 64,584
Corporate Credit Cards-FC 14 - 14
With Instalments - - -
Without Instalments 14 - 14
Overdraft Accounts-TRL (Legal Entity) 171,267 - 171,267
Overdraft Accounts-FC (Legal Entity) - - -
Total 485,462 3,973,739 4,459,201
f) Loans according to borrowers:
Current Period Prior Period
Public 62,959 71,520
Private 15,634,901 16,200,371
Total 15,697,860 16,271,891
g) Domestic and foreign loans:
Current Period Prior Period
Domestic loans 15,677,782 16,261,185
Foreign loans 20,078 10,706
Total 15,697,860 16,271,891
h) Loans granted to subsidiaries and associates:
Current Period Prior Period
Direct loans granted to subsidiaries and associates 24,718 26,266
Indirect loans granted to subsidiaries and associates - -
Total 24,718 26,266
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
54
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
5. Information on loans (cont’d):
i) Specific provisions provided against loans:
Specific Provisions (*) Current Period Prior Period
Loans and receivables with limited collectability 27,058 21,865
Loans and receivables with doubtful collectability 106,385 99,784
Uncollectible loans and receivables 341,182 424,311
Total 474,625 545,960
(*) Specific provision amounting to TRL 647 Thousand for loans classified as “Financial assets at fair value through profit and loss” at the current period (31 December 2015- TRL 1,274 Thousand).
j) Information on non-performing loans (Net):
j.1) Information on loans and other receivables included in non-performing loans which are restructured or
rescheduled:
III. Group: IV. Group: V. Group
Loans and receivables
with limited
collectability
Loans and receivables
with doubtful
collectability
Uncollectable loans
and receivables
Current period
(Gross amounts before the specific reserves) - 9,337 53,628
Loans and other receivables which are restructured - - -
Rescheduled loans and other receivables - 9,337 53,628
Prior period
(Gross amounts before the specific reserves) - 4,218 60,320
Loans and other receivables which are restructured - - -
Rescheduled loans and other receivables - 4,218 60,320
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
55
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
5. Information on loans (cont’d):
j.2) The movement of non-performing loans:
III. Group IV. Group V. Group
Loans and
receivables with
limited
collectability
Loans and receivables
with doubtful
collectability
Uncollectable
loans and receivables
Prior period end balance 165,581 274,067 571,986
Additions (+) 536,040 18,687 11,642
Transfers from other categories of non-performing loans (+) - 477,763 377,408
Transfers to other categories of non-performing loans (-) (477,763) (377,408) -
Collections (-) (23,611) (90,626) (49,641)
Write-offs (-) - (1,505) (366,962)
Corporate and commercial loans - (507) (312,937)
Retail loans - (10) (42,112)
Credit cards - (988) (11,913)
Current period end balance (*) 200,247 300,978 544,433
Specific provision (-) (*) 27,058 106,385 341,182
Net Balances on Balance Sheet 173,189 194,593 203,251
(*) Non performing loans amounting to TRL 1,266 Thousand (31 December 2015 – TRL 2,209 Thousand) and specific provision amounting to TRL 647 Thousand (31 December 2015 – TRL 1,274 Thousand) are classified as “Financial assets at fair value through profit and loss” in the
current period.
j.3) Informations on non-performing loans and other receivables in foreign currency: None (31 December
2015 – None).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
56
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
5. Information on loans (cont’d):
j.4) Information regarding gross and net amounts of non-performing loans with respect to user groups:
III. Group IV. Group V. Group
Loans and
receivables with
limited collectability
Loans and
receivables with
doubtful
collectability
Uncollectable
loans and
receivables
Current Period (Net) (*)
Loans to Real Persons and Legal Entities (Gross) 200,247 300,978 544,433
Specific provision (-) (27,058) (106,385) (341,182)
Loans to Real Persons and Legal Entities (Net) 173,189 194,593 203,251
Banks (Gross) - - -
Specific provision (-) - - -
Banks (Net) - - -
Other Loans and Receivables (Gross) - - -
Specific provision (-) - - -
Other Loans and Receivables (Net) - - -
Prior Period (Net) (*)
Loans to Real Persons and Legal Entities (Gross) 165,581 274,067 571,986
Specific provision (-) ( 21,865) ( 99,784) ( 424,311)
Loans to Real Persons and Legal Entities (Net) 143,716 174,283 147,675
Banks (Gross) - - -
Specific provision (-) - - -
Banks (Net) - - -
Other Loans and Receivables (Gross) - - -
Specific provision (-) - - -
Other Loans and Receivables (Net) - - -
(*) Non-performing loans amounting to TRL 1,266 Thousand (31 December2015 – TRL 2,209 Thousand) and specific provision amounting to
TRL 647 Thousand (31 December2015 – TRL 1,274 Thousand) are classified as “Financial assets at fair value through profit and loss”.
k) Main principles of uncollectable loans and receivables:
The Bank Management applies provision policy for the “non-performing loans” in accordance with the
requirements of the Turkish banking regulation adopted by the BRSA.
l) Explanations on write-off policy:
On 29 September 2016, the Bank sold uncollectable non-performing loans amounting to TRL 139,587
Thousand for total cash amount of TRL 7,150 Thousand to Final Varlık Yönetim A.Ş. and Mega Varlık
Yönetim A.Ş. (31 December 2015 – On 30 March 2015 the Bank sold uncollectable non-performing
commercial and consumer loans including credit cards amounting to TRL 209,057 Thousand for total cash
amount of TRL 15,100 Thousand, in particular, for TRL 2,200 Thousand to Güven Varlık Yönetim A.Ş., for
TRL 7,200 Thousand to Destek Varlık Yönetim A.Ş. and for TRL 5,700 Thousand to Final Varlık Yönetim
A.Ş.. On 20 May 2015, the Bank sold TRL 2,814 Thousand of the non-performing commercial loans to RCT
Varlık Yönetim A.Ş. for TRL 675 Thousand in cash. On 16 December 2015 the Bank sold uncollectable non-
performing consumer loans including credit cards amounting to TRL 29,944 Thousand for TRL 3,600
Thousand in cash to Destek Varlık Yönetim A.Ş.)
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
57
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
6. Information on held-to-maturity investments:
a.1) Information on held-to-maturity investments given as collateral or blocked:
Current Period Prior Period
Treasury Bill - -
Bond and Similar Securities 239,334 236,337
Other - -
Total 239,334 236,337
a.2) Held-to-maturity investments subject to repurchase agreements are TRL 635,394 Thousand (31 December
2015 – 802,357 Thousand).
b) Information on public sector debt investments held-to-maturity:
Current Period Prior Period
Government Bonds 1,059,788 1,268,303
Treasury Bills - -
Other Public Sector Debt Securities - -
Total 1,059,788 1,268,303
Net book value of unrestricted held-to-maturity investments is TRL 185,060 Thousand (31 December 2015 – TRL
229,609 Thousand).
c) Information on held-to-maturity investments:
Current Period Prior Period
Debt Securities 927,037 1,119,996
Quoted on a stock exchange 927,037 1,119,996
Not quoted on a stock exchange - -
Impairment Provision (-) (688) (1,191)
Accruals 133,439 149,498
Total 1,059,788 1,268,303
d) Movement of held-to-maturity investments:
Current Period Prior Period
Beginning Balance 1,118,805 1,222,792
Foreign currency differences on monetary assets 11 81
Purchases during year - -
Disposals through sales and redemptions (192,971) (104,523)
Provision reversal / Impairment provision (-) 504 455
Closing Balance 926,349 1,118,805
Accruals 133,439 149,498
Total 1,059,788 1,268,303
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
58
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
7. Information on associates (Net):
a) Information on associates:
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 2015 is stated below.
b) Information on associates with the order as presented in the table above:
Total Asset Shareholders‟
Equity Tangible Assets
Interest Income
Income from
Marketable Securities
Portfolio
Current
Period
Profit/Loss
Prior Period Profit/Loss
Fair Value
50,898 28,910 39,844 100 - (1,466) (54,240) 123,544
c) Movement of associates:
Current Period Prior Period
Balance at the beginning of the period 4,140 4,140
Movement during the period - -
Purchases - -
Bonus shares obtained - -
Share in the current year income - -
Sales - -
Revaluation increase - -
Provision of Impairment (-) - -
Balance at the end of the period 4,140 4,140
Capital Commitment - -
Share percentage at the end of the period (%) 100 100
d) Measurement of associates
Current Period Prior Period
Measured with cost 4,140 4,140
Measured with fair value - -
Measured with equity method - -
e) Sectoral information and the related carrying amounts on Associates:
Seltur Turistik İşletmeler A.Ş. is operating in tourism sector.
