2017 Year End Investor Presentation Albaraka Trk Participation Bank - PowerPoint PPT Presentation

2017 Year End Investor Presentation Albaraka Türk Participation Bank 23 February 2017

Agenda 1 Turkey Macroeconomics 2 Banking Sector Performance Financial Review 3 Market Comparison 4 Appendix 5

Turkey Macroeconomics

1 Turkey Macroeconomic Developments GDP Growth 11,1% GDP Growth GDP growth was 11.1% y-o-y in 3Q2017 and this higher-than-expected figure marked the 5,4% 5,3% 5,7% strongest growth seen in the last 6 years. While growth drivers were broad-based, a pick up in domestic demand played a major role. Moreover, increases in export growth 3,5% 5,3% 4,5% and construction investment also impacted economic growth positively while the 4,0% 3,8% 2,5% ongoing recovery in tourism also helped drive growth. Moving forward, the MTP target for 2017 year-end GDP growth is 5.5% y-o-y due to elevated expectations regarding the Q1 Q2 Q3 Q4 -1,3% receding of uncertainty which in turn should improve business and consumer sentiment, 2015 2016 2017 and in turn help provide some tailwinds for public consumption. Inflation Inflation 11,87% 12,98% Y-o-Y annual inflation increased from 8,53% to 11,92% on the back of growing 11,92% 10,68%11,20%11,90% 10,35% 11,72% 10,90% 10,53%11,29% inflationary pressures stemming from ongoing exchange rate depreciation and a rise in 9,79% commodity prices. Food and Oil price related inflationary pressures continue to play a 8,79% 8,05% 7,28% 7,16% 7,00% 8,53% strong role in driving inflation figures while demand, stoked by the Credit Guarantee 9,58% 7,64% 7,46% 9,22% 8,78% Fund, also played a critical role in pushing inflation higher. Inflation is expected to stay 6,57% 6,58% in the high single digits with the Central Bank expecting a year-end inflation of 9.8%. 2016 2017 2018 Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. FX Rates Turkish Lira 5 4,5 USD/TRY The Turkish lira appreciated 7.4% versus the USD in the 2017 and depreciated by 23,4 % against the EURO; Lira appreciation has been supported by a defacto tight monetary 4 EUR/TRY stance of the central bank, stabilizing domestic political developments after the April 3,5 referendum, and USD-related depreciation. The euro, on the other hand, found support on the back of declining uncertainties about the future of the EU and overall strong 3 economic growth in the EU. USD/TRY has been lingering near 3.80 level and EURO/TRY 2,5 4.01.… 15.02… 28.03… 9.05.… 21.06… 5.08.… 23.09… 4.11.… 16.12… 27.01… 10.03… 21.04… 6.06.… 20.07… 31/08… 12/10… 23/11… 04/01… 15/02… is also at 4.60 level at the end of December. Source: CBRT, Turkstat

2 Turkey Macroeconomic Developments Central Bank Monetary Policy Rates (%) Q1’17 Q2’17 Q3’17 Q4’17 Overnight borrowing rate 7.25 7.25 7.25 7.25 The Central Bank maintains its tight monetary policy stance and continues to keep its main policy rate window, the weekly repo shut. The O/N lending window and the One-week repo (policy) rate 8.00 8.00 8.00 8.00 O/N borrowing window have remained as is since 1Q2017. The Late liquidity window rate was increased from 11.75% to 12.75% (+100bps) in 2017. The rate hike decisions Overnight lending rate 9.25 9.25 9.25 9.25 of the CB has been linked to the deteriorating Lira movement in addition to the worsening core inflation outlook. Late liquidity window rate 11.75 12.25 12.25 12.75 Foreign Trade and Current Account Balance Balances – Quarterly (billion In 2017, exports increased by 10,2% to 157,1 billion USD and imports surged by 17,7% to USD) 233,8 billion USD compared to 2016, which resulted in the foreign trade deficit Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 expanding by 36.8% y-o-y to USD 76.7 bio in 2017. S trong global demand, largely attributable to the recovery in economic activity in European countries, had supported -8,0 May our export performance in 2017. On the import side, the sharp increase in oil prices, -10,3 the increase in gold imports, and increasing domestic economic activity led to a steep -8,1 surge in imports. -12,9 -12,6 -13,9 The Current account deficit posted a rapid increase by 42,1% in 2017 compared to -15,9 previous year and was realized as 47,1 billion USD. High energy prices and a sharp rise -18,3 in net gold imports in 2017 stoked upward pressure on the current account deficit. On the other hand, the recovery in economic activity in the European Union countries, -22,8 -23,0 which is Turkey’s largest export market, supported exports. Moreover, a rise in tourism Foreign Trade Balance Current Account Balance revenues provided some cushion for the widening in the current account deficit. Budget Balance Budget Balance (billion TRY) In 2017, budget indicators performed better than the Medium Term Plan (MTP) targets announced in October. Budget revenues exceeded MTP target by 18.3 billion TRY whereas budget deficit which came in 47.4 billion TRY in 2017 was 14.3 billion TRY Q1'17 Q2'17 Q3'17 Q4'17 below the MTP’s year-end forecast. -6,4 -10,2 According to 2017 year-end targets, fiscal discipline was maintained despite the recent expansionary fiscal policies in 2017. Budget deficit to GDP ratio projections were -14,9 -15,8 revised downwards after the announcement of December figures. Finance Minister Naci Ağbal stated that they expected this respective ratio, which is expected to be 2% under the MTP projections, to be 1.5%. The ratio was 1.1% in 2016. Source: CBRT, Turkstat, Ministry of Finance

