Banks. Turkiye Halk Bankasi. Turkey Credit Analysis. Rating Rationale

Transcription

1 Turkey Credit Analysis Turkiye Halk Bankasi Ratings Turkiye Halk Bankasi Foreign Currency Long-Term IDR* Short-Term Outlook Local Currency Long-Term IDR* Short-Term Outlook National Long-Term Outlook BB- B Positive BB- B Positive A (tur) Stable Individual C/D Support 3 Sovereign Risk Foreign Long-Term IDR* Local Long-Term IDR* Outlook * IDR Issuer Default Rating BB- BB- Positive Financial Data Turkiye Halk Bankasi 31 Dec Dec 04 Total Assets (USDm) 19,870 18,973 Total Assets (TRYm) 26,727 25,559 Equity (TRYm) 3,255 3,077 Published Net Income (TRYm) Operating ROAA (%) Operating ROAE (%) Eligible Capital /Risk Weighted Assets (%) Tier 1 Ratio (%) Analysts Gulcin Orgun, Istanbul [email protected] Turda Ozmen, Istanbul [email protected] Rating Rationale The IDRs, Short-term, Support and National Rating of Turkiye Halk Bankasi (Halkbank) reflect the potential support it can expect to receive from its shareholder, the Turkish state. The Individual Rating takes into account continued asset diversification, solid funding, sound capitalisation and improvements in the operating environment. These are balanced by continued, albeit reduced, reliance on government securities income. The profitability of Halkbank improved in Q306, mainly driven by high-yielding retail loans and controlled costs, despite higher taxes from increased taxable income, and much lower extraordinary gains from the sale of fixed assets in Q306. Halkbank needs to increase its fee and commission income a relatively stable source of income in an environment with narrowing margins. It also needs to decrease its reliance on securities income by continued growth in the loan portfolio without creating asset quality problems. The balance sheet composition of the bank has changed in favour of loans in 2005 and Q306; gross loans equalled 33% (2005: 28%) and government securities made up 54% (2005: 66%) of end-q306 assets. Asset quality was aided by loan growth and continued to improve as old NPLs were collected, without generating any major new NPLs since The bank maintained full reserve coverage of the NPLs. Halkbank has a well distributed core deposit base. Although asset liquidity is low, liquidity risk, which is created by maturity mismatch, is mitigated to some extent by the stable deposit base arising from the bank s strong franchise and state-ownership. At end-q306 Halkbank s consolidated Tier 1 ratio, despite having declined due to higher risk-weighted assets as a result of loan growth, still equalled a high 34.44%. Although the capital adequacy ratio is estimated to diminish as the bank grows, it will still remain adequate given improving asset quality, fully recovered problem loans and reduced levels of non interest-earning assets. Support In Fitch Ratings opinion, Halkbank s state ownership and its importance to the Turkish banking system would result in the authorities endeavouring to provide support if needed. However, their ability to do so, in view of Turkey s IDR, is moderate. Rating Outlook and Key Rating Drivers The IDR and Outlook for Halkbank s IDR is dependent upon Turkey s Sovereign Rating. Fitch believes that Halkbank s Individual Rating could be upgraded if the loan portfolio grows to levels that would boost core profitability and if dependence on securities income were to decline markedly. A downgrade may occur were there to be persistent deterioration in core profitability, major new asset quality problems, accompanied by weaker capitalisation. Profile State-owned Halkbank became operational in It went through a major restructuring process starting in 2001, including the bank being recapitalised and the staff and the branch network being rationalised. It specialises in financing artisans, tradesmen and SMEs. After Pamukbank was merged into Halkbank in November 2004, its focus extended to retail banking. The bank is planned to be privatised through a block sale in February

