Financial.services.industry in turkey

Investment Support and Promotion Agency of Turkey
The Financial Services Sector in Turkey
1
February 2014

©2014 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited
2
Glossary of Terms
Acronym
Definition
ATM
Automated Teller Machine
AUM
Assets Under Management
BIST
Borsa Istanbul
BKM
Interbank Card Center
BRSA
Banking Regulation and Supervision Agency
CAGR
Compound Annual Growth Rate
CAR
Capital Adequacy Ratio
CBRT
Central Bank of the Republic of Turkey
CEO
Chief Executive Officer
CMB
Capital Markets Board of Turkey
CRD
Capital Requirements Directive
EBRD
European Bank of Reconstruction and Development
EGM
Pension Monitoring Center
EIU
Economist Intelligence Unit
EU
European Union
FCI
Factors Chain International
FDI
Foreign Direct Investment
FİDER
Turkish Leasing Agency
GDP
Gross Domestic Product
IFC
Istanbul Financial Center
HATMER
Life Insurance Information and Monitoring Center
Acronym
Definition
HAYMER
Insurance Claims Follow-up and Monitoring System
IMF
International Monetary Fund
IMKB
Istanbul Stock Exchange before 2012
ISE
Istanbul Stock Exchange
ISPAT
The Republic of Turkey Prime Ministry Investment Support and Promotion Agency
N/D
No Data
NPL
Non-Performing Loan
O/N
Overnight
OECD
Organization for Economic Cooperation and Development
OIC
Organization of the Islamic Cooperation
Q
Quarter
ROA
Return on Assets
ROE
Return on Equity
SAGMER
Health Insurance Information and Monitoring Center
SME
Small and Medium Enterprises
TBB
Turkish Bank Association
TEB
Turkish Economy Bank
TL
Turkish Lira

3
Glossary of Terms
Acronym
Definition
TSRB
Insurance Association of Turkey
TSPAKB
The Association of Capital Market Intermediary Institutions of Turkey
UK
United Kingdom
USA
United States of America
USD
United States Dollar
WB
World Bank

4
Table of Contents
Executive Summary
5
A. Overview of Economic Indicators in Turkey
6-12
i. Turkey’s Macroeconomic Outlook
7-8
ii. FDI in the Financial Services Sector in Turkey
9-10
iii. Mergers and Acquisitions
11-12
B. A Detailed Look at the Financial Services Sector
13-67
i. A Brief Overview of the Global Financial Services Sector
14-17
ii. The Banking Sector in Turkey
18-37
iii. Insurance and Pension Funds in Turkey
38-51
iv. Financial Leasing in Turkey
52-57
v. Factoring in Turkey
58-61
vi. Consumer Financing in Turkey
62-66
C. The Detailed Outlook on Capital Markets
67-72
i. Borsa Istanbul
68-71
ii. Brokerage Firms
72
D. Turkey’s Competitive Landscape
73-82
i. Turkey’s Workforce and Skilled Labor within Financial Services
74-75
ii. Disposable Income
74
iii. Major Projects Financed by Turkish Banks
77
iv. The Financial Sector’s 2018 Targets
78
v. Istanbul Financial Center Initiative
79-80
vi. Major Financial Sector Stakeholders
81-82

•Turkey has demonstrated robust macroeconomic growth in recent years thanks to the government’s ambitious growth program and is expected to sustain it over the next 5 years according to international economic organizations. According to OECD forecasts, real GDP growth is projected to rise approximately 4% in 2014 and 2015, while the Economist Intelligence Unit (EIU) expects an annual average growth rate of 5% until 2017.
•According to the EIU, even though around 78% of bank assets globally were located in developed markets in 2012, and 22% in developing countries, this ratio is expected to change by 2017, and the trend will shift towards emerging markets.
•Turkey’s financial services sector continued to show healthy growth with an expanding loan base and favorable liquidity conditions. Total asset size grew a CAGR 19% between 2008 and the third quarter of 2012 surpassing a total asset size of TL 2,140 billion.
•The asset quality the of Turkish banks improved as asset size grew a staggering CAGR 21% between 2003 and September 2013 exceeding TL 1,630 billion with an asset to GDP ratio of 97% in 2012.
•Despite the Eurozone crisis, Turkey’s loan expansion continued to grow as the economy grew. Total loans exceeded TL 794 billion in 2012, while the loan to deposit ratio surpassed 103% in 2012.
5
Executive Summary
•The Capital Adequacy Ratio (CAR) remained well above international standards as the average CAR for banks were 17.3% in 2012, while the same ratio was 34.2% for development and investment banks and 13.9% for participation banks.
•The share of life insurance premiums increased a CAGR of 14%, while non-life insurance premiums grew at a CAGR of 17% from 2009 to 2012.
•Financial leasing receivables between 2008 and 2012 increased at a CAGR of 3.2% exceeding TL 16 billion in 2012, while total assets in the factoring sector reached TL 18.1 billion in 2012, which accounts for a 16% increase compared to the previous year.
•Capital markets in Turkey also had an advantageous year in 2012. In 2012, Borsa Istanbul’s BIST-100 index had the highest index return percentage in the world with 61%.
•Turkey’s ambitious 2023 goal is to transform Istanbul into a prominent financial center. Turkey’s large population of young people, qualified labor force and rapidly developing markets along with its geographic location makes Istanbul an ideal candidate for a finance hub.

6
A.Overview of Economic Indicators in Turkey
i.Turkey’s Macroeconomic Outlook
ii.FDI in the Financial Services Sector in Turkey
iii.Mergers and Acquisitions

7
Turkey’s fast-growing economy is expected to attract more investments in the future.
•Turkey has undergone profound economic transformation over the last decade and its economic fundamentals are quite solid. It is the 17th largest economy in the world and the 6th largest economy in Europe with a current GDP of approximately USD 820 billion in 2013.
•Having boomed as fast as 9.3% and 8.8% in real terms in 2010 and 2011, OECD projects a real GDP growth of around 4% in 2014 and 2015, while EIU projects on average 5% growth until 2017.
•Monetary policy played a vital role in reining in inflation over recent years. Turkish inflation has stayed under 10% since 2004 and year-end inflation was 7.4% in 2013. EIU forecasts that average inflation will further ease to 4% by 2018.
Source: TurkStat
Figure 1: GDP Growth Rate (Constant Prices)
Figure 2: Inflation, 2004-2013
0%
3%
6%
9%
12%
15%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: TurkStat, OECD, EIU
*f: forecast
-6%
-1%
4%
9%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014f
2015f
2016f
2017f
EIU*

0%
10%
20%
30%
40%
50%
60%
Borrowing
Lending
8
Turkey’s investment environment has become increasingly more welcoming to foreign investors.
•Overnight lending rates have been steadily decreasing over the years, reaching 7.5% in September 2013, which is a 500 basis point decrease since 2002.
•Fitch Ratings announced Turkey’s investment grade rating as BBB in November 2012 and Standard & Poor’s announced a BB+ rating in March 2013. These events signal further upgrades and are expected to boost the inflow of institutional funding.
•Moody's raised Turkey’s government bond ratings to Baa3 and revised its outlook to stable from positive in May 2013. These rating upgrades are due to sustained economic growth, rapid progress on structural and institutional reforms and improving public finance metrics.
Figure 3: The Central Bank of the Republic of Turkey O/N Interest Rates
Source: CBRT
Rating (Local Currency)
Outlook (Local Currency)
Rating
(Foreign Currency)
Outlook (Foreign Currency)
Standard & Poor’s
BBB
Stable
BB+
Negative
Fitch
BBB
Stable
BBB-
Stable
Moody’s
Baa3
Stable
Ba1
Positive
JCR
BBB-
Stable
BBB-
Stable
Table 1: Turkey’s Credit Ratings
Source: Moody’s (May 2013), S&P (February 2014), Fitch (December 2013),
JCR (May 2013)

9
Turkey has attracted significant foreign direct investments in the last decade.
•Turkey has become an attractive destination for foreign direct investments (FDIs). After 2002, weak FDI inflows then experienced an incremental increase and reached a record level of USD 22 billion in 2007.
•The decrease of inflows in 2009 was due to the global economic crisis, which lowered FDI across the globe including Turkey. However, according to 2011 totals, Turkey has recovered well from the global crisis.
•In 2013, FDI inflow rose to USD 12.9 billion, compared to USD 8.6 billion in 2009.
Source: World Bank DataBank
Figure 4: FDI Inflows to Turkey, 2003-2013
1.7
2.7
10
20.1
22
19.7
8.6
9
16
12.5
12.9
0
5
10
15
20
25
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
USD Billion
6.1
0.8
1.6
5.8
1.9
3.4
0
1
2
3
4
5
6
7
2008
2009
2010
2011
2012
2013
USD Billion
Figure 5: Total FDI in the Financial Services Sector, 2008-2013
Source: Ministry of Economy, CBRT
Note: FDI does not include Sberbank’s acquisition of Denizbank ,since Sberbank bought Dexia’s shares of Denizbank.
•Financial services is one of the most popular sectors for foreign direct investments. In 2012, the financial services sector accounted for 15.4% of the total FDIs in Turkey.
•In 2013, total FDI in financial services reached USD 3.42 billion, which accounts for 26% of the total FDIs in Turkey.

10
The Financial Services Sector and Major M&As in 2013: The financial services sector was in second place for M&As which included both local and foreign investments.
227
86
100
119
135
315
460
656
707
746
773
1
1.6
0
1.000
2.000
3.000
4.000
5.000
6.000
Other
Internet&Mobile Services
Construction
Restaurants&Hospitality
Tourism
Real Estate
Logistics&Transportation
Media
Retail
Manufacturing
Food&Beverage
Infrastructure
Financial Services
Energy
USD Million
Figure 6: M&A Deal Values in 2013 (Disclosed)
•The financial services sector had the second highest M&A disclosed deal values in 2013 with USD 1.6 million, coming in right after energy- related deals.
•The totals shown for M&As include both local and foreign deals.
•The total number of business deals in 2013 was 259. Financial services had a total of 24 deals placing it in third place overall, after energy- related and manufacturing deals.
•In 2013, a total of 217 deals were finalized. Financial services accounted for 10 deals, placing the sector in the top 10 for number of deals.
Source: Deloitte M&A Report 2013

11
Major M&As in the financial services sector amounts to USD 1.6 billion in 2013.
Acquirer
Origin
Target
Stake
Deal Value
(USD Million)
Allianz SE
Germany
YapıKredi Sigorta
74.0%
882
Commercial Bank of Qatar
Qatar
Alternatif Bank
70.8%
448
Khazanah Nasional
Berhad
Malaysia
Acıbadem Sağlık ve Hayat
Sigorta
90.0%
252
Alternatifbank A.Ş.*
Turkey
Alternatif Finansal Kiralama
100.0%
69
Private Investors (Enver
Çevik, Hasan Özsoy)
Turkey
ICG Investments
100.0%
6
UCP Holdings, Inc.
USA
Cosmos Yatırım Ortaklığı
11.9%
1
Azimut
Italy
Global Menkul Değerler
50.0%
N/D
Denizbank
Turkey
Citibank A.Ş. (Consumer
Banking Business)
100.0%
N/D
Mediterra Capital
Turkey
ACP Sigorta ve Reasürans
Brokerlığı
66.7%
N/D
Fibabanka
Turkey
Societe Generale's Turkish
Consumer Loan Business
100.0%
N/D
Table 2: Selected Financial Services M&As in 2013
* Sberbank bought Dexia’s shares of Denizbank, therefore the amount is not included as FDI.

