KFS - Yapı Kredi

Transcription

KFS - Yapı Kredi

KFS & YAPI KREDİ
Acquisition – Integration – Results
Merrill Lynch EEMEA One on One Banks Forum
London, 12-13 September 2006
AGENDA
MACROECONOMIC & BANKING ENVIRONMENT
KFS & THE NEW SIZE
VISION & STRATEGY
2005 KEY FINANCIALS
2Q2006 RESULTS
STATUS OF THE INTEGRATION
ANNEX
2
TURKEY IS A BIG AND ATTRACTIVE COUNTRY, RAPIDLY AND
STRUCTURALLY RECOVERING FROM RECENT FINANCIAL TURMOILS …
Year 2005
Turkey
Population, mln
73.5
Avg. age population
29.5
Per Capita GDP, Euro
Country rating
4,032
Delta
vs 2002
Turkey is one of the biggest markets in the European and
Mediterranean area
Population is young (avg 29.5 years) and is concentrated in top
10 cities (43.9%),
Per capita GDP is on an increasing trend after ‘94, ‘00, and ’01
financial crises
The 2 key anchors:
- S&P (1)
BB- +3
– IMF: for the first time in 2004 a program has been completed;
- Fitch
BB- +2
- Moody’s
Ba3 +1
on track the new IMF program for 2005-2007 (Usd 10 billion)
– EU: full membership negotiations started in October 2005
Political situation
Single party government since December 2002 with strong Parliamentary majority (two-third) enables
government to react promptly
Reforms are continuing: the most important ones are (a) ongoing tax reform and (b) ongoing social security
reform
FDI up to USD 9 billion in 2005 and expected to be about USD 12 billion in 2006
3
Source: NE Research Network
… AND NOW SUSTAINED GDP GROWTH + SHARP DECREASE OF
INFLATION AND MARKET RATES CONFIRM THE ATTRACTIVENESS OF
THE COUNTRY
GDP Growth (%)
Turkey has been enjoying high growth
8.9
7.9
rates in the aftermath of 2001 crisis,
helping economy to stabilize…
7.4
5.8
5.2
5.4
…and it is expected to continue growing
2002
2003
2004
2005
2006F
above 5% in 2006 and 2007.
2007F
CPI Inflation end of year (%)
29.7
The impressive decline in inflation during
the last 3 years paused in 2006 due to the
financial turmoil in May and June, which
affected all emerging markets .
18.4
9.3
7.7
8.9
6.5
Disinflation process is expected to be
2002
2003
2004
2005
2006F
restored in 2007.
2007F
Current Account Deficit (as % of GDP)
C/A Deficit
C/A Deficit FDI adj
3.3 2.8
5.2
7.4
6.4
4.5
4.0
Current account deficit remains as the
7.0
4.4
major risk in the economy…
5.0
…however, FDI inflows also increased
significantly during this period, easing the
concerns regarding its sustainability
0.8 0.3
2002
2003
2004
2005
2006F
2007F
4
THE TURKISH BANKING SYSTEM HAS BECOME HEALTHIER IN THE LAST
THREE YEARS; AS A RESULT, COMPETITION IS EXPECTED TO INCREASE
2000 - 2001
Economic crisis led by
political conflicts:
33% depreciation in
TL,
Short-term interest
rates around 95%
level,
Rapid increase in
inflation,
Aggravated problems
in the banking sector
The takeover of 20
banks by the SDIF
2003 - 2004
2002
IMF reform program
Restructuring in the
Sale and merging
process of SDIFmanaged banks
banking sector:
Tight regulatory and
Robust capital structure
Triple supervision
More efficient risk
supervisory rules
process
management systems
(BASEL II)
Sale or liquidation of
troubled banks
Strengthening of
Improvement in asset
Istanbul Approach
Rapid change in the
quality
capital structure of
banks
structure of the sector in
a declining interest rate
& inflation environment
Single party government
5
2005 - 2006
Privatization of stateowned banks
Increase in banks’
capitals
Increase in mergers and
portfolio investments
Foreign partnerships
Increase in real sector
financing in the
disinflationary
environment
THE SECTOR IS AMONG THE MOST ATTRACTIVE IN NEW EUROPE IN
TERMS OF SIZE AND GROWTH PROSPECTS...
Branches per mln
inhabitants
(Loans+Deposits)/GDP
banking sector is significantly low
513
Banks are rapidly recovering from the recent financial
224%
crises that led to significant losses
68%
87
EU
2004
Today financial intermediation role of Turkish
Turkey
2005
EU
2004
Turkey
2005
The crises served as filter: total number of banks in
the sector declined to 47 from 81 at the end of 1999,
while that of privately owned commercial banks
declined to 18 from 35
2004
2005
2006F
2007F
52
51
40
24
26
27
24
17
Rate on Loans(2), %
17.5
15.4
15.0
13.5
Rate on Dep.(2), %
9.8
8.0
9.4
9.0
Spread (2), %
7.7
7.3
5.6
4.5
Loans
growth(1),
%
Deposits growth(1),%
Source: NE research network
(1)
(2)
Strong performing loan growth
expected with the restructuring of
the loan portfolio starting from
2003
Deposit growth to be parallel to
GDP growth
Spread expected to stay around
5.5% in 2006
Nominal Growth
End-of-period Banking System data; compound rates calculated on average of FX and LC Loans and Deposits
6
…AND WITH SPECIFIC AREAS WHERE A HIGH GROWTH IS EXPECTED
2005 +368% yoy, but only 2.5% of the GDP (in 2006, 192% yoy growth as of
MORTGAGES
CREDIT CARDS
MUTUAL FUNDS
July, 4% of GDP expected for the year-end)
Room for further growth vs GDP ratio of CEE benchmarks: 5.5% in Poland,
7.6% in Czech Republic, 9.6% in Hungary, and 46% for EU-25
The New Law, although still expected to be approved in the parliament,
introduces flexible rates, deduction of interests from individual tax base and
promotion of asset backed securities business

