Yapı Kredi 2014 Earnings Presentation & Outlook Profitable growth delivered, strategy confirmed 2 February 2015
Agenda Phase I: 2014 − Overview − Details of 2014 Performance Phase II: 2015 and Beyond 2
2014: Ambitious targets of accelerated growth strategy successfully achieved with some areas performing even better than guidance Strategic Guidelines Results Market Share Gains Loan Composition Increasing «natural market 10.2% Loans Retail 27% 27% share» to 10% Accelerated Cards 9.5% 14% 19% 10.0% Deposits Growth Remixing loan book towards 59% 54% Corp/Comm more profitable segments 9.1% 2013 2014 2013 2014 R… CAR LDR (inc TL Bonds) 116% 16.0% Sector 15.0% CAR CAR >14% and Tier-1 >10% Strong 104% 112% YKB 11.6% CT1 Fundamentals LDR within comfortable band 11.1% T1 10.9% 97% 2013 2014 2011 2012 2013 2014 Cost / Income Net Income RoATE (cum.) Investing in growth while maintaining discipline in 47% 614 12.8% 12.0% Solid +3pp 45% +2pp 501 513 ordinary costs 44% 429 43% Profitability Below sector excl. Increasing trend in quarterly growth investments net income 2013 2014 2013 2014 1Q14 2Q14 3Q14 4Q14 YKB Sector YKB Sector NPL Ratio Cost of Risk -10bps 3.5% 2013 Level 3.4% In line with sector NPL ratio +20bps Resilient 2.8% 2.6% 1.27% evolution Asset 1.17% Stable CoR vs YE13 Quality 2013 2014 2013 2014 2013 2014 YKB Sector Note: LDR (inc TL bonds), Cost/Income and RoATE ratios for sector based on BRSA monthly data as of Dec ’14 NPL ratio for sector based on BRSA weekly data as of 2 Jan’15 3 RoATE indicates return on average tangible equity (excl TL 979 mln goodwill) Cost of Risk, cumulative = (Total Loan Loss Provisions-Collections)/Total Gross Loans
How did we do it? Through significant investment in our network and commercial effectiveness capabilities Headcount ATMs Branches Innovation ~1,850 > 600 ~60 new 3 Direct Banking 4 net increase ytd to increase ytd to model introduced ~18,500 1 3,606 1,003 total Customer experience (~70% 2 in network and call center) process redesigned ~ 200 renovations Internet banking enhanced: Market Share Market Share Market Share Market Share +80 bps to 8.7% +80 bps to 7.9% +30 bps to 8.9% +80 bps to 12.3% 3 (+1 ranking to 4th position) (5th position maintained) (+2 ranking to 3rd position) We created a «NEW BANK» (1) Indicates Group headcount. Bank only: ~17,500 (2) Includes branches and call center (3) Net new: 54 branches 4 (4) Direct Banking, launched in May’ 14 under the new brand name of “NUVO”, is a branchless service via internet and mobile channels which offers advantageous pricing and other non-banking advantages (5) As of 9M14
«Core Bank»: increasing commercial effectiveness «New Bank»: already contributing with acceleration expected in the future Volumes Productivity «New Bank» «Core Bank» «New Bank» with YKB above sector in contribution already Customer Acquisition productivity increasing faster further potential visible Loans Loans/Employee 2.7x ~ 600K increase New Bank +18% y/y +14% y/y 7% +16% y/y 6,916 7,168 (TL 8 bln) 5,870 220K 224K Core 4,695 Bank (TL 112 bln) 2012 2013 2014 YKB Sector YKB Core Bank YKB New Bank Deposits Deposits/Employee Addition of new customers New already contributing to +11% y/y Bank +9% y/y 9% volumes with potential +8% y/y 6,092 6,022 (TL 10 bln) 5,226 upside in productivity 5,401 Core Bank (TL 95 bln) YKB Sector YKB Core Bank YKB New Bank Note: Based on YKB’s internal calculations Balance sheet volumes for sector based on BRSA weekly data as of 2 Jan’ 15; Sector employee number based on Turkish Banking Association data as of Dec’ 14 5
Agenda Phase I: 2014 − Overview − Details of 2014 Performance Phase II: 2015 and Beyond 6
