A N N U A L R E P O R T 2 0 1 3 Index
02 Index 03 History of the Bank 06 Supervisory and Executive Board 07 Supervisory Board Report (extract) 09 Executive Board Report (extract) 13 Departments Presentation 16 Financial Statements 20 Notes to the Balance-Sheet and to the Profit and Loss Statement (extract) 24 Balance Sheet 25 Profit and Loss Statement 26 Audit Certificate 28 Edition notice
2 Bank On the 1st of April 2012 Euro Yatırım Menkul Değerler A.Ş. Istanbul acquired Gries & the Heissel Bankiers AG, Wiesbaden, which was founded 1987 in Berlin. of In July 2012 the name of the bank was changed to Eurocity Bank AG and the headquarter was moved from Wiesbaden to Frankfurt am Main. At the end of 2012
History the branch in Berlin was closed.
After termination of the private banking business and asset management, a new strategy has been defined and implemented. The Bank began to build up its own security portfolio and to extend loans to foreign companies. Simultaneously a new retail banking department was established, which focuses on collecting deposits from non-banks. Securities business for retail customers has been limited to online-brokerage.
After the takeover of Gries & Heissel Bankiers AG the capital paid in has been raised from 8 Mio. EUR to 13 Mio and in October 2012 to 16 Mio. EUR.
At the beginning of 2013 a further increase to 20 Mio. EUR took place.
The profit of 2013 will not be payed out.
3 Euro Yatırım Menkul Değerler A.Ş.
In 2001 Mr. Mustafa Şahin bought Yurt Menkul Kıymetler A.Ş., which was founded 1996 in Istanbul, from the Turkish Savings Deposit Insurance Fund. The name was changed to Euro Yatırım Menkul Değerler A.Ş..
Euro Yatırım Menkul Değerler A.Ş., headquarter is located in Istanbul, is an investment company offering financial services such as trading of derivative financial instruments, Bank stock certificates and bond-bills, repurchase agreements and reverse repurchase agreement transactions, margin trading services, public offering and investment the consultancy services with its 7 different authorization certificates (licenses). of
Euro Yatırım Menkul Değerler A.Ş., the leading company of the group, established 3 investment funds namely „Euro B Tip Yatırım Ortaklığı A.Ş.“ in 2006, „Euro Trend Yatırım History Ortaklığı A.Ş.“ in 2007 and „Euro Kapital Yatırım Ortaklığı A.Ş.“ in 2010. Annual turnover of the 3 investment funds exceeded 220 Mio. EUR.
The Euro Group, in order to diversify its services to its clients, purchased Toprak Sigorta A.Ş. on 15th January 2008 , which was founded in 1995 and changed its name to Euro Sigorta A.Ş.. The insurance company became a member of the Euro group. After a capital increase a team of 80 specialists provides various insurance products in different categories.
Euro Yatırım Menkul Değerler A.Ş., the parent of the Euro Group, was listed on the Istanbul Stock Exchange (İMKB) in 2010. In 2011 a capital increase took place.
Euro Yatırım Menkul Değerler A.Ş. operates under the permission, applicable rules and auditing of the Capital Markets Board of Turkey, the supreme board authorized to regulate and audit the establishment and activities of the investment companies. Moreover because it is a public listed company at the İMKB, it is also under continuous auditing, monitoring and supervision of the Istanbul Stock Exchange.
Detailed information on our main shareholder, Euro Yatırım Menkul Değerler A.Ş., is accessible on www.euroyatirim.com.tr www.kap.gov.tr www.imkb.gov.tr
4 Milestones
1987 The Bank was founded in Berlin under the entity Gries & Heissel Bankiers AG. Bank 1989 Frankfurt Branch Office was opened. the of 1990 Founders and Executives of the Bank were awarded the prize “The Best Entrepreneur of the Year”.
History 2000 Frankfurt Branch Office moved to Wiesbaden.