2 Profile A state-owned bank focused on financing artisans, tradesmen and SMEs Restructuring programme initiated in 2001 to rationalise the network, personnel and workflows Sixth-largest bank in Turkey, with 7.3% share of total banking assets Halkbank started offering banking services in 1938 and in 1984 became a fully state-owned bank, owned by the Under-secretariat of the Turkish Treasury (Treasury). The shares of the bank which belonged to Treasury were transferred to Republic of Turkey Prime Ministry Privatisation Administration in August 2006 prior to the planned privatisation. The bank s original mandate was to provide loans to artisans, tradesmen and SMEs in economically underdeveloped parts of the country. Halkbank made a series of acquisitions and mergers, including Tobank in 1992, Sumerbank in 1993, Etibank in 1998, part of Emlak Bank in 2001 and, finally, Pamukbank in As with other state-owned banks, Halkbank started to pursue a restructuring programme in April 2001 following the major financial crises in Turkey, in order to rationalise the network, staff and workflows and prepare the bank for its planned privatisation. Halkbank s short-term borrowing requirement was gradually phased out. Additionally, the Turkish Treasury exchanged the duty losses for government securities (principally in TRY and floating-rate) and recapitalised Halkbank in On 3 July 2001, laws covering duty losses incurred by state-owned banks were abolished and replaced by new regulations which prohibited any additional duty losses from being booked unless budgeted for. Major rationalisation of branches and staff in 2001 and 2002 changed the status of the state-owned banks employees to that of private sector workers, and performance, productivity and efficiency evaluations, similar to those of other private banks, were introduced. In November 2004, the shares of Pamukbank, which used to belong to Cukurova Group before being transferred to the Savings Deposit Insurance Fund (SDIF), were transferred to Halkbank as well as all Pamukbank s assets and liabilities, including offbalance-sheet commitments, but excluding relatedparty exposure. As Pamukbank had negative equity, SDIF provided TRY2.3bn worth of special issue government securities to Halkbank. Pamukbank was an upper-mid-sized bank focusing on retail banking and credit cards business, trade finance and commercial banking. The merger with Pamukbank was very beneficial in terms of IT as well as credit culture, retail banking know-how and human resources. However the integration process took a long time as expected and the bank focused more on reorganisation than growth in 2005, whereas the sector as a whole grew very rapidly over the same period. The bank started to focus more on growth in 2006 while the sector continued to grow at a high speed. At end-9m06, Halkbank ranked as the sixthlargest bank in Turkey, with 7.3% of Turkish banking assets (2005: 6.81%). The bank s market shares in TRY and FX loans were 5.8% and 2.8%, respectively, and it held 11% and 6% of sector TRY and FX deposits and had 8.71% of the total bank branches in Turkey at end-q306. At the end of the same period, Halkbank s market share reached 5.7% (2005: 3%) of consumer loans and 3.7% of housing loans (2005: 0.4%). The bank had 588 branches, two branches in northern Cyprus and one offshore banking unit in Bahrain at end-september It also had three financial services branches in Germany and a representative office in Iran. The bank had 11,007 staff at end-9m06. The branch network was reorganised in 2005 and the branches were dedicated to serving corporate, commercial and retail customers, as well as entrepreneurs. Halkbank has three international joint ventures with banks in Europe (Demir Halk Bank N.V. (rated BB ), Magyaroszagi Volksbank R.T.) and Central Asia (Gagarum Joint Stock Bank), also has stakes in domestic financial institutions in insurance, securities brokerage, leasing, banking and also in services including IT. The bank had only a 1.75% share in total international trade volume in Turkey in Q306. Strategy: In addition to its main focus of providing loans to local artisans, tradesmen and SMEs, the bank also provides a full range of banking services within corporate, commercial and retail banking. The acquisition of Pamukbank has contributed to the improvement of Halkbank s customer and marketing-oriented approach and