0%
5%
10%
15%
20%
25%
30%
35%
0
5
10
15
20
25
2008
2009
2010
2011
2012
2013
USD Billion
Total Deal Value
Financial Investor Deals
Ratio to Total Deal Value (%)
12
Private equity activities in Turkey reached USD 17.5 billion in 2013.
Figure 7: Private Equity Activity, 2013 (Disclosed)
•A total number of 35 transactions were realized in 2013, which accounted for 12% of the total annual deal volume.
•Turkey has become one of the key destinations in the world for private equity activities. There are many major private equity and venture capital firms in Turkey. These firms include, but are not limited to, Turkven, Carlyle, 3i, Blackstone, KKR and Abraaj Capital.
•In regards to deal numbers, the manufacturing, e- commerce and food & beverage sectors shared the lead with 4 transactions each, followed by the real estate, technology, retail and energy sectors each with 3 transactions.
•For financial services, two deals were completed and are summarized in the table below.
Acquirer
Origin
Target
Stake
Deal Value
(USD Million)
Khazanah Nasional Berhad
Malaysia
Acıbadem Sağlık ve Hayat
Sigorta
90.0%
252
Mediterra Capital
Turkey
ACP Sigorta ve Reasürans
Brokerlığı
100.0%
N/D
Table 3: Private Equity Activity Selected Players

B. A Detailed Look at the Financial Services Sector
i.A Brief Overview of the Global Financial Services Sector
ii.The Banking Sector in Turkey
iii.Insurance and Pension Funds in Turkey
iv.Financial Leasing in Turkey
v.Factoring in Turkey
vi.Consumer Financing in Turkey
13

-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
North America
Western Europe
Asia and Australia
Turkey
World
14
Global asset size exceeded USD 100 trillion in 2012.
•According to EIU, although approximately 78% of banking assets were located in developed markets in 2012, and 22% in developing countries, this ratio is expected to change by 2017, where the trend will shift towards emerging markets. According to estimations, emerging markets will account for 34% of banking sector assets in 2017.
•Global assets grew almost CAGR 4% between 2007 and 2012 and are expected to further increase CAGR 5% from 2012 to 2017, surpassing USD 149 trillion in 2017.
•Moreover, it is important to note that global outstanding bank loans are forecasted to rise in nominal terms to USD 96.3 trillion in 2013 and reach USD 129.9 trillion by 2017. Turkey experienced higher year-over-year loan growth rates compared to the world average and other regions between 2009 and 2012 and yearly growth rates are projected to remain over 15% until 2017.
Figure 9: Year-Over-Year Loan Growth in Turkey and Other Regions
Source: EIU
f: forecast
USD Trillion
Figure 8: Total Global Asset Size
Source: EIU
Note: EIU calculation for the world is based on the 51 largest countries.
f: forecast
0
20
40
60
80
100
120
140
160
2007
2008
2009
2010
2011
2012
2013
2014f
2015f
2016f
2017f
CAGR
4.5%

•Life insurance premiums grew a CAGR 3.4% globally, while non-life insurance premiums had a CAGR 4.5% growth rate from 2009 to 2012. The total premium volume in 2012 exceeded USD 4.6 trillion.
•In 2012, the largest life insurance premium growth was witnessed in the USA, with a total of more than USD 587,000 million. Turkey, on the other hand, came in with more than USD 1,740 million ranking 43rd worldwide in overall life insurance premiums.
•The USA also ranked number one in non-life insurance premiums with USD 703,128 million followed by Japan with USD 129,740 million and Germany with 125,597 million. Turkey was ranked 29th worldwide with total non-life premiums of USD 9,140 million in 2012, which was a nominal increase of 7.9% from the previous year.
•A Swiss Re Sigma study expects insurance premium growth to improve further in the near future.
15
Insurance premiums grew across the globe in 2012 despite the challenging global economy.
0
1.000.000
2.000.000
3.000.000
4.000.000
5.000.000
2009
2010
2011
2012
Life
Non-Life
USD Million
Figure 10: Global Insurance Premium Volume
Source: TSRB, Swiss Re

•Turkey’s asset size is relatively lower than developed economies like the UK and France. Even though Turkey’s banks are under penetrated are starting to reach their full potential. Therefore, it will increase its asset size and reach its full potential in the future.
16
Turkey is one of the fastest growing countries in terms of bank asset size, and this reflects opportunities for growth
0%
5%
10%
15%
20%
25%
30%
0%
5%
10%
15%
20%
25%
30%
France
UK
CAGR 2003-2012
CAGR 2013-2017
Figure 11: Banking Sector Total Asset Growth by Country
Source: EIU, Deloitte Analysis Note: Growth rates are calculated in terms of USD, bubble size represents asset size in 2012 in terms of USD.
Czech Republic
Turkey
Brazil
Romania
Russia
Poland
India
427%
398%
163%
106%
94%
89%
87%
63%
60%
Figure 12: Banking Assets Percentage of GDP Ratio Comparison, 2012
Source: EIU
•Turkey’s total asset size, calculated in terms of USD, is expected to increase almost CAGR 11% from 2013 to 2017 outpacing that of countries such as Poland, Brazil, France, the Czech Republic and the UK.

Major milestones in Financial Services Industry of Turkey
17
1982-2000
2001-2006
Personal Pension Savings and Investment System Law
Banking Act, Law No. 5411
Regulation on Measurement and Evaluation of Capital Adequacy of Banks
Mortgage Law, Official Gazette No. 26454
Implementation of Basel II standards in Turkey
Record profitability of the banking sector in Turkey
Law No. 6361 regarding Financial Leasing, Factoring and Financial Institutions
Establishment of Insurance Information and Monitoring Center - TRAMER, SAGMER, HATMER, HAYMER
All local or foreign insurance , reinsurance and pension companies operating in Turkey are members of the Insurance Association of Turkey
New Capital Market Law No. 6362
2007-2012
2013-…
Capital Market Law
Istanbul Stock Exchange (ISE) Market opens
Banking Regulation And Supervision Agency (BRSA) founded
Consolidation of the Market from 100 Banks to 49 Banks
Takasbank is Authorized by CMB as the National Numbering Agency of Turkey
Start of internet banking services
Source: BRSA, CMB
Figure 13: Milestones of Turkey’s Financial Services Industry
Establishment of Borsa Istanbul A.Ş. with Law No. 6362 Implementation of Basel III standards in Turkey Public banks will be able to establish participation banks

•Turkey’s financial sector is among the best in the world with an ever growing asset size, and has a strong equity structure to protect it against shocks that may arise from loans or turbulent market conditions.
•The financial sector’s asset size has been growing. It achieved a double digit CAGR rate of almost 20% between 2008 and the third quarter of 2012 exceeding TL 2 trillion.
•Banks, including the Central Bank, represented 70% of total assets, reaching a value of TL 1,497 billion, while insurance represented 2% of total assets with TL 47 billion.
18
Turkey’s powerful banking sector represents 70% of the financial sector’s assets size.
0
500
1.000
1.500
2.000
2.500
2008
2009
2010
2011
2012Q3
Banking
Central Bank
Insurance and Private
Pension
Other*
Source: BRSA
•Other includes :ISE capitalization, securities, consumer finance, real estate investments, investment trusts, asset management and venture capital investment trust assets.
CAGR
2008-2012 Q3
16%
14%
16%
25%
Figure 14: Asset Size of Turkey’s Financial Sector
CAGR
19%
TL Billion
Share
2012 Q3
61%
9%
2%
28%

•After the crisis in 2001, the Turkish banking sector was strengthened and restructured through BRSA regulations and the Turkish banking system became one of the strongest in Europe. Moreover, the declining inflation rate, continuing budgetary discipline and overall optimistic expectations for the industry led to the growth of the banking sector. Currently, the sector is one of the most developed and competitive inTurkey.
•Turkey enjoys strong asset growth with a stunning CAGR 21% increase between 2003 and November 2013 exceeding TL 1,630 billion in total assets. Moreover, there was a remarkable increase in the total assets to GDP ratio from 55% in 2003 to 97% in 2012.
•In regards to asset to GDP ratio, Turkey is below the EU-27 average by 355%, but offers much potential. The top 10 banks in Turkey represent 85% of the total assets in the sector. Iş Bank is the leader in terms of total assets with TL 204 billion, followed by the public bank Ziraat with TL 196 billion and Garanti Bank with TL 190 billion in assets.
19
The banking sector’s asset size grew to more than TL 1.6 trillion in November 2013.
55%
55%
63%
66%
69%
77%
88%
92%
94%
97%
0%
20%
40%
60%
80%
100%
120%
0
200
400
600
800
1.000
1.200
1.400
1.600
1.800
Total Assets
Total Assets/GDP
TL Billion
Source: BRSA, Deloitte Analysis
* As of November 2013
Figure 15: Total Asset Size for the Banking Sector in Turkey
51
56
63
127
128
143
180
190
196
204
0
50
100
150
200
250
TEB
Denizbank
Finans Bank
Vakıf Bank
Halk Bank
YapıKredi Bank
Akbank
Garanti Bank
Ziraat Bank
Iş Bank
Figure 16: Top 10 Turkish Banks by Asset Size, September 2013*
TL Billion
Source: TBB
* Non-consolidated balance sheet
BankingInsuranceandPensionLeasingFactoringConsumer Financing

