yapı kredi: from integration to growth
TRANSCRIPT
1
UBS LAT/EMEA ConferenceNew York, 3 - 4 December 2007
Yapı Kredi: From Integration to Growth
2
Agenda
Macroeconomic & Banking Environment
9M 2007 Results (BRSA Bank-only)
Annex
Strategic Guidelines
YKB’s Competitive Positioning
3
Turkey is one of the biggest markets in the European and Mediterranean area
Population is young (avg 29 years) and is concentrated in top 10 cities (44%)
Per capita GDP is on an increasing trend after ‘94, ‘00, and ’01 financial crises
The 2 key anchors:– IMF: for the first time in 2004 a program has been
completed; the new IMF program for 2005-2007 on track (USD 10 billion)
– EU: full membership negotiations started in October 2005
Political situation
Single party government since December 2002 with strong Parliamentary majority
General elections took place on 22 July 2007; macro picture still solid despite recent volatility
FDI (net) up to USD 9 billion in 2005 and USD 19 billion in 2006. USD 16 billion and USD 15 billion of FDI expected in 2007 and 2008, respectively
Year 2006 Turkey
Population, mln 73
Per Capita GDP, Euro 4,365
Source: NE Research Network
Country rating- S&P
- Fitch
- Moody’s
+3
+2
+1
Delta vs 2002
BB-
BB-
Ba3
Turkey is a big and attractive country, rapidly and structurally recovering from recent financial volatility…
Avg. age population 29
4
Productivity-led GDP growth of 7.2% during 2002-2006 on the back of stable political outlook
Macro environment to remain strong in 2007 and 2008 with GDP growth above 5% and ongoing disinflationary trend
Increasing FDI easing concerns over current account deterioration
Sustained GDP growth + sharp decrease of inflation andmarket rates confirm attractiveness of the country
GDP Growth (%)
2002 2003 2004 2005 2006 2007FCPI Inflation (year-end, %)
2002 2003 2004 2005 2006 2007F
Current Account Deficit (as % of GDP)
7.95.8
8.97.4
5.06.1
29.718.4
9.37.7 9.7 7.8
2008F
6.1
2008F
5.7
C/A DeficitC/A Deficit FDI adj
0.8
2002 2003 2004
3.3
2005
5.2
2006
6.38.2
0.32.8
4.5 3.8 3.4
2007F
7.7
4.4
2008F
8.0
5.2
6.2
2009F
4.8
2009F
8.2
5.8
2009F
5
Banking sector is yet underpenetrated…
Eurozone2006
92
540
BRANCHES PERMLN INHABITANTS
Turkey2006
89%
214%
(LOANS+DEPOSITS)/GDP
Turkey2006
Eurozone2006
Mortgages Consumer loans(1) Credit cards(1)
5.5%15.7%
1%7.7%
4%4%4%
78.5%
40.4%
UK (2005)
Turkey (2006)Eurozone (2005)
UNDERPENETRATED BANKING MARKET IN TERMS OF BOTH INDIVIDUAL BANKING PRODUCTS AND SME LENDING
SME CASH LOANS/GDP(2)
Turkey
16.7%France
18.1%Germany
17.0%Italy
17.1%UK
3.8%
MUTUAL FUNDS/GDP INSURANCE PREMIUMS/GDP
12.5%UK
9.1%US
6.8%Germ.
4%Cze
1.7%
71%
25%
11%
11%
3.8% Turkey
USA
UK
Germ.
Hung.
Turkey
(2) Based on companies below 3 million USD turnover. Source: KOSGEB, SIS, McKinsey
(1) For personal loans, EU figures exclude professional loans, which make up another 10% of GDP; for credit cards, outstanding balances to GDP used. Source: YKB team analysis, TBA, BRSA, Merrill Lynch
2006 year end figures for Turkey, Hungary and Czech while 2005 year end figures the rest.
6
Growth coupled with decreasing country risk
BANKING SECTOR
No of Banks 54 46
(1) Nominal Growth(2) Annual returns / costs calculated on total interest revenues & expenses on total loans and deposits
2006 2007F 2009F2008F
Loan growth(1) (%) 40 2924 28
Deposit growth(1) (%) 22 2016 19
Return on Loans(2) (%) 15.0 13.315.5 14.5
Cost of Deposits(2) (%) 10.1 9.311.0 10.2
Spread (%) 4.9 4.04.5 4.2
BANKING SECTOR
POSITIVE SECTOR ENVIRONMENT…
…EXPECTED TO CONTINUE
Effective regulatory environment with increasing regulatory action
Strong profitability track record: 19% ROE in 2006
2030 TR Eurobond spread at the lowest level achieved so far in June ’07
Strong loan growth on the back of the portfolio restructuring started in 2003
Loan and deposit growth expected to remain significant in 2008-2009
Loan-deposit spread expected to be around 4.5% in 2007 and 4.2% in 2008
(1) Spread on the 2030 Eurobond
SPREADS ON TURKISHEUROBONDS(1)
77% 84%Assets / GDP
37%18%Loans / GDP
36% 71%Loans / Deposits
19%11%ROE
2002 2006
0200400600800
10001200
Jan-
01
Sep-
01
May
-02
Jan-
03
Sep-
03
May
-04
Jan-
05
Sep-
05
May
-06
Jan-
07
Sep-
07
7
Agenda
Macroeconomic & Banking Environment
9M 2007 Results (BRSA Bank-only)
Annex
Strategic Guidelines
YKB’s Competitive Positioning
8
Yapı Kredi at a glance
Extensive distribution network of 661* branches with over 11% market share in top 10 cities
in Turkey
FINANCIAL HIGHLIGHTS(BRSA Bank-Only Figures in YTL, 30 Sep 2007)
Total Assets (bln)Total Assets (bln) 47.947.9
Performing Performing Loans Loans (net, bln)(net, bln) 25.225.2
Deposits Deposits (bln)(bln) 31.531.5
Mutual Funds Mutual Funds (bln)(bln) 4.84.8
Number of Credit Cards Number of Credit Cards (mln(mln)) 5.45.4
Number of Number of Customers Customers (mln(mln) ) 114.04.0
Number of Number of Branches Branches 661661
Number of ATMNumber of ATMs s 11,,873873
Number of Number of Employees Employees 1133,,712712
PaidPaid--in Capital (in Capital (mlnmln)) 3,143,1499(1)(1)
3Kırklareli 3
Ankara 70
Adana 15
K.Maraş 2
Tokat 2
Aksaray1
Nevşehir
Çorum 2
1
Bolu 2
Eskişehir 6
Afyon 3
Kırıkkkale 1
Amasya 2
Diyarbakır 5
Mardin2
Malatya 3Elazığ 3
Karaman 1
Niğde 1 Batman 1
Osmaniye1
Sivas 1
Erzurum 2
Isparta2
Kütahya 2
Manisa7
İzmir 53
Aydın 6Denizli 5
Muğla17
Balıkesir 9
Çanakkale 4 Bursa 27
Uşak 2
2
?
Kocaeli
Burdur
Yozgat
Kırşehir
G
Bayburt
?r?
Adıyaman
AğrıIğdır
HakkariŞırnak
Siirt
BitlisMuşBingöl
Düzce 1
Ş.Urfa 2
Konya 7
Ankara
Adana
Kayseri 5
Tokat
Aksaray1
2
Çorum 2
Kastamonu 1
Bolu 2
Afyon
AmasyaSamsun 6
Ordu 3Giresun1
Trabzon 3Rize 1
Mardin2
Malatya 33 Van 2
Karaman 1
1 Batman 1
Kars 1
Osmaniye1
Sivas 1
Erzurum 2
Isparta
Kü
1
Tekirdağ 5 İstanbul2268
Yalova 2
Zonguldak 4
13
Burdur
Yozgat 1
1Erzincan 1
Tunceli
G
Bilecik 1
Hakkari
Siirt
Bitlis
Bingöl
SinopEdirne 4
Sakarya 5
Artvin Ardahan
Çankırı 1
1
Mersin 10Antalya 32
Gümüşhane
Karabük 1
Bartın 1
Hatay 4
G.Antep 6Kilis 1
* Including 1 off-shore branch in Bahrain(1) 3,427 mln YTL as of 26 October 2007
9
Strong franchise with unique competitive advantages
Unique competitive advantages
SEGMENT FOCUSED ORGANISATION ALREADY IN PLACE
FOCUS ON EFFICIENCY AND CUSTOMER SERVICE
STRONG SHAREHOLDERS
... WITH LARGE CUSTOMER BASE NOT YET FULLY EXPLORED
QUALITY REVENUE GENERATION...