has provided know-how in retail banking. The bank aims to maintain its leading position in lending to SMEs and also to increase its market share in retail banking, while increasing cross-selling. The bank has payroll agreements for a large number of customers, which also forms a platform for its retail banking products. Halkbank also aims to improve the diversification both of its product range and also its funding sources. Investment in government securities is planned to be decreased as a proportion of total assets, in parallel with the planned growth in loans. Halkbank has an agreement with Turkey s Chamber of Industry and Commerce, whereby it is provided with access to their members and to potential business opportunities. Halkbank also receives funds from 2

3 international institutions like European Investment Bank, to extend loans to SMEs. Halkbank was initially due to be privatised by the end of 2003; however, this has been postponed until The bank has decided to be privatised through a block sale. Pending completion of legal procedures, an auction is to be organised in 2007 for the privatisation of the bank. Presentation of Accounts: Unless otherwise stated, all references in this report are to the bank s inflation-adjusted, consolidated financial statements in accordance with IFRS. Interim figures are based on audited financial statements prepared in accordance with Banking Regulation and Supervision Agency ( BRSA ) guidelines, which are broadly in line with IFRS. Performance Improved profitability, mainly due to increased income from loans and controlled costs Continued, albeit reduced, reliance on securities income Improved efficiency In 2005 and Q306 the balance sheet composition of the bank changed in favour of loans. Halkbank s profitability improved in Q306, mainly driven by high-yielding retail loans and controlled costs, despite tax charges from increased taxable income and much lower extraordinary gains from the sale of fixed assets in Q306. Revenues: Interest income from loans as a proportion of total interest income increased, but was still low at 32% in Q306. However interest income from government securities fell to 63% from 70% over the same period. Loan yield ratio on our spreads is not adjusted for the specialised loans funded by the Treasury. Although net fee and commission income increased, it remained below average at 12% of total operating income at end-q306 due to levels of lending remaining subdued. Stronger non interest-earning activities would support profitability in the future, in the face of narrowing margins caused by intensifying competition. Trading of government securities remained very low, resulting in low trading income in Q306. The bulk of securities are kept as held-to maturity, and only realised capital gains from the trading and available-for-sale portfolio are recorded as trading gains. Turbulent market conditions in H106 did not have a major effect, either on the bank s profitability or on Tier 2 capital, due to government securities being repriced weekly on average, and also to the bank s very small net FX position. Unrealised marked-to-market losses on available-for-sale securities equalled 5% of equity at end-h106 and this declined to 2% at end-q306. Non-Interest Expenses: Non-interest expenses fell slightly on an annualised basis in Q306 despite an increase in the number of staff and continued renovation of branches, mainly due to controlled administrative expenses. Coupled with higher operating income, this has resulted in an improved cost/income ratio in the period. At the same time overhead costs as a percentage of average assets also improved, reflecting better efficiency. In the attached spreadsheets, the provisions that the branches had transferred in 2004 and 2003 to the head office are shown as in Other Operating Income and also as an expense in Loan Loss Provisions. After the related adjustment, the cost/income ratio equalled 42.9% in Loan Impairment Charges: There were loan impairment charges (LIC) amounting to TRY82m and TRY248m recoveries in Q306 resulting in net Table 1: Performance Indicators Halkbank 1 ( BB- ) Ziraat Bankasi 1 (%) Q Q Asset growth , Net interest income/average earning assets Cost/income Cost/average assets Loan yield n.a. n.a Cost of funding Operating income/average assets Operating income/average equity Equity/assets Based on audited and consolidated data under IFRS, except for Q306, which is under BRSA guidelines for Halkbank (consolidated) and Ziraat Bankası (bank-only) 2 Inflation adjusted 3 Non inflation-adjusted 4 Annualised for Q306 Source: BRSA data adapted by Fitch 3

