| Updated as of August 2008
INVESTOR FAQ
I. YKB
General Topics
II.Banking Sector
- What is a brief description of Yapı Kredi?
- Turkey's first privately-owned bank with a nationwide presence Yapı Kredi is the fourth largest private bank with total assets of YTL 64.6 billion, as of 1H08. Yapı Kredi, through its innovative products and services, is one of the Turkish banking sector's standard-setters. As of 1H08, Yapı Kredi has a 9.6% market share in total cash loans and a 9.6% market share in total deposits. The Bank is sector leader in credit cards (23.0%), leasing (15.1%), and factoring (19.4%). It also ranked second in mutual funds (18.5%) and third in private pension funds with a 15.2% market share. Through a customer-centric strategy and segment-based service model, Yapı Kredi has an extensive customer base to which it delivers a comprehensive array of retail, SME (Small and Medium Size Enterprises), corporate, commercial, and private banking products and services as well as asset management, leasing, private pension, insurance, and brokerage services.
- Yapı Kredi has financial subsidiaries in Turkey that complement the Bank's strong, segment-based business structure and also international banking operations located in the Netherlands, Russia, and Azerbaijan. Yapı Kredi controls one of the most extensive branch and alternative delivery channel networks in the Turkish banking sector. In addition to a physical service network consisting of 791 branches and 2.220 ATMs, Yapı Kredi's internet and telephone banking applications are at the service of its customers.
- Yapı Kredi's principal shareholder, Koç Financial Services (KFS), the 50-50% joint venture between UniCredit and Koç Group, controls a 81,8% stake in the Bank while minorities' stake is 18.2%. The Bank's shares are traded on the Istanbul Stock Exchange and on the London Stock Exchange.
- What is the vision and strategy of the Bank?
Yapı Kredi’s vision is to become the undisputed leader of the finance sector through sustainable growth and value creation and be the first choice of customers and employees.
Yapı Kredi’s strategy is focused on:
- Accelerated growth,
- Profitability, and
- Efficiency
Yapı Kredi’s strategy is based on five key business objectives:
- Expand branch network significantly
- Reinforce leadership in credit cards
- Grow in SME banking on the back of underpenetrated SME market
- Bring individuals segment towards higher profitability
- Strong focus on cost and efficiency
- What are YKB’s competitive advantages?
- Large network & leading brand
- Leadership in key segments/products
- Segment focused organization already in place
- Solid risk profile
- Quality revenue generation…
- …With large customer base not yet fully explored
- Focus on efficiency and customer service
- Strong shareholders
- What is the strategic positioning of Yapı Kredi?
- Yapı Kredi is well positioned with leading positions in credit cards, assets under management, leasing and factoring. Focusing on a customer-focused strategy and service model, the Bank offers its over 5.9 million active customers through around 800 branches (as of June 2008) across the country a broad range of financial products and services in retail, corporate, commercial and SME banking, asset management, leasing, insurance and brokerage.
- Yapı Kredi has a unique strategic positioning:
| 4th largest position among privately-held banks by asset size (9.2%) |
| 3rd position in terms of number of branches (9.7%) |
| No 1 in credit cards (23.0%) |
| No 2 in asset management (18.5%) |
| No 1 in non-cash loans (15.0%) |
| No 1 in factoring (19.4%) |
| No 1 in leasing (15.1%) |
| No 3 in pension funds (15.2%) |
| No 7 in non-life insurance (5.9%) |
| 4th position in cash loans (9.6%) |
| 4th position in total deposits (9.6%) |
- What is the Istanbul Stock Exchange stock symbol for Yapı Kredi Bank?
- The bank’s shares trade under the ticker symbol YKBNK.IS on the Istanbul Stock Exchange.
- What is the paid-in capital of the Bank?
- Who are Yapı Kredi’s main shareholders?
- As of June 2008, 81.79% of Yapı Kredi is owned by Koç Financial Services A.Ş. (“KFS”) -- the 50/50% joint venture between UniCredit and Koç Group - while minorities’ stake in the Bank is 18.21%.
