Corporate Credit Rating. Banking TURKEY. Updated. [Financial Institutions] Nurol Yatırım Bankası A.Ş. Strengths. Constraints

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1 Sovereign* National International TURKEY Corporate Credit Rating Updated Long Term Foreign Currency BBB- A 3 Local Currency BBB A 3 Short Term Outlook Stable Stable Local Rating AA (Trk) A-1 (Trk) Outlook Stable Stable Sponsor Support 1 - Stand Alone AB - Foreign Currency BBB- - Local Currency BBB- - Nurol Yatırım Bankası A.Ş. Banking [Financial Institutions] F i n a n c i a l D a t a * * * * * 2009* Total Assets (000,000 USD ) Total Assets (000,000 TRY) Total Net Loans (000,000 TRY) Equity (000,000 TRY) Net Profit (000,000 TRY) Market Share (%) ** ROAA (%) ROAE (%) Equity/T. Assets (%) CAR - Capital Adequacy Ratio (%) Asset Growth Rate (Annual) (%) Outlook FC Stable - LC Stable - *Affirmed by Japan Credit Rating Agency, JCR on July 11, Analyst: Orkun İNAN / orkun.inan@jcrer.com.tr NIM (%) 6.18 ROAA (%) CAR (%) Market Share (%) ROAE (%) Strengths 0.31 Growth Rate (%) Proven capability to achieve recurring capital gains based on widened NIM, Well established risk management supporting asset quality despite ongoing loan growth, Sound financial profile to react swiftly to external shocks, The emergence of new instruments to generate fresh revenue streams supporting profitability margins, Continuation of eye-catching headway in cleaning its high related party exposure since 3Q, Maintain liquidity position via matched funding profile and the funding diversification, Experienced and well-educated management team as well as specialized knowledge of the Turkish financial sector * End of Year ** On Solo Basis Among the Turkish Banking Sector Company Overview Nurol Yatırım Bankası A.Ş. (hereinafter Nurol Bank or the Bank ), incorporated on August, 1998, is a national private bank. The Bank provides services in the field of Corporate Banking, Investment Banking and Treasury & Financial Institutions through its diversified corporate clientele with a staff force of 39 people in FYE. Nurol Bank, with a total asset size of TRY mn, is one of Turkey s small private investment banks and ranks 38 th in terms of assets size among the 51 banks in the Turkish financial market and had a 0.032% market share in the entire banking sector as of FY. The Company s shareholding structure covers 3 entities, the main controlling shareholders, Nurol Holding A.Ş. (78.16%) -one of well-known holdings in Turkey- and Nurol İnşaat ve Tic A.Ş. (15.96%) -one of the World s largest international contractors- controlled by the Çarmıklı Family, principally focused to 5 sectors, including Construction & Contracting, Defense & Production, Trading & Service, Finance and Tourism sectors. JCR Eurasia Rating has upgraded Nurol Yatirim Bank s National Local Rating by one notch to AA (Trk) from AA- (Trk). Constraints Capital adequacy ratio remaining well below the sector average and well above the legal limit Lopsided customer concentration driving vulnerability on asset quality, Absent alternative delivery channels to support continuity of efficiency gains, Upside risks via weakened TL and downside risks to growth with sluggish policy response thereto exerting pressure on profit margins while continuing to deteriorate asset quality through weakened debt-servicing capabilities of the real sector. Publication Date: May 22, 2015 Global Knowledge supported by Local Experience Copyright 2007 by JCR Eurasia Rating. 19 Mayıs Mah., 19 Mayıs Cad., Nova Baran Plaza No:4 Kat: 12 Şişli-İSTANBUL Telephone: +90(212) Fax: +90 (212) Reproduction is prohibited except by permission. All rights reserved. All information has been obtained from sources JCR Eurasia Rating believes to be reliable. However, JCR Eurasia Rating does not guarantee the truth, accuracy and adequacy of this information. JCR Eurasia Rating ratings are objective and independent opinions as to the creditworthiness of a security and issuer and not to be considered a recommendation to buy, hold or sell any security or to issue a loan. This rating report has been composed within the methodologies registered with and certified by the SPK (CMB-Capital Markets Board of Turkey), BDDK (BRSA-Banking Regulation and Supervision Agency) and internationally accepted rating principles and guidelines but is not covered by NRSRO regulations.

2 1. Rating Rationale In the assignment of Nurol Yatirim Bank s ratings, quantitative and qualitative assessments regarding profitability indicators, funding and adequacy of capital, liquidity profile, asset quality, efficiency and risk management practices along with growth strategy and market shares have been taken into consideration. JCR Eurasia Rating has upgraded Nurol Yatirim Bank s National LC one notch to AA (Trk) from AA- (Trk) and has affirmed International LC note as BBB - the latter positioned above the country ceiling with a Stable outlook on both ratings. JCR Eurasia Rating has also affirmed the Bank s International FC note as BBB- in the long term and A-3 in the short term. Nurol s international foreign currency is limited by the country ceiling, while its international local currency is one notch above the sovereign rating in local currency. Additional rating actions on Nurol Bank s international notches are subject to changes in the sovereign rating. These ratings were primarily based on Nurol Bank s (i) established and expanding earning generation supporting profitability margins, (ii) diversified financial services encouraging its solid market position (iii) improved capitalization level maintained above the required and further recommended levels and (iv) strengthened liquidity position through generation of alternative funding sources. In addition, JCR Eurasia Rating continues to await the Bank to maintain its improved financial ratios which includes easing the blow on the company of the adverse macroeconomic status. Particularly, JCR Eurasia Rating s regards the Bank's focus on operating efficiency and capital level. The Key Rating Drivers are; Strengthened Profitability Ratios The strategic reorganisation initiated in 3Q continues to underpin profitability with regard to restructuring of costs and product diversity. Nurol Bank has seen a significant recovery in its profitability margins, stemming from robust NIM during FY. Nurol Bank s profitability margins have proven to absorb a reduction in NII. The Bank's resilient profitability is foreseen to be the first line of protection against unexpected losses. However, a possible rising rate environment is expected to hamper banks margins, which would drive a notably impact on capital and earnings. Capitalization Level to Support Sustainability Nurol Bank s CAR improved as at the end of FY. Additionally, this ratio remained to be above the minimum CAR requirements (8%) set and the recommended level (12%) by the BRSA. The Bank has also remained compliant with and performed well above the minimum requirements of Common Equity Tier 1 Ratio (4.5%) and Tier 1 Ratio (6%) set by the BRSA effective from January 1,. Improvement in Liquidity Management Adequate liquidity level without funding gap or violations remained compliant with BRSA parameters. Nurol Yatirim Bank eases liquidity position via short term bond issue and balanced assets and liabilities in terms of maturity dates. Sound Management Team The Company benefits from improved financial operations supported by robust and experienced management team. Operational Environment with Uncertainties Rising: The tension in international and domestic politics and the unrest in some bordering countries continue. These stiff political headwinds are further aggravated by the uncertainties of the upcoming election in June, After the completion of the Fed tapering, a potential drop in international capital flows to Turkey is expected to drive in a raise in funding costs for Turkish Banks. Upside risks via weakened TL while downside risks to growth with sluggish policy response thereto also exert pressure on profit margins while continuing to worsen asset quality through impoverished debt payment capabilities of the real sector. Customer Concentration Risks High credit risk concentration in cash and non-cash loans, with the first 10 customers in each segment constituting 87.6% of the total cash and 64.9% of the non-cash loans deteriorates asset quality. Nurol Yatırım Bankası Anonim Şirketi 1