4 recoveries of TRY166m, compared with net recoveries of TRY61m in LIC should continue to increase, in line with planned loan growth. Prospects: Halkbank is experienced, has a well established franchise and well placed in its core market of very small SMEs. This segment of the market is not targeted by other Turkish banks, which tend to target relatively larger SMEs. This provides the bank with a strong competitive edge in its core market segment. On the funding side, Halkbank also has an advantageous position in having access to a large number of small depositors that contribute to the stability of its core deposit base. Although it has been declining, reliance on government securities income continues, and is only set to reduce gradually, as proceeds from maturing government securities are placed in loans. The bank aims to improve noninterest income, with a growing loan book and improved cross-selling opportunities; this should help the bank to offset any fall in margins, either from a fall in interest rates or from intensifying competition in the Turkish banking sector. At end- 2007, Halkbank plans to increase loans as a proportion of assets to 41%; the share of government securities would then fall to a still-high 44%. The capital adequacy ratio is estimated at about 25% at end-2007, which is considered good given improving asset quality, fully recovered problem loans and a reduced level of non-interest earning assets. Risk Management Loan growth accelerated in Q306 and loans made up 33% of assets Asset quality continued to improve No major new NPLs since 2001 Government securities remain high at 54% of end-q306 assets The risk management department defines, analyses, measures and monitors risks, as well as devising limits and policies. It reports directly to the board member responsible for risk management. Independent internal and financial control functions have also been created at branch level. Credit Risk: After the merger with Pamukbank in 2004, Halkbank started using Pamukbank s internal rating system which is more advanced and has been used since The rating system for corporate and commercial loans uses both qualitative and quantitative criteria and has 10 rating grades. The bank has an internally developed scoring model for SMEs and retail loans, which has six rating grades. Approximately 85% of the loan portfolio is collateralised, the collaterals mainly comprising real estate mortgages, which the bank re-values at least annually. At end-q306, the 20 largest cash and noncash loans equated to 16% of the bank s total cash and non-cash exposure and 61% of equity, reflecting a diversified loan portfolio. Although the bank will be initially applying the standardised approach under Basel II in 2008 as per regulations, it is planning to use the advanced internal ratings-based approach in The bank has been collecting default and recovery statistics since Halkbank s gross loans grew by 33% in 2005 from a low base and a further 48% in Q306 and equalled 33% of assets (2005: 28%). In terms of remaining maturity, the loan portfolio is dominated by shortterm (Q306: 56%) and TRY loans (Q306: 83%). At end-q306 commercial loans (mainly comprised of SMEs) had the largest share with 50% of the total loan book, followed by retail loans (19%), subsidised loans to cooperatives (22%) and specialised loans funded by the Treasury (9%). The bank does not carry the risk of non-repayment by the borrower on 7% of its performing loans as of end-q306. Such funds provided or guaranteed by the Treasury are lent-on by Halkbank for specific purposes to cooperatives, SMEs, earthquake areas, regional development projects, etc. The share of consumer loans and credit cards reached 20% in total at end-q306 (2005: 10%), housing