• The first Islamic banking applications in Turkey started in mid 1980’s. Albaraka Türk Finans Kurumu A.Ş. and
Faisal Finans Kurumu A.Ş. (known today as Türkiye Finans Katılım Bankası) were the first institutions that
followed Islamic banking principles. In 2005, these institutions were named participation banks and were
allowed to conduct banking activities under the scope of Islamic principles. Participation bank numbers in
Turkey increased to four when Asya Katılım Bank and Kuveyt Türk Katılım Bank started their operations.
• The total asset size of participation banks was more than TL 70 billion in 2012, growing at an impressive CAGR
of 32% between 2005 and 2012 and constituting approximately 5% of total banking sector assets. The total
assets surpassed TL 90 billion in November 2013 constituting more than 5.4% of the total banking sector asset
size. The first Sukuk auctions were conducted by the Turkish Treasury in 2012. A total of TL 3 billion and TL 1.5
billion worth of Sukuk were issued in these auctions.
20
The total asset size of participation banks was more
than TL 70 billion in 2012.
2,4%
2,8%
3,3% 3,5%
4,0%
4,3%
4,6%
5,1%
5,4%
0%
1%
2%
3%
4%
5%
6%
0
10
20
30
40
50
60
70
80
90
100
Participation Bank Asset Size
Participation Banks' Asset/Total Assets
TL Billion
Source: BRSA
Figure 17: Asset Growth of Participation Banks Figure 18: Lending Growth of Participation Banks
4,2%
4,3%
4,9%
4,8%
6,0%
5,9%
5,6%
6,0% 6,0%
0%
1%
2%
3%
4%
5%
6%
7%
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
Total Loans
Participation Banks' Loan/Total Loan
TL Million
Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing
Source: BRSA

4
13
32
49
0
50
100
150
Total
Participation Banks
Dev. & Inv Banks
Deposit Banks
31%
28%
26%
26%
27%
27%
26%
23%
37%
31%
29%
29%
29%
28%
29%
28%
12%
22%
25%
26%
24%
24%
26%
26%
20%
19%
21%
20%
20%
21%
20%
23%
0%
20%
40%
60%
80%
100%
2005
2006
2007
2008
2009
2010
2011
2012
Open to Public
Foreign Shareholders
Private Turkish Shareholders
State
21
Through the years, Turkey’s banking industry has attracted many foreigners resulting in a marked increase of foreign ownership assets
Figure 19: Distribution of Banking Assets by Ownership
•As of November 2013, the total assets of banks were TL 1,636 million. Moreover, in 2012, 23% of the banking assets were owned by public banks, 28% by private banks, 26% by foreign banks, while 23% was opened to public.
•20% of the shares that are open to public are owned by foreign investors. Adding this amount to the shares already owned by foreigners increases the total share of foreigners to more than 46% in 2012. There is room for growth in shares open to the public, since banks use BIST as a mean of reaching to more capital.
•As of September 2013, there were 49 banks in Turkey. There are a total of 32 savings banks, 13 development and investment banks and 4 participation banks.
•5 of the deposit banks are state owned banks, namely, Türkiye Cumhuriyeti Ziraat Bankası, Türkiye Halk Bankası, Türkiye Vakıflar Bankası T.A.O, Adabank A.Ş and Birleşik Fon Bankası. These banks accounted for more than 27% of total assets in 2012.
•Additionally, there are 4 state owned development and investment banks, namely, İller Bankası, İMKB, Takasbank, Türkiye İhracat Kredi Bankası A.Ş and Türkiye Kalkınma Bankası A.Ş. which held a total asset share of 2.5% in 2012.
Source: CBRT, BRSA
Source: BRSA
Figure 20: Type of Banks, 2012 Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

©2014 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited 22
Turkey was effected slightly by the global economic
crisis and loan expansion continued to grow.
Figure 21: Banking Sector Loan-Deposit Growth
Source: BRSA
TL Billion
• Turkey’s loan to deposit ratio, which measures the liquidity of banks within a country, has been on the verge of
increase since 2008. The total ratio reached 103% in 2012.
• Turkey’s banking sector has a lot of potential as it is below the average loan to deposit ratio of the EU-28, which
was 145% in 2012. European banks are more reliant to wholesale funding, whereas Turkish banks have a lot of
exposure to deposits, since deposits were the main funding resource for Turkish banks. However, with a
powerful capital structure and commitment to international banking standards, Turkish banks are well placed to
diversify their funding resources with securitization and syndication loans.
• Total loans increased by a stunning CAGR of 21% between 2008 and 2012. The increase in loans were due to
decreasing interest rates and increasing capital investments in Turkey.
Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing
81%
76%
85%
98% 103% 111%
0%
20%
40%
60%
80%
100%
120%
0
400
800
1.200
1.600
2008 2009 2010 2011 2012 2013*
Thousands
Assets Deposits Loans Loan/Deposit

23
Deposit and loan amounts are expected to grow further in Turkey…
348
392
440
523
594
673
449
528
595
707
804
911
0
500
1.000
1.500
2.000
2012
2013f
2014f
2015f
2016f
2017f
Loans
Deposits
USD Billion
Source: EIU
f: forecasts
Figure 22: Turkey’s Banking Sector Growth Projections
102
83
76
69
31
15
10
9
8
7
7
1
Figure 23: Loans per Person (USD Thousand), 2012
85
83
80
54
28
20
11
8
7
5
2
1
Figure 24: Deposits per Person (USD Thousand), 2012
•Loans and deposits are expected to expand further through 2017. Total deposits are expected to grow at CAGR of 14% between 2012 and 2017, while total loans are expected to grow slightly above total deposits with a CAGR 15% during the same period.
•Loans per person and deposits per person amounts are behind some European countries but there is great potential for loans and deposits to grow as banks focus on the under banked population in Turkey.
Source: EIU
Note: The population aged between 15-65 years have been considered for this graph. Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

•Turkey’s credit to GDP ratio is relatively smaller than Western European countries and also Eastern European countries. However, as the economy and the banking sector is expected to grow stronger, the CBRT expects the credit to GDP ratio to increase in the short term.
•The CBRT estimates the loan to GDP ratio to be between 60% and 70% by 2015. According to CBRT estimates, credit growth will range between 13% and 17% in 2015.
•Furthermore, the CBRT projects the credit to GDP ratio to be 78% by 2032.
24
…which will positively reflect on the loan to GDP ratio.
Figure 25: Loan to GDP Ratio , 2012
Source: EIU
54%
57%
58%
60%
58%
61%
64%
60%
66%
70%
0%
20%
40%
60%
80%
100%
2012
2013f
2014f
2015f
Base
Median
Upper
Figure 26: Loan to GDP Ratio Forecast Scenerios
Source: CBRT f: forecast
170%
144%
101%
76%
75%
54%
0%
50%
100%
150%
200%
UK
France
Germany
Czech Republic
Poland
Turkey
Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

25
Total loans increased in the double digits surpassing TL 1,200 billion
Figure 27: Development of Non-Cash and Cash Loans in Turkey
0
200.000
400.000
600.000
800.000
1.000.000
1.200.000
1.400.000
Cash Loans
Non-cash Loans
TL Million
Source: BRSA * As of October 2013
•Cash and non-cash loans increased at a CAGR 20% and 24%, respectively, from 2006 to October 2013. Non- cash loans surpassed TL 300,000 million as of October 2013, while cash loans were more than TL 990,000 million during the same period.
•SMEs are the backbone of the Turkish economy. Turkish banks started funding SMEs at an increased rate from 2006 to October 2013. Total SME loan amounts increased at a CAGR of 23% during this period with more than TL 257,000 in 2012.
CAGR 23%
0
50.000
100.000
150.000
200.000
250.000
300.000
Total Loans Extended to Medium Size Enterprises
Total Loans Extended to Micro Enterprises
Total Loans Extended to Small Enterprises
TL Million
Source: BRSA *As of October 2013 Note: SME is defined by BRSA as an entity that employs less than 250 workers and has TL 40 million or less total net sales or balance sheet size
Figure 28: Total SME Loans Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

26
Banks’ improved risk management decreased the NPL ratio to less than 3% in 2013.
27%
27%
23%
21%
24%
24%
25%
26%
0%
5%
10%
15%
20%
25%
30%
0
250.000
500.000
750.000
1.000.000
Total Cash Loans
SME Loans/ Total Cash Loans
TL Million
Source: BRSA * As of October 2013
Figure 29: Loan Breakdown in Turkey
•The total percentage of SME loans to total cash loans in Turkish banks increased to 26% in October 2013.
•Turkish banks have been affected slightly by the global economic crisis of 2009, and were able to maintain low levels of NPL ratios. The NPL ratio of Turkish banks decreased to 2.8% as of October 2013. The main reason for this decrease was due to the comprehensive risk management framework applied by the banks as well as the increase in the amount of NPLs sold to asset management companies, which increased to 5.7% in 2012 from 2% in 2008.
3.6%
5.2%
3.6%
2.7%
2.8%
2.7%
0%
1%
2%
3%
4%
5%
6%
2008
2009
2010
2011
2012
2013*
Figure 30: NPL Ratio* in Banking
Source: BRSA Note: Problem Cash Loans/Total Loans * As of October 2013 Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

27
New products offered by banks increased the amount of consumer loans.
0
20.000
40.000
60.000
80.000
100.000
120.000
140.000
160.000
180.000
200.000
220.000
240.000
260.000
2005
2006
2007
2008
2009
2010
2011
2012
Vehicle Loans
Other Loans
Credit Card
Risk
Consumer
Loans
Mortgage
Loans
Figure 31: Consumer Loan Breakdown by Type of Loan
TL Million
Source: BRSA
•Total consumer loans increased substantially with a CAGR of 30% from 2005 to 2012 exceeding TL 257,000 million.
•The increase in different loan product categories offered by banks supported the increase in consumer loans. Within this scope, the introduction of mortgage loans, which constitute more than 30% of total consumer loans, grew by double digits to more than TL 86,000 million with a CAGR of 30% from 2005 to 2012. Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

•Since July 2012, Turkey has begun fully implementing Basel II standard of credit risk assessment.
•The technical requirements for Basel III are also significant. The Basel III accords aim to strengthen the capital base of the banking sector, enhance risk coverage, introduce an overall leverage ratio and global liquidity risk standards and deal with procyclicality.
•The new total capital ratio is set at 10.5% consisting of 4.5% for common equity and 6% for Tier 1 capital for Basel III.
•After Basel III, banks will maintain cash-like assets in the short term to adjust their liquidity ratios. Furthermore, Basel III requires that banks report their liquidity metrics on a daily basis.
•The Dodd-Frank Act, which requires banks to revise or determine the minimum leverage and risk-based capital adequacy ratios in the USA, has set the minimum risk-based capital ratio for well capitalized banks at 10% and 8% for banks that are adequately capitalized. Furthermore, the minimum leverage ratio is 5% and 4%, respectively.
•The USA has not fully adopted Basel II, but it has signed Basel III.
28
Turkey is fully committed to Basel III standards…
•The USA is expected to fully comply with main capital, leverage and liquidity standards of Basel III. However, the timetable for implementation is not certain.
•The Turkish banking sector has capital adequacy ratios (CAR) above the regulator limits of BRSA, which was 12% in 2012. Moreover, Turkey’s CAR exceeds that of Basel II, which was 8% and Basel III, which will gradually increase each year and will be set at a total capital ratio of 10.5% by January 2019.
8%
0%
10%
20%
Basel II
Basel III
10.5%
0%
3%
0%
5%
10%
Basel II
Basel III
Figure 32: Total Capital
Figure 33: Leverage
Source: Deloitte Analysis
250 bps
300 bps Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