2004 Headquarter moved from Berlin to Wiesbaden.
2007 Gries & Heissel Bankiers AG celebrates its 20th anniversary.
2011 Restructuring of the Bank
2012 April The bank was acquired by Euro Yatırım Menkul Değerler A.Ş.. The capital was increased from 8 Mio EUR to 13 Mio EUR.
July The name of the Bank was changed to Eurocity Bank AG.
August Bank’s Headquarter moved from Wiesbaden to Frankfurt am Main.
October Paid in capital was increased from 13 Mio EUR to 16 Mio EUR.
2013 Further increase of the paid in capital from 16 Mio EUR to 20 Mio EUR.
5 Executive Board and
Supervisory Members of the Supervisory Board
Chairman Mustafa Şahin
Vice Chairman Dr. Eberhard Weber
Board Member Coşkun Arık
Members of the Executive Board
Dr. Ismail Hakkı Ergener (until 31.12.2013)
Veli Abudak
Metin Yıldırım (as from 01.01.2014)
6 Report of the Supervisory Board (Summary) Board Report In 2013 the Supervisory Board was represented by Mr. Mustafa Şahin (Chairman), Dr. Eberhard Weber (Vice-Chairman) and Mr. Coşkun Arık.
In the Supervisory Board meeting dated 13th December 2013, Dr. Ergener informed the
Supervisory Supervisory Board about his demission as Chairman of the Executive Board. The Supervisory Board acknowledge that and appointed Mr. Metin Yıldırım as member of the Executive Board per 1 January 2014.
The Supervisory Board met quarterly. Subjects of the meetings (extract) have been:
• Notes to the financial statement and management report 2012
• Business plan for 2013 including workforce planning and training activities
• The approval of the annual financial statement was made by circular resolution on the 4th
July 2013.
• The Supervisory Board informed the Supervisory Board about the current situation of the bank and about the Risk Management System including risk reports and the state of implementation of MaRisk.
• The Supervisory Board took notice of the risk reports presented by the Executive Board
7 Report of the Supervisory Board (Summary) Board Report Deloitte & Touche GmbH Wirtshaftsprüfungsgesellschaft as the auditing company (appointed by the annual meeting) audited and confirmed the financial statement including notes and management reports for the financial year 2013 and an unqualified audit opinion was given. Supervisory The financial statement was drawn up according to the rules of the commercial code. The Supervisory Board has discussed the financial statement notes to the balance sheet and the profit-loss statement of the bank in a meeting dated 27th June 2014. The auditors participated in the meeting and analyzed the fundamental audit results and have been available to answer the questions.
The Supervisory Board has endorsed the annual account presented by the Executive Board on the 31st December, 2013.
The Financial Statement 31st December, 2013 of the Eurocity Bank AG was hereby stated.
For the Supervisory Board
Frankfurt am Main, 09. July 2014
(Chairman)
8 Report by the Executive Board (extract)
After two years of stagnation, the global economy started to recover in 2013 lead by the United States. US GDP grew by 2.6% in quarter four compared to the previous quarter. Private consumer spending accumulated by 3.3%.
Even in Europe sentiment indicators improved, although the growth in the Eurozone remained weak achieving 0.5% in quarter four compared to the previous year. In 2014 growth is expected to accelerate to 1.1%
Emergent countries, which have been engine of global economy in former years, showed less dynamic in 2013. High capital outflows and sinking rates of local currencies made it necessary to hike interest rates, even though the economic situation rather would have Executive Board Report required expansionary monetary policy. Looking to 2014 growth should recover, due to solid demography and low indebtedness.
Turkey showed a similar development like the other countries – but homemade political disputes affected the economy. Nevertheless GDP grew by 4% in 2013, a similar growth is expected for 2014. Despite a positive growth rate and moderate indebtedness, Turkey is vulnerable to a high current account deficit and politic tensions which could have a negative impact to the economy.
Summing up, we expect for 2014 an acceleration of global growth based on the USA. If the growth rate should increase significantly, we see a risk of rising bond yields. In contrast, Eurozone money market interest rates should remain low. In the United States interest rate hikes are expected, if the FED is going to stop the quantitative easing program, which should happen in autumn 2014. The main risks for economic development in 2014 are the high level of indebtedness of the industrialized countries as well as political turbulences in Eastern Europe and Northern Africa, which could result in higher energy prices.