3 Deteriorating Asset Quality Progressive degradation in NPLs, constituting 13.46% of equity at the end of has imposed negative impacts on asset quality. However, substantially all of non-performing loans are expected to be collected by the Bank management due to the strong collateral structure. Significant factors that may be taken into consideration for any future change in ratings and outlook status: Positive (I) Paid-in capital support for its capital base & continuation of internal capital generation, (II) Financial flexibility with new revenue streams along with supporting NIM, and (III) An improvement in market share may result in a positive rating action. Negative (I) A downturn in financial performance through weak NIM generation, (II) A marked deterioration in asset quality eroding capital ratios, (III) A possible recession in Turkey resulting from corporate default risk, (IV) Slowdown conditions in the banking sector may trigger a negative rating result. The assessment is primarily based on Nurol Yatirim Bank s audit report prepared in line with International Financial Reporting Standards (IFRS) standards have been deployed for the analysis of financial positions whereas special data sets such as projections and clarifications provided by the Bank. Additionally, audited financial statements which are compiled according to Banking Regulation and Supervision Agency (BRSA) regulations were utilized when comparing with the banking sector. 2. Outlook JCR Eurasia Rating has affirmed Stable outlooks on the short and long term national and international ratings perspectives of Nurol Yatırım Bank, considering the recurrent and resilient nature of revenue streams supported by clientele profile, balance sheet composition, adequate capitalization level well above the legal and targeted boundaries indicating the capacity to absorb incidental losses as well as positive growth prospects in the Turkish economy even under arising worrisome circumstances and in the event that no further deterioration arises in the operation environment of its major shareholders. to be exerted by outflow of funds in the medium term, (iii) length and management of temporary margin contraction pressures to result from re-pricing of assets in a changing interest rate environment and (iv) increasing tension in international politics particularly pertaining to Turkey s neighbouring countries and in internal politics pertaining to persistence and recurrence risk of the current unrest. 3. Sponsor Support and Stand Alone Sponsor Support notes and risk assessments reflect the financial strength and expected assistance of the controlling shareholders. It is considered that the utmost shareholder has the tendency and satisfactory financial strength to offer financial support when liquidity needs arise in the short or long term perspective. Based on these assessments, the Sponsor Support Note of the Bank has been determined as 1, which denotes a strong external support possibility. Nurol Holding, the main shareholder, is one of the leading conglomerates in Turkey with over 9,000 employees. On the other hand, even if the shareholders or public authorities do not provide any assistance, the Bank is expected to be able to manage its balance sheet risks successfully given its own strong equity base and capitalization levels which are adequate to absorb incidental losses. Within this context, the Stand-Alone Grade of the Bank has been determined as AB in JCR Eurasia s notation system, which signifies a strong and credible bank. 4. Company Profile a. History A subsidiary of Nurol Holding, founded in 1998 as an investment Bank, Nurol Yatırım Bankası A.Ş. continues its operations since May 1999 via its a domestic branch in Ankara as of. The general key considerations which would impede the ratings are (i) the sovereign rating level of Turkey, (ii) probable adversities in terms of external finance pressures Nurol Yatırım Bankası Anonim Şirketi 2

4 Nurol Holding A.Ş.'s Engaged Sectors Nurol İnşaat ve Tic. A.Ş. Construction and Contracting Nurol Gayrimenkul Yatırım Ort. A.Ş. Otoyol Yatırım ve İşletme A.Ş. Nurol Enerji Üretim ve Paz. A.Ş. Enova Enerji Üretim A.Ş. Defence and Production Nurol Makina ve Sanayi A.Ş. Nurol Makina ve Sanayi A.Ş. / Çelik İşletmeleri FNSS Savunma Sistemleri A.Ş. Nurol Teknoloji San. ve Mad. Tic. A.Ş. Nurol Gulf W.L.L. Financial Services Nurol Yatırım Bankası A.Ş. Commercial and Services Botim İşletme Yönetim ve Tic. A.Ş. RGM Turkey Gayrimenkul Yön. ve İşletme A.Ş. Nurol Havacılık A.Ş. Tourism Turser Turizm Serv. ve Tic. A.Ş. Bosfor Turizm İşletmecilik A.Ş. Club Salima Tatil Köyü ve Tur. İşl. A.Ş. Sheraton Batumi Otel Nurol Holding A.Ş., is the holding company of Nurol Group, engaged in 5 various industries, such as Construction and Contracting & Defence and Production & Finance & Commercial and Services, Tourism Sectors through over 40 establishments, subsidiaries, affiliates and project partnerships.. The Holding is of the most known conglomerate headquartered in Ankara with operations spread out over fifteen countries across three Continents. Prime business activities are based in Turkey, the Middle East, North Africa and the Turkic Republics. Nurol Holding, trace back to the establishment of its flagship company Nurol İnşaat ve Ticaret A.Ş which was was incorporated in 1966 as a contracting company. The company carries out operation in Infrastructure Projects, Housing & Social Centre Projects, Manufacturing Facilities & Industrial Plant Projects and Industrial District Sites & Business Centre Projects. The Company completed many major projects both in Turkey and abroad. As a consortium leader Nurol, Özaltın, Makyol, Astaldi, Yüksel and Göçay Joint venture group won the Gebze İzmir Highway Built Operate-Transfer tender. The construction cost of the Project is approximately USD 7.5bn. The following table shows the current shareholder structure of Nurol Holding A.Ş. as of December,. Shareholders Structure b. Organization & Employees (TL) Share % Nurettin Çarmıklı 258,454,622 33,30601 Erol Çarmıklı 258,454,621 33,30601 Mehmet Oğuz Çarmıklı 258,454,621 33,30601 Eyüp Sabri Çarmıklı 93, Gaye Çarmıklı 93, Gürol Çarmıklı 62, Gürhan Çarmıklı 62, Gözde Çarmıklı 62, Eda Çarmıklı Yolcu 62, S. Ceyda Çarmıklı 62, Oğuzhan Çarmıklı 62, Aynur Türkan Çarmıklı 30, Müjgan Sevgi Kayaalp 30, Melih Kayaalp 8, Semih Kayaalp 8, Hüseyin Hüsnü Doğan Uğur Cumhur Tevfik Doğan İsmail Bozkurt Ahmet Paşaoğlu Paid Capital (000 TL) 776, The Board of Nurol Bank consists of ten members, three of whom are independent members and a general manager. According to Capital Market Board (CMB) principles three of Board Members should be independent and the members of the audit committee of the BoD are accepted as independent members. The Company s organization structure includes 4- Committee (pricing committee, credit, corporate, audit, asset and liability, discipline and personnel, information systems strategy) 2 chief assistant general managers, 2 assistant general managers. Nurol Yatırım Bankası Anonim Şirketi 3

