RNS Number:1606P
Turk Ekonomi Bankasi A.S.
29 August 2003
Turk Ekonomi Bankasi
Anonim Sirketi
Consolidated Financial Statements
As of June 30, 2003
Together With Review Report
(CONVENIENCE TRANSLATION OF A REVIEW REPORT AND FINANCIAL STATEMENTS)
ORIGINALLY ISSUED IN TURKISH- SEE SECTION III, NOTE XXV)
(Convenience Translation of A Review Report And Financial Statements
Originally Issued In Turkish - See Section III, Note XXV)
TURK EKONOMI BANKASI ANONIM SIRKETI
REVIEW REPORT AS OF June 30, 2003
We have reviewed the consolidated balance sheet of Turk Ekonomi Bankasi Anonim
Sirketi as of June 30, 2003 and the related consolidated statements of income,
changes in shareholders' equity and cash flows for the interim period then
ended. These financial statements are expressed in the equivalent purchasing
power of Turkish lira as of June 30, 2003. These financial statements are the
responsibility of the Bank's management. Our responsibility as independent
auditors is to issue a review report on these financial statements based on our
review.
We conducted our review in accordance with the auditing standards which were
determined under the provisions of Banking Law Number 4389. These standards
require that the review should be planned and performed to obtain limited
assurance as to whether the financial statements are free of material
misstatement. A review is limited primarily to inquires of bank personnel and
analytical procedures applied to financial data and thus provides less assurance
than an audit. We have not performed an audit and, accordingly we do not express
an opinion.
The consolidated financial statements of Turk Ekonomi Bankasi Anonim Sirketi for
the period ended June 30, 2002 were examined by other auditors who have ceased
operations and whose report dated July 31, 2002 expressed that nothing has come
to their attention that causes them to believe that those consolidated interim
financial statements were not presented fairly, in all material respects, in
accordance with the accounting principles and standards that are based on the
Article 13 of the Banking Law number 4389
Based on our review, nothing has come to our attention that causes us to believe
that the accompanying consolidated interim financial statements of Turk Ekonomi
Bankasi Anonim Sirketi at June 30, 2003 are not presented fairly, in all
material respects, in accordance with the accounting principles and standards
that are based on the Article 13 of the Banking Law number 4389.
Additional paragraph for convenience translation to English:
The above mentioned accounting principles differ from International Financial
Reporting Standards (IFRS) issued by International Accounting Standards Board
and so far as such differences apply to the financial statements of the Bank
they mainly relate to the format of financial statements and disclosure
requirements, accounting for deferred taxes and accounting for retirement pay
liabilities. The effects of the differences between these accounting principles
and accounting principles generally accepted in the countries in which the
accompanying financial statements are to be used and IFRS have not been
quantified in the accompanying financial statements. Accordingly, the
accompanying financial statements are not intended to present the financial
position and results of operations in accordance with the accounting principles
generally accepted in the countries of users of the financial statements and
IFRS.
Guney Serbest Muhasebeci Mali Musavirlik Anonim Sirketi
An Affiliated Firm of Ernst & Young International
Esra Peri, SMMM
August 27, 2003
Istanbul, Turkiye
INDEX
SECTION ONE
Page no.
General Information
I. Footnotes and Explanations on the Parent Company Bank's Service
Activities and Operating Areas 1
II. Explanations and Footnotes Regarding the Including Group of the
Parent Company Bank 1
III. Explanations on the consolidated financial statements 1
SECTION TWO
Consolidated Financial Statements
I. Consolidated Balance Sheets - Assets 3
II. Consolidated Balance Sheets - Liabilities 4
III. Consolidated Income Statements 5
IV. Consolidated Statements of Off Balance Sheet Commitments 6
V. Consolidated Statements of Changes in Shareholders' Equity 7
VI. Consolidated Statements of Cash Flows 8
SECTION THREE
Accounting Principles
I. Basis of Presentation 9
II. Presentation of the Information Regarding the Parent Company
Bank and the Group Companies Included in the Consolidation 10
III. Explanations on Forward, Option Contracts and Derivative
Instruments 11
IV. Netting of Financial Assets and Liabilities 12
V. Interest Income and Expense 12
VI. Fees and Commission Income and Expense 12
VII. Securities Held for Trading 12
VIII. Sales and Repurchase Agreements and Lending of Securities 12
IX. Securities Held to Maturity, Securities Available for Sale and
Bank Originated Loans and Receivables 13
X. Unconsolidated Participations and Subsidiaries 14
XI. Originated Loans and Receivables and Provisions for Loan
Impairment 14
XII. Goodwill and Other Intangible Fixed Assets 15
XIII. Tangible Fixed Assets 15
XIV. Leasing Transactions 16
XV. Provisions and Contingent Liabilities 16
XVI. Liabilities Regarding Employee Benefits 16
XVII. Taxation 17
XVIII. Additional Explanations on Borrowings 18
XIX. Paid-in Capital and Share Certificates 18
XX. Acceptances 18
XXI. Government Incentives 18
XXII. Securities at Custody 18
XXIII. Impairement of Assets 18
XXIV. Reporting Regarding Operational Sections 18
XXV. Other Issues 18
SECTION FOUR
Information on Fianancial Structure
I. Capital Adequacy Standard Ratio 19
II. Consolidated Market Risk 22
III. Consolidated Foreign Currency Risk 22
IV. Consolidated Interest Rate Risk 24
V. Consolidated Liquidity Risk 26
SECTION FIVE
Footnotes and Explanations on Consolidated Financial Statements
I. Explanations on Consolidated Assets 28
II. Footnotes and Explanations Related to Consolidated
Liabilities 38
III. Footnotes and Explanations Related to Consolidated Income
Statement 42
IV. Explanations Related to Consolidated Off-balance Sheet Items 44
V. Explanations Related to Consolidated Cash Flows 46
VI. Footnotes and Explanations on the Risk Group of the Bank 47
VII. Footnotes and Explanations Related to Inflation Accounting 49
VIII. Explanations Related to Subsequent Events 51
SECTION SIX
Independent Auditor's Report
I. Explanations on independent review report 51
SECTION ONE
GENERAL INFORMATION
I- Footnotes and Explanations on the Parent Company Bank's Service
Activities and Operating Areas
a) Commercial name of the Bank : Turk Ekonomi Bankasi Anonim
Sirketi (the Bank)
Reporting period : 1 January - 30 June 2003
Address of the head office : Meclis-i Mebusan Caddesi No:35
Findikli 34427 - ISTANBUL
Telephone number : (0212) 251 21 21
Facsimile number : (0212) 249 65 68
Web page : www.teb.com.tr
E-mail address : @teb.com.tr
b) The Parent Company Bank's service activities and operating areas: The
Parent Company Bank operates in corporate, commercial, retail and private
banking areas.
c) Financial statements and relevant explanations together with the
footnotes are stated in Billions of Turkish Lira.
II- Explanations and Footnotes Regarding the Including Group of the Parent
Company Bank
The Including Group of the Parent Company Bank: Turk Ekonomi Bankasi Anonim
Sirketi ("the Bank") is included in the Colakoglu Group. The 70.08% of shares of
the Bank belong to TEB Mali Yatirimlar Anonim Sirketi (TEB Mali Yatirimlar) and
8.60% of the shares belong to Colakoglu Metalurji Anonim Sirketi.
III- Explanations on Consolidated Interim Financial Statements
a) Accounting principles and basis of valuation used in the preparation of
year-end financial statements are also used for the preparation of interim
financial statements without any changes or exceptions, and are summarized in
Section Three below.
b) There are no transactions realized in the interim period that are of a
seasonal or periodical nature.
c) There are no non-recurring transactions or basic accounting
misstatements.
d) There are no extraordinary items in terms of nature or amount that
affect the assets, liabilities, equity, net income or the cash flow of the Bank.
e) Prior period interim financial statements, do not contain any changes
with respect to the estimated values related with the current period. There are
no items in the prior period financial statements that are recorded with their
estimated value.
f) There are no convertible bonds or any other debt securities issued
during the current period.
g) In accordance with the decision related with the distribution of
profit, declared at the Annual General Meeting of the Bank dated March 27, 2003,
the Bank distributed dividends to its shareholders in the current period
starting at April 4, 2003.
h) There are no subsequent events that occurred after the preparation date
of the interim financial statements which have a material impact on the interim
financial statements, and not reflected in the interim financial statements.
i) There are no transactions that may cause a structural change for the
Bank such as restructuring, mergers and acquisitions, or discontinue of any
operations.
j) There are no changes in the commitments and contingencies of the Bank
that have arisen subsequent to the year-end balance sheet date.
SECTION TWO
CONSOLIDATED FINANCIAL STATEMENTS
I. Consolidated Balance Sheets - Assets
II. Consolidated Balance Sheets - Liabilities
III. Consolidated Statements of Income
IV. Consolidated Statements of Off Balance Sheet Commitments
V. Consolidated Statements of Changes in Shareholders' Equity
VI. Consolidated Statements of Cash Flows
I- CONSOLIDATED BALANCE SHEET - ASSETS
Reviewed Audited
Current Period Prior Period
30.06.2003 31.12.2002
Note Ref.
