Yapi ve Kredi Bankasi A.S. · BIST:YKBNK
Yapi ve Kredi Bankasi A.S — Yapı Kredi — Investor Presentation (December 2006)
81 slides from Yapi ve Kredi Bankasi A.S's investor presentation, December 2006
Slide 1: YAPI KREDİ: Post-Legal Merger Overview
YAPI KREDİ: Post-Legal Merger Overview İstanbul, December 2006 1
Slide 2: Agenda
AGENDA MACROECONOMIC & BANKING ENVIRONMENT THE NEW BANK SHAREHOLDING AND ORGANIZATIONAL STRUCTURE VISION & STRATEGY STATUS OF THE INTEGRATION 3Q 2006 RESULTS PEER COMPARISON ANNEX – SELECTED HISTORICAL AND RECENT FINANCIALS 2
Slide 3: Turkey is a big and attractive country, recovering from financial turmoils
TURKEY IS A BIG AND ATTRACTIVE COUNTRY, RAPIDLY AND STRUCTURALLY RECOVERING FROM RECENT FINANCIAL TURMOILS … Year 2005 Turkey Turkey is one of the biggest markets in the European and Mediterranean area Population, mln 72 Population is young (avg 29.5 years) and is concentrated in Avg. age popula
Slide 4: Turkish economy recovering with high growth and single digit inflation
TURKISH ECONOMY HAS BEEN RECOVERING FROM THE FINANCIAL TURMOILS IN RECENT YEARS, ACHIEVING HIGH GROWTH RATES AND SINGLE DIGIT INFLATION GDP PER CAPITA (USD) 7,000 5,381 5,998 6,000 5,018 5,000 3,417 4,234 4,000 2,645 3,000 After decades of instability, Turkey has 2,000 1,000 been enjoying high gro
Slide 5: Growing current account deficit remains the major risk
GROWING CURRENT ACCOUNT DEFICIT REMAINS THE MAJOR RISK ANNUAL FOREIGN TRADE (USD BILLION) 180 160 153 136 140 116 120 Current account deficit has been the 98 92 100 69 73 83 major concern lately in the economy. 80 63 52 47 60 36 The current account deficit reached 40 20 6.4% of the GDP in 2005 a
Slide 6: Tight fiscal policy reduced budget deficit and public debt
TIGHT FISCAL POLICY SINCE 2002 HAS RESULTED IN A CONSIDERABLE REDUCTION OF THE BUDGET DEFICIT AND THE PUBLIC DEBT STOCK CONSOLIDATED BUDGET BALANCE/GDP (%) Keeping high primary surplus in the 7.4 5.7 10 4.6 5.2 6.1 6.9 consolidated budget has been one of the main pillars of the economic 5 0 progra
Slide 7: Sound economic policies reflected positively in financial markets
THE OUTCOME OF SOUND ECONOMIC POLICIES, SUCCESSFUL DISINFLATION AND CONSISTENT GROWTH WERE REFLECTED POSITIVELY IN THE FINANCIAL MARKETS REAL INTEREST RATES (%) The economic program implemented since 50% 2002 improved confidence in Turkey’s 40% economy – also reflected in fin. markets. 30% The h
Slide 8: Turkish banking system healthier and more competitive
THE TURKISH BANKING SYSTEM HAS BECOME HEALTHIER AND MORE COMPETITIVE IN THE LAST THREE YEARS 2000 - 2001 2002 2003 - 2004 2005 - 2006 • Economic crisis led by • IMF reform program • Sale and merging process • Privatization of state- political conflicts: of SDIF-managed banks owned banks • Restructur
Slide 9: Sector among the most attractive in New Europe
THE SECTOR IS AMONG THE MOST ATTRACTIVE IN NEW EUROPE IN TERMS OF SIZE AND GROWTH PROSPECTS... Branches per mln (Loans+Deposits)/GDP inhabitants Today financial intermediation role of Turkish banking sector is significantly low 540 Banks are rapidly recovering from the recent 275% financial cris
Slide 10: Growth potential in consumer banking, particularly mortgages
DUE TO EXISTING LOW PENETRATION, HIGH GROWTH POTENTIAL IN SPECIFIC CONSUMER BANKING AREAS, PARTICULARLY MORTGAGES • 2005 +368% yoy, but only 2.5% of the GDP (in 2006, 113% yoy growth as of October, 4% of GDP expected for the year-end) • Room for further growth vs GDP ratio of CEE benchmarks: 5.5% in
Slide 11: Further room for growth for credit cards
DESPITE AN ESTABLISHED MARKET, THERE IS FURTHER ROOM FOR GROWTH FOR CREDIT CARDS • Developed business comparable to those in developed countries (UK) • 30 million credit cards, 0.4 cards per inhabitant (2.4 in U.K, 1.3 in Germany, 1.2 in Italy, 0.7 in France), average ROE is about 50%, driven by car
Slide 12: Growth opportunity in mutual funds
STRONG GROWTH OPPORTUNITY IN MUTUAL FUNDS WILL BE REALIZED IN LINE WITH CONTINUED STABILITY AND DISINFLATIONARY TREND • Size: USD 15 billion as of October 2006, • Financial turmoil in May/June caused a sharp drop in the volume of mutual funds (24% drop from the year-end value). However, their share
Slide 13: Pension funds underpenetrated retail banking area
PENSION FUNDS IS ANOTHER UNDERPENETRATED RETAIL BANKING AREA OFFERING STRONG GROWTH PROSPECTS • New business rapidly growing with 1,078,000 plan owners (October 2006), up 67% yoy • Volume USD 1,739 million (October 2006) with a 113% growth YTD (in YTL terms) Pension Funds Assets / GDP (%) 0.6 0.4 0.