loans being the fastest-growing sub-segment. The major reason for the boost in retail loans was advertising and marketing for specially designed retail banking packages that put together a number of products. At end-q306, non-cash loans equated to only 9% of assets, mainly comprised of letter of guarantees and letter of credits. Loan Loss Experience and Reserves: Halkbank defines a loan as an NPL after 90 days of nonrepayment, except for retail loans, for which this period is shorter at 60 days. The bank sets aside reserve provisions for NPLs regardless of the value of the collaterals. NPLs continued to decline in absolute terms and the NPL ratio equalled 9.29% at end-q306, aided by loan growth (2005: 16%, 2004: 21.61%). Reserve coverage of NPLs was 99% at end-q306 (2005: 98%; 2004: 97%). Halkbank did not incur any major new NPLs since 2001 and the NPL ratio, excluding the old NPLs prior to 2001, was below 1% at end-q306. The bank has some restructured loans that are included in performing loans, which were equal to only 1.7% of gross loans at end-q306. Market Risk: The bank currently uses the standard method for calculating capital charge for market risk. The bank also applies in-house developed parametric models daily to calculate VaR. It also carries out 4

5 back-testing, the results of which are reported to the board of directors daily. Maximum VaR calculated during Q306 was equal to 10% of equity. The proceeds from matured government securities in the held-to-maturity portfolio continued to be replaced by available-for-sale securities. The share of government securities markedly declined to 54% of end-q306 assets (2005: 66%) mainly due to the increasing proportion of the growing loan book. Government securities mainly comprised securities received against duty losses deposit liabilities transferred to Halkbank from Etibank and Sumerbank during their privatisation, and finally, in relation to Pamukbank. The share of the held-tomaturity portfolio declined to 68% of the total portfolio at end-q306 (2005: 79%). TRYdenominated government securities constituted 85% of the total portfolio, whereas 83% of the government securities had maturities of more than one year. 88% of the government securities were floating-rate and were re-priced weekly on average, in line with yields on government securities auctions. Unrealised losses on relatively smaller AFS securities portfolio equalled 5% of equity at end- H106. Nevertheless unrealised losses declined to 2% of equity at end-q306 as a result of partial recovery in market conditions. The bank had a small net long position equal to 2% of its end-q306 equity, hence had a limited FX risk. As with other banks, Halkbank had a maturity mismatch between its longer-term assets funded by short-term liabilities. Nevertheless, the short-term portion of loans and floating-rate government securities reduces the interest rate risk from the maturity mismatch. Assets repricing in less than one month equalled a comfortable 67% of liabilities repricing within the same timeframe; the figure for assets repricing in less than three months was 76%. Operational Risk: Halkbank identified its operational risk areas and has been collecting loss data since Although Halkbank is internally measuring its operational risk according to basic indicator, standardised and alternative standardised approaches periodically, it will initially follow the basic indicator approach under Basel II as per regulatory requirements. The bank has a disaster recovery centre located in Izmir. The upgrade of IT infrastructure has simplified operational processes, helping to reduce operational risks and also contributed to better online internal controls. Corporate Governance: Halkbank s board of directors comprised seven members. The responsibilities of the general manager, also a board member, were increased in 2005 prior to the planned privatisation. The bank announced its corporate governance principles in 2005 in line with regulations, and established an audit committee. The bank has an audit committee with two independent members. Due to the nature of the bank and full state ownership, related-party loans and deposits are negligible. Funding