Investor Presentation with 3M’17 Financials
April 2017 Executive summary
Structurally attractive Turkish Economy Underpinning A Dynamic Banking Sector • Turkish market presents a strong opportunity among emerging markets thanks to large and growing economy energized by a highly attractive demographic profile • In this macro backdrop, banking sector has a promising future, with growth opportunities implied by current product and volume penetration figures, and a profitability higher than that of emerging market peers • Tight monetary stance of the Central Bank helped ease the currency volatility paving the way for realization of growth objectives • With positive impact from macro incentives headlined by the Credit Guarantee Fund program, strong growth returned to lending
One of the Top Performing Banks in the Market • QNB Finansbank is one of the strongest players in this market with 5th ranking across most categories among privately owned banks • It has a very strong distribution network balanced between a branch footprint covering 99% of banking business in the market and best in market digital offerings • It has shown strong financial performance beyond its scale even in most volatile market conditions driven by differentiation, adaptability and right people brought together
New Shareholder Opens a New Frontier to QNB Finansbank • Recent acquisition by QNB positions QNB Finansbank as the Turkish bank with the strongest shareholder • QNB is the largest player in Middle East and Africa by all critical measures and has the highest ratings among all banks with a presence in Turkey • Its presence across a wide geography overlaps well with Turkey’s key foreign trade partners bringing opportunities in this area • QNB Finansbank’s launch of tis new brand has been very successful, and is translating to successful expansion of its customer franchise in potential growth areas • QNB Finansbank already started seeing positive impact of new shareholder structure in funding costs and trade volumes • With the new shareholder, QNB Finansbank will add a new growth chapter in its successful history capturing its fair share in Corporate and Commercial Banking while sustaining its success in Retail and SME Banking
1 Contents
1 Macro-economic Overview
2 QNB Finansbank and QNB Group at a Glance
3 Loan-based Balance Sheet Delivering High Quality Earnings
4 Solid Financial Performance
5 Appendix
2 Macro-economic Overview Structurally attractive Turkish economy and focus on fiscal discipline(1)
Large economy with low GDP / capita… …and highly attractive demographic profile … generating high real GDP growth
GDP # GDP per capita Population by Age Groups GDP Growth, Constant Prices 2016, USD, tn (USD, k) 2016 ,% 2016, % 31.7 8.7 8.9 10.7 12.3 5.3 SA 28 18 41 7 6 2.9 2.8 10.8 TR 25 16 43 8 7 1.7 1.8 0.3 BR 23 16 44 9 8 1.3 -0.2 0.9 RU 17 10 45 14 14 0.5 0.3 PL 15 11 44 14 16 -3.6 EUZ BR RU TR PL SA 0-14 15-24 25-54 55-64 65+ TR PL EUZ SA RU BR
Low fiscal deficit… … and controlled external deficit… … with low public debt
Fiscal Deficit / GDP Current Account Deficit / GDP Gross Public Debt / GDP 2016, % 2010-2016, % 2016, % 8.7 91.3 8.9 78.3 6.7 3.7 3.5 5.5 54.2 4.7 50.5 2.4 3.7 3.8 1.7 29.1 1.3 17.0
TR EUZ PL RU SA BR 2011 2012 2013 2014 2015 2016 RU TR SA PL BR EUZ
Source: IMF WEO – Apr’17; ECB; CIA World Fact Book; Central Banks; BRSA; Turkstat; IMF FSI (1) EUZ: Eurozone, BR: Brazil, RU: Russia, PL: Poland, SA: South Africa, TR: Turkey 4 Sound banking system with inherent growth potential(1)
Low leverage ratio… … and limited NPL levels… … with strong profitability characteristics
Leverage ratio NPL ratio Banking Sector Pre-tax RoA 2016 2016, % 2010-2016 average, % 12.5 12.2 9.6 2.3(3) (2) 10.8 10.5 10.0(3) 9.1 1.6(2) 1.5 1.4 5.1 1.1 4.0 3.8(2) 3.2 2.9
EUZ SA BR PL RU TR RU EU PL BR TR SA TR RU BR SA PL
Further growth potential in deposits… … feeding overall lending growth potential… … as well as ongoing retail lending growth
Deposits / GDP Loans / GDP Household debt / GDP 2016, % 2016, % 2016, % 111.2 110.3 50.2
80.5 79.4 36.8 36.0 66.9 63.9 59.2 65.1 24.9 56.1 49.7 55.8 49.6 16.2 13.5
EUZ SA PL BR TR RU EUZ SA TR PL RU BR EUZ SA PL BR TR RU
Source: Bloomberg; ECB; Central Banks; BRSA; Turkstat; IMF FSI (1) EUZ: Eurozone, BR: Brazil, RU: Russia, PL: Poland, SA: South Africa, TR: Turkey (2) As of Q2’16 5 (3) As of Q3’16 Lacklustre credit growth of 2016 has turned high pace in 2017 thanks to Credit Guarantee Fund Program and regulatory normalization in retail
Credit Guarantee Fund Program Annualized credit growth rate in Turkish market
Business loans Total guaranteed portfolio TRL, % • Business loans (constant FX) size: TRL 250bn(1) • A total of TRL Retail loans • Individual client loan size cap 250-280bn loans 37 for PGS will be under ˗ SME: TRL 12mn CGF guarantee 32 ˗ Commercial: TRL 50mn at the end of the • Guarantee ratio program 27 ˗ SME: 90% • This is equal to 26 25 ˗ Commercial: 85% 22% of business 29 24 ˗ Exporter: 100% loans at the end 26 25 • NPL cap for guarantee: 7% of of 2016 20 20 total portfolio 18 20 17 15 11 Regulatory changes to support retail loan growth 14 14
• Extended maximum loan maturity from 36 to 48 months 10 9 • General provision on retail loans reduced from 4% to 1% 7 • Risk weighting of retail loans realigned to international standards • LTV on mortgages increased from 75% to 80% 2011 2012 2013 2014 2015 2016 3M’17
