2020 Earnings Presentation 2Q2020 – BRSA Bank-only Results
Macro Outlook Banking Sector Economy and Markets • Recent • CBRT loosening monetary policy and incentives for leading indicators such as PMI, confidence indicators, electricity consumption and foreign trade data consumer loans and TL SME loans helped recovery in signalled recovery in the economic activity. credit activity. • We expect the economy to recover further during the • Accelaration in loan growth despite a challenging second half of the year and 2021, with the assumption backdrop; mainly driven by TL consumer loans. YTD FX that we won’t experience another COVID-19 wave. adjusted loan growth reached 16% at June-end, compared to 3% at the same time of last year. • Driven by the strong loan growth and recovery in • Contraction in FX corporate loans further continued in domestic consumption, we expect to see a positive GDP figure in 2020. Our estimated inflation figure points to 2Q-20, with a ytd drop of 4%. high single digits. • In the 2H-20, no major change in the monetary policy is Loan Growth in 1H20 (FX-Adj., YTD) 16.0% expected from CBRT which cut the policy rate down further to 8.25% from 9.75% in the 2Q-20. Corporate Loan Growth (FX-Adj.) 15.0 % Consumer Loan Growth 27.0 % FC Corporate Loan Growth (FX Adj.) Source: BRSA, TSKB -4.1% *Foreign Currency 2
TSKB’s Key Highlights with respect to 2Q-20 Robust Unchanged NPL 3.4% Net CoR* YTD 9% Liquidity Stage2 @11% 107 bps TL Loan Growth Solid Solvency** Strong and Stable ROTE 12.4% CAR @16.6% NIM 4.3% Tier I @11.3% ▪ Sound liquidity supported by timely Eurobond issuance in January, successful roll-over of the syndicated loan and continuous DFI funding engagements ▪ FX-adjusted terms close to flat loan growth ▪ Transition to Turkish Accounting Standards 27 (TAS 27) regarding valuation of subsidiaries ▪ Asset quality remained intact ▪ Coverage ratio enhanced with extra provisioning ▪ Robust NIM, hoovering above 4% levels ▪ Strong solvency ratios ▪ Sustainability focus are being tackled with dedicated efforts resulting in new developments: Lowest ESG Risk rating in Turkey 3 *Net Cost of Risk is calculated for the first 6M of the year. **Excluding forbearance
2020YE Guidance Revisions 2Q20 2020E Revised Financial Guidance (Bank Only) Figures Guidance Guidance (%) -1.5 FX Adjusted Loan Growth 3-5 Flat 75 Confirmed Loan/Assets ~75 128 Confirmed Fees & Commissions Growth >50 OPEX Growth 8.0 <20 <15 4.3 Confirmed Net Interest Margin (adj.) ~4.0 Return On Tangible Equity 12.4 >16 >14 Confirmed Return On Assets 1.5 1.7 – 1.9 Confirmed Cost/Income Ratio 12.0 <15 Capital Adequacy Ratio 16.6 >18 >17 Tier 1 Ratio 11.3 >12.5 >11.5 Confirmed Stage 2 Loans Ratio 11.0 Flat 3.4 Confirmed NPL Ratio <3.5 107 bps* Net Cost of Risk <100 bps <150 bps *Net Cost of Risk is calculated for the first 6M of the year. 4 Investor Relations I BRSA Unconsolidated Earnings Presentation 2Q-20