- Koç Group is Turkey’s largest industrial and services group, focusing on the main driving sectors of the Turkish economy with leading positions in almost every sector it operates, supported by the largest distribution network and richest customer database in Turkey. Koç Holding is the only Turkish company in Fortune 500 and owns the largest international network of Turkish origin with operations in 30 countries.
- UniCredit (UCI) is one of the largest banking and financial services organizations in Europe with a network of over 10,000 branches, over 177,000 employees and strong local roots in 22 countries serving 40 million customers. Its international network is made of branches, representative offices and banking subsidiaries in 50 countries worldwide.
(1H08)
- What is Koç Financial Services (KFS)?
- KFS, Yapı Kredi’s major shareholder with 82% stake, is an integrated and well capitalized financial services provider. Its partners Koç Group and UniCredit share a common vision and goal based on significantly growing KFS’s 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 revenue growth, cost and risk control.
- When did UniCredit (UCI) enter into Turkey?
- UCI decision to enter the Turkish market was based on a strong vision in the significant growth potential of Turkey and its banking sector. UCIs presence in Turkey dates back to October 2002 when UCI finalized a 50%-50% partnership with the Koç Group in Koç Financial Services (KFS), a first in the Turkish financial sector. The aim of the strategic partnership has been to consolidate and significantly grow KFS’s position as one of the top leading financial groups in Turkey in order to realize a sizable value generation opportunity.
- UCI and its local partner Koç Group further deepened their commitment for growth in Turkey by acquiring, through KFS, Yapı Kredi Bank (YKB), one of Turkey’s top four private banks at the time and a leading retail franchise.
- Exclusive negotiations with YKB’s previous shareholder the Çukurova Group that started in January 2005 led to a share purchase for the acquisition of 57.4% stake in YKB held by the Çukurova Group and SDIF (Saving Deposit Insurance Fund).
- The deal was finalized with the transfer of YKB shares to Koçbank in September 2005.
- In April 2006, KFS increased its shareholding in YKB to 67.3% through the acquisition of an additional 9.9% YKB shares by Koçbank.
- As a final step, the legal merger of the two banks under the “Yapı Kredi” name took place in October 2006. The new YKB is uniquely positioned as Turkey’s fourth largest private bank by assets with leading positions in key segments and products such as credit cards, non-cash loans, asset management, leasing, factoring, pension funds and non-life insurance.
- YKB acquisition is the result of UCI and Koç Group’s shared vision in Turkey’s long-term growth prospects as well as their strategic focus on growth in the financial services sector. The combined KFS group’s financial services network (including its international and domestic financial subsidiaries) encompasses more than 840 branches, 17,000 employees and close to 6 million customers across the country and constitutes a premier franchise in retail, corporate and commercial banking offering a broad range of banking products.
- Turkey represents one of the biggest investments UCI has made in the CEE region, contributing 17% to UCI’s CEE division operating profit as of 1H08. UCI aims to further grow in Turkey with an objective to become one of the top three leading players in the banking sector.
- Can you provide some key financial highlights for YKB?
As of 1H08, based on BRSA consolidated financials in YTL:
| Total Assets (bln) |
|
64.6 |
| Performing Loans (net, bln) |
|
34.1 |
| Deposits (bln) |
|
39.5 |
| Mutual Funds (bln) |
|
6.2 |
| Number of Credit Cards (mln)(1) |
|
7.3 |
| Number of Customers (mln) |
|
5.7 |
| Number of Branches |
|
791 |
| Number of ATMs |
|
2,220 |
| Number of Employees |
|
14,821 |
(1) Including virtual cards. Total # of virtual cards: 1.3 mln
- What is the capital adequacy ratio (CAR) of the bank?
- Yapı Kredi’s consolidated CAR is 13.17%, bank-only CAR is 14.96% as of 1H08.
- What does the accelerated branch expansion plan involve?
- According to the accelerated branch expansion plan announced in July 2007, Yapı Kredi is targeting to reach a total of ~1,000 by 2009. As of June 2008, the bank has 791 branches (including one off-shore branch in Bahrain) in 70 cities with 59% of the network concentrated in the top 4 cities in Turkey. YKB has the 3rd largest branch network in Turkey as of 1H08 with an overall branch market share, in terms of number of branches, of 9.7%
- What are the main themes of the 3 Year Strategic Plan for YKB?