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.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
59
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
8. Information on subsidiaries (Net):
a) Information related to equity components of 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
Mortgage
Finansman
A.Ş.
Zahlungsdienste
GmbH Der
Şekerbank T.A.Ş.
Core Capital
Paid in Capital 24,104 60,624 14,424 31,195 21,041 26,000 802
Share Premiums - 1,243 - - - - -
Marketable Securities Value
Increase Fund - - - (48) - - -
Legal Reserves 1,274 2,169 3,515 1,547 1,999 614 -
Extraordinary Reserves 1 4,757 - 7,115 9,913 (2,383) -
Tangible assets revaluation
differences - - - - 6,971 - -
Other capital reserves - - - (33) 22 33 -
Other Income Reserves - - 917 - - - (80)
Profit/Loss (2,576) (12,662) (658) 2,700 (5,921) 2,690 (161)
Prior Years‟ Profits and Losses (3,670) (13,650) (931) - (1,041) - (165)
Net Profit for the Period 1,094 988 273 2,700 (4,880) 2,690 4
Total Core Capital 22,803 56,131 18,198 42,476 34,025 26,954 561
Supplementary Capital - - - - - - -
CAPITAL 22,803 56,131 18,198 42,476 34,025 26,954 561
NET AVAILABLE EQUITY 22,803 56,131 18,198 42,476 34,025 26,954 561
(*)Financial information is as of 30 June 2016.
b) Information on the subsidiaries:
Description (*) Address (City/
Country)
Bank‟s Share Percentage-If Different Voting Percentage
(%)
Bank‟s Risk Group Share Percentage
(%)
Şekerbank Kıbrıs Ltd. Nicosia/TRNC 96.11 96.11
Şeker Finansal Kiralama A.Ş. Istanbul/ Turkey 54.13 61.13
Şekerbank International Banking Unit Ltd. Nicosia/TRNC 95.80 95.80
Şeker Yatırım Menkul Değerler A.Ş. Istanbul/ Turkey 99.04 100.00
Şeker Faktoring A.Ş. Istanbul/ Turkey 99.99 99.99
Şeker Finansman A.Ş. Istanbul/ Turkey 62.31 62.31
Zahlungsdienste GmbH Der Şekerbank T.A.Ş. Cologne/Germany 100.00 100.00
(*) Latest financial information of the related subsidiaries as of 30 June 2016 is stated below.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
60
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
8. Information on subsidiaries (Net) (cont’d):
c) Information on the 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
(*)
208,505 22,803 4,924 10,898 138 1,094 (3,670) 15,219
436,035 56,131 29,279 15,881 496 988 (13,650) 48,538
18,943 18,198 1,952 570 - 273 (931) 11,953
117,305 42,476 22,503 4,811 989 2,700 - 34,162
334,350 34,025 18,866 26,294 - (4,880) (1,041) 42,664
601,968 26,954 491 37,322 - 2,690 - 32,406
1,360 561 - 36 - 4 (165) 907
(*) Fair values of the related subsidiaries are stated as of 31 December 2015.
d) Movement of subsidiaries:
Current Period Prior Period
Balance at the beginning of the period 115,052 111,052
Movement during the period 30,000 4,000
Purchases 25,000 -
Bonus shares obtained 5,000 4,000
Share in the current year income - -
Sales - -
Revaluation increase - -
Provision reversal / Provision of Impairment (-) - -
Balance at the end of the period 145,052 115,052
Capital Commitment - -
Share percentage at the end of the period (%) 100 100
e) Measurement of Subsidiaries
Current Period Prior Period
Measured with cost 145,052 115,052
Measured with fair value - -
Measured with equity method - -
f) Sectoral information and the related carrying amounts on Subsidiaries
Subsidiaries Current Period Prior Period
Banks 15,283 15,283
Insurance Companies - -
Factoring Companies 51,908 21,908
Leasing Companies 25,888 25,888
Finance Companies 18,963 18,963
Other Financial Subsidiaries 33,010 33,010
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
61
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
8. Information on subsidiaries (Net) (cont’d):
g) Subsidiaries Quoted to Stock Exchange
Current Period Prior Period
Quoted to Domestic Stock Exchange 25,888 25,888
Quoted to Foreign Stock Exchange - -
h) Information on Subsidiaries which are Sold in the Current Period:
None.
i) Information on Subsidiaries Purchased in the Current Period:
None.
9. Information on entities under common control: None (31 December 2015 – None).
10. Information on finance lease receivables (Net): None (31 December 2015 – None).
11. Information on derivative financial assets for hedging purposes: None (31 December 2015 – None).
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 2015 –
TRL 2,050 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 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.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
62
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
13. Information on intangible assets (cont’d):
e) Amount of purchase commitments for intangible fixed assets: None.
f) Information on revalued intangible assets according to their types: None.
g) Amount of total research and development expenses recorded in income statement within the period if
any: None.
h) Information on goodwill: None.
i) Movements on goodwill in the current period: None.
14. Information on investment property: None (31 December 2015 – None).
15. Explanations on deferred tax asset:
a) As of 30 September 2016, deferred tax asset computed on the temporary differences is reflected in the
financial statements by netting off with deferred tax liability and is presented in Section V. Note II.10.
b) Temporary differences over which deferred tax asset is not computed and recorded in the balance sheet in
prior periods: None.
c) Allowance for deferred tax and deferred tax assets from reversal of allowance: None.
d) Movement of deferred tax: mentioned in Section V. Note II.10-b1.
16. Information on assets held for sale and discontinued operations: As of 30 September 2016 the Bank has
TRL 78,600 Thousand assets held for sale (31 December 2015 - TRL 123,300 Thousand).