ASSETS (Section TL FC Total TL FC Total
Five)
I. CASH AND BALANCES WITH THE CENTRAL 24,045 412,983 437,028 23,344 455,519 478,863
BANK OF TURKEY
1.1 Cash 10,577 6 10,583 6,846 - 6,846
1.2 Foreign currency - 61,017 61,017 - 89,886 89,886
1.3 Balances with the Central Bank of I-1 13,468 351,960 365,428 16,498 365,633 382,131
Turkey
II. TRADING SECURITIES (Net) 70,081 14,182 84,263 45,180 10,626 55,806
2.1 Public sector debt securities I-2 70,081 13,174 83,255 45,180 10,323 55,503
2.1.1 Government bonds I-2 54,250 655 54,905 38,779 7,349 46,128
2.1.2 Treasury bills I-2 15,830 - 15,830 6,400 - 6,400
2.1.3 Other I-2 1 12,519 12,520 1 2,974 2,975
2.2 Share certificates - - - - - -
2.3 Other marketable securities - 1,008 1,008 - 303 303
III. BANKS AND OTHER FINANCIAL
INSTITUTIONS 69,193 889,215 958,408 43,553 1,110,701 1,154,254
3.1 Due from banks 69,193 889,215 958,408 43,553 1,110,701 1,154,254
3.1.1 Domestic banks 55,127 191,535 246,662 30,826 199,184 230,010
3.1.2 Foreign banks 14,066 697,680 711,746 12,727 911,517 924,244
3.2 Other financial institutions - - - - - -
IV. MONEY MARKET PLACEMENTS 159,310 90,089 249,399 261,185 199,241 460,426
4.1 Interbank money market placements 153,850 90,089 243,939 253,325 199,241 452,566
4.2 Istanbul Stock Exchange money market - - - - - -
placements
4.3 Receivables from reverse repurchase 5,460 - 5,460 7,860 - 7,860
agreements
V. SECURITIES AVAILABLE FOR SALE (Net) 8 29,018 29,026 10 18,790 18,800
5.1 Share certificates I-3 8 - 8 10 - 10
5.2 Other marketable securities I-3 - 29,018 29,018 - 18,790 18,790
VI. LOANS 464,546 849,862 1,314,408 401,780 1,062,405 1,464,185
6.1 Short term I-4 426,432 774,998 1,201,430 372,994 869,844 1,242,838
6.2 Medium and long term I-4 32,914 74,864 107,778 23,255 192,561 215,816
6.3 Loans under follow-up I-4 20,231 35 20,266 22,531 45 22,576
6.4 Specific provisions (-) I-4 (15,031) (35) (15,066) (17,000) (45) (17,045)
VII. FACTORING RECEIVABLES 57,533 21,179 78,712 46,708 27,483 74,191
VIII. SECURITIES HELD TO MATURITY (Net) 38,649 2,512 41,161 41,002 3,166 44,168
8.1 Public sector debt securities I-5 38,649 2,512 41,161 41,002 3,166 44,168
8.1.1 Government bonds I-5 38,367 1,364 39,731 40,752 3,166 43,918
8.1.2 Treasury bills I-5 282 - 282 250 - 250
8.1.3 Other I-5 - 1,148 1,148 - - -
8.2 Other marketable securities I-5 - - - - - -
IX. INVESTMENTS AND ASSOCIATES (Net) 347 - 347 494 - 494
9.1 Financial investments and associates I-6 347 - 347 494 - 494
9.2 Non-Financial investments and - - - - - -
associates
X. SUBSIDIARIES (Net) 373 - 373 377 - 377
10.1 Financial subsidiaries I-7 373 - 373 377 - 377
10.2 Non-Financial subsidiaries - - - - - -
XI. OTHER INVESTMENTS (Net) - - - - - -
XII. FINANCE LEASE RECEIVABLES (Net) 8,215 104,725 112,940 5,220 89,585 94,805
12.1 Gross finance lease receivables I-8 9,212 117,897 127,109 7,312 100,744 108,056
12.2 Unearned income ( - ) I-8 (997) (13,172) (14,169) (2,092) (11,159) (13,251)
XIII. RESERVE DEPOSITS 9,624 113,193 122,817 10,303 136,738 147,041
XIV. MISCELLANEOUS RECEIVABLES I-9 849 578 1,427 347 46 393
XV. ACCRUED INTEREST AND INCOME 28,658 10,013 38,671 26,835 13,433 40,268
RECEIVABLES
15.1 Loans I-10 8,575 8,235 16,810 10,431 10,944 21,375
15.2 Marketable securities I-10 6,651 689 7,340 4,689 599 5,288
15.3 Other I-10 13,432 1,089 14,521 11,715 1,890 13,605
XVI. PROPERTY AND EQUIPMENT (Net) 44,338 1,405 45,743 46,750 458 47,208
16.1 Book value 106,947 2,152 109,099 106,510 1,250 107,760
16.2 Accumulated depreciation ( - ) (62,609) (747) (63,356) (59,760) (792) (60,552)
XVII. INTANGIBLE ASSETS (Net) 4,292 79 4,371 4,197 139 4,336
17.1 Goodwill 412 - 412 412 - 412
17.2 Other 10,417 872 11,289 9,461 1,016 10,477
17.3 Accumulated amortization ( - ) (6,537) (793) (7,330) (5,676) (877) (6,553)
XVIII. OTHER ASSETS I-11 46,373 8,063 54,436 41,216 2,795 44,011
- - -
TOTAL ASSETS 1,026,434 2,547,096 3,573,530 998,501 3,131,125 4,129,626
The accompanying notes are an integral part of these balance sheets.
II- CONSOLIDATED BALANCE SHEET - LIABILITIES
Reviewed Audited
Current Period Prior Period
30.06.2003 31.12.2002
Note Ref.
LIABILITIES (Section TL FC Total TL FC Total
Five)
I. DEPOSITS
449,941 2,081,654 2,531,595 434,885 2,692,819 3,127,704
1.1 Bank deposits II-1 42,949 44,443 87,392 33,809 83,731 117,540
1.2 Saving deposits II-1 194,620 138,475 333,095 182,330 - 182,330
1.3 Public sector deposits II-1 10,863 - 10,863 39 - 39
1.4 Commercial deposits II-1 156,794 776,926 933,720 181,687 - 181,687
1.5 Other institutions deposits II-1 44,715 - 44,715 37,020 - 37,020
1.6 Foreign currency deposits II-1 - 1,112,485 1,112,485 - 2,584,057 2,584,057
1.7 Precious metals deposit accounts II-1 - 9,325 9,325 - 25,031 25,031
II. MONEY MARKET BALANCES 21,930 - 21,930 25,416 - 25,416
2.1 Interbank money market takings - - - - - -
2.2 Istanbul Stock Exchange money - - - - - -
market takings
2.3 Funds provided under repurchase II-2 21,930 - 21,930 25,416 - 25,416
agreements
III. FUNDS BORROWED 40,698 414,882 455,580 39,385 398,575 437,960
3.1 Funds borrowed from the Central - - - - - -
Bank of Turkey
3.2 Other funds borrowed II-3 40,698 414,882 455,580 39,385 398,575 437,960
3.2.1 Domestic banks and institutions II-3 26,333 23,811 50,144 18,782 13,537 32,319
3.2.2 Foreign banks, institutions and II-3 14,365 391,071 405,436 20,603 385,038 405,641
funds
IV. MARKETABLE SECURITIES ISSUED (Net) - - - - - -
4.1 Bills II-4 - - - - - -
4.2 Asset backed securities II-4 - - - - - -
4.3 Bonds II-4 - - - - - -
V. FUNDS II-5 - - - - - -
VI. MISCELLANEOUS PAYABLES II-6 19,628 30,869 50,497 24,744 41,934 66,678
VII. OTHER EXTERNAL RESOURCES II-7 51,669 15,126 66,795 20,785 7,364 28,149
VIII. TAXES AND OTHER DUTIES PAYABLE 10,928 46 10,974 7,534 - 7,534
IX. FACTORING PAYABLES 19,045 13,046 32,091 14,607 16,586 31,193
X. FINANCE LEASE PAYABLES (Net) - - - - - -
10.1 Finance Lease Payables II-8 - - - - - -
10.2 Deferred finance lease expenses ( - II-8 - - - - - -
)
XI. ACCRUED INTEREST AND EXPENSES 34,817 8,987 43,804 14,561 13,195 27,756
PAYABLE
11.1 Deposits II-9 7,973 6,116 14,089 5,908 9,842 15,750
11.2 Borrowings II-9 2,288 1,807 4,095 2,297 2,436 4,733
11.3 Repurchase agreements II-9 23 - 23 31 - 31
11.4 Other II-9 24,533 1,064 25,597 6,325 917 7,242
XII. PROVISIONS 41,197 2,953 44,150 40,854 1,878 42,732
12.1 General provisions II-10 6,753 - 6,753 6,792 - 6,792
12.2 Reserve for employee termination II-10 1,896 - 1,896 1,952 - 1,952
benefits
12.3 Provisions for income taxes II-10 21,554 2,953 24,507 23,683 1,878 25,561
12.4 Insurance technical reserves (Net) 10,457 - 10,457 7,822 - 7,822
12.5 Other provisions II-10 537 - 537 605 - 605
XIII. SUBORDINATED LOANS II-10 - 21,115 21,115 - 27,418 27,418
XIV. MINORITY INTEREST 21,495 - 21,495 21,454 - 21,454
XV. SHAREHOLDERS' EQUITY 237,319 36,185 273,504 240,736 44,896 285,632
15.1 Paid-in capital II-11 55,125 - 55,125 55,125 - 55,125
15.2 Supplementary capital II-11 209,222 63 210,809 209,371 - 209,371
15.2.1 Share premium II-12 - - - - - -
15.2.2 Share cancellation profits - - - - - -
15.2.3 Marketable securities value 75 63 138 224 - 224
increase fund
15.2.4 Revaluation fund - - - - - -
15.2.5 Value increase in revaluation fund - - - - - -
15.2.6 Other capital reserves - - - - - -
15.2.7. Effect on inflation accounting on 209,147 - 209,147 209,147 - 209,147
share capital
15.3 Profit reserves 7,419 1,524 8,943 4,916 6,522 11,438
15.3.1 Legal reserves 7,419 - 7,419 4,916 - 4,916
15.3.2 Status reserves - - - - - -
15.3.3 Extraordinary reserves - - - - - -
15.3.4 Other profit reserves - 1,524 1,524 - 6,522 6,522
15.4 Profit or loss (34,447) 34,598 151 (28,676) 38,374 9,698
15.4.1 Prior year income/loss (40,997) 32,234 (8,763) (44,977) 25,695 (19,282)
15.4.1.1 Group's share (30,338) 32,234 1,896 (33,538) 25,695 (7,843)
15.4.1.2 Minority shares (10,659) - (10,659) (11,439) - (11,439)
15.4.2 Current year income/loss 6,550 2,364 8,914 16,301 12,679 28,980
15.4.2.1 Group's share 7,460 2,364 9,824 15,166 12,679 27,845
15.4.2.2 Minority shares (910) - (910) 1,135 - 1,135
TOTAL LIABILITIES 948,667 2,624,863 3,573,530 884,961 3,244,665 4,129,626
The accompanying notes are an integral part of these balance sheets.