Pretty developed business comparable to those in developed countries (UK)
30 million credit cards, 0.4 cards per inhabitant (2.4 in U.K, 1.3 in Germany, 1.2
in Italy, 0.7 in France), average ROE is about 50% and it is driven by card
number

USD 16 billion as of July 2006,

Bring stability to earnings for the banks and offer stable returns for the clients

PENSION FUNDS

Share in total wealth is expected to be 8% in 2006, overtaking the securities,
other than stocks to be the second largest saving instrument after deposits
New business rapidly growing with 965,000 plan owners (July 2006) and 72%
yoy growth,
Volume USD 1,371 million (July 2006) with a 66% growth (in YTL terms) since
the start of the year
7
AGENDA
KFS & THE NEW SIZE
VISION & STRATEGY
2005 KEY FINANCIALS
2Q2006 RESULTS
ANNEX
8
KOÇ FINANCIAL SERVICES (KFS) AN INTEGRATED AND WELL
CAPITALIZED FINANCIAL SERVICES PROVIDER …
€ billion, Consolidated Figures as of December 2005
Total Assets
27.5
Deposits
18.0
Gross Cash Loans
14.4
Loans/Deposits, %
80
AuM
(1)
4.8
Total Revenues (2)
2.0
Net Consolidated Profit (mln)
232
Credit Cards (#, mln)
5.0
Customers (#, mln) (3)
12.9
Branches (4)
638
Employees
16,189
50%
50%
PARTNERS SHARE A COMMON VISION AND GOAL
KFS significantly grows its financial operations,
network and market share as a result of a focused
commercial growth plan and a conservative risk
profile approach, under the guidance of a strong local
management team and with the dedicated strategic
support of UniCredit
Value creation will be driven by revenues
growth, cost and risk control
Note: IFRS - Exch. rate YTL/EUR 1.5506
9 funds, pension funds and other DPM
(1) Including mutual
(2) Normalized proforma (Yapi Kredi consolidated for 12 months, excluding adjustments /
extraordinary gains)
(3) out of which 7.2 mln is active; excluding Yapı Kredi Subsidiaries
(4) Of which Koçbank 174, YapiKredi bank 416 YK Subs 46 Other KFS subs 2
… WITH THE STRONG SUPPORT OF ITS SHAREHOLDERS …
Koç Holding Turkey’s largest industrial
and services group with more than 100
companies in 9 different sectors
UniCredit International banking group,
leader in Central and Eastern Europe (CEE)
with presence in 20 countries
2005
2005
Market capitalisation
$ 4.5(1) billion
Market capitalisation
Gross turnover
$ 31.2 billion
Total assets
€ 787 billion
€ 20.7 billion
Revenues / Turkish GDP
9%
Total revenues
Exports / Turkish Exports
8%
Number of customers
Services network
> 14,000
Branch network
Personnel number
~ 82,000
Personnel number (2)
10
(1)
(2)
As of August 25th, 2006
FTE including KFS & YKB at 100%
~ € 65(1) billion
> 28 million
> 7,000
~ 144,000
… AND WITH A COMPLETE RANGE OF FACTORIES - LEASING,
FACTORING, ASSET MANAGEMENT, BROKERAGE, LIFE AND NON LIFE COUPLED WITH AN INTERNATIONAL PRESENCE
% ownership
L
% 2005 revenues
% 2006 bdg net profit
L
L
100 100
50%
50%
(1)
99.8
99.9
28.7 17.4
1.5
3.9
99.9
0.8
1.4
99.0
3.2 12.5
99.9
0.8
2.0
100.0
1.1
99.8
2.5
0.2
0.3
Azerbaijan
NV
L
(2)
67.3
L
94.3
0.2
0.4
99.9
1.6
2.9
2.1
2.6
98.4
0.8
3.0
99.9
0.3
1.0
100.0
(3)
0.9
1.0
97.5
(4)
0.6
0.7
0.7
1.4
55.9 46.6
(6)
93.9
(7)
1.5 -0.7
93.9
1. Through Koç Yatirim
2. 30% YKB, 15% YKY, 52,5% YKE
3. Through YK Holding BV (NV) fully owned by YKB
4. 62,92% YKB, 34,58% YKH BV
5. 99,8% YKB, 0.2% YKL
L
6. Through Sigorta 99,927%, YKF 0,038%
7. 74,01% YKB, 7,95% YKF, 11.9% YKY
11
(5)
100
Listed
MAIN STEPS OF YAPI KREDİ ACQUISITION PROCESS
16 JANUARY 2005
Exclusive negotiations
31 JANUARY 2005
Share Transfer Agreement
8 MAY 2005
28 SEPTEMBER 2005
Share Purchase Agreement
Transfer of 57.4% of Yapı Kredi shares to Koçbank
23 FEB. – 9 MAR. 2006
Tender offer process for Yapı Kredi minority shares (completed
with 0.0050% shareholding acceptance)
APRIL 2006
Acquisition of additional 9.9% of Yapı Kredi shares by Koçbank
JUNE 2006
Announcement of merger ratio of 19.73%
TOTAL DIRECT OWNERSHIP OF KOÇBANK IN YAPI KREDİ
12