LEADERSHIP IN KEY SEGMENTS/PRODUCTS
LARGE NETWORK & LEADING BRAND
HIGH SOLID RISK PROFILE
10
Segment focused organisation
Divisionalised structure…
NO 1 PLAYER IN THE MARKET
Factoring (market share: 20%)
Non-life insurance (market share: 15%(2)) Mcap: Euro 535 mln
…with leading product factories and networks
LEADING POSITION
#1 in Leasing (market share: 21%)Mcap: Euro 809 mln
#2 in Mutual Funds (market share: 19%)
#6 in Brokerage (market share: 4%)
5.4 M cards 13.9 M customers
+42Kcustomers
+6Kcustomers
+55Kcustomers
YK NederlandYK MoscowYK DeutschlandYK Azerbaijan
Mass
Upper Mass
SME
Affluent
HNW
UHNW
Credit Cards Retail Private Corporate Commercial Product
Factories
Int’l Operations
230K POS156 direct sales force
516 branches2,743 RMs1,723 ATMs
21 branches213 RMs
8 branches73 RMs
116 branches(1)
457 RMs
(1) Including 2 Free Zone branches
Market shares as of 30 Sep 2007, market capitalisations as of 15 Nov 2007(2) YK Sigorta/YK Emeklilik + Koç Allianz / KA Emeklilik (Koç Allianz Co’s are not KFS subsidiaries)
L
L
L
L = Listed
No 1 in credit cards (25%) & non-cash loans (18%)Mcap: Euro 8.5 bln
HNW= High Net WorthUHNW=Ultra High Net Worth
#2 in Private Pension (market share: 21%(2))
11(1) Excluding credit card loans(2) Outstanding balance market share(3) Through Koç Allianz which is not a KFS subsidiary (Koç Group subsidiary)(4) Equity trading volumes(5) Cash Loans excluding credit card outstanding and consumer loans
Leadership in key segments/products on the back of a strengthened franchise, large network and leading brand
POSITIONING – SEPT ´07
Anadolu 12, AxaOyak 12
Yapı Kredi
# of Branches
Deposits
Consumer Loans
Credit Cards
Brokerage Asset Management
Leasing
Factoring
Retail
AuM + Brokerage
Corporate Non Cash Loans
Non-Life
InsuranceLife
Cash Loans
Key Competitors - %
Ziraat 17, İş 13, Ak 10
Ziraat 20, İş 13, Ak 12, Gar 11
Ziraat 14, Ak 13, İş 13, Gar 13
Garanti 22, Ak 15, İş 13
İş 21, Garanti 14, Ak 13
İş 6, Ak 5, Deniz 5, Finans 5
Ak 13, İş 13, Gar 13
Garanti 14, İş 9
Garanti 19, Finans 8
Garanti 12, Fiba 9, TEB 8
Anadolu 24, Başak 15, Avivasa 11
Avivasa 25, Anadolu 20
(4)
(1)
Total Assets
Rank nr 5
(2)
(5)
Pension
4
5
2
6
1
2(3)
9.0
9.6
19.3
4.3
18.0
20.6
19.7
7 5.7
1 25.3
4
12.6
21.0
9.2
1
1(3) 15.4
Rank Mkt. Sh. %
1
3(3)
Assets 5 9.1
TOTAL
Loans Ak 13, Garanti 14, İş 134 9.6 İş 15, Ziraat 15, Ak 13, Garanti 11
12
Agenda
Macroeconomic & Banking Environment
9M 2007 Results (BRSA Bank-only)
Annex
Strategic Guidelines
YKB’s Competitive Positioning
13
9M2007 Key Highlights: Another quarter of consistent post-merger growth & profitability improvementYTL 632 mln of bank-only net income (87% YoY(1) and 9% QoQ) with bank-only ROE of 25% (+7 ppts up YoY(1)). YTL 721 mln of consolidated net income (after minorities)
Healthy revenue growth of 18% YoY(1)(2) , another quarter of solid fee &commission growth (15% QoQ)
Positive growth trend in all almost segments of loans (especially SME & Consumer) and deposits with market share gains in general purpose loans (+26% QoQ) accelerated by launch of CARMA(3) project
Further improvement in CAR to 12.9%
Leadership in credit cards maintained with outstanding volume market share up to 25.3% (+0.1 ppts QoQ)
Completed project for the reconstruction of Turkey’s largest credit card platform, WORLD, on 5 Nov
Announced credit card brand sharing agreement with Vakıfbank on 7 Nov, largest partnership in terms of number of credit cards (WORLD total: in excess of 8.5 mln) and issuing volume
Cost/Income down to 61%(1)(2) in 9M07 (-5 ppts YoY(1)) (51% if cost base adjusted for IFRS)
NPL ratio down to 6.6% (-0.2 ppts vs 2Q) with 82.4% NPL provisioning coverage
23 new branch openings in 3Q07 totalling 53 YTD, in line with accelerated branch opening plan (total: 661). 721additional recruitments YTD in 2007 to support the plan
Secured one-year USD 800 mln syndicated loan on 24 Sept with an all-in cost of Libor + 47.5 bps (down from 52.5 bps last year) through the participation of 31 international banks
Completed 1st phase of KFS restructuring on 26 Oct with the transfer of YK Leasing, YK Factoring and YK Azerbaijan shares from KFS to YKB. Increase of KFS ownership in YKB to 81.8% (+1.6%)
(1) In comparison with 9M06 YKB pro-forma merged bank figures normalized for the financial cost of stake increase and sub-loan as well as some minor accounting policy applications. (2) Adjusted to exclude loan write-off effects mainly due to Superonline stake sale in 2Q07 and non-core fixed asset sale gain/loss in 3Q07
(3) Centralized Automated Risk Management Approach
14
22% 25% 27%
1Q07 2Q07 3Q07
18%25%
9M06 9M07
338
632
9M06N 9M07
1.51%2.38%
9M06N 9M07
2.32% 2.41% 2.41%
1Q07 2Q07 3Q07
188 213 232
1Q07 2Q07 3Q07
66% 61%
9M06N 9M07
Solid quarterly track record in profitability improvement
Net Income (mln YTL)
9M06 figures not adjusted for the effects of corporate tax rate decrease from 30% to 20% due to change in tax legislation in 2Q06 (1) Cost base adjusted by provision expenses of pension fund and Worldcard points for comparison with IFRS guidance. (2) Adjusted to exclude loan write-off effects mainly due to Superonline stake sale in 2Q07 and non-core fixed asset sale gain/loss in 3Q07 (3) ROE calculations based on beginning of year equity.
Cost / Income(2) Net Income / Av.RWA
ROE(3)
35% on tangible equity
+7 ppts
38% on tangible equity
+87 bps
-5 ppts
60% 61% 60%
1Q07 2Q07 3Q07
+87%
54%(1) 51%(1) 51%(1)51%(1) 51%(1)
9M06N: As per BRSA financial reports, the 2006 figures refer to pre-merger YKB. For comparison, throughout the presentation, 2006 figures have been stated as pro-forma for the merged bank (YKB and Koçbank) normalized for the financial cost of stake increase and sub-loan as well as some minor accounting policy applications.
