ISBANK EARNINGS PRESENTATION 2016 Q1
2016 Q1 Recent Developments in the Economy Binler Global Outlook Main Indicators of Turkey US EA Moderate expansion in the US economy Solid labor market data Still accommodative monetary policy stance Continued downside risks to Euro Area economy Looser monetary policy by the ECB Ongoing concerns over inflation outlook 16 12 8 4 0 Contributions to GDP (pp) Consumption Net Exports Investment Stocks 100 80 60 40 20 Current Account (12-m, bn USD) FDI & Long Term Portfolio & Short Term CAD EM Rebalancing of the Chinese economy The upturn in capital flows to emerging markets Recovery in commodity prices -4-8 2010 2011 2012 2013 2014 2015 0-20 2010 2010 2011 2012 2013 2014 2015 Domestic Outlook Annual CPI Inflation (%) Currency Basket and VIX Mild and steady economic activity Leading indicators signaling a moderate economic growth CA deficit at 30.5 bn USD, the lowest level since mid-2010 Budget posted surplus in Q1 More favorable inflation outlook Correction in food price inflation Appreciation of the TL Geopolitical risks 10 9 8 7 6 2014 2015 2016 35 VIX (0.5USD+0.5EUR) (right axis) 30 25 20 15 10 Jan.2016 Feb.2016 Mar.2016 3.3 3.2 3.1 3.0 2.9 2.8 2
Period s Highlights Increased focus on selective lending, 35 bps QoQ rise in the TL loan yield Securities portfolio made positive contribution to asset growth, whereas the impact of TL appreciation on growth was negative. Decline in loan to deposit ratio in the quarter QoQ decline in NPL flows and net NPL formation rate Share of deposits increased to 57% in total liabilities. YoY growth in NII was 27.3% with NIM rising to 4.1% by the end of Q1. Quarterly increase in TL and FX spreads Strong growth in F&C income continued >15% YoY growth 3
Asset Structure Assets (TL mn.) 2015 Q1 2015 2016 Q1 YtD YoY Cash & Banks 28.849 33.170 32.163-3,0% 11,5% Securities (Net) 43.341 44.781 46.759 4,4% 7,9% Loans 164.759 177.037 175.312-1,0% 6,4% Participations (Net) 9.287 9.394 9.999 6,4% 7,7% Fixed Assets (Net) (*) 2.284 4.747 4.726-0,5% NM Other Assets 4.410 6.589 7.061 7,2% 60,1% Total Assets 252.931 275.718 276.020 0,1% 9,1% TL Assets 158.269 168.739 170.937 1,3% 8,0% FX Assets 94.662 106.978 105.082-1,8% 11,0% FX Assets (USD mn.) 36.833 37.340 37.936 1,6% 3,0% Asset Composition 92,6% 91,3% 90,8% 11,4% 12,0% 11,7% 17,1% 16,2% 16,9% IEA / Total Assets Cash & Banks Securities 65,1% 64,2% 63,5% Loans Participations & Other Assets 6,3% 7,5% 7,9% 2015 Q1 2015 2016 Q1 (*) Accounting policy for real estate portfolio changed to mark-to-market valuation in 2015 Q3. 4
Loan Portfolio Loans (TL bn.) 6,4% 6,5% -1,0% -1,5% 6,2% 104,6 112,2 113,1 113,1 111,5 60,1 62,3 67,0 164,8 174,4 180,2 177,0 175,3-1,5% -0,1% 3,4% 63,9 63,9 23,4 23,5 22,5 22,3 23,1 (1) TL Loans FX Loans FX Loans (USD bn.) Total Loans Loans/Deposits 2015 Q1 2015 Q2 2015 Q3 2015 2016 Q1 Share of loans in total assets is 63,5%. 114,1% 115,1% 110,1% 110,6% 111,1% 106,9% Comfortable level of Loans/Deposits ratio Adjusted Loans/Deposits ratio is 106,9%. (2) 2015 Q1 2015 2016 Q1 Loans / Deposits Loans / Deposits (Adj.) (2) (1) FX loans expressed in USD equivalent. (2) TL securities issued added to deposits. 5