•Savings banks in Turkey had a CAR level of 17.3%, while participation banks and development and investment banks had 13.9% and 34.2% capital adequacy ratios, respectively.
•Despite the global economic crisis and the Eurozone crisis, the high capital adequacy ratio of Turkish banks allowed them to achieve strong financial statements. Hence, Turkish banks were only slightly effected by both crises. Moreover, Turkish banks are already prepared to meet the new capital requirements of Basel III.
•The Basel Consensus has a place in the EU legal acquis under the scope of financial services. The EU aims to create compliance of the Basel Consensus with the Capital Adequacy IV (CRD-IV) package. The abovementioned package will be put in the practice on 1 January 2014 and consists of 2013/36/EU Directive and (EU) 575/2013 legislation. Turkey is in accordance with the EU regarding the calendar for the implementation of the aforementioned standards.
•Turkey prepared for Basel III by organizing seminars together with KOSGEB and TBB. Working papers and regular progress reports have been published by committees delineating the implementation of the regulations within Turkey.
29
…and has even implemented a higher CAR than those set by Basel III regulation.
Source: BRSA
16,6%
19,3%
17,7%
15,5%
17,3%
15,2%
15,3%
15,1%
14,0%
13,9%
59,4%
60,3%
58,7%
48,2%
34,2%
5%
15%
25%
35%
45%
55%
65%
2008
2009
2010
2011
2012
Deposit
Participation
Dev & Inv
Figure 34: Capital Adequacy Standard Ratio Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

14,9
13,4
20,2
22,1
19,8
23,6
0
5
10
15
20
25
-20
0
20
40
60
80
100
120
2007
2008
2009
2010
2011
2012
Interest Income
Interest Expense
Non-Interest Income (Expense)
Net Profit (Loss)
30
The solid capital structure of Turkish banks allowed the sector to enjoy high profits.
7%
10%
12%
12%
12%
12%
13%
14%
14%
13%
4%
6%
8%
10%
12%
14%
16%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Figure 36: Fees, Commissions and Banking Services Income/Total Income (Percentage)
•The strong growth in the Turkish banking sector was also reflected in its profits as it climbed at a staggering CAGR of 10% from 2007 to 2012 exceeding TL 23 billion.
•The total interest income, which includes interest received from loans given, interest received from required reserves, interest received from other banks and interest received from money market transactions increased at a CAGR of 9% between 2007 and 2012 surpassing TL 109 billion.
•Non-interest income, which includes non-core banking activities such as fees received from deposits and transactions also grew a CAGR 4% during the same period to more than TL 1 billion in 2012.
•The banking sector not only benefits from increased income from interest but also from fees collected from other banking activities. The share from fees, commissions and banking services increased from 7% in 2003 to 13% in 2012.
Source: BRSA
TL Billion
TL Billion
Figure 35: Banking Sector Profit (Loss)
Source: BRSA Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

31
The sector grew as a result of its strong asset quality and was able to maintain high profits.
-1%
1%
2%
4%
2008
2009
2010
2011
2012
2013*
UK
USA
France
Czech
Republic
Poland
Russia
Turkey
Figure 37: ROA Country Comparison
Source: IMF Financial Soundness Indicators
*The latest data available on UK, France and Russia’s was from December 2013, Czech Republic and Turkey was from June 2013 and for USA and Poland was from March 2013.
Note: Numerator was annualized net income before extraordinary items and taxes, from the beginning of the year until the reporting month. Denominator was an average value of total assets (financial and nonfinancial) over the same period.
-2%
8%
18%
28%
2008
2009
2010
2011
2012
2013*
Figure 38: ROE Country Comparison
•The Turkish banking sector’s return on asset (ROA) ratio was stronger than that of banks in major financial centers as well as Eastern European countries. In 2013, ROA was 2.42% in Turkey, followed by the USA with 1.63%, which was a lower margin compared to Turkey’s ROA.
•Moreover, return on equity was, again, well above that of the USA and Europe with 20.3% in 2013 followed by the Czech Republic with 18% during the same period. Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

32
Turkey’s growing banking sector also resulted in the increase in the number of bank branches.
Figure 39: Total Number of Bank Branches in Turkey Including Foreign Branches, 2006-2012
20,9
20,9
19,6
19,2
19,0
18,5
18,2
18,1
16
17
18
19
20
21
22
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
Total
Branch per Employee
Source: BRSA
* As of March 2013
•The total number of branches increased at a CAGR of 9% between 2006 and 2012.
•The highest number of branches belongs to commercial banks, followed by participation banks and development banks. Branch expansion was highest in participation banks with CAGR 21%.
•The per branch employee number decreased as a result of the increasing trend towards centralization of branch operations as well as the increase in automated functions.
0
10.000
20.000
30.000
40.000
50.000
2008
2009
2010
2011
2012
2013*
Figure 40: Development of Cashpoints (ATMs) in Turkey, 2008-2012
•The development of the banking sector over recent years has affected the usage of cashpoints. As of October 2013, there were a total of 40,937 ATM cashpoints in Turkey.
•Between 2008 and 2012, the number of ATMs grew at a CAGR of 13%.
Source: BKM
*: As of October 2013 Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

33
Banks also started focusing on alternative technologies that provide low cost and faster transaction services.
0
200
400
600
800
1.000
1.200
1.400
1.600
1.800
2008
2009
2010
2011
2012
Cash
Transfers
Investments
Payments
Credit Cards
Other
0
2.000
4.000
6.000
8.000
10.000
12.000
Cash
Transfers
Investments
Credit Cards
Payments
Other
Figure 41: Internet Banking Transaction Values
Figure 42: Mobile Banking Transaction Values
Source: TBB
•The internet banking transaction value increased CAGR 23% between 2008 and 2012. Cash transfers had the lions’ share in total internet banking transactions with 69% and increased impressively by a CAGR of 26% from 2008 to 2012. Notwithstanding the large share from cash transfers, the fastest growth was observed in payments with a staggering CAGR of 39% during the same period.
•Growth in mobile banking transaction values also reached an all-time high. The transaction values increased 185% from 2011Q4 to 2012Q4 surpassing TL 11,000 million in the fourth quarter of 2012. It is noteworthy to mention the development of mobile phone users and the number of 3G phone subscribers. The number is expected to increase in the future as mobile coverage increases. Between 2011 and 2012, the number of 3G phone subscribers increased by 33% reaching 41.8 million. According to BMI, this figure is expected to reach approximately 69 million people by 2017.
TL Billion
TL Million
Source: TBB Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

34
Transactions for both credit and debit cards have increased significantly.
0
20
40
60
0
100
200
300
400
2008
2009
2010
2011
2012
2013*
Transaction Volume
Total Number of Credit Cards (secondary axis)
Figure 43: Development of Credit Cards and Transaction Volume, 2008-2012
•Turkey’s vibrant and growing economy had a positive impact on the development of credit and debit cards, providing significant potential for banks.
•The number of credit cards in Turkey increased at a CAGR of 6% between 2008 and 2012. And, a staggering CAGR of 18% was realized during this time in transaction volume.
•In 2012, the transaction volume for credit cards reached TL 361 billion, which accounts for a 94% increase compared to the transaction volume in 2008.
•The sharp development was also observed for debit cards. In 2012, transaction volume reached TL 311 billion and the CAGR since 2008 was at 19%.
0
50
100
150
0
100
200
300
400
2008
2009
2010
2011
2012
2013*
Transaction Volume
Total Number of Debit Cards (secondary axis)
Figure 44: Development of Debit Cards and Transaction Volume, 2008-2012
TL Billion
Source: BKM
*As of October 2013
Source: BKM
*As of October 2013
TL Billion
Million
Million Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

35
A Success Story: Odea Bank
Source: Odea Bank
"We hope to become one of the biggest banks in Turkey by 2017. Since our entrance into the Turkish market in 2012, the Turkish economy remained stable and showed significant growth despite the global economic environment. The reforms made by the government and the Banking Regulation and Supervision Agency (BRSA) enhanced our performance." Hüseyin Özkaya, Director General of Odea Bank, July 2013
•Odea Bank started its operations in Turkey in October 2012. Odea Bank is the first bank to receive a banking license in Turkey in the last 15 years.
•In June 2013, the bank’s total assets increased by 42% compared to its assets in March 2013, an increase of more than TL 11 billion. During the same period, the bank’s loans rose to TL 6.4 billion with a 68% increase and its deposits to TL 8.3 billion with a 28% increase in only a three month period.
•In September 2013, Odea Bank’s total assets increased to TL 13.4 billion and the bank was ranked 16th among 45 banks (excluding participation banks) in Turkey.
•91.4% of the bank’s shares are owned by Bank Audi, a Lebanese group, which has banking operations in 11 countries in the region. Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

36
Financial Services Sector: Selected Players
Source: ISO 500
Akbank
•Established in 1948 in Adana for cotton growers, Akbank is owned by Sabancı Holding and other shareholders including a 9% stake that belongs to Citibank Overseas Investment.
•Akbank provides consumer, commercial, SME, corporate and private banking services as well as foreign exchange, foreign trade financing and treasury transactions.
•The bank’s total assets reached approximately TL 180 billion as of September 2013.
Iş bank
•Iş Bank was established in 1924 and is Turkey’s largest bank.
•The bank’s shares are held by the Işbank Pension Fund, the Republican People’s Party and 32% of the shares were open to public.
•Iş Bank’s total assets were TL 204 billion for the third quarter of 2013.
•Iş Bank’s products and services include retail, corporate banking and capital market operations and other financial services such as private pensions, insurance, asset management, leasing and factoring.
Ziraat Bank
•Homeland Funds, the origin of Ziraat Bank, was founded in 1863 to support farmers and agricultural development.
•The Republic of Turkey Prime Ministry Under secretariat of the Treasury is the sole owner of Ziraat Bank.
•Ziraat Bank has the most extensive network among Turkish banks and its total asset size is one of the largest in the country.
•Ziraat Bank’s total assets reached TL 195 billion as of September 2013.
Garanti Bank
•Founded in 1946, Garanti is Turkey’s second largest private bank with total assets worth TL 189 billion as of September 2013.
•Garanti is jointly controlled by Doğuş Holding and the Spanish bank BBVA.
•Garanti provides integrated financial services in every segment of banking and has subsidiaries for pension, life insurance, factoring, leasing, brokerage and asset management on both national and international levels. Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