15
25,20424,035
22,504 22,331
2006 1Q07 2Q07 3Q07
31,51731,74131,12728,870
2006 1Q07 2Q07 3Q07
Increased commercial focus in the network accelerating growth with selective market share gains
Total Deposits (mln YTL)
Total Loans (mln YTL) TL Loans (mln YTL)
FC Loans (mln USD)
TL Deposits (mln YTL)
FC Deposits (mln USD)
Market Shares* (%)
4Q06 1Q07
(*) Excluding accruals, based on weekly BRSA data
5%
12%
11% YoY
1%6% YoY
17,80016,539
15,349 15,050
2006 1Q07 2Q07 3Q07
6,2765,194 5,389 5,848
2006 1Q07 2Q07 3Q07
-1%
18,28418,117
15,73916,167
2006 1Q07 2Q07 3Q07
10,8599,719
10,627 11,215
2006 1Q07 2Q07 3Q07
3Q07
Loans 10.2% 9.6% 9.8% 9.8%
TL loans 9.9% 9.2% 9.4% 9.2%
FC loans 11.0% 10.7% 10.9% 11.1%
Deposits 10.3% 9.2% 9.8% 9.6%
TL Dep. 8.7% 8.1% 8.8% 8.7%
FC Dep. 12.9% 11.0% 11.4% 11.3%
2Q07
16%
8%
13%
1%
21%
3%
7%
6%
Non-cash loans 18.7% 18.0%18.8%20.2%
Slight decrease (-1%) in total deposits QoQ, mainly driven by 3% decrease in FC deposits (in YTL terms) due to appreciating YTL
USD/YTL exchange rates -- 2006: 1.378, 1Q07: 1.351, 2Q07: 1.282, 3Q07: 1.180
10.4%
9.9%
11.5%
9.8%
8.9%
11.5%
18.4%
16 Nov
16
Healthy revenue growth (+18% YoYA(2)) and cost control (+8% YoYA(2)) continuing
Total Revenues
9M07 YoY %
2,691 +30%
Operating Costs (1,737) +27%HR costs (574) +28%
Operating Income 954
Non-HR costs (1,163) +27%
Provisions (186) -12%Pre-tax Income 768Net Income 632
9M06
2,184
(1,362)
(447)
822
(915)
(267)555387
Net Interest Income 1,451 +22%Non-Interest Income 1,240 +41%
1,307877
+35%
+55%+87%
+23%
+27%
+28%
+16%
+27%
-30%+38%+63%
+11%+41%
Core Non-HR(1) (845) +47%(576) +47%
(mln YTL)
o/w Fees & Comm.
YoY %Normalized
629 726 +15% +15%
9M06N
2,068
(1,362)
(447)
705
(915)
(211)495338
1,191877
(576)
629
(1) Including depreciation and excluding HR related costs (such as management bonuses, ETB, and vacation rights ) and pension fund and bonus point provisions(2) Adjusted to exclude loan write-off effects mainly due to Superonline stake sale in 2Q07 and non-core fixed asset sale gain/loss in 3Q07. For a detailed explanation, please see slide 47
(2)
+8%Operating Costs
(2)
+18%Total Revenues(2)
+1%Core Non-HR
17
60%54%58%
30%27%
30%
5%15%
8%
2%1%
2%
3%
3%
2%
9M06N 9M07 9M07A
275.2
225.1 239.1210.5 211.3
3Q06N 4Q06N 1Q07 2Q07 3Q07
Improved revenue mix with higher share of interest income (+22% YoYN) and fees (+15% over 2Q)
2,691
Composition of Revenues (mln YTL)
Net InterestIncome
Net Fees & Commissions
Other Oper. Inc.
30%
15%
22%
140%
Net Fees & Commissions (mln YTL)
15%
Dividend. Inc.Trading Inc.
22% increase in 3Q07 vs 3Q06N
In 9M07, net interest income increased by 22% YoY and fees & commissions increased by 22% in 3Q07 vs. 3Q06 (15% vs 2Q07), mainly driven by credit cards and asset management fees.Higher share of fee income in total revenues vs the peer average and the sector
2,068
(1)
2,433
13%
(1) Adjusted to exclude loan write-off effects mainly due to Superonline stake sale in 2Q07 and non-core fixed asset sale gain/loss in 3Q07(2) Peers adjusted for one-off gains in 9M07
18
23%
25%
27%
27%
11%
11%
12%
10%
26%
26%
1%
1%
3Q07
2006
58%58%
8%
10%
28%
26%
6%
6%
9M06N 9M07
Strengthened interest income with a diverse mix... ...heavy in higher margin SME and consumer loans
Share of retail in total cash loans increased to 50% (+2ppts vs YE06) mainly driven by increased focus on consumer and SME
Differentiated and dedicated approach to SMEs resulted in increased weight of SME’s in total cash loans up to 12% (+2 ppts vs YE06)
26% of cash loans constituted by highest yielding credit cards
(*) MIS data (commercial bank only)
Cash Loans by SBU*Medium
Corporate(2)Credit CardsLarge
Corporate(1) Consumer(3) PrivateSME(4)
Retail (50%, up 2 ppts vs 06YE)Corporate (50%, down 2 ppts vs 06YE)
FC Loans (mln USD)Total Loans (mln YTL) TL Loans (mln YTL)21% YTD
Composition of Interest Income (mln YTL)
3,440
YTL Loans
FC Loans
Securities
Other
4,409
12% YTD 16% YTD
28% YoY
(1) Loans extended to companies with annual turnover of above 50 mln USD(2) Loans extended to companies with annual turnover between 3 – 50 mln USD(3) Loans extended to individuals (housing, auto and general purpose loans)(4) Loans extended to companies with annual turnover less than 3 mln USD
25,20422,741 22,331
24,035
3Q06 1Q07 2Q07 3Q07
27%
6%
40%
25%
17,80014,855 15,050
16,539
3Q06 1Q07 2Q07 3Q07
6,2765,8775,389
5,848
3Q06 1Q07 2Q07 3Q07
5%
11%
8%
20%
7%
7%
19
50% 50% 53%48%
28% 29% 27%31%
14% 13% 12%13%8% 8% 8%8%
3Q06 1Q07 2Q07 3Q07
57% 58% 60% 62%
43% 42% 40% 38%
3Q06 1Q07 2Q07 3Q07
Heavier weight of loans (+7 ppts vs YE06), reduced weight of securities (-7 ppts vs YE06) in total assets
IEAs remain high at 92%103 mln YTL of non-core real estate has been disposedout of first tranche portfolio announced on 12 July, with further disposal expected in 4Q & 08 Increase in TL IEAs in total IEAs to 60%, +3 ppts vs. 2Q,driving margins higherShare of loans in total assets increased to 53%, up 3 pts vs. 2Q07; further shrinkage insecurities portfolio to 27% (-2 ppts vs. 2Q)70% of total loans constituted by less riskyhigher margin TL loans vs. FC loansFurther room for improvement in loans/deposits ratio (79%)
(1) Securities including derivative accruals.(2) Performing loans
Composition of Assets (mln YTL) TL/FC Breakdown of Assets (mln YTL)
FC
TL
TL Loans/Loans(2)
TL IEAs/IEAs
Loans(2)/Deposits
45,940
68%53%
71%
200665%55%
75%
3Q0667%55%
77%
1Q07
92%
Non IEAs
Other IEAs
Securities(1)
Loans
92%
46,744 47,803
68%57%
75%
2Q07
4%
-6%
70%60%
79%
3Q07
47,917
5%
-8%
-1%
2%
0.2% +2% in USD terms
20
91% 95% 96% 96%
4% 2%2% 2%5% 2%
3% 2%
3Q06 1Q07 2Q07 3Q07
46% 48% 49% 50%
54% 52% 51% 50%
3Q06 1Q07 2Q07 3Q07
96% of securities portfolio invested in HTM in line with stable revenue generation and limited capital at risk
Strong focus on risk managementDerivatives allowed only for hedging purpose; options allowed only for client-driven transactions immediately fully hedgedNo FX speculative open positions allowed ; VaR limits, stop loss, max open position monitored on a daily basisSecurities declined by 23% YTD due to redemptions of short term bonds; share of securities in total assets shrunk by 2 ppts vs 2Q to 27%