- Network Expansion
- ~340 branch openings between 2008-2010 to exceed 1,000 branches in 2010
- Acquire new customer business with increasing presence in mid size cities
-
Strong Commercial Focus
- Rapid growth in SME segment; profitable growth in mortgage and consumer lending
- Maintain leadership in credit cards with growing focus on profitability
- Reinforce leadership in Private and Affluent segments also through introduction of new enhanced service model
- Continuous strengthening of Commercial segment based on profitability and return on capital; focus on overall client/product profitability in Corporate segment
-
Continuous Attention on Cost/Income
- Productivity enhancements on existing network, also leveraging on strong collaboration among network and product factories
- Continuous strong focus on efficiency improvements and tight cost management
- Capital Management
- Active strategic portfolio management for better capital usage/allocation
- RWAs reduction measures to reduce capital absorption and boost value creation
II. Banking Sector
- How significant is the future growth potential of the Turkish banking sector?
-
Turkish banking sector has a significant growth potential compared with the EU and other developed countries. Although growing rapidliy, penetration of the sector into the economy is still low. While the ratio of the sum of loans and deposits to GDP is 237% in the Eurozone countries in 2006, this ratio is only 71% in the case of Turkey as of 2007. Turkish banking sector is underpenetrated in terms of branch number as well. While there were 573 branches per million inhabitants in the Eurozone countries in 2006, there are only 108 branches per million inhabitants in Turkey as of 2007. In line with ongoing stability and sustainable and balanced growth, we expect low penetration levels to increase and gradually approach to EU levels. As the inflation and interest rates continue to decline, Turkey will have a macroeconomic and operating environment similar to that of the EU.
- Please comment on the future outlook and trends in the Turkish banking sector
Structural transformation is expected to continue with privatization of state banks and additional foreign entries. Further mergers and acquisitions might follow so as to make use of economies of scale and increase efficiency. Pressure is expected from decreasing margins due to falling interest rates. Therefore, fee income generation will be crucial. We expect loan and deposit growth to remain robust in the next few years.. .
Small and medium sized enterprises (SME) segment is and will continue be an important area of competition. Banks will compete to find creditworthy SME’s that were “under banked” in the previous years. This will increase the importance of risk management and credit scoring systems. Efficiency increasing efforts (such as POS-sharing, ATM-sharing) are expected to continue.
- What are some of the specific areas that high growth is expected?
Due to existing low penetration, high growth potential exists in specific consumer banking areas:
Mortgages: Significant room for growth remains comparing Turkey’s mortgage penetration (mortgages/GDP) with CEE benchmarks: 8% in Poland, 12% in Hungary, and 46% for EU-25 in 2006. This ratio rose from 1.9% in 2005 to 3.6% in 2007 in Turkey and is expected to reach easily to around 5% in 2010. The New Mortgage Law, approved in the parliament in 2007, introduced variable rates, up to 2% pre-payment penalty, establishment of a secondary market for the securitization of mortgages, faster collection of collateral and shortened foreclosure process.
Credit Cards: Credit cards are a developed business in Turkey comparable to those in developed countries (UK). Credit card expenditures covered around 24% of total private consumption expenditures in 2007 with increase to around 26% expected for 2008. Despite an established market, there is further room for growth for credit cards. There are 41 million credit cards in Turkey, 0.6 cards per inhabitant (2.4 in U.K, 1.3 in Germany, 1.2 in Italy, 0.7 in France). Credit cards are the highest yielding banking instrument with average ROE about 50%, driven by card number.
Pension Funds: Pension funds are another underpenetrated retail banking area offering strong growth prospects. The pension funds to GDP ratio was 0.05% in 2004, 0.17% in 2005, 0.37% in 2006 and 0.53% in 2007.
SMEs: SME segment is an important area of competition. Banks will compete to find creditworthy SMEs in this “under-banked” customer segment with a significant potential. This will increase the importance of credit scoring and risk management systems.
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