III- CONSOLIDATED STATEMENTS OF INCOME
Reviewed Reviewed Reviewed Not
Reviewed
Current Prior 01.04.2003 01.04.2002
Period Period - -
Note Ref. 30.06.2003 30.06.2002 30.06.2003 30.06.2002
INCOME AND EXPENSES (Section Total Total Total Total
five)
I. INTEREST INCOME III-1 207,301 268,112 94,611 157,778
1.1 Interest on loans 100,215 112,253 48,083 65,986
1.1.1 Interest on TL loans 73,513 72,456 36,601 43,663
1.1.1.1 Short term loans 69,996 68,047 35,454 40,718
1.1.1.2 Medium and long term loans 3,517 4,409 1,147 2,945
1.1.2 Interest on foreign currency loans 26,542 39,533 11,430 22,116
1.1.2.1 Short term loans 16,182 33,480 8,002 17,837
1.1.2.2 Medium and long term loans 10,360 6,053 3,429 4,279
1.1.3 Interest on loans under follow-up 160 264 52 207
1.1.4 Premiums received from Resource Utilisation - - - -
Support Fund
1.2 Interest received from reserve deposits 2,815 1,925 1,308 1,097
1.3 Interest received from banks 22,331 29,015 9,461 16,462
1.3.1 The Central Bank of Turkey - - - -
1.3.2 Domestic banks 13,588 5,217 7,369 2,233
1.3.3 Foreign banks 8,743 23,798 2,092 14,229
1.4 Interest received from money market 48,210 56,475 19,953 28,094
transactions
1.5 Interest received from marketable securities 12,890 49,774 6,370 34,403
portfolio
1.5.1 Trading securities 2,217 49,774 1,145 34,403
1.5.2 Available-for-sale securities 791 - 50 -
1.5.3 Held to maturity securities 9,882 - 5,175 -
1.6 Other interest income 20,840 18,670 9,437 11,736
II. INTEREST EXPENSE III-2 120,552 148,797 64,564 81,652
2.1 Interest on deposits 84,771 99,593 40,498 51,649
2.1.1 Bank deposits 6,429 4,972 3,062 3,480
2.1.2 Saving deposits 38,916 30,501 22,243 15,042
2.1.3 Public sector deposits - 4 - 3
2.1.4 Commercial deposits 27,845 16,001 12,402 6,705
2.1.5 Other institutions deposits 195 41 99 (20)
2.1.6 Foreign currency deposits 11,305 48,002 2,675 26,397
2.1.7 Precious metals vault accounts 81 72 17 42
2.2 Interest on money market transactions - 36 - 6
2.3 Interest on funds borrowed 14,795 28,429 7,178 15,184
2.3.1 The Central Bank of Turkey - - - -
2.3.2 Domestic banks 4,384 4,408 2,190 2,383
2.3.3 Foreign banks 10,411 21,394 4,988 11,241
2.3.4 Other financial institutions - 2,627 - 1,560
2.4 Interest on securities issued - - - -
2.5 Other interest expense 20,986 20,739 16,890 14,813
III. NET INTEREST INCOME (I - II) 86,749 119,315 30,047 76,126
IV. NET FEES AND COMMISSIONS INCOME 17,013 16,343 7,478 6,492
4.1 Fees and commissions received 25,771 23,099 12,143 8,978
4.1.1 Cash loans 2,506 1,362 1,205 673
4.1.2 Non-cash loans 6,020 3,851 2,835 2,326
4.1.3 Other 17,245 17,886 8,103 5,979
4.2 Fees and commissions paid 8,758 6,756 4,664 2,486
4.2.1 Cash loans 1,327 742 671 (251)
4.2.2 Non-cash loans 319 146 194 19
4.2.3 Other 7,112 5,868 3,799 2,718
V. DIVIDEND INCOME - - - -
5.1 Trading securities - - - -
5.2 Available-for-sale securities - - - -
VI. NET TRADING INCOME 12,892 332 21,337 (3,737)
6.1 Profit/losses on trading account securities 13,274 5,724 11,714 2,783
(Net)
6.2 Foreign exchange gains/losses (Net) (382) (5,392) 9,623 (6,520)
VII PROFIT/LOSS FROM HELD TO MATURITY MARKETABLE III-3 - - - -
SECURITIES
VIII. OTHER OPERATING INCOME III-4 8,854 17,322 4,284 13,673
IX. TOTAL OPERATING INCOME (III+IV+V+VI+VII+VIII) 125,508 153,312 63,146 92,554
X. PROVISION FOR LOAN LOSSES OR OTHER RECEIVABLES III-5 3,059 9,811 1,386 4,404
(-)
XI. OTHER OPERATING EXPENSES (-) III-6 73,949 75,435 35,313 46,228
XII. NET OPERATING INCOME (IX-X-XI) 48,500 68,066 26,447 41,922
XIII. PROFIT/LOSSES FROM ASSOCIATES AND SUBSIDIARIES III-7 170 - 170 -
XIV. NET POSITION INCOME/EXPENSE (25,137) (30,036) 862 (15,546)
XV. INCOME BEFORE TAXES (XII+XIII+ XIV) 23,533 38,030 27,479 26,376
XVI. PROVISION FOR TAXES ON INCOME (-) 14,619 16,322 7,337 10,318
XVII. NET OPERATING INCOME/EXPENSE AFTER TAXES 8,914 21,708 20,142 16,058
(XV-XVI)
XVIII. EXTRAORDINARY INCOME/EXPENSE AFTER TAXES - - (5) 22
18.1 Extraordinary net income/expense before taxes - - (5) 22
18.1.1 Extraordinary income - - (40) -
18.1. 2 Extraordinary expense (-) - - 35 22
18.2 Provision for taxes on extraordinary income - - - -
XIX. NET PROFIT/LOSSES (XVII+XVIII) III-8 - - - -
XX. Earnings/Losses per share 8,914 21,708 20,137 16,080
9,824 20,336 19,405 15,826
(910) 1,372 732 254
80.85 196.90 182.65 145.85
The accompanying notes are an integral part of these statements
IV- CONSOLIDATED STATEMENTS OF OFF-BALANCE SHEET COMMITMENTS
Reviewed Audited
Current Period Prior Period
Note Ref. 30.06.2003 31.12.2002
OFF BALANCE SHEET (Section TL FC TOTAL TL FC TOTAL
COMMITMENTS five)
A. OFF BALANCE SHEET 666,568 1,412,836 2,079,404 589,365 1,669,729 2,259,094
COMMITMENTS
(I+II+III)
I. GUARANTEES IV-1 328,403 690,781 1,019,184 295,327 765,961 1,061,288
1.1. Letters of 327,460 269,854 597,314 295,200 352,057 647,257
guarantee
1.1.1. Guarantees subject 34,889 69 34,958 31,778 282 32,060
to State Tender Law
1.1.2. Guarantees given 77,313 19,434 96,747 77,750 52,357 130,107
for foreign trade
operations
1.1.3. Other letters of 215,258 250,351 465,609 185,672 299,418 485,090
guarantee
1.2. Banks loans 871 43,754 44,625 - 44,992 44,992
1.2.1. Import letter of - 43,754 43,754 - 44,992 44,992
acceptance
1.2.2. Other bank 871 - 871 - - -
acceptances
1.3. Letters of credit 72 369,111 369,183 80 358,852 358,932
1.3.1. Documentary letters 72 332,106 332,178 80 316,251 316,331
of credit
1.3.2. Other letters of - 37,005 37,005 - 42,601 42,601
credit
1.4. Prefinancing given - - - - - -
as guarantee
1.5. Endorsements - - - - - -
1.5.1. Endorsements to the - - - - - -
Central Bank of
Turkey
1.5.2. Other endorsements - - - - - -
1.6. Securities issue - - - - - -
purchase guarantees
1.7. Other guarantees - 7,325 7,325 47 1,555 1,602
1.8. Other collaterals - 737 737 - 8,505 8,505
II. COMMITMENTS 202,734 126,688 329,422 202,033 367,010 569,043
2.1. Irrevocable 200,640 126,688 327,328 202,033 367,010 569,043
commitments
2.1.1. Asset purchase - - - 1,115 - 1,115
commitments
2.1.2. Deposit purchase 6,000 126,688 132,688 - 367,010 367,010
and sales
commitments
2.1.3. Share capital - - - - - -
commitment to
associates and
subsidiaries
2.1.4. Loan granting 94,821 - 94,821 125,856 - 125,856
commitments
2.1.5. Securities issue - - - - - -
brokerage
commitments
2.1.6. Commitments for 400 - 400 - - -
reserve deposit
requirements
2.1.7. Commitments for 93,239 - 93,239 75,062 - 75,062
credit card limits
2.1.8. Other irrevocable 6,180 - 6,180 - - -
commitments
2.2. Revocable 2,094 - 2,094 - - -
commitments
2.2.1. Revocable loan - - - - - -
granting
commitments
2.2.2. Other revocable 2,094 - 2,094 - - -
commitments
III. DERIVATIVE IV-2 135,431 595,367 730,798 92,005 536,758 628,763
FINANCIAL
INSTRUMENTS
3.1. Forward foreign 135,431 400,169 535,600 92,005 196,726 288,731
currency buy/sell
transactions
3.1.1. Forward foreign 50,620 208,730 259,350 23,415 119,227 142,642
currency
transactions-buy
3.1.2. Forward foreign 84,811 191,439 276,250 68,590 77,499 146,089
currency
transactions-sell
3.2. Swap transactions - 185,096 185,096 - 340,032 340,032
related to f.c. and
interest rates
3.2.1. Foreign currency - 92,794 92,794 - 169,267 169,267
swap-buy
3.2.2. Foreign currency - 92,302 92,302 - 170,765 170,765
swap-sell
3.2.3. Interest rate - - - - - -
swaps-buy
3.2.4. Interest rate - - - - - -
swaps-sell
3.3. Foreign currency - - - - - -
and interest rate
options
3.3.1. Foreign currency - - - - - -
options-buy
3.3.2. Foreign currency - - - - - -
options-sell
3.3.3. Interest rate - - - - - -
options-buy
3.3.4. Interest rate - - - - - -
options-sell
3.4. Foreign currency - 10,102 10,102 - - -
futures
3.4.1. Foreign currency - 5,051 5,051 - - -
futures-buy
3.4.2. Foreign currency - 5,051 5,051 - - -
futures-sell
3.5. Interest rate - - - - - -
futures
3.5.1. Interest rate - - - - - -
futures-buy
3.5.2. Interest rate - - - - - -
futures-sell
3.6. Other - - - - - -
B. CUSTODY AND PLEDGED 1,683,680 423,067 2,106,747 1,293,320 428,328 1,721,648
ITEMS (IV+V)
IV. ITEMS HELD IN 1,227,179 276,248 1,503,427 903,684 286,426 1,190,110
CUSTODY
4.1. Assets under - - - - - -
management
4.2. Investment 508,675 163,666 672,341 313,989 161,469 475,458
securities held in
custody
4.3. Checks received for 687,753 50,011 737,764 574,303 49,267 623,570
collection
4.4. Commercial notes 27,604 15,990 43,594 14,042 23,373 37,415
received for
collection
4.5. Other assets 1,086 46,581 47,667 485 52,317 52,802
received for
collection
4.6. Assets received for - - - - - -
public offering
4.7. Other items under 2,061 - 2,061 865 - 865
custody
4.8. Custodians - - - - - -
V. PLEDGED ITEMS 456,501 146,819 603,320 389,636 141,902 531,538
5.1. Marketable 18,347 9,445 27,792 13,102 9,329 22,431
securities
5.2. Guarantee notes 7,467 1,156 8,623 6,920 1,470 8,390
5.3. Commodity 206,295 12,745 219,040 210,235 - 210,235
5.4. Warranty - - - - - -
5.5. Immovables 120,265 50,420 170,685 124,568 41,300 165,868
5.6. Other pledged items 104,127 73,053 177,180 34,811 89,803 124,614
5.7. Pledged - - - - - -
items-depository
TOTAL COMMITMENTS 2,350,248 1,835,903 4,186,151 1,882,685 2,098,057 3,980,742
(A+B)
The accompanying notes are an integral part of these statements.
V- CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Effect of
Note Paid-in inflation Share Legal Status Extraordinary
Current Period Ref. Capital Accounting premium Reserves Reserves Reserves
on
Capital
1 Balances at the 55,125 209,147 - 4,916 - -
beginning of the period
- January 1, 2003
Increases in the period - - - - - -
:
2 Available for sale - - - - - -
investment
2.1 Net fair value - - - - - -
gain/losses
3 Cash flow hedge: - - - - - -
3.1 Net fair value - - - - - -
gain/losses
4 Foreign exchange - - - - - -
difference
Transferred Amount :
5 Available for sale - - - - - -
investment
5.1 Transferred to net - - - - - -
income
6 Cash flow hedge: - - - - - -
6.1 Transferred to net - - - - - -
income
6.2 Transferred to assets - - - - - -
7 Effect of Changes in - - - 15 - -
Consolidation and Other
8 Net Income - - - - - -
9 Dividend - - - - - -
10 Transferred to legal - - - 2,503 - -
reserves
11 Issuance of share - - - - - -
certificate
Closing Balance - June
30 2003 55,125 209,147 - 7,419 - -
(1+2+3+4+5+6+7+8+9+10)
Value Marketable
Current Increase Securities
Other Period Prior Period Revaluation Fund Value
Current Period Reserves Net Net Revaluation Increase Total
Income/(Loss) Income/(Loss) Fund Fund Fund
1 Balances at the 6,522 28,980 (19,282) - - 224 285,632
beginning of the
period - January 1,
2003
Increases in the - - -
period :
2 Available for sale - - - - - - -
investment
2.1 Net fair value - - - - - - -
gain/losses
3 Cash flow hedge: - - - - - - -
3.1 Net fair value - - - - - - -
gain/losses
4 Foreign exchange (4,998) - - - - - (4,998)
difference
Transferred Amount :
5 Available for sale - - - - - - -
investment
5.1 Transferred to net - - - - - - -
income
6 Cash flow hedge: - - - - - (86) (86)
6.1 Transferred to net - - - - - - -
income
6.2 Transferred to assets - - - - - (86) (86)
7 Effect of Changes in - - - - - - 15
Consolidation and
Other
8 Net Income - 8,914 - - - - 8,914
9 Dividend - - (15,973) - - - (15,973)
10 Transferred to legal - (28,980) 26,492 - - - -
reserves
11 Issuance of share - - - - - - -
certificate
Closing Balance -
June 30 2003 1,524 8,914 (8,763) - - 138 273,504
(1+2+3+4+5+6+7+8+9+10)
Effect of
Prior Period Note Paid-in inflation Share Legal Status Extraordinary
Ref. Capital Accounting premium Reserves Reserves Reserves
on
Capital
1 Balances at the beginning 55,125 458,414 - 60,867 - -
of the period - January
1, 2002
Increases in the period :
2 Available for sale - - - - - -
investment
2.1 Net fair value - - - - - -
gain/losses
3 Cash flow hedge: - - - - - -
3.1 Net fair value - - - - - -
gain/losses
4 Foreign exchange - - - - - -
difference
Transferred Amount :
5 Available for sale - - - - - -
investment
5.1 Transferred to net income - - - - - -
6 Cash flow hedge: - - - - - -
6.1 Transferred to net income - - - - - -
6.2 Transferred to assets - - - - - -
7 Effect of Changes in - - - - - -
Consolidation and Other
8 Net Income - - - - - -
9 Dividend - - - - - -
10 Transferred to legal - - - 344 - -
reserves
11 Issuance of share - - - - - -
certificate
Closing Balance - June 30 55,125 458,414 - 61,211 - -
2002
(1+2+3+4+5+6+7+8+9+10+11)
Value Marketable
Current Increase
Prior Period Other Period Prior Period Revaluation Fund Securities
Reserves Net Net Revaluatio Total
Income/(Loss) Income/(Loss) Fund n Fund Value
Increase
Fund
1 Balances at the 5,748 (66,198) (258,301) - - - 255,655
beginning of the period
- January 1, 2002
Increases in the period
:
2 Available for sale - - - - - - -
investment
2.1 Net fair value - - - - - - -
gain/losses
3 Cash flow hedge: - - - - - - -
3.1 Net fair value - - - - - - -
gain/losses
4 Foreign exchange 2,184 - - - - - 2,184
difference
Transferred Amount :
5 Available for sale 633 - - - - - 633
investment
5.1 Transferred to net 633 - - - - - 633
income
6 Cash flow hedge: - - - - - - -
6.1 Transferred to net - - - - - - -
income
6.2 Transferred to assets - - - - - - -
7 Effect of Changes in - - 2,806 - - - 2,806
Consolidation and Other
8 Net Income - 21,708 - - - - 21,271
9 Dividend - - - - - - -
10 Transferred to legal - 66,198 (66,542) - - - -
reserves
11 Issuance of share - - - - - - -
certificate
Closing Balance - June 8,565 21,708 (322,037) - - - 282,986
30 2002
(1+2+3+4+5+6+7+8+9+10+11)
The accompanying notes are an integral part of these statements.
Reviewed Reviewed
Current Period Prior Period
VI- CONSOLIDATED STATEMENTS OF CASH FLOWS 01.01.2003 01.01.2002
Note Ref - 30.06.2003 - 30.06.2002
A. CASH FLOWS FROM BANKING OPERATIONS
1.1 Operating profit before changes in operating assets and 58,084 9,067
liabilities(+)
1.1.1 Interest received(+) 207,731 262,322
1.1.2 Interest paid(-) (111,820) (166,203)
1.1.3 Dividend received(+) - -
1.1.4 Fees and commissions received(+) 25,771 23,099
1.1.5 Other income(+) 19,880 22,047
1.1.6 Collections from previously written off loans and other 2,248 999
receivables(+)
1.1.7 Payments to personnel and service suppliers(-) (33,748) (32,195)
1.1.8 Taxes paid(-) (57,805) (30,342)
1.1.9 Other 5,827 (70,660)
1.2 Changes in operating assets and liabilities (437,086) 436,008
1.2.1 Net (increase) decrease in trading securities(+/-) (28,457) (10,397)
1.2.2 Net (increase) decrease in due from banks and other financial 20,230 4,040
institutions(+/-)
1.2.3 Net (increase) decrease in loans 149,445 (206,327)
1.2.4 Net (increase) decrease in other assets(+/-) (41,543) 9,189
1.2.5 Net increase (decrease) in bank deposits(+/-) (30,148) (54,531)
1.2.6 Net increase (decrease) in other deposits(+/-) (565,961) 448,899
1.2.7 Net increase (decrease) in funds borrowed(+/-) 17,620 146,697
1.2.8 Net increase (decrease) in matured payables(+/-) - -
1.2.9 Net increase (decrease) in other liabilities(+/-) 41,728 98,438
I. Net cash provided from banking operations(+/-) (379,002) 445,075
B. CASH FLOWS FROM INVESTING ACTIVITIES
II. Net cash provided from investing activities(+/-) (13,328) (37,752)
2.1 Cash paid for purchase of investments, associates and - -
subsidiaries(-)
2.2 Cash obtained from sale of investments, associates and - 774
subsidiaries(+)
2.3 Fixed assets purchases(-) (2,952) (6,118)
2.4 Fixed assets sales(+) 1,818 3,347
2.5 Cash paid for purchase of securities available for sale (-) (29,026) -
2.6 Cash obtained from sale of securities available for sale (+) 18,800 -
2.7 Cash paid for purchase of investment securities(-) (2,437) (40,117)
2.8 Cash obtained from sale of investment securities(+) 469 4,362
2.9 Extraordinary items(+/-) - -
2.10 Other (+/-) - -
C. CASH FLOWS FROM FINANCING ACTIVITIES
III. Net cash provided from financing activities(+/-) (15,973) 2,455
3.1 Cash obtained from funds borrowed and securities issued(+) - -
3.2 Cash used for repayment of funds borrowed and securities - -
issued(-)
3.3 Capital increase(+) - -
3.4 Dividends paid(-) (15,973) -
3.5 Payments for finance leases(-) - -
3.6 Extraordinary items(+/-) - -
3.7 Other(+/-) - 2,455
IV. Effect of change in foreign exchange rate on cash and cash (44,399) (37,612)
equivalents
V. Net increase / (decrease) in cash and cash equivalents (452,702) 372,166
(I+II+III)
VI. Cash and cash equivalents at beginning of the year(+) VI-1 2,078,214 1,554,326
VII. Cash and cash equivalents at end of the year VI-1 1,625,512 1,926,492
The accompanying notes are an integral part of these statements.
SECTION THREE
ACCOUNTING PRINCIPLES
I. Basis of Presentation
The Parent Bank prepares its financial statements in accordance with the
"Accounting Application Regulations" (AAR) based on Article 13 named as
"Accounting and Recording System" of the Banking Law 4389 and related
communiques and related explanations and further communiques that add or cause a
change on the content of the relevant communiques.
Presentation of the financial statements in accordance with the current
purchasing power of money
The "Accounting Standard on Financial Statements at Hyperinflation Periods",
Communique No:14, of "Accounting Application Regulations" (AAR) became effective
from July 1, 2002.
In accordance with the communique No:14, the parent company Bank's financial
statements should be restated, taking the current period equivalent purchasing
power of Turkish lira into account. In other words, Communique No:14 states
that, financial statements prepared in terms of the domestic currency of a
country with high inflation rate should be restated in accordance with the
equivalent purchasing power of the domestic currency at the balance sheet date.
Prior period financial statements should also be restated in their entirety to
the measuring unit current at the balance sheet date. One characteristic that
necessitates the application of inflation accounting under the provisions of
Communique No: 14 is a cumulative three-year inflation rate approaching or
exceeding 100%. Restatement of financial statements is based on both the
principles described in Communique No.14 and the wholesale price indices
published in its appendix and the wholesale price indices announced by the State
Institute of Statistics. Detailed information on the application of inflation
accounting is given in the section V, footnote VI, "Footnotes and Explanations
on Inflation Accounting" of the following footnotes.
Other valuation methods
Other basis of valuation used for assets and liabilities in the preparation of
financial statements are explained among the accounting principles for the
related assets and liabilities.
Changes in Accounting Policies and Valuation Methods in the Current Period
Changes in Accounting Policies
Until September 30, 2002, the parent company Bank's financial statements were
being prepared in accordance with the Uniform Chart of Accounts, standard
balance sheet, income statement, supplementary financial statements and
footnotes to these financial statements and the explanations related to the
applications of such financial statements and the accounting and valuation
principles thereto that are based on the article 13 of the Banking Law 4389 as
revised by Law Number 4672 and 4491 and the "Accounting Standard on Financial
Statements at Hyperinflation Periods", Communique No:14, published at Official
Gazette dated June 22, 2002 and numbered 24793 and which is related to the "
Regulation of Accounting Applications" and became effective from July 1, 2002.
After October 1, 2002, the Bank's financial statements are prepared in
accordance with the accounting policies explained below and included in both
Communique No:14 and the other communiques related to the Regulation of
Accounting Applications effective from October 1, 2002. Accordingly, assets and
liabilities were classified as of October 1, 2002 in accordance with the
provisions of the related communiques and the required changes for the other
accounts were made and the effects of such changes were reflected in the income
statement for 2002.
II- Presentation of the Information Regarding the Parent Bank and the
Group Companies Included in the Consolidation:
Turk Ekonomi Bankasi Anonim Sirketi and its financial institutions, The Economy
Bank N.V. (Economy Bank), Petek International Holdings B.V. (Petek
International), TEB Yatirim Menkul Degerler A.S. (TEB Yatirim), TEB Portfoy
Yonetimi A.S. (TEB Portfoy), TEB Finansal Kiralama A.S. (TEB Leasing), TEB
Factoring A.S. (TEB Factoring) and TEB Sigorta A.S. (TEB Sigorta) are included
in the accompanying consolidated financial statements by full consolidation
method. The provisions of the Communique 15 "The Standard of Preparation of
Consolidated Financial Statements and Accounting for the Subsidiaries,
Participations and the Entities and Participations Jointly Controlled" of the
AAR were considered while determining the institutions to be consolidated. The
Parent Bank and the institutions included in the consolidation will be named as
"the Group".
Certain changes were made on the financial statements of the subsidiaries, which
were prepared in accordance with the principles and rules regarding financial
statement and report presentation stated in the Turkish Commercial Code and/or
Financial Leasing Law and/or XI/1 and XI/11 numbered communiques of the Capital
Board Market and any other communiques which adds and changes statements at the
formal communiques, in order to present their financial statements in accordance
with to AAR.
Explanations on Consolidation Method and Scope
The commercial names of the institutions included in consolidation and the
locations of the head offices of these institutions:
Commercial Name: Head Office
---------------------- ---------------
Economy Bank Netherlands
Petek International Netherlands
TEB Yatirim Istanbul
TEB Portfoy Istanbul
TEB Leasing Istanbul
TEB Factoring Istanbul
TEB Sigorta Istanbul
Full consolidation method is used for all the financial institutions included in
the consolidation.
The unconsolidated subsidiary TEB Kiymetli Madenler Anonim Sirketi is valued at
cost. The financial statements of TEB Kiymetli Madenler Anonim Sirketi is not
included in the consolidation as of June 30, 2003 in accordance with the AAR's
materiality principle.
When there are differences between the accounting policies of the subsidiaries
and the Parent Bank, the financial statements are adjusted in accordance with
the ARR principles considering the materiality. The financial statements of the
subsidiaries are prepared as of June 30, 2003 and December 31, 2002 and restated
in accordance with the inflation accounting principles.