Securities Composition by Type (mln YTL)
Securities Compositionby Currency (mln YTL)
13,382
YTL
FC
Held-to-maturity
Trading
Available For Sale
23% YTD
14,654 13,75412,704
(26%FLOATING)
(21%FLOATING)
(21%FLOATING)
(20%FLOATING)
(47%FLOATING)
(75%FLOATING)
(69%FLOATING)
(54%FLOATING)
8%
21
961764669654
3Q06 1Q07 2Q07 3Q07
1,9511,7351,5911,561
3Q06 1Q07 2Q07 3Q07
469468486587
3Q06 1Q07 2Q07 3Q07
66% 66%66% 64%
19%20%
19%21%8%8%
9%10%5%
5%6%7%
3Q06 1Q07 2Q07 3Q07
Composition of Consumer Loans & Credit Cards (mln YTL)
Continuing positive trend in consumer loan market shares, especially in general purpose loans (+26% QoQ)
Housing Loans (mln YTL)
Auto Loans (mln YTL)
8,292
Credit Cards
Housing
Gen.Purpose
Auto
13% YTD
Note: Consumer loans are those loans granted to individuals only
13% YTD14% YoY
42% YTD
26% YTD
Gen. Purpose Loans (mln YTL)8,1778,846
9,4537%
12%
25%
47%
26%
20%
0.2%
Consistent quarterly increase in all consumer loan market sharesConsumer loan growth in Q3 mainly driven by above sector growth in general purpose (26% vs 2Q) and housing loans (12% vs 2Q) Growth in general purpose loans mainly due to the successful implementation of the CARMA(1) project through pre-approved limits for ~1.3 mln existing customers64% share of credit cards in retail loans, down from 66% in 2Q
Market Shares*
Consumer loans
- Housing
- Gen. Purpose
- Auto
5.5%
6.8%
3.4%
8.1%
2Q071Q07
5.6%
6.8%
3.4%
8.1%
3Q07
5.7%
7.0%
3.8%
8.2%(*) Excluding accruals, based on weekly BRSA data
(1) Centralized Automated Risk Management Approach
6.0%
7.1%
4.3%
8.6%
16 Nov
22
55195,8795,6025,584
6,072
3Q06 4Q06 1Q07 2Q07 3Q07
Long-standing leadership position in credit cards maintained
(2) Excluding virtual cards. Total # of credit cards including virtual cards: 6,568,048.(1) Excluding the estimated Maximum-card issuance of Ziraat to the existing customers. Including: 18.5%
Issuing Volume Market Share (quarterly)
YKB
Koçbank
No of CCs Market Share
Credit Card Outstanding (mln YTL)
2006 1Q07
98%
Mkt share: (CE)
27.0% 26.3% 25.4%(2)
10% YoY
Market Share vs Closest Competitor
25.3%23.4%21.6%19.0%(1)
CCs Outstanding
Issuing Volume
Acquiring Volume
Number of CCs
YKB
Mkt. ShareAdvantage
-166 bps+ 178 bps+ 170 bps + 390 bps
# of credit cards(2)
# of merchants
# of POS
CC Turnover (mln YTL, cum.)
Revolving Ratio
Card Activation Ratio
Fraud/Volume
Churn Rate(3)
(As of Sep 2007)
2Q07
5,098,115 5,328,7425,164,730
168,235 185,825174,332
194,400 218,603174,332
28,009 15,2516,997
29.6% 29.40%31.80%
84.0% 86.7%84.0%0.022% 0.015%0.015%
4.20% 4.35%4.20%
25.2%
19.7%19.3%19.3%19.0%
4Q06 1Q07 2Q07 3Q07
3Q07
5,418,236
193,631
229,804
23,709
30.20%
86.0%0.010%
4.77%
25.3%
23.5% 23.7% 23.4%
1Q07 2Q07 3M asof Oct
3%
(1)
(3) Card terminations based on customer requests.
23
Completion of project to reconstruct Turkey’s largest credit card platform, WORLD, through “can-do” philosophy
• First not only in Turkey but also globally• New system structured under one card and one brand under the
umbrella of WORLD• End of “card inflation” in wallets• “Can-do” philosophy
– Interactive, customized program architecture – one or more clubs and programs easily loaded into any credit card
– 6 new clubs, 4 new programs offering different services and added value, able to evolve in parallel to changing customer preferences
– Quick, easy and practical solutions for consumers regardless of income level or social class
• No additional costs for unnecessary features• End of CRM phase, transition to CMR dimension (Customer Managed
Relationship)
Changing the paradigm and approach in the industry, defining the standards of the future
24
34% 39%39%34%
28%28%30%28%
20%21%19%21%
10% 10% 10% 10% 8%2%2%7%
3Q06 1Q07 2Q07 3Q07
Strong and diversified liability structure with solid deposit base and international funding capacity and access
Composition of Liabilities (mln YTL)
MutualFunds(4)
Assets Under Custody
Market Sharein Mutual Funds
Composition of Customer Assets(mln YTL)
(1) Includes pension fund deficit of 447 mln YTL and 574 mln YTL accounted respectively in 3Q06 and 3Q07(2) Including bank repos (3) Includes domestic and international borrowings (incl. securitizations and sub-loans) (4) Excluding pension funds and other DPM (5) Including bank deposits
Deposits(4)
FundsBorrowed(3)
Repos(2)
SHE
Others(1)
TL Deposit(5)
FC Deposit(5)
Repo(2)
19.9% market sharein mutual funds (#2 player) with the return of positive trend
3% increase in mutual funds in Q3 over Q2
62% 66% 66% 65%
13% 13% 13%
11% 8% 2% 2% 7% 8% 8% 8% 7% 9% 11% 11% 10%
3Q06 1Q07 2Q07 3Q07
20.7% 19.1% 19.3% 19.9%
1Q07 2Q07 3Q07 Oct-07
45,940 46,744 47,803 47,91748,386
46,157 46,14747,308
-1%
-2%
2%
6%
5%
1%
-3%
14%
3%
2%
3%
25
15% YoY growth in fee and commission income (15% QoQ)Healthy composition of fee and commission incomederived from leading positions in credit cards, asset management and non-cash loans51% of total fee and commission income generated by credit cards Further room for diversification and expansion in fee income due to cash-loan growth potential Contribution of fee & commission income to total revenues at 30%(1)
Fees & commissions cover 112% of HR related costs(2)
Consistently strong fee & commission growth driven by leading positions in credit cards, asset management and non-cash loans
Fees & Commission Income (mln YTL)
NetPaid
Net Fees & Commissions/ Total Revenues(1)
9M06N 814185 629
15% 13%5%
Received
CC Fee and Commission
Composition of Fees & Commission Received
(2) Including HR-related Non-HR costs
919193 7269M07
32% 27%
3Q06N 1Q07
29%
2Q07A
Net Fees & Commissions/ Opex(1)
46% 49%
9M06N 9M07
44% 45%
30% 30%
9M06N 9M07A
47%
2Q06N 1Q07 2Q07A
Cash Loans 4%
Asset Mng. 10%
Other 25%
Non Cash Loans 11%
Credit Cards 51%
Other 1%
Cash Withdrawal
12%
Interchange 38%
Merchant 26%
Overlimit 11%
Annual Fee 12%
34%
3Q07A
56%
3Q07A
Cumulative
Cumulative
(1) Adjusted to exclude loan write-off effects mainly due to Superonline stake sale in 2Q07 and non-core fixed asset sale gain/loss in 3Q07
(3)
(3) Includes fees and comms. from banking transactions such as money transfers, background enquiry fees for loan applications, insurance etc.