37
Participation Banks: Selected Players
Source: ISO 500
Türkiye Finans
•Türkiye Finans was established in 1991 following the merger of the companies Family Finans and Anadolu Finans.
•It operates in credit intermediation and related activities.
•Türkiye Finans had assets worth TL 23.3 billion in the third quarter of 2013.
•The bank has retail, commercial and SME banking services for both national and international customers.
Kuveyt Türk
•Kuveyt Türk started its activities in 1989.
•It is owned by Kuwait Finance House, the Public Institution for Social Security of Kuwait, the Turkish Directorate General of Foundations and the Islamic Development Bank.
•Kuveyt Türk’s total assets were TL 21 billion in the second quarter of 2013.
•The bank’s main products are current and participation accounts, investment and saving accounts and leasing.
Albaraka
•Established in 1984 by Albaraka Banking Group, Islamic Development Bank and other investors; it is a pioneer in participation banking in Turkey.
•Albaraka had TL 11.5 billion of total assets as of September 2013.
•Albaraka Türk offers its customers participation accounts, personal and corporate finance, leasing and project-based profit and loss sharing services. Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

38
The premiums to GDP ratio in Turkey is low, demonstrating potential for growth in the future years.
Figure 45: Total Premiums as a Percentage of GDP, Country Comparison, 2011*
Source: Swiss Re, Pension Monitoring Center * Turkey’s data is from the year 2012.
7,0%
6,8%
5,4%
4,1%
3,9%
3,2%
3,0%
2,4%
1,5%
1,4%
Italy
Germany
Spain
India
Czech Republic
Brazil
China
Russia
Romania
Turkey
1,29%
1,28%
1,33%
1,40%
0,00%
0,50%
1,00%
1,50%
2009
2010
2011
2012
•Turkey’s total premiums as a percentage of GDP is 1.4%. Moreover, the percentage of private pension funds to total GDP in Turkey was also 1.4% in 2012.
•The insurance market is still underpenetrated and unsaturated compared to peer countries and will provide significant potential as new insurers set up shop and acquire a share of the relatively untapped Turkish market. Turkey has seen strong economic growth fueled in part by a young and dynamic population that is increasingly in need of financial products and services.
Figure 46: Total Premium Growth as a Percentage of GDP in Turkey

39
Turkey’s insurance sector asset size grew at a CAGR of 17% between 2008 and 2012.
•There are a total of 59 insurance and retirement pension companies in Turkey of which 35 are non- life insurance companies, 6 life insurance companies, 17 retirement/pension companies and 1 reassurance company as of 2012. Moreover, 43 of these companies have foreign partnerships.
13
17
21
25
32
13
15
14
16
19
0
5
10
15
20
25
30
35
40
45
50
55
2008
2009
2010
2011
2012
Non-Life Insurance Companies
Life Insurance and Pension Companies
TL Billion
Figure 47: Asset Size of Turkey’s Insurance Sector
•Total asset size increased at a CAGR of 17% between 2008 and 2012 in the non-life and life insurance sector surpassing TL 50 billion in 2012.
Source: TSRB
•The asset size of non-life insurance increased a stunning CAGR 23%, while the asset size of life insurance and pension companies also reported a significant increase of a CAGR of 10% during the same period.
0
5
10
15
20
Life
Non-Life
2009
2010
2011
2012
TL Billion
CAGR 14%
CAGR 17%
Figure 48: Growth of Premiums in Turkey
Source: TSRB
•Life insurance premiums grew at CAGR of 14% between 2009 and 2012 to more than TL 2,000 million, while non-life insurance grew a CAGR 17% during the same period exceeding TL 17,000 million. Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

The size of premiums grew in every business line of
non-life insurance between 2009 and 2012.
1.418
1.822
1.925
1.415
935
2.671
2.249
1.608
2.181
1.980
1.705
993
3.117
2.545
1.935
2.686
2.309
1.999
1.474
3.787
2.974
2.021
2.711
2.645
2.237
1.742
4.534
3.937
Life
Other Non-
Life**
General
Losses
Health
Fire and
Forces of
Nature
Land
Vehicles
Liability*
Share of Total Premium by Type
2012
14%
10%
9%
11%
13%
Premium Written
(TL Million)
2009
2010
2011
2012
Source: TSRB
*Land vehicles liability insurance is compulsory. **Other non-life insurance includes accident, railway rolling stock, aircraft,
maritime, aircraft liability, general liability, credit, suretyship, financial losses, legal protection and assistance.
Land Vehicles
29%
23%
• Premiums grew in
every business line in
the non-life insurance
sector between 2009
and 2012. The areas of
general losses, land
vehicles and land
vehicles liability grew
considerably
registering CAGRs of
22%, 18% and 19%,
respectively.
CAGR
(2009-2012)
14%
13%
23%
16%
11%
21%
19%
Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing
Figure 49: Breakdown of Premiums in 2012

8%
10%
9%
8%
7%
7%
65%
62%
60%
59%
60%
59%
17%
19%
22%
23%
23%
24%
9%
10%
9%
10%
10%
10%
0%
50%
100%
2008
2009
2010
2011
2012
2013*
Direct
Agency
Bancassurance
Broker
•Insurance sales in Turkey are conducted via direct sales, agencies, bancassurance and brokers.
•Total insurance sales reached TL 20 billion in October 2013. 85% of these sales were non-life insurance sales with more than TL 16.7 billion in sales, while the rest were life insurance sales with a total worth of more than TL 2.8 billion.
•Agencies had the biggest share in total sales constituting 59% of total sales with more than TL 11 billion. The significant amount of sales is due to the strong presence of agencies in Turkey. There were more than 16,000 actively operating agencies as of 2012.
•Agency sales are followed by bancassurance sales. Bancassurance grew from 17% to 24% from 2008 to October 2013, exceeding TL 4.6 billion in total sales.
41
Banks are increasingly considering insurance products for cross-selling opportunities.
Figure 50: Premium Distribution by Sales Channels
Source: TSRB *As of October 2013 Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

•Axa Sigorta was the leader in non-life insurance market in terms of written premiums in 2012 with a share of 14%, followed by Anadolu Sigorta and Ak Sigorta with 13% and 8%, respectively.
•The large scale non-life insurance companies (the top 5 companies) represent 50% of total market as of December 2012.
42
Axa Sigorta is the market leader in non-life insurance, the life insurance market is dominated by Ziraat Hayat ve Emeklilik.
2%
6%
10%
14%
2008
2009
2010
2011
2012
Figure 51: Non-Life Insurance Market Share, Written Premiums
Source: TSRB
Axa Sigorta
Anadolu Sigorta
Ak Sigorta
Allianz Sigorta
YapıKredi Sigorta*
0%
5%
10%
15%
20%
25%
30%
2008
2009
2010
2011
2012
Source: TSRB
* YapıKredi Sigorta and YapıKredi Emeklilik’s majority shares were bought by Allianz.
Ziraat Hayat ve Emeklilik
Anadolu Hayat Emeklilik
Garanti Emeklilik YapıKredi Emeklilik* Halk Hayat ve Emeklilik
Figure 52: Life Insurance Market Share, Written Premiums
•Ziraat Hayat ve Emeklilik started its operations in the life insurance business in 2009. As of 2010, Ziraat Hayat ve Emeklilik became the market leader in terms of life insurance premiums and continued to increase its market share thanks to its large retail customer base and branch network. Ziraat Hayat ve Emeklilik had a share of 22% in 2012, followed by Anadolu Hayat ve Emeklilik with 14% and Garanti Emeklilik with 10%. Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

The government will fund 25% of a participant’s monthly contribution in order to promote savings.
•In October 2001, private pension plans were established in Turkey after the enactment of Law No. 4632 - Private Pension Plans Savings and Investment System. The objective of the new pension regulation can be described as follows:
•Increase the savings behavior of the population with the new tax and financial incentives
•Involve and integrate the non-working population into the system
•Decrease the lapse issue within the system
43
Government Grants and Advantages
•The government will contribute 25% of the monthly participant contribution into a separate pension contract. The government’s annual contribution will be up to 25% of the gross annual minimum wage.
•The participant is eligible for the pension fund with the following terms:
•0-3 years of participation (0% of the fund)
•10 years of participation and before the age of 56 (60% of the fund)
•10 years of participation and after the age of 56 (retirement), death and disability (100% of the fund)
Major Conditions for the Individual Pension Plans
•A minimum 10 years in the system
•A minimum retirement age of 56
•No more requirement of minimum 10 years of contribution payment
•Participants can switch funds 6 times and pension plans 4 times a year
•Once the participant retires, he/she can claim the amount via three different means (i.e., total payment of asset under management, installed repayment, and annuity contract)
•A contract is signed when the first contribution amount is transferred into the company’s account.
•The participant has the right to withdraw the money in the fund up to 60 days after the contact has been signed.
•There is gradual tax on net return instead of accumulated value. Pricing is based on the riskiness of the pension fund.
Source: EGM Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

•Pension funds in the world’s developed and developing countries play a crucial role in the economy since they provide long term funds to the market.
•In 2012, the ratio of pension funds to GDP in Turkey was 3.8%, an increase from 2.3% in 2010. The figure is still significantly lower than major OECD countries. However, there is great potential for the market because of the government’s promotion of savings plans to the general population.
44
In 2012, Turkey’s pension funds relative to the size of the economy was 3.8%
Figure 53: Pension Funds Relative to the Size of the Economy (as Percentage of GDP), 2012
Source: OECD
160,0%
95,7%
74,5%
17,2%
8,4%
7,1%
6,3%
3,8%
3,3%
0,3%
0%
50%
100%
150%
200%
Netherlands
UK
USA
Poland
Spain
Czech Republic
Germany
Turkey
Hungary
France
2.3%
2.2%
3.8%
0,00%
1,00%
2,00%
3,00%
4,00%
2010
2011
2012
Figure 54: Pension Funds Relative to the Size of the Economy (as Percentage of GDP) in Turkey
Source: OECD Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

