Investor Presentation
TAS Bank Only Results 2006 YE March, 2007
1 History
Established in April 1954 under the special law “Türkiye Vakıflar Bankasi Türk Anonim Ortaklığı Kanunu” to manage cash derived from revenues and expenditures of charitable organisations set up during the Ottoman Empire period, conducting banking activities with branch offices in Ankara, Istanbul and Izmir In 1957, made its first venture towards broadening its sevices by establishing Güneş Insurance Company Over the next 20 years continued to expand its geographic presence in Turkey reaching 206 branches by 1977 Since the early 1990s, Vakifbank has increased the scope of its retail banking and diversified its loan portfolio by including equipment financing, enterprise loans, auto loans, mortgage loans, and credit cards. In 2000, Vakifbank began offering internet banking services Vakifbank is now a full service commercial and retail bank headquartered in Ankara, providing retail, commercial and investment banking services through a network of 311 branches, 116 satellite branches and five mobile branches, covering 81 Turkish cities Internationally, Vakifbank has subsidiaries in Austria (which operates a branch in Frankfurt and a branch in Köln) and the Turkish Republic of Northern Cyprus and two branches in New York and Bahrain.
2 Following successful IPO in November 2005, c. 25% of Vakifbank of is now listed
Main Shareholders Ownership structure General Directorate of Foundations The GDF manages foundations owning 58.45% of the shares General in the Bank (43.0% in the form of Class A shares and 15.45% Free float Directorate in the form of Class B shares). The GDF was established in 25,18% of Foundations 1924 to administer and regulate existing and future Turkish 58,45% charitable foundations as a state entity directly reporting to the Prime Minister. Non-Affiliated Foundations Other The non-affiliated foundations are independent foundations 0,27% with separate boards of trustees. They currently hold Class B shares, constituting 0.19% of the Bank’s equity. VakifBank Vakifbank Pension Fund Employee The Vakifbank Pension Fund has a 16.10% stake in the Pension fund Bank’s capital as a Class C shareholder. The Bank’s 16,10% employees contribute to the Vakifbank Pension Fund as opposed to the mandatory social security coverage provided by the state Social Insurance Institution. Other Shareholders The other shareholders consist of individual or legal entities that together own 0.08% of the Bank’s equity as Class C Shareholders. Free Float Public domestic and international shareholders.
3 Vakıfbank: An Overview of 2006 results & financial performance trends
Increased share of loans in total assets Total Assets 37,033.9 B/S mix Decreasing securities portfolio Increased funding from retail deposits Gross Loans 19,045.2
B/S Strong asset growth driven primarily by rapid growth loan expansion (retail and SME loans) Securities 10,423.9
Decreasing level of NPLs, stringent credit Total Deposits 24,842.1 Asset review/scoring systems quality 100% NPL coverage Shareholders’ Equity 4,487.4 Capitalis Strong capitalisation levels, allowing for future ation growth Net Interest Income 1,585.2
Increased share of interest income from loans, Revenue rather than securities Net Profit 769.7 mix Focus on generating fee & commission income Branch Network 311 Profitabil Well managed cost base and efficient network ity Customer Number Over 6.3 million 4 Million YTL Financial performance of 2006
Performance highlights
Continued rapid expansion of loan portfolio supported by growth in external borrowings as well as the liquid assets. • Loan portfolio increased by 50% to YTL18 bn YoY • Deposits grew by 7.3% to YTL24.8 bn YoY • Funds borrowed grew by 41.4% to YTL5 bn YoY
Share of loans in total assets increased to 49% compared to 37% in 2005, while the share of securities portfolio contracted to 28.2% from 34.8% in 2005
Loan to deposit ratio reached 73% in 2006 compared to 52% in 2005
Prudent provisioning and improving loan quality: NPLs down to 5.3% of gross loan portfolio in 2006 from 7.7% in 2005 and are fully provisioned
Net interest income grew by 20.2% to YTL1,585.3 mm YoY
Operating Income grew by 18.3% to YTL 2,281.3 mm YoY
Net profit reached to YTL770 mm with an increase of 46% YoY
5 VakifBank is a market leader, particularly in retail and SME finance
Total market share (%) (31.12.2006)
27.0%
20.9%
14.9% 11.3% 9.3% 8.1% 8.4% 8.6% 5.8% 4.6% 4.6% 3.0%
Total Public YTL Mutual Total Loans Retail Credit Commercial ATMs Branches Debit Credit Deposits salary deposits funds loans** Card Installment Card # Card # accounts* Loans
Deposits / Funding Credits Distribution
Source: BRSA weekly reports, Capital Markets Board * VakıfBank estimates ** Includes home, auto and other. Credit card loans, overdrafts not included
6 Yield on Loans & Cost of Funding
Further move toward higher margin loans in YTL. Despite the repricing on YTL deposits, lower cost of YTL deposits.