Slide 14: Increasing interest from abroad for Turkish banks
INCREASING INTEREST FROM ABROAD FOR TURKISH BANKS 2004 Confidence in macroeconomic TEB - BNP Paribas stability and healthy growth opportunities in the sector spurred the 2005 interest of foreign players for Turkish banks Dışbank – Fortis Three state banks will be privatized; Garanti – GE C
Slide 15: Foreign banks control 31% of banking sector assets
FOREIGN BANKS IN TURKEY CONTROL 31% OF THE BANKING SECTOR ASSETS Market Share by Assets* Market Share by Loans Market Share by Deposits Foreign Foreign 31% 30% Foreign 40% Domestic Domestic Domestic 69% 60% 70% 15 * Treating all joint ventures as foreign-owned Source: ING Report
Slide 16: Outlook: shift to proper intermediation, margin pressures
OUTLOOK: BUSINESS TO INCREASINGLY SHIFT FROM FINANCIAL MARKET OPERATIONS TO PROPER INTERMEDIATION. PRESSURES ON MARGINS FROM FALLING RATES Structural transformation to continue, with Introduction of the mortgage system and privatisation of state banks and additional mortgage backed securities is
Slide 17: Agenda
AGENDA MACROECONOMIC & BANKING ENVIRONMENT THE NEW BANK SHAREHOLDING AND ORGANIZATIONAL STRUCTURE VISION & STRATEGY STATUS OF THE INTEGRATION 3Q 2006 RESULTS PEER COMPARISON ANNEX – SELECTED HISTORICAL AND RECENT FINANCIALS 17
Slide 18: Yapı Kredi merger is the biggest M&A project in Turkish banking
YAPI KREDİ MERGER IS THE BIGGEST M&A PROJECT IN THE HISTORY OF THE TURKISH BANKING SECTOR FINANCIAL HIGHLIGHTS-PROFORMA MERGED BANK (BRSA Bank-Only Figures in YTL, September 2006) (1) Total Assets (bln) 45.3 Performing Loans (net, bln) 22.5 Deposits (bln) 28.9 • Creation of one of the most dynamic a
Slide 19: Strategic rationale
STRATEGIC RATIONALE • Significant scale increase, building one of the top four banking groups in DIMENSIONAL (1) Turkey, with Euro 28 billion of consolidated assets, Euro 13.6 billion of GROWTH customer loans and over 13 million clients • Creation of a group with strong distribution/production platf
Slide 20: Main steps of the merger
MAIN STEPS OF THE MERGER • 16 JANUARY 2005 Exclusive Negotiations • 31 JANUARY 2005 Share Transfer Agreement • 8 MAY 2005 Share Purchase Agreement • 28 SEPTEMBER 2005 Transfer of 57.4% of Yapı Kredi Shares to Koçbank • 23 FEB.- 9 MAR. 2006 Tender Offer Process for Yapı Kredi Minority Shares (complet
Slide 21: Historical background
HISTORICAL BACKGROUND YAPI KREDİ • Established in 1944 as Turkey’s first nationwide private bank • Introduced many firsts in the sector leveraging its technological leadership and differentiated banking approach • Introduced Turkish consumers to consumer loans, credit cards, account access cards, AT
Slide 22: Merger combines both banks' competitive advantages
THE MERGER CREATES THE BASIS FOR COMPLEMENTARITY ALLOWING BOTH BANKS TO COMBINE THEIR STRONG COMPETITIVE ADVANTAGES Dedicated service model for each segment Large private/affluent customer base Excellence in mutual fund business Effective cost and risk management Customer-focused strategy
Slide 23: Fourth largest private bank with leading positions