and Capital Customer deposits remain the main source of funding Liquidity risk is partly mitigated by a stable core deposit base Sound capitalisation Funding: Customer deposits continued to grow and remained the main source of funding, with an 85% share in end-q306 liabilities (2005: 88%). Demand deposits made up only 10% of total deposits and 74% of deposits were in TRY at end-q306. According to bank data, depositors tend to keep their deposits for longer periods than the contractual maturities indicate, and 61% of the deposits are reportedly core deposits, that are rolled over at their contractual maturities and remain with the bank. The savings and foreign currency deposits under the Savings Deposits Insurance Fund ( SDIF ) guarantee threshold of TRY50,000 made up 46% of the total, reflecting a well-diversified core savings deposit base. Borrowings increased but still equalled only 10% of liabilities at end-q306 (2005: 8%) and mainly consisted of long-term funds provided by the Treasury (Q306: 31%; 2005: 53%) of total borrowed funds) and by international multilateral institutions, such as the European Council Development Fund, Kreditanstalt fur Wiederaufbau and the European Investment Bank (Q306: 26%; 2005: 24%) and short-term funding from banks (Q306: 43%, 2005: 23%). Halkbank plans to be more active in borrowing from international markets in order to extend the maturities of its liabilities, improve diversification in funding and also provide sources for planned growth in long-term housing loans. Liquidity: Liquid assets increased but still equalled only 10% of assets at end-q306 (2005: 7%) and covered a low 13% of customer deposits (2005: 9%). Assets with less than one month and three months maturity covered 21% and 29% of liabilities with the same maturity, respectively. Liquidity risk created by low asset liquidity and maturity mismatch is partly mitigated by a diversified and stable core deposit base and also by a strong franchise and stateownership. There is also a designated liquidity facility from the Turkish central bank to prime 5

6 dealers of government securities, which includes Halkbank. Capital: Equity continued to increase, mainly due to an increase in reserves, despite full dividend payment of distributable income to the shareholder. There was also a small cash increase of TRY100m in paid-in capital in Q306. At end-q306 Halkbank s consolidated Tier 1 and Total capital ratios despite having declined due to higher risk-weighted assets from growth in loans, still equalled a high 34.44% and 32.39%, respectively, compared with 50.55% and 49.64%, respectively, at end Free capital equalled 7.49% of assets at end-q306 and is expected to improve with a planned reduction in non-core assets. Capital adequacy ratios would drop under Basel II, with an estimated 100% riskweighting for FX government securities, capitalisation is estimated to remain strong. 6

7 Balance Sheet Analysis TURKIYE HALK BANKASI 31 Dec Dec Dec Dec 2002 Year End Year End As % of Average Year End As % of Year End As % of Year End As % of USDm TRZth Assets TRZth TRZth Assets TRZth Assets TRZth Assets Original Original Original Original Restated Restated Restated Restated Restated Restated A. LOANS 1. Loans and Advances < 3 months ,018, , , n.a. - n.a Loans and Advances 3-12 months 1, ,397, ,012, ,628, n.a. - n.a Loans and Advances > 1 year 2, ,914, ,511, ,108, n.a. - n.a Loan Impairment (to deduct from above) n.a. n.a. - n.a. n.a. - n.a. - n.a Loan Impairment (memo) ,182, ,179, ,176, ,270, ,469, Less: Loans from the Insurance Business n.a. n.a. - n.a. n.a. - n.a. - n.a. - TOTAL A 4, ,329, ,397, ,466, ,936, ,631, B. OTHER EARNING ASSETS 1. Loans and Advances to Banks 1, ,727, ,829, ,930, ,939, ,222, Government Securities 13, ,563, ,736, ,908, ,974, ,466, Trading Assets Derivatives n.a. n.a. - n.a. n.a. - n.a. - n.a Other Securities and Investments , , , , , Equity Investments , , , , , Insurance n.a. n.a. - n.a. n.a. - n.a. - n.a. - TOTAL B 14, ,431, ,711, ,992, ,008, ,836, C. TOTAL EARNING ASSETS (A+B) 19, ,760, ,109, ,458, ,944, ,467, D. TANGIBLE FIXED ASSETS , , , , , E. NON-EARNING ASSETS 1. Cash and Due from Banks , , , , , Other , , , , , F. TOTAL