Turkish Banking Sector_April2012

Industry Analysis
Banking Industry
April 30, 2012
New era in Turkish Banking:
normalised “CAR and ROE”...
Even though the current environment is increasing the
risk of reinvestment in Turkish Banks we believe that
the negatives are mostly priced in by a broad sway of
market participants. The main risks for Turkish Banks in
2012 are 1) Weaker than anticipated GDP growth, 2)
Higher than expected inflation, and hence further
tightening of CBT policy, 3) Deterioration in asset
quality and 4) Implication of Basel II, hence a decline in
the sector’s capital adequacy. We see selected value in
banks that have: 1) High CAR ratio, 2) High ROE, 3)
Earn wider spread between loans and deposits, 4)
Diversified funding base, and hence less constraint on
funding cost.
Margins to pick up slightly, although nothing
spectacular expected...Banks are more upbeat on
margin improvement, vs. a year ago and we expect
modest recovery in sector margins (an average 20-
30bps), which is in line with the guidance we get from
the banks under our coverage. The positive effect of
loan re-pricing done (on average 350-700bps) during 2H
of 2011 will kick in. We factor in slower re-pricing on
the lending book and a flattish deposit rate for rest of
2012.
Muted Fee & Commission income growth...The banks
enjoyed splendid fee income growth in 2011 mainly
stemming from: 1) High volume growth, 2) Introduction
of new fees by banks and increased fees on services 3)
Cross-selling. However, in 2012 regulatory wise there
will be two factors in the sector affecting fee and
commission income negatively: 1) Decreased fees from
mutual funds and 2) A decline in fees on cash loans due
to the change in accounting (now on an accrual basis),
both of which became effective as of 2012.
Stake sale news to keep the sector buoyant...The
Turkish Banking sector is undergoing a major stake sale
activity boom, and there are several banks in the
system waiting for suitable buyers since their foreign
partners have decided to exit due to credit problems at
home. We think that the sale of any of the banks would
invigorate the sector, and hence draw further
investment and possible consolidation in the long term.
While this may create short term volatility, overall,
sector consolidation will be positive for the long term.
CAR to decline and ROE’s to normalise...With the
implementation of Basel II as of July 2012 we expect
the banking sector Capital Adequacy Ratio to decline
by between 100-150bp from 16.5% in Dec-11, and
Akbank and Garanti to stand out with their CAR ratios.
We believe that going forward the sector ROE level will
normalise between 15-16% and that banks that earn
higher ROE’s compared to the sector will distinguish
themselves from the rest.
Derya Guzel
+90 (212) 334 33 33 x228
dguzel@sekeryatirim.com
Turkish Banks
Seker Securities Research
Market
Perform
EPS 2011A 2012F 2013F
Akbank 0.60 0.66 0.78
Garanti 0.73 0.78 0.91
Halkbank 1.64 1.84 2.09
Isbank 0.59 0.55 0.63
Vakifbank 0.49 0.46 0.56
Yapi Kredi 0.43 0.46 0.53
2012E PBR (x) PER (x) ROE (%)
Akbank 1.38 10.25 14.2
Garanti 1.40 8.61 17.3
Halkbank 1.48 6.83 23.9
Isbank 0.94 7.58 13.0
Vakifbank 0.81 7.14 11.8
Yapi Kredi 1.11 7.47 15.9
60.0
70.0
80.0
90.0
100.0
110.0
Apr-11
May-11
May-11
Jun-11
Jun-11
Jul-11
Jul-11
Aug-11
Aug-11
Aug-11
Sep-11
Sep-11
Oct-11
Oct-11
Nov-11
Nov-11
Dec-11
Dec-11
Jan-12
Jan-12
Jan-12
Feb-12
Feb-12
Mar-12
Mar-12
Apr-12
TURKISH
BANKING
INDEX
MSCI
EMERGING
MARKET
BANKING INDEX
RUSSIAN
BANKING INDEX
POLISH
BANKING
INDEX