FOURTH LARGEST PRIVATE BANK WITH LEADING POSITIONS IN CREDIT CARDS, NON-CASH LOANS, AUM, LEASING AND FACTORING. GROWTH POTENTIAL FOR CONSUMER LOANS AND DEPOSITS Rank Mkt. Sh. % Key Competitors - % SEPTEMBER 2006 # of Branches 4 9.0 Ziraat 17, İş 13 Deposits (1) 4 10.0 Ziraat 20, İş 15, Ak 12 Retail
Slide 24: Extensive distribution network of 598 branches
EXTENSIVE DISTRIBUTION NETWORK OF 598 BRANCHES WITH OVER 12% MARKET SHARE IN TOP 10 CITIES IN TURKEY As of 30 September 2006. 24
Slide 25: Key issues and major accomplishments so far
KEY ISSUES & MAJOR ACCOMPLISHMENTS SO FAR Adjustments envisaged during the due diligence process have been Write-offs reflected in YKB’s post acquisition opening accounts On 25 November 2005, shares of Turkcell Holding and Turkcell İletişim Turkcell were sold with a value of YTL 1,638 million. T
Slide 26: Major write-offs reported during 3Q 2005
MAJOR WRITE-OFFS REPORTED DURING 3Q 2005 Related to the credit exposure against Çukurova Group YTL 399 Mn Announced on 28 September 2005 as part of the Share Purchase agreement signed between Koçbank and Çukurova Group YTL 475 Mn Impairment on Fiskobirlik receivable YTL 450 Mn Provisions ste
Slide 27: Major adjustments reported during 4Q 2005
MAJOR ADJUSTMENTS REPORTED DURING 4Q 2005 Provision recognized for the Pension Fund deficit -- 60% of the total YTL 331 Mn technical deficit of YTL 551 million The remaining to be recognized until end of 2007 Loss recognized due to change in accounting policy -- the Bank YTL 293 Mn commenced m
Slide 28: Agenda
AGENDA MACROECONOMIC & BANKING ENVIRONMENT THE NEW BANK SHAREHOLDING AND ORGANIZATIONAL STRUCTURE VISION & STRATEGY STATUS OF THE INTEGRATION 3Q 2006 RESULTS PEER COMPARISON ANNEX – SELECTED HISTORICAL AND RECENT FINANCIALS 28
Slide 29: Koç Financial Services is an integrated financial services provider
KOÇ FINANCIAL SERVICES (KFS) IS AN INTEGRATED AND WELL CAPITALIZED FINANCIAL SERVICES PROVIDER € billion, Unaudited IFRS Consolidated Figures 50% 50% September 2006 Total Assets 28.0 Deposits 17.8 Net Cash Loans 13.6 PARTNERS SHARE A COMMON VISION AND GOAL Loans/Deposits, % 76 KFS significantly grow
Slide 30: Strong and dedicated support of its shareholders
… WITH STRONG AND DEDICATED SUPPORT OF ITS SHAREHOLDERS Koç Holding Turkey’s largest industrial UniCredit International banking group, and services group with leading positions leader in Central and Eastern Europe (CEE) in the main driving sectors with presence in 20 countries 30 September 2006 30 S
Slide 31: Koç Holding is Turkey's leading industrial and services group
KOÇ HOLDING IS TURKEY’S LEADING INDUSTRIAL AND SERVICES GROUP WITH STRONG POSITIONS IN THE MAIN DRIVING SECTORS OF THE TURKISH ECONOMY Ranks #358(1) in Fortune Global 500 as the only Turkish Company YoY D YoY D US$bn 2006E 2005 2004 2005-2006 2004-2005 Total Revenues* 50.1 61% 31.2 10% 28.3 (Combine
Slide 32: Koç Group alliances with international partners
KOÇ GROUP FORMED HEALTHY ALLIANCES WITH STRONG INTERNATIONAL PARTNERS TARGETING GROWTH AND SUSTAINABILITY • International partnerships for growth that involve new capabilities, • New channels and new geographies while mitigating risk Automotive Finance Consumer Durables Retailing Energy 32
Slide 33: Koç Group expanding global reach