Quarterly
Quarterly
26
SME 10%
Large Corporate
24%
Credit Cards 9%
Private 14%
Retail 21%
Medium Corporate
22%
4.6%4.5%4.2%4.5%4.2%4.1%5.2%
4.6%
9.0%8.4%
7.2%7.9%7.6%9.0%
7.2% 7.7%
1Q 2Q 3Q 4Q 2006 1Q07 2Q07 3Q07
Large Corporate 6%
Private 3%
Credit Cards 26% Medium
Corporate 14%
Other 25%Retail 14%
SME 14%
NIM improved to 4.6% due to better mix
9M07 Net Revenues Revenues / Average IEAs
9M07 - Annual Revenues / Average IEAs*3Q07 Customer Volumes
(1) Treasury, work out and other(2) Cash loans + Non cash loans + Deposits + Asset under Management + Assets under Custody.
(*) After adjusting revenues for the excess capital base vs. 12% CAR as the benchmark (excess capital * avg. annual interbank rate). Peers adjusted for one-off gains in 9M07
26% of revenues generated by most profitable credit card business
Sum of retail and SME segments generate 28% of revenues and 31% volumes(2)
Consistent quarterly increase in NIM further improving to 4.6% in 3Q (up from 4.5% in 2Q and 4.2% in 1Q)
Revenues/IEAs up to 9.0% in 3Q driven by growth in higher margin products/segments(credit cards, SME loans)
Higher ratio of Revenues/IEAs (8.1%) vs peer average in 9M07
(4) Normalized
(Only commercial bank driven values)
(2)
(3) Excluding dividends 8.5%
ow/ NIM: 4.7%
Quarterly Annual
NIM
Quarterly
(5) If adjusted by provision reversals mainly from Superonline stake sale: 7.7%
8.1%7.6%
YKB Peer Avg.
(5)
(4)
(3)
(4)
(1)
ow/ NIM: 4.4%
(6)
(6) If adjusted by non-core fixed asset sale gain/loss: 7.5%
6.9%* ow/ NIM: 4.1%
27
254
85 76
447 574
583576
242
9M06N 9M07A
Costs under control despite branch expansion
Total Costs (mln YTL) Total costs(4) increased to 1,475(5) mln YTL in 9M07, up 8% YoY, mainly affected by salary adjustment in 1H07 and branch expansion
Total HR costs (including HR related non-HR)increased 22% YoY, mainly driven byaccelerated branch network expansion
2% decrease in total non-HR costs due to strict cost management
Opex/average assets improved +231 bps in 9M07A(4) vs. same period last year
HR
1,3621,475(4)
+1%
+28%
+8%
(1)HR related non-HR includes MBO (Management by Objectives – Results driven bonus scheme), ETB and vacation rights (2)Includes provision expenses for pension fund and world card points
(3) Including depreciation and excluding HR related costs (such as management bonuses, ETB, and vacation rights ) and pension fund and bonus point provisions(4) Adjusted to exclude loan write-off effects mainly due to Superonline stake sale in 2Q07 and non-core fixed asset sale gain/loss in 3Q07(5) If not adjusted: 1,737 mln YTL
-11%
-5%Other Non-HR(2)
HR Related Non-HR(1)
Core Non-HR(3)
Total Non-HR:-2% YoY 3.3%
3.0%
9M06N 9M07A
Opex / Average Assets
(4)
(4)
28
Branch expansion in line with plan
3Kırklareli 3
Ankara 70
Adana 15
K.Maraş 2
Tokat2
Aksaray1Nevşehir
Çorum2
1
Bolu2
Eskişehir6
Afyon3
Kırıkkkale 1
Amasya2
Diyarbakır 5
Mardin2
Malatya 3Elazığ 3
Karaman 1
Niğde1 Batman 1
Osmaniye1
Sivas 1
Erzurum 2
Isparta2
Kütahya2Manisa7
İzmir 53
Aydın6 Denizli 5
Muğla17
Balıkesir9Çanakkale4 Bursa 27
Uşak 2
2?
Kocaeli
Burdur
YozgatKırşehir
GBayburt
?r?
Adıyaman
Ağrı Iğdır
HakkariŞırnakSiirt
BitlisMuşBingöl
Düzce 1
Ş.Urfa 2
Konya 7
Ankara
Adana
Kayseri 5
Tokat
Aksaray12
Çorum2
Kastamonu1Bolu2
Afyon
AmasyaSamsun 6Ordu3Giresun1
Trabzon 3Rize1
Mardin2
Malatya 33 Van 2
Karaman 1
1 Batman 1
Kars 1
Osmaniye1
Sivas 1
Erzurum 2
Isparta
Kü
1
Tekirdağ5 İstanbul2268
Yalova 2
Zonguldak 413
Burdur
Yozgat 11
Erzincan 1
Tunceli
G
Bilecik 1
HakkariSiirt
BitlisBingöl
SinopEdirne 4
Sakarya5
Artvin Ardahan
Çankırı 1
1
Mersin 10Antalya 32
Gümüşhane
Karabük 1
Bartın 1
Hatay 4
G.Antep 6Kilis 1
New Branch Openings
Announced the agressive branch expansion plan in July 07
Target is to open 350 branches (vs. previous target of 100)
53 branches already opened YTD out of a target of 80 for 07
721 additional recruitments YTD in 2007 to support the plan, ~410 more expected in 4Q07
YKB’s Domestic Branch Network
661 branches(1) in 67 cities as of 30 Sept 200711% market share in top 10 cities 64% of branch network concentrated in top 4 cities
2007 target ~ 80Year to Date (net) 53
Ankara 5Istanbul 6Izmir 5Others 37
2008 target ~160Total number of branches to reach by end-2009:
~1,000
# of Branches
(1) Including one off-shore branch in Bahrain
29
8.1%1.8%
81.8%
2.0%
11.1%7.4%
11.4%
82.4%
NPL ratio down to 6.6% (-0.2 ppt vs 2Q), confirming strong focus on asset quality
Gross Net
NPL Ratio
Significant drop in gross NPL ratio QoQ by 0.2 ppts to 6.6% with further room to improve
NPL coverage ratio at 82.4% (remaining 19.5% collateralized) and total coverage ratio constant at 7.4%
Watch loan coverage at 11.4% and standard coverage at 1.8%, highlighting a more conservative approach vs. the market
(1) Excluding the impact of the new regulation related to participations of Bank’s
Coverage Ratio
NPL Watch Loan Standard Total
1.5% 1.6% 1.4% 1.2%
6.6%7.2% 6.8%7.5%
2006 1Q07 2Q07 3Q07 2006 1Q07 2Q07 3Q07 2006 3Q07 2006 3Q07 2006 3Q07 2006 3Q07
7.0%(1)6.5%(1)
6.3%(1)
30
954
12957
137
632
OperatingIncome
Loan LossProvisions
Other Provisions Taxes Net Income
From operating income to net income
• Specific provisions of YTL 118 mln
• General provisions of YTL 11 mln
• Current tax expense of YTL -214 mln
• Deferred tax income of YTL +77 mln
(mln YTL)
+9% QoQ
9M2007 • Provision on non-core subsidiaries of YTL 52 mln
• Other provisions of YTL 5 mln
+87% YoYN
13% QoQ35% YoYN
31
Agenda
Macroeconomic & Banking Environment
9M 2007 Results (BRSA Bank-only)
Annex
Strategic Guidelines
YKB’s Competitive Positioning
32
Strategy focused on ensuring accelerated growth, profitability and efficiency
KEY STRATEGIC GUIDELINESKEY OBJECTIVES
• Leadership in the higher return on capital and growth segments/businesses
• Strong investment innetwork development and customer satisfaction
• Efficient cost/income, most effective sales forceand outstanding risk management
FOCUS ON 4 MAIN BUSINESS TARGETS:Expand branch network significantlyReinforce leadership in Credit CardsGrowth in SME Banking on the back of underpenetrated SME marketBring individuals segment towards higher profitability through:
reactivating dormant/low activity client baseincreasing penetration through cross sellingexpanding consumer lending mainly through development of the mortgage market and relaunchingefficiency programs
In addition:Continue to expand Private Banking leveraging on strong mutual funds positionSelective growth in Commercial and Corporate Banking
33
Accelerated branch openings expected to provide stronger value creation
Strong capability and drive of YKB to reach break-even
2002 2006
NO OF BRANCHES IN TURKEY
6,1066,849
Accelerated branch openings of up to 350 branches in 3 years under consideration vs existing plan of 100
Number of branches is rapidly expanding….