April 30, 2012
Banking Industry | Turkish Banking Sector P a g e | 1
Executive Summary
Improvement in margins will make up for the
slowdown in credit growth
We expect the sector’s margins to recover in 2012 by an average 20-30bps,
which is in line with guidance we get from the banks under our coverage.
This year the banks will reap the fruits of loan book re-pricing (on an
average 350-650bps) during 2011 (especially in 2Q11 and 4Q11). We factor in
slower re-pricing on the lending book and a flattish deposit rate for the rest
of 2012. Upside risk to our expectation here would be the CBT’s reduction in
RRR, which would help the bank’s funding cost, and hence further
improvement in NIM. On the other hand the CBT’s volatile funding policy is a
downside risk to our assumptions where it will create deposit competition
between banks, and hence a pickup in deposit interest rates, which would in
turn reduce spreads.
As widely expected loan growth will lose steam from the heights of 2011.
The consensus now expects 15% loan growth for the sector, vs. 20-30% in
3Q11 for 2012. The CBT last week reduced their loan growth rate to 14%
from 15% previously. We are more bullish compared to the consensus and
foresee 17% loan growth for the sector (driven by SMEs and consumer
segment), vs. the banks management expectation which ranges between 15-
20%. Asset growth should moderate this year and be driven by loan growth.
LAR (loans to assets) in the system increased to 56.0%, vs. 52.2% in 2010
whereas the share of securities declined 501bps to 23.5% as banks sold some
part of their sovereign bond portfolios to fund the lending. On the securities
side the banks increased their exposure to CPI linked bonds and moved from
fixed rate to FRN notes.
Manageable deterioration in asset quality and rise in
COR to continue
Slower inflow of bad loans and higher collections exceeding new NPL
generation allowed the sector to reduce the NPL ratio to 2.7%, vs. 3.7% in
2010. However since 4Q of 2011 the trend has been in reversal and NPLs are
now in an increasing trend. While we don’t view this as a threat, we believe
it is something to keep an eye on, and expect NPL to have peaked by end-
2013. With growth falling behind last year’s boom and a possible pick up in
the unemployment rate we expect further deterioration in asset quality, and
CoR to rise by at least 50bps on average. Even though some banks will be
able to sell and restructure bad loans (mainly private ones) we anticipate
the banking sector’s NPL ratio rising to 3.2% by year-end from 2.8% currently
(based on weekly data published as of 30 March 2012).
We believe that re-
priced loan yields
will support NIM in
the coming quarters
as loan growth picks
up.
We expect 17%
loan growth, vs.
15% consensus
expectation
Risk of NPL ratio
picking up and
slow down in
collections

April 30, 2012
Slower F&CI generation
For the last two years the banks introduced new fees for the services they
have not been charging previously (i.e. money transfer, money exchange
over the counter, credit card payment from branches and internet banking
text message service), and hence the sector’s net fee and commission
income increased drastically. The sector increased its FCI by 19% in 2011.
However, it might be a different story for 2012 as regulation-wise there will
be two factors affecting fee and commission income growth negatively, both
of which became effective in the sector as of 2012. 1) Decreased fees from
mutual funds, 2) A decline too in fees on cash loans due to change in
accounting (now on accrual basis).
New era in Turkish Banking: normalised “CAR and
ROE”
With the implementation of Basel II as of July 2012 we expect the banking
sector Capital Adequacy Ratio to decline by between 100-150bp from 16.5%
in Dec-11. The banks that have more SME and retail exposure should feel the
Basel II affect to a lesser extent than the rest as the risk weighting of the
segment was reduced to 75% from 100% previously.
Banking sector profitability was under pressure last year with sector earning
an average ROE of 15.48%, vs. 20.12% a year earlier (and 23% in 2009). Our
coverage universe ROE averaged at 18.2% in 2011, with Halkbank 25.1%,
Garanti 23.4% the top two ROEs. We believe that operating in a low rate
environment; the sector’s sustainable ROE level will be at around 15-16%
going forward. Those banks that earn higher ROE’s compared to the sector
would distinguish themselves from the rest.
BBG Seker
consensus estimate Seker vs BBG Seker Seker vs
Banks net income net income consensus TP TP consensus BBG consensus rating Seker rating
2012E TRYm 2012E TRYm TRY TRY
Akbank 2,595 2,639 1.7% 6.63 6.5 -2.0% 1 BUY, 14 HOLD, 16 SELL Underperform
Garanti 3,099 3,260 5.2% 7.62 7.59 -0.4% 19 BUY, 14 HOLD, 2 SELL Outperform
Halkbank 2,168 2,298 6.0% 14.6 14.7 0.7% 28 BUY, 18 HOLD, 7 SELL Outperform
Isbank 2,506 2,459 -1.9% 4.65 4.22 -9.2% 13 BUY, 12 HOLD, 7 SELL Market Perform
Vakifbank 1,238 1,142 -7.8% 3.48 3.55 2.0% 8 BUY, 18 HOLD, 7 SELL Market Perform
Yapi Kredi 1,958 1,989 1.6% 3.77 3.97 5.3% 14 BUY, 15 HOLD, 5 SELL Outperform
We expect 100-150bp
decrease in sector
CAR due to Basel II
implementation
Sector ROE to
normalise going
forward