9 Report by the Executive Board (extract)
Development of the Banking System
In 2013 the European sovereign debt crisis was much less noticeable than 2012. In perception of the capital markets, the risks of escalation of the crisis could be stopped by unusual monetary money market transactions – implementation of bailout-funds starting progress in the restructuring of the crisis countries and slowly recovering economic growth.
According to the European Central Bank (ECB) tensions in major financial markets have continued to drop. Risk premiums and prices of credit default swaps for government bonds of peripheral countries dropt significantly. Flight of capital out of these countries has slowed
Executive Board Report noticeably. The signs of improvement in the indebtedness crisis strengthened the confidence of investors in the European banking system in the second half of 2013 – therefore risk premiums and prices of credit default swaps for European banks decreased and equity prices went up.
Banks have been affected by low interest rates and increased regulatory requirements. Especially small banks are hit by those factors in respect of business development and profitability as small banks have to fulfill the same requirements as large banks. It would be desirable that the principle of proportionality, which can be found in many official statements duly, is applied.
Eurocity Bank AG operates in some niches such as in the financing of Turkish companies and foreign banks and in the securities business for Turkish customers. In the Turkish company loan market, we see a substantial demand, so that the risk-bearing capacity determines volume.
10 Report by the Executive Board (extract)
A target of the bank is, to become an additional banking correspondent for local and international clients.
We want to achieve substantial growth within the fields of proprietary trading-, international commercial business and private client business as an online bank.
Main markets are Turkey and Germany. In order to spread risks investments in emergent countries could be made.
Activities in the credit department will remain focused on loans to well-known Turkish companies, syndicated loans and promissory notes. Company based business with the core
Executive Board Report countries Turkey and Germany will be enhanced. At the expense of bond holdings as market conditions reach the yield requirements.
We will use the established relationships of the management team and our parent companies.
11 Report by the Executive Board (extract)
Development of the Bank
In 2013 the bank achieved an annual income of 1.85 Mio. EUR compared to an annual loss of 1.02 Mio. EUR in the previous year. This result was generated by net interest income and income from proprietary trading.
At the beginning of the year the capital was raised by 4 Mio. EUR to a total of 20 Mio. EUR.
A secure refinancing structure was build up via starting time deposit business using interest rate comparing websites. At the same time the website of the bank was redesigned, opening of accounts via website was possible. Executive Board Report The additional funds have been used to increase the security portfolio. Contacts to other banks have been used for secondary market transactions and participations in syndicated loans. The parent company Euro Yatırım Menkul Değerler A.Ş. supported us to build up a loan portfolio, consisting of Turkish companies and banks. All these activities generated an asset structure to achieve a stable interest income.
The bond portfolio was used for open market transactions with the European Central Bank (ECB) and other repo transactions. The “Entschädigungseinrichtung” secures client’s deposits up to 100 TEUR.
In 2013 money market transactions with affiliates or affiliated companies in an amount of up to 3.5 Mio. EUR had been executed.
12 Private Banking Department
All accounts and portfolios of private banking clients of “Gries & Heissel Bankiers” have been transferred to Sydbank A/S Germany at the end of 2011. Mid-2012 the new shareholders changed the name from “Gries & Heissel Bankiers” to
Presentation “Euro City Bank AG” and the restructuring of the bank began. The new Private Banking Department was established and started its activities in 2013 especially to recruit new clients for investment in time deposits. This policy was very successful and after 6 months all targets were reached. At the end of
Departments 2013 the number of new clients exceeded 2.000. Also products in the securities and fund-business were launched and offered to targeted customers, via advertisement in trade magazines, internet and mailings.
13 Credit Department
2013 certainly was a year of transformation. As a great part of the old loan portfolio has been taking over by the other banks or had expired, there was the need to define a new loan strategy for the bank.