17. Information on other assets:
a) Breakdown of other assets:
Current Period Prior Period
Receivables from Instalment Sales of Assets 3,892 6,693
Collaterals Given 263,937 245,483
Advances Given 86,884 62,939
Receivables from Banking Services 2,597 3,868
Clearing Account 85,793 63,349
Receivables from Credit Card Payments 36,514 29,618
Prepaid Expenses 59,059 47,320
Other Receivables 18,052 17,143
Total 556,728 476,413
b) Other assets which exceed 10 % of the balance sheet total (excluding off balance sheet commitments) and
breakdown of these which constitute at least 20 % of grand total:
None.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
63
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
II. Explanations Related to the Liabilities
1. Information on maturity structure of deposits
a) 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 457,926 - 242,066 5,786,268 239,503 129,102 235,347 1,204 7,091,416
Foreign currency deposits 473,736 - 142,726 2,043,153 240,497 185,345 830,827 82 3,916,366
Residents in Turkey 429,939 - 134,147 1,722,589 144,018 90,896 164,898 79 2,686,566
Residents abroad 43,797 - 8,579 320,564 96,479 94,449 665,929 3 1,229,800
Public sector deposits 72,745 - 1 3,386 1,366 1,480 110 - 79,088
Commercial deposits 405,662 - 221,209 1,621,498 60,742 9,361 92,034 8 2,410,514
Other institutions
deposits 38,330 - 5,458 435,639 46,091 51,660 488 - 577,666
Precious metals deposits 106,064 - - - 13,091 7,710 - - 126,865
Interbank deposits 45,219 - 505,994 87,514 2,024 - - - 640,751
Central Bank of
Turkey - - - - - - - - -
Domestic Banks 629 - 504,307 28,999 2,024 - - 535,959
Foreign Banks 1,070 - 1,687 58,515 - - - - 61,272
Special finance
houses 43,520 - - - - - - - 43,520
Other - - - - - - - - -
Total 1,599,682 - 1,117,454 9,977,458 603,314 384,658 1,158,806 1,294 14,842,666
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 352,370 - 196,771 5,032,834 135,896 87,917 180,340 879 5,987,007
Foreign currency deposits 663,206 - 225,725 2,711,190 261,084 202,122 853,907 31 4,917,265
Residents in Turkey 640,302 - 211,820 2,500,179 216,087 118,446 306,071 31 3,992,936
Residents abroad 22,904 - 13,905 211,011 44,997 83,676 547,836 - 924,329
Public sector deposits 63,365 - 1 5,437 231 1,271 512 - 70,817
Commercial deposits 458,869 - 282,342 970,986 8,943 16,416 15,682 57 1,753,295
Other institutions deposits 32,253 - 7,865 492,306 1,245 13,416 552 - 547,637
Precious metals deposits 113,477 - - - 13,189 6,260 - - 132,926
Interbank deposits 440,889 - 699,074 276,025 37,267 5,431 - - 1,458,686
Central Bank of
Turkey - - - - - - - - -
Domestic Banks 1,401 - 698,582 107,571 - - - - 807,554
Foreign Banks 1,171 - 492 168,454 37,267 5,431 - - 212,815
Special finance
houses 438,317 - - - - - - - 438,317
Other - - - - - - - - -
Total 2,124,429 - 1,411,778 9,488,778 457,855 332,833 1,050,993 967 14,867,633
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
64
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
II. Explanations Related to the Liabilities (cont’d)
1. Information on maturity structure of deposits (cont’d)
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
Current Period Prior Period Current Period Prior Period
Saving deposits 3,775,757 3,500,216 3,364,883 2,487,174
Foreign currency saving deposits 1,399,099 1,544,495 1,890,156 2,643,113
Other deposits in the form of saving deposits - - - -
Branches‟ deposits under foreign
authorities' insurance - - - -
Off-shore banking regions‟ deposits under foreign authorities' insurance - - - -
Total 5,174,856 5,044,711 5,255,039 5,130,287
(*) 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 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 Bank is in Turkey and the 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:
Current Period Prior Period
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 25,943 12,117
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 - -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
65
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
II. Explanations Related to the Liabilities (cont’d)
2. Information on derivative financial liabilities:
a) Negative differences table related to derivative financial liabilities held-for-trading:
Liabilities due to held for trading derivatives
Current Period Prior Period
TRL FC TRL FC
Forward Transactions - 1,460 - 917
Swap Transactions 97,819 12,788 103,856 34,411
Futures Transactions - - - -
Options 1,092 9,613 82 334
Other - - - -
Total 98,911 23,861 103,938 35,662
3. a) Information on banks and other financial institutions:
Current Period Prior Period
TRL FC TRL FC
Loans from Central Bank of Turkey - - - -
From Domestic Banks and Institutions 44,448 88,841 55,138 97,851
From Foreign Banks, Institutions and Funds 69,574 1,946,515 65,938 2,001,306
Total 114,022 2,035,356 121,076 2,099,157
b) Maturity analysis of borrowings:
Current Period Prior Period
TRL FC TRL FC
Short-term 43,766 142,619 54,014 395,688
Medium and long-term 70,256 1,892,737 67,062 1,703,469
Total 114,022 2,035,356 121,076 2,099,157
c) Additional explanation related to the concentrations of the Bank’s major liabilities:
The Bank‟s liabilities do not have any concentration in any sector.
4. Information on funds provided from repurchase agreement transactions:
Current Period Prior Period
TRL FC TRL FC
From domestic transactions 1,092,831 - 1,868,656 -
Financial institutions and organizations 1,085,208 - 1,805,840 -
Other institutions and organizations 1,470 - 55,467 -
Real persons 6,153 - 7,349 -
From foreign transactions - - - -
Financial institutions and organizations - - - -
Other institutions and organizations - - - -
Real persons - - - -
Total 1,092,831 - 1,868,656 -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
66
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
II. Explanations Related to the Liabilities (cont’d)
5. Marketable securities issued: The Bank issued Asset Covered Bond amounting to TRL 1,500,000 Thousand and details are shown in the table
below. The investors 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 Bank‟s SME loans
were used as colleteral. Outstanding Asset Covered Bond amount is TRL 684,589 Thousand as of 30 September
2016 (31 December 2015 – TRL 764,218 Thousand).
Issue Group Series Investors Amount
Outstanding
Amount (*) Currency Maturity
27 February 2014 2014-1 Qualified Institutional
Investors 361,846 361,846 TRL 13.03.2017
18 December 2015 2015-1 EIB 319,400 319,400 TRL 12.03.2019
(*) Outstanding amounts do not include accruals.
Current Period Prior Period
TRL FC TRL FC
Bills 66,814 - 425,588 -
Asset Backed Securities 684,589 - 764,218 -
Bonds - - - -
Total 751,403 - 1,189,806 -
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 financial lease obligations (Net):
Current Period Prior Period
TRL FC TRL FC
Lease Payables 9,245 119 13,563 483
Deferred Lease Expenses (1,367) (3) (2,431) (19)
Total 7,878 116 11,132 464
8. Information on derivative financial liabilities for hedging purposes:
The Bank does not hold derivative financial liabilities for hedging purposes.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
67
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
II. Explanations Related to the Liabilities (cont’d)
9. Information on provisions:
a) Information on general provisions:
Current Period Prior Period
General Provisions 149,648 177,980
Provisions for first group loans and receivables 87,623 110,265
Additional provisions for the loans with extended payment plan - 13,911
Provisions for second group loans and receivables 42,307 47,746
Additional provisions for the loans with extended payment plan - 32,918
Provisions for non-cash loans 14,291 16,651
Other 5,427 3,318
b) Foreign exchange losses on the foreign currency indexed loans and finance lease receivables: Foreign
exchange losses on the foreign currency indexed loans is TRL 29 Thousand (31 December 2015 - TRL 1,790
Thousand).
c) The specific provisions provided for unindemnified non-cash loans amount to TRL 48,399 Thousand (31
December 2015 - TRL 42,109 Thousand).
d) Information on employee termination benefits and unused vacation accrual:
The Bank 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 10.70%, inflation rate is 5.00% (31 December 2015 - discount rate
10.70%, inflation rate is 5.00%).
- TRL 3,828.37 (full TRL) of maximum wage amount which was in effect as of 31 December 2015 was
taken as maximum amount for the calculation regarding the current period.
- It was assumed that maximum wage would be increased in inflation rate for every year.
- CSO 1980 table was used for mortality averages of females and males.
As of 30 September 2016, the Bank has recorded in the financial statements TRL 61,554 Thousand reserve for
employee termination benefits (31 December 2015 – TRL 53,380 Thousand).