YAPI KREDİ IS READY TO EXPLOIT THIS POTENTIAL
… with room for further expansion: 500 new branches and 11,000 employees in ‘06
BRANCH PENETRATION
GDP per capita
Correlation = 90%
TR, 2006
0 10 20 30 40
NL UK
CH
Germany
France
Italy
Belgium
Spain
Portugal
431Turkey ‘06
Retail volumes/ branchEUR Million
Retail profit/branchEUR Thousands
19
292231
42
56
681
BRANCH PROFIT AND VOLUMES: BENCHMARKING
134
163
241
309
334
383Favorable market conditions in terms of branch profitability
7,366
Sept 07
… 500 new branches and 10,640 employees further added to the sector as of Sept 07 YTD
34
Profitable growth in SME banking with a differentiated approach on the back of underpenetrated market
SME LENDING(1) AS % OF TOTAL BANK LOANS
# of Active SME CLIENTS
2007F 2009
11%13%
+2ppts
2007F
16%
+3ppts19%
2009
YKB’s Differentiated SME Approach:Fast and Outstanding Service for SMEs
Dedicated service model with 1100 specialized micro and macro RMsSimplified proprietary credit underwriting process already developed
and in use for 2 years (SMILE)Bundled product offerings with insurance coverage, working capital
and asset based financing options (leasing) Unique offering in the market through disbursement of Grant Programs which are supplied by national and international institutions
In 2006, 5 mln Euros of EU funds granted to 51 SMEsIn 2007, 289 new projects totaling 34 mln Euros in process up-to-date.
Expected approval ratio: 80% Specialized consultancy services free of charge: Basel II meetings, SME fairs, services for Chambers of Commerce, Anatolia Meetings, value creating online platform, first in Turkey (www.kobiline.com)
3,200 SMEs reached through Anatolia Meetings in 200796 customized loan agreements signed with Chambers of
Commerce and Trade AssociationsActivation of low activity client base
Target to reach ~500K active clients by end-2009
SME REVENUES AS % OF TOTAL BANK REVENUES
2007F
367K
+136K503K
2009
(1) YKB’s SME definition: Loans extended to companies with annual turnover less than 3 mln USD
35
Further room for profitability in individuals segment
Expand customer base through reactivation of dormant/low activity clients
8.3 mln dormant clients
~100K clients activated on a monthly basis in 2007
Increase penetration through aggressive cross-selling (current cross-sell ratio <1.5)
Expand consumer lending(2) to achieve close to 10% natural market share (5.9% as of 26 Oct)
Relaunch branch efficiency programs to reduce cost to serve
Full centralization of back office operations
Reduce non-sale activities on sales people
Manage peak time efficiently
Improve non-cash transaction ratio through aggressive migration of transactions from branch to ADC (ATM, Internet, Phone Banking)
(1) Product ownership per customer(2) Lending to individuals (includes general purpose loans, auto loans, housing loans)
YKB Benchmark
1.38
2.34
CROSS-SELL RATIO(1) (%)
2007F 2009
3.3
6.8
INDIVIDUAL LOAN GROWTH (Bln YTL)
x2
Jan 07 Dec 08
382035
502124
NO OF TRANSACTIONS BY CHANNEL (%)
BranchInternetATMOther 7 5
36
Focus on mortgages as another key driver
MORTGAGES EXPECTED TO TAKE OFF WITH INTEREST RATE REDUCTION
Mortgages/GDP
Interest rate
2006 2010 20152008
10%
20%
30%
4%
8%
12%
16%
YKB STRATEGY ON MORTGAGES
Introduction of variable rates and up to 2% pre-payment penalty
Establishment of secondary market for the securitisation of mortgages
Faster collection of collateral, shortened foreclosure process
KEY BUSINESS CHALLENGES FOR BANKS ADRESSED BY NEW
MORTGAGE REGULATION
Product and channel differentiation, leveraging also on state-of-the art CRM potentialEfficient credit process, lean and fast response, cross-sellingFocusing on origination, tailoring for securitization needs
POTENTIAL OF MORTGAGE MARKETIN TURKEY
79% growth in 2006, 32% YTD(1)
Home ownership ratio in Turkey: 68% (58% in Istanbul)Low existing quality of housing stock
33% above 25 years old40% needs to be renewed
(1) As of 9 November 2007
HungaryEU-25 Czech Poland Turkey
43%
10% 10%5% 4%
Mortgages increase cross-sell to existing customers and bring new clients to YKB:
In 2006, 70% of mortgages were issued to existing customers while 30% to new clients
Mortgage penetrations for EU-25, Hungary, Czech and Poland are as of 2005 while Turkey as of 2006.
37
2007 IFRS Financial Guidance
17%Assets
24%Loans
16%Deposits
18%Mutual Funds
10%Revenues
ROE
Cost/Income
CAR
2007 Banking Sector Growth Forecasts 2007 Yapı Kredi Performance
Cost of Risk
2005-2008 IFRS Targets at KFS Level (3 Year Plan)
> 20%
< 50%
> 12%
~ 0.9%
SECTOROUTPERFORM
SECTOROUTPERFORM
SECTOROUTPERFORM
SECTOROUTPERFORM
SECTOROUTPERFORM
Key Focus Areas
Further increase in IEAs (sale of ~400 mln YTL non-core real estate)
Less capital absorbing products/reinforce leadership in cards
Remix towards demand deposits and lower cost funding base
Maintain leadership position in mutual funds
High double digit growth in all key segments, aiming to increase market share
(1) 2005-2008 CAGR
Total Revenues
AUM (Mutual Funds)
Average RWA
# of Branches
~13%
~14%
~20%
~745
(1)
(1)
(1)
38
Agenda
Macroeconomic & Banking Environment
9M 2007 Results (BRSA Bank-only)
Annex
Strategic Guidelines
YKB’s Competitive Positioning
39
2,291
2,3853,785 4,037 4,150 4,737 4,937
2,3041,415
803
3.6%7.2%
12.9%12.6%13.0%12.3%12.0%10.5%9.3%11.7%
3Q05 4Q05 1Q06 2Q06 3Q06 3Q06 4Q06 1Q07 2Q07 3Q07
Pre-merger YKB stand alone YKB + KB Pro-forma
Capital Base (mln YTL)
Post-merger Yapı Kredi
Acquisition and opening adjustments
Sub-loan of €500 mln (1)
Merger with Koçbank
12 months ahead of the original plan
CAR
No major impact on equity due to May-June 2006 market turmoil. Decrease in CAR mainly driven by one-off deferred tax effect due to decrease in corporate tax from 30% to 20%.