Yield on loans&securities Spreads NIM
2005 2006 2005 2006 2005 2006
YTL Loans 23.67% 20.27% YTL Loans 9.85% 6.93% 5.47% 5.23%
FX Loans 5.84% 7.72% FX Loans 2.82% 3.64%
YTL Securities 16.74% 15.44% YTL Securities 2.92% 2.10%
FX Securities 6.91% 8.66% FX Securities 3.89% 4.58%
Cost of deposits
YTL Deposits 13.82% 13.34%
FX Deposits 3.02% 4.08%
7 Diversification of asset mix towards interest-earning assets
Breakdown of assets (YTLbn) Interest earning assets (YTLbn)
Cash and central bank Interbank Securities Loans 37.0 Fixed assets Other Lo a ns Se c uritie s Int e r ba nk 1.0 32.6 0.9 32.3 5% : 27. 1.1 GR 1.0 CA 28.2 24.2 18.0 19.5 12.0 1.4 18 .0 1.1 20.0 12. 0 1.5 15.6 1.1 8.0 8. 0 5.4 11.4 10.4 5. 4 11. 4 8.6 10 .4 7.9 8. 6 7. 9 4.8 3.9 3.4 2.3 3. 4 4. 8 3. 9 1.3 1.7 2.3 2.8 2. 3 2003 2004 2005 2006 200 3 2004 2005 200 6
Strong growth in interest earning assets – increased by 14.5% from 2005 to 2006- driven by rapid expansion of loan portfolio
Continued diversification away from securities–from 40.5% of total assets in 2003 and 35.0% of total assets in 2005 to 28.2% in 2006 8 Expansion of loan portfolio continued…
Loans (YTLmm) Comments
FX YTL Loan portfolio registered a CAGR of 49.8% increase between 2003 to 2006 9.8% 18,043 R: 4 CAG YTL loans grew by 41.2% while FX 12,042 12,366 68.5% loans increased by 72.8% from 2005 to 8,062 2006. 5,367 8,756 5,730 Strong growth on loan to deposit ratio 3,539 5,677 31.5% 1,829 2,332 3,286 with focus on profitability 2003 2004 2005 2006
Loan/Deposit (%) Loan/Asset (%)
72.6% 48.7% 36.9% 45.9% 51.9% 33.3% 37.1% 27.5%
2003 2004 2005 2006 2003 2004 2005 2006 9 …with strong focus on retail and SME lending…
Breakdown of loans by sector Comments
YE2005 YE2006 Good position in traditionally strong regions of central and Overdraft Other eastern Turkey Other 2.5% Auto 10.1% OverdraftAuto 1.2% 3.6% 2.2% 10.7% Credit card • Selective expansion in 3.5% Istanbul region Credit card 5.8% To strengthen its retail franchise, VakifBank has 652 Commercial Mortgages Commercial Mortgages 47.9% 11.0% SME portfolio managers, 402 51.9% 8.4% retail portfolio managers and SME 438 marketing associates as SME 19.7% of YE2006 21.5% As a result of these initiatives, cross-selling ratio for SME portfolio managers is 2.38x Guarantees and Commitments (million YTL) and for retail portfolio managers is 2.25x as of 4,638 4,871 YE2006 3,595 3,761 2,971 2,999 2,675 Sustainable growth rate of off- 1,536 balance sheet
2003 2004 2005 2006
Guaratees Commitments
10 …and in particular on high margin products
Loan growths by product in Retail, SME and COMM. loans (YTLmm) 2006 (%) Home Loans 98.30% Commercial SME Mortgages * 18,043 Credit cards Overdraft Auto Gen. Pur. Consumer 1,829 Other Loans 41.96% 221 458 642 Auto Loans -16.77% .8% 49 : GR 1,994 Total Retail Loans 54.44% CA 12,042