As of 30 September 2016, the Bank provided a reserve of TRL 4,486 Thousand (31 December 2015 – TRL 3,959
Thousand) for the unused vacations. This balance is classified under reserve for employee benefits provisions in the
financial statements.
d.1) Movement of employee termination benefits:
Current Period Prior Period
As of 1 January 53,380 57,994
Service Cost 21,928 7,709
Interest Cost 4,161 4,601
Actuarial Loss/(Gain) (*) - (5,208)
Indemnity Paid During the Term (17,915) (11,716)
Total 61,554 53,380
(*) Actuarial loss/gain shown under other capital reserves after netting of deferred tax.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
68
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
II. Explanations Related to the Liabilities (cont’d)
9. Information on provisions (cont’d):
e) Information on other provisions:
e.1) Provisions for possible losses: Unconsolidated financial statements include a general reserve amounting to
TRL 10,000 Thousand in the current period.
e.2) The breakdown of the sub-accounts if other provisions exceed 10 % of the grand total of provisions:
Current Period Prior Period
Unindemnified Non-Cash Loans 48,399 42,109
Credit Card Liquid Point Promotion Provisions 835 986
Retirement Fund Provision 7,941 7,941
Legal Case Provisions 18,570 16,359
Bonus Provision 7,860 10,087
SDIF Premium Provision 9,727 2,703
BRSA Pay Provision 2,747 -
Other Provisions 58,829 59,739
Total 154,908 139,924
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
69
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
II. Explanations Related to the Liabilities (cont’d)
9. Information on provisions (cont’d): f) Liabilities on pension rights:
f.1) Liabilities for pension funds established in accordance with “Social Security Institution”:
Şekerbank T.A.Ş. Pension Fund, of which each Bank employee is a member, 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 “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.
Through a commission constituted by the attendance of one representative separately from the
Social Security Institution, Ministry of Finance, Turkish Treasury, 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 9.8% will be used in
the actuarial calculation of the value in cash,
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
70
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
II. Explanations Related to the Liabilities (cont’d)
9. Information on provisions (cont’d):
f) Liabilities on pension rights (cont‟d):
f.1) Liabilities for pension funds established in accordance with “Social Security Institution” (cont‟d):
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.
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 7,941 Thousand actuarial deficit in the actuary report
dated January 2016 which was prepared using a technical interest rate of 9.80 % in accordance with the basis set out
in the Council of Ministers decision no: 2006/11345 on 30 November 2006 (31 December 2015- TRL 7,941
Thousand actuarial deficit).
As of 30 September 2016, TRL 7,941 Thousand provision is recorded in the financial statements of the Bank (31
December 2015 - TRL 7,941 Thousand).
The actuary audit, explained above and which is in compliance with the principles of the related law, calculates the
present value of the liability as of 30 September 2016, in other words, the estimated amount to be paid to SGK
(Social Insurance Institution). CSO 1980 mortality table, 9.80 % of technical interest rate, 34.50 % of premium rate
was considered in the actuarial calculation. In the table below, cash value amount of the health expenses within the
framework of Social Security Institution are shown.
Present values of bonuses and salaries payment including health expenses reserve are shown following table in
accordance with SGK as of 31 December 2015.
31.12.2015
Reserve of Probable Retirement Pensions (151,470)
Reserve of Probable Widow and Orphant (83,566)
Reserve of Liability Items (673,365)
Reserve for Salary Portions to be Given to Social Insurance Institution for those who leave the Pension
Fund (115,585)
Health and Funeral Expenses Reserve (98,310)
Assets (*) 368,491
Cash Value of the Premiums of the Active Members 672,455
Reserve of Common Members‟ Salary Proportion
Receivables from other social insurance institutions. 73,409
Actual and Technical Surplus / (Deficit) Amount (7,941)
(*) The Pension Fund records the assets by their fair value and these fair values were considered for the actuarial work.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
71
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
II. Explanations Related to the Liabilities (cont’d)
9. Information on provisions (cont’d):
Assets of the Pension Fund consist of following items:
31.12.2015
Banks and Other Financial Investments 215,620
Associates 51,500
Immovable 89,288
Other 12,083
Total 368,491
f.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.
10. Explanations on taxes payable:
a) Information on current tax liability:
a.1) Corporate taxes:
The Bank has TRL 23,399 Thousand corporate tax provision and is netted off with prepaid tax amounting
TRL 31,826 Thousand as of 30 September 2016 (31 December 2015 - The bank had no corporate tax
provision and prepaid tax was TRL 8,560 Thousand).
a.2) Information on taxes payable:
Current Period Prior Period
Corporate Tax (8,427) (8,560)
Taxation on Securities 14,129 14,086
Capital Gains Tax on Property 501 544
Banking Insurance Transaction Tax (BITT) 16,019 19,797
Value Added Tax Payable 691 624
Other 6,077 7,334
Total 28,990 33,825
a.3) Information on premiums:
Current Period Prior Period
Social Security Premiums-Employee 178 181
Social Security Premiums-Employer 347 362
Bank Social Aid Pension Fund Premiums-Employee - -
Bank Social Aid Pension Fund Premiums-
Employer - -
Pension Fund Membership Fees and Provisions-Employee - -
Pension Fund Membership Fees and Provisions-
Employer - -
Unemployment insurance-Employee - -
Unemployment insurance-Employer - -
Other - -
Total 525 543
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
72
SECTION FIVE (cont’d
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
II. Explanations Related to the Liabilities (cont’d)
10. Explanations on taxes payable (cont’d):
b) Explanations on deferred tax liabilities, if any:
b.1) Breakdown of deferred tax:
Current Period Prior Period
Deferred Tax Assets/(Liabilities)
Tangible Assets Base Differences (51,748) (60,606)
Provisions (*) 34,363 29,845
Valuation of Financial Assets 18,114 17,299
Financial Losses - 5,886
Net Deferred Tax Assets/(Liabilities) 729 (7,576)
(*) Provisions include employee benefit liabilities, credit card bonuses provisions, legal case provisions and other provisions.
b.2) Current and prior year deferred tax movements are shown in the table below.
Current Period Prior Period
Deferred Tax Asset/(Liability), Period Beginning (7,576) (29,623)
Current Period (Expense) / Income 8,974 17,403
Deferred Tax Classified under Equity (669) 4,644
Deferred Tax Asset/(Liability), Period Ending 729 (7,576)
11. Information on liabilities regarding assets held for sale and discontinued operations: None.
12. Explanations on the number of subordinated loans the Bank used maturity, interest rate, institution
that the loan was borrowed from, and conversion option, if any:
Current Period Prior Period
TRL FC TRL FC
Domestic Banks - - - -
Other Domestic Institutions - - - -
Banks Abroad - 44,098 - 271,559
Other Institutions Abroad - 84,540 - 226,662
Total - 128,638 - 498,221
13. Information on Shareholders’ Equity:
a) Presentation of Paid-in capital:
Current Period Prior Period
Common stock (*) 1,158,000 1,158,000
Preferred stock - -
(*) Nominal Capital
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
73
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
II. Explanations Related to the Liabilities (cont’d)
13. Information on Shareholders’ Equity (cont’d):
b) Paid-in capital amount, explanation as to whether the registered share capital system is applicable at Bank and
if so amount of registered share capital ceiling:
Registered share capital system is applied in the Bank: Maximum registered capital amount is TRL 1,250,000
Thousand.