Significantly above sector loan growth together with effective remixing towards higher value generating areas Lending Loan Composition y/y ytd Δ Market Share bps 2014 Rank YKB Sector (TL bln) Total Loans 1 125.5 26% 18% 10.2% +71 5 2% Auto -2pp Comm +1 31% TL 83.7 28% 17% 10.1% +84 5 +1pp Install 27% 27% FC ($) 18.1 13% 12% 10.6% +38 4 32% Retail Mortg -2pp +1 Consumer Loans 23.8 29% 13% 8.8% +111 6 35% GPL +4pp +1 14% Mortgages 11.0 22% 13% 9.6% +72 6 19% Cards General Purpose 12.2 46% 15% 8.1% +173 7 +5pp TL 50% Auto 0.7 -39% -22% 10.8% -316 4 Credit Cards 17.8 -5% -6% 20.8% +16 1 FC 50% -5pp 59% Companies 2 +1 84.0 35% 24% 9.6% +94 5 54% Corp / Comm Share y/y +1 TL 42.1 50% 26% 8.9% +142 6 Project Finance 60% 36% Working Capital 9% 8% FC ($) 18.1 13% 12% 10.6% +38 4 LT Investments 31% -4% SME 3 36.1 49% 25% 11.9% +187 n/a 2013 2014 Comm. Install. 10.5 34% 30% 6.7% +18 6 Total loans +26% ytd (vs 18% sector) with highest quarterly growth recorded in 4Q (+8% q/q vs +5% sector) Effective remixing of loan book to higher value generating areas while increasing market share Currency balance maintained in company loans to mitigate risk Note: Balance sheet volumes for sector based on BRSA weekly data as of 2 Jan’15. FC -indexed loans included in TL loans Market share ranking information as of 9M14, ranking evolution compared to YE13 (1) Total performing loans 7 (2) Total loans excluding consumer loans and credit cards (3) SME definition: <TL 40 mln annual turnover as per BRSA. YKB internal SME definition: <US$ 10 mln annual turnover (share of TL: 95%) Ranking evolution vs YE13
Strong focus on deposit gathering to sustain growth initiatives and wholesale funding to manage duration mismatch while preserving margins Funding Borrowing Composition ytd Δ y/y Market Rank Supranational Share bps (TL bln) 2014 YKB Sector 4% (-3% ytd) Total Deposits 107.6 22% 10% 10.0% +94 6 Securitisations 7% Other 3 (+19% ytd) 17% TL 62.9 41% 11% 10.0% +236 7 (+25% ytd) Sub-Debt FC ($) 19.3 -6% 1% 10.0% -127 4 16% Borrowings (+4% ytd) by Subsidiaries 17% Customer Deposits 1 105.1 22% 10% 10.5% +104 5 +1 (+27% ytd) Syndications 15% Demand Deposits 16.6 16% 9% 8.5% +59 7 (+6% ytd) TL Bonds+ Eurobonds (inc LPN) TL Bonds 2 Borrowing/Liabilities: 3.3 98% 43% 7.3% +205 24% 21% (+51% ytd) (stable vs YE13) Repos 6.2 83% 18% 4.7% +168 Significantly above sector deposit growth (+22% ytd vs 10% sector) mainly driven by TL deposits Repo volume increasing ytd due to attractive pricing - still among lowest levels in peer group (3% share in liabilities vs 10% avg private peers) Sustained focus on funding diversification with >100% of funding plan for 2014 achieved Notes: Balance sheet volumes for sector based on BRSA weekly data as of 2 Jan’15 Market share ranking information as of 9M14, ranking evolution compared to YE13 (1) Excluding bank deposits 8 (2) Including TL and covered bonds (3) Other borrowings include foreign trade related borrowings Ranking evolution vs YE13
~TL 2.1 bln net income with progressive improvement on a quarterly basis via increased contribution of growth investments Income Statement 1Q14 2Q14 3Q14 4Q14 q/q 2013 2014 y/y (TL mln) Total Revenues 1,938 2,149 2,201 2,466 12% 8,058 8,754 9% Revenues +9% y/y despite volatile operating Operating Costs 935 1,029 1,009 1,173 16% 3,543 4,146 17% environment Costs +17% y/y Operating Income 1,003 1,120 1,192 1,293 9% 4,515 4,607 2% incorporating significant investments for growth Provisions 463 443 515 518 1% 1,552 1,939 25% Provisions impacted by Pre-tax Income 540 677 677 775 15% 2,963 2,669 -10% strong loan growth and regulation Discontinued Operations 0 0 0 0 nm 1,326 0 nm Cumulative net income at Net Income 429 501 513 614 20% 3,659 2,056 -44% TL 2,056 mln with RoATE at 12.0% Net Income 2,375 2,056 -13% (excluding insurance business sale) Strong contribution of subsidiaries with 17% of net income and 8% of assets Return on Average Tangible Assets 10.0% 11.6% 11.6% 13.7% 16.7% 12.0% Return on Assets 1.0% 1.2% 1.1% 1.3% 1.5% 1.1% Cost/Income 48% 48% 46% 48% 44% 47% Note: Return on Average Tangible Equity, Return on Assets and Cost/Income Ratios for 2013 are adjusted for Yapı Kredi insuran ce business sale (consolidated capital gain of TL 1,284 mln post 5% capital gain tax) Return on Average Tangible Equity (RoATE) excludes TL 979 mln goodwill 9 RoATE calculation based on the average of current period equity (excluding current period profit) and prior year equity. Annualised Return on Assets (RoA) calculation based on net income / end of period total assets. Annualised
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