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Western EuropeMay 2 2004

Bank snapshots

As the Turkish economy expands, the major institutions are raising their game and improving their performance. Below we detail the key financial indicators for Turkey’s banking front runners.
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AKBANK

Akbank had highest capacity to create revenues among all banks in the Turkish banking system in 2003. In the first nine months of 2003, Akbank alone accounted for 23% of the profits in the Turkish banking sector and 25% of the income of the country’s deposit banks. At the end of 2003, it had a net income of E754m, up from E628m at the end of September. It had a return on capital of 26.3% in 2003. Foreign currency transactions were one of the items that played a key role in bolstering its net income. With the Turkish lira gaining value against western currencies, it was able to turn losses from foreign currency trading to an income of E251m at year-end 2003.

The bank, the leader in all net profitability indicators, is ranked third in the banking system in total capital, assets, and deposits. With economic stability in the country, Akbank achieved balanced growth. Its management quality is reflected in its year-end results. In 2003, Akbank had E16.8bn in assets. Its off-balance sheet obligations stood at E16.6bn. Akbank maintained a high amount of free capital of E2.3bn in 2003.

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TURKIYE IS BANKASI Turkiye Is Bankasi (Is Bank) moved up to number one in asset size among private commercial banks in 2003 from second place in 2002 with E17.7bn in assets. It stands second to T C Ziraat Bankasi assets among all Turkish banks. It lost its number one position in terms of loan volume in the last quarter of 2003, falling to second place. With a net income of E241m, it was Turkey’s fourth largest profit-making bank in 2003. Total loans of Is Bank, which stood at E5.1bn at the end of September 2003, fell to E4.8bn at the year-end. This development, which ran counter to trends in the Turkish banking sector, led to a drop in loans in its total assets. In 2003, the bank’s loans as a percentage of total assets fell 3% to 27%. . One outstanding feature in its asset composition in 2003 was that the share of liquid assets in total assets rose rapidly, jumping 12 percentage points to 49.6% at the end of last year from 38% in 2002.

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YAPI VE KREDI BANKASI Yapi ve Kredi Bankasi was Turkey’s fifth biggest bank in terms of assets at the end of September 2003 and fourth largest in terms of equity capital. At the end of 2003, the bank reported a net income of E92m and was ranked 14th in terms of year-end profits. In the past two years, the bank’s loans have increased five percentage points in its assets to 38%. Its liquid assets in total assets fell six percentage points to 29%. Foreign currency in assets and liabilities items is continuing to nosedive.

The bank is continuing efforts to meet capital adequacy requirements. In the past two years it has raised its equity capital to total assets to 16.8%, up seven percentage points. The bank is attempting to improve the quality of its assets. The bank’s loans are increasing while non-performing loans in total loans are declining, and special provisions set aside for loans under follow-up are rising. The amount of non-performing loans provisioned has risen to 74% at the end of 2003 from 30% previously.

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OYAKBANK Oyakbank continued the fast growth in its loans’ volume in 2003. Loans in assets in 2003 increased 18 percentage points to 48.5%. The bank ranked 12th in the banking system in loans with E1.2bn. It had a higher rate of loans than the sector average. Despite the growth in its loans, it continues to protect the quality of its assets. In 2003, only 1% of its loans were non-performing. Some 24.3% of these loans were provisioned. In 2003, the bank set a limit to investments carried out with liquid assets. Liquid assets in total assets last year dropped 18 percentage points to 20.1%. This development limited money market transactions. But its policies toward short-term loans led to an increase in the bank’s net interest revenues in real terms. Oyakbank ranks 13th among 15 deposit banks in equity capital, with equity capital of E301m.

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TURKISH BANK In 2003, Turkish Bank continued investing its liquid assets which reached E183m of its in E207m total assets; 53% of the bank’s liquid assets were its accounts at other banks and financial institutions. E60m in these accounts was held in foreign currency in domestic banks. Interest on money market transactions carried out accounted for 57% of the Turkish Bank’s interest revenues. Interest earned from short-term Turkish lira loans within total interest earnings declined at the bank, a specialist in money market transactions. In 2003, interest earned from short-term Turkish lira loans in total interest earnings of the bank stood at 9%. Special provisions have covered all of the bank’s non-performing loans. Foreign currency accounts in both bank’s assets and liabilities are declining, nevertheless the drop is not as sharp as in the banking sector overall, both falling only 2%. Over the past three years, the bank has displayed a positive picture on capital adequacy. In 2003 equity capital in its total assets rose to 16.3% from 14.2% in 2001. The bank, which is attempting to improve its capital adequacy, is expected to increase its income in 2004 with a policy of expanding loans to its high quality assets.

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HSBC BANK One of the four foreign banks that have been established in Turkey, HSBC continued to maintain a high percentage of equity capital in 2003. It raised it shareholders’ equity to total assets ratio to 25%. Its high capital adequacy increases the bank’s free capital. This ratio increased to 21.9% in 2003 from 19.2% in 2001. At the end of September 2003, HSBC ranked 10th among banks in the Turkish system in terms of equity capital and eighth among deposit-taking banks. In the last three years, loans in total assets of the bank climbed 21 percentage points to 51.2%. Non-performing loans continue at only 2% of the bank’s total loans. The bank has set aside provisions to cover almost all of these non-performing loans.

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TURK DIS TICARET BANKASI By turning its income indicators to positive over the past three years, Disbank has become one of the deposit-taking banks to rapidly develop its profitability. Disbank had a net income of E98m in 2003. Its return on assets rose to 3.3% in 2003 from –1.8% in 2001, while its return on equity rose to 19.6% from –13.3%. The bank’s expansion of its loan and foreign exchange risks in items under assets shows itself in the bank’s income and expense structure; 37% of the bank’s interest revenues were obtained from short-term Turkish Lira loans, while 33% came from interest on money market transactions. The bank’s net interest income in 2003 was $217m.

Disbank continues to increase its equity capital. In 2003, its capital/assets ratio o increased three percentage points to 16.8% from 2001. The bank’s free capital to total assets ratio also increased 5.4 percentage points in the same period to 9.6%.

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TURKIYE GARANTI BANKASI Garanti Bankasi, which has reached agreement to sell a 46% share in the bank to Italy’s Intesa, was the fourth biggest bank in Turkey in terms of assets in 2003 with E12.7bn and third in terms of deposit banks. It controls 8.8% of the assets of the Turkish banking system and 9.2% of the deposits. At the end of September 2003, Garanti Bankasi ranked sixth in terms of loans and fourth in terms of equity capital among Turkey’s banks. The bank reported a net income of E172m in 2003, as a result of revenues from capital market transactions and foreign currency earnings. The bank managed to turn its foreign exchange losses to profits because of the strong Turkish lira. The bank is continuing efforts to increase its capital adequacy. Its equity capital to total assets rose to 10.9% at the end of 2003 from 7.5% in 2001. The failure of the bank’s assets to generate sufficient revenue reduced the ability of the bank to expand its equity capital. It could not turn its freecapital to positive values due to these developments.

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