Capital System Paid-in Capital Maximum
Registered Capital 1,158,000 1,250,000
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 interim period, the general purpose
of these commitments and projected resources required to meet these commitments: None.
f) Indicators of the Bank‟s income, profitability and liquidity for the previous periods and possible effects of
these future assumptions on the Bank‟s equity due to the uncertainty of these indicators:
Retained and current year income, profitability and liquidity of the Bank are closely monitored, reported by
the Financial Control, Budget and Strategic Planning Department to the Board of Directors, Asset and
Liability Committee. This department prognoses the effects of interest, currency and maturity fluctuations
that change these indicators 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 Bank‟s future
interest income via simulations of net interest income and scenario analysis.
g) Information on preferred shares:
The Bank has no preferred shares.
h) Information on marketable securities value increase fund:
Current Period Prior Period
TRL FC TRL FC
From Subsidiaries, Associations and Entities Under
Common Control - - - -
Marketable Securities Available for Sale (37,070) (638) (70,239) -
Valuation Difference - - - -
Foreign Exchange Difference - - - -
Total (37,070) (638) (70,239) -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
74
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
II. Explanations Related to the Liabilities (cont’d)
14. Information on legal reserves:
Current Period Prior Period
First legal reserves 82,882 77,750
Second legal reserves 15,106 15,106
Other legal reserves appropriated in accordance with
special legislation 175,996 -
Total 273,984 92,856
15. Information on extraordinary reserves:
Current Period Prior Period
Reserves appropriated by the General Assembly 890,402 997,434
Retained earnings - -
Accumulated losses - -
Foreign currency share capital exchange difference - -
Total 890,402 997,434
16. Other Information on Shareholders’ Equity:
As of 29 April 2016 the Bank acquired 109,211,666.248 shares at TRL 175,000 Thousand through the
auction. After the notification to our Bank through the letter of Istanbul 14th Enforcement Office dated 25
July 2016, in accordance with the provisions of the Turkish Commercial Code and the Turkish
Accounting Standards; TRL 175,996 Thousand, being “the charges-and-taxes-included cost value” of the
repurchased shares is deducted from the Bank‟s “Other Capital Reserves” equity account as of 31 July
2016.
17. Information on other capital reserves:
Actuarial gain/loss is shown under other capital reserves.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
75
SECTION FIVE (cont’d)
III. Explanations Related to the Off-Balance Sheet Contingencies and Commitments
1. Information on off-balance sheet liabilities:
a) Nature and amount of irrevocable loan commitments:
Current Period Prior Period
Forward Asset Purchase Commitments 227,646 139,182
Loan Granting Commitments 824,903 747,973
Payment Commitments for Cheques 623,942 640,840
Commitments for Credit Card Expenditure limits 559,783 597,580
Commitments for Promotions related with Credit Cards and Banking Transactions 1,095 1,278
Subsidiaries and Associates Capital Commitments - -
Tax and Fund Obligations for Export Commitments 5,720 5,826
Total 2,243,089 2,132,679
b) Possible losses and commitments related to off-balance sheet items including items listed below:
The Bank, 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:
Current Period Prior Period
Guarantees 97,321 102,830
Bank Loans 238,850 398,828
Letters of Credit 349,255 488,906
Total 685,426 990,564
b.2) Guarantees, surety ships, and similar transactions:
Current Period Prior Period
Definite Letter of Guarantees 2,930,160 3,334,465
Temporary Letter of Guarantees 390,617 561,358
Surety ships and Similar Transactions - -
Other Letter of Guarantees 643,966 876,394
Total 3,964,743 4,772,217
c.1) Total amount of non-cash loans:
Current Period Prior Period
Letters of Guarantees issued for cash loans 421,873 490,296
With maturity of 1 year or less than 1 year 161,532 183,830
With maturity of more than 1 year 260,341 306,466
Other non-cash loans 4,228,296 5,272,485
Total 4,650,169 5,762,781
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
76
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
III. Explanations Related to the Off-Balance Sheet Contingencies and Commitments (cont’d)
1. Information on off-balance sheet liabilities: (cont’d)
c.2) Information on sectoral risk breakdown of non-cash loans:
Current Period Prior Period
TRL (%) FC (%) TRL (%) FC (%)
Agricultural 5,403 0.18 9,173 0.57 17,507 0.47 10,569 0.53
Farming and raising livestock 3,331 0.11 9,173 0.57 13,492 0.36 10,569 0.53
Forestry 2,008 0.07 - - 3,787 0.10 - -
Fishery 64 0.00 - - 228 0.01 - -
Manufacturing 281,918 9.26 641,014 39.99 531,602 14.09 858,027 43.14
Mining 18,492 0.61 68,245 4.26 21,779 0.58 96,390 4.85
Production 249,504 8.19 559,577 34.91 492,023 13.04 746,912 37.55
Electric, gas and water 13,922 0.46 13,192 0.82 17,800 0.47 14,725 0.74
Construction 1,402,528 46.03 422,570 26.36 1,500,966 39.78 433,543 21.80
Services 1,353,991 44.42 530,207 33.08 1,717,333 45.50 687,011 34.53
Wholesale and retail trade 516,077 16.94 177,470 11.07 660,745 17.51 265,044 13.32
Hotel, food and beverage
services 11,324 0.35 14,209 0.88 20,384 0.53 17,330 0.87
Transportation and
telecommunication 71,963 2.36 19,681 1.23 85,514 2.27 34,353 1.73
Financial institutions 294,520 9.67 66,508 4.15 348,130 9.23 67,916 3.41
Real estate and renting services 386,591 12.69 148,220 9.25 520,078 13.78 189,923 9.55
Self-employment services - - - - - - - -
Education services 413 0.01 - - 1,647 0.04 - -
Health and social services 73,103 2.4 104,119 6.5 80,835 2.14 112,445 5.65
Other 3,365 0.11 - - 6,223 0.16 - -
Total 3,047,205 100 1,602,964 100 3,773,631 100.00 1,989,150 100.00
c.3) Information on I st and II nd Group non-cash loans:
Non-cash loans I st Group II nd Group
TRL FC TRL FC
Letters of guarantee 2,793,612 800,582 237,058 133,491
Bank acceptances 10,204 227,954 - 692
Letters of credit 664 335,293 - 13,298
Endorsements - - - -
Underwriting commitments - - - -
Guaranteed prefinancing credits - - - -
Other commitments and surety ships 5,667 69,364 - 22,290
The Bank provided reserve amounting to TRL 48,399 Thousand (31 December 2015 – TRL 42,109 Thousand) for
unindemnified non-cash loans amounting to TRL 124,096 Thousand (31 December 2015 - TRL 106,696 Thousand).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
77
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
III. Explanations Related to the Off-Balance Sheet Contingencies and Commitments (cont’d)
2. Information related to derivative financial instruments:
Current Period Prior Period
Types of trading transactions
Foreign currency related derivative transactions (I): 10,959,738 11,766,499
Forward transactions 835,883 601,088
Swap transactions 8,447,194 11,018,727
Futures transactions - -
Option transactions 1,676,661 146,684
Interest related derivative transactions (II) : - -
Forward rate transactions - -
Interest rate swap transactions - -
Interest option transactions - -
Futures interest transactions - -
Other trading derivative transactions (III) 1,013,026 1,089,835
A. Total trading derivative transactions (I+II+III) 11,972,764 12,856,334
Types of hedging transactions
Fair value hedges - -
Cash flow hedges - -
Net investment hedges - -
B.Total hedging related derivatives - -
Total Derivative Transactions (A+B) 11,972,764 12,856,334
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 Bank‟s derivative instruments consist of foreign currency swaps, option and forward foreign currency buy/sell
transactions. The Bank revalues foreign currency forward and swap transactions using the Bank‟s end of reporting
foreign exchange rates. 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‟s statement of income. Some of the derivative instruments, although made for economical hedging
purposes, are accounted as trading transactions since they are not qualified to be a hedging instrument as per Turkish
Accounting Standard on “Financial Instruments: Recognition and Measurement” (“TAS 39”).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
78
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
III. Explanations Related to the Off-Balance Sheet Contingencies and Commitments (cont’d)
2. Information related to derivative financial instruments (cont’d):
As of 30 September 2016, breakdown of the Bank‟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
Future Buy
Future Sell
Current Period
TRL 184,314 245,171 753,529 2,167,663 248,719 588,320 - -
USD 145,300 114,855 1,602,049 1,558,604 564,584 260,600 - -
EURO 84,443 54,036 2,164,144 801,798 - - - -
OTHER 3,882 3,946 192,548 219,821 14,438 - - -
Total 417,939 418,008 4,712,270 4,747,886 827,741 848,920 - -
Prior Period
TRL 149,177 150,605 814,950 3,284,312 44,639 26,756 - -
USD 141,437 139,507 2,260,447 1,639,043 27,221 45,034 - -
EURO 9,749 9,749 2,785,532 801,747 872 2,162 - -
OTHER 2,766 3,081 180,987 336,561 - - - -
Total 303,129 302,942 6,041,916 6,061,663 72,732 73,952 - -
As of 30 September 2016, the Bank has no cash flow hedges (31 December 2015 – None).
