Performance Highlights in 3Q18​

• TRY 214 million pre-tax income fully allocated to loan loss provisions, allowing to improve coverage ratios
• 23.4% of capital adequacy ratio as per BRSA post-forbearance, of which 15.5% in CET1
• 0.8% total primary liquidity to deposits ratio, of which 34% in foreign currencies
• TRY 22.6 billion of customer's loans funded by TRY 23.2 billion of total deposits, representing 97.3% loans to deposits ratio

In details:

• In the third quarter of 2018, the Bank reported TRY 214 million of pre-tax, pre-provisions income compared to TRY 166 million and TRY 247 million in the first and second quarters, which was fully allocated to loan loss provisions. Accordingly, net income after provisions and taxes reached TRY 164 million in the first nine months of 2018 compared to TRY 230 million in the same period last year.
• The Bank's performance in the third quarter of 2018 stems from sustained revenue generation capacity coupled with tight cost control in spite of ramping inflation. Total operating income realized at TRY 387 million in 3Q 18, almost the same level as in 2Q 18. In parallel, general operating expenses, excluding one-off expenses, decreased to TRY 139 million in 3Q 18 from TRY 143 million in 2Q 18. In the first nine months of 2018, total general operating expenses contracted year-on-year by 22% to TRY 428 million, owing to the cost initiatives set in place in 2017, resulting in improving the cost to income ratio from 46.8% in 9M 17 to 39.3% in 9M 18.
• Balance sheet activity continued to reflect the ongoing deleveraging policy. Total deposits stood at TRY 23.2 billion as at end-September 2018, registering an increase by TRY 1.8 billion compared to end-June 2018, of which TRY 3.4 billion of FX translation impact along with a real contraction of TRY 1.6 billion.
• Loans to customers stood at TRY 22.6 billion as at end-September 2018, compared to TRY 21.5 billion as at end-June 2018. This is equivalent to an increase by TRY 1.1 billion, of which TRY 2.9 billion of FX translation impact. The remaining decrease represents loan exposure reduction and settlements amid an adverse environment. As a result, the loans to deposits ratio reached 97.3% as at end-September 2018 compared with 100.5% at end-June 2018, still ranking among the lowest levels in the sector.
• Within this context, we continued to adopt a conservative approach to IFRS 9 classification. NPLs ratio stood at 7.6% as at end-September 2018 compared to 6.2% as at end-June 2018. Nonetheless, NPLs coverage by specific provisions have improved to 51.9% from 44.1% over the same period. In parallel, collective provisions increased from TRY 364 million as at end-June 2018 to TRY 444 million as at end-September 2018, representing 2% of net loans.
• In the third quarter of 2018, the Bank's financial flexibility reinforced further. At the solvency level, capital ratios, including regulatory forbearance, improved to 15.5% CET1 ratio and a 23.4% total CAR ratio as at end-September 2018, compared to 14.1% and 20.2% respectively as at end-June 2018. Excluding regulatory forbearance, capital ratio continues to sustain comfortable levels of 13.2% CET1 ratio and 20.1% total CAR ratio. Liquidity remained also sound representing 30.8% of deposits while the foreign currencies liquidity ratio stood at 34%.