67.3%
STRATEGIC RATIONALE OF THE TRANSACTION
Dimensional
growth
Strategic
positioning
Performance
improvement

Significant scale increase, building one of the top three banking groups in
Turkey, with Euro 27.5 billion of consolidated assets, Euro 14.4 billion of
customers loans and more than 7.2 million active clients

Creation of a group with strong distribution/production platforms and
leadership position in most business lines

Strong market coverage with 590 bank branches, 9% market share at
national level
– Significant concentration, with over 12% market share in top 10
cities of the country

Significant value creation opportunities through revenue and cost
synergies

Possibility of leveraging other strategic advantages (critical mass, growth
speed) coming from increased size and market presence of the combined
group
13
AVERAGE NEW POSITIONING IS NUMBER 4 WITH LEADING POSITIONS IN
CARDS, AUM, NON CASH LOANS AND FACTORING. AREAS OF
IMPROVEMENT FOR CONSUMER LOANS AND DEPOSITS
Rank
KFS+YKB
Mkt. Sh.
%
14
6
5
9.0
Ziraat 18, İş 14
8
7
4
10.3
Ziraat 20, İş 15
Consumer Loans (2)
12
9
6
6.6
Credit Cards (3)
12
1
1
26.3
Garanti 22, Ak 14
5
4
2
20.7
İş 21, Ak 13
24
9
6
4.4
İş 6, Fin.7 ,RJ 6
Deposits (1)
8
7
4
10.3
Ziraat 20, İş 15
Cash Loans(6)
9
5
4
11.4
İş 14, Ak 14, Garanti 13
Non Cash Loans
6
1
1
19.0
Garanti 13, İş 9
Leasing
2
8
2
15.5
Garanti 17.3, Finans 9.4
Factoring
1
4
1
23.8
Garanti 9, Deniz 8
Life
7
4
3
Anadolu 23,Başak 17
1
5
1
14.6
22.2
KFS
# of Branches
Deposits (1)
Retail
KFS
AuM +
Brokerage
Total Assets
Rank nr 4
(KB 8, YKB 7)
Corporate
Insurance
Rank
YKB
June 2006
Asset Management
Brokerage (5)
(4)
(4)
Pension
Non-Life
9
3
14
(4)
(4)
(4)
1
(4)
17.4
Key Competitors - %
Ak 14,Ziraat 14, İş 14
Ak 16, Anadolu 16
AxaOyak 12, Anadolu 12
(1) Total deposit since total retail deposits for all banks are not disclosed separately
(2) Excluding credit card loans, (3) Outstanding balance market share,
(4) Through Koc Allianz which is not a KFS subsidiary (Koç Group subsidiary), (5) Equity trading volumes
(6) Cash loans excluding credit card outstanding and consumer loans
ONE OF THE STRENGTHS OF THE NEW GROUP: NETWORK
&
Kırklareli 3
Bartın 1 Kastamonu 1 Sinop
Artvin
Karabük 1
Zonguldak 4
Samsun 5
Rize 1
Kocaeli 3 Düzce 1
Trabzon 3
Amasya 1
Çankırı
Ordu
1
Sakarya
3
Yalova 1
Giresun 1 Gümüşhane
Bolu 2
Çorum 2
Tokat 1
Bayburt
Bilecik
Bursa 24
Erzurum 2
Kırıkkale 1
Edirne 4
Tekirdağ 5 İstanbul 268
Çanakkale 4
Balıkesir 6
Eskişehir 4
Kütahya 1
Uşak 2
İzmir 49
Sivas 1
Kırşehir
Manisa 7
Nevşehir 1
Afyon 2
Denizli 5
Isparta 2
Konya 5
Niğde 1
Antalya 27
Karaman 1
Ağrı
Osmaniye 1
Mersin 9
Bingöl
Muş
Bitlis
Diyarbakır 5
Siirt
Batman 1
Şırnak
Adıyaman
Mardin 2
Adana 9
Muğla 16
Iğdır
Antep 5
Urfa 2
Hatay 4
Nationwide service with 590 branches Yapı Kredi: 416 Koçbank: 174
As of 31 December 2005, including off-shore branches
15
Van 1
Malatya 3
Maraş 2
Burdur
Tunceli
Elazığ 3
Kayseri 4
Aksaray 1
Aydın 6
Kars 1
Erzincan
Yozgat
Ankara 65
Ardahan
Hakkari
KEY ISSUES & MAJOR ACCOMPLISHMENTS SO FAR
Write-offs
Adjustments
envisaged during the due diligence process have been
reflected in YKB’s post acquisition opening accounts
On
Turkcell
25 November 2005, shares of Turkcell Holding and Turkcell İletişim
were sold with a value of YTL 1,638 million.The sale profit of YTL 1,144
million has been added into the capital of YKB
On 30 December 2005, the receivable, which was determined in YTL 152
Fiskobirlik
Fintur &
Digiturk
A-TEL
million nominal value, has been collected in the form of a 3-year special
type government bond based on the protocol signed with the
Undersecretariat of Treasury
On 5 January 2006, shares of Fintur and Digitürk, that were owned by
YKB, were sold with a value of YTL 174 million
On 9 August 2006, YKB sold its share in A-Tel to Turkcell with a value of
USD 150 million.
16
AGENDA
KFS & THE NEW SIZE
VISION & STRATEGY
2005 KEY FINANCIALS
2Q2006 RESULTS
ANNEX
17
THE NEW GROUP AIMS AT BECOMING MARKET LEADER …
Become the leading player in the market
Mission
Key
strategic
objectives
in terms of growth and value creation…