Loan Portfolio Loans (TL mn.) 2015 Q1 2015 2016 Q1 YtD YoY Total Loans 164.759 177.037 175.312-1,0% 6,4% TL Loans 104.618 113.137 111.450-1,5% 6,5% Retail Loans 44.440 46.797 46.063-1,6% 3,7% Housing Loans 14.322 15.726 15.553-1,1% 8,6% Auto Loans 898 811 741-8,6% -17,5% GPLs (1) 20.037 19.865 19.390-2,4% -3,2% Credit Card Loans 9.184 10.394 10.379-0,2% 13,0% Non-Retail Loans 60.177 66.340 65.388-1,4% 8,7% SME Loans (2) 37.216 39.643 39.122-1,3% 5,1% Commercial and Corporate Loans 22.961 26.697 26.266-1,6% 14,4% FX Loans 60.141 63.899 63.862-0,1% 6,2% SME Loans (2) 2.383 2.560 2.476-3,3% 3,9% Commercial and Corporate Loans 57.759 61.339 61.386 0,1% 6,3% FX Loans (USD mn.) 23.401 22.303 23.055 3,4% -1,5% SME Loans (2) 927 894 894 0,0% -3,6% Commercial and Corporate Loans 22.474 21.410 22.161 3,5% -1,4% (1) Including overdraft accounts (2) SME definition includes companies with number of employees < 250 and turnover or total assets <= TL 40 mn. 6
Loan Composition Currency Mix Loan Composition - Total Loans 36,5% 36,1% 36,4% 63,5% 63,9% 63,6% FX TL 21,4% 20,6% 20,4% 5,6% 5,9% 5,9% 24,0% 23,8% 23,7% 49,0% 49,7% 50,0% (1) Consumer (2) Credit Cards (3) SME Commercial & Corporate 2015 Q1 2015 2016 Q1 2015 Q1 2015 2016 Q1 Loan Composition - TL Loans Loan Composition - FX Loans 42,5% 41,4% 41,3% Retail (4) 4,0% 4,0% 3,9% (3) SME 35,6% 35,0% 35,1% 21,9% 23,6% 23,6% (3) SME Commercial & Corporate 96,0% 96,0% 96,1% Commercial & Corporate 2015 Q1 2015 2016 Q1 (1) Including retail overdraft accounts (2) Shows retail credit card balances only (3) SME definition includes companies with number of employees < 250 and turnover or total assets <= TL 40 mn. (4) Including retail credit cards and overdraft accounts 2015 Q1 2015 2016 Q1 7
Asset Quality 545 263 282 562 268 294 587 284 303 788 315 473 630 303 327 NPL Ratio Gross CoR (1) is 102 bps as of 2016 Q1. Coverage ratio is 76,5%. 1,5% 1,6% 1,7% 2,0% 2,2% 19,8% collection rate (2) in 2016 Q1 15 Q1 15 Q2 15 Q3 15 Q4 16 Q1 NPL Trends (3) (TL mn.) 0,71% 0,69% 0,68% 1,06% 0,74% NPL Sales (TL thousand) Period Amount Revenue 16 Q1 - - 15 Q4 - - 15 Q3 - - 15 Q2 - - 15 Q1 189.224 29.091 15 Q1 15 Q2 15 Q3 15 Q4 16 Q1 Net NPL Formation Rate (4) Additions Recoveries Net NPL Formation (1) (Specific Loan Loss Provisions + General Loan Loss Provisions ) / Average Performing Loans (2) Collections / (Prior period ending balance NPL + Additions) (3) Calculations are on quarterly basis. (4) Net NPL Formation / Average Performing Loans 8