(1) At least 80% will be under Portfolio Guarantee System (an accelerated way to include bank loans in CGF incentive program. CGF approves loans to be induced in 2 days on average) 6 Effective tightening of monetary policy led to stabilization in FX volatility
Central Bank rates TRL against USD
12.5 Late liquidity 4.0
12.0
3.5
response
Moody’s Moody’s downgrade
11.5 US election Coup attempt Coup
3.0 resignation PM Monetary policy policy Monetary 11.0 O/N lending downgrade Fitch
10.5 2.5
10.0
Jul’16
Jan’17 Jan’16
Jun’16
Oct’16
Feb’16 Sep’16 Feb’17
Apr’16 Apr’17
Dec’16
Mar’17 Mar’16
Aug’16 Nov’16 May’16 9.5 Avg. funding rate Options implied TRL volatility 9.0
8.5 25
8.0 20 response
1 week repo Moody’s downgrade
7.5 15 US election
Coup attempt Coup
PM resignation PM Monetary policy policy Monetary 7.0 O/N borrowing 10 downgrade Fitch
6.5 5
Jul’16
Jul’16
Jan’17 Jan’16
Jun’16
Jan’16 Jan’17
Oct’16
Jun’16
Feb’16 Sep’16 Feb’17
Oct’16
Apr’16 Apr’17
Sep’16 Feb’16 Feb’17
Dec’16
Apr’16 Apr’17
Mar’17 Dec’16 Mar’16
Aug’16 Nov’16
Mar’16 Mar’17
Aug’16 Nov’16
May’16 May’16
7 QNB Finansbank and QNB Group at a Glance QNB Finansbank: 5th Largest Privately Owned Universal Bank(1)
QNB Finansbank group structure QNB Finansbank market positioning
% Owned by QNB Finansbank Bank only, 2016 Comm. Total Total Total Credit install. Branch assets loans deposits GPL(2) cards loan Mortgage Brokerage, Co-operation Leasing and Information Consumer Fund Mgmt. with Other Factoring Technology Finance 1st İşbank İşbank İşbank İşbank İşbank Garanti İşbank Garanti and Insurance Banks 99 100 100 33 100 Yapı 2nd Garanti Garanti Garanti Garanti Garanti Garanti İşbank 100 51 100 9 Kredi
Yapı Yapı Yapı Yapı 3rd Akbank Akbank İşbank Akbank 49 Kredi Kredi Kredi Kredi
Yapı Yapı Yapı 4th Akbank Akbank Akbank Akbank Kredi Kredi Kredi Financial highlights 5th DenizbankDenizbank Denizbank TEB TEB QNB Finansbank BRSA bank only financials 3M’17 TRL, bn 6th Denizbank DenizbankDenizbankDenizbank Total assets 109.0 Net loans 69.2 7th TEB TEB TEB TEB ING HSBC Akbank Denizbank Customer deposits 54.9 Shareholder's equity 10.7 8th ING ING ING ING TEB TEB ING ING Branches (#) 604
Active customers (mn) 5.3 9th HSBC HSBC HSBC HSBC HSBC ING HSBC HSBC Bank only employees (#) 12,277
Source: BRSA bank only data; BAT Note: All information in the presentation is based on BRSA bank only data unless stated otherwise (1) In terms of total loans 9 (2) Includes overdrafts QNB Finansbank covers Turkish geography through a diverse distribution network and market’s only “pure digital bank”
Internet banking Mobile banking
Mobile banking
ATMs Internet banking
872k active 1,501k active internet banking mobile banking customers customers 391k active mobile banking customers 604 branches Direct sales 2,824 ATMs 207k active around Turkey internet banking customers
Covering 71 out of 594 in-house and 5 81 cities of POS Field service outsource Turkey(1) personnel Call center
Call center Telesales
234k POS 137 field service terminals personnel 173 inbound agents 777 inbound 49 outbound agents agents
Source: BRSA Finturk (1) Representing 99% of banking activity in Turkey in terms of total loans and deposits by cities 10 QNB Finansbank has shown success beyond its scale in volatile market settings
Financial performance since 2010 Drivers of QNB Finansbank’s performance resilience
Average RoA Between Q1’10 and Q4’16, quarterly 2.1 Unique practices delivering market 2.0 Differentiation leading financial results 1.9
1.8
1.7 (4) 1.6 (2) Entrepreneurial culture and capabilities Adaptability 1.5 to adapt to changing market conditions (3) 1.4
1.3
1.2 (1) 1.1 Right people brought together via a clear guidance of meritocracy and an Right people 1.0 aspiration for diversity that forms the 50 100 150 200 250 300 350 basis of everything Asset Size TRL bn, 2016
Source: BRSA bank only data (1) Profit for the Year from Discontinued Operations amounting to TRL 271mn is excluded (2) TRL 180mn sale of Finans Emeklilik in Q4’12 is excluded (3) TRL 388mn sale of Deniz Emeklilik in 2011 and TRL 262mn dividend income in 2012 are excluded 11 (4) Sale of YKB Emeklilik in 2013 is excluded QNB’s recent acquisition of Finansbank has brought a strong support to one of market’s leading performers
QNB Finansbank QNB Group
% %
Qatar National Bank Qatar Investment Authority Shareholder 99.88 50.0 Structure Other Private Sector 0.12 50.0
Moody’s Fitch Moody’s Fitch S&P Long-term Foreign Currency Ba1 BBB- Aa3 AA- A+ Borrowing Long-term Ratings Short-term Foreign Currency NP F3 P-1 F1+ A-1 Borrowing Short-term
• Focused on traditional banking activities, complemented by • Largest bank in Qatar by market cap., assets, loans, deposits ancillary services (investment banking, brokerage, leasing, and profit factoring, asset management) • Largest bank in MEA by total assets, loans, deposits and profit Corporate • Important partnerships in insurance with leading • Operating in more than 30 countries around the world across 3 Information international institutions (Sompo Japan in basic insurance continents and Cigna in life insurance and private pensions) • More than 1,250 locations, supported by more than 4,300 ATMs and employing more than 28,000 staff