Banking Sector Performance

3 Banking Sector vs Participation Banking Sector Banking Sector highlights Participation Banking highlights � In 2017 the Total Revenues of the banking sector rose 25,7% � The sector continued to grow in asset and profitability compared to 2016. terms during 2017. Participation banking rose 20,5% Ytd. � Loan growth rate reached 20,9% while NPL amount increased asset growth by 6,0%. � Capital Adequacy figures continued to increase, from 16.17% to 16,98% � Loan growth is stronger than in previous years owing to expansionary fiscal policies in place and macroprudential policies supportive of the financial system (ex: Credit � Remarkable net profit increase, 43,1 % yoy Guarantee Fund). Commercial loan growth continued to grow at a higher rate than consumer loans. � Number of total branches increased to 1032 at the end of 2017 � Net Profit increased by 30,9% Key Financial Indicators Year End Year End Year End Year End Key Financial Indicators Y-Y (%) Y-Y (%) (mn TRL) (mn TRL) 2016 2017 2016 2017 Total Assets 2.730.942 3.257.819 19,3% Total Assets 132.874 160.136 20,5% Loans* 1.804.711 2.182.096 Loans* 20,9% 88.483 111.071 25,5% Deposits Deposits 1.547.551 1.804.766 16,6% 84.785 107.311 26,6% Shareholder’s Equity 300.172 359.091 Shareholder’s Equity 11.494 13.645 16,3% 18,7% Total revenues Total revenues 241.270 303.160 25,7% 10.417 12.901 23,8% Net profits 37.532 49.122 Net profits 1.106 1.583 30,9% 43,1% *Financial leasing receivables included.

Agenda 1 Turkey Macroeconomics 2 Banking Sector Performance Financial Review 3 Market Comparison 4 Appendix 5

Financial Review

4 6 Albaraka Turk – 2017 Main Highlights (Balance Sheet) TRL million Q4’15 Q4’16 Q4’17 Y-Y (%) 29.512 32.851 36.229 10,28 Total Assets 19.505 22.722 25.193 Total Funded Credits 10,87 20.346 23.155 25.310 9,31 Deposits Shareholder’s Equity 2.104 2.279 2.482 8,91 Asset Segmentation (2017) Total Assets Total Funded Credits Total Collected Funds 36.229 34.231 33.827 Other 33.021 32.851 Assets; 3,0% 25.310 23.771 24.109 23.155 23.668 25.193 23.711 22.892 22.876 22.722 Liquid Assets; 20,0 Securities Portfolio; Funded 7,9% Credits; 69,1% Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 *Liquid Assets includes Cash and Balances with the Central Bank, Financial Assets at Fair Value Through Profit and Loss(net) and Banks

5 6 Albaraka Turk - 2017 Main Highlights (Income Statement) TRL million Q4’15 Q4’16 Q4’17 Y-Y (%) 1.935 2,219 2.659 19,8 Profit Share Income 886 1.024 1.268 23,8 Net Profit Share Income 1.188 1.372 1.584 15,5 Total Operating Profits 377 264 289 9,5 Net Operating Profits 74 46 52 13,0 Tax Provision 281 579 699 20,7 Spesific Provisions for NPL 303 218 237 Net Profit 8,9 Net Profit Net Profit Share Margin* Net Profit Share Income 303 4,47 1.268 237 218 1.024 4,32 886 4,22 4,17 4,14 2015 2016 2017 2015 2016 2017 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 * Trailing for last four quarters