1,289 3,572 265 Credit Cards -8.59% 434 702 8,062 1,006 854 Overdraft 5.52% 388 2,584 389 5,367 597 439 531 166 389 1,730 9,420 391 SME Loans 38.24% 287 711 5,764 3,665 2,892 Com.&Cor. Loans 63.43%
2003 2004 2005 2006
*:Includes Housing Loans+TOKI. (YTLmm) Total Loans 49.83% 11 Steady and significant improvement in asset quality
Gross NPLs as % of gross loans Comments
Despite expansion of the -8.7p.p. 14.0% loan portfolio, NPLs continued to decrease 9.0% 7.7% reaching 5.3% of total 5.3% gross loan portfolio in YE2006 compared to 7.7% 2003 2004 2005 2006 in YE2005 Since 2003, loan loss provisions cover 100% of Gross NPLs and provisions (YTLmm) NPLs
998,927 998,927 1,002,0471,002,047 875,828 875,828 795,155 795,155
2003 2004 2005 2006
Gross NPLs Provisions
12 Securities portfolio evolution
Securities 2006 (YTLmm) Comments
Trading securities portfolio Portfolio available for sale Securities held to maturity The securities portfolio 11,359 10,432 372 decreased by 8.2% in 8,595 3.3% 48 7,859 0.5% 2006 YoY and its share in 552 6.4% 1,002 12.8% 1,339 17.0% 9,908 87.2% total assets continued to 5,365 9,914 95.0% 62.4% decline—from 40.3% in 5,517 70.2% 2003 and from 34.8% in 2,679 31.2% 9.5% 4.5% 1,080 470 2005 to 28.2% in 2006 2003 2004 2005 2006 Portfolio of securities Security portfolio breakdown by interest 2006 available for sale stood at 95.0% of total securities YTL FX portfolio in 2006 compared to 17.0% in 2003 and 87.2% in 2005
Floating; For the Year End 2006; 43.0% Floating; Fixed; Fixed; 50.4% 49.6% average yield on YTL 57.0% security portfolio is 15.44% and average yield on FX security portfolio 13 is 8.66% Strong growth in external borrowings supporting the expansion of loan portfolio
Breakdown of liabilities&shareholders equity (YTLbn) Comments
Other Shareholders equity Provisions Total liabilities&shareholders equity grew by 13.5% Funds Interbank Customer Deposits in 2006 comparing to 2005, driven by increase in external funding and continued expansion of 37.0 deposit base 2.3 External Borrowings increased by 41.5% YoY 32.3 1.1 Customer deposits posted a 7.2% growth in 2006 4.5 12.2% and accounted for 65.4% of total liabilities 13.6% 0.4 4.4 5 13.5% Loans and customer deposits (YTLbn) 24.2 0.4 1.3 3.5 10.8% 0.6 2 0.6 8.3% Deposits Loans Loans/Deposits 19.5 0.4 1.4 37.1% 45.9% 52.0% 72.6% 1.3 2.9 12.0% 6.7% 0.1 0.9 2.2 11.3% 0.2 24.2 22.6 70.0% 65.4% 16.8 14.3 69.4% 23.2 24.8 73.3% 17.6 18.0 14.5 12.0 8.1 5.4
2003 2004 2005 2006 2003 2004 2005 2006 14 Deposit base composition and evolution
Customer deposit breakdown by type and currency Comments