12 QNB is the leading financial institution by all measures in the MEA region
Total Assets Loans Deposits USD bn, 2016 USD bn, 2016 USD bn, 2016
197.7 143.0 139.2 182.6 109.0 142.4 97.0 122.0 84.6 84.1 117.7 79.1 77.6 80.9 67.6
(1) (1) (1)
Net Profit Top MEA Banking Brands Top MEA Banks by Market Cap USD bn, 2016 2016 USD bn, 2016
3.40 3.8 37.6 3.09 3.4 2.48 27.3 2.17 2.5 1.97 22.7 2.1 2.0 21.1 17.4
(1) (1)
(1) NBAD + FGB Source: Companies’ December 2016 Press Release or Financial Statements if available; Brand Finance 2017; Bloomberg 13 QNB ownership brings a strong geographic reach to QNB Finansbank QNB presence QNB footprint(1) especially with important trade partners of Turkey… Top 40 trade partners of Turkey
Middle East North Africa
Qatar Egypt
KSA Libya
Jordan Tunisia
UAE Sudan
Syria Algeria
Palestine Mauritania
Iraq Europe
Oman United Kingdom
Bahrain France
Kuwait Switzerland
Lebanon Turkey
Yemen Asia
(2) Iran Indonesia
Singapore Sub-Saharan Africa India South Sudan China Togo Vietnam
Myanmar (1) Through ownership of 20% shares of Ecobank as of 30 June 2016, including ordinary and QNB’s convertible preferred shares (2) Dormant 14 …and with QNB, QNB Finansbank has the strongest shareholder of all banks in Turkish market
QNB’s exceptional strength is underlined by all three QNB has superior ratings and dominant presence in domestic market major rating agencies Parent’s Parent’s Foreign Currency Market Share Major Controlling Long-term Rating in Domestic “Our stable outlook on Qatar National Bank (QNB) reflects the bank’s resilient Banks Shareholder Moody’s Fitch S&P Market(1) financial performance supported by its core franchise in Qatar as well as its expected extraordinary support from the Qatari Government” Akbank Sabancı Holding Not rated N/A May 31st, 2016
Isbank Pension Isbank Not rated N/A Fund “The standalone rating reflects: (1) consistently high profitability levels, supported by QNB's dominant market position and government relationships; (2) strong asset quality and sound capitalization; (3) strong funding and liquidity Garanti BBVA A3 A- BBB+ 12% metrics supported by growth in both its domestic private and international deposit base and (4) increasing business diversification derived from non-domestic Unicredit Baa1 BBB+ BBB- 13% operations.” Yapi Kredi Koç Holding Baa3 Not rated BBB- N/A May 20th, 2016 QNB QNB Aa3 AA- A+ 45% Finansbank “Profitability is stronger than that of most peers. Risk appetite is fairly conservative despite rapid growth and expansion into some higher-risk markets. Denizbank Sberbank Ba2 BBB- N/A 29% We note however that QNB has a good track record of integrating and managing subsidiaries in weaker operating environments” BNP Paribas A1 A+ A Not TEB April 21st, 2016 Çolakoğlu Holding Not rated Disclosed(2)
Only bank ranked among top 50 safest banks(3) in the world with Source: Bloomberg; company reports; ECB; Central Bank of Russia presence in Turkey (1) Only banking entities and market share by assets as of 2016 (2) BNP Paribas is among the 10 largest banks in the World and the largest French bank 15 (3) Global Finance Safest Banks in the World Strong deployment of ‘‘QNB’’ brand across the country supports capturing synergies…
Bank rebranding launch through a new Professional sports sponsorships ‘‘QNB’’ brand standalone awareness in Turkey media campaign
73%
55% 47% 43% 39%
Nov’16 Dec’16 Jan’17 Feb’17 Mar’17 ‘‘Stronger than ever, we are now QNB Finansbank’’ Customer perception of QNB acquisition
Rebranding of all branches Relaunch of CardFinans platform Positive perception share Negative perception share
64% 586(1) 506 51% 51% 389 44% 46% 293 175 81 41 14% 14% 14% 8%
0%
20’ -
16 ‘‘There is more to life than
Jan’17 Nov’16 Dec’16 Jan’17 Feb’17 Mar’17
Oct’16
Feb’17
Dec’16
Mar’17 Nov’16 Oct things you buy’’
(1) All physical street level locations are completed as of March; some branch locations carry two branch licenses 16 … supporting growth in a new segment of clients or strengthening areas of weakness
Strong client base growth in retail deposits ensuring stable and cheaper Ability to attract stable and cheap deposits from SME clients funding
Number of retail deposit clients(1) Number of active SME time deposit clients(2) Thousands
+23% +83%
408 13,267 333 6,238
Dec’15 Mar’17 Dec’15 Mar’17
Leveraging groups geographic footprint and stronger correspondent Significant improvement in SME lending thanks to more competitive access for improving trade business pricing
Trade finance market share Share of low risk clients in SME portfolio 6.6% 73% 5.7% 64%
4.8% 4.8% 5.0% 5.4% 4.3% 4.5% 5.2%
Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 Q3’16 Q4’16 Q1’17 Mar’16 Mar’17
(1) Includes clients with at least TRL 3,000 in total deposit balances. Excludes retail deposit clients managed in other business banking segments; includes Enpara clients 17 (2) Segment minimum volumes per customer applied … and delivering improvement in cost of funding
QNB Finansbank’s deposit interest rate costs already converged to ….while wholesale funding costs declined immediately following the sector… announcement of acquisition
Gap with non-state banks in TRL time deposit pricing Eurobond yields Bps Percent, 2014 issuances 70 7
60 QNB Finansbank 50 6 40
30 5 20
10 4 0 Peers’ average(1)
-10
-20 3