Comprehensive Income Statement Net Banking Income vs Provisions 792 743 419 375 372 250 173 202 1H-19 1H-20 1Q-20 2Q-20 Net Banking Income Provisions TL mn 1H-19 1H-20 YoY QoQ 1Q-20 2Q-20 Net Interest Income 770.7 797.8 4% 427.6 16% Strong NII generation 370.2 Trading Income 24.1 64.8 n.m 33.5 31.3 -6% n.m Net Commissions 13.0 29.6 n.m 21.5 8.1 Dividend & Other 35.6 7.8 n.m 1.9 5.9 n.m 11% Banking Income 843.4 899.9 7% 427.1 472.8 OPEX (-) 100.2 108.3 8% 53.5 -3% 54.9 13% Net Banking Income 743.2 791.6 7% 372.2 419.4 Elevated Stage2 and Provisions (-) 250.0 375.2 50% 201.8 16% 173.4 Stage 3 Coverage Ratios Tax Provisions (-) 107.5 94.4 -12% 45.1 49.3 9% 385.6 322.0 -16% 168.3 9% Net Profit 153.7 • TMS 27 adjustments were applied for all given periods. • Based on MIS data • Interest expense of long and short term swaps, valuations of hedge positions for Eurobonds issued and exchange differences arising from rediscounts are adjusted under NII. • Interest Income from securities includes impairment expenses of marketable securities with provisions. • 2Q20 Provisions include Other Income, Deferred Tax and Expected Credit Losses in the audited P&L excluding impairment expenses of marketable securities 5 Investor Relations I BRSA Unconsolidated Earnings Presentation 2Q-20
Strong NIM Generation 434 434 Annualized NIM 4.3% 4.2% 4.1% 4.1% 3.9% 3.5% 2016 2017 2018* 2019 1Q-20 2Q-20 TL Security Yields** 19.0% 17.7% Quarterly FX Loan Spreads 17.2% 16.0% 17.2% 16.5% 16.5% 14.5% 3.3 3.2 3.1 3.1 3.1 2Q-19 4Q-19 1Q-20 2Q-20 TL Sec. Yield TL Sec. Yield exc. CPI 2Q-19 3Q-19 4Q-19 1Q-20 2Q-20 *CPI Normalized FX Loans **Bank’s Oct. -Oct. CPI assumption is 9.5 percent 6 Investor Relations I BRSA Unconsolidated Earnings Presentation 2Q-20
Comfortable FX Liquidity and Maturity Profile Maturity Profile of External Debt USD mn Funding / Total Liabilities (exc. equity) USD mn 6,382 -176 * -157 6,343 6,137 -418 6,068 -103 -511 -473 3% 4% 7% 4% -350 4% -300 ** 4% -300 4% 4% 5% 5% 5% 5% -2,195 21% 17% 23% 18% -400 12% 11% 11% 11% -300 3Q-20 2020 2021 2022 2023 >=2024 4Q-20 53% 53% 53% Syndication DFI Funding Eurobond Tier 2 51% * Syndication facility dated 9 July 2019 rolled-over. **Tier 2 bond has issuer call in 2022. 2Q-19 4Q-19 1Q-20 2Q-20 Successful roll-over of T. Guarenteed DFI Funding Unguarenteed DFI Funding the syndicated loan Securities Issued Subordinated Debt Syndication & Other Repo &Money Market facility as of 9 July 2020. Roll-over ratio:85% Amount: 150 mio USD $567 mn Non-Withdrawn DFI Funding • Inclusiveness 47% New funding from AIIB as part • Climate + Environment 30% of the Covid-19 Credit Project • Sustainable Infrastructure 13% with an amount of • Manufacturing Industry 11% USD 200 mio 7 Investor Relations I BRSA Unconsolidated Earnings Presentation 2Q-20