Leader in the segment/business with
higher return on capital/growth potential

Leanest player in the market:
Best cost/income
Most effective sales force
Outstanding risk management
18
2008 KEY STRATEGIC GOALS ENSURE GROWTH, EFFICIENCY AND
PROFITABILITY
KEY STRATEGIC GUIDELINES
KEY 2008 TARGETS
Focus on 5 main business targets:
9 Consolidate leadership in cards and become
leader in consumer finance
9 Become leader in Asset Gathering and 1st
ROE
> 20%
Cost / Income
< 50%
Group’s CAR
> 12%
choice for HNWI
9 Bring mass segment towards profitability
9 Selectively growth on Commercial and
Corporate
9 Growth in Small Business through a profitable
business model
Execution of cost management measures
Excellence on credit and market risk management
Integration of the 2 banks and the key financial
subsidiaries
19
KEY PRIORITIES FOR BUSINESS STRATEGY & INTEGRATION /
REORGANIZATION ARE EXPECTED TO FINETUNE BUT WITH THE COMMON
TARGET TO HAVE THE NEW BANK AT FULL SPEED STARTING FROM 2007
2005 – 4Q

3y plan approval and 1st common
budget process

Pricing alignment and commercial
focus on key products: Cards
(World card through KB) Retail /
Private (AuM and mortgages),
Corporate (cash loans volumes)
Business
strategy

Treasury / Market risks: FX
position on control, cost of funding
decrease
Cost management principles in
place (1st cut)
2006

Focus on the key segments / products: Cards
(consolidate leadership), Retail (upper mass,
positioning in consumer lending/mortgages,
decrease Mass cost to serve), Private (AuM /
asset gathering), Small Business (new profitable
service model to be defined), Mid-Large
Corporate (selective growth + value added
service)

New service model: piloting / implementation

Align monitoring and risk management
functions to KFS standards

MBO system in place
2007-2008

Bank at full speed with
full deployment of new
service model

Expansion of product
offering

Reinforce presence in
Small Business

Further decrease cost to
serve in mass

Operational fine tuning in
order to reach 3 years plan
efficiency targets

Legal Merger of the 2 banks (target 2H)

Mandatory activities per legal
integration
IT integration (to be completed within 4Q) +
training

Head quarters consolidation

Operational engine rationalisation (including
back-office / operation centres / call centres)
New branch openings (up
to a total of 70)

Banks’ branch reorganisation + new openings
Complete the
rationalisation of
subsidiaries

Subs integration / merger (only key financial
subs)
Post acquisition: tender offer,
sub loan
Integration /