Q4’15 Q2’16 Q4’14 Q1’15 Q2’15 Q3’15 Q1’16 Q2’16 Q3’16 Q4’16 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Q3’16 Q4’16 Q1’17 Feb’17
Source: BRSA; Bloomberg (1) Eurobonds of Garanti, Akbank, Isbank and Yapi Kredi issued around the same time as QNB Finansbank 18 The new shareholder opens a new frontier of growth for one of Turkey’s top performers
2016 beyond: Sustained success 1987-2004: fast growth behind 2005-2011: Retail banking boom 2012-2016: Business banking in Retail and SME while leap leadership in Corporate & with market leading growth and growth with productivity and risk frogging market in Corporate & Commercial Banking success focus Commercial Banking Total Assets Market share Market share Market share Ranking in Private Banks(1) % % % Commercial 6 Credit cards 14.2 credit cards 9.1 3.5-4.0 9 8.1 10.5 Mortgage Commercial 8.0 2.3 7.3 7.5 instalment loans(3) GPL(2) 6.0 3.7 Corporate & Commercial 6.9 SME loans 5.0 4.2 banking 5.0 3.1 35 1.2 Retail deposits 2.6 Business demand deposits
1987 2001 2004 2005 2010 2011 2015 Feb’17 Next 3-5 years
Source: BAT; BRSA (1) Among private banks operating in given year 19 (2) Including overdraft (3) Excluding commercial auto and mortgage loans Loan-based Balance Sheet Delivering High Quality Earnings Asset size reached TRL 109bn with 18% average annual growth over last three years while 2017 YTD growth significantly outpacing historical figures
TRL assets growth significantly picked-up Loan heavy balance sheet in 3M’17 Total Assets TRL Assets TRL, bn TRL, bn CAGR +18% CAGR +13% +7% +8% 75.2 85.7 101.5 109.0 67.3 72.7 100% 55.1 60.9 Other 9% 10% 11% 10%
Cash & banks 12% 12% 15% 14%
Securities 12% 11% 2014 2015 2016 3M’17 13% 13% Stable growth of FX assets due to shift to business banking and growing FX securities FX Assets(1) USD, bn IEA CAGR +7% 67% 67% +3% Loans 62% 63% 10.0 8.7 8.5 9.7
2014 2015 2016 3M’17 2014 2015 2016 3M’17
(1) FX-indexed TRL loans are shown in FX assets 21 Sustained and successful execution of the growth strategy…
Loan book continued to shift towards business banking with strong growth in 3M’17 Retail loans are almost flat over the period supported by CGF program Performing Loans by Segment and Currency Retail Loans TRL, bn CAGR +15% TRL, bn +10% CAGR +1% -1% 49.8 56.5 62.3 68.6 100% 21.4 21.6 22.0 21.9 Corporate & 22% 26% Commercial 33% Business 34% Banking(1)
SME(2) 35% 2014 2015 2016 3M’17 35% 31% 34% Significant growth in business loans Credit cards(2) 15% 14% Business Loans 13% 11% TRL, bn CAGR +25% Consumer 28% +16% 25% 23% 21% 46.7 40.3 34.9 2014 2015 2016 3M’17 28.4
TRL Loans 80% 77% 73% 74% FX Loans(3) 20% 23% 27% 26% 2014 2015 2016 3M’17
(1) Based on BRSA segment definition (2) Excluding commercial credit cards 22 (3) FX-indexed TRL loans are shown in FX loans Business banking … focused on business banking loans and selective retail banking segments Retail banking
SME loan growth resumed in 3M’17 with Strong growth in corporate & commercial Selective growth in consumer loans... focused use of CGF program loans supported also by FX rates SME Loans(1) (2) Corporate & Commercial Loans(1) Consumer Loans(3) TRL, bn TRL, bn TRL, bn CAGR +14% CAGR +41% CAGR +1% +20% +12% 0% 23.4 23.4 20.8 13.8 13.9 14.2 14.2 17.5 19.9 19.5 15.0 10.9
2014 2015 2016 3M’17 2014 2015 2016 3M’17 2014 2015 2016 3M’17
... with stabilized volume in credit cards … and decline in mortgages due to low ... mainly driven by GPLs... excluding seasonal declines … profitability General Purpose Loans(4) Credit Card Loans(5) Mortgage Loans TRL, bn TRL, bn TRL, bn CAGR +7% CAGR +1% CAGR -7% +2% -2% -3% 8.9 9.1 9.2 7.6 7.7 7.8 7.7 5.9 7.9 5.0 5.1 5.0
2014 2015 2016 3M’17 2014 2015 2016 3M’17 2014 2015 2016 3M’17
(1) Based on BRSA segment definition (2) Excluding commercial credit cards (3) Including GPL, overdraft and mortgage loans 23 (4) Including overdraft (5) Credit card outstanding from individual clients CGF(1) proactively used as a key strategic tool for high quality SME lending growth
… supporting high loan growth, outpacing the Strong pick-up by QNB Finansbank to date … … and portfolio collateralization market … Volume of CGF guaranteed loans Business loan market share Collateralization ratio(2) TRL billion Small enterprises M/S in CGF program 19.4% 54.4% 49.4% 6.55
3.50%
3.32%
Dec’16 Mar’17 11.4% 3.21% 3.46 Medium enterprises 10.1% 62.0% 3.16% 58.2%
0.59
Dec’16 Feb’17 Mar’17 Dec’16 Jan’17 Feb’17 Mar’17 Dec’16 Mar’17
(1) Credit Guarantee Fund (2) Cash, Mortgage and CGF 24 Controlled asset quality with high coverage ratios
Improving NPL inflows thanks to stringent Across the board improvement in NPL NPLs are well covered through general and risk measures and changing business mix inflows specific provisions NPL Additions / Average Loans% NPL Additions / Average Loans by Segment NPL Coverage(1) GP/ NPL % % SP / NPL 6.7 6.4 Credit cards 119 120 5.4 118 114 3.4 3.3 3.3 4.9 35 34 38 34 Consumer 3.9 3.8 2.7 3.4 3.5 3.6 3.0 3.0 2.9 1.7 SME & Micro 79 80 84 86 1.2 1.0 0.9 Corporate & Commercial 2014 2015 2016 3M’17 2014 2015 2016 3M’17 2014 2015 2016 3M’17
Note: NPL sales of TRL 542mn, TRL 1,153mn and TRL 1,195mn during 2013, 2014 and 2016 respectively (1) General provisions include watch-list provisions 25 Increasingly more conservative approach in consumer lending
QNB Finansbank credit cards QNB Finansbank general purpose loans