Securities Portfolio Securities Composition of Securities (2016 Q1) TL Securities FX Securities (TL mn.) 2015 Q1 2015 2016 Q1 YtD YoY 7,8% Total Securities 43.341 44.781 46.759 4,4% 7,9% TL Securities 35.500 34.869 36.718 5,3% 3,4% FX Securities 7.841 9.912 10.041 1,3% 28,1% 60,0% 92,2% Floating Fixed FX Securities (USD mn) 3.051 3.460 3.625 4,8% 18,8% 40,0% Yield of Securities (Quarterly) (*) 8,53% 8,74% 8,87% 9,12% 9,63% 5,04% 4,46% 4,61% 3,99% 4,01% 28,9% share of CPI linkers in total portfolio 315 mn TL interest revenue and 9.73% yield on CPI linkers portfolio Average durations: 1,75 years for TL securities 5,64 years for FX securities 15 Q1 15 Q2 15 Q3 15 Q4 16 Q1 (TL mn.) 15 Q1 15 Q2 15 Q3 15 Q4 16 Q1 TL Securities FX Securities Interest Inc. from CPI Linkers 231 259 275 279 315 (*) Based on MIS data 9
Liabilities Structure Liabilities (TL mn.) 2015 Q1 2015 2016 Q1 YtD YoY Deposits 144.363 153.802 157.795 2,6% 9,3% REPOs & Money Market 15.414 20.089 17.435-13,2% 13,1% Funds Borrowed 25.437 28.408 28.146-0,9% 10,6% Securities Issued 18.114 19.761 17.895-9,4% -1,2% Other (*) 21.092 21.621 21.361-1,2% 1,3% Equity 28.511 32.035 33.387 4,2% 17,1% Total Liabilities & Equity 252.931 275.718 276.020 0,1% 9,1% TL Liabilities 138.588 146.962 150.067 2,1% 8,3% FX Liabilities 114.343 128.756 125.953-2,2% 10,2% FX Liabilities (USD bn.) 44.491 44.941 45.470 1,2% 2,2% Liabilities Composition 81,8% 82,0% 81,2% 57,1% 55,8% 57,2% 6,1% 7,3% 6,3% 10,1% 10,3% 10,2% 7,2% 7,2% 6,5% 11,3% 11,6% 12,1% 8,3% 7,8% 7,7% 2015 Q1 2015 2016 Q1 (*) Includes subordinated debt. IBL / Total Liabilities Deposits Repos & Money Market Funds Borrowed Securities Issued Equity Other (*) 10
Deposits 21,6% 20,7% 20,6% 22,9% 21,0% 21,5% 24,7% 22,2% 22,8% 23,7% 22,6% 22,6% 21,6% 24,4% 22,6% Deposits (TL mn.) 2015 Q1 2015 2016 Q1 YtD YoY Total Deposits 144.363 153.802 157.795 2,6% 9,3% TL Deposits 74.750 73.230 78.012 6,5% 4,4% TL Saving Deposits 51.654 52.569 53.464 1,7% 3,5% TL Commercial Deposits 15.578 15.834 18.219 15,1% 17,0% Other TL Deposits 7.519 4.827 6.329 31,1% -15,8% FX Deposits 69.613 80.572 79.783-1,0% 14,6% FX Deposits (USD mn.) 27.087 28.123 28.803 2,4% 6,3% Demand Deposits 29.768 34.683 35.605 2,7% 19,6% Demand Deposits / Total Deposits Demand Deposits Market Share 15,1% 15,0% 16,2% 15,2% 15,1% 15,2% 15,1% 15 Q1 15 Q2 15 Q3 2015 16 Q1 (*) TL FX Total (*) 15 Q1 15 Q2 15 Q3 2015 16 Q1 (*) Excluding interbank deposits 11
Sufficient Capitalization 229.950 14,9% 34.263 12,6% 240.384 14,5% 34.730 12,2% 249.887 14,2% 35.531 12,0% 241.335 15,65% 37.767 13,4% 236.809 15,46% 36.615 13,9% Capital Adequacy Ratio RWAs vs. Regulatory Capital (TL mn.) -19 bps 15 Q1 15 Q2 15 Q3 2015 16 Q1 CAR Tier I Ratio Impacts on CAR (bps) 2016 Q1 Regulation Impact -58 Changes on the Treatment of Tier 2 Borrowing Instruments Buffers (%) 2016 Capital Conservation Buffer 0.625 Counter Cyclical Buffer 0.014 SIFI Buffer (*) - Group 3 0.500-75 Free Provisions -34 Other Regulation Impacts +51 Dividend Payment -33 Currency Impact +13 MtM Differences +51 Profit for the Period & Change in RWA +8 TOTAL -19 15 Q1 15 Q2 15 Q3 2015 16 Q1 RWAs Regulatory Capital Capital adequacy ratio is well above the regulatory limit. Comfortable level of capital (*) Taken into consideration only on a consolidated basis 12