•Gross national savings as a percentage of GDP was 12.3% in 2012, which is relatively lower than other countries.
•The Turkish government is trying to increase savings by enhancing the private pension system and generally raising awareness and promoting household savings. Thus, Turkey’s gross national savings is expected to increase slightly in the short term to approximately 13%.
45
Gross national savings make up 12.3% of Turkey’s GDP and is expected to stay at the range of 13% in the future.
Figure 55: Gross National Savings Percentage of GDP, 2012
Source: IMF
Note: Gross national savings is expressed by the IMF as gross disposable income less final consumption expenditure after taking into account an adjustment for pension funds. For many countries, the estimates of national saving are built up from national accounts data on gross domestic investment and from balance of payments-based data on net foreign investment
32,2%
28,7%
23,4%
18,5%
17,6%
17,6%
16,3%
13,1%
12,3%
11,4%
7,1%
India
Russia
Germany
France
Spain
Brazil
Poland
USA
Turkey
UK
Greece
13,1%
13,9%
12,3%
13,4%
13,6%
13,4%
13,1%
12,9%
11,0%
11,5%
12,0%
12,5%
13,0%
13,5%
14,0%
14,5%
2010
2011
2012
2013f
2014f
2015f
2016f
2017f
Source: IMF f: forecast
Figure 56: Turkey’s Gross National Savings Percentage of GDP Growth Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

46
Both AUM and contribution amounts had rapid growth since 2006 with a CAGR of 39% and 36%, respectively.
0
5
10
15
20
25
2006
2007
2008
2009
2010
2011
2012
AUM
Accumulated Total Contribution
Figure 57: Pension Funds (AUM) and Contribution Growth
1,06
1,08
1,10
1,11
1,11
1,11
1,13
1,02
1,04
1,06
1,08
1,10
1,12
1,14
0
1
2
3
4
2006
2007
2008
2009
2010
2011
2012
Number of Contracts
Number of Participants
Contract per Participant (secondary axis)
TL Billion
Million
Figure 58: Number of Participants/Contracts in Pension Funds
•In 2012, the number of participants in Turkey’s pension funds increased at a CAGR of 19% between 2006 and 2012, while total contributions increased at a CAGR of 36% during the same period.
•As of 13 December 2013, total contributions totaled TL 25,369 million, which is a staggering 57% increase from the previous year. This increase was due to the new pension regulation, in which the government funds 25% of the monthly contribution.
•According to the Pension Monitoring Center’s Private Pension Development Report 2012, the total number of contracts increased to 3.5 million with 3.1 million participants. Moreover, the Pension Monitoring Center also expects a total of 4.3 million participants in the pension system with a total of TL 26.9 billion in assets under management by the end of 2013. As of 29 November 2013, 94% of the assets under management projection was reached.
Source: EGM
Source: EGM Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

47
The performance of Turkey’s pension fund was better than most OECD countries.
-5%
0%
5%
10%
15%
Turkey
Hungary
Germany
Canada
Italy
UK
Poland
Real
Nominal
Figure 59: Pension Fund Nominal and Real Average Annual Returns in Selected OECD Countries, 2008-2012
Source: OECD
Note: Pension Fund Nominal and Real 5-Year (Geometric Average)
•Turkey withstood the global economic crisis with the best results in pension fund returns, both in nominal terms and in real terms with returns of 11.6% and 8.5%, respectively.
•In 2012, net income flow for pension funds in Turkey exceeded that of most OECD countries amounting to 22.5% of total investment.
Figure 60: Pension Funds' Net Income for Selected OECD Countries, 2012 (As a Percentage of Total Assets)
5,0%
5,2%
5,5%
6,8%
14,7%
15,4%
22,5%
0%
5%
10%
15%
20%
25%
Czech Republic
Germany
Spain
Poland
Greece
Hungary
Turkey
Source: OECD Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

48
The top 4 pension funds constituted 75% of the total market.
Other; 25%
Anadolu Hayat ve Emeklilik; 20%
Garanti Emeklilik; 16%
AvivaSA; 19%
Allianz Yaşam ve Emeklilik** 20%
Figure 61: Pension Funds (AUM) Share, 2013*
36%
19%
18%
15%
13%
2012
Figure 62: Market Share in terms of Number of Participants, 2012
Garanti Emeklilik ve Hayat
AvivaSA Emeklilik ve Hayat
Anadolu Hayat Emeklilik
Allianz Yaşam ve Emeklilik**
•Allianz Yaşam ve Emeklilik is the market leader in the pension fund sector in terms of assets under management. However, it is not the market leader in terms of number of participants.
•Garanti Emeklilik ve Hayat has the highest share in terms of number of participants with 19% as of 13 December 2013.
Source: EGM *As of 13 December 2013 **Allianz bought 80% of YapıKredi Emeklilik as of March 2013 and includes Allianz Yaşam ve Emeklilik.
Other Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

49
Non-Life Insurance Sector: Selected Players
49
AXA Sigorta
•French insurance giant Axa entered the Turkish insurance market in 1995 under the name Axa Oyak Life Insurance.
•In 2008, AXA bought Oyak’s shares.
•92% of the shares of the company belong to Axa Holding A.Ş., 7% to Ziraat Bank and the rest to smaller stakeholders.
•In 2012, Axa Sigorta’s total non-life premium amounted to more than TL 2.3 billion with a non-life technical income of more than TL 1.7 billion.
Anadolu Sigorta
•Anadolu Sigorta was founded in 1925 by İş Bank.
•57% of the company is owned by Milli Reasürans T.A.Ş. and the rest is publicly listed.
•In 2012, Anadolu Sigorta’s non-life premium equaled TL 2.2 billion with a non- life technical income of TL 1.8 billion.
Allianz Sigorta
•In 1988, the German company Allianz along with Tokio Marine Insurance from Japan bought shares of Şark Sigorta operating under Koç Holding.
•Since 2008, Allianz owns 87% of the life insurance shares of the company. The other 11% is held by Tokio Marine and 3% by other stakeholders.
•TL 1.4 billion was made by Allianz from non-life insurance premiums in 2012 and a total non- life technical income of more than TL 1 billion.
Güneş Sigorta
•Güneş Sigorta was established in 1957.
•Vakıf Emeklilik owns 34% of Güneş Sigorta and Groupama, one of the leading insurance companies in France, owns 30%. The rest of the shares are owned by the Retirement Foundation of Vakıfbank’s personnel and the public.
•It had more than TL 922 million non-life premiums in 2012. Güneş Sigorta’s non- life technical income exceeded TL 471 million. Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

Life Insurance Sector:
Selected Players
ING HAYAT ve
EMEKLILIK
• Oyak Emeklilik A.Ş.,
was founded in 2003.
• Dutch financial services
group ING acquired the
company in 2007.
• Oyak Emeklilik’s name
changed to ING Emeklilik
in 2009.
•ING Emeklilik’s total
assets under
management in 2012
reached TL 1.09 billion.
GARANTI EMEKLILIK
ve HAYAT
• Garanti Emeklilik ve
Hayat began its
operations in 2002.
• 84% of Garanti Hayat
ve Emeklilik’s shares
are owned by Garanti
Bank, and the
remaining are owned by
Dutch insurance
company Achmea.
• Garanti Emeklilik ve
Hayat’s total assets
under management was
more than TL 3.3 billion
in 2012.
AvivaSA Emeklilik ve
Hayat
• AvivaSA was
established in 2007 with
approximately 50%
percent of its shares
divided between
Sabancı Holding and
Aviva.
• Aviva is a global
insurance company
headquartered in Britain
with over 50 million
customers.
• AvivaSA had TL 4 billion
asset under
management in 2012.
ANADOLU HAYAT ve
EMEKLILIK
• Anadolu Hayat Emeklilik
was founded in 1990
and is Turkey’s only
publicly listed insurance
company.
• 62% of the company‘s
shares are owned by Iş
Bank, 20% by Anadolu
Sigorta, 17% is open to
public and less than 1%
is held by Milli
Reasürans T.A.Ş.
• In 2012, the company’s
asset under
management totaled TL
4.2 billion.
Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing

51
A Success Story: YapıKredi Sigorta
Source: Bloomberg
"Turkey is one of the fastest growing insurance markets worldwide. The transaction is a unique opportunity to move into a leading position in one of Europe’s key growth markets, which is also an important bridge between the Middle East and Central Asia." Oliver Baete, Allianz Board Member, March 2013
•Established under the name Halk Sigorta in 1943, the company changed its name to YapıKredi Sigorta in 2000. Since 2005, it operates within Koç Financial Services.
•Allianz acquired 94% of YapıKredi Sigorta’s shares for USD 880 million and 80% of YapıKredi Bank’s pension business, YapıKredi Emeklilik, in March 2013.
•This acquisition, undertaken with the approval of Turkey’s Competition Authority, means an increase in market share for both companies. Together, they have more than TL 3 billion in non-life insurance premiums and approximately TL 5 billion for pension funds.
•Lately, Allianz along with other European insurance companies have been investing in emerging countries.
•YapıKredi Sigorta’s technical income from life insurance was TL 204 million and technical income from non-life insurance was TL 887 million in 2012. Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

52
Financial leasing, factoring and consumer financing now fall under one law.
•Laws and regulations regarding financial leasing, factoring and financing institutions are defined clearly in Law No. 6361 regarding Financial Leasing, Factoring and Financial Institutions published in December 2012. With the enactment of the new law, the parameters of the sector are now aligned with international standards, which will increase the attractiveness of the Turkish market for foreign investors.
•It is also important to note that the factoring sector is regulated by the Banking Regulatory Supervision Agency (BRSA).
•There are several major points in the law that are crucial for investors, and they can be summarized as follows:
•Conditions to Establish a Company
•The company should be established as joint stock company and the number of founding partners should not be less than five people.
•The trade name of the company must have one of the following terms in it: financial leasing company, factoring company, or financing company
•Its paid-up capital to establish a company should not be less than TL 20 million.
•The business plan for the intended field of activity, the projections regarding the financial structure of the institution, the budgetary plan for the first three years and an activity program showing the establishment of the corporate structure must be submitted.
•Opening of Branches
•In order to open domestic and overseas branches, companies must acquire permission from the Banking Regulation and Supervision Board.
•Principles and procedures relating to the opening of branches are determined by the Board.
•Internal System, Accounting, Reporting and Independent Audit
•Companies are obliged to send financial statements and statistical information, the form and scope of which will be determined by the Banking Regulation and Supervision Agency
•Independent audit of the company shall be made within the framework of Accounting and Auditing Standards Board.