New organisation in place
restructuring

Re-branding & communication

Definition of segmentation rules
and new service model
20
AGENDA
KFS & THE NEW SIZE
VISION & STRATEGY
2005 KEY FINANCIALS
2Q2006 RESULTS
ANNEX
21
2005 IFRS FINANCIAL RESULTS OF THE GROUP : THE NEW DIMENSION
2005 KFS
pro-forma of which
normalized ‘’old’’ KFS
of which
YK Group
normalized (4)
2005 KFS
Group (1)
2005 KFS
pro-forma (2)
Total Revenues (3)
1,533
3,053
3,053
1,066
1,987
Operating Expenses
(873)
(3,371)
(1,880)
(493)
(1,388)
Gross Operating Profit
660
(318)
1,173
574
599
Pre - tax Profit
502
(2,587)
872
490
382
Combined Profit
365
(2,410)
662
360
302
Consolidated Net Profit
360
360
YTL mln
22 1)
2)
3)
4)
Yapı Kredi Group consolidated for 3 months
Yapi Kredi consolidated for 12 months
Including monetary gain
Excluding adjustments and Turkcell gain
THE NEW GROUP DIMENSION AND COMPOSITION
CASH LOANS – bln YTL
22.3
9.5
13.2
KFS Yapı Kredi
Group
KFS Yapı Kredi
BRANCHES - #
638
27.9
176
10.0
KFS Yapı Kredi
Group
Group
4.2
3.2
KFS Yapı Kredi
EMPLOYEES - #
16,189
17.9
(1) Banks only
7.4
3.6
DEPOSITS – bln YTL
Group
AUM – bln YTL
13.1
9.1
Group
NON-CASH LOANS (1) – bln YTL
KFS Yapı Kredi
23
12,321
462
3,868
Group
KFS Yapı Kredi
KFS (*) FIRST 4 YEARS RESULTS ARE VERY POSITIVE...
ROE
NET INCOME (YTL mln)
358
231
36%
23%
2002 (1) 2003
2004
263
9
26%
2004
2005
NPL RATIO %
2005
COST / INCOME RATIO % (3)
66%
11.1
8.3
48%
47%
46%
4.9
-1pp
-3.4pp
2002 (1) 2003
(1)
+3pp
1%
2002 (1) 2003
11.7
24%
(2)
2004
2005
Pro-forma; NPL adjusted for a transfer done in May 2003
2002 (1) 2003 2004
(2)
(3)
2005
Based on normalised Equity (net of 1 bln Euro for YapiKredi acquisition)
Revenues netted by monetary loss
24
(*) Old perimeter excluding Yapı Kredi acquisition
(IFRS)
…WHILE FOR YAPI KREDI THERE IS A CLEAR ROOM FOR IMPROVEMENT
2004- 2005
Without Adj.
(%)
2004
2005
Adjustments
(1)
Ordinary
2005
1,798
3,144
(1,157)
1,987
+ 11
(1,471)
(2,879)
1,491
(1,388)
-6
(430)
(2,186)
1,968
(217)
-49
70
307
(388)
(81)
n.a
Net Income
(31)
(1,617)
1,915
298
n.a
Cost / Income
82%
92%
IFRS
mln YTL
Revenues (2)
Costs
Provisions
Tax
25
(1) Including Turkcell gain
(2) Including monetary gain
70%
TOTAL ASSETS GATHERED FROM CUSTOMERS UP BY 11.6% YOY
MAINLY THANKS TO INFLOW OF NEW DEPOSITS AND MUTUAL FUNDS
IFRS Results
KOÇ FINANCIAL SERVICES (‘’old’’) – YTL bln
YAPI KREDİ GROUP
+ 9.3%
+ 15.6%
AUM
3.3
+27%
-1%
AUC
AUM
19.2
16.6
Indirect
28.9
Indirect
4.2
AUC
2.1
+50%
3.2
10.5
8.2
27%
5.0
5.1
18.6
+22%
Direct
31.6
8.2
2004
10.0
-3%
17.9
Direct
2004
2005
26
2005
GROSS CUSTOMERS LOANS UP BY 33% YOY MAINLY THANKS TO
CARDS, CONSUMER LENDING AND CORPORATE ACTIVITY
IFRS Results
KOÇ FINANCIAL SERVICES (‘’old’’) – YTL bln
YAPI KREDİ GROUP
13.17
+ 62%
11.06
9.11
6.57
5.93
5.63
Corporate
+11%
7.42
Corporate*
+65%
Consumer
4.50
3.24
0.82
Consumer
Cards
NPL
Watchlist
0.28
0.21
0.47
+193%
0.18
2004
0.74
Cards
- 3%
0.21
0.45
NPL
0.88
+ 16%
0.21
Watchlist
0.28
0%
+ 54%
3.89
+ 20%
+ 29%
1.13
+ 57%
0.44
2004
2005
1.14
27
* Adjusted for 1.8 bln YTL Çukurova Group Loan
2005
+ 19%
ASSET QUALITY IN A CONSTANT IMPROVING TREND WITH