THE GROUP HAS BEEN INCREASING ITS GLOBAL REACH THROUGH EXPANSION INTO MARKETS WITH HIGH GROWTH POTENTIAL Strategy • To position Koç Group companies among the largest and most rapidly growing companies in Europe • To generate at least 50% of revenues outside Turkey and lessen dependence on domestic e
Slide 34: UniCredit is a resolutely European bank
UNICREDIT, OTHER SHAREHOLDER OF KFS, IS A UNIQUELY AND RESOLUTELY EUROPEAN BANK… ~70 bn market cap (#3 among Eurozone banks)(1) More than 28 million customers Over 7,000 branches Banking operations in 20 countries Over 132,000 FTE Over 430 bn euros of customer loans Strong market posit
Slide 35: Solid track record sustained over time
…WITH A SOLID TRACK RECORD SUSTAINED OVER TIME GROWTH INTERNATIONALIZATION UniCredit EPS and Mkt. Cap. Evolution (Euro) Country weights on Group gross op. profit 0 % GR: 3 0.34 0.37(1) CA 21% CEE 5 94 -200 0.29 0.31 19% GER 19 0.28 0.28 11% 0.26 100% AT 49% IT 0.19 1994 2005 0.09 0.07 PROFITABILITY
Slide 36: Clear reorganization path of group legal entities
CLEAR REORGANIZATION PATH OF GROUP LEGAL ENTITIES Current Group Structure Target Structure UCI UCI CEE UCI IB UCI AM UCI Asset Italian HVB (incl. (UBM) (PGAM) Italian HVB BA-CA Pekao Mgmt. Banks Bph) Banks (PGAM) Investment BA BA-CA Bank(1) Bank(2) HVB CEE BA-CA UCI IB UCI CEE HVB AM CEE (UBM) HVB I
Slide 37: CEE strategy of UniCredit Group
CEE STRATEGY OF UNICREDIT GROUP : A UNIQUE FRANCHISE IN THE CEE REGION WITH PRESENCE IN 17 COUNTRIES Integration countries (1) Estonia No. 6 – 0.1 Merger countries Russia CEE region (4) Ranking on 2005 Total Assets Latvia No. 8 – 4.7 No. 10 – 0.4 (TA) – TA in Euro bn ~ 84 Euro bn Poland Lithuania To
Slide 38: Leading player among international competitors in CEE
LEADING PLAYER AMONG INTERNATIONAL COMPETITORS IN THE CEE REGION Proforma 2005, as of perimeter May 2006i Consolidated Assets Total Revenues Net Profit before min. int. Countries of (Euro bln) i (Euro mln) (Euro mln) ii Presence iii (2) UniCredit 84.5 (1) 4,196 (1) 1,405 (1) 17 (3) (3) (3) 39.4 48.7
Slide 39: CEE region is a large market
THE CEE REGION IS A LARGE MARKET WHERE UNICREDIT IS WELL POSITIONED Year 2005 data EU 15 CEE 16(1) Real. GDP % Net Profit Weight on growth Countries UniCredit GDP of CEE (avg 06- CEE Banks % Population, mln 385(2) 386 08) Poland 49.0% 14,4% 4.3% GDP, Euro bn 10,264 1,668 Croatia 1,9% 4.0% 10.9% Turk
Slide 40: Post-merger ownership structure
POST-MERGER OWNERSHIP STRUCTURE PRE-MERGER OWNERSHIP STRUCTURE POST-MERGER OWNERSHIP STRUCTURE 50% 50% (1) KFS Subsidiaries 80.27% 19.73% Minorities Yapı Kredi and Koçbank formally merged on 2 October 2006 by virtue of dissolution of Koçbank and transfer of all its Yapı Kredi rights, receivables, li
Slide 41: New group structure
NEW GROUP STRUCTURE % ownership % 2005 revenues % 2006 bdg net profit L Listed L 100 100 L 50% 50% (1) 80.3 84.6 64.0 99.9 1.5 3.9 99.9 0.8 1.4 99.0 3.2 12.5 99.9 0.8 2.0 100.0 1.1 2.5 99.8 0.2 0.3 NV Azerbaijan * * L L (2) (3) (4) 94.3 0.2 0.4 99.9 1.6 2.9 98.4 0.8 3.0 99.9 0.3 1.0 100.0 0.9 1.0 97
Slide 42: Efficient new organizational structure
EFFICIENT NEW ORGANIZATIONAL STRUCTURE WITH OUTSTANDING LOCAL AND INTERNATIONAL MANAGERIAL TALENT Board Board of of Directors Directors CEO/GM CEO/GM Kemal Kemal Kaya* Kaya* COO COO Federico Federico Ghizzoni* Ghizzoni* CORPORATE OPERATIONS OPERATIONS CORPORATE ORGANIZATION ORGANIZATION IDENTITY IDE