April 30, 2012
Figure 1 : Turkish Banking index performance vs. MSCI EMEA Banks (rebased to 100)
60.0
70.0
80.0
90.0
100.0
110.0
Apr-11
May-11
May-11
Jun-11
Jun-11
Jul-11
Jul-11
Aug-11
Aug-11
Aug-11
Sep-11
Sep-11
Oct-11
Oct-11
Nov-11
Nov-11
Dec-11
Dec-11
Jan-12
Jan-12
Jan-12
Feb-12
Feb-12
Mar-12
Mar-12
Apr-12
TURKISH
BANKING
INDEX
MSCI
EMERGING
MARKET
BANKING INDEX
RUSSIAN
BANKING INDEX
POLISH
BANKING
INDEX
TR Banks 2012F PBR 1.09x vs. EMEA Peers 1.55x
TR Banks 2012F PER 7.6x vs. EMEA Peers 9.6x

April 30, 2012
Macro Assumptions
Monetary Policy to maintain flexibility on inflation
concerns
In 2011, the Turkish economy displayed a very strong growth performance of
8.5%, following 9.2% upwardly revised growth in 2010. Our economist’s view
on the sustainability of elevated GDP levels is that it is questionable this
year. In fact, QoQ contraction in economic activity in the first quarter is a
high probability, given the weakness of indicators such as credits, industrial
production, capacity utilization and PMI. The slowdown in consumer credits
was even more pronounced than we had been anticipating in our
economist’s annual economic view.
After reaching 11.93% on January 6th, cost of funding from the CBRT
declined significantly, even outpacing our economist’s pessimistic projection
thanks to the effect of short term inflows on the lira. Following the initial
phase of additional tightening, the CBRT admitted that reaching its inflation
target would be difficult and gave mid-2013 as the time to reach the 5%
medium-term inflation target, as reaching the target by year-end would
require excess tightening, which could cause undesired fluctuations in
economic activity. While the central bank eased funding costs from 12%
early this year to around 7.5%, it narrowed the interest rate corridor by
cutting its upper limit (O/N lending rate) by 100 bps to 11.50% (from 12.00%
to 11.00% for primary dealers) in February, “also considering the recent
expansionary monetary policy decisions throughout the globe.” (Figure 2)
Appreciation of the lira against the basket by 8.2% between end-2011 and
February 20th certainly played a role in decreasing the upper boundary of
the corridor.
Figure 2: Interest rate (simple, %)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
14.0
O/N repo in ISE
O/N Borrowing
O/N Lending to PDs
One-week repo rate

April 30, 2012
Our preliminary forecasts for Q1 point to some 0.5% contraction in economic
activity over Q4 last year. The CBRT hinted that economic activity may have
remained flat or contracted in Q1 over Q4. While bad weather conditions
played a role in the weak economic activity, we believe that the weakness
came mainly on the back of slow loan growth, and is likely to continue in the
second quarter. The loan rates will likely remain high in Q2 compared to the
average of the past year as the CBRT used a second round of additional
tightening in late March and is using a third one in April against lira
weakness. CBRT officials reportedly stated their expectation that additional
tightening would not push loan rates upwards, and we broadly concur with
this expectation as banks are now sure that additional tightening would be
temporary after the two experiences.
However, the cost of CBRT funding is likely to stay above 7.5% (the level
prior to the second additional tightening) and will prevent a material decline
in loan rates and a strong acceleration in credit growth, in our view.
Therefore, in contrast to the CBRT and the general market consensus, we
expect flat economic activity, or a slight contraction also in the second
quarter before the economy recovers in the second half, despite positive
signals from real sector confidence. Credits will revive in Q2 and beyond,
and yet the revival would not be strong enough to warrant the government’s
4% growth projection, a figure now shared by a significant number of market
players. Although future expectations have been improving, credit growth,
which is projected as 14% at year-end (down from 15% previously) by the
CBRT in the second inflation report of the year, will likely take its toll on
economic activity, in our opinion.
The cost of CBRT
funding is likely to
stay above 7.5%
Loan rates will likely
remain high in 2Q12