DECREASING NPL RATIO AND ADEQUATE PROVISIONING LEVEL
KOÇ FINANCIAL SERVICES (“old”)
NPL
Coverage
Ratio (1)
70.8%
76.3%
77.3%
8.3%
5.8%
NPL Ratio
YAPI KREDİ GROUP
79.6%
6.8%
80.8%
78.4%
10.0%
NPL
Coverage
Ratio (1)
8.6%
5.0%
NPL Ratio
2004
Watch
Coverage
Ratio (2)
25.9%
2004
Standard
Coverage
Ratio (3)
1.8%
2004
3Q05
2005
2004
14.3%
26.7%
18.6%
3Q05
1.5%
3Q05
3Q05
2005
1.4%
2005
2005
13.6%
0.8%
2004
3Q05
2005
2.2%
2.1%
3Q05
2005
0.6%
2004
Watch
Coverage
Ratio (2)
28
(1) Specific provisions for NPL / NPL
(2) Specific Provisions for Watch Loans / Watch Loans
(3) General Provisions / Standard Loans
Standard
Coverage
Ratio (3)
ASSET QUALITY: IMPORTANT ACTIONS TAKEN IN ORDER TO MAINTAIN
CREDIT ACTIVITY UNDER EFFICIENT CONTROL
Implementation of Credit Risk Policies and Credit Tableau de Board in both KB & YKB,
Implementation of Credit Underwriting tools (ACE for Corporate & Commercial, SMilE for Micro &
Small Business) completed in Koçbank, to be implemented in YKB in 1Q07
Implementation of Credit Monitoring tool (C-mon) completed in Koçbank (for YKB in 1Q07)
Revision (and increase) of the authority levels for both banks, in accordance with new workflows
and the new Banking Law
Basel-II Assessment and Gap Analysis conducted, Master Plan being defined to reach alignment
with the Basel-II IRB approaches
Monthly monitoring and submission of the largest 25/50 exposures to the CRO and Board
Group consolidation in accordance with banking regulation and S/H’s agreement, monthly monitoring
of related parties’ exposure
Calculation of cost of credit risk by segments, alignment of generic provisioning to the CoR
Revision and monthly monitoring on classified loans and underlying provisions
Centralized approvals of international large exposures
29
SECURITIES PORTFOLIO FOCUSED ON HELD-TO-MATURITY AIMING AT
STABLE REVENUES GENERATION
YAPI KREDİ GROUP
KOÇ FINANCIAL SERVICES (‘’old’’) – bln YTL
-8%
+ 5%
Bln YTL
HFT
AFS
4.43
4.87
4.64
100%
3%
100%
100%
1%
3%
7%
3%
4%
8.12
100%
100%
55%
37%
3Q05
6.94
100%
23%
16%
40%
96%
90%
2004
7.52
HFT
93%
HTM
Bln YTL
2005
AFS
42%
HTM
3%
2004
61%
23%
3Q05
2005*
New Investment policy: general principles
No proprietary or directional risk on the market or performing transactions with speculative intent
Derivatives allowed for hedging purpose; options allowed only for client driven transactions immediately fully hedged
No FX speculative open positions are allowed
VaR limits, stop loss, max open position monitored on a daily basis
30
* As of June 2006, YKB’s securities portfolio consists of 88.8%
HTM, 5.7% AFS and 5.5% HFT securities.
CAPITAL STRUCTURE OF THE TWO BANKS IS NOW BACK WITHIN THE
REGULATORY REQUIREMENTS
YAPI KREDİ BANK
KOÇBANK
2005
2Q06
2005
2Q06
CAR (%)
11.6
12.3
7.3
9.3
Supervisory Capital
906
1,157
1,415
2,169
Tier 1 Capital
2,721
2,886
1,525
1,492
Tier 2 Capital
191
1,533
648
1,466
(2,006)
(3,262)
(758)
(789)
7,827
9,419
19,541
23,437
7,446
8,616
18,775
22,353
381
803
766
1,084
YTL mln
Deductions
Total Risks
RWA
Market Risk
ON 31 MARCH 2006
YKB received a
Euro 500 mln
subordinated
loan
ON 28 APRIL 2006
Koçbank
received a Euro
350 mln
subordinated loan