Slide 43: Agenda
AGENDA MACROECONOMIC & BANKING ENVIRONMENT THE NEW BANK SHAREHOLDING AND ORGANIZATIONAL STRUCTURE VISION & STRATEGY STATUS OF THE INTEGRATION 3Q 2006 RESULTS PEER COMPARISON ANNEX – SELECTED HISTORICAL AND RECENT FINANCIALS 43
Slide 44: Aims at becoming market leader in sustainable profitability and growth
YAPI KREDİ AIMS AT BECOMING MARKET LEADER IN TERMS OF ACHIEVING SUSTAINABLE PROFITABILITY AND GROWTH To become the perceived leader in the market in terms of sustainable value creation and MISSION growth, being the first choice of customers and employees • Leader in the segment/business with higher
Slide 45: 2008 key strategic targets
2008 KEY STRATEGIC TARGETS BASED ON ENSURING GROWTH, EFFICIENCY AND PROFITABILITY KEY STRATEGIC GUIDELINES KEY 2008 TARGETS Focus on 5 main business targets: (1) Total Revenues ~13% 9 Consolidate leadership in cards and become (1) leader in consumer finance AUM (Mutual Funds) ~14% 9 Become leader
Slide 46: Key priorities for business strategy and integration
KEY PRIORITIES FOR BUSINESS STRATEGY & INTEGRATION / REORGANIZATION ARE EXPECTED TO FINETUNE; COMMON TARGET TO HAVE THE NEW BANK AT FULL SPEED STARTING FROM 2007 2005 – 4Q 2006 2007-2008 3y plan approval and 1st common Focus on the key segments / products: Cards Bank at full speed with full bu
Slide 47: Agenda
AGENDA MACROECONOMIC & BANKING ENVIRONMENT THE NEW BANK SHAREHOLDING AND ORGANIZATIONAL STRUCTURE VISION & STRATEGY STATUS OF THE INTEGRATION 3Q 2006 RESULTS PEER COMPARISON ANNEX – SELECTED HISTORICAL AND RECENT FINANCIALS 47
Slide 48: Legal merger realized; major integration timeline
LEGAL MERGER OF TWO BANKS REALIZED ON 2 OCTOBER 2006 WHILE IT SYSTEMS MIGRATION MERGING TWO NETWORKS COMPLETED AT THE END OF OCTOBER MAJOR INTEGRATION TIMELINE Legal Full Core Subs 2005 2006 Merger integration Mergers 2007 DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR Mandatory ful
Slide 49: Major integration accomplishments so far
MAJOR INTEGRATION ACCOMPLISHMENTS SO FAR New organizational structure of both banks has been established New service model piloting phase to increase efficiency has been completed in 7 branches Relocation plan has been defined and almost completed the implementation (Main HQ, Asset management
Slide 50: Agenda
AGENDA MACROECONOMIC & BANKING ENVIRONMENT THE NEW BANK SHAREHOLDING AND ORGANIZATIONAL STRUCTURE VISION & STRATEGY STATUS OF THE INTEGRATION 3Q 2006 RESULTS PEER COMPARISON ANNEX – SELECTED HISTORICAL AND RECENT FINANCIALS 50
Slide 51: Total assets of the merged bank up 21% YTD
TOTAL ASSETS OF THE MERGED BANK UP 21% YTD, 48% OF ITS ASSETS CONSTITUTE LOANS WHILE SECURITIES’ SHARE AT 29% Pro-forma Unaudited IFRS figures, billion YTL YKB Merged YTD % 30 September 2006 Koçbank Consolidated Bank * Change Total Assets 19.3 30.5 48.1 20.7% Loans 8.0 15.2 23.2 21.5% Securities Por
Slide 52: Revenues up 6.5% YoY; cost/income at 58%
REVENUES UP 6.5% YOY MAINLY DRIVEN BY STRONG FEE AND COMMISSION GROWTH; COST/INCOME AT 58% Pro-forma Unaudited IFRS figures, million YTL YKB Merged YoY % 30 September 2006 Koçbank Consolidated Bank * Change * * Total Revenues 594 1,696 2,249 6.5% of which net interest income 348 1,032 1,359 0.3% of