5 c. Shareholders, Subsidiaries The table below indicates the detailed shareholding structure of the Bank. The greatest shareholder of Nurol Bank is Nurol Holding A.Ş., which holds 78.16% of the shares. The shareholding pattern is detailed in the following table. Shareholders Structure d. Corporate Governance Share % Nurol Holding A.Ş Nurol İnşaat ve Tic A.Ş Nurol Otelcilik ve Tur İşl. A.Ş Nurettin Çarmıklı Erol Çarmıklı Mehmet Oğuz Çarmıklı Eyüp Sabri Çarmıklı Oğuzhan Çarmıklı Gürol Çarmıklı Gürhan Çarmıklı Others Paid Capital (000 TL) 45, , Although Nurol Bank is not a publicly traded company, the Bank carries out its operations under Banking Law and the Banking Regulation and Supervision Authority (BRSA) regulations. In order to comply with the Communiqué on Corporate Governance Principles of Banks published on November 1, 2006 by BRSA, the Bank has set up Corporate and Remuneration committees, and disclosed its mission, vision, values, periodic financials, annual reports and ethical rules pursuant with the Communiqué of BRSA.. Nurol Bank has a Corporate Governance Committee responsible for monitoring whether the Corporate Governance Principles are complied with, expressing the issues that may originate stemming from non-compliance and submitting reformative activity to its Board of Directors. However, the Bank has also established an Investor Relations Department in. The Bank s Board is composed of ten members and qualifications of the members meet the terms expressed in the principles. As can be seen in the resumes found on the Bank s website, the members possess the necessary qualifications in terms of education, professional and managerial experience. According to Capital Market Board (CMB) principles, three of Board Members should be independent and the members of the audit committee of the BoD are accepted as independent members. The Bank s renewed web site provides amply information and documentation in terms of transparency and contains the capital and shareholder structure, curriculum vitaes of the BoD and top management, articles of association and organization chart, annual report, financial data, ethical principles, audit committee reports and social responsibility. 5. Sector Analysis& Operational Environment The Turkish Banking Sector, regulated by the Banking Regulatory and Supervisory Agency (BRSA), consists of deposit banks, development and investment banks and participation banks the latter operating in line with Islamic principles on a profit-sharing model. The Banking Sector enjoys the largest share across the wider Turkish financial services industry with an asset size of USD857 bn (TRY1,994 bn) as of FYE. In aggregate terms, the profitability performance of the Turkish Banking Sector throughout FY resembled that of FY and as such recorded a fall. The macroeconomic measures that have been taken for credit cards and vehicle loans in particular to slow down the growth in the current account deficit have brought about changes and difficulties in the sector s business models and competitiveness. The Turkish Banking Sector possesses the necessary fiscal strength to lend support to economic activity and growth and maintains its capability to reach external resources and further prolong this capacity. The monetary tightening regime pursued by the Federal Reserve (FED) will raise the international cost of borrowing for the sector. However, the domination of international funding of the Turkish Banks by the European Banks will help to limit such increases. In addition, the loose monetary policies adopted by the European Central Bank will contribute to the funding costs of the Turkish Banking Sector. Turkish Banking Sector manages its pricing policies and balance sheet mechanisms in line with international risk parameters. The interest of the state sponsored banks in participation banking will provide the sector with additional external fund markets. Nurol Yatırım Bankası Anonim Şirketi 4

6 The Turkish Banking Sector currently has high levels of return on assets, with high net interest margins and exhibits an upward trend in non-interest income. Despite the relatively low asset size, high level of profitability, large share of deposits, high non-interest expenses and capitalization levels, inflation and real growth rates were the major factors that helped to maintain its performance throughout FY. It is anticipated that the sector will preserve its growth momentum for a long period. The sector s capability to create resources other than deposits which began in FY accelerated throughout FY. The number of banks operating in the sector increased to 51 as of FY, up from 49 in FY. Sizable levels of investment in internet banking, ATM and POS systems are maintained in order to ensure greater access to banking services with further effectiveness. The level of assets, loans and deposit concentration across the sector is quite significant. As such, in all of the three mentioned fields, the total market share of the five largest banks was approximately 60%. The highest levels of concentration are observed in the fields of deposits, loans and profitability, respectively. DECEMBER, TURKISH BANKING SECTOR NUMBER OF BANKS NUMBER OF BRANCHES NUMBER OF STAFF DEPOSIT BANKS 34 11, ,354 State Banks 3 3,500 55,851 Private Banks 11 5,455 95,838 SDIF Bank Foreign Banks 19 2,226 43,438 DEVELOPMENT & INVESTMENT BANKS ,524 PARTICIPATION BANKS ,270 TOTAL 51 12, ,148 With the exception of international branches and deposit guarantees, the legal framework of the Turkish Banking Sector, which remains largely compliant with the EU regulations, is currently in line with criteria for integration into the global economy, the Basel criteria, and the Capital Requirements Directives (CRD). Competition is observed largely across the smaller players in the sector whilst competitive behavior among large banks remains limited due to the levels of concentration inherent in the sector. The Banking Sector is one of the industries with the highest levels of exposure to national and international regulations, constantly evolving customer demands, developing technologies, and changes in political structure and society. As the level of interaction with the external environment remains high, issues such as capital, liquidity, profitability and cost management are expected to occupy an increasingly significant role on banks agendas. The Turkish Banking Sector, with an infrastructure shaped according to the needs of innovative and sustainable loans, deposit customers and investors, possesses a dynamic structure in product and service offering. The robust capital structure and the deepening of capital markets will continue to confer competitive advantages across the sector in the field of deposit collection and domestic and international fund raising throughout FY2015. The Turkish Banking Sector, which currently lacks the desired levels of scale and cost productivity, is anticipated to change its organizational structure and growth strategies throughout FY2015 accordingly. As such, it is expected that the sector will increase its strategic collaboration between domestic and international institutions outside of the financial sector from FY2015 onwards. Despite the adoption of innovative techniques in the field of branching across the Turkish Banking Sector, branches maintain their significance among the different distribution channels. The loan issuing capacity of the Turkish Banking Industry remains above the globally accepted optimum levels with the elasticity coefficients despite interest rate volatility and regulatory pressures. Legal regulations have led to improvement in the resistance of banks against crises, while exerting downward pressure on productivity and profitability. However, the financial innovations that have been constituted on a national and international basis have helped to counteract the negative effects of regulatory constraints. Although banks continue to rely principally on deposits for their financing needs, the utilization of alternative resources is following a rising trend. In line with the increase in funding opportunities resulting from expansionary monetary policies pursued by developed economies, banks international liabilities have maintained an upward trend during the recent years. The external debt rollover ratio of the sector has been maintained at a level above 100% and the long term nature of the international funds helps to extend the maturity structure of liability composition. The issues of securities by banks have accelerated and maintained their growth trend. Nurol Yatırım Bankası Anonim Şirketi 5