Thanks to those two actions CARs of both Banks have been well positioned within the regulatory
requirements

The CAR of the new bank at merger it is expected to be in the range of 10%
31
Source: BRSA Report
AGENDA
KFS & THE NEW SIZE
VISION & STRATEGY
2005 KEY FINANCIALS
2Q2006 RESULTS
ANNEX
32
POSITIVE FIRST HALF RESULTS CONFIRM INCREASED FOCUS ON SUSTAINABLE
REVENUE SOURCES AND HIGH MARGIN INSTRUMENTS. ON A NORMALIZED BASIS,
YAPI KREDİ HAS IMPROVED PROFITABILITY DESPITE MARKET TURMOIL
% of commissions in
total revenues increased
to 27% from 25%in
1H05
1H 2006
IFRS RESULTS (un-audited)
YTL mln
% of commissions in total
revenues up to 30% on a
consolidated basis from
25% in 1H05
% of commissions in total
revenues increased to
31% from 25%in 1H05
YKB GROUP
KFS GROUP
1H06
KFS Consolidated (1)
1H06
%yoy chg.
Revenues
537
+3
1,068
-1
1,582
-1
- of which commissions
145
+ 10
329
+ 22
474
18
(239)
+6
(694)
+8
(898)
+3
Net Operating Income
298
+1
373
- 13
684
-6
Provisions
22
- 138
(201)
+ 97
(169)
+6
Tax
(81)
+ 20
(259)
+ 276
(332)
143
Net Profit
238
+ 41
-86
- 134
210
- 51
Normalized Net Profit (3)
262
+ 55
101
- 61
342
- 20
Cost / Income Ratio - %
44
+ 1pp
65
+5pp
57
+2pp
Costs
%yoy chg.(2)
33
(1)
(2)
(3)
Including consolidation adjustments
Normalized 2005 YKB BRSA figures
Adjusted for one-off tax effect
1H06
%yoy chg.(2)
ASSET GROWTH PROVED STEADY DESPITE THE MARKET
VOLATILITY. LOANS GREW BY 61% yoy WHILE FUNDING BASE
STRENGTHENED, WITH 37% yoy GROWTH IN DEPOSITS
Despite the sluggishness in demand following the market
turmoil in May, loan growth continued to be healthy. At a
combined level, loans-to-assets increased from 42% as of 1H05
to 48% at the end of June 06. At YKB Group, loans constituted
51% of total assets as of 1H06.
1H 2006
IFRS RESULTS (un-audited)
YKB GROUP
KFS GROUP
1H06
% yoy chg.(1)
YTL bln
1H06
Assets
22.6
+ 64
30.4
+8
Loans
10.2
+ 65
15.4
Deposits
12.6
+ 45
AuM
2.9
AuC
Non – Cash Loans
KFS + YKB
% yoy chg.(1)
1H06
% yoy chg. (1)
53.0
+ 27
+ 33
25.6
+ 44
20.7
+ 32
33.3
+ 37
- 22
3.2
+ 30
6.1
-1
3.4
- 26
12.0
+ 140
15.4
+ 60
4.2
+ 34
10.5
+ 16
14.7
+ 21
(2)
34
(1)
(2)
2005 YKB Proforma
+ 59% and +61% respectively, if adjusted by Cukurova loan
(2)
AGENDA
KFS & THE NEW SIZE
VISION & STRATEGY
2005 KEY FINANCIALS
2Q2006 RESULTS
ANNEX
35
STATUS OF THE INTEGRATION PROCESS
Major Steps
May 2005
September 2005
2 October 2006
End of Oct. 2006
Closing
Legal Merger
System Migration
Signature of SPA
January 2007
Merger of core Subs.
Assessment phase
3 Year Plans
preparation
Around 170 projects
have been launched by
integration teams
Integration
Planning
Integration of the two banks
Integration
Office
Retail
Corp. and
Comm.
Treasury
P&C
Credit Mgmt.
ORM/MRM
Communication
Audit
Accounting
and Subs
HR
Legal
International
Operations
Organization
IT
ADC and Call
Center
Logistics and
Cost
Credit Cards
Teams
36
Private and
WM
19 macro teams are
defined in charge of
integration projects
Around 11 major work
streams have been
identified
TARGET FOR THE MERGER OF TWO BANKS: OCTOBER 2nd
MAJOR INTEGRATION TIMELINE
2005
Legal
Merger
2006
DEC
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
Full
integration
NOV
Core Subs
Mergers
DEC
JAN
2007
FEB
MAR
Mandatory fulfillments for legal merger
Orga structure finalization
Headquarter relocation
Unification macro offer & pricing
Common clients
analysis
Service
model
roll-out
Implement
common
clients policies
New segmentation definition
Operation Modules Roll Out
Run field pilot
Service model
set-up
Virtual re-flagging of
clients
Major divisional
process design
Sales Modules Roll-out
Branches rationalization and new openings
Tuning ntwk coverage
New Brand & Communication
IT system integration - fill the gap and migration set up
System migration
Fine tuning
Training (phase 2)
Training (phase 1)
Core Subs. Organization & business alignment
Legal Merger Process
Today
37
Fine Tuning
MAJOR INTEGRATION ACCOMPLISHMENTS SO FAR
New organizational structure of both banks has been established
Legal merger process almost completed
New service model piloting phase to increase efficiency has been completed in 7 branches
Relocation plan has been defined and almost completed the implementation (Main HQ, Asset
management companies have moved into the same estate, Plans for Gebze/Çamlıca are being prepared)
Centralization of different activities has started (e.g. FX Outgoing transfers) and centralization of 3
regional operation center has been already finalized
Launched a conversion plan of the staff from HQ – NW
Macro offer and pricing alignment for the most important products and services has been completed.
Cross product sales on both networks has started
Control functions and policies (credit, risk, cost mgnt, etc.) have been aligned in both banks
New branches opening and relocations have started
IT system for the combined entity has been defined and IT projects have been launched
Training process has started following the completion of Pilot task force training
Koçbank cardholders’ conversion to Worldcard clients has been almost completed
The integration legal path has been defined also for Core Subsidiaries
38
MAIN STEPS OF THE LEGAL MERGER