The transactions and balances between the Parent Bank and the subsidiaries are
netted off.
No subsidiaries were acquired during the current period. The Group does not have
any goodwill related to the subsidiaries. No difference occured while applying
the fair values at the foreign entities' assets and liabilities. There are no
subsidiaries disposed in at the current or previous periods.
Explanations on Foreign Currency Transactions
Gains or losses arising from foreign currency transactions are reflected in the
statement of income as they are realized during the year. Foreign currency
assets and liabilities at each year-end are translated into Turkish lira at the
year-end foreign exchange buying rates announced by the Parent Bank and the
resulting foreign exchange gains or losses are recorded in the statement of
income as foreign exchange gain or loss. The USD exchange rate used for
translating foreign currency transactions into Turkish Lira and reflecting these
to consolidated financial statements as of June 30, 2003 is TL 1,407,647
(December 31, 2002 - TL 1,639,745 (in full TL)).
The Group's total net foreign exchange loss included in the net income of the
period is TL (382) (June 30, 2002 - TL (5,392)). The foreign exchange loss
results from recording of the foreign exchange gain amounting to TL 2,083
related to the foreign currency indexed loans under the "Interest Income" and
from recording of the foreign exchange loss amounting to TL 11,039 related to
the foreign currency indexed loans under the "Interest Expense" accounts in
accordance with the Uniform Chart of Accounts. There are no capitalized foreign
exchange losses.
The information regarding the principles of foreign currency risk management are
stated in Section Four, Note III.
The net investment in foreign entities of the Group as of the related year-ends
were translated into Turkish lira by applying the Parent Bank's exchange rates
prevailing at respective dates. The resulting foreign exchange gains or losses
are recorded in the statement of income.
There are no debt securities issued. Foreign exchange gains and losses arising
from translating monetary financial assets are reflected to foreign exchange
gains / (losses) in the statement of income.
III- Explanations on Forward, Option Contracts and Derivative Instruments
The Parent Company Bank makes forward currency agreements and swap transactions
to reduce the foreign currency risk. In accordance with Communique No:1, "
Accounting Standards of Financial Instruments" of AAR, derivative financial
instruments that are not designated as hedging instruments are classified as
held-for-trading and carried at fair value.
As of June 30, 2003, foreign currency forward and swap transactions were
evaluated by comparing year- end foreign exchange rates of the Parent Bank with
the forward rate amortized to the balance sheet date, since the book values
approximate their fair values. The resulting gain or loss is reflected to the
income statement.
There are no embedded derivatives separated from the host contract or that are
designated as hedging instruments.
Before the effective date of AAR, above-mentioned transactions had been recorded
by means of arbitrage accounting, the changes at the foreign currencies had been
recorded through evaluation under accounts and the liabilities at the maturity
had been followed under off balance sheet commitments. In order to avoid the
effects of the changes at the rates on the income statement, the amounts
followed under off balance sheet commitments had been evaluated and the
generated differences had been recorded under the income and expense accrual
accounts.
IV- Netting of Financial Assets and Liabilities
Financial assets and liabilities are netted off when the Parent Bank has a legal
right and sanction regarding netting off, and when the Bank has the intention of
collecting or paying the net amount of related assets and liabilities or when
the Bank has the right to off set the assets and liabilities simultaneously.
There is no netting of financial assets and liabilities at the accompanying
financial statements as of June 30, 2003.
V- Interest Income and Expense
Interest income and expense are recognized in the income statement for all
interest bearing instruments on an accrual basis using the effective interest
method. In accordance with the related regulation, the due and not due interest
accruals of the non-performing loans are cancelled and interest income related
to these loans are recorded as interest income only when collected.
VI- Fees and Commission Income and Expense
Commission income and fees for various banking services in the period of
collection.
Fees and commissions for funds borrowed paid to other financial institutions,
which is a part of the transaction costs, are recorded as prepaid expenses and
considered as a part of interest of the related funds borrowed and accordingly,
recorded as expense monthly.
The dividend income is reflected to the financial statements on cash basis when
the profit distribution is realized by the participations and the subsidiaries.
VII- Securities Held for Trading
Trading securities are securities which were either acquired for generating a
profit from short-term fluctuations in price or dealer's margin, or are
securities included in a portfolio in which a pattern of short-term profit
taking exists. Trading securities are initially recognized at cost. Transaction
costs of the related securities are included in the initial cost. The positive
difference occurred between the cost and fair value of the marketable security
is accounted as interest and income accrual. The negative difference occurred is
accounted under marketable security diminution in value account.
Since the foreign currency financial assets held in the same portfolio
(Eurobond) do not hold a price formed in an active market and since the fair
values of these securities could not be determined reliably, they are valued at
amortized cost by using relevant interest rates as stated in the articles 8 and
9 of the AAR's Communique No:1, "Accounting Standards of Financial Instruments."
VIII- Sales and Repurchase Agreements and Lending of Securities
The Parent Bank has been following the repurchase agreements made with the
clients as a balance sheet item since February 1, 2002 in accordance with the
Uniform Chart of Accounts. Accordingly, the government bonds and treasury bills
sold to clients under repurchase agreements are recorded under the related
securities account in the financial statements and are valued according to the
valuation principles of the related account. Funds obtained by repurchase
agreements are classified as a separate sub account under money markets account
in the liabilities. The interest expense accruals calculated by means of
effective interest method for the funds obtained by means of repurchase
agreements are reflected to the interest and other expense accruals account in
the balance sheet.
The above-mentioned transactions are short term and consists of domestic public
sector debt securities.
The income and expenses generated from above mentioned operations are reflected
to the "Interest Income on Marketable Securities" and "Interest Expense on
Marketable Securities subject to Repurchase Agreement" accounts in the statement
of income.
As of June 30, 2003, the Parent Bank does not have any reverse repo
transactions (December 31, 2002 - None).
As of June 30, 2003, the Parent Bank does not have any lent marketable
securities (December 31, 2002 - None).
IX- Securities Held to Maturity, Securities Available for Sale and Bank
Originated Loans and Receivables
Securities held to maturity are obtained with the intention of holding till the
maturity of the security, and accordingly, including the funding abilities, the
relevant conditions for this exist. This portfolio includes securities with
fixed or determinable payments and with a fixed maturity, excluding bank
originated loans and receivables.
Securities available for sale include all securities other than bank originated
loans and receivables, securities held to maturity and securities held for
trading.
The marketable securities are initially recognized at cost including the
transaction costs.
Foreign currency denominated financial assets included in the available for sale
securities portfolio (Eurobonds) are stated by translating the cost value to
Turkish lira at The Bank's exchange rates. The differences generated from the
translation is reflected to foreign currency gains and losses account at the
relevant period. Since these securities do not hold a price formed in an active
market and since the fair values of these securities could not be determined
reliably, they are valued at amortized cost by using relevant interest rates as
stated in the articles 8 and 9 of the AAR's Communique No:1, "Accounting
Standards of Financial Instruments." The differences between the cost and the
valued amounts are reflected to the income accrual accounts.
Loans and receivables originated by the Bank are those generated by lending
money and exclude those that are held with the intention of trading or selling
in near future.
Held to maturity securities are remeasured at amortized cost by using original
effective interest rate and reserve for impairment in value is provided, if any.
The interests received from securities held to maturity are recorded as interest
income. There are no profit shares.
There are no financial assets that cannot be classified as securities held to
maturity for two years because of tainting rules.
The Bank classifies securities according to above-mentioned portfolios at the
acquisition date of the related security.
The sale and purchase transactions of the securities held to maturity are
recorded at the delivery dates.
Prior to the effective date of AAR, the Bank had initially recorded marketable
securities held with the intention of not selling till maturity (investment
portfolio), which were given as collateral at cost, and the income accruals of
these securities were calculated by straight line method and reflected to the
financial statements.
X- Unconsolidated Participations and Subsidiaries
Turkish lira participations which are quoted at the stock exchange are valued at
fair value and any positive difference between fair value price and cost is in
included under shareholders' equity in the financial statements. The others are
valued by means of restating their costs and the capital increases after
deducting the ones generated by means of adding the values accumulated at the
revaluation like funds to the capital of the participations, with the rates
applicable for the relevant dates. A provision is provided when there is a
permanent diminution in value. The difference between the fair value and cost
value of the participations valued at fair value is recorded to " Marketable
Security Increase in Value Fund " under the Shareholders' Equity.
Turkish lira subsidiaries are valued by means of restating their costs and the
capital increases after deducting the ones generated by means of adding the
values accumulated at the revaluation like funds to the capital of the
subsidiaries, with the rates applicable for the relevant dates.
There are no foreign currency unconsolidated participations or subsidiaries.
XI- Originated Loans and Receivables and Provisions for Loan Impairment
The Parent Bank initially records originated loans and receivables at cost, and
at the following periods, in accordance with the AAR, Communique No:1, these
loans are remeasured at amortized cost by means of effective interest rate
method. The taxes, transaction expenses and other expenses paid for the
guarantees taken for the originated loans are taken into consideration while
calculating the banks financing cost and these are reflected to the interest
rates of the loans.
Cash loans are recorded in accordance with the regulations stated at the
Communique on the Uniform Chart of Accounts and Its Explanations.
Provision is set for the loans that may be doubtful and the amount is expensed
at the current period. The provisioning criteria for the non-performing loans
are determined by the Bank's management for compensating the probable losses of
the current loan portfolio, by means of evaluating the portfolio for its quality
and risk factors and by means of considering the economical conditions, other
facts and related regulations.
Allowances are computed for group III, group IV, group V loans and reflected in
accordance with the Banking Law No.4389 as revised by Law Number 4672 and 4491,
Article 3, Sub Article 11 and Article 11, Sub Article 12 published on the
Official Gazette No. 24448 dated 30.06.2001 on "Methods and Principles for the
Determination of Loans and Other Receivables to be Reserved for and Allocation
of Reserves" amended by Communiques dated 31.01.02 in the current period
financial statements These provisions are reflected to the statement of income
under "Provision and Diminishing in Value Expenses - Special Provision Expense".
The collection made regarding these loans are first deducted from the principal
amount of the loan and the remaining collections are deducted from interest
receivables.
The collections made regarding the current year provision of the above mentioned
loans are deducted from the "Provision for Loans and Other Receivables" account
in the income statement. The collections made related to the previous years'
written-off loans or allowances are recorded under "Other Operating Income"
account and interest incomes are recorded under the "Interest Received from
Non-performing Loans" account.
Release of provision are removed by means of reversing the amount to the "
Provision and Diminishing in Value Expense - Provision Expense" account. Foreign
currency denominated loans are recorded at the Turkish Lira equivalent values at
the recording dates and the foreign currency exchange gains generated from these
loans are recorded under the interest income accounts.
XII- Goodwill and Other Intangible Fixed Assets
The negative difference amounting to TL 634 ( 2002 - TL 634 ), between the cost
of TEB Leasing and the Parent Bank's share in its equity, generating from the
changes at the Parent Bank's participation structure in the year 2000 has been
reflected in that related period's income statement in accordance with effective
application date of AAR. The positive difference amounting to TL 412 ( 2002 - TL
412 ), between the cost of TEB Factoring and the Parent Bank's share in its
equity is reflected under the intangible fixed assets as goodwill in the
accompanying consolidated financial statements after deducting the accumulated
amortization amounting to TL 289 ( 2002 - TL 247 ).
The intangible fixed assets are reflected with their restated costs in
accordance with inflation accounting and depreciated with straight-line method.