As of 30 September 2016, the Bank has no hedge of net investment in foreign operations (31 December 2015 –
None).
3. Explanations on contingent liabilities and assets:
a.1) The Bank's share in contingent liabilities arising from entities under common control together with
other venturer: None.
a.2) Share of entity under common control in its own contingent liabilities: None.
a.3) The Bank‟s contingent liabilities resulting from liabilities of other venturers in entity under common
control: None.
b) Accounting and presentation of contingent assets and liabilities in the financial statements:
b.1) Contingent assets are accounted for, if probability of realization is almost certain. If probability of
realization is high, then it is explained in the footnotes. As of 30 September 2016, there are no
contingent assets that need to be explained.
b.2) A provision is made for contingent liabilities, if realization is probable and the amount can reliably be
determined. If realization is remote or the amount cannot be determined reliably, then it is explained in
the footnotes.
As of 30 September 2016, there are 1,044 continuing legal cases against the Bank based on information received
from the Law Department of the Bank. The total amount of these cases is TRL 55,274 Thousand. Provision amount
for these cases is TRL 18,570 Thousand. (According to the information obtained from the Law Department of the
Bank, as of 31 December 2015, numbers of continuing legal cases against the Bank were 1,160. Total amount of
those cases was TRL 52,159 Thousand. TRL 16,359 Thousand of provision was allocated for those cases).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
79
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
III. Explanations Related to the Off-Balance Sheet Contingencies and Commitments (cont’d)
3. Explanations on contingent liabilities and assets (cont’d):
c) Explanations on revocable commitments: As of 30 September 2016, the Bank‟s revocable commitments
amount to TRL 994,537 Thousand (31 December 2015 - TRL 264,199 Thousand).
4. Custodian and intermediary services:
Information related with custodian and intermediary services is given in the financial structure section under the
name of the “Explanations related to transactions made on behalf of others and fiduciary transaction based on trust”
in XI item.
5. The information on the Bank’s rating by the international rating institutions:
The results of the ratings performed are shown below:
Fitch Ratings: February 2016
JCR: September 2016
Foreign Currency Foreign Currency
Long Term BB- International Long Term BBB-
Short Term B International Short Term A-3
Outlook Stable Local Currency
Local Currency International Long Term BBB-
Long Term BB- International Short Term A-3
Short Term B Outlook Negative Outlook Stable Long Term National AA- (Trk)
National A +(tur) Short Term National A-1+ (Trk)
Outlook
Viability
Negative Support Rating 2
Support Rating bb- Individual Rating AB
Foreign Currency 5
Moody’s: September 2016 Capital Intelligence: December 2015
Foreign Currency Foreign Currency
Long Term B1 Long Term BB
Short Term NP Short Term B
Local Currency Financial Strength Rate BB
Long Term B1 Support Rating 4
Short Term NP Outlook Negative
National Long Term Baa2.tr
National Short Term TR-3
Outlook Negative
Financial Strength Rate D
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
80
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
IV. Explanations Related to the Income Statement
1. a) Information on interest income on loans:
Current Period Prior Period
TRL FC TRL FC
Interest on Loans (*) 1,548,973 114,681 1,385,570 99,466
Short Term Loans 792,631 25,801 688,270 30,175
Medium and Long Term Loans 740,180 88,880 683,189 69,291
Interest on Non-Performing Loans 16,162 - 14,111 -
Premiums received from Resource Utilization Support Fund - - - -
(*) Includes fees and commissions obtained from cash loans.
b) Information on interest received from banks:
Current Period Prior Period
TRL FC TRL FC
The Central Bank of Turkey - 340 - -
Domestic Banks 287 34 289 31
Foreign Banks - 1,425 98 1,363
Branches and Head Office Abroad - - - -
Total 287 1,799 387 1,394
c) Interest income from marketable securities portfolio:
Current Period Prior Period
TRL FC TRL FC
Trading securities 152 304 93 243
Financial assets at fair value through profit and loss - - - -
Available-for-sale securities 107,375 536 75,571 -
Held-to-maturity securities 88,782 38 79,056 24
Total 196,309 878 154,720 267
d) Information on interest income received from associates and subsidiaries:
Current Period Prior Period
Interest Income Received from Associates and Subsidiaries 3,825 4,828
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
81
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
IV. Explanations Related to the Income Statement (cont’d)
2. a) Information on interest expense on funds borrowed:
Current Period Prior Period
TRL FC TRL FC
Banks (*) 10,767 57,073 2,986 49,777
The Central Bank of Turkey - - - -
Domestic Banks 2,583 1,967 2,986 1,684
Foreign Banks 8,184 55,106 - 48,093
Branches and Head Office Abroad - - - -
Other Financial Institutions - - - -
Total 10,767 57,073 2,986 49,777
(*) Includes fees and commission expenses of cash loans.
b) Information on interest expense to associates and subsidiaries:
Current Period Prior Period
Interest Expense to Associates and Subsidiaries 3,396 2,754
c) Information on interest expense to marketable securities issued:
Current Period Prior Period
TRL FC TRL FC
Interest expense on securities issued 84,755 - 63,921 -
d) Distribution of interest expense on deposits based on maturity of deposits:
Account Name 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 - 29,314 11,552 - - - - 40,866
Saving deposits 77 12,050 459,601 15,077 8,276 14,728 43 509,852
Public sector deposits - 51 364 61 95 38 - 609
Commercial deposits 10 10,791 100,796 1,961 1,996 3,206 1 118,761
Other deposits - 596 48,773 832 1,976 34 - 52,211
7 days call accounts - - - - - - - -
Precious metal deposits - - - - - - - -
Total 87 52,802 621,086 17,931 12,343 18,006 44 722,299
Foreign Currency
Foreign currency
deposits 113 734 31,641 2,807 2,500 12,996 - 50,791
Bank deposits 112 - 405 - - - - 517
7 days call accounts - - - - - - - -
Precious metal deposits 194 - - - - - - 194
Total 419 734 32,046 2,807 2,500 12,996 - 51,502
Grand Total 506 53,536 653,132 20,738 14,843 31,002 44 773,801
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
82
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
IV. Explanations Related to the Income Statement (cont’d)
3. Information on dividend income:
Current Period Prior Period
Trading Securities - -
Financial assets at fair value through profit and loss - -
Available-for-sale securities - -
Other 5,001 7,350
Total 5,001 7,350
4. Information on net trading income:
Current Period Prior Period
Income 5,832,458 9,347,750
Profit on capital market operations 28,698 5,871
Profit on derivative financial instruments 730,076 1,063,425
Foreign exchange gains 5,073,684 8,278,454
Losses (-) 5,929,180 9,511,415
Losses on capital market operations 422 575
Losses on derivative financial instruments 852,879 961,627
Foreign exchange losses 5,075,879 8,549,213
5. Information on other operating income:
The information on the factors affecting the Bank‟s income including new developments, and the explanation
on nature and amount of income earned from such items:
As of 30 September 2016, TRL 196,281 Thousand stated under other operating income in the statement of
income includes TRL 145,216 Thousand prior years‟ expense and provisions reversal income and TRL
51,065 Thousand other operating income.