7 The ratio of non-performing loans to equity exhibited a value of 12.87% in FY and increased to 15.29% and 15.69% in FY and FY, respectively. While there was a nominal increase of 22.91% in the non-performing loans throughout, the lower nominal increase of 18.65% in total loans compared to that in non-performing loans resulted in a mathematical increase in the share of nonperforming loans to total loans. The ratio of non-performing loans to assets was 2.84% as of FYE. MARKET SHARE % PARTICIPATION BANKS DEVELOPMENT AND INVESTMENT BANKS DEPOSIT BANKS As of FYE, deposit banks held the leading rank among the banking sector assets with a 90.53% share, followed by participation and development banks with shares of 5.23% and 4.24%, respectively. The Turkish Banking sector exhibited successive growth on a cumulative basis for the last 9 years with an aggregate cumulative growth rate of % for the periods. The capital adequacy ratio of the sector was 17.90% at FYE and underwent a fall and attained a value of 15.30% by FYE. However, it recovered throughout FY and increased to 16.28% at FYE. The fact that 85.53% of the sector s legal equity was constituted of core capital proves that the sector maintains its robust equity structure despite the fall from the 90% level observed in the past. The Banking Sector maintained its asset growth throughout FY principally resulting from the expansion in loans and required reserves in a similar trend to that of FY. This was largely funded via the increase in deposits, equity, issued securities and rises in payables to banks. The regulation, supervision and monitoring activities that have been put in place following the fiscal crisis in 2000 along with their execution at an internationally accepted high quality level has brought discipline into the sector. The effects of legal regulations helped to increase the resistance of banks against crises, whilst exerting downward pressure on productivity and profitability. However, the innovations that have been rolled out at the national and international level helped to counter the negative effects of regulatory constraints. In particular, the growth in loans was rather subdued resulting from the macro-economic measures that have been implemented in FY. On USD terms, the Turkish Banking Sector exhibited growth across all years with the exception of 2008 and where there was a contraction in asset size due to the sudden devaluation of the Turkish Lira (TRY). Examining the details of the FY growth in greater detail, reveals that participation and investment banks recorded the greatest increase with a rate of 20.58%. Participation banks had an annual growth rate of 8.50% whilst deposit banks attained a growth rate of 15.28%. Compared to the previous years, the low growth of participation banking throughout FY stemmed from the ongoing problems associated with Bank Asya which was largely publicized in the press. Deposits, international borrowing and equity, which has been increasing through internal profitability generation, constituted the principal resources of growth for the sector in the past. The growth observed throughout FY was driven first and foremost by increases in general deposits, particularly that of foreign currency deposits, followed by borrowings from international banks, funding via repurchase agreements and finally issued securities and bonds. The diversification of resources extended maturities and eased liquidity management. However, the share of equity among total resources has declined to a level that was last observed Nurol Yatırım Bankası Anonim Şirketi 6

8 9 years ago. There was an increase in deposit interest rates and funding costs across the wider Turkish Banking Sector from 1Q onwards. Consequently, the sector s growth rate underwent a limited slowdown. Deposits continue to enjoy the highest share with respect to funding of the Banking Sector. However, their share among total resources dropped to 53.77% at FYE from 61.90% at FYE2005. In line with the development of capital markets and integration of the system into the global economic dynamics, the issue of capital market instruments and resources obtained via direct borrowing started to play an increasingly important role. In this regard, the share of resources obtained through such means has increased to 28.07% at FYE from 18.45% at FYE2007. The share of securities among total assets maintained an increasingly downward trend and fell to 15.99%. Loans, on the other hand, increased to 62.85% at FYE from 38.93% in FY2005. The highest level of growth among total resources was observed across provisions for required reserves and bank liquidity requirements. Provisions, which constituted 3.68% of total assets at FYE2005, formed 8.62% of total assets at FYE. The desire to slow down credit growth is the major factor that lies behind the increase in provision rates across the sector. The profitability indicators of the Turkish Banking Sector began to exhibit a downward trend despite the maintenance of relatively high levels throughout FY. The domination of the sector s funding structure by deposits is a factor that increases the need for a branch network and operating expenses and as such leads to downward pressures on the sector profitability. On the other hand, banks reflect the anticipated losses in their credit assignment processes fully onto their interest margins in accordance with the principles of prudence, weakening the return on assets. The high level of non-interest expenses indicates that banks should improve operational productivity. Turkish Banking Sector Profitability Indicators % Interest Margin % ROAA (%) ROAE (%) Net Profit Margin % Provision Expenses / T. Revenues% Despite the gradual drop in interest rates from 1H onwards, the net interest margin generated by the Banking Sector has currently not been negatively impacted by such developments. However, provision expenses maintain negative pressures on banks balance sheets. Net interest income constitutes the principle source of revenue while the sector has difficulty in diversifying its revenue streams. The effects of provision expenses in the margins are greater compared to EU countries among the different components. Net interest income forms the principal source of revenue for the Turkish banking system, constituting 68.12% of total banking revenues. On the other hand, the ratio of non-interest expenses to total revenues is lower than the levels observed in EU countries. The leading indicators of foreign currency position in the sector, the ratios of Total Foreign Currency Position to Assets and Total Foreign Currency Position to Equity, attained values of 0.30% and 2.61% as of FYE. As such, the effect of foreign currency position risk on the sector s revenue generating capacity is almost negligible. The short covering of foreign currency position via off balance sheet hedging methods has increased the rollover and counterparty risks across the Turkish Banking Sector. There is no liquidity deficit for the balance sheet transactions across all maturities. The highest level of excess liquidity was observed for the period of up to 7 days maturity and on a yearly basis due to the effects of the increases in provisions. Liquidity deficit is observed in all off-balance sheet transactions across different maturities. However, the Turkish Banking System is in liquidity surplus overall. As of FY, the Banking Sector finances 52.79% of its assets via deposits and participation funds. Despite the creation of various tax incentives to increase the maturity of the funding structure, the average maturity of banking deposits was days in compared to 74 days in. Leasing and loan receivables from 62.22% of the total asset size of the Turkish Banking Sector, whilst 15.99% of total assets are constituted by debt securities, large share of which belongs to government bonds. While the share of debt securities across balance sheet items is in decline, the share of loans is on the rise. The credit, market and operational risks of the Turkish Banking System are measured in accordance with internal methodologies and the BRSA regulations. External independent rating agencies have not yet taken Nurol Yatırım Bankası Anonim Şirketi 7