The depreciation rate is 20%. The cost of assets subject to depreciation is
restated after deducting the exchange differences, capitalized financial
expenses and revaluation increases, if any, from the cost of the assets.
Major group classified as other intangible fixed assets by the Parent Bank is
soft wares. While determining the depreciation periods of these, the essentials
of General Tax Regulations are taken in to consideration and no special criteria
are used. The useful lives of these assets are determined as 5 years. Soft wares
mainly used are developed within the Parent Bank by the Bank's personnel, and
the expenses regarding these are not capitalized. Software is purchased only in
emergency cases and for special projects.
There are no expected changes in the accounting estimates about the depreciation
rate and method and residual values for the current and future periods.
XIII- Tangible Fixed Assets
Buildings are reflected to the financial statements at their restated costs and
reserve for impairment is provided, if any. In accordance with the Communique
No:14, buildings are valued by real estate expertise companies and the expertise
value is higher than the restated costs at June 30, 2003. The straight-line
method for depreciation is used and economical life is accepted to be 50 years.
Other tangible fixed assets are reflected with their restated cost in accordance
with inflation accounting, and depreciated by straight-line depreciation method.
The depreciation rate is 20%. A prorata basis is used for depreciating assets
held less than one year as of the balance sheet date. The leasehold improvements
are depreciated in accordance with the lease period by means of straight-line
method. The annual rates used, which approximate rates based on the estimated
economic lives of the related assets, are as follow:
%
Buildings 2
Motor vehicles 20
Furniture, fixtures and office equipment 20
Leasehold improvements Lease period-not less than 5 years
Gain profit or loss resulting from disposals of the tangible fixed assets are
reflected to the statement of income as the difference between the net proceeds
and net book value.
The repairment costs of the tangible fixed assets are capitalized if the
operation lengthens the economic life of the asset. Otherwise the repairment
costs are expensed. There are no pledge, mortgage or other restrictions on the
tangible fixed assets. There are no purchase commitments related to the tangible
fixed assets.
There are no expected changes in the accounting estimates, which could have a
significant impact on the current and future periods.
XIV- Leasing Transactions
Leasing of fixed assets are recorded in accordance with AAR, Article 7 of the
Communique No:4, "Accounting Standard for Leasing Transactions." In accordance
with the above-mentioned article, the leasing transactions, which consist only
foreign currency liabilities, are translated to Turkish lira with the exchange
rates effective at the transaction dates and they are recorded both as an asset
and a liability. The foreign currency liabilities are translated to Turkish lira
with the Bank's period end exchange rate. The increases resulting from the
differences in the foreign exchange rates are recorded as expense in the
relevant period. Rent payments consist of financing costs generated due to
leasing, and the amount of the leased asset corresponding to the relevant
period. The financing cost resulting from leasing is distributed through the
agreement period to form a fixed interest rate.
In addition to interest expense, the Parent Bank records depreciation expense in
each period for the leased assets. The depreciation rate is determined in
accordance with the Communique No:2 "Accounting Standard of Tangible Fixed
Assets" and the depreciation rate is 20%.
The gross lease receivables including interest and principal amounts regarding
the Group's financial leasing activities conducted by TEB Leasing as "Lessor"
are stated under the receivables from the financial leasing activities. The
difference between the total of rent payments and the cost of the related fixed
assets are reflected to the" unearned income" account. The interest income is
calculated and recorded as prevailing a stable periodic income ratio over the
lessor's investment on the leased item.
The Group expenses the rent payments made regarding the rent agreements made
under operational activities throughout the rent period in equal amounts.
XV- Provisions and Contingent Liabilities
The provisions and contingent liabilities are determined in accordance with the
Communique No:8 of AAR, except for the general and specific provisions set for
the loans and other receivables. Liabilities generated from previous events are
recorded by the Group immediately at the estimated amounts. The Parent Bank did
not provide an additional provision for contingent liabilities as of June 30,
2003 apart from the doubtful receivable provision and general provision set in
accordance with the released regulations.
XVI- Liabilities Regarding Employee Benefits
In accordance with the existing social legislation, the Group is required to
make lump-sum termination indemnities including retirement and notice payments
to each employee whose employment is terminated due to resignment or for reasons
other than misconduct. The retirement pay is calculated for every working year
within the Group over the wage for 30 days and the notice pay is determined by
the relevant notice period time calculated over the years worked within the
Group. In accordance with AAR, Communique No:10, the Group sets provision for
retirement and notice pay liabilities by taking the actual payment rates for the
previous 5 years into consideration. The Group has no employees contracted for
determined periods.
As of June 30, 2003 the arithmetical average of the actual payments realized for
the previous five years is 8.35% (December 31, 2003 - %8.44 ). The Parent Bank's
consolidated participations and subsidiaries provided full reserve for
retirement pay for the eligible personnel as of June 30, 2003 and 2002.
The Group employees are members of TEB'LILER Foundation. The Parent Bank does
not have any liability to this foundation. There are no liabilities that require
additional provisions related to other employee rights.
XVII- Taxation
Corporate Tax
In accordance with the incumbent tax Law, Corporate Tax is computed over
statutory net income that is subject to tax, without taking into account the
effects of inflation accounting.
The corporate tax rate for incomes of year 2002 is 30% and after adding the 10%
of fund share, the effective corporate tax rate ia applied as 33%. 19.8%
withholding tax is calculated over the income excepted from corporate tax and
investment incentives ( except investment incomes ). Additionally, if profit is
distributed over the accumulated income including income of year 2002, the
distributed part of income over which corporate tax is calculated is subject to
5.5% and 16.5% withholding tax in accordance with the fact that the Bank is
quoted to stock exchange or not respectively.
In line with the new tax Law number 4842, published in the Official Gazette
dated April 24, 2003, starting with the current year income, the corporate tax
rate to be applied is 30 % .
As long as the Group does not distribute the yearly income for 2003, there will
not be any withholding taxes with regards to this income. The Parent Bank's
distribution of profit to "Fully-liable" institutions will also be exempt from
any withholding taxes. The Parent Bank's distribution of profit to real
persons, "semi-liable" institutions, and those institutions that are not liable
and or exempt from both corporation tax and income tax, will be subject to
withholding taxes of 10%.
The investment incentives taken into consideration while calculating the income
subject to corporate tax, do not have to be related to any investment incentive
documents after April 24, 2003, and the minimum deduction rate will be 40%, and
additionally this amount will not be subject to witholding tax. It is possible
to state the incentive rate as 40% for the investment incentives taken before
April 24, 2003, and to except these from 19,8% of witholding tax by a written
application made to the related tax office.
In accordance with the Tax Procedural Code, in every three-month period the
temporary corporate tax is calculated at a rate of 30% ( 25% before April 24,
2003 ) and paid in cash. The paid temporary taxes are deducted from the tax
liability calculated over the yearly income. The corporate tax will be paid at
once during the yearly tax return period ( 2002- in 3 installments ).
In accordance with the Tax Procedural Code, the losses presented in the tax
declarations can be deducted from the tax assessments at the current period
within five years.
The Tax Procedural Code does not allow the corporate and income taxes to be
calculated on consolidated basis. Accordingly, the current and deffered taxes
reflected to the accompanying financial statements are calculated over company
basis, separately.
In Turkey, tax returns are filed during the fourth month following the year-end.
According to existing tax regulations, the tax authorities may examine such
returns and the underlying accounting records within five years.
Deferred tax
Certain income and expense items are taxable in periods different from those in
which they are recognized in the financial statements. Deferred taxes on such
timing differences are calculated and reflected in full in the accompanying
financial statements. The Group does not compute deferred tax on the effects of
inflation accounting.
As of June 30, 2003 and December 31, 2002, the deferred tax asset is included in
other assets in the accompanying balance sheet and the deferred tax provision is
stated under the tax provision in the accompanying income statement.
XVIII- Additional Explanations on Borrowings
The Parent Company Bank has not issued any debt securities.
The Group has not issued convertible bonds during the current period or the
previous period.
XIX- Paid-in Capital and Share Certificates
The Parent Bank does not have any costs related to share issue. In the General
Assembly meeting of the Parent Bank, dated March 27, 2003, it was decided that
the profit for the year 2002, will be distributed to the shareholders, which
will amount to 276 (Nominal full TL) of dividend for every 1,000 TL nominal
shares owned by each shareholder. The payment of dividends to the shareholders
were started at April 4, 2003 and completed as of June 30, 2003.
XX- Acceptances
Acceptances are realized simultaneously with the payment dates of the clients
and they are presented as commitments in off-balance sheet accounts.
There are no acceptances presented as liabilities against any assets.
XXI- Government Incentives
There are no government incentives utilized by the Group.
XXII- Securities at Custody
Securities at custody held by the Parent Bank on behalf of clients are not
reflected to the financial statements since they are not the Bank's assets.
XXIII- Impairment of Assets
At every balance sheet date, the evidence on impairment in value of assets is
evaluated objectively for existence. When an evidence regarding impairment in
value exists, the market value of the asset is determined. The difference
between book and net realizable values of the asset is recorded as provision for
impairment in the balance sheet and as an expense in the income statement.
XXIV- Segment Reporting
Segment reporting will be made effective January 1, 2004.
XXV- Other Matters
Explanation for convenience translation to English:
The accounting principles used in the preparation of the accompanying
consolidated financial statements differ from International Financial Reporting
Standards (IFRS) and so far as such differences apply to the consolidated
financial statements of the Bank they relate mainly, but not limited, to the
format of consolidated financial statements and disclosure requirements,
accounting for deferred taxes and reserve for retirement pay liabilities. The
effects of the differences between these accounting principles and the
accounting principles generally accepted in the countries in which the
accompanying financial statements are to be used and IFRS have not been
quantified in the accompanying financial statements. Accordingly, the
accompanying consolidated financial statements are not intended to present the
consolidated financial position and results of its consolidated operations in
accordance with accounting principles generally accepted in the countries of
users of the financial statements and IFRS.
There are other matters that are required to be disclosed.
SECTION FOUR
INFORMATION ON FINANCIAL STRUCTURE OF THE GROUP
I- Consolidaded Capital Adequacy Standard Ratio
The method used for risk measurement for capital adequacy standard ratio is
performed in accordance with the Communique on "Measurement and Assessment of
Banks Capital Adequacies ", which was published on January 31, 2002 in the
Official Gazette numbered 24657. The consolidated capital adequacy ratio of the
Parent Company Bank, calculated in accordance with the Communique on
"Measurement and Assessment of Banks Capital Adequacies " is %16.13 ( December
31, 2002 - 16.75% ).
In the computation of capital adequacy standard ratio, information prepared in
accordance with statutory accounting requirements are used. Additionally, the
market risk amount is calculated in accordance with the communique on the
"Internal Control and Risk Management Systems of the Bank" and is taken in to
consideration in the capital adequacy standard ratio calculation.
The values deducted from the capital in the shareholders' equity computation are
not considered while calculating risk-weighted assets, non-cash loans and
contingent liabilities. Assets subject to depreciation and depletion among
risk-weighted assets are included in the calculations over their net book values
after the relative depreciations and provisions are deducted.
When calculating the basic amounts subject to credit risk regarding the
transactions on the non-cash loans, the net receivable amount from the counter
parties found by means of deducting the provision amount set in accordance with
the "Communique on Methods and Principles for the Determination of Loans and
Other Receivables to be Reserved for and Allocation of Reserves" is multiplied
by the rates presented at the Clause 1, Article 21 of the "Communique on
Regulations on the Establishment and Operations of Banks", and included in the
related risk group and weighted by the related group's risk.