53
Financial leasing assets grew at a CAGR of 8% between 2007 and 2012.
1,21%
0,72%
0,36%
0,44%
0,65%
0,68%
0,0%
0,4%
0,8%
1,2%
1,6%
0
4
8
12
16
20
24
2007
2008
2009
2010
2011
2012
TL Billion
Leasing Asset Size
Leasing Volume/GDP
Figure 64: Financial Leasing Asset Size Growth in Turkey
Source: FİDER
Figure 63: Financial Leasing Transaction Volume, 2011
4%
10%
5%
5%
12%
20%
28%
11%
15%
0%
5%
10%
15%
20%
25%
30%
0
10
20
30
40
50
60
70
Romania
Czech Rep.
Turkey
Netherlands
Poland
UK
Russia
France
Germany
Transaction Volume
Penetration
USD Billion
Source: FİDER
•Turkey’s leasing transaction volume reached USD 4.3 billion in 2011, which is a 52% increase from the previous year. Despite the huge year-over-year growth Turkey’s leasing sector is still under penetrated but has a lot of upside potential as leasing asset size grows.
•The total asset size grew at an impressive CAGR of 8% from 2007 to 2012 to more than TL 20.2 billion in 2012.
•Furthermore, participation banks in Turkey can also conduct financial leasing operations on tangible items.

Construction equipment had the highest share in
financial leasing with 33% in 2012.
4%
8%
7%
5%
5%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
0
4.000
8.000
12.000
16.000
20.000
2008 2009 2010 2011 2012
Leasing Receivables NPL
Figure 65: Financial Leasing Receivables in
Turkey
TL Million
Source: BRSA
Figure 66: Financial Leasing Investment Amount
by Product Type, 2012
• The Turkish government promotes financial leasing operations. As of December 2011, it reduced the VAT
applied for leasing operations to 1% for leasers that have investment incentive documents. The items that can
be leased include steam boilers, steam turbines, concrete pumps and centrifuges among other items. In light of
this support, financial leasing receivables increased from 2008 to 2012.
• Financial leasing receivables between 2008 and 2012 increased at CAGR of 3.2% exceeding TL 16 billion in
2012.
• Leasing of construction equipment had the highest share in terms of investment amount with 33%, followed by
machinery and other equipment with 25%.
33%
25%
9%
7%
6%
4%
3%
3% 3%
2%
2%
2%
1%
Construction Equipment
Machinery and
Equipment
Textile Equipment
Real Estate
Air Transportation
Medical Equipment
Electronics and Optic
Equipments
Office Equipment
Land Transportation
Maritime Transportation
Press and Media
Equipment
Tourism Equipment
Other
Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing
Source: FİDER

Leasing Sector Operational Figures
Table 4: Leasing Sector Operational Figures
2008 2009 2010 2011 2012
Number of
Branches
18 18 16 17 18
Number of
Agencies
80 76 69 72 75
Number of
Personnel
1,427 1,280 1,286 1,217 1,258
Number of
Clients
73,577 60,010 50,428 43,294 45,089
Number of
Contracts
121,627 98,596 82,615 76,258 72,920
• The leasing sector in Turkey makes up a significant part of the non-banking sector with 72,920 contracts in
2012.
• In 2012, the number of skilled personnel in the leasing sector was 1,258 and the total number of clients was
45,089.
• With 75 different agencies all across Turkey, leasing companies provide necessary services to their clients.
Banking
Insurance and
Pension
Leasing Factoring
Consumer
Financing
Source: BRSA

56
The leasing sector is a promising one with 20% growth in revenues in 2012 compared to 2011.
1.538
805
1.035
1.129
1.356
0
100
200
300
400
500
600
700
0
200
400
600
800
1.000
1.200
1.400
1.600
1.800
2008
2009
2010
2011
2012
TL Million
TL Million
Leasing Revenues
Net Profit/Loss
Figure 67: Leasing Revenues and Net Profits/Loss, 2008-2012
Source: BRSA
•Revenues in the leasing sector in Turkey have been increasing since 2009.
•As of 2012, leasing revenues were TL 1,356 million, which corresponds to a 20% increase compared to the previous year and 68% increase compared to 2009.
•However, net profit decreased from TL 521 million to TL 434 million in 2012. Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

57
Leasing Sector: Selected Players
57
BNP PARIBAS
Leasing Solutions
•BNP Paribas Leasing Solutions, a global leader in financial services, signed a cooperation agreement with TEB Leasing in 2005.
•In 2009, BNP acquired Fortis Leasing.
•TEB Leasing and Fortis Leasing then merged under the umbrella of BNP Paribas Finansal Kiralama A.Ş. in 2011.
•BNP leases medical and data processing equipment, energy facilities, transport vehicles, construction machinery and real estate. Its total assets in 2012 equaled TL 1.3 million.
YATIRIM Leasing
•Yatırım Leasing was founded in 1993. It joined TETAŞ Group in 2004. The company offers its clients investment services in different sizes and terms and consultancy to promote leasing activities in Turkey.
•Yatırım Leasing provides financing for capital such as medical and construction equipment, press and packaging, appliances for metals and textile sectors.
•The company’s total assets were TL 62.498 million in 2012.
SIEMENS AG
Leasing
•Siemens Finansal Kiralama A.Ş. was established in 1997 by Siemens AG Leasing, which has offices in more than 20 countries.
•Siemens leases printing machines, textile, tourism and office equipment, transport vehicles, computers and software, cranes and construction machinery, power stations and communication and security systems.
•Siemens Leasing’s total assets amounted to TL 546,357 million in 2012.
GARANTI
Leasing
•Garanti Leasing was founded in 1990.
•It uses Garanti Bank branches as a distribution channel. In 2007, Garanti Leasing founded Garanti Fleet.
•Garanti Leasing aims to become the first Turkish leasing company to open offices overseas.
•Business premises, real estate, medical and office equipment, construction, textile and manufacturing machinery can be leased from Garanti Leasing.
•Garanti Leasing’s total assets in 2012 amounted to TL 3 million. Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

7,8
10,5
14,5
15,7
18,2
0
5
10
15
20
25
2008
2009
2010
2011
2012
TL Billion
•In Turkey, factoring was introduced in 1988 to support manufacturers’ export activities. One of the major advantages of factoring is its ability to provide companies with immediate cash flow for their accounts receivable.
•The total assets in factoring sector reached TL 18.1 billion in 2012, which accounts for a 16% increase compared to the previous year.
•It is also observed that between 2008 and 2012 total assets grew at a staggering CAGR of 24%.
•Receivables in the sector grew by 94% compared to 2009 and non-performing loans decreased from 9% in 2009 to 5% in 2012.
58
The assets in the factoring sector in Turkey have been increasing significantly, reaching TL 18.2 billion in 2012.
Figure 68: Total Asset Development of the Factoring Sector in Turkey, 2008-2012
CAGR 24%
Source: BRSA
TL Billion
2009
2010
2011
2012
Receivables
8.4
12.4
14.2
16.3
NPLs (%)
9%
6%
4%
5%
Reserves
0.4
0.4
0.4
0.7
Banks
1.1
1.2
0.5
0.7
Credit
7.6
11.1
11.5
12.8
SE Equity
2.5
3
3.4
3.9
Table 5: Factoring Sector Selected Financial Indicators, 2008-2012
Source: BRSA
Source: BRSA

•The revenue and net profit of the factoring sector have been increasing since 2009.
•Compared to 2009, factoring revenues increased 59% reaching TL 2,614 million in 2012 .
•The slight decline in 2009 can be ascribed to the global financial crisis, which affected many other sectors. However, the factoring sectoring in Turkey recovered promptly and has been increasing ever since.
•The net profits in factoring reached TL 597 million in 2012, an increase of 18% compared to the previous year.
59
Factoring revenues increased by 28% in 2012 demonstrating a vast potential in the sector.
1.757
1.358
1.514
2.040
2.614
0
100
200
300
400
500
600
700
0
500
1.000
1.500
2.000
2.500
3.000
2008
2009
2010
2011
2012
TL Million
TL Million
Factoring Revenues
Net Profit
Figure 69: Factoring Revenues and Net Profit, 2008-2012
Insurance and
Pension
Leasing Factoring
Consumer Financing

60
The total numbers of clients and contracts have been increasing in the factoring sector demonstrating its high service potential.
Table 6: Factoring Sector Operational Figures
2008
2009
2010
2011
2012
Number of Branches
20
26
28
25
62
Number of Agencies
128
116
175
218
185
Number of Personnel
3,009
2,959
3,557
3,819
4,186
Number of Clients
50,228
40,997
57,094
66,468
67,054
Number of Contracts
146,558
65,952
89,516
91,029
84,769
•The table above provides some of the most crucial operational figures of the factoring sector. The sector continued its growth between 2008 and 2012 in almost every operational activity.
•For example, the number of clients in the factoring sector increased by 33% in 2012 compared to 2008 reaching 67,054. This also resulted in the increase of highly skilled personnel in this field reaching a total of 4,186, which is a 40% increase compared to 2008.
Insurance and
Pension
Leasing Factoring
Consumer Financing

61
Factoring Sector: Selected Players
Garanti Factoring
•Garanti Factoring was established in 1990 in order to provide factoring services to industrial and commercial companies.
•Garanti Factoring open edits shares to the public in 1993 and is traded on Borsa Istanbul.
•The company currently has 21 branches in 14 cities of Turkey.
•The total assets of the company were TL 1,955 million in 2012.
YapıKredi Factoring
•YapıKredi Factoring was established in 1999.
•The company provides services to commercial companies and more than 90% of its customer base is small and medium size enterprises.
•YapıKredi Factoring is an active member of both the Factoring Association and Factors Chain International (FCI).
•In 2012, the total assets of YapıKredi Factoring were TL 1,791 million.
TEB Factoring
•TEB Factoring was established in Turkey in 1997.
•The company provides factoring services domestically and internationally.
•Since 1998, TEB Factoring is a member of the Factors Chain International.
•The total assets of TEB Factoring in 2012 amounted to TL 786.4 million.
Source: Official Websites Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