Implied limit weighted PD(1)(2) Implied limit weighted PD(1)(2) Indexed to sector for each period Indexed to sector for each period 140 140
130 130
120 120
110 110
100 100
90 90
80 80
Q4’16 Q3’15 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 Q3’16 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q4’15 Q1’16 Q2’16 Q3’16 Q4’16
Feb’17 Feb’17
Source: Credit Bureau (1) Probability of default: estimated using sector and QNB Finansbank’s breakdown of new volumes / cards underwritten and observed PD of each score 26 interval with QNB Finansbank data Securities portfolio increased to TRL 13.9bn, making up 13% of assets
Growth in securities portfolio largely driven by FX securities 85% of TRL securities are indexed / variable rate
Total Securities TRL Securities CAGR +4% TRL, bn TRL, bn +2% CAGR +20% +8% 7.0 6.4 7.5 7.7 100% 12% 9% 15% 15% 9.2 9.2 12.9 13.9 Fixed 100% 0% 0% 0% 1% CPI 57% 56% 55% 55% Trading FRN 30% 35% 30% 30% 54% 52% Available for sale 59% 58% 2014 2015 2016 3M’17
Sustained and strong growth in FX securities
FX Securities 48% Held to maturity 41% 42% 46% USD, bn CAGR +31% +12% 0.9 1.0 1.5 1.7 100% 2014 2015 2016 3M’17 Fixed TRL Securities 76% 70% 58% 55%
FX Securities 24% 30% 42% 45% 2014 2015 2016 3M’17
27 Well-diversified funding structure underpinned by solid deposit base
Use of diversified funding sources while increasingly leveraging new shareholder structure to Slight decline in TRL liabilities refrain from deposit competition Total Liabilities TRL Liabilities TRL, bn TRL, bn CAGR +5% CAGR +18% -4% +7% 53.9 46.4 48.3 51.9 75.2 85.7 101.5 109.0 100% Equity 11% 11% 10% 10%
Other liabilities 11% 13% 12% 12% 2014 2015 2016 3M’17
Borrowings 24% 22% 26% 28% Strong growth of FX liabilities leveraging CBRT swap facility and soaring FX deposits Demand deposits 8% 9% FX Liabilities 9% 10% USD, bn CAGR +11% IBL +16% 15.7 Time deposits 46% 46% 13.5 42% 40% 12.4 12.9
2014 2015 2016 3M’17 2014 2015 2016 3M’17
28 Stable L/D ratio despite strong loan growth, with improving deposit mix thanks to strong demand deposit growth
Stable TRL deposits with selective exit from price sensitive clients Recent growth in FX deposits in line with the sector
TRL Deposits FX Deposits TRL, bn USD, bn CAGR +5% CAGR +6% +16% -3% 31.2 6.3 6.8 26.9 28.6 30.2 5.9 5.9
2014 2015 2016 3M’17 2014 2015 2016 3M’17
Impressive growth in demand deposits Loan-to-deposit ratio in line with the sector
Demand Deposits Loan-to-deposit ratio(1) TRL, bn % CAGR +34% +23% 120 119 118 11.4 117 9.2 7.5 5.8
2014 2015 2016 3M’17 2014 2015 2016 3M’17
(1) Including bank deposits, excluding CBRT deposits 29 Disciplined use of non-deposit funding and strong capital base
Low reliance on institutional borrowings and repo funding; strong Capital adequacy at comfortable level with additional buffer despite long-term opportunity with new shareholder structure exchange rate impact and sub-loan amortization (1) Borrowings by Type Capital Adequacy Including TRL bn, % of borrowings % expected sub-loan conversion effect 26.8 30.7 % of liabilities CAR 17.0 14.7% 4.2 4.2 Bonds issued 16.1% 15.4 15.4(2) 14.5 14.3
Funds borrowed 40.2% 41.3% 10.6 11.7
3.2 3.1 Sub-debt 12.1% 11.0% 13.0 Tier 1 12.0 12.6 12.5 Bank deposits 7.4% 1.9 5.1 18.0%
Repo 24.3% 6.4 4.2 14.9%
2016 3M’17 2016 3M’17 2014 2015 2016 3M’17
(1) Non-deposit funding (2) 115bps impact from conversion of USD 260mn sub-loan tranche to Basel III; additional 218bps remain due to potential conversion of remaining 30 USD 650mn of Basel II compliant subloans Current sub-loan portfolio creates significant capital buffers to support future growth
Outstanding Capital sub-loans Maturity Amount Compliance consideration
• Tranche 1 Oct’20 USD 325.00 Basel II USD 79.4mn • Conversion to Basel III compliant sub-loan can be carried over either through parent or market issuances • Tranche 2 Oct’21 USD 200.00 Basel II USD 48.9mn • Actual timing will depend on capital requirements • Tranche 3 Dec’21 USD 125.00 Basel II USD 30.5mn
• Tranche 4 Dec’21 USD 260.00 Basel II USD 0 • Planned conversion to Basel III compliant 10 year maturity sub-loan; expected May’17
Impact of CAR buffers on reported CAR % 17.58 15.40 2.18 14.25 1.15
Current CAR Uplift through CAR with Additional CAR with expected expected buffers all buffers conversion conversion through future conversions
31 A structured approach to market and liquidity risk management
• TRL interest rate sensitivity is actively managed in the international swap market Focused ALM • Hedge swap book stands at TRL 15.2bn as of Q1’17 leads to low interest rate • Net change in Economic Value / Equity is constantly monitored under several scenarios sensitivity • Regulatory IRRBB ratio is at 12.8% as opposed to 20% limit in February 2017; indicating a conservative interest rate position on the banking book
• Strong framework is in place to ensure sufficient short-term and long-term liquidity • Total Regulatory Liquidity Coverage ratio is 98.1% as opposed to 80% limit, whereas FX Regulatory Prudent Liquidity coverage ratio is 127.8% as opposed to 60% limit. Liquidity coverage ratio limits will be increased management of gradually by 10% each year up to 100% and 80% in 2019 for total liquidity and FX liquidity, respectively liquidity risk • Continuous monitoring and reporting are in place to support effective management in addition to contingency plans for extreme situations