Receivables from counter parties generated from foreign currency and interest
rate transactions are included in the related risk group at the loan conversion
rates stated in Clause 2, Article 21 of the "Communique on Regulations on the
Establishment and Operations of Banks" and weighted for a second time by the
weight of the related risk group.
Information related to the capital adequacy ratio:
Consolidated Parent Bank
Risk Weight Risk Weight
0% 20% 50% 100% 0% 20% 50% 100%
Risk Weighted Assets, Liabilities
and Non Cash Loans
Balance Sheet items (Net) 1,083,784 916,654 151,374 1,215,764 844,543 300,652 38,434 873,726
Cash 71,600 - - - 71,584 - - -
Due from banks 365,428 916,654 - 41,754 365,428 300,652 - 5,600
Interbank money market 243,939 - - - 243,939 - - -
placements
Receivables from reverse repo 5,460 - - - - - - -
transactions
Reserve deposits 122,817 - - - 122,817 - - -
Special finance houses - - - - - - - -
Loans 251,939 - 38,434 1,097,547 32,982 - 38,434 814,229
Loans under follow-up (Net) - - - 5,200 - - - 5,200
Subsidiaries, associates and - - - - - - - -
investments held to maturity
Miscellaneous receivables - - - 1,427 - - - 878
Marketable securities held to - - - - - - - -
maturity
(Net)
Advances for assets acquired by - - - - - - - -
financial leasing
Financial lease receivables - - 112,940 - - - - -
Leased assets (Net) - - - - - - - -
Fixed assets (Net) - - - 37,914 - - - 33,964
Other assets 22,601 - - 31,922 7,793 - - 13,855
Off balance sheet items 155,554 426,993 268,782 42,273 146,584 393,615 262,602 39,281
Guarantees and pledges 20,961 421,255 68,142 26,344 16,527 387,889 68,142 24,321
Commitments 126,688 - 200,640 - 126,688 - 194,460 -
Other off balance sheet items - - - - - - - -
Transactions related with - - - 3,647 - - - 4,085
derivative
Financial instruments
Interest and income accruals 7,905 5,738 - 12,282 3,369 5,726 - 10,875
Non risk weighted accounts - - - - - - - -
Total Assets Subject to Risk 1,239,338 1,343,647 420,156 1,258,037 991,127 694,267 301,036 913,007
Total Risk Weighted Assets - 268,729 210,078 1,258,037 - 138,853 150,518 913,007
Summary information related to the capital adequacy ratio:
Consolidated Parent Bank
Current Prior Current Prior
Period Period Period Period
Total Risk Weighted Assets (*) 1,788,946 1,824,955 1,247,112 1,229,328
Shareholders' Equity 288,540 305,736 186,619 189,301
Shareholders' Equity / Total risk weighted assets (CAR (%)) 16.13 16.75 14.96 15.40
(*) The above mentioned amounts consist of base amounts of the market risk
which are TL 52,102 and TL 44,734 as consolidated and as for the Parent Bank
basis, respectively, for the current period and TL 56,014 and TL 21,933 for the
previous period.
Information related to the shareholders' equity components :
Consolidated Parent Bank
Current Period Prior Period Current Period Prior Period
MAIN CAPITAL
Paid-in Capital 55,125 55,125 55,125 55,125
Nominal capital 55,125 55,125 55,125 55,125
Capital commitments (-) - - - -
Effect on Inflation Accounting on Share 209,147 209,147 209,147 209,147
Capital
Share Premium - - - -
Legal Reserves 8,943 11,439 2,390 -
First legal reserve (Turkish Commercial 7,419 4,917 2,390 -
Code 466/1)
Second legal reserve (Turkish - - - -
Commercial Code 466/2)
Other legal reserve per special 1,524 6,522 - -
legislation
Statute Reserves - - - -
Extraordinary reserves - - - -
Reserves allocated by the General - - - -
Assembly
Retained earnings - - - -
Accumulated loss - - - -
Foreign currency share capital exchange - - - -
difference
Profit 8,914 28,980 22,393 20,638
Current period profit 8,914 28,980 20,118 20,638
Prior period profit - - 2,275 -
Loss (-) (8,763) (19,282) - -
Current period loss - - - -
Prior period loss (8,763) (19,282) - -
Total Main Capital 273,366 285,409 289,055 284,910
SUPPLEMENTARY CAPITAL
Revaluation Fund - - - -
Furniture, fixture and vehicles - - - -
Buildings - - - -
Profit on sale of associates, - - - -
subsidiaries and buildings to be
transferred to share capital
Revaluation fund of leasehold - - - -
improvement
Increase in the Value of Revaluation - - - -
Fund
Foreign Exchange Differences - - - -
General Reserves 6,753 6,792 6,753 6,792
Provisions for Possible Losses - - - -
Subordinated Loans 21,115 27,418 21,115 27,418
Marketable Securities and Investment 138 224 68 224
Securities Value Increase Fund
Associates and subsidiaries 138 224 68 224
Available for sale securities - - - -
Structured positions - - - -
Total Supplementary Capital 28,006 34,434 27,936 34,434
TIER III CAPITAL - - - -
CAPITAL 301,372 319,842 316,991 319,344
DEDUCTIONS FROM THE CAPITAL 12,832 14,107 130,372 130,043
Investments in unconsolidated financial 720 871 121,383 119,072
companies whose main activities are
money and
capital markets, insurance and that
operate with licenses provided in
accordance with
special laws
Leasehold improvements 7,829 8,414 6,023 7,113
Start-up costs - - - -
Prepaid expenses 4,160 4,657 2,966 3,858
The negative difference between the - - - -
market values and the carrying amounts
for
unconsolidated investments,
subsidiaries, other investments and
fixed assets
Subordinated loans given to other banks - - - -
which operate in Turkey
Goodwill (Net) 123 165 - -
Capitalized expenses - - - -
Total Shareholder's Equity 288,540 305,736 186,619 189,301
II- Consolidated Market Risk
The Group has determined market risk management operations and has taken the
necessary precautions in order to hedge market risk within its financial risk
management purposes, in accordance with the Communique on "Internal Control and
Risk Management Systems of Groups" announced in the 24312 numbered and February
8, 2001 dated Official Gazette.
The interest rate and exchange rate risks of the financial positions taken by
the Group related to balance sheet and off-balance sheet accounts are measured
and while calculating the capital adequacy, the amount subject to VAR is taken
into consideration by the standard method. Scenario analysis and stress tests
are used additionally in market risk computations.
In order to measure the market risk of the Parent Bank, the Board of Directors
has determined risk management strategies in accordance with the proposals of
the Top Management Risk Committee and these strategies are forced to be followed
up periodically. The Board of Directors evaluates the basic risks faced and
determines limitations accordingly. The limits are revised periodically.
Additionally the Board of Directors has urged the risk management group and the
top management to take necessary precautions to consider, evaluate, control and
to control the variety of risks the Bank faces.
Consolidated Parent Bank
Capital to be employed for interest rate risk - standard method 2,529 2,431
Capital to be employed for general market risk 2,522 2,431
Capital to be employed for specific risk 7 -
Capital to be employed for options subject to interest rate risk - -
Capital to be employed for common stock position risk - Standard method - -
Capital to be employed for general market risk - -
Capital to be employed for specific risk - -
Capital to be employed for options subject to common stock position risk -
-
Capital to be employed for currency risk - Standard method 1,639 1,148
Capital liability 1,639 1,148
Capital to be employed for options subject to currency risk - -
Total Value-at-risk (VAR)-Internal Model - -
Total capital to be employed for market risk 4,168 3,579
Amount subject to market risk 52,102 44,734
III- Consolidated Foreign Currency Risk
Foreign currency risk indicates the possibilities of the potential losses that
Banks are subject to due to the exchange rate movements in the market. While
calculating the share capital requirement, all foreign currency assets,
liabilities and forward transactions of the Parent Bank are taken into account.
Net short and long position of Turkish Lira equivalent of each foreign currency
is calculated. The value, which will be a base for calculating the share capital
requirement, is computed by taking the higher absolute value of the position by
adding to absolute net gold position. Share capital requirement is computed over
of this amount. The Board of Directors sets limits for the positions, which are
followed up daily. Additionally, possible value changes in the existing or
possible foreign currency positions are observed together with the follow-up of
the foreign currency risk in accordance with the provisions of the "Communique
on Internal Control and Risk Management Systems of Banks".
As an element of the Group's risk management strategies, foreign currency
liabilities are hedged against exchange rate risk by derivative instruments.
The Board of Directors of the Parent Bank determines the short position limits
that the Bank can hold in accordance with the present legal limitations. The
Treasury Department of the Bank is responsible for the management of Turkish
Lira or foreign currency price, liquidity and affordability risks that could
occur in the domestic and international markets. The Risk Control Department
continuously controls risk and risk related transactions occurring in the money
markets and prepares weekly reports for the Bank's Asset-Liability Committee.
The related principles and limitations of the counterparties are determined by
the Loan Committee. The limits concerning the maturity structure of the foreign
currency transactions and interest rates are examined by the Asset-Liability
Committee.
As of June 30, 2003, the Group's net long position is TL 8,175 (December 31,
2002 - TL 24,087, net short) resulting from short position amounting to TL 9,608
(December 31, 2002- TL 64,318) on the balance sheet and long position amounting
to TL 17,783 (December 31, 2002 - 40,231 ) from off-balance sheet position.
The announced current foreign exchange buying rates of the Parent Bank at the
balance sheet date and the previous five working days are as follows:
23/6/03 24/6/03 25/6/03 26/6/03 27/6/03 30/6/03
USD 1,425,412 1,430,099 1,431,814 1,426,927 1,421,717 1,407,647
CHF 1,070,660 1,077,748 1,076,602 1,062,049 1,048,790 1,035,502
GBP 2,364,948 2,384,162 2,385,588 2,375,020 2,352,848 2,322,246
JPY 12,052 12,118 12,160 12,006 11,849 11,712
EUR 1,646,066 1,653,338 1,650,882 1,637,255 1,623,601 1,609,503
The simple arithmetical average of the major current foreign exchange buying
rates of the Bank for the thirty days before June 30, 2003 is as follows:
Monthly Average
FX rates
USD 1,418,523
CHF 1,072,841
GBP 2,354,887
JPY 11,958
EUR 1,655,554
Information on the foreign currency risk of the Group:
Current Period EUR USD YEN OTHER FC TOTAL
Assets
Cash (cash in vault, foreign currency cash, money 23,232 388,756 - 2,605 414,593
in transit, cheques purchased) and balances with
the Central Bank of Turkey
Due from other Banks and financial institutions 95,902 726,995 518 64,191 887,605
Trading securities (**) 3,258 10,790 - 352 14,401
Investment securities available-for-sale - 29,018 - - 29,018
Loans (**) 250,230 650,084 - 8,343 908,656
Investments in subsidiaries and participations - - - - -
Investment securities held-to-maturity - 1,364 - 1,148 2,512
Property and equipment 1,486 - - - 1,486
Goodwill - - - - -
Other assets 102,153 241,265 - 13,685 357,103
Total Assets 476,260 2,048,272 518 90,323 2,615,374
Liabilities
Bank deposits 4,629 7,979 119 31,716 44,443
Foreign currency deposits (*) 284,710 1,708,033 580 43,890 2,037,213
Funds provided from other financial institutions 47,342 377,128 - 11,527 435,997
Marketable securities issued - - - - -
Miscellaneous payables 16,009 16,651 - 1,207 33,867
Other liabilities 48,320 19,873 - 5,269 73,462
Total liabilities 401,010 2,129,664 699 93,609 2,624,982
Net Balance Sheet Position 75,250 (81,392) (181) (3,285) (9,608)
Net Off-Balance Sheet Position (69,201) 87,724 - (740) 17,783
Financial derivative assets 104,246 191,180 - 11,149 306,575
Financial derivative liabilities 173,447 103,456 - 11,889 288,792
Non-cash loans (***) 194,742 465,183 6,287 24,569 690,781
Prior Period
Total Assets 521,872 2,564,549 21,312 113,271 3,221,003
Total Liabilities 460,396 2,711,703 900 112,324 3,285,322
Net Balance Sheet Position 61,476 (147,154) 20,412 948 (64,318)
Net Off-Balance Sheet Position (115,754) 188,511 (20,157) (12,369) 40,231
Non-cash loans (***) 197,398 535,507 4,727 28,330 765,961
(*) Gold account deposits amounting to TL 9,325 (December 31, 2002 - TL
25,037) are included in the foreign currency deposits.