ASSETS 19, ,726, ,142, ,558, ,740, ,538, G. DEPOSITS & MONEY MARKET FUNDING 1. Due to Customers < 1 year 15, ,195, ,567, ,939, n.a. - n.a Due to Customers > 1 year , , , n.a. - n.a Due to Customers, no breakdown n.a. n.a. - n.a. n.a. - 15,933, ,067, Deposits from Banks , , , , , Other Deposits and Short-term Borrowings n.a. n.a. - n.a. n.a. - 1,337, ,001, TOTAL G 15, ,009, ,348, ,688, ,289, ,134, H. OTHER LIABILITIES 1. Derivatives n.a. n.a. - n.a. n.a. - n.a. - n.a Trading Liabilities n.a. n.a. - n.a. n.a. - n.a. - n.a Fair Value Portion of Debt n.a. n.a. - n.a. n.a. - n.a. - n.a Insurance n.a. n.a. - n.a. n.a. - n.a. - n.a. - TOTAL H n.a. n.a. - n.a. n.a. - n.a. - n.a. - I. OTHER FUNDING 1. Long-term Borrowing 1, ,420, ,593, ,766, , ,412, Subordinated Debt n.a. n.a. - n.a. n.a. - n.a. - n.a Other Funding n.a. n.a. - n.a. n.a. - n.a. - n.a. - TOTAL I 1, ,420, ,593, ,766, , ,412, J. NON-INTEREST BEARING ,041, ,034, ,026, , , K. HYBRID CAPITAL 1. Non-cumulative Hybrid capital n.a. n.a. - n.a. n.a. - n.a. - n.a Other Hybrid n.a. n.a. - n.a. n.a. - n.a. - n.a. - L. TOTAL LIABILITIES 17, ,472, ,976, ,481, ,793, ,151, M. EQUITY 1. Common Equity 2, ,195, ,136, ,077, ,947, ,387, Minority Interest n.a. n.a. - n.a. n.a. - n.a. - n.a Revaluation Reserves , n.a. n.a. - n.a. - n.a. - TOTAL M 2, ,254, ,165, ,077, ,947, ,387, MEMO: CORE CAPITAL 2, ,195, ,136, ,077, ,947, ,387, MEMO: ELIGIBLE CAPITAL 2, ,195, ,136, ,077, ,947, ,387, N. TOTAL LIABILITIES & EQUITY 19, ,726, ,142, ,558, ,740, ,538, Exchange Rate USD1 = TRZ USD1 = TRZ USD1 = TRZ USD1 = TRZ

8 Income Statement Analysis TURKIYE HALK BANKASI 31 Dec Dec Dec Dec 2002 Income As % of Income As % of Income As % of Income As % of Expenses Total AV Expenses Total AV Expenses Total AV Expenses Total AV TRZth Earning Assts TRZth Earning Assts TRZth Earning Assts TRZth Earning Assts Original Original Restated Restated Restated Restated Restated Restated 1. Interest Income 3,718, ,089, ,554, ,485, Interest Expense 2,792, ,793, ,002, ,710, NET INTEREST REVENUE 926, ,296, ,551, ,775, Net Fees & Commissions 155, , , , Net Insurance Revenue n.a. - n.a. - n.a. - n.a Other Operating Income 440, , , , Personnel Expenses 354, , , , Other Operating Expenses 343, , , , PRE-IMPAIRMENT OPERATING PROFIT 823, , ,360, ,704, Loan Impairment Charge 114, , , , Other Credit Impairment and Provisions n.a. - n.a. - n.a. - n.a OPERATING PROFIT 708, , , , Other Income and Expenses 49, , , PUBLISHED PRE-TAX PROFIT 758, , , , Taxes 228, , , , Profit/(Loss) from Discontinued Operations n.a. - n.a. - n.a. - n.a Change in Value of AFS investments 59, n.a. - n.a. - n.a CurrencyTranslation Differences n.a. - n.a. - n.a. - n.a Other Gains/(Losses) not in Published Net Income n.a. - n.a. - n.a. - n.a FITCH COMPREHENSIVE INCOME 589, n.a. - n.a. - n.a Total Gains/(Losses) not in Published Net Income 59, n.a. - n.a. - n.a IFRS Dividends included in Fitch Interest Expense n.a. - n.a. - n.a. - n.a PUBLISHED NET INCOME 530, , , ,

9 Ratio Analysis TURKIYE HALK BANKASI 31 Dec Dec Dec Dec 2002 Year End Year End Year End Year End TRZth TRZth TRZth TRZth Original Restated Restated Restated I. PERFORMANCE 1. Net Interest Margin % Loan Yield % n.a. n.a. 3. Cost of Funds % Costs/Average Assets % Costs/Income % Pre-Impairment Operating ROAA % Operating ROAA % Pre-impairment Operating ROAE % Operating ROAE % II. CAPITAL ADEQUACY 1. Internal Capital Generation % n.a. n.a. 2. Core Capital/Total Assets % Eligible Capital/Regulatory Weighted Risks % n.a. 4. Eligible Capital+Eligible Revaluation Reserves/Regulatory Weighted Risks % n.a. 5. Tier 1 Regulatory Capital Ratio % n.a. 6. Total Regulatory Capital Ratio % n.a. 7. Free Capital/Equity % III. LIQUIDITY (year end) 1. Liquid Assets/Deposits & Money Mkt Funding % Loans/Deposits % IV. ASSET QUALITY 1. Loan Impairment Charge/Gross Loans (av.) % Total Credit Impairment/Pre-impairment Operating Profit % Loan Impairment/Gross Impaired Loans % , Individual Loan Impairment/Gross Impaired Loans % n.a. n.a. n.a. n.a. 5. Impaired Loans Gross / Loans Gross % Impaired Loans Net/Eligible Capital % Net Charge-offs/Gross Loans (av.) % n.a. n.a. n.a. n.a. 9

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