2005 2006 Ensured strong profitability by maintaining liquidity levels and FX-term YTL- FX-term YTL- 25.2% demand 24.0% demand controlling interest expenses 12.0% FX- 12.2% FX- through controlled 7.7% demand demand increase of customer deposits in 3.4% 5.3% YTL- YTL-term term 2006 compared to 2005. 59.2% 58.7% YTL Deposit growth was 6.4% Total: YTL23,161.1 million Total: YTL24,842.1 million where FX Deposit growth was 10.9% YoY. Deposit composition by type Focus on retail deposits, with an 2005 2006 increase of 61.8% in 2006 (YTLmm) Amount % Amount % compared to 2005. Saving deposits¹ 3,664 16.4% 5,929 24.7% Demand deposits share Demand 548 2.4% 729 3.0% increased to 17.3% in 2006 from Term 3,116 14.0% 5,200 21.7% Public and Commercial² 12,262 54.9% 11,013 45.8% 15.6% in 2005. Demand 2,282 10.2% 2,258 9.4% Term 9,980 44.7% 8,755 36.4% Foreign currency 6,398 28.7% 7,101 29.5% Demand 778 3.5% 1,306 5.4% Term 5,620 25.2% 5,795 24.1%
Total³ 22,324 100.0% 24,043 100.0%
¹ Represents deposits taken from retail customers ² Represents deposits taken from government related corporates, SMEs and other entities which are not individuals ³ Totals do not include Interbank deposits and accrued interests for deposits
15 Focus on Retail Deposits State deposits evolution
Focus on Retail Deposits (mmYTL) Demand Deposits (%) Comments
Retail Deposits 17.8% 24.7% 16.1% VakifBank did not Share of retail deposits Demand Deposits experience a significant 16.4% Share of demand deposits withdrawal of state 5,929 deposits after IPO 4,293 3,664 3,608 Much less pressure felt after two largest deposit departures in Q3 2005 and 2005 2006 2005 2006 Q1 2006 State deposits (YTLmm) Thanks to focus on retail deposits and control on State Deposits Share of state deposits cost of deposits, share of 31.8% state deposits decreased 27.6% and saving deposits 21.9% increased 20.7% 7,307
5,442 4,853
2,992
2003 2004 2005 16 2006 Strengthened capitalisation to support rapid growth
Capital position Comments
(YTLmm) 2004YE 2005YE 2006YE The bank successfully Paid in share capital 420.1 1,279.0 2,500.0 raised YTL1,45mm Adjustment to paid-in capital 605.8 605.8 0 through an IPO in Share premium 0 1,172.3 723.9 November 2005
Reserves 32.1 326.9 264.6 The board will offer 50% Profit 623.9 535.2 769.7 pay out as dividend to the Prior year income/loss 231.9 0 39.2 General Assembly. After the dividend approval of General provisioning ( upto 25% of Tier 1) 0 0 21.0 the general assembly bank has two months time Total core capital 1,913.9 3,919.2 4,318.5 to pay dividend. After the Supplementary capital 423.3 540.2 235.3 dividend payment date Total capital 2,337.3 4,459.4 4,398.2 existing and bonus shares Deductions (244.3) (403.0) (220.9) will be merged. Total shareholders’ equity 2,093.0 4,056.4 4,332.7 Vakifbank increased the bank’s paid-in-capital RWA 10,713.6 14,498.5 20,623.1 from YTL-1,279,000,000 to Market risk 1,474.8 1,474.9 1,349.3 YTL-2,500,000,000, which implies issuing 0.954652 new bonus shares per CAR 17.3% 25.4% 19.7% existing 1 share.