Slide 53: Capital adequacy ratio of pro-forma merged bank at 12%
CAPITAL ADEQUACY RATIO OF PRO-FORMA MERGED BANK AT 12% KOÇBANK YAPI KREDİ 31 MARCH 2006 YTL mln 2005 3Q06 2005 3Q06 YKB received a Euro 500 mln CAR (%) 11.6 13.9 7.3 10.5 subordinated Supervisory Capital 906 1,275 1,415 2,385 loan Tier 1 Capital 2,721 3,050 1,525 1,602 Tier 2 Capital 191 1,488 648 1
Slide 54: Agenda
AGENDA MACROECONOMIC & BANKING ENVIRONMENT THE NEW BANK SHAREHOLDING AND ORGANIZATIONAL STRUCTURE VISION & STRATEGY STATUS OF THE INTEGRATION 3Q 2006 RESULTS PEER COMPARISON ANNEX – SELECTED HISTORICAL AND RECENT FINANCIALS 54
Slide 55: Yapı Kredi according to international bank analysts
YAPI KREDİ ACCORDING TO INTERNATIONAL BANK ANALYSTS “…a strong franchise in many areas and backed by some deep and committed pockets.” MERRILL LYNCH, August 2006 “Awakening a sleeping beauty? We expect YKB to undergo significant restructuring under the steer of new management, leading to a substanti
Slide 56: Lowest share of securities in total assets
LOWEST SHARE OF SECURITIES IN TOTAL ASSETS – SECURITIES COMPOSITION WELL ALIGNED WITH PRUDENT RISK APPROACH Securities / Total Assets - 30.9.2006 Composition of Securities Portfolio - 30.9.2006 Held To Maturity Trading Available For Sale 0.0% 0.0% 33.6% 65.9% 93.9% 98.8% 65.0% 35.1% 34.0% 25.6% 27.9
Slide 57: High share of cash loans to total assets
HIGH SHARE OF CASH LOANS TO TOTAL ASSETS IN LINE WITH REAL BANKING – PROFITABLE GROWTH CONCENTRATED ON HIGH MARGIN BUSINESSES Cash Loans / Total Assets - 30.9.2006 Composition of Cash Loans -30.9.2006 TL Commercial Loans Consumer Loans FX Commercial Loans Credit Cards Share of cons. loans + credit c
Slide 58: Improving asset quality and building coverage
CONSISTENTLY IMPROVING ASSET QUALITY AND BUILDING COVERAGE YAPI KREDİ – NPL Ratio and Coverage GARANTİ - NPL Ratio and Coverage 122.9% 119.1% 124.2% 95.8% 118.3% 100.0% 80.7% 82.5% 79.6% 76.0% 80.7% 81.2% 81.7% 73.7% 66.8% 67.6% 7.3% 7.4% 6.1% 6.4% 4.1% 3.7% 2.6% 2.4% Q405 Q106 Q206 Q306 Q405 Q106 Q
Slide 59: General provisions-to-performing loans ratio
GENERAL PROVISIONS-TO-PERFORMING LOANS RATIO COVERING COST OF RISK; WELL ABOVE THE REGULATORY REQUIREMENT YAPI KREDİ - General Loan Provisions / GARANTİ - General Loan Provisions / Performing Loans Performing Loans 3.0% 3.0% 3.0% 2.7% 0.6% 0.6% 0.6% 0.6% Q405 Q106 Q206 Q306 Q405 Q106 Q206 Q306 AKBAN
Slide 60: Low level of related party lending
LOW LEVEL OF RELATED PARTY LENDING YAPI KREDİ - Related Party Lending GARANTİ - Related Party Lending 4.7% 4.5% 5.0% 1.3% Related party cash 30.09.2006 30.09.2006 Loans / total cash loans AKBANK - Related Party Lending İŞBANK - Related Party Lending Related party non-cash loans / total non-cash loan
Slide 61: Deposit composition: TL deposits and demand share
OF TOTAL DEPOSITS, 53% CONSTITUTED BY TL DEPOSITS WHILE 1/5TH IS DEMAND YAPI KREDİ - 30.9.2006 GARANTİ - 30.9.2006 19.5% 23.0% 53.0% 49.0% 80.5% 77.0% FX FX 47.0% Securities 51.0% Securities /FX Dep.: /FX Dep.: 50.8% 43.9% Loans/Deposits: Demand Deposits Dem. vs Time Deposits TL vs FX Deposits Dem.