• Low trading risk appetite is reflected by the limit structure both on portfolio and product level Low risk appetite for trading risks • Best-in-class measurement methodologies are in place with daily monitoring of all market risk metrics (VaR, sensitivities, etc.) in addition to stress tests and scenario analysis
32 Solid Financial Performance % CAGR % Real banking Focus on real banking income generation growth
Slight decline in NIM(1) due to change in Operating income driven from core banking activities business mix and regulatory impact(2) Total Operating Income NIM after Swap TRL, mn % +11% 5.2 4.8 4.7 5.0 5,601 100% = 452 4,810 4,552 351 Trading & 1,363 476 other income 1,314 2014 2015 2016 3M’17 Fees and 1,334 commissions Stable fee generation despite regulations +28% Real Fees / Assets banking 3,786 1,499 % income Net interest 3,145 1,173 54 All fees (1) 2,742 1.9 Income 53 410 319 1.6 1.6 800 1,035 1.5 1.6 1.5 2014 2015 2016 3M’16 3M’17 1.4 1.4 Fees excluding account maintenance +10% +29% 2014 2015 2016 3M’17
(1) Including swap expenses (2) Interest rate cap in cards and O/D reduced from 2.02% per month to 1.84% per month as of January 1, 2017 34 Exceptional spread management in both TRL and FX fronts
Resilient TL loan yields and loan to deposit spreads Consistent loan-to-deposit spreads for FX side
TRL Spread FX Spread(1) %, period average %, period average
16.7 4.7 4.7 16.4 4.5 Loan 15.5 Loan 4.4 15.1 yield yield
11.1 10.5 10.5 Time 9.9 deposit cost 2.3 Time 2.2 2.1 deposit 9.1 9.5 Blended 1.9 8.8 8.7 cost(2) cost Blended 1.8 1.7 1.7 cost(2) 1.5
2014 2015 2016 3M’17 2014 2015 2016 3M’17 LtD LtD 6.3 6.4 7.2 7.7 2.9 2.9 2.9 3.0 spread spread
(1) Adjusted for FX rate changes (2) Blended of time and demand deposits 35 Sustained fee generation with strong performance across diversified business segments 32% YoY adjusted growth in fee generation driven by strong loan growth and value added service revenues Cumulative Net Fees and Commissions Recovery of fees in total income thanks to loan TRL, mn Adjusted(1) +32% growth related fee generation Reported Fees / Total Income +28% % 319 410 YoY Change Others 4% 7% All fees +124% Insurance 11% 29.3 14% +57% Account 7% 27.3 27.4 maintenance 4% -20%
24.3 Loans 22% 26.3 +60% 25.6 27% 24.4 23.2 Fees excluding account maintenance
Payment systems 57% 48% +10%
2014 2015 2016 3M’17
3M’16 3M’17
(1) When regulatory impact of account maintenance fees is excluded 36 Change in business mix combined with measures taken in credit risk management across segments translates to better asset quality
Shift towards business banking helps improve cost of risk
Loan Composition SCoR CoR on a declining trend % of total loans 3M’17, % Cost of Risk % 3.0 Credit cards(1) 15 14 13 11
13 2.1 2.3 General 15 2.2 2.2 16 16 purpose loans 7 0.1 8 9 1.6 Mortgage 12
31 34 2.4 35 SME(2) 35
33 34 0.7 Corporate & 27 2014 2015 2016 3M’17 22 Commercial
2014 2015 2016 3M’17
(1) Excluding commercial credit cards (2) Based on BRSA segment definition, excluding credit cards 37 Diligent focus on efficiency even facing high business growth leading to improving efficiency metrics
Stable operating expenses… … leading to improvement in cost/income ratio…
OpEx Cost / Income TRL, mn % CAGR 9.5% -0.2% 56.9(1) 51.3 50.0(2) 2,334 2,737 2,800 703 701 46.8 Depreciation & 9% 8% 9% 9% 9% Amortization
2014 2015 2016 3M’17 General & 50% 54% 50% 51% 48% Administration … and efficiency improvement with high business growth
OpEx / Assets % 3.3 3.3(1) 3.0(2) 2.7 43% Staff 41% 39% 41% 41%
2014 2015 2016 3M’16 3M’17 2014 2015 2016 3M’17
(1) Including one-off fine of TRL 32.7mn from Ministry of Customs and Trade in 2015 (2) Including one-off fine of TRL 30,8mn provision for RUSF penalty 38 Key financial ratios
Bank only figures 2014 2015 2016 3M’16 3M’17 YoY RoAE 10.9% 8.0% 12.7% 7.1% 16.2% +9.0pps RoAA 1.2% 0.9% 1.3% 0.7% 1.6% +0.9pps Profitability Cost / Income 51.3% 56.9% 50.0% 59.9% 46.8% -13.1pps NIM after swap expenses 4.7% 4.7% 5.2% 4.7% 5.0% +0.3pps
Loans / Customer deposits 123.8% 121.8% 121.1% 119.5% 126.1% +6.6pps Liquidity Loans / Deposits 119.7% 117.9% 116.7% 115.6% 118.7% +3.1pps (incl. Bank Deposits, excl. CBRT deposits)
NPL Ratio 5.2% 6.3% 5.8% 6.6% 5.6% -1.0pps Asset Quality Coverage 79.2 80.4% 84.0% 81.2% 85.9% +4.7pps Cost of Risk 2.3% 2.2% 2.2% 1.8% 1.6% -0.2pps
CAR 17.0% 15.4% 14.5% 14.7% 14.3% -0.4pps Solvency Tier I Ratio 13.0% 12.0% 12.6% 12.7% 12.5% -0.1pps Leverage 8.8 9.5 10.0 9.5 10.1 +0.7
39 Key strategies in 2017 and going forward
• Real banking, i.e., minimum market risk
Long Term • Prudent credit risk management Sustainable Strategy • High CAR, high liquidity at all times
• Leverage wholesale funding opportunities presented by new shareholder structure
• Maintain solid, above the market growth in Corporate & Commercial and SME segments
• Measured growth in consumer lending with general purpose loans and renewed emphasis on credit cards with “high card spend” – a driver of acquiring volume (an SME business) Mid Term • Profitability and downstream business focus in Corporate & Commercial segments Strategic Actions • Continued emphasis on building a stable deposit base through new channels, offerings to untapped segments and customer groups (enpara.com)