9 part in the measurement of these risks, particularly credit risk. According to data compiled by the BRSA, 90.08% of total risks in the system are constituted by credit risk, followed by operational risks and market risks with shares of 7.45% and 2.47% respectively. The aggregate monetary measure of risk across the system is TRY1.66 bn. The Turkish Banking Sector hedges its balance sheet foreign currency short position with an off balance sheet foreign currency long position. The sector s foreign currency net general position has been low for a relatively long period of time. The ratio of non-performing loans across the sector was 2.84% as of FYE and remains low in comparison to global averages. However, the pressures on economic growth in 2015 are anticipated to lead to a fall in the asset quality. Across the sector, the share of equity to the overall asset size was 13.17% at FYE whilst the same ratio was 11.19% at FYE, and declined to 11.64% at FYE. Participation banks had the lowest equity to total resources ratio. On the other hand, despite the damage that has been done to the reputation and appeal of development and investment banks in developed markets due to their deteriorating equity and asset composition, the sector in Turkey maintains its appeal as it remains well-capitalized with a high equity ratio Financial Analysis a. Financial Indicators & Performance i. Indices Relating to Size Turkish Banking Sector Turkish Devolopment and Investment Banking Sector Nurol Yatırım Bankası A.Ş Cumulative Asset Growth Rates % The graph above shows the growth of the Nurol s asset base in comparison to the sectors. Over the reviewed period, the asset base growth performance of the Bank demonstrated an upward trend since FYE with the exception of FY Turkish Banking Sector Turkish Devolopment and Investment Banking Sector Nurol Yatırım Bankası A.Ş. Annual Asset Growth Rates % Nurolbank recorded a remarkable growth, in total asset size of 46.49% as of FY, following the increase of 74.25% in FYE and outperformed both the Turkish banking sector and Development & Investment banking sectors growths of 15.11% and 20.58%, respectively in the same period, growth performance is mainly driven by the loan book. The Bank's strategy is to create a diversified corporate loan book targeting high-quality corporate credits with a range of customers. Nurol Bank has focused on developing its capacity to offer a wide range of products to its current and new corporate clients Market Share in Turksh Banking Sector (%) Market Share in Investment Banking Sector (%) Trendline Nurol Bank s asset size market shares amongst all 15 development & investment banks and the entire Turkish banking sector were 0.749% and 0.032%, respectively at the end of FY and displayed a slight increase compared to the previous year. Nurol Bank ranked 38 th among 51 banks in terms of assets size base at the end of FY. ii. Indices Relating to Profitability According to the IFRS-compliant financials, Nurolbank gained a net profit of TRY 15.87mn in FYE, a striking improvement of 29.75% compared to the TRY 516k net profit of FY. In the same period, the Turkish banking sector s net profits exhibited a drop of % and while the development & investment banking sector s net profit figure demonstrated an increase of 36.11% Nurol Yatırım Bankası Anonim Şirketi 8

10 Nurol Bank s financial performance was deteriorated in FYE due to high operating expenses and high funding costs. However, an improvement in profitability ratios has indicated the Bank s higher-yielding credit assets strategy in FYE ROAA Nurol Yatırım Bankası A.Ş. ROAA Turkish Devolopment and Investment Banking Sector ROAA Turkish Banking Sector ROAA Comparison In tandem with increasing ROAA figures of the development & investment banking sector, Nurol Bank s ROAA increased to 3.89% in FYE from -0.30% in FYE.Moreover, Nurol Bank s profit from operating activities before income tax figure expanded by 62.84% to TRY20.17 mn in FY y-o-y ROAE Nurol Yatırım Bankası A.Ş. ROAE Turkish Devolopment and Investment Banking Sector ROAE Turkish Banking Sector ROAE Comparison The share of NII within the total income composition of Nurol Bank continued to narrow slightly in relative terms for the 3 consecutive periods to 65.19% in FYE from 66.04% in FYE and from 70.46% in FYE. Additionally, the share of net fee and commission income was one of the main drivers of profitability ratios in FYE. Meanwhile, Nurol Bank s interest income mix remained dominated by loans and advances to customers and marketable securities % 16.94% 13.64% 2009 Net Interest Income / Total Income Net Fee and Commision Income / Total Income Total Operating Income / Total Income 52.10% 27.32% 20.58% 24.61% 9.58% 65.81% 73.90% 16.26% 9.84% 80.40% 18.00% 1.60% 85.20% 24.96% % 100% 80% 60% 40% 20% 0% -20% 65.19%, 19.10% of total income was contributed by net interest income, net fee & commission income, respectively, as of December 31,. Thus, 84.28% of the Bank s total income resulted from sustainable streams and was engendered mainly through core banking activities, indicating the maintenance of the profitability level. The Bank s gross profit margin and coverage of total income to total expense ratio fluctuated in a wide range over the reviewed period Interest Rate for Costly Liabilities (avg.) % Interest Rate for Earning Assets (avg.) % Margin % Interest Margin % Nurol Bank s net income figure showed a level that was higher than expectation thanks to by outstanding earning asset growth rate and ongoing strong collection achievement during FY. Nurol Bank s interest margin increased to 3.38% in FYE from 2.28% in FYE. Nurol Bank s concentration on a relatively client triggers it to charge higher interest rates on its loan book. Particularly, the Bank s performance in the profitability field through the reviewed period was stronger than both the Turkish banking sector and Development & Investment banking sector with the exception of the FYE Nurol Yatırım Bankası Anonim Şirketi 9