Slide 62: Relatively low level of repo funding
RELATIVELY LOW LEVEL OF REPO FUNDING YAPI KREDİ - 30.9.2006, YTL GARANTİ - 30.9.2006, YTL Total Repos: Total Repos: 3,993,592 3,057,120 2,908,328 2,680,062 377,058 1,085,264 TL vs FX Repos TL vs FX Repos TL Repos FX Repos AKBANK - 30.9.2006, YTL İŞBANK - 30.9.2006, YTL Total Repos: Total Repos: 3,54
Slide 63: Revenue dependent on loans rather than securities income
REVENUE GENERATION DEPENDENT ON LOANS RATHER THAN SECURITIES INCOME – HIGHEST SHARE OF INCOME FROM LOANS IN INTEREST INCOME YAPI KREDİ - 30.9.2006 GARANTİ - 30.9.2006 5.8% 9.3% 25.6% 32.6% 68.6% 58.0% Breakdown of Int. Income Interest on Loans Breakdown of Int. Income Interest on Securities AKBANK -
Slide 64: Increasing interest earning assets
CONSISTENTLY INCREASING INTEREST EARNING ASSETS MAINLY DRIVEN BY SUCCESSFUL AND ACCELERATED ASSET RESTRUCTURING YAPI KREDİ - Ave. IEAs / Ave. IBLs GARANTİ - Ave. IEAs / Ave. IBLs 106.9% 105.2% 102.9% 104.1% 102.2% 104.8% 101.1% 101.9% 102.6% 99.4% Q305 Q405 Q106 Q206 Q306 Q305 Q405 Q106 Q206 Q306 AK
Slide 65: Well positioned to defend NIM
WELL POSITIONED TO DEFEND NIM DUE TO FOCUS ON HIGH YIELDING INSTRUMENTS AND LUCRATIVE BUSINESS LINES -- HIGHEST NIM AS OF END-SEPTEMBER YAPI KREDİ - Net Interest Margin GARANTİ - Net Interest Margin 7.3% 6.0% 6.2% 6.7% 5.4% 5.7% 5.6% 5.2% 5.3% 4.5% 3Q05 4Q05 1Q06 2Q06 3Q06 3Q05 4Q05 1Q06 2Q06 3Q06 A
Slide 66: High share of quality revenues
HIGH SHARE OF QUALITY REVENUES WITH FURTHER POTENTIAL TO INCREASE BASED ON SOLID POST-MERGER GROWTH PLATFORM Fees and Commissions (gross) / Total Revenues Fees and Commissions (gross) / Total Assets September 2006 September 2006 43.5% 36.8% 26.8% 2.8% 2.7% 24.8% 24.0% 2.3% 20.7% 19.4% 1.9% 1.8% 1.6%
Slide 67: Concentration on sustainable sources of revenue
INCREASING CONCENTRATION ON SUSTAINABLE SOURCES OF REVENUE – ALMOST 1/3RD OF TOTAL OPERATING INCOME GENERATED BY FEES & COMMISSIONS YAPI KREDİ - Net F&C/Oper. Income GARANTİ - Net F&C/Oper. Income 28.2% 32.6% 30.09.2006 30.09.2006 AKBANK - Net F&C/Oper. Income İŞBANK - Net F&C/Oper. Income 20.3% 21.
Slide 68: Highest positive FX position
HIGHEST POSITIVE FX POSITION Net Open Positions After Hedge / Total Equity September 2006 % 3.1 2.5 2.5 0.9 0.1 -2.4 -3.3 -5.0 YK (CE) Deniz Vakıf Garanti Akbank Finans İşbank 68 Analysis based on BRSA bank-only financials. YK (Combined Entity) figures include Yapı Kredi + Koçbank.
Slide 69: Healthier balance sheet; prudent lending policy
HEALTHIER B/S DUE TO ASSET RESTRUCTURING WITH FURTHER ROOM TO IMPROVE; PRUDENT LENDING POLICY WITH FOCUS ON HIGH TURNOVER LENDING ACTIVITIES Fixed Assets / Total Assets Accrued Interest on Loans / Gross Loans September 2006 September 2006 4.8% 2.9% 2.6% 2.6% 2.8% 2.2% 1.6% 1.6% 1.8% 1.7% 1.6% 1.3% 1
Slide 70: Ranking by interest earned on loans and paid on deposits
RANKING BY INTEREST EARNED ON LOANS AND INTEREST PAID OUT TO DEPOSITORS Effective Interest Earned On Loans Effective Interest Paid Out On Deposits September 2006 September 2006 16.8% 16.2% 16.0% 15.2% 15.2% 12.9% 10.5% 9.9% 9.2% 9.2% 9.0% 8.4% Vakıf İşbank YK (CE) Akbank Fortis Garanti Vakıf Fortis
Slide 71: Agenda
AGENDA MACROECONOMIC & BANKING ENVIRONMENT THE NEW BANK SHAREHOLDING AND ORGANIZATIONAL STRUCTURE VISION & STRATEGY STATUS OF THE INTEGRATION 3Q 2006 RESULTS PEER COMPARISON ANNEX – SELECTED HISTORICAL AND RECENT FINANCIALS 71
Slide 72: 2005 IFRS financial results of the Group