Sub-loan of €200 mln(3)
absorbing operational risk introduced in June
Further improvement in CAR driven by healthy revenue generation strengthening the capital base
(1) Additional €350 mln sub-loan added to Koçbank’s Tier 2 Capital(2) Excluding adjustment for the effects of corporate tax rate decrease from 30% to 20% due to change in tax legislation in 2Q06.(3) €200 mln sub-loan added to YKB’s Tier 2 capital in June 2007
Transfer from Turkcell gain to Tier 1
2,168
(2)
40
KFS Restructuring Process aims to move the financial subsidiaries under YKB
L Listed
KFS
50% 50%
80.2%
Russia
Factoring Yatırım NV AzerbaijanBANK L
UCIL Koç
GroupL
Germany Holding BV
Sigorta Yatırım Ort
Portfoy
Emeklilik
Leasing
99.8% 65.4% 100% 74% 11.1%12.7% 87.3%
99.8%67.2%35.3%59.5%73.1%L
L
99.9%
64.7%45%12%8%
40.5%25.7
%
UCI KoçGroup
50% 50%
Yatirim NV
BANKL
L L
Portfoy 12.7%
87.3%
67.2%35.3%
Target Structure(After Phase 2)
UCI KoçGroup
KFS
50% 50%
L
~82%L
LeasingL
Factoring
Azerbaijan
~99,8%
NV
Russia
YatırımOrt
67.2%
100%
~ 11.1%Yatirim
Portfoy
~87,3%Sigorta
L
Emeklilik
~ 74% *
~ 45%
UCI ç
KFS
50% 50%
L
BANK
LeasingL
~98.9%
Factoring
~99.9%Azerbaijan Sigorta
L
Emeklilik
~ 99,9%~12%
After Phase 1Pre-KFS Restructuring
Process approaching completion:June 21st – First approval of BRSAJuly 18th – First Extraordinary General AssemblyJuly 23rd – Announcement of exchange ratio of 91.90% for the transfer of YK Leasing, YK Factoring and YK AzerbaijanAugust 21st – Second BRSA approvalSeptember 13th – Second Extraordinary General AssemblyOctober 26th – Completion of share exchange between YKB & KFS December 2007 – Expected completion of the process (incl. Yatırımand N.V.) subject to CMB and BRSA approvals
Russia Germany Holding BV
Sigorta Yatırım Ort
Emeklilik
99.8% 65.4% 100% 74%* 11.1%L
99.9%
KFS
64.7%
32.8%
34.6%Leasing Factoring Azerbaijan
L98.9% 99.9% 99.8%
* YKB’s total stake (direct and indirect) in YK Sigorta is 93.9% through 74.01% YKB, 7.95% YK Leasing & 11.99% YK Yatirim
LL
L
Today
45%
Holding B.V.
100%
32.8%
~82%
41
First Phase of KFS restructuring complete, Second Phase targeted to be finalized by end of 2007
Valuation(YTL mln)
NAV(YTL mln)
239311
14
133
4531st Phase: Share Exchange
98 mln. €159 mln. $
22
145
607
KFS Stake (YTL mln)
35.28%450 mln $YK Yatırım (inc. YK Portföy)2nd Phase: Cash Acquisition
73.10%831YK Leasing (listed)*
KFS Stake
99.80%21.9YK Azerbaijan
59.47%243YK Factoring
67.24%145 mln €YK Netherlands 100.00%99.98%
99.80%99.95%98.85%
YKB’s Post-KFS Restructuring
Stake
774 mln YTL value added to YKB
following phase 1
First Phase: Valuation reports of YKB, YK Leasing, YK Factoring, YK Azerbaijan prepared by Deloitte and independently audited by PWC. In addition, evaluation by an independent court expert was carried out. All necessary approvals secured from CMB and BRSA. Combination of methods used for the valuation of the subs. such as the “discounted cash flow”, “net asset value”, “market capitalization” and “comparable company”. First phase completed through share exchange on 26 Oct. 07. Second Phase: Valuation reports of YK Yatırım & YK N.V. prepared by Deloitte and Ernst & Young, respectively.
YKB Book Value: 3,526 mln YTL Valuation: 8,775 mln YTL
* YK Leasing’s Mcap as of 31 March was 1,264 mln YTL
Expected impact of KFS restructuring:
More transparency for the market due to full consolidation of all subs under listed YKB
More efficient allocation of capital - increase in CAR of 2-2.5% and absorption of Basel II impact
No more cross shareholdership - clearer chain of control; no duplication of functions
Increase in ownership by KFS of YKB by 1.6% from 80.2% to 81.8%
32.76%64.72%
0%40.48%25.74%
YKB’s Pre-KFS Restructuring
Stake
Note:Base financials for YK Leasing, YK Factoring & YK Azerbaijan as of 31 March 07Base financials for YK Yatırım as of 30 June 07, for YK Netherlands as of 31 July 07
Base financials for KFS restructuring
42
631
29661 18
848
127
721
Bank-only Net Income
Performance ofSubsidiaries
DividendEliminations
OtherConsolidationAdjustments
Net Incomebefore
Minorities
Minorities ConsolidatedNet Income
From bank-only net income to consolidated net income
(mln YTL)
9M2007
YKB 78%
Other 2%YK Emeklilik 3%YK Sigorta 9%
YK Portföy 1%
YK Yatırım 2%YK Factoring 1%
YK Leasing 4%
(1) Mainly from profit elimination of the share purchase of YK Portföy from YK Emeklilik (2) Including YK Sigorta (non-life) and YK Emeklilik (life & private pension)
(1)
78% of total consolidated revenues generated by the BankOf the 22% coming from subsidiaries, the two biggest contributors are insurance (12%(2)) and leasing (4%)businesses
Composition of YK Group Revenues
43
21% 16%
15% 16%
8% 9%
34% 35%
22% 24%
2006 9M0719% 17% 16% 16%
81% 83% 84% 84%
3Q06 1Q07 2Q07 3Q07
58%57%55% 54 %
42%43%45% 46%
3Q06 1Q07 2Q07 3Q07
10,62710,195 11,2159,719
3Q06 1Q07 2Q07 3Q07
18,28418,117
16,180 15,739
3Q06 1Q07 2Q07 3Q07
Continued focus on diversification and improving quality of deposit base; share of retail deposits increased to 68% (+4 ppts vs YE06)
Demand
Time
TL/FC Breakdown of Deposits (mln YTL)
TL Deposits (mln YTL)
Demand Dep./ Total Deposits
FC Deposits (mln USD)
13%
10%
+1% increase in TL deposits and +6% increase in FC deposits (in USD terms) QoQTotal deposits decreased by a slight 1% due to exchange rate effectFurther room for improvement in demand deposits/total deposits (16%). As a result, cost of funding expected to improve
Deposits by SBU(1) (Mln YTL)
Large Corp.
Medium Corp.