Income Statement Highlights (TL mn.) 2015 Q1 2015 Q4 2016 Q1 QoQ YoY Net Interest Income 1.950 2.463 2.483 0,8% 27,3% (-) SWAP Cost (1) 103 320 295-7,8% 186,4% Net Interest Income Incl. Swap Cost 1.847 2.143 2.188 2,1% 18,5% Net Fees & Commissions 551 663 636-4,0% 15,6% Net Trading Gains/Losses Excl. Swap Cost 125 181-203 NM NM Dividends Received 161 0 366 NM 127,3% Released Provisions 385 275 186-32,6% -51,7% Other Operating Income 33 62 68 9,6% 103,0% Total Operating Income 3.101 3.324 3.241-2,5% 4,5% (-) Reversal of Provisions for Tax Disputes 207 0 0 - - (-) Free Provision Reversal 0 200 0 - - Total Operating Income - Adj. 2.894 3.124 3.241 3,8% 12,0% HR Expenses 611 665 710 6,7% 16,2% Non-HR Expenses 738 1.139 784-31,2% 6,2% Total Operating Expenses 1.349 1.805 1.494-17,2% 10,7% (-) Fee Rebates 61 50 39-22,4% -35,5% (-) Additional Provision for Pension Fund 0 277 0 - - Total Operating Expenses - Adj. 1.288 1.477 1.455-1,5% 12,9% Operating Profit 1.752 1.519 1.747 15,0% -0,3% Operating Profit - Adj. 1.606 1.647 1.786 8,5% 11,3% Specific Loan Loss Provisions 396 415 443 6,8% 11,7% General Provisions 209 17 4-75,0% -97,9% Other Provision Charges 26 17 188 NM NM Total Provision Charges 632 449 635 41,3% 0,5% (-) Provisions for Payment to SDIF 0 0 138 - - Total Provision Charges - Adj. 632 449 497 10,7% -21,3% Tax Provisions 208 186 143-22,8% -31,2% NII incl. swap cost : 18.5% YoY growth Net F&C : 15.6% YoY growth Core banking income (2) increased by 17.6% YoY OPEX 10.7% increase YoY, in line with the budget Adj. operating profit up by 11.2% YoY Net Income 912 884 969 9,6% 6,2% NM: Not meaningful (1) Based on MIS data (2) Core Banking Income = NII + Net F&C + Net Trading Gains / Losses 13
Commissions Income Performance (TL thousand) 2015 Q1 2016 Q1 YoY Non-Cash Loans 81.420 100.941 24,0% (*) Cash Loans 74.317 76.986 3,6% Mutual Fund Man. & Other Inv. Acc. Fees 48.633 51.516 5,9% Credit Cards (Net) 204.064 256.202 25,5% Fund Transfer (Net) 58.905 70.232 19,2% Insurance 34.194 37.263 9,0% Account Keeping Fees 28.500 15.353-46,1% Other 20.518 27.866 35,8% Total Fees & Commissions Income (Net) 550.551 636.359 15,6% Total Fees & Commissions Income (Gross) 635.653 749.562 17,9% Net Fee & Commission Composition Diversified fees & commissions base 28,3% 28,0% 8,8% 8,1% 37,1% 40,3% Lending Related Fees Mutual Fund Man. & Other Inv. Acc. Fees Credit Cards (*) 25,8% 23,7% Other 2015 Q1 2016 Q1 (*) Includes refinancing fees 14
Margin & Spreads (1) NIM (2) (Cumulative) TL Loan-Deposit Spread (Quarterly) NIM NIM - Swap Adjusted 4,06% 3,63% 3,64% 3,74% 3,80% 3,43% 3,37% 3,36% 3,39% 3,58% 12,42% 12,16% 12,58% 13,26% 13,61% 7,36% 7,52% 7,49% 8,04% 8,38% 5,06% 4,64% 5,09% 5,22% 5,24% Loan Yield Deposit Cost TL Spread 15 Q1 15 Q2 15 Q3 2015 16 Q1 15 Q1 15 Q2 15 Q3 15 Q4 16 Q1 NIM (2) (Quarterly) FX Loan-Deposit Spread (Quarterly) NIM NIM - Swap Adjusted 3,91% 4,00% 4,06% 3,63% 3,43% 3,66% 3,30% 3,35% 3,48% 3,58% 5,06% 4,92% 5,26% 4,85% 4,89% 1,40% 1,46% 1,36% 1,26% 1,24% 3,66% 3,46% 3,90% 3,59% 3,65% Loan Yield Deposit Cost FX Spread 15 Q1 15 Q2 15 Q3 2015 16 Q1 15 Q1 15 Q2 15 Q3 15 Q4 16 Q1 (1) Based on MIS data (2) Interest earning assets include Central Bank reserves. 15