11 [BANKING] b. Asset Quality The Bank s risk management framework includes the credit, market, liquidity and operational risks. The Bank has set up Audit, Credit, Corporate Governance, Asset and Liability, Remuneration and Information System Committees and Internal Control, Internal Audit, and Risk Management Departments under the Internal System in line with BRSA regulations in order to establish a thorough and comprehensive risk management system. The Bank is exposed to market risk, liquidity risk, operational risk and principally credit risk. Nurol Yatırım Bank executes its credit risk by the allocation of loan limits for customers and customer groups as well as the definition of limits for sectors. Allocation limits, monitoring, controlling and auditing credit activities are managed under the Bank s credit risk management policy and procedures are approved and implemented by the Board of Directors as well as in the frame work of Banking Law. Nurol Yatırım Bankası A.Ş. Turkish Devolopment and Investment Banking Sector Turkish Banking Sector NPL % The Bank s gross non-performing loans portfolio at the end of FY deteriorated to 2.72% from 0.23% on IFRS basis. As of FY, the non-performing loans portfolio of Nurol Bank as a proportion of its equity increased to 13.46% (FY: 0.61%) but staying well below both the Turkish banking sector and Turkish Development & Investment banking sector. The Bank expects that NPLs pertaining to the previous years activities will not be reflected in FYE2015 financial statements. In addition, substantially all of non-performing of non-performing loans is expected to be collected due to the strong collateral structure such as real estate mortgage and protocol with customers Nurol Yatırım Bankası A.Ş. Turkish Devolopment and Investment Banking Sector Turkish Banking Sector Loans Loss Reserves / Impaired Loans % Nurol Bank remained behind the sector averages in its loan loss provisions (LLR) to impaired loans in FYE. Moreover, the Bank reported tough losses in FYE, impaired loans representing an amount of TRY1.91mn..However, Nurol Bank s earnings are highly sufficient to absorb expected loan losses. As stated in last year's outlook report, the management made a clean sweep of related party exposure during. Consequently, 7% and 44% of the Bank s cash and non-cash loans in FYE, decreased from 54% and decreased from 58% in FYE, are given to group companies. Additionally, interest and commission income from related parties accounted TRY21.95mn in FYE for cash loans and TRY161k for non-cash loans. c. Funding & Adequacy of Capital As an investment bank, Nurol Bank is not entitled to collect customer deposits. The Bank meets its funding needs through issued debt securities, borrowed funds from domestic institutions, current balances of its loan customers, equity, and obligations under repurchase agreement Equity Non-Costly Liabilities Other Borrowing Resource Distribution % % 80% 60% 40% 20% 0% Nurol Bank s collected fund, including issued debt securities and current balances of loan customers, accounted for the largest share in total fund resources with a rate of 50.74% as of December,. Nurol Yatırım Bankası Anonim Şirketi 10

12 5.48% 6.37% 9.23% 4.61% 28.59% 18.81% 71.41% 94.52% 93.63% 90.77% 81.19% 95.39% [BANKING] The second largest fund resource was non costly liabilities, consisting of bank loans which increased by 30.79% and obligations under repurchase agreement CAR (%) Nurol Yatırım Bankası A.Ş. CAR (%) Turkish Devolopment and Investment Banking Sector CAR (%) Turkish Banking Sector The Bank s Capital Adequacy Ratio (CAR) was calculated as 16.89% at the end of FY, up 268 base points from the previous year and stood above the minimum CAR requirements set by the Basel Accord (8%), BRSA (12%) and the banking sector (16.28%) Core Capital Supplementary Capital Risk Profile & Management a. Risk Management Organization & its Function General Information The Bank has exposure to Credit, Market, Liquidity and Operational Risks from its use of financial instruments and activities. The risks are executed under the risk management frame and implementation communiques. The Bank s risk management policies and strategies are reviewed regularly to reflect changes in market conditions and according to arising needs. A separate risk management department was established within the Bank, which reports to the Board and is entitled to carry out risk management operations independent of executive activities. The Board of Directors has the overall responsibility of establishing and supervising the Bank s risk management framework. The Bank has set up Assets and Liabilities Committee, Audit Committee, Liquidity Risk Management Committee, Market Risk Committee, Credit Risk Committee, Operational Risk Committee under the BoD. Own Fund Structure 120% 100% 80% 60% 40% In addition to these, an Anti-Fraud Monitoring Committee, Sustainability Committee, Internal Control Unit and departments of Risk Management, Internal Audit, Anti- Fraud Monitoring and Compliance were also set up for further surveillance. These departments report directly to the Board of Directors Tier 1 Capital or Core Capital is the principal measure of a bank s financial strength. According to the audited IFRS report, Nurol Bank s Tier 1 capital raised to TRY96.17mn. in FYE from TRY58.19mn in FYE. 20% 0% b. Credit & Market Risks Creditworthiness of borrowers is reviewed regularly in compliance with the legislation by the internal risk rating models. The Bank utilizes an internal risk rating model for its corporate, commercial and MSE loan portfolio. Credit risk of the Bank is principally derived from loans & advances to customers and the securities portfolio. The Bank extended 45.48% of assets as loans at the end of FY (FY: 73.21%) and continued its increase, the growth performance is mainly driven by the loan book, constituting the % of the total assets in FYE (FY: 54.95%). Nurol Yatırım Bankası Anonim Şirketi 11

13 Concentration in Cash Loan Portfolio % Customer Concentration First First First Concentration in Non Cash Loan Portfolio % Customer Concentration First First First The Bank s customer concentration with top ten and twenty customers represented 87.6% and 98.6% in cash loan book while non-cash loan book s customer concentration with top ten and twenty customers accounted at 64.9% and 86.1% as of December,. Cash Loan Book Composition % (First-5) Textile 29.0 Mining 15.6 Infrastructure 15.0 Other 7.5 Transportation / Shipping 6.7 Non Cash Loan Book Composition % (First-5) Road (Land-Railway-Tunnel) 25.2 Energy 20.7 Banks 12.0 Superstructure Commitment 6.9 Infrastructure Commitments 6.7 Nurol Bank has exposure to concentration risk where its business activities focus particularly on a similar type of customers and industrial sectors in Turkey. The Group has large sectorial concentrations in cash loan book and non-cash loan book. monitors its market risk operations and takes the required evaluations in accordance with the Communique on Measurement and Evaluation of Capital Adequacy of Banks. In the field of market risk, the Nurol Bank is mostly exposed to currency exchange and interest rate movement risks, respectively. The Bank s foreign currency risk exposure is restricted and complies with BRSA regulations. The Bank s interest rate risk is also limited and risk arising from interest rate fluctuations is monitored on a daily basis and managed by the asset and liability committee. c. Liquidity Risk Appropriate and timely measures through a corporate procedure in the event of a liquidity crisis which may arise from market conditions or the Bank s own balance sheet structure are taken by the relevant organizational units, namely the Risk Management Department, through the management of the liquidity risk by the Assets and Liabilities Committee (ALCO). The liquidity risk is also monitored by the Liquidity Risk Management Committee within the context of specified early warning signals, cash flow projections, stress levels and possible actions to be taken. In overcoming the liquidity risk considering short and long term liquidity requirements, the Bank has been in an effort to develop alternative funding channels and to diversify its funding sources through instruments including mainly bonds. BRSA stipulated in its Communiqué dated 1 November 2006 that the weekly and monthly liquidity ratios on a bank-only basis for foreign currency assets/liabilities and total assets/liabilities should stand at a minimum of 80% and 100%, respectively. In addition to the fact that Nurol Bank remained compliant with BRSA s parameters, the Bank s first maturity bracket improved while second maturity bracket deteriorated (to 210% from 203% for the first maturity bracket and to 129% from 157% for the second). Additionally, Nurol Bank was applied for bond issue up to TRY285 mn. in May, Market risk occurs due to change in market and equity prices, interest and foreign currency exchange rates related with the Bank s on and off balance sheet position. The Bank Nurol Yatırım Bankası Anonim Şirketi 12