(**) Foreign currency indexed factoring receivables amounting to TL 9,263
are included in the other assets, loans amounting to TL 58,796 (December 31,
2002 - TL 89,632) are included in the loan portfolio, and foreign currency
indexed factoring payables amounting to TL 119 are included in the other
liabilities.
(***) Foreign currency indexed marketable securities amounting to TL 219
(December 31, 2002 - TL 243) are included in the trading portfolio.
(****) The amount does not have any impact on the net off-balance sheet
position.
IV- Consolidated Interest Rate Risk
Interest rate risk shows the loss probability related to the changes in the
interest rates depending on the Parent Bank's position, and it is managed by the
Treasury Department. The interest rate sensitivity of assets, liabilities and
off-balance sheet items related to this risk are measured by using the standard
method. The first step at calculation of interest rate risk, is to place the
instruments subject to interest rate risk in the appropriate one of the 13
maturity sections according to the remaining time to maturity or to the
reprising. At the second step, the instruments with variety of maturities are
weighted according to their risks for reflecting the interest rate risk
volatilities that match their maturities.
The first priority of the Group's risk management is to protect from interest
rate volatility. All types of sensitivity analysis performed within the context
is calculated by the risk management and reported to the Asset Liability
Committee.
Work is performed regarding interest income according to the macro economical
indicators in the Group's budget estimations and the effects of the market
interest fluctuations on the financial position and cash flow are purified at
the maximum level possible by means of target revisions.
The Bank management follows the market interest rates daily and determines the
interest rates of the Bank when necessary.
Since the Group does not permit or imposes limits on maturity mismatches, it is
not expected that the Group will face a significant interest rate risk.
Information related to the interest rate sensitivity of assets, liabilities and
off-balance sheet items based on reprising dates):
Up to 1 1-3 3-6 6-12 1 Year and
Months Months Months Months Over Demand Total
Current Period
Assets
Cash (cash in vault, foreign 488,246 - - - - 71,599 559,845
currency cash, money in
transit, cheques purchased) and
balances with the Central Bank
of Turkey
Due from Banks and other 1,017,349 17,962 15,323 4,000 - 153,169 1,207,803
financial institutions
Trading securities 3,846 3,032 9,591 21,494 46,298 - 84,261
Securities available-for-sale 8 - - 6,572 22,446 - 29,026
Loans 434,748 330,717 220,421 210,968 104,239 8,115 1,309,208
Securities held-to-maturity 1,743 36,632 1,148 1,638 - - 41,161
Other assets 31,462 65,024 68,148 40,429 69,476 67,687 342,226
Total Assets 1,977,402 453,367 314,631 285,101 242,459 300,570 3,573,530
Liabilities
Bank deposits 73,927 12,098 1,200 - - 167 87,392
Other deposits 1,973,265 149,280 60,940 114,912 58,863 86,944 2,444,204
Miscellaneous payables 721 55 - - - 49,750 50,526
Marketable securities issued - - - - - - -
Funds provided from other 61,650 45,875 329,472 26,404 16,340 - 479,741
financial institutions
Other liabilities 43,961 13,815 49,887 14,914 1,989 387,101 511,667
Total Liabilities 2,153,524 221,123 441,499 156,230 77,192 523,962 3,573,530
Balance Sheet Interest (176,123) 232,244 (126,868) 128,871 165,268 (223,392) -
Sensitivity Gap
Off Balance Sheet Interest - - - - - - -
Sensitivity Gap
Total Interest Sensitivity Gap (176,123) 232,244 (126,868) 128,871 165,268 (223,392) -
The other asset line at the without interest column consists of TL 45,743 amount
tangible fixed assets, TL 4,371 of intangible fixed assets, TL 373 of
participations and TL 347 of subsidiaries and the other liability line consists
of equity total amounting to TL 273,504 and TL 21,495 amount minority interest.
Up to 1 1-3 3-6 6-12 1 Year and
Months Months Months Months Over Demand Total
Prior Period
Assets
Cash (cash in vault, foreign 529,170 - - - - 96,992 626,161
currency cash, money in
transit, cheques purchased) and
balances with the Central Bank
of Turkey
Due from Banks and other 1,508,349 16,649 12,354 2,976 - 74,352 1,614,680
financial institutions
Trading securities 2,818 31,941 12,399 7,555 790 303 55,806
Securities available-for-sale - 18,790 - - - 10 18,800
Loans 447,309 281,775 335,190 172,406 221,976 5,531 1,464,187
Securities held-to-maturity 231 40,521 1,719 1,447 250 - 44,167
Other assets 6,074 90,279 16,498 25,549 35,081 132,344 305,825
Total Assets 2,493,950 479,954 378,160 209,933 258,097 309.532 4,129,626
Liabilities
Bank deposits 113,492 2,933 1,115 - - - 117,540
Other deposits 2.495,912 180,862 59,077 91,457 182,856 - 3,010,163
Miscellaneous payables - - - - - 66,677 66,677
Marketable securities issued - - - - - - -
Funds provided from other 37,407 220,909 83,337 112,722 11,004 - 465,379
financial institutions
Other liabilities 2,999 38,177 1,206 260 - 427,226 469,867
Total Liabilities 2,649,810 442,880 144,735 204,438 193,859 493,903 4,129,626
Balance Sheet Interest (155,860) 37,074 233,425 5,495 64,237 (184,371) -
Sensitivity Gap
Off Balance Sheet Interest
Sensitivity Gap
Total Interest Sensitivity Gap (155,860) 37,074 233,425 5,495 64,237 (184,371) -
The other asset line at the without interest column consists of TL 47,208 amount
tangible fixed assets, TL 4,336 of intangible fixed assets, TL 377 of
participations and TL 494 of subsidiaries and the other liability line consists
of equity total amounting to TL 285,632 and TL 21,454 amount minority interest.
Average interest rates applied to monetary financial instruments:
EURO % USD % YEN % TL %
Current Period
Assets
Cash (cash in vault, foreign currency cash, money in transit, cheques 1.00 0.39 - 25.00
purchased) and balances with the Central Bank of Turkey
Due from Banks and other financial institutions - 1.37 - 40.91
Trading securities 10.58 10.68 - 54.30
Securities available-for-sale - 10.23 - -
Loans 5.96 6.20 6.36 48.63
Securities held-to-maturity - - - 58.18
Liabilities
Bank deposits 3.37 2.10 4.33 39.64
Other deposits 3.05 3.03 3.04 33.20
Miscellaneous payables - - - -
Marketable securities issued - - - -
Funds provided from other financial institutions 4.51 2.98 5.93 39.23
V- Consolidated Liquidity Risk
Liquidity risk occurs when there is not sufficient amount of cash or cash flows
to fulfill the cash outflows completely and on time, resulting from the unstable
cash inflows.
Liquidity risk may occur when the market penetration is not enough, when the
open positions cannot be closed urgently with a suitable price and sufficient
amount due to barriers and break-ups at the markets.
The Group's policy is to establish a liquid asset structure that can afford all
kinds of liabilities by liquid sources. In this scope liquidity problem does not
happen at any period. The Boards of Directors of the Group continuously
determines the liquidity ratios and related standards, and controls them, in
order to keep this structure.
There is a system worked on to apply international measurement methods. However,
according to the general policies of the Group, the adaptation of the assets,
liabilities, the interest rates to the payments are always established within
the asset liability management strategies. A positive difference is tried to be
established between the yields of TL and foreign currency assets and liabilities
at the balance sheet and their costs. According to this strategy, the Group pays
special attention not to take maturity risk, and no banking service is marketed
when the price is lower than the financing cost.
When the funding and liquidity sources are considered, the Parent Bank covers
majority of its liquidity need by deposits, and in addition to this source, it
makes use of prefinancing and syndication products to generate additional
sources. Generally the Bank does not prefer to utilize liquidity from interbank
money markets and is in a net lender position in interbank money markets.
Presentation of assets and liabilities according to their remaining maturities :
3-6 6-12 1 Year and
Months Months Over
Current Period Demand (*) 1-3 Months Total
Assets
Cash (cash in vault, foreign currency 559,845 - - - - 559,845
cash, money in transit, cheques
purchased) and Balances with the Central
Bank of Turkey
Due from Banks and other financial 1,167,172 21,312 15,323 4,000 - 1,207,807
institutions
Trading securities 1,644 1,981 9,591 22,767 48,277 84,260
Securities available-for-sale 9 - - 6,571 22,446 29,026
Loans 442,863 325,889 220,421 210,968 109,068 1,309,209
Securities held-to-maturity - 282 1,148 39,731 - 41,161
Other assets(***) 47,083 69,093 69,703 41,150 59,559 342,222
Total Assets 2,218,616 418,557 316,186 325,187 239,350 3,573,530
Liabilities
Bank deposits 74,094 12,098 1,200 - - 87,392
Other deposits 2,060,209 149,280 60,940 114,912 58,863 2,444,204
Funds provided from other financial 61,650 31,438 234,396 55,586 93,624 476,695
institutions
Marketable securities issued - - - - - -
Miscellaneous payables 43,189 2,718 2,772 4,913 - 53,591
Other liabilities(**) 115,094 11,218 48,180 33,592 303,564 511,648
Total Liabilities 2,354,236 206,752 347,488 209,003 456,051 3,573,530
Net Liquidity Gap (135,620) 211,805 (31,302) 116,184 (216,701) -
Prior Period
Total Assets 2,748,349 425,463 377,727 209,819 315,846 4,129,626
Total Liabilities 3,066,056 330,307 152,976 304,205 276,083 4,129,626
Net Liquidity Gap (317,707) 95,156 224,751 (94,386) 39,763 -
(*) The maturity of up to 1 month of interbank funds sold amounting to TL
243,939, reverse repurchase agreement receivables amounting to TL 5,460, loans
amounting to TL 434,748, and domestic and foreign Banks placements amounting to
TL 767,950 are shown in the demand column. Furthermore, deposits with maturities
up to one month amounting to TL 1,973,265 is included in the other deposits and
shown at the demand columns.
(**)The 1 year and over column of the other liabilities consist of shareholders'
equity amounting to TL 273,504 and minority interest amounting to TL 21,495.
(***) An amount of TL 55,634 of the total column consists of subsidiaries and
participations amounting to TL 720, prepaid expenses amounting to TL 4,160,
tangible fixed assets amounting to TL 45,743, intangible fixed assets amounting
to TL 4,371 and office supply inventory amounting to TL 640 and those are not
taken in to consideration at the maturity distribution.
MORE TO FOLLOW
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