As of 30 September 2016, prior years expense and provision reversal income includes TRL 53,187 Thousand
collection and reversal of specific provisions of cash loans, TRL 14,882 Thousand reversal of non-cash
provisions, TRL 2,624 Thousand of securities impairment provision reversal and TRL 74,523 Thousand
reversals of legal case provision and other provisions.
As of 30 September 2015, TRL 181,762 Thousand stated under other operating income in the income
statement includes TRL 109,669 Thousand prior years‟ expense and provisions reversal income and TRL
72,093 Thousand other operating income.
As of 30 September 2015, prior years expense and provision reversal income includes TRL 65,881 Thousand
collection and reversal of specific provisions of cash loans, TRL 21,959 Thousand reversal of non-cash
provisions, TRL 544 Thousand of securities impairment provision reversal and TRL 21,285 Thousand
reversal of legal case provision and other provisions.
Visa Europe Ltd, the payment systems company to which the Bank was also a member, has been transferred
to Visa Inc. operating in the same field, and TRL 14,225 Thousand that accrue for the Bank from this
transaction, has been credited with the Bank's accounts. Within the scope of the said sales, the Bank has also
acquired 1,574 units of C type shares of Visa Inc. which were recorded in the value of TRL 4,559 Thousand.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
83
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
IV. Explanations Related to the Income Statement (cont’d)
6. Provision expenses of banks for loans and other receivables:
Current Period Prior Period
Specific provisions for loans and other receivables 350,849 251,765
III. Group Loans and Receivables 72,430 55,425
IV. Group Loans and Receivables 98,145 80,672
V. Group Loans and Receivables 180,274 115,668
General loan loss provision expenses - 16,871
Provision expenses for possible losses - -
Marketable securities impairment losses 3,244 333
Financial assets at fair value through profit and loss 142 116
Investment securities available for sale 3,102 217
Impairment provision expense 1,096 303
Associates - -
Subsidiaries - -
Entities under common control - -
Investments held to maturity 1,096 303
Other (*) 40,470 47,561
Total 395,659 316,833
(*) Other provisions include TRL 21,172 Thousand unindemnified non-cash loans provision (30 September 2015 – TRL 12,041
Thousand unindemnified non-cash loan).
7. Information on other operating expenses:
Current Period Prior Period
Personnel expenses 265,797 271,554
Reserve for employee termination benefits 8,174 8,181
Bank social aid provision fund deficit provision - -
Impairment losses on fixed assets - -
Depreciation expenses of fixed assets 19,525 17,652
Impairment losses on intangible assets - -
Goodwill impairment losses - -
Depreciation expenses of intangible assets 22,899 15,813
Impairment for investments accounted for under equity method - -
Impairment losses on assets held for resale 396 51
Depreciation expenses of assets held for resale 8,727 9,656
Impairment losses on assets held for sale - -
Other operating expenses 238,277 213,602
Services Rent expenses 54,186 41,442
Maintenance expenses 13,305 10,211
Advertisement expenses 6,824 9,330
Other expenses (**) 163,962 152,619
Loss on sales of assets 243 84
Other (*) 98,486 77,372
Total 662,524 613,965
(*) “Other” includes TRL 32,458 Thousand premiums paid to the Saving Deposit Insurance Fund, TRL 3,574 Thousand legal case
provision and TRL 7,500 Thousand premium provision (30 September 2015 – TRL 18,500 Thousand to the Saving Deposit Insurance
Fund premium provision and TRL 1,640 Thousand legal case provision). (**) Other expenses include TRL 18,194 Thousand communication expenses, TRL 24,211 Thousand computer usage expenses, TRL
4,492 Thousand promotion applications related with credit cards and banking services (30 September 2015 - TRL 19,130 Thousand
communication expenses, TRL 13,054 Thousand computer usage expenses, TRL 4,245 Thousand promotion applications related with credit cards and banking services).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
84
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
IV. Explanations Related to the Income Statement (cont’d)
8. Information on profit/ (loss) from continued and discontinued operations before taxes:
Profit before tax of the Bank has increased by 13.81 % for the period ended 30 September 2016 as compared
to the related prior period. In comparison with the related prior period, the Bank‟s operating income increased
by 13.69 %, net fees and commissions‟ income increased by 1.86 %, provision expenses increased by 24.88
%, other operating income increased by 7.99 % and other operating expenses increased by 7.91 %.
9. Information on tax provision for continued and discontinued operations:
a) As of 30 September 2016, current tax charge is TRL 23,399 Thousand (30 September 2015 – TRL 2,956
Thousand current tax charge) and deferred tax benefit is TRL 8,974 Thousand (30 September 2015– TRL
13,109 Thousand deferred tax benefit).
b) Deferred tax benefit on temporary differences is TRL 8,974 Thousand (30 September 2015 – TRL 13,109
Thousand deferred tax benefit).
10. Information on net profit/ (loss) from continued and discontinued operations:
The net profit of the Bank decreased for the period ended 30 September 2016 by 23.19 % as compared to the
related prior period profit.
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 Bank's performance for the period: None.
b) Effect of changes in accounting estimates on income statement for the current and, if any, for subsequent
periods: None.
c) If the other items in the income statement exceed 10 % of the income statement 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 211,021 198,642
Other Fees and commissions given Current Period Prior Period
Fees and commissions given to Banks 8,788 8,797
Fees and commissions given for Credit Cards 22,514 16,729
Other 17,400 14,941
Total 48,702 40,467
d) 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.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
85
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
V. Explanations on the Risk Group of the Bank
1. Volume of related party transactions, income and expense amounts involved and outstanding loan and
deposit balances:
a) Current 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 and other receivables
Balance at beginning of period 26,266 21,219 398,308 47,233 - -
Balance at end of period 24,718 17,669 398,439 49,065 - -
Interest and commission income 3,825 143 19,629 437 - -
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 and other receivables
Balance at beginning of period 46,270 18,730 355,511 42,241 - -
Balance at end of period 26,266 21,219 398,308 47,233 - -
Interest and commission income 4,828 105 19,034 262 - -
c.1) Information on related party deposits balances:
Related parties Subsidiaries and Associates
Direct and Indirect
Shareholders of the Bank
Other Entities Included
in the Risk Group
Deposits
Current
Period
Prior
Period
Current
Period
Prior
Period
Current
Period
Prior
Period
Balance at beginning of period 166,173 85,903 53,626 90,946 - -
Balance at end of period 137,531 166,173 117,326 53,626 - -
Interest on deposits 3,396 2,754 7,591 4,837 - -
c.2) Information on forward and option agreements and other similar agreements made with related parties:
Related Parties Subsidiaries and Associates
Direct and Indirect
Shareholders of the Bank
Other Entities Included
in the Risk Group
Current
Period
Prior
Period
Current
Period
Prior
Period
Current
Period
Prior
Period
Transactions Held for Trading
Beginning Balance 394,816 369,385 - - - -
Ending Balance 395,747 394,816 - - - -
Total Profit/Loss (*) (59,607) (82,938) - - - -
(*)The Bank and its subsidiaries do not conduct derivative transactions “for-profit”, derivative transactions for hedging is carried out in the
framework of subsidiaries’ risk management policy. The risks arising from derivative transactions conducted with subsidiaries are covered by the derivative transactions with third parties.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
86
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
V. Explanations on the Risk Group of the Bank (cont’d)
2. Disclosures for related parties:
a) The relations of the Bank with the entities controlled by the Bank and its related parties, regardless of
whether there are any transactions or not:
In the normal course of its banking activities, the Bank conducted various business transactions with related
parties at commercial terms and at rates which approximate market rates.