Resilient Asset Composition Asset Composition Total Loans TL bn 46.8 47.2 TL bn Currency 35.1 6% 5% Breakdown 5% 34.2 41.4 42.0 6% 4% 3% 5% 15% 4.0 9% 15% 11% 3.0 31.4 16% 14% 30.2 2.7 2.3 4.9$ 75% 73% 4.8$ 4.7$ 4.6$ 75% 74% 89% 2Q-19 4Q-19 1Q-20 2Q-20 2Q-19 4Q-19 1Q-20 2Q-20 Loans Securities Cash & MM Non IEAs & Other FX Loans ($) TRY Loans 2Q Loans by Currency & Type Working Capital TL; 11% Loans; 23% USD; 48% Investment Loans; 69% APEX; 8% EUR; 41% Investor Relations I BRSA Unconsolidated Earnings Presentation 2Q-20
Loan Portfolio in Detail 2Q Loans by Sector Inclusive Finance (Support Women’s Employment & the Economy in Refugee-Impacted Areas) $168 mio Financing 9 Investor Relations I BRSA Unconsolidated Earnings Presentation 2Q-20
Intact Asset Quality 1.00% 0.82% Gross Share Provisions Coverage Ratio Stage 1 Loans Amount in Total (-) Stage 1 30,018 85.6% 1% 300 86.0% 85.6% Stage 2 3,839 11% 12.96% 498 78.0% Stage 3 1,195 3.4% 37.69% 450 1Q-20 2Q-20 Gross Loans 35,052 100.0% 3.56% 1,249 1H-2020 Net CoR * 12.96% 107 bps Stage 2 Loans 11.5% TL 220 mio free provision FX provisions are 11.0% 10.6% 72% of Stage2, long positioned 2.0% 0.0% 60% of Stage3, 1Q-20 2Q-20 69% of Stage2&3 restructured 37.69% 33.6% 5.5% Stage 3 Loans Share in Stage 2 Coverage 30.0% 3.4% 3.4% Electricity Generation 26.8% 7.0% 20.0% REL 22.3% 5.0% Not REL 2.7% 28.5% 10.0% 0.5% 1Q-20 2Q-20 Electricity/Gas Distribution 14.2% 23.8% Coverage Ratio *Net Cost of Risk is calculated for the first 6M of the year. 10 Investor Relations I BRSA Unconsolidated Earnings Presentation 2Q-20
Security Book TL Securities Portfolio Breakdown TL 7.2 bn TL 7.2 bn TL 6.7 bn TL 5.8 bn 408$ 384$ Fixed Fixed Fixed 376$ Fixed %32 %32 %33 %38 309$ CPI CPI CPI CPI %68 %64 %49 %51 %51 %43 4,601 4,528 4,432 4,043 Floating Float Float Float Float %19 %18 %17 %17 2Q-19 4Q-19 1Q-20 2Q-20 2Q-19 4Q-19 1Q-20 2Q-20 TL (mn) FX($ mn) Securities / Assets : 15.4% ▪ Remaining maturity: 1.8 yrs in Fixed bonds, 1.2 yrs in Floating bonds, 2.8 yrs in CPIs in TL Sec. Portfolio. ▪ 68% is in Financial Assets at Fair Value Through Other Comprehensive Income portfolio and the rest 32% is Financial Assets Measured at Amortized Cost. ▪ Private sector bonds: 3.1% of total portfolio ▪ Free Capital/IEA Ratio: 9.6% 11 Investor Relations I BRSA Unconsolidated Earnings Presentation 2Q-20
Strong Solvency Metrics Evolution of RWA and Equity TL bn 17,8% 16,4% 16.6% 49.5 15,8% 48.8 42.6 12.0% 41.2 12.4% 8.5% 10.7% 11.3% 11.1% 7.8 8.1 7.6 6.8 5.3 5.3 5.5 4.6 2Q-19 2019 1Q-20* 2Q-20* 2Q-19 2019 1Q-20 2Q-20 Tier I (CET 1) CAR RWA Core Equity Total Capital *Excluding Forbearance Tier 1 (CET1) Evolution Solvency Limits (%) 2020 - 1.6 - 0.2 0.7 Capital Conservation Buffer 2.500 Counter Cyclical Buffer 0.010 12.4 11.3 CET 1 7.010 Tier 1 Ratio 8.510 CAR 10.510 4Q-19 Δ RWA Δ MtM 2Q- Net Income 2Q-20 12 Investor Relations I BRSA Unconsolidated Earnings Presentation 2Q-20
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