• Focus on fee generation and operating expenses control as well as continuing improvement on cost of risk front thanks to the shift in loan book mix towards less risky segments
40 Appendix Finansbank BRSA Bank-Only Summary Financials
Income Statement Balance Sheet
TRL, mn 2014 2015 2016 3M’16 3M’17 TRL, mn 2014 2015 2016 3M’16 3M’17 Cash & Banks(1) 9,108 10,313 14,925 10,941 15,143 Net Interest Income (After 2,742 3,145 3,786 800 1,035 Securities 9,165 9,197 12,950 9,765 13,931 Swap Expenses) Net Loans 50,344 57,273 62,923 58,447 69,191 Fixed Asset and Net Fees & Commissions 2,380 2,283 2,912 2,398 2,945 1,334 1,314 1,363 319 410 Investments(2) Income Other Assets 4,209 6,661 7,792 5,802 7,801
Trading & Other Income 476 351 452 53 53 Total Assets 75,206 85,727 101,503 87,354 109,010 Customer Deposits 40,652 47,009 51,966 48,920 54,889 Total Income 4,551 4,810 5,600 1,173 1,499 Borrowings 17,964 18,835 26,794 19,176 30,736
Operating Expenses (2,334) (2,737) (2,800) (703) (701) Bonds Issued 5,373 4,336 4,312 4,725 4,527 Funds Borrowed 4,898 5,640 10,758 5,922 12,706 Total Operating Income 2,218 2,073 2,800 470 797 Sub-debt 2,122 2,662 3,236 2,627 3,380
Provisions (1,076) (1,170) (1,316) (266) (263) Bank Deposit 1,423 1,557 1,973 1,652 5,539 Repo 4,147 4,639 6,515 4,250 4,584 Profit before tax 1,142 903 1,484 204 534 Other 8,017 10,860 12,617 10,090 12,644
Tax expenses (265) (197) (280) (42) (112) Equity 8,574 9,024 10,126 9,166 10,742 Total Liabilities 75,206 85,727 101,503 87,354 109,010 Profit after tax 877 706 1,203 162 422 & Equity
(1) Includes CBT, banks, interbank, other financial institutions (2) Including subsidiaries 42 Finansbank BRSA Consolidated Summary Financials
Income Statement Balance Sheet
TRL, mn 2014 2015 2016 3M’16 3M’17 TRL, mn 2014 2015 2016 3M’16 3M’17 Cash & Banks(1) 9,209 10,403 15,084 11,058 15,279 Net Interest Income (After 2,865 3,272 3,962 840 1,076 Swap Expenses) Securities 9,209 9,254 12,983 9,809 13,983 Net Loans 50,181 57,110 62,637 58,258 68,895
Net Fees & Commissions Fixed Assets(2) 1,897 1,979 2,243 1,979 2,280 1,397 1,387 1,445 338 431 Income Other Assets(3) 6,339 9,304 11,378 8,512 11,703 Total Assets 76,835 88,049 104,326 89,615 112,140 Trading & Other Income 474 307 455 54 62 Customer Deposits 40,473 46,755 51,892 48,726 58,299 Total Income 4,736 4,966 5,862 1.232 1,569 Borrowings 19,439 20,921 29,324 21,221 30,028
Operating Expenses (2,444) (2,874) (2,938) (732) (735) Bonds Issued 5,825 5,827 6,332 6,229 6,630 Funds Borrowed 5,853 6,066 11,164 6,322 13,344 Total Operating Income 2,292 2,092 2,923 500 834 Sub-debt 2,122 2,662 3,236 2,627 3,380 Provisions (1,100) (1,207) (1,390) (284) (278) Bank Deposit 1,423 1,557 1,973 1,652 1,973
Profit before tax 1,192 884 1,533 216 556 Repo 4,216 4,809 6,620 4,391 4,702 Other 8,126 10,968 12,806 10,223 12,863 Tax expenses (276) (204) (295) (45) (110) Equity 8,798 9,405 10,304 9,445 10,950 Profit after tax 916 680 1,238 171 446 Total Liability 76,835 88,049 104,326 89,615 112,140
(1) Includes CBT, banks, interbank, other financial institutions (2) Including subsidiaries 43 (3) Including Leasing & Factoring receivables Borrowings and Issuances
Type of Borrowing Maturity Currency Outstanding Principal (mn) Tenor (Years) TRY Bond Apr-17 TRY 76.48 0.50 TRY Bond Jun-17 TRY 77.30 0.26 TRY Bond Jun-17 TRY 95.90 0.26 TRY Bond Apr-17 TRY 63.63 0.25 TRY Bond Apr-17 TRY 53.66 0.25 TRY Bond Apr-17 TRY 411.95 0.25 TRY Bond Apr-17 TRY 66.76 0.25 TRY Bond May-17 TRY 108.80 0.28 TRY Bond Jul-17 TRY 39.37 0.47 TRY Bond May-17 TRY 160.17 0.28 TRY Bond Jun-17 TRY 35.00 0.26 Eurobond Nov-17 USD 350.00 5.00 Eurobond Apr-19 USD 500.00 5.00 Eurobond Apr-17 USD 3.00 0.25 Eurobond Apr-17 USD 24.00 0.25 Eurobond Feb-18 USD 15.00 1.00 Eurobond Jun-17 USD 5.00 0.25 Eurobond Jun-17 USD 5.00 0.25 EIB Oct-17 EUR 28.63 7.01 Securitisation Nov-24 EUR 45.83 11.91 Securitisation Nov-17 EUR 6.25 4.91 EBRD May-20 EUR 50.00 5.27 EFSE Dec-19 EUR 25.00 5.01 PROPARCO Jul-25 EUR 20.00 10.32 Subordinated loan Oct-20 USD 325.00 11.07 Subordinated loan Oct-21 USD 200.00 12.01 Subordinated loan Dec-21 USD 125.00 12.01 Subordinated loan Dec-21 USD 260.00 10.01 EIB Nov-19 USD 8.43 7.00 EIB Nov-20 USD 12.09 7.01 EIB Mar-21 USD 43.87 7.01 EIB Apr-21 USD 25.51 7.01 Securitisation Nov-17 USD 37.50 4.91 Securitisation EBRD Aug-20 USD 100.00 4.92 Securitisation IFC Aug-20 USD 100.00 4.92 Securitisation IFC Aug-20 USD 50.00 4.92 Securitisation IFC Aug-20 USD 30.00 4.92 EIB Dec-21 EUR 30.00 6.01 EFSE Dec-22 EUR 15.00 6.97 Syndication EUR Tranche Nov-17 EUR 397.60 1.01 Syndication USD Tranche Nov-17 USD 103.50 1.01 EIB Feb-23 USD 21.13 6.00 EFSE Mar-24 USD 20.00 7.06
44 Board of Directors Same members
Previous Board of Directors under NBG Ownership Current Board of Directors under QNB Ownership
Name Position Background Name Position Background
Chairman and QNB • Founding member of Finansbank Chairman and QNB • Founding member of Finansbank Dr. Ömer A. Aras Dr. Ömer A. Aras Finansbank Group CEO • Former CEO of Finansbank for 6 years Finansbank Group CEO • Former CEO of Finansbank for 6 years