14 8. Budget & Debt Issue Within the framework of projections and budgeting activities of Nurol Bank, the financial assumptions and estimations spanning between the years of FYE2015 and FYE2017 have been established (including bond issue of TRY285mn in FY2015). Projected financial statement remains disciplined and continues to increase the results of its operation efficiency through increasing NIM thanks to expanding product mix and cost efficiency. Despite difficult conditions resulting from the fluctuations in the financial markets, Nurol Bank has projected a mild growth of 0.77% in asset size and 0.07% in loans base with an increase of 29.41% in interest income profit as of yearend 2015 in line with its healthy and sustainable growth policy. Nurol Bank forecasts the net profit to drop % in FYE2015 in line with the Turkish banking sector s decline in profit margins. However, the Bank s management expects a net profit growth of 10% in FYE2016 and FYE2017. According to the base scenario developed by the Nurol Bank Management, some of the planned topics are shown in the graphs below; As of the first quarter of 2015, Nurol Bank s total assets decreased by 6.20% based unconsolidated financial statements complying with BRSA regulations. In the same period, the equity of Nurol Bank increased by 1.20%, compared to year end ROE - Pretax Profit / Equity (avg.) ROA - Pretax Profit / Total Assets (avg.) Nurol Bank s strategy of focusing on profitability via efficiency gains in the sector rather than asset growth. The profitability ratios of ROAA and ROAE based on the assumptions and parameters are expected to remain its level during the to 2016 forecast period. Cumulative Equity Growth Rate % Cumulative Asset Growth Rate % Cumulative Liability Growth Rate % The Bank management projects the loan book of Nurol Bank constitute approximately 69 % of the total assets between FY2015 and FY ,000 Interest Expense Net Interest Income Profit from Operating Activities Before Income Tax Interest Income 100,000 87,012 95,713 79,101 80,000 60,000 40,000 20, ,125 33,110 28,015 20,173 49,999 45,453 41,321 45,714 37,780 41,558 16,500 18,150 15,000-20, Nurol Yatırım Bankası Anonim Şirketi 13

15 FYE FYE FYE FYE FYE FYE FYE FYE As % of As % of As % of FYE FYE FYE Nurol Yatırım Bankası A.Ş. BALANCE SHEET - ASSET USD TRY TRY TRY TRY TRY TRY TRY Assets Assets Assets Growth Growth Growth (000) (Converted) (Original) (Average) (Original) (Average) (Original) (Average) (Original) (Original) (Original) (Original) Rate % Rate % Rate % A- TOTAL EARNING ASSETS ( I+II+III ) 268, , , , , , , , I- LOANS AND LEASING RECEIVABLES (net) 153, , , , , , , , a) Short Term Loans 64, , , , , ,586 96,789 87, b) Lease Assets 5,320 12,336 14,965 17,594 8, n.a n.a c) Medium & Long Term Loans 78, , ,166 55,082 49,953 44,824 36,738 28, d) Over Due Loans 6,166 14,298 7, ,517 22, , e) Others 0 0 2,014 4,027 2, n.a 0.92 n.a n.a n.a f) Receivable from Customer due to Brokerage Activities n.a n.a n.a n.a n.a n.a g) Allowance for Loan and Receivables Losses (-) ,912-1, ,314-22, II- OTHER EARNING ASSETS 87, , ,804 81,277 47,526 13,774 18,653 23, a) Balance With Banks -Time Deposits 47, ,210 84,012 58,814 35,832 12,849 12,235 11, b) Money Market Placements 36,678 85,053 52,033 19,012 9, ,181 10, n.a n.a c) Reserve Deposits at CB (*) 3,284 7,616 3, n.a n.a n.a n.a n.a d) Balance With CB- Demand Deposits ,951 3,451 2, ,238 1, III- SECURITIES AT FAIR VALUE THROUGH P/L 27,552 63,891 76,825 89,759 77,358 64,956 44,088 23, a) Treasury Bills and Government Bonds 16,602 38,499 51,241 63,983 39,653 15,322 19,271 23, b) Other Investment 10,950 25,392 25,584 25,776 37,705 49,634 24, n.a c) Repurchase Agreement n.a n.a n.a n.a n.a n.a B- INVESTMENTS IN ASSOCIATES (NET) + EQUITY SHARE n.a n.a n.a n.a n.a n.a a) Investments in Associates (Net) n.a n.a n.a n.a n.a n.a b) Equity Share n.a n.a n.a n.a n.a n.a C- NON-EARNING ASSETS 6,835 15,850 21,266 26,681 25,388 24,095 24,103 24, a) Cash and Cash Equivalents b) Balance With Banks - Current Accounts 4,258 9,875 7,944 6,013 5,619 5,225 4,476 3, c) Financial Assets at Fair Value through P/L n.a n.a n.a n.a n.a n.a d) Accrued Interest from Loans and Lease n.a n.a n.a n.a n.a n.a e) Other 2,496 5,788 13,171 20,554 19,571 18,587 19,270 19, Intangible Assets 440 1,021 1,056 1, Property and Equipment Deferred Tax n.a n.a n.a n.a n.a Other 1,845 4,279 11,582 18,884 17,930 16,976 17,743 18, TOTAL ASSETS 275, , , , , , , , Nurol Yatırım Bankası Anonim Şirketi 14