SME
Retail
Private
Retail (68%)
Corporate
(32%)
(1) MIS data (Commercial bank only)
TL
FC
29,860 28,87031,741
-1%6%
1%
31,517
6%
USD/YTL exchange rates -- 2006: 1.378, 1Q07: 1.351, 2Q07: 1.282, 3Q07: 1.180
44
Efficient organisational structure with outstanding local and international managerial talent
Organizational structure updated as of May 2007
BOARD OF DIRECTORS
RISK MANAGEMENT
INTERNAL CONTROL
INTERNAL AUDIT
CORPORATEIDENTITY AND
COMMUNICATION
CREDIT CARDS AND
CONSUMERLENDING
CORPORATEBANKING
RETAIL BANKING
COMMERCIAL BANKING
PRIVATE BANKING AND INTERNATIONAL
ACTIVITIES
TREASURY
CHIEF OPERATING OFFICER
(COO)
LOGISTICS AND COST MANAGEMENT
LEGAL
OPERATIONS ORGANIZATION
ALTERNATIVE DISTRIBUTION CHANNELS
IT
HR
FINANCIAL PLANNING,ADMINISTRATION AND
CONTROL (CFO)
CREDIT MANAGEMENT
CHIEF EXECUTIVE OFFICER(CEO)
(2)
(2)
(1) Position covered by Executive Board Member(2) Under Chief Risk Officer (CRO) at KFS Group level
(1)
(1)
(1)
45
YKB – 3Q 2007 Summary P&L (BRSA Bank-only)
(mln YTL) 2Q06N(2) 1Q07 YoYN(1)
%QoQ
%
Total Revenues
Operating Expenses
Gross Operating Profit
Pre-tax Profit
Provisions
Tax
Net Profit
677
(478)
199
(93)
106
(47)
(152)
786
(84)
229
188
(41)
(473)
313
+40
+45
+32
+53
+28
-17
-169
+8
+6
+13
+69
+5
+8
-13
2Q07
914
(612)
302
(37)
264
213
(51)
(1) YKB merged bank figures normalized for the financial cost of stake increase and sub-loan as well as some minor accounting policy applications. (2) YKB merged bank figures normalized for some minor accounting policy applications
1Q06N(1)
684
(434)
249
(75)
174
(67)
107
707
(450)
257
(42)
215
278
63
3Q07
990
(651)
339
(64)
276
232
(44)
3Q06N(2)
46
3Q07
47,91725,20412,704
31,517
3,035
1,0376,1384,050
14,562
6,0539,947
YKB -3Q 2007 Summary Balance Sheet (BRSA Bank-only)
Assets
2Q07 YTD % YoY %
47,803 +4Loans 24,035 +11Securities 13,754 -1
Deposits 31,741 +6
Fixed Assets & Participations 3,099 +4
Repos 1,012 -69Borrowings 6,277 +17Equity 3,826 +29
Assets under Management(2)
Assets under CustodyNon-cash Loans 14,721
(mln YTL) 4Q06
48,88722,50416,470
31,127
3,069
3,3576,1593,344
6,1458,927
15,342
3Q06
45,94022,74112,817
29,860
2,921
3,3205,2643,149
14,444
(1) Including YTL 979 mln amount of goodwill(2) Assets under management includes mutual funds, pension fund, DPM and mutual funds sold by YK Yatırım
-2+12-23
+1
-1
-69+0
+21
-1+11
+1
(1)
-5
5,895 5,9588,733
+3-310,299
1Q07
46,74422,33114,654
28,870
3,016
3,6016,2073,526
14,571
5,6659,258
QoQ %
+0+5-8
-1
-2
+2-2+6
-1
+2+14
47
Explanation regarding major extraordinary factors affecting 2Q07 and 3Q07 results
2Q07 and 3Q07 figures have been adjusted to neutralize the impact of extraordinary factorsaffecting quarterly P&L
2007 Adjustments:
Extraordinary Costs (included in non-HR costs) Total (262) mln YTLLoss regarding loan write-offs mainly from Superonline (2Q07) (104) mln YTLNon-core fixed asset sale losses (3Q07) (158) mln YTL
Extraordinary Income (included in other income) Total 258 mln YTLLoan loss provision reversals related to loan write-offs mainly 89 mln YTLfrom Superonline (2Q07) Non-core fixed asset sale gain and impairment reversals (3Q) 169 mln YTL
48
Koç Financial Services (KFS) is an integrated and well capitalized financial services provider
YTL billion, Unaudited IFRS Consolidated Figures, Sep 2007
Total Assets 54.8Deposits 33.7Net Cash Loans 28.4Loans/Deposits, % 84AuM (1) 6.1Total Revenues 2.8Net Consolidated Profit (mln) 857
Credit Cards (#, mln) 5.4Customers (#, mln) (2) 14.0Branches (3) 712Employees 16,184
5050%% 5050%%
KFS significantly grows its financial operations, network and market share as a result of a focused commercial growth plan and a conservative risk profile approach, under the guidance of a strong local management team and with the dedicated strategic support of UniCredit
PARTNERS SHARE A COMMON VISION AND GOAL
Value creation will be driven by revenue growth, cost and risk control
(1) Including mutual funds, pension funds and other DPM(2) Excluding subsidiaries(3) Of which Yapı Kredi Bank 661 and KFS subs 51
49New KFS = KFS Including merged Yapı Kredi(1) Pro-forma; NPL adjusted for a transfer done in May 2003(2) Based on normalized Equity (net of 1 bln Euro for Yapı Kredi acquisition)(3) Revenues netted by monetary loss(4) Calculated as combined normalized profit on consolidated equity
20052004
265360
20032002(1)
231
920062005N
KFS - Combined Net Profit mln YTL
+21% 755
625
8.3
4.9
11.111.7
6.37.1
KFS - NPL Ratio - %
2005200420032002(1) 20062005
…and a proven positive track record during its first four years
KFS - ROE (Consolidated) - %
2326(2)
24
1
21(4)24
2005200420032002(1) 20062005N
+3 ppts
47 4648
66
5257
KFS - Cost / Income - % (3)
2005200420032002(1) 20062005N
-5 ppts-0.8 ppts
IFRS Figures, 9M07 unauditedN = Normalized for the one-off deferred tax, cost of acquisition and sub-loan
688
857
9M06N 9M07 9M06N 9M07
2527
New KFS New KFS
9M06 9M07
6.1 5.9
5749
9M06N 9M07
New KFS New KFS
+25% +2 ppts
-8 ppts
-0.2 ppts
50
YK Leasing, YK Factoring and YK Azerbaijan moved under the bank as of end Oct 07 in line with KFS restructuring process
% 2006 revenues % 2006 net profit
= % ownership
L = Listed
1.Through 35.3% in YK Yatırım which is holding 87.3% in YK Portföy
2.Through 64.7% in YK Yatırım which is holding 87.3% in YK Portföy; 12.7% direct YKB
3.Through YK Holding BV (NV) fully owned by YKB4.Through 65.42% YKB, 34.58% YKH BV5.Through 99.84% YKB, 0.15% YKL, 0.0098% YKD6.Through 99.93%YKS, 0.04% YKF, 0.04% YKY 7.Through 74.01% YKB, 7.95% YKF, 11.99% YKY8. Remaining 0.1% YK Yatırım, 0.1% YK Leasing
L
50%50%
L
100 100100 100
L
84.2 71.584.2 71.5
2.5 5.72.5 5.7
*1.6 3.4
1.3 3.41.3 3.4
KFS:35.3, YKB:64.7
KFS:30.8(1),YKB:69.2(2)
KFS:67.2, YKB:32.8(3)
1.7 -0.3
100(6)
1.7 -0.3
100(6)100(6)
2.3 1.6
93.9(7)
L
2.3 1.62.3 1.6
93.9(7)93.9(7)
L
0.2 -4.6
100(4)
**0.2 -4.60.2 -4.6
100(4)100(4)
**4.0 13.9
98.9
L
4.0 13.94.0 13.9
98.998.9
L
1.0 2.5
99.9
1.0 2.51.0 2.5
99.999.9
0.2 0.5
99.8(8)
0.2 0.50.2 0.5
99.8(8)99.8(8)
0.5 1.0
100(5)
0.5 1.00.5 1.0
100(5)100(5)
87.3%
99.9%(*) Formed as a result of merger between YK Nederland and KB Nederland completed on 2 July 07(**) Sales process of YK Deutschland under progress – completion expected within 2007Other YKB subsidiaries: (1.) Yapı Kredi Investment Trust. Ownership: YKB:11.1%, YK Yatırım: 45%, Free Float: 44%(2.) BCP (Banque de Commerce et de Placements). Ownership: YKB: 31%, Borak SA: 69% (3.) Yapı Kredi Koray (REIT). Ownership: YKB: 30%, Free Float: 45%, Others: 25% (Non-financial sub.
Not consolidated)(4.) YK Kültür-Sanat Yayıncılık (Culture, art and publishing). Ownership: YKB: 100% (Non-Financial
sub. Not Consolidated)
81.8%
51
For enquiries please contact:
Yapı Kredi Investor Relations
Phone: +90 212 339 7647 or 7640 or 7323Fax: +90 212 339 6103