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 423,157 2.60
Non-cash loans 66,734 1.44
Deposits 254,857 1.72
Forward transactions and option agreements 395,747 3.31
These transactions are priced in accordance with the general pricing policies of the 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 Bank enters into lease agreements with Şeker Finansal Kiralama A.Ş. As of 30 September 2016 the total
leasing obligations related to those agreements amounted to TRL 136 Thousand (31 December 2015 - TRL
484 Thousand). Additionally, the Bank provides agency services for Şeker Yatırım Menkul Değerler A.Ş.
through its branches.
With-in the limits of the Banking Law, the Bank renders cash and non-cash loans to its related parties and the
ratio of these loans to the Bank‟s total cash and non-cash loan portfolio is 2.34 % as of end of the reporting
period. Details of these loans are explained in the Section V, Note VII 1a.
As of 30 September 2016 the Bank 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 top management personnel during current period amount to TRL 11,047 Thousand (30
September 2015 - TRL 16,606 Thousand).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
87
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
VI. Explanations and notes related to subsequent events:
None.
SECTION SIX
AUDITORS’ REVIEW REPORT
I. Explanations on the Auditors’ Review Report:
The unconsolidated financial statements for the nine-month period ended 30 September 2016 were audited by Akis
Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik AŞ (the Turkish member firm of KPMG International
Cooperative, a Swiss entity) and Auditors‟ Review Report dated 8 November 2016 is presented in the introduction
of this report.
II. Other Footnotes and Explanations Prepared by Independent Auditors:
None.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
88
SECTION SEVEN (cont’d)
INFORMATION ON INTERIM ACTIVITY REPORT
I. Board of Directors Chairman’s Assesments on Interim Report
Esteemed Shareholders,
The global economy, especially in developed countries, has been experiencing a growth problem for a long time and
this stagnancy in world commerce cannot be overcome. Despite all political risks and global fluctuations, Turkey,
having 4 percent growth, has succeeded in becoming the fourth fastest growing G-20 country in 2015. Although in
the Medium Term Program the 2016 the growth goal was revised as 3.2% and the 2017 goal was revised as 4.4%,
these rates indicate a strong performance compared to developing countries and the world growth.
Despite all international prejudices, the whole world has seen again how strong the Turkish economy is with all the
main economic indicators going back to normal after our government and our people united to eliminate the heinous
coup attempt of July 15.
The necessary measures taken promptly by the Government and the rulers of the finance sector, like the Central
Bank and the Banking Regulation and Supervision Agency, as well as the unity of the business society and citizens
along with the government enabled Turkey to get back into normal stance in a short span of time. The Turkish
economy has attained great gains in the last 15 years. The financial stability, the relatively low rates of indebtedness,
strong financial system and growth potential have made Turkey‟s economy strong. In this context Turkey continues,
despite the recession in the global economy, to be one of the safest ports for international investors with its strong
history of growth and potential.
The government has recently introduced a broad reform program aimed atsavings increase, finance growth,
maintenance of the budget balance, and increase of the technology part in the industrial production, increase of
export and local and foreign direct investments through improving the investment environment. The “Turkey
Wealth Fund” that will provide long term affordable financing for large infrastructure investments, the “Automatic
Individual Retirement System” comprising the second leg of public social security, the new tax and R&D
regulations have been gone into effect. Also, applications like the incentive system focused on medium and high
technologies will forge the path for the Turkish economy and accelerate production.
As for Şekerbank, following our responsible banking approach for 63 years since its foundation, we have been
always considering ourselves as a whole with our customers and our country, we have always strived to show our
devotion under any circumstances and continue our activities today with this same sense of responsibility. In the
upcoming period we will continue to support production, commerce, investments and export financing with the
same decisiveness to reach the sustainable growth speed that will reveal the potential of Turkey.
Sincerely,
Dr. Hasan Basri Göktan
Chairman of the Board of Directors
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
89
SECTION SEVEN (cont’d)
INFORMATION ON INTERIM ACTIVITY REPORT (cont’d)
II. General Manager’s Assesments on Interim Report Esteemed Stakeholders,
According to the unconsolidated financial statements as of 30 September 2016 the assets reached TL 23 billion and
the profit was TL 54 million as of nine months of this year. In 2016 we continued supportting the real sector by
extending loans, which constitute 71 percent of the assets, the rate much higher than the sector average. As of 30
September 2016, 90 percent of our total loan portfolio amounted at TL 16.3 billion is consisted of commercial loans
or in other words loans for agriculture, craftsmen, small enterprises, SMEs and corporate loans.
Our widespread and deep rooted deposit base grew even stronger this year, while equity reaches TL 2.5 billion
according to the unconsolidated financial statements as of 30 September 2016. While according to the
unconsolidated financial statements the ratio of deposits to the total liabilities was 53 percent for the Turkish
banking sector, the same ratio as per the financial statements of Şekerbank as of 30 September 2016 was 65 percent.
70 percent of TL 15 billion deposit base were attributed to individual savings. We will continue being the reliable
address for wide range savings through our branch network located in 71 provinces and nearly 100 off-center
districts that has been in the same location for half a century.
In the last period we became more focused on supportting the production in line with our Community Banking
mission, which we are realizing during the 63 years. On the occasion of our 63-year anniversary, during the last
month Şekerbank provided TL 100 million finance for craftsmen and small businesses at a very appropriate cost of
only TL 63, no commission and interest rate decreased 1.17.
As a Company, which during the 63 years has been providing a wide range of society members from rural to urban
areas with finance for production and investment based growth, we will continue increasing our support for the
country to reach its potential growth, taking on our share of the responsibility.
Sincerely,
Servet Taze
General Manager
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
90
SECTION SEVEN (cont’d)
INFORMATION ON INTERIM ACTIVITY REPORT (cont’d)
III. Şekerbank by Numbers
Financial Highlights (TL thousand) 30.09.2016 30.09.2015
Assets 22,846,053 23,776,650
Loans (Net) 16,268,893 16,520,771
Securities 2,484,135 2,696,073
Equity 2,444,877 2,425,816
Deposits 14,842,666 14,908,844
Profit Before Taxation 68,360 60,063
Net Profit 53,935 70,216
Financial Ratios 30.09.2016 30.09.2015
Securities / Assets 10.87 11.34
Loans (Net) / Assets 71.21 69.48
Deposits / Assets 64.97 62.70
IV. Financial Standing, Profitability, and Solvency
Şekerbank earned TRL 53,935 Thousand net profit during the nine months of 2016. Total assets reached TRL
22,846,053 Thousand. As of 30 September 2016 loans were 71.21% of the total assets.
Securities portfolio is TRL 2,484,135 Thousand. The share of deposits of the Bank has reached 64.97% of the
liabilities and net worth. As of 30 September 2016 the Bank‟s equity is TRL 2,444,877 Thousand.
The Bank posted TRL 811,958 Thousand as net interest income and TRL 210,025 Thousand as net fee and
commission income.