Presentation As an international bank we focus on German and international companies and financial institutions.
The loan department analyzes the country risks and implements country lines, which are controlled on a daily base. Departments A new risk classification procedure was established to meet the new requirements.
New products like promissory notes, syndicated loans, repos and letter of credits have been implemented.
In the near feature, we plan to strengthen our activities in corresponding banking. Working capital – and trade financing are covered as well as guarantees.
Due to our liability structure, we can offer the financing on a mid-term base. Another task of the loan department is the installation of money market and FX-lines.
14 Treasury
The main activities of treasury cover, money market, FX and security transactions. The strategies regarding the liquidity and profitability are part of the responsibility of the asset and liability committee. Presentation An important task of treasury is the management of transformation of terms.
Asset and liability strategy of the bank is discussed in the asset and liability committee and adjusted to the expected market conditions. Departments
15 Statement of the annual account (extract from management report)
The balance sheet total of Eurocity Bank AG amounted on the 31th December 2013 to EUR 122,134. Financial StatementsFinancial
2009 2010 2011 2012 2013
Total assets 81.870 51.792 41.799 31.381 122.134
16 Receivables shown in the balance sheet have following maturity structure:
up to three more than more than more than months three one year to five years months to five years one year
TEUR TEUR TEUR TEUR Financial StatementsFinancial
Other claims to credit 20.292 9.045 4.000 0 institutions (A3b) Claims to customers (A4) 2.504 1.986 30.278 1.012
Accrued interests due after 31.12.13 are shown in column until three months.
Receivables from customers (A4) include claims of 1.8 Mio. EUR (previous year 2.6 Mio. EUR) without undefined maturity.
Amongst the claims, there are no amounts included, which are claims to affiliates or affiliated companies.
The aforementioned amounts are non-evidenced claims.
17 The bank has no equity interest in the amount of at least 20% in other companies.
In asset item 10 (fixed assets) are included: − Office furniture and equipment 74 TEUR (previous year: 78 TEUR) − BGA hardware 1 EUR thousand (previous year 2 TEUR)
In the heading and subheading of the active site 2 TEUR subordinated assets are not included.
In the assets of foreign currency items are the equivalent of EUR 190 included.
The amounts reported in the balance sheet liabilities have the following maturities: up to three months more than more than one more than five three months year to five years years to one year
TEUR TEUR TEUR TEUR
Liabilities to credit institutions with Financial StatementsFinancial an agreed term and cancelation period (P1b) 34.000 0 0 0
Savings with an agreed concelation period form more than three months 0 (P2ab) 0 0 0
Other liabilities to customers with an agreed term or cancelation period 4.957 589 57.009 3.182 (P2bb)
Accrued interest, which will be due after cutoff date of the balance sheet in column 1.
For open market operations with the ECB, securities amounting to 29,214 TEUR (previous year 14,302 TEUR have been pledged. At the 31st December 2012 open market operations of 21,000 TEUR (previous year 11,000 TEUR) have been utilized.
Amongst the liabilities, there are no amounts included which are claims to affiliates or affiliated companies.
The aforementioned amounts are non-evidenced claims.
Foreign currency items amount 2 TEUR (previous year 0,000 TEUR) in the liabilities.
The balance sheet provisions for pensions and similar obligations concern the discharged members of the board of directors exclusively.
According to §246 Abs. 2 HGB, the covered funds estimated to its current value had been prorated with pension obligations, if attributable. This covered funds consists of pledged reinsurance coverage.