62
The assets of the consumer financing sector in Turkey have been increasing since 2010.
4,7
4,5
6,1
8,9
11,6
-4%
36%
46%
30%
-10%
0%
10%
20%
30%
40%
50%
0
2
4
6
8
10
12
14
2008
2009
2010
2011
2012
TL Billion
Total Assets
% Growth
Figure 70: Consumer Financing Sector Asset Development, 2008-2012
•One of the main advantages of consumer financing companies is their ability to provide fast and efficient loans for their customers. Most consumer financing companies in Turkey are focused on specific financing fields such as car loans or mortgages, which allow them to serve their customers faster and with a variety of choices targeted to them.
•Also, it is important to note that with the amendment of Law No. 6361 regarding "Leasing, Factoring and Financing Company Law," new benefits were introduced in the financing sector.
•According to the law, financing companies now have the title of credit institutions and are now allowed to provide cash loan up to 5% of their total assets.
•As of 2012, total assets for the consumer financing sector was TL 11.6 billion increasing by 30% compared to the previous year.
•Regarding non-performing loans (NPLs), the percentage has decreased significantly since 2009. NPLs in 2012 were 3%, whereas it was as high as 10% in 2009.
TL Billion
2009
2010
2011
2012
Receivables
3.9
5.4
8.4
10.7
NPLs (%)
10%
6%
2%
3%
Reserves
0.1
0.2
0.1
0.1
Banks
0.3
0.4
0.2
0.5
Credit
3.6
4.5
7.1
9.0
SE Equity
0.4
0.5
0.6
0.9
Source: BRSA
Table 7: Consumer Financing Sector Selected Financial Indicators, 2008-2012
Source: BRSA

63
Over the years, the operational development of the consumer financing sector in Turkey has been impressive.
2008
2009
2010
2011
2012
Number of Branches
3
1
1
3
3
Number of Personnel
544
512
551
595
707
Number of Clients
357,475
229,676
261,905
328,422
383,069
Table 8: Financing Sector Operational Development Data
0
50.000
100.000
150.000
200.000
250.000
300.000
350.000
400.000
450.000
2009
2010
2011
2012
CAGR 19%
Figure 71: Number of Consumer Financing Contracts in Turkey
Source: BRSA
•The consumer financing sector has been developing in Turkey since 2009. As of 2012, the total number of contracts in the sector reached 411,619, which accounts for an 18% increase compared to the previous year and 70% increase compared to 2009.
•Consumer finance companies that promote vehicle loans usually work with car dealerships that are a part of the same parent company.
•As the sector developed over the years, the number of highly skilled employees also increased, thereby providing professional services in the financing sector.
Insurance and
Pension
Leasing Factoring
Consumer Financing

64
Consumer Financing Companies: Major Players
Name
Logo
Web Page
What They Do
Koçfinans
http://www.kocfinans.com.tr/
Koçfinans offers its customers car, mortgage and education loans. Since its founding in 1995, the company has provided credit for more than 3 million customers, approximately USD 3.4 billion worth of loans.
Koç Fiat Kredi
https://www.kocfiatkredi.com.tr/
Koç Fiat Kredi was founded in 2000 by Koç Holding and Fiat and was later bought by Tofaş Türk Otomobil Fabrikaları A.Ş. It is a captive finance company serving 6 brands. In 2012, the company made 45,453 loans worth of TL 1,008 million.
MAN Financial Services
http://www.man-financial- services.com.tr/
Since it started its operations in 2005, MAN offers consumer credits for MAN vehicles and trucks.
ORFIN
http://www.orfin.com.tr/
Orfin has been operating since 2011 and has a financial portfolio of products worth EUR 22.5 billion worldwide. In Turkey, the company has TL 93 million and offers its services for the sales of the Renault and Dacia brands.
Mercedes Benz Finansman
http://www.mercedes-benz- finansalhizmetler.com/
Mercedes Benz Finansman was founded in 2008 to lead the brand’s operations in Turkey. As of 2012, it had total assets worth TL 19,550 million. Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

65
Name
Logo
Web Page
What They Do
ALJ Finance
https://www.aljfinans.com.tr/
ALJ Finance was founded in 2011 by Saudi Arabian ALJ car distributors. The company’s total assets reached TL 129.8 million in 2012.
DD Mortgage
http://www.ddm.com.tr
Founded in 2006 by Doğan Holding and Deutsche Bank, DD Mortgage had a credit portfolio of TL 349 million in 2012.
VDF
http://www.vdf.com.tr/
Established in 1999 by Volkswagen and Doğuş Finans, VDF offers 5 types of credit covering 15 brands for its customers across Turkey.
Şeker Finans
https://sekerfinans.com.tr/
Şeker Finans started its operations in 2008 under the name Istanbul Finans and then merged with Şekerbank in 2010. It offers mortgage and renovation work loans.
PSA Finance
http://psafinansman.com/
PSA Finance was created in 2010. It is a subsidiary of the French firm, PSA Financial Holding. Its total capital is TL 20 billion.
Türk Eximbank
http://www.eximbank.gov.tr
In 2012, it provided USD 15.1 billion loans, USD 6.9 billion insurance. Its total financial support accounted for 14.5% of Turkey’s exports. As of 2012, it has total assets worth of USD 8.7 billion. Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

66
Name
Logo
Web Page
What They Do
TEB Cetelem
http://www.tebcetelem.com.tr/
TEB Cetelem was the product of the partnership between TEB Financial Investments A.Ş and BNP Paribas Personal Finance, which has been active in Turkey since 1995.
Turkish Agricultural Credit Cooperative
http://www.ddm.com.tr
Since 1863 the cooperative has given general purpose loans for agricultural producers including loans for pesticides, fertilizers, animal husbandry, oil, and irrigation up to TL 50,000, which is to be repaid in 1 - 4 years with interest rates varying between 8 or 10%. Banking
Insurance and
Pension
Leasing Factoring
Consumer Financing

67
C. The Detailed Outlook on Capital Markets
i.Borsa Istanbul
ii.Brokerage Firms

•BIST is the Turkish stock exchange located in Istanbul. There are more than 400 different tradable shares and 395 companies that are quoted on Borsa Istanbul. The exchange aims to have 1,000 companies listed from a minimum of 10 different countries by 2023. Thus strengthening its position and ensuring its competitiveness on the global arena.
•BIST had a market value of more than USD 310 billion and a stock volume of more than USD 340 billion in 2012.
•Even though BIST has a lower market value and stock value from other major exchanges around the world, it has significant room for growth. BIST’s liquidity was higher than most exchanges in 2012 with a 112% market volume to market value ratio.
68
Borsa Istanbul has liquidity of 112%, which exceeds some major global exchanges.
97%
32%
78%
70%
45%
40%
95%
214%
65%
56%
86%
112%
0%
60%
120%
180%
240%
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
NYSE
Nasdaq OMX
LSE
NYSE Euronext
Deutsche Börse
Borsa Istanbul
Market Value
Stock Volume
Market Value/GDP (secondary axis)
Market Volume/Market Value (secondary axis)
Source: TSPAKB
USD Billion
Figure 72: Market Value of Exchanges, 2012

69
BIST-100 yielded a 61% return in 2012, surpassing both emerging market and developing market stock exchanges.
Source: TSPAKB *National Stock Exchange Of India **Return percentage is calculated in USD terms.
Figure 73: Index Return Percentages, 2012**
61%
43%
42%
40%
36%
29%
28%
27%
0%
50%
100%
Borsa Istanbul
Egypt
Philippines
Warsaw
Athens
Mexico
India*
Bombay
Borsa Istanbul’s BIST-100 Index had the highest index return percentage with 61% in 2012
•The top 10 highest return yielding exchanges were from emerging markets. Borsa Istanbul’s BIST-100 Index yielded 61% in returns in terms of dollars and 52% in terms of Turkish lira in 2012.

70
Revenue from the registration fees for securities rose to 17% of total revenue in 2012 from 9% in 2010.
0%
50%
100%
2010
2011
2012
Other
Information
technologies
sales income
Terminal fees
License income
Data vending
income
Securities listing
fees
Securities
registration fees
Securities
exchange fees
Figure 74: Revenue of Borsa Istanbul
•Borsa Istanbul’s main revenue is its securities exchange fee. Between 2010 and 2012 more than half of the stock exchange’s revenue was generated by security exchange fees, followed by registration and listing fees.
•Major exchanges earn considerable revenue through data vending income, licensing income, terminal fees and information technologies. However, data vending income, licensing income, terminal fees and information technologies account for only 16% of Borsa Istanbul’s revenue in 2012.
•Borsa Istanbul can earn higher revenue from these items as it develops a broader range of products, optimizes pricing strategies and restructures itself with new partnerships, for example, its partnership with Nasdaq OMX. Thus, the exchange has huge potential going forward.
•As Nasdaq OMX’s partner, Borsa Istanbul will be able to sell IT infrastructure and services to other exchanges. This partnership will further increase revenues for Borsa Istanbul.
•Other fees constitute a total of less than 1% and include the public disclosure platform, share market default commission and overdue interest incomes as well as broker training and annual membership fees.
Source: Borsa Istanbul Annual Report 2012

71
Case Study: BIST
•With the new Capital Markets Law coming into effect in 2012, the IMKB, the Istanbul Gold Exchange, TURKDEX merged under BIST. Because of this, BIST trades various assets such as equities, contracts written on energy and commodities, debt instruments, derivative products and precious metals and gems.
•A strategic partnership pre-agreement was signed with NASDAQ OMX on July 2013. The agreement will establish Borsa Istanbul as a part of the global exchanges network. The settlement, risk management and surveillance systems of Borsa Istanbul will be synchronized with the world’s prominent exchanges. The Borsa Istanbul staff will receive training. It will enable the trading of spot market and various financial instruments denominated in diverse currencies, including derivatives and contracts on commodities and energy.
•In 2012, the economy grew at a slower pace than the previous year, but its performance was stable.
•The IMKB equity market traded 742 securities with a total traded value of TL 622 billion in 2012.
•The market capitalization of IMKB traded companies equaled TL 550.1 billion. The annual total traded value of the National Market was TL 548.1 billion in 2012, making up the 88% of the total traded value of the equity market.
•There are many indices on which investors can trade on BIST such as the sectorial indices, BIST- 100, BIST-30, TURKDEX, and BIST Dividend Index.
•Institutions using and/or willing to use BIST Indices for their financial products (including over-the- counter financial products) should sign the "BIST Indices License Agreement (License Agreement)". The licensing agreements for the BIST indices in 2012 saw 47 new companies signing the agreement.
•Furthermore, following the reunion of the Organization of Islamic Cooperation (OIC) Member States’ Stock Exchanges Forum parties agreed to create a joint Islamic Index. Istanbul Traded Index was introduced with the cooperation of the Wiener Börse for the trade of 20 companies denominated in Euro, US Dollar and Turkish Lira. Another Sustainability Index was finalized and will soon be introduced by Borsa Istanbul.
0
25.000
50.000
75.000
100.000
125.000
2009 Global Economic Crisis
BIST 30
BIST 100
Source: BIST
Note: Data is from January 2003 to December 2013.
Figure 75: Growth of BIST-30 and BIST-100

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