Profitability and Efficiency Ratios (1) ROAA ROAE 1,51% 1,17% 1,16% 13,02% 10,40% 10,31% 2015 Q1 2015 2016 Q1 Cost / Income 2015 Q1 2015 2016 Q1 Cost / Average Assets 50,3% 52,0% 52,6% 46,9% 47,0% 47,0% 2,50% 2,41% 2,39% 2,26% 2,11% 2,12% 2015 Q1 2015 2016 Q1 Reported Adjusted (2) 2015 Q1 2015 2016 Q1 (2) Reported Adjusted (1) Calculations are based on trailing four quarters data. (2) Adjusted for non-recurring and other items given in Appendix-2 on page 19 and real estate revaluation. 16
Q&A 17
Appendix 1 Quarterly Income Statement Highlights (TL mn.) 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 QoQ Interest Income 4.393 4.644 5.044 5.120 5.266 2,9% Interest Expense 2.443 2.498 2.617 2.657 2.783 4,8% Net Interest Income 1.950 2.146 2.426 2.463 2.483 0,8% Net Fees & Commissions 551 593 582 663 636-4,0% Net Trading Gains/Losses 22-178 -573-139 -498-256,8% Dividends Received 161 394 0 0 366 NM (*) Released Provisions 385 141 106 275 186-32,6% Other Operating Income 33 43 63 62 68 9,6% Total Operating Income 3.101 3.141 2.604 3.324 3.241-2,5% Personnel Expenses 611 693 619 665 710 6,7% Other Operational Expenses 384 464 450 536 447-16,7% Depreciation & Amortization 91 93 104 106 110 3,9% (*) Other Expenses 263 296 454 497 227-54,3% Total Operating Expenses 1.349 1.546 1.628 1.805 1.494-17,2% Operating Profit 1.752 1.594 976 1.519 1.747 15,0% Loan Loss Provisions 396 314 290 415 443 6,8% General Provisions 209 156 148 17 4-75,0% (*) Other Provision Charges 26 51 18 17 188 980,5% Total Provision Charges (Excl. Tax Prov.) 632 522 455 449 635 41,3% Tax Provisions 208 165 142 186 143-22,8% Net Income 912 908 379 884 969 9,6% (*) See Appendix-2 for non-recurring and other items on page 19. NM: Not meaningful 18
Appendix 2 Non-recurring and Other Items (TL mn.) 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 Released Provisions Reversal of provisions for tax disputes 207 Free provision reversal 200 Non-HR Expenses Fee rebates 61 76 55 50 39 Loss on asset sale 154 Provision for administrative fine 83 Additional provision for pension fund 277 Other Provision Charges Provisions for payment to SDIF 138 19
Appendix 3 Market Shares Largest Private Bank Market Shares (%) (1) Rank (2) 2015 2016 Q1 2015 2016 Q1 Total Assets 12,3 12,1 1 st 1 st Total Loans 12,4 12,1 1 st 1 st TL Loans 11,9 11,5 1 st 1 st FX Loans 13,5 13,4 1 st 1 st Consumer Loans (3) 12,5 12,1 2 nd 2 nd Non-Retail Loans 12,3 12,0 1 st 1 st Total Deposits 12,4 12,3 1 st 1 st TL Deposits 10,5 10,9 1 st 1 st FX Deposits 14,7 14,1 1 st 2 nd Demand Deposits 15,2 15,1 1 st 1 st (1) Market share calculations are based on weekly BRSA data excluding participation banks. Total assets market share is based on monthly BRSA data. (2) Ranking among private-sector banks (3) Including retail overdraft accounts 20
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