18 Basic figures of income 2009 2010 2011 2012 2013 statement TEUR TEUR TEUR TEUR TEUR
Interest surplus 1.061 909 654 554 2.356
Commission surplus 1.401 1.409 1.084 145 67
Other operating income 1.653 3.252
Administration costs 5.735 5.912 5.031 3.086 3.065
Financial StatementsFinancial Annual result -2.966 -3.935 -4.142 -1.017 1.850
6.000 Interest surplus
4.000 Commission surplus
2.000 Other operating 0 income
Administration -2.000 costs
-4.000 Annual result
-6.000 2009 2010 2011 2012 2013 TEUR TEUR TEUR TEUR TEUR
19 Notes to the Equity capital and development (extract from management report)
After the capital increase in January 2013, the capital paied in amounts to EUR 20,000 . sheet and -
2009 2010 2011 2012 2013 TEUR TEUR TEUR TEUR TEUR Financial equity
Notes to the balance statement loss and profit the to 14.749 7.815 3.673 13.656 19.506
Liable equity 14.747 7.813 3.672 13.485 17.656
Solvency ratio 21,4 % 16,9 % 9,39 % 63,94 % 16,79%
The bank’s capital fund is 20 Mio. EUR (previous year: 16 Mio. EUR) and is classified in 20 Million no-par-value registered shares with the face value of 1 EUR each.
The annual account is drawn up according to the rules of “Handelsgesetzbuch” in the version of the German Accounting Law Modernization Act (BilMoG) from the 25th of May 2009 in connection with the ordinance of the credit institutions’ and financial services provider institutions’ financial reporting (RechKredV). The Balance is organized according to application form 1 of the RechKredV, and the Profit and Loss Statement according to application form 2 (account statement) of the RechKredV.
Information about items, which can be optionally found in the balance sheet or in the notes to the balance sheet and profit and loss statement follow in the supplement. In the structure of the balance sheet and profit and loss statement, no changes were found.
20 Principles of Accounting as well as Analysis of the Balance sheet and the Profit and Loss (extract from management report) The cash reserve, demands on banks and customers as well as other assets were defined by the face value. Amongst the demands, all the recognizable single risks and the general credit risk were considered through the appropriate valuation allowances in the form of value sheet and - adjustments. The difference between the face value and the lower payable amount was defined according to §340 e Abs. 2 HGB.
For the securities of the liquidity reserve the lowest value principle was used and a valuation loss of 211TEUR was booked.
The intangible assets were valued according to acquisition costs and linearly defined in accordance to the expected useful life. On the reporting date 31.12.2013 the bank did not
Notes to the balance statement loss and profit the to have any intangible assets.
The valuation of operating and office equipment was determined by acquisition costs, reduced by the depreciation of the expected duration of use. The depreciations are in accordance to a linear method. Low-cost business assets are completely depreciated in the year of acquisition.
Liabilities are valued by their settlement amount.
The calculation of the pension provisions are carried out according to the Projected Unit Credit – Method, on the basis of the mortality tables 2005 G of the Heubeck- “Richttafeln” GmbH. The technical interest rate for the pension provisions amounts to 4,88 %. An income trend of 0% was specified. The future discounted services will be valued as long as they have been earned by the valuation date.
Pension obligations, which are partly covered by insolvency-proof life insurances, were accounted for to their net current value according to §246 Abs. 2 HGB, as long as pledges are present. The evaluation of the additional provisions follows the value of the necessary fulfillment amount determined according to a sensible business manner. Provisions with remaining terms of more than one year are discounted according to their average market interest rate over the last seven fiscal years, relative to their remaining terms.
Assets and obligations denominated in a foreign currency as well as outstanding, unsettled spot transactions were appropriately converted according to §256a HGB for the average spot exchange rate on the reporting date.
In order to hedge on - balance sheet foreign currency positions were held by 31st of December 2013 one FX swap.
21 Other Information
Other significant financial obligations that do not appear in the balance sheet, exist in the form of leases with terms up 2017 in the amount of 900 TEUR. sheet and
- Due to the option to disclaim the amount of active, deferred taxes, there are no balance sheet items included. The bank’s annual account will be consolidated in the IFRS – the consolidated financial statement of the parent company Euro Yatırım Menkul Değerler A.Ş., Istanbul/Turkey.
The annual account and the notes to the balance sheet and the profit and loss statement of the Eurocity Bank AG will be published in the electronically in the “Bundesanzeiger” (www.bundesanzeiger.de) Notes to the balance statement loss and profit the to The total calculated fee of the auditors amounted to a sum of 114 TEUR for the fiscal year, of which 71 TEUR are allotted the annual account auditing and 24 TEUR to the Deposit- and WpHG (securities trading act)- account.