• Former CEO of Finansbank for 7 years • Former CEO of Finansbank for 7 years Sinan Şahinbaş Vice Chairman • Previously worked in Treasury, Corp. Banking and Sinan Şahinbaş Vice Chairman • Previously worked in Treasury, Corp. Banking and Risk Mgmt. departments of Finansbank Risk Mgmt. departments of Finansbank Member of the BoD and • Former Minister of Transportation • QNB Group Chief Business Officer Prof. Dr. Mustafa Abdulla Mubarak Chairman of Corporate • Former Head of Budget Commission in Turkish Member of the BoD • Holds board membership in various QNB subsidiaries Aysan Al-Khalifa Governance Committee Parliament in Qatar, Egypt and Jordan • QNB Group Chief Operating Officer Ali Rashid Al- Christos Alexis • Former CEO of Coca Cola (Greece), Papastratos Member of the BoD • Holds board membership in various QNB subsidiaries Member of the BoD Mohannadi Komninos Cigarette Manufacturer and Shelman S.A. in Egypt and UAE • QNB Group Chief Financial Officer • NBG Group Chief Economist and Strategist Ramzi Talat A Mari Member of the BoD • Holds board membership in various QNB subsidiaries Dr. Paul Mylonas Member of the BoD • Experience in IMF and OECD in Qatar, Egypt and Jordan • QNB Group Chief Risk Officer • Former partner in Arthur Andersen and KPMG Stefanos • Experience in Commonwealth Bank of Australia Member of the BoD • Former board member of Don&Low, Scotland; Alpha Grant Eric Lowen Member of the BoD Pantzopoulos • Holds board membership in various QNB subsidiaries Bank, Greece; NBG, Greece in Egypt and Indonesia • Founding member and former CEO of Garanti • QNB – AGM of Group Credits Mustafa Hamdi Member of the BoD Investment Bank Fatma A Al-Suwaidi Member of the BoD • Holds board membership in various QNB subsidiaries Gürtin • Former CEO of Turkish Commerce Bank in Tunisia and UAE Member of the BoD and • Former Vice Undersecretary of Treasury Member of the BoD and • Former Vice Undersecretary of Treasury Ali Teoman Kerman Chairman of Audit • Former Vice President of BRSA Ali Teoman Kerman Chairman of Audit • Former Vice President of BRSA Committee • Former board member of SDIF Committee • Former board member of SDIF • Current Vice President of Corporate Affairs in Tekfen Dr. Osman Reha Holding Ioannis Vagionitis Member of the BoD • Experience in HSBC (Greece) and Bank of Cyprus Member of the BoD Yolalan • Former CEO of Yapı Kredi • Part-time professor in various universities • Experience in Alpha Bank (Greece), Greek Treasury, Georgios • Former Vice President of BRSA Member of the BoD Geniki Bank (Greece), Emporiki Bank (Greece) and Koutsoudakis Durmuş Ali Kuzu Member of the BoD • Experience in Vakıfbank, Emlakbank, Treasury, Public Probank (Greece) Oversight Institution
Member of the BoD and • Former EVP of Retail Banking and Strategy Member of the BoD and • Former EVP of Retail Banking and Strategy Temel Güzeloğlu Temel Güzeloğlu QNB Finansbank CEO • Experience in Unilever, Citibank, McKinsey & Co. QNB Finansbank CEO • Experience in Unilever, Citibank, McKinsey & Co.
45 Loan heavy balance sheet, 3M’17
Deposits by Segments Avg. Ticket Maturity TRL Cost 100% = TRL 101.5bn % of total TRL, k Days % % Securities by Type Maturity AFS TRL Yield(2) % of total Years(1) % % %
Securities 13% Retail 69% 103.3 58 54 10.6 CPI-Linker 30% 5.57 29 100 11.5 Due from 1% FRN 17% 3.18 100 100 9.7 banks Corporate 31% Cash and 890.9 65 57 11.2 13% reserves Fixed 53% 8.18 49 16 9.4 50% Deposits Wholesale Funding Maturity TRL Cost % of total Years(1) % %
Syndication 8% 0.7 0 0.9 Performing Loans(3) Avg. Ticket Maturity Collateral TRL Yield(2) % of total TRL, k Years(1) %(4) % % Eurobond 15% 1.4 0 5.8 TRY Bond 5% 0.1 100 11.9
Corp. & 35% Comm. 1,014 4.5 29 33 14.2 Post finance 42% 0.8 1 2.6
Net Loans 63% SME 31% 42 2.2 47 93 16.3 21% Borrowings Due to banks 24% 0.0 16 3.0 79 5.8 100 100 11.5 Securitization 3.7 0 3.7 Mortgage 7% 6% GPL 13% 3.2 2.2 5 100 17.7 3% Sub-Debt Capital Base Maturity TRL Cost Credit card(5) 14% 0.6 0.2 N/A 100 12.3 4% Repo % of total Years(1) % %
Sub-debt 24% 4.3 0 5.7 10% Equity
Equity 76% N/A 100 - Fixed and Other 10% 12% other assets Liabilities
(1) Remaining maturity (2) TRL yields only (3) Excluding accruals. Based on QNB Finansbank business lines definition 46 (4) Hard collateralization including cash and mortgages (5) Including business CC. Calculation of Yield includes not revolving CC balance Disclaimer
QNB Finansbank (the “Bank”) has prepared this Presentation for the sole purposes of providing information which include forward looking projections and statements relating to the Bank (the “Information”). No representation or warranty is made by the Bank for the accuracy or completeness of the Information contained herein. The Information is subject to change without any notice. Neither the Presentation nor the Information can construe any investment advise, or an offer to buy or sell the Bank’s shares. This Presentation and/or the Information cannot be copied, disclosed or distributed to any person other than the person to whom the Presentation and/or Information delivered or sent by the Bank or who required a copy of the same from the Bank. QNB Finansbank expressly disclaims any and all liability for any statements including any forward looking projections and statements, expressed, implied, contained herein, or for any omissions from Information or any other written or oral communication transmitted or made available.
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