17 Net banking income posted healthy growth in 2006
Net banking income grew by 18.1% over the last 1 year in 2006 comparing to 2005 (YTLmm) 2003 2004 2005 2006 Continuous diversification from securities to Net interest income 371.6 1,184.8 1,319.4 1,585.3 more client-driven business Net F&C income 240.1 250.2 293.7 288.4 Net banking income composition (YTLmm) Net trading income 673.6 116.9 175.7 47.8 % Dividend income 0.6 3.9 10.3 16.6 18.1 2,265 Other operating income 197.7 245.6 129.0 343.3 1,918 343 Total operating income 1,483.7 1,801.4 1,928.0 2,281.3 48 129 Total operating expenses (-) 785.7 722.1 731.7 935.3 176 288 Operating profit 698.0 1,079.3 1,196.3 1,346.0 294 Provisions (-) 439.8 344.5 444.9 323.4
Tax provisions (-) 0 143.1 223.9 252.9 Income from investments and 16.3 47.9 0 0 1586 associates 1319 Net monetary gain/loss (10.4) (15.6) 0 0
Net income 264.1 623.9 527.6 769.7
2005 2006 Net interest income Net F&C income Net trading income Other
18 Strong growth in non-interest income
Non-interest income composition (YTLmm) Net F&C income % of operating income
Trading Income Net F&C Other Dividend 696 17 617 609 4 10 129 246 343
294
250 15.2% 288 13.9% 12.6%
176 117 48
2004 2005 2006 2004 2005 2006
Increase in Other Income comes from; • FX currency gains in FX Loans&Security portfolio which is ~48 million YTL in 2006, • NPL recovery which is ~210 million YTL in 2006.
19 Increasing interest income from loan activities
Net interest income; up by 20.2% in 2006 Net interest income(YTLmm) comparing to 2005 despite slowdown in loan demand in 2nd half of 2006, with a CAGR of 372 62.1% between 2003-2006. 1,185 1,319 1,585 • increasing income from lending activity Interest Income growth was 22.7% in 2006 YoY with a CAGR of 18.7% between 2003- 2006. 2003 2004 2005 2006
Interest income (YTLmm) 2,639 3,068 3,592 4,409
16.2% 7.2% 11.0% 11.5%
36.5% 50.3% 52.3% 56.4%
47.3% 42.5% 36.7% 32.1%
2003 2004 2005 2006
Securities Loans Other
20 Operating expenses under control
Slight growth in costs, despite going through restructuring at branch and headquarter level.
Due to the accounting policy changes other expenses increased by ~110 million YTL. Adjusted increase for other expenses in 2006 is 12.8% YoY.
Other expenses composition (YTLmm) Cost over assets (%)
722 732 935
48.8% 47.5% 54.3% 3.0% 8.1% 2.5% 10.2% 6.8% 2.2% 2.2%
41.0% 44.3% 38.9%
2004 2005 2006 2004 2005 2006 Adj.2006 Other Expenses Amortisation Personnel Expenses
21 Demonstrated ability to withstand margin pressure
NIM (%) Despite rate hikes on deposits and slowdown on loan demand NIM slightly 6.66 decreased by 24 bps, compared to 2005in 2006 5.47 5.23 Further growth in loans/assets expected to provide more support to Vakifbanks NIM
Return on average assets (ROAA) is 2.2% in 2006 and 1.9% in 2005.