22 Expected Development (extract from management report)
We expect business activity to continue growth at a low level. The European Commission expects estimates a growth rate 1.2% for the Eurozone for this year and 1.8% in 2015. Germany will grow by 1.8% this year and 2.0% next year. The Turkish government assumes a
sheet and growth rate of 4.0% for this year. -
Despite this expected recovery, business environment will continue to be difficult due to low interest rates and the increased regulatory requirements.
The loan portfolio of non-EU countries will be extended in the case of favorable market conditions as well as security brokerage. As a major risk to the recovery of the European economy, we assume that growth rate will not reach the necessary level to reduce indebtedness. In Southern European countries deflationary trends are a main risk factor. Notes to the balance statement loss and profit the to Due to the coming presidential elections in Turkey, political risk could rise, which would enlarge margins and risks. In the case of a down rating of Turkey, we will reduce our commitment in Turkish assets.
Based on our new strategy we gained a profit in 2013 and will continue the path of success. The Supervisory Board appointed Mr. Metin Yıldırım as member of the executive board per 01.01.2014. He succeeds Dr. Ismail Ergener, who resigned 31.12.2013.
Business development in the first quarter of 2014 was positive. The Bond and loan portfolio secured a balance net interest income. The first quarter profit was achieved due to security trading.
The bank maintains no branches.
Frankfurt, the 30th May 2014
Veli Abudak Metin Yıldırım
23 sheet as at December 31. 2013 - Balance
24 Loss Statement and Profit
25 This annual report contains extracts of the report by the executive board (the figures of the bank ; consisting of balance sheet income statement and notes) as well as charts about the figures. The complete report by the executive board for the year 2013 and the balance sheet, income state and corresponding notes for Dec. 31, 2013 of the Eurocity Bank AG are published in the electronic Federal Gazette under „Eurocity Bank AG “. An unqualified opinion of independent auditors has been given in this complete version of companies report for 2013.
We have issued in accordance with Sec. 322 HGB (“German Commercial Code”) an unqualified opinion for the complete financial statement and management report. The translation of the auditors’ report reads as follows:
[Independent] Auditors' Report
We have audited the financial statements - comprising the balance sheet, the income statement and the notes to the financial statements - together with the bookkeeping system and the management report of Eurocity Bank AG, Frankfurt am Main/Germany, for the business year from 1 January to 31 December 2013. The maintenance of the books and records and the preparation of the annual financial statements and management report in accordance with German commercial law and supplementary provisions of the articles of incorporation agreement are the responsibility of the Company's management. Our responsibility is to express an opinion on the annual financial statements, together with the bookkeeping system, and on the management report based on our audit.
We conducted our audit of the annual financial statements in accordance with Sec. 317 HGB ("German Commercial Code") and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer. Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the annual financial statements in accordance with German principles of proper accounting and in the management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the entity and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the books and records, the annual financial statements and the management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall presentation of the annual financial statements and management report. We believe that our audit provides a reasonable basis for our opinion.
26 Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the annual financial statements of Eurocity Bank AG, Frankfurt am Main/Germany, comply with the legal requirements and supplementary provisions of the articles of incorporation agreement and give a true and fair view of the net assets, financial position and results of operations of the entity in accordance with German principles of proper accounting. The management report is consistent with the annual financial statements and as a whole provides a suitable view of the entity's position and suitably presents the opportunities and risks of future development.
Frankfurt am Main/Germany, 27 June 2014
Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft
(Dr. Braun) (p.p. Eisel) Wirtschaftsprüfer Wirtschaftsprüfer [German Public Auditor] [German Public Auditor]
27 E d i t i o n n o t i c e
Eurocity Bank AG Goetheplatz 4 60311 Frankfurt am Main Tel.: +49 (0) 69 - 800 853 - 0 Fax: +49 (0) 69 - 800 853 - 199 E-Mail: [email protected] 28