2005 IFRS FINANCIAL RESULTS OF THE GROUP : THE NEW DIMENSION 2005 KFS of which 2005 KFS 2005 KFS of which pro-forma YK Group YTL mln Group (1) pro-forma (2) normalized ‘’old’’ KFS normalized (4) Total Revenues (3) 1,533 3,053 3,053 1,066 1,987 Operating Expenses (873) (3,371) (1,880) (493) (1,388) G
Slide 73: KFS first years results are very positive
KFS (*) FIRST 4 YEARS RESULTS ARE VERY POSITIVE... NET INCOME (YTL mln) ROE (2) +3pp 358 36% 24% 26% 23% 263 231 9 1% 2002 (1) 2003 2004 2005 2002 (1) 2003 2004 2005 NPL RATIO % COST / INCOME RATIO % (3) 11.7 11.1 66% 48% 8.3 47% 46% 4.9 -1pp -3.4pp 2002 (1) 2003 2004 2005 2002 (1) 2003 2004 2005 73
Slide 74: For Yapı Kredi there is clear room for improvement
…WHILE FOR YAPI KREDI THERE IS A CLEAR ROOM FOR IMPROVEMENT 2004- 2005 IFRS Ordinary Without Adj. 2004 2005 Adjustments (1) 2005 mln YTL (%) Revenues (2) 1,798 3,144 (1,157) 1,987 + 11 Costs (1,471) (2,879) 1,491 (1,388) -6 Provisions (430) (2,186) 1,968 (217) -49 Tax 70 307 (388) (81) n.a Net Incom
Slide 75: Total assets gathered from customers up 20.5% YTD
TOTAL ASSETS GATHERED FROM CUSTOMERS UP BY 20.5% YTD THANKS TO INFLOW OF NEW DEPOSITS AND MUTUAL FUNDS IFRS Results KOÇ FINANCIAL SERVICES (‘’old’’) – YTL bln YAPI KREDİ GROUP 37.1 + 17.4% + 25.5% 31.6 3.0 AUM Indirect 24.1 28.9 3.2 2.1 19.2 2.9 14.2 AUC 16.6 4.2 10.5 8.0 8.2 AUM 3.3 Indirect 5.0 AU
Slide 76: Gross customer loans up by 22% YTD
GROSS CUSTOMERS LOANS UP BY 22% YTD MAINLY THANKS TO CARDS, CONSUMER LENDING AND CORPORATE ACTIVITY IFRS Results KOÇ FINANCIAL SERVICES (‘’old’’) – YTL bln YAPI KREDİ GROUP 16.68 +14.7% +26.3% 10.45 13.17 9.11 11.06 6.57 7.97 +21% 5.93 +11% 7.42 +16% 8.62 5.63 Corporate* 1.74 +53% +65% 1.14 Corporat
Slide 77: Securities portfolio focused on held-to-maturity
SECURITIES PORTFOLIO FOCUSED ON HELD-TO-MATURITY AIMING AT STABLE REVENUE GENERATION KOÇ FINANCIAL SERVICES (‘’old’’) – bln YTL YAPI KREDİ GROUP Bln YTL 4.43 4.87 4.64 6.25 Bln YTL 7.52 8.12 6.94 8.30 100% 100% 100% 100% 100% 100% 100% 100% HFT 3% 3% 1% 1% 6% 23% 10% 4% 3% 3% 55% 37% AFS 7% HFT 16%
Slide 78: Asset quality in constantly improving trend
ASSET QUALITY IN A CONSTANTLY IMPROVING TREND WITH DECREASING NPL RATIO AND ADEQUATE PROVISIONING LEVEL KOÇ FINANCIAL SERVICES (“old”) YAPI KREDİ GROUP NPL 76.3% 77.3% 80.8% 80.0% 70.8% 79.6% 78.4% NPL Coverage 71.6% Coverage Ratio (1) Ratio (1) 10.0% 8.3% 8.6% 5.8% 7.2% NPL Ratio 5.0% 6.8% 4.6% NPL
Slide 79: Asset quality: important actions taken
ASSET QUALITY: IMPORTANT ACTIONS TAKEN IN ORDER TO MAINTAIN CREDIT ACTIVITY UNDER EFFICIENT CONTROL Implementation of Credit Risk Policies and Credit Tableau de Board in both KB & YKB, Implementation of Credit Underwriting tools (ACE for Corporate & Commercial, SMilE for Micro & Small Business)
Slide 80: Enquiries
ENQUIRIES: Yapı Kredi Investor Relations Team yapikredi_investorrelations@yapikredi.com.tr Hüseyin İmece Hale Tunaboylu Executive Vice President Head of Investor Relations Tel. +90 212 339 7368 Tel. +90 212 339 7647 E-mail: huseyin.imece@yapikredi.com.tr E-mail: hale.tunaboylu@yapikredi.com.tr 80
Slide 81: Disclaimer
DISCLAIMER This presentation contains forward-looking statements that reflect the Company management’s current views with respect to certain future events. Although it is believed that the expectations reflected in these statements are reasonable, they may be affected by a variety of variables and c