NIM= Net Interest Income / Average Interest Earning Assets (Interbank +
2004 2005 2006 Securities + Loans)
ROAE (%) Cost/Income (%)
40.1 41.0 37.3 38.0
16.5 17.4 36.2
2004 2005 2006 2004 2005 2006 Adj.2006
22 Peer group comparison
NIM (%) Cost/Income (%)
5.22 5.26 5.23 4.47 46.96 42.25 39.98 41.00
Isbank Akbank Garanti Vakifbank Isbank Akbank Garanti Vakifbank
Loans/Number of Employee (thousandYTL) Net Profit/Number of Employee (thousandYTL)
2,297.7 2,297.0 2,349.7 129.7
100.2 1,592.1 89.3
59.2
Isbank Akbank Garanti Vakifbank 23 Isbank Akbank Garanti Vakifbank Balance Sheet Details for 2006: Assets
(Thousand YTL) 2006 2005 Growth %
Cash&Balances with Central Bank 2,783,183 2,343,320 18.8
Interbank 3,935,291 4,777,909 (17.6)
Securities 10,432,412 11,359,165 (8.2)
Trading Securities 470,483 1,079,535 (56.4)
Available for Sale Portfolio 9,913,538 9,908,056 0.1
Held to Maturity Securities 48,391 371,574 (86.9)
Loans 18,043,240 12,042,392 49.8
Subsidiaries&Investments 408,595 612,469 (33.3)
Property&Equipment 862,107 1,006,918 (14.4)
Other 569,135 476,252 19.5
Total Assets 37,033,963 32,618,425 13.5
24 Balance Sheet Details for 2006: Liabilities Off-Balance Sheet Details for 2006
(Thousand YTL) 2006 2005 Growth %
Deposits 24,842,060 23,161,091 7.3
Funds&Funds Borrowed 4,997,136 3,532,832 41.5
Other 2,330,476 1,140,497 104.3
Provisions 376,862 416,634 (9.6)
Shareholder’s Equity 4,487,429 4,367,371 2.8
Total Liability 37,033,963 32,618,425 13.5
Off-Balance Sheet Guarantees 4,871,922 4,638,360 5.0
Commitments 2,999,572 2,970,852 1.0
Derivatives 384,968 9,524 3942.1 25 P&L for 2006
(Million YTL) 2006 2005 Growth %
Net Interest Income 1,585,250 1,319,391 20.2
Net F&C Income 288,374 293,672 (1.8)
Dividend Income 16,557 10,278 61.1
Net Trading Income 47,782 175,670 (72.8)
Other Income 343,326 129,026 166.1
Operating Income (ex div. income) 2,264,732 1,917,759 18.1
Total Revenues 2,281,289 1,928,037 18.3
Operating Expenses (935,331) (731,661) 27.8
Provisions (323,361) (444,885) (27.8)
Tax Provisions (252,867) (223,917) 12.9
Net Income 769,730 527,574 45.9
26 Subsidiaries and affiliates
Türkiye Vakıflar Bankasi T.A.O
Financial Subsidiaries Non-Financial Subsidiaries
Vakıf Yatırım Menkul Degerler A.Ş 99% Vakıf Sistem Paz.Yaz.Ser.Tic San A.Ş 73%
Vakifbank International A.G 90% Vakıf Enerji ve Madencilik A.Ş 66% World Vakıf Off Shore Banking Ltd. 82% Taksim Otelcilik A.Ş 51% Vakıf Finans Factoring Hizmetleri A.Ş 78% Ataköy Mağazacılık Ticaret A.Ş. 46% Vakıf Deniz Finansal Kiralama A.Ş 69% İşkur İşçi İşadamı Kimya Kur. A.Ş. 25% Vakıf Finansal Kiralama A.Ş 59% Vakıf Gayrimenkul Ekspertiz ve Deg. A.Ş 20% Vakıf Emeklilik A.Ş 54%
Güneş Sigorta A.Ş 36%
Vakıf Girişim Sermayesi Yatırım Ortaklığı A.Ş 31%
Vakıf Gayrimenkul Yatırım Ortaklığı A.Ş 28%
Kıbrıs Vakıflar Bankası Ltd. 15%
Vakıf Menkul Kıymetler Yatırım Ortaklığı A.Ş 12%
27 THANK YOU [email protected] +90-212-3167120 +90-212-3167121
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