YKB/Koçbank Board resolutions on merger
20 April
First BRSA application
21 April
Close merger financials as of end of April(1)
30 April

Deliver audited merger financials and Board resolutions to call 1st G.A.
12 June
Preparation of merger agreement and amendments
to Articles of Association and valuation reports
21 June

1st application to CMB (which includes merger ratio)
26-29 June
General Assembly meeting to approve merger financials and draft merger agreement 29 June
2nd application to BRSA
30 June
√
√
√
May
June
√
√
√
√
√
√

Approval for 1st application to CMB received
3 August
Approval for 2nd application to BRSA received
18 August

Second General Assembly to approve merger and
Article of Associations amendments
21 September

Application to CMB and ISE and Trade Registry
End September

Legal Merger
2nd October
39
(1)
April
Merger financials are only valid for a period of 6 months before the approval in
the 2nd G.A.
July
August
Sept
Oct
AGENDA
KFS & THE NEW SIZE
VISION & STRATEGY
2005 KEY FINANCIALS
2Q2006 RESULTS
ANNEX
40
KFS
RECLASSIFIED CONSOLIDATED P&L (IFRS)
mln YTL
KFS
PROFIT & LOSS
Interests, net
Monetary gain/loss
Dividends and income (loss) from participations at equity
Net interest income (*)
Fees and commissions, net
Trading gains (losses) from investment securities
Foreign exhange gains (losses)
Other non-interest income, net
Net non-interest income
TOTAL REVENUES
Payroll expense
Other administrative expenses
Depreciation of tangible and intangible assets
Operating expenses
OPERATING PROFIT
Goodwill amortization
Provisions for loans, mlpr and credit related commitments, net
Other provisions and impairments
Total amortizations ad provisions
NET PROFIT BEFORE TAX, MONETARY POSITION AND MINORITIES
Taxation
NET PROFIT BEFORE MINORITIES
Minorities
NET PROFIT
(*) Including monetary gain/loss
41
2004
IFRS
2005
IFRS
2005
"old" KFS
yoy%
1H06
726.0
-117.4
0.0
608.6
244.7
26.8
34.5
12.2
318.1
926.7
-194.5
-181.0
-46.1
-421.7
505.0
-10.7
-91.5
-22.6
-124.9
380.1
-114.8
265.4
-2.4
263.0
1,014.6
-24.6
0.0
990.0
432.1
25.3
43.1
42.4
543.0
1,533.0
-395.9
-395.4
-81.4
-872.7
660.3
0.0
-142.7
-15.9
-158.6
501.7
-137.2
364.5
-4.5
360.0
751.5
-29.9
0.0
721.6
281.5
15.8
31.3
16.0
344.6
1,066.2
-236.1
-212.3
-44.1
-492.6
573.6
0.0
-67.3
-16.0
-83.3
490.3
-130.3
360.0
-1.6
358.4
4%
-75%
0%
19%
15%
-41%
-9%
31%
8%
15%
21%
17%
-4%
17%
14%
-100%
-27%
-29%
-33%
29%
14%
36%
-33%
36%
333.5
0.0
0.0
333.5
144.8
31.2
12.3
14.9
203.1
536.7
-125.4
-94.2
-19.0
-238.6
298.1
0.0
21.2
0.9
22.1
320.1
-81.4
238.7
-0.8
237.9
YAPI KREDİ GROUP
RECLASSIFIED CONSOLIDATED P&L (IFRS)
mln YTL
YKG
PROFIT & LOSS
Interests, net
Monetary gain/loss
Dividends and income (loss) from participations at equity
Net interest income (*)
Fees and commissions, net
Trading gains (losses) from investment securities
Foreign exhange gains (losses)
Other non-interest income, net
Net non-interest income
TOTAL REVENUES
Payroll expense
Other administrative expenses
Depreciation of tangible and intangible assets
Operating expenses
OPERATING PROFIT
Goodwill amortization
Provisions for loans, mlpr and credit related commitments, net
Other provisions and impairments
Total amortizations ad provisions
NET PROFIT BEFORE TAX, MONETARY POSITION AND MINORITIES
Taxation
NET PROFIT BEFORE MINORITIES
Minorities
NET PROFIT
(*) Including monetary gain/loss
42
2004
IFRS
2005
IFRS
2005
Normalised
yoy%
1H06
873.1
119.6
0.0
992.7
535.5
101.2
46.8
121.8
805.3
1,798.0
-498.5
-753.0
-219.2
-1,470.7
327.3
0.0
-154.6
-275.4
-430.0
-102.7
70.4
-32.3
0.9
-31.4
1,184.5
11.4
0.0
1,195.9
547.3
67.2
3.9
1,329.6
1,948.0
3,143.9
-581.1
-2,016.3
-281.2
-2,878.7
265.2
0.0
-1,167.2
-1,018.4
-2,185.6
-1,920.4
307.3
-1,613.1
-4.0
-1,617.0
1,184.5
11.4
0.0
1,195.9
547.3
67.2
3.9
172.6
790.9
1,986.8
-529.1
-668.4
-190.3
-1,387.8
599.0
0.0
-215.8
-1.6
-217.4
381.6
-80.1
301.5
-4.0
297.5
36%
-90%
0%
20%
2%
-34%
-92%
42%
-2%
11%
6%
-11%
-13%
-6%
83%
0%
40%
-99%
-49%
-472%
-214%
-1033%
-534%
-1048%
663.9
0.0
0.0
663.9
328.8
-19.3
11.3
83.0
403.8
1,067.7
-305.1
-323.4
-65.8
-694.3
373.3
0.0
-134.2
-66.4
-200.6
172.7
-258.7
-86.0
-0.4
-86.3
KFS & YAPI KREDİ GROUP
BALANCE SHEET (IFRS)
"old" KFS
mln YTL
YK Group
ASSETS
Cash and placements
Securities portfolio
- Held-for-trading
- Available-for-sale
- Held-to-maturity
Loans and advances to custom
Fixed assets
Goodwill
Other assets
2004
12,740.0
2,701.6
3,494.2
123.9
316.3
3,987.1
5,168.8
153.4
86.2
1,135.8
2005
% change
17,373.7
36%
1,766.9
-35%
4,639.1
33%
49.2
-60%
138.3
-56%
4,451.6
12%
8,600.7
66%
111.6
-27%
86.2
0%
2,169.2
91%
LIABILITIES
Deposits
Funds borrowed (*)
Other liabilities
Shareholders' equity
12,740.0
8,211.0
2,422.9
677.9
1,428.2
17,373.7
9,984.7
3,225.9
778.5
3,384.7
36%
22%
33%
15%
137%
(*) including bank deposits
43
1H06
22,635.2
2,717.5
6,419.3
35.5
202.1
6,181.7
10,220.0
90.8
200.0
2,987.6
2004
26,311.6
2,968.5
7,518.3
4,162.8
3,163.2
192.3
12,087.4
2,519.3
0.0
1,218.1
2005
% change
26,153.2
-1%
4,535.6
53%
6,940.4
-8%
1,567.0
-62%
1,124.7
-64%
4,248.7
2110%
11,980.1
-1%
1,306.5
-48%
0.0
0%
1,390.6
14%
1H06
30,361.7
3,557.8
8,896.6
773.5
989.4
7,133.6
15,402.3
1,254.3
0.0
1,250.6
22,635.2
12,555.7
5,344.6
1,071.7
3,663.1
26,311.6
18,549.8
1,718.1
2,653.6
3,390.2
26,153.2
17,934.5
2,658.1
3,991.1
1,569.6
30,361.7
20,731.4
3,471.5
3,767.6
1,549.3
-1%
-3%
55%
50%
-54%
CONTACT LIST
Carlo Vivaldi – Chief Financial Officer
Tel. +90 212 339 7047
E-mail address: [email protected]
Hüseyin İmece – Executive Vice President
Tel. +90 212 339 7368
Hale Tunaboylu – Head of Investor Relations
Tel. +90 212 339 7647
44
DISCLAIMER
This
presentation
contains
forward-looking
statements
that
reflect
the
Company
management’s current views with respect to certain future events. Although it is believed that
the expectations reflected in these statements are reasonable, they may be affected by a
variety of variables and changes in underlying assumptions that could cause actual results to
differ materially.
Neither Koç Finansal Hizmetler nor Yapı Kredi Bankası nor any of its directors, managers or
employees nor any other person shall have any liability whatsoever for any loss arising from
the use of this presentation.
45