16 FYE FYE FYE FYE FYE FYE FYE FYE As % of As % of As % of FYE FYE FYE Nurol Yatırım Bankası A.Ş. BALANCE SHEET LIABILITIES & SHAREHOLDERS' EQUITY USD TRY TRY TRY TRY TRY TRY TRY Assets Assets Assets Growth Growth Growth (000) (Converted) (Original) (Average) (Original) (Average) (Original) (Average) (Original) (Original) (Original) (Original) Rate % Rate % Rate % A- COST BEARING RESOURCES ( I+II ) 139, , , , , , , , I- DEPOSIT n.a n.a n.a n.a n.a n.a a) TL Deposit n.a n.a n.a n.a n.a n.a b) FC Deposit n.a n.a n.a n.a n.a n.a c) FC & LC Banks Deposits n.a n.a n.a n.a n.a n.a II- BORROWING FUNDING LOANS & OTHER 139, , , , , , , , a) Borrowing From Domestic Market 117, , , , ,590 74,187 85,207 96, b) Borrowing From Overseas Markets n.a n.a n.a n.a n.a n.a c) Borrowing from Interbank n.a n.a n.a n.a n.a n.a d) Securities Sold Under Repurchase Agreements 22,211 51,505 87, ,442 87,006 50,569 33,152 15, e) Subordinated Loans & Others n.a n.a n.a n.a n.a n.a B- NON-COST BEARING RESOURCES 89, , ,198 8,051 11,820 15,588 9,969 4, , a) Provisions 1,283 2,974 2,785 2,595 2,641 2,686 2,535 2, b) Current & Deferred Tax Liabilities ,469 2,298 1, c) Trading Liabilities (Derivatives) 953 2,211 1, , d) Other Liabilities 87, , ,620 4,737 7,647 10,556 5,880 1, , C- TOTAL LIABILITIES 229, , , , , , , , D- MINORITY INTEREST n.a n.a n.a n.a n.a n.a E- EQUITY 45, ,222 98,322 90, , ,057 92,266 71, a) Prior Year's Equity 38,993 90, , ,057 92,266 71,475 63,951 56, b) Equity (Added From Internall & External Resourses At This Year) ,609-23,151 7,280 37,710 19,822 1, , c) Profit & Loss 6,842 15,867 8, ,194 3,872 8,494 13, , TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 275, , , , , , , , USD Rates 1=TRY Nurol Yatırım Bankası Anonim Şirketi 15

17 Nurol Yatırım Bankası A.Ş. FY FY FY FY FY INCOME STATEMENT (000) TRY Net Interest Income 33, , , , , a) Interest Income 61, , , , , b) Interest Expense 28, , , , , Net Fee and Commission Income 9, , , , , a) Fee and Commission Income 11, , , , , b) Fee and Commission Expense 2, , Total Operating Income -3, , , , Net trading income (+/-) 5, , , Foreign Exchange Gain or Loss (net) (+/-) -11, , Gross Profit from Retail Business Premium Income from Insurance Business Income on Sale of Equity Participations and Consolidated Affiliates , Gains from Investment Securities (Net) 1, , , , Other Operating Income 1, , Taxes other than Income Dividend Provisions 1, , Provision for Impairment of Loan and Trade Receivables 1, , , Other Provision , Total Operating Expense 16, , , , , Salaries and Employee Benefits 7, , , , , Depreciation and Amortization Other Expenses 8, , , , , Profit from Operating Activities before Income Tax 20, , , Income Tax Current Income Tax Deferred 4, Net Profit for the Period 15, , , Total Income 50, , , , , Total Expense 28, , , , , Provision 1, , Pre-tax Profit 20, , , Nurol Yatırım Bankası Anonim Şirketi 15

18 Nurol Yatırım Bankası A.Ş. FY FY FY FINANCIAL RATIOS % I. PROFITABILITY & PERFORMANCE 1. ROA - Pretax Profit / Total Assets (avg.) ROE - Pretax Profit / Equity (avg.) Total Income / Equity (avg.) Total income / Total Assets (avg.) Provisions / Total Income Total Expense / Total Liabilities (avg.) Net Profit for the Period / Total Assets (avg.) Total Income / Total Expenses Non Cost Bearing Liabilities + Equity- Non Earning Assets / Total Assets Non Cost Bearing Liabilities - Non Earning Assets / Total Assets Total Operating Expenses / Total Income Net Interest Margin Operating ROAA (avg.) Operating ROAE (avg.) Interest Coverage EBIT / Interest Expenses Net Profit Margin Gross Profit Margin Market Share in Turkish Devolopment and Investment Banking Sector Market Share in Entire Banking System Growth Rate II. CAPITAL ADEQUACY (year end) 1. Equity Generation / Prior Year s Equity Internal Equity Generation / Previous Year s Equity Equity / Total Assets Core Capital / Total Assets Supplementary Capital / Total Assets Tier 1 / Risk Waighted Asset Capital / Total Assets Own Fund / Total Assets Standard Capital Adequacy Ratio Surplus Own Fund Free Equity / Total Assets Equity / Total Guarantees and Commitments + Equity III. LIQUIDITY (year end) 1. Liquidity Management Success (On Demand) Liquidity Management Success (Up to 1 Month) Liquidity Management Success (1 to 3 Months) Liquidity Management Success (3 to 6 Months ) Liquidity Management Success (6 to 12 Months) Liquidity Management Success (Over 1 Year & Unallocated) IV. ASSET QUALITY 1. Loan and Receivable s Loss Provisions / Total Loans and Receivables Total Provisions / Profit Before Provision and Tax Impaired Loans / Gross Loans Impaired Loans / Equity Loss Reserves for Loans / Impaired Loans Total FX Position / Total Assets Total FX Position / Equity Assets / Total Guarantees and Commitments + Assets Nurol Yatırım Bankası Anonim Şirketi 15

19 Sovereign* National International [BANKING] The Rating Results Issued by JCR-ER May 22, October 23, July 31, Long-Term Short-Term Long-Term Short-Term Long-Term Short-Term Foreign Currency BBB- A-3 BBB- A-3 BBB- A-3 Local Currency BBB A-3 BBB A-3 BBB- A-3 Outlook FC Stable Stable Stable Stable Stable Stable LC Stable Stable Stable Stable Stable Stable Local Rating AA (Trk) A-1 (Trk) AA- (Trk) A-1 (Trk) A+ (Trk) A-1 (Trk) Outlook Stable Stable Stable Stable Positive Stable Sponsor Support Stand-Alone AB - AB - AB - Foreign Currency BBB- - BBB- - BBB- - Local Currency BBB- - BBB- - BBB- - Outlook Analysts FC Stable - Stable - Stable - LC Stable - Stable - Stable - (*) Affirmed by Japan Credit Rating Agency on July 11, (*) Affirmed by Japan Credit Rating Agency on July 11, (*) Assigned by Japan Credit Rating Agency on May 23, Mr. Orkun İNAN Mr. Orkun İNAN Mr. Şevket GÜLEÇ Nurol Yatırım Bankası Anonim Şirketi 18