April 30, 2012
Figure 3: Macro framework
Seker Sec.
2008 2009 2010 2011 2012f
Growth (GDP; %) 0.7 -4.8 9.2 8.5 1.6
GDP (TRY bn.) 951 953 1099 1295 1446
GDP ($; bn.) 730 614 731 772 803
GDP per capita ($) 10,271 8,528 10,020 10,444 10,729
CPI Inflation (%)
Avg. 10.4 6.3 8.6 6.5 9.9
EoP 10.1 6.5 6.4 10.4 7.3
Central Government Budget Balance (TRY bn) 1/ -17.4 -52.8 -39.6 -17.4 -29.5
as % of GDP -1.8 -5.5 -3.6 -1.3 -2.0
o/w: Primary Balance (as % of GDP) 3.5 0.0 0.8 1.9 1.4
Central Government Debt (as % of GDP) 40.0 46.3 43.1 40.0 37.4
Domestic 28.9 34.6 32.1 28.5 ...
External 11.1 11.7 11.0 11.6 ...
Public Debt (as % of GDP) 42.9 48.9 45.2 42.2 39.5
Current Account Balance ($ bn) -42.0 -13.4 -46.6 -77.2 -70.0
as % of GDP -5.7 -2.2 -6.4 -10.0 -8.7
Trade Balance (TURKSTAT definition; $ bn) -69.9 -38.8 -71.7 -105.9 -99.1
Oil price (Brent; $) 98.4 61.5 79.5 111.2 120.0
Exchange Rate (TL/$)
Avg. 1.302 1.550 1.502 1.677 1.800
EoP (December) 1.540 1.503 1.518 1.866 1.787
% 31.1 -2.4 1.0 22.9 -4.2
Real Effective Exchange Rate (2003=100)
EoP 115 117 126 109 120
% (up means appreciation) -12.7 1.6 7.6 -12.9 9.9
Interest Rate on Benchmark Bond (comp.; %)
EoP (December) 17.9 9.2 7.4 10.4 8.7
Real Interest Rate (compounded eop; %) 2/ 7.1 2.5 1.0 0.0 1.2
Central Bank Policy Rate (EoP; simple; %) 3/ 15.00 6.50 6.50 5.75 5.75
Source: CBRT, MoF, Treasury, TURKSTAT, Turkey Data Monitor, Seker Securities. f= forecast.
2/ Ex-post annual: (1+nominal interest)/(1+eop inflation).
3/ One week repo rate for 2010-2012. O/N borrowing rate for the previous years.
1/ MoF definitions.

April 30, 2012
Sector Outlook
LOAN GROWTH
Slow start to the year, although volumes to pick up in 2H’12
Latest weekly data (as of 6th April, 2012) published by the Turkish banking
regaulator (BRSA) shows that there is a visible slowdown in loan growth in
1Q12. YTD the loan growth came in at 2.3% (24.3% YoY). We factor in 17%
loan growth for the sector in 2012 and 20% in 2013.
This year we expect most of the growth to realize in 2H of the year as
opposed to last year’s trend (last year’s loan growth was frontloaded) and
for growth to be driven by smaller corporate loans (Macro and micro SMEs)
and higher yielding consumer loans (such as GPL, mortgage loans and credit
cards as banks will try to improve NIM). When looking into the details of the
latest loan data we see that so far lending growth is driven by corporate and
commercial loans, which outpaced that of consumer loans, 3.4% YtD, vs.
2.0% respectively.
Figure 4: Sector loan growth (%) vs. GDP growth (%)
Source: Loan growth 2003-2011 BRSA data, 2012F and 2013F Seker Securities estimates.
GDP growth 2003-2011 TurkStat, 2012F and 2013F Bloomberg consensus data.
As seen in the 30th
March 2012 BRSA weekly data, loans on a 13W annualised
basis grew by 10.5%, vs. 6.3% a week earlier. The sharp increase was due to
quarter-end window dressing efforts as the banks tried to reach their
quarterly targets before books closed.
Loan growth to gain
pace during in 2H
Loan growth to gain
pace during 2H
We expect 17% loan
growth in 2012, vs. the
consensus GDP growth
estimate of 2.6%.

April 30, 2012
Figure 5 : 13W Annualised loan growth (%)
Source: BRSA
We foresee that last year’s loan growth laggards, such as Halkbank and
Vakifbank, should be on the catch up move and grow their lending book by
more than the sector this year. We forecast 18.9% loan growth for Halkbank
and 118.7% for Vakifbank in 2012.
Source: Company data, Seker Securities estimates
Evolution in loan yield so far...
Starting from the second half of last year we saw banks re-pricing their loan
books agressively, ranging from 350-700bps depending on loan segments.
However, higher yielding loan classes i.e GPLs (General Purpose Loans)
experience the highest re-pricing. Garanti was the first bank among its
peers to initiate the replacing of lower yielding loans with higher yielding
products, which was later followed by rest of the sector.
However, since the start of the year we have witnessed some downward
pricing in loan yields, especially from mid-cap banks.
Figure 6 : Coverage loan growth (%)
-5
0
5
10
15
20
25
30
35
40
45
50
January
February
March
April
May
June
July
August
September
October
November
December
January
2010 2011 2009-2011 2012
Aggressive re-pricing of
loans in 2011 (2Q and
4Q) will result in stable
NIM in 2012
13W annualized loan
growth in 1Q12 came in
at 10.5%.
2010 2011A 2012E
2012 Company
guidance
Akbank 33.2 32.9 17.1 18.0
Garanti 30.4 29.3 17.4 14.0
Halkbank 36.5 26.9 18.9 16-20
Isbank 32.9 42.6 17.0 15-17
Vakifbank 29.8 27.7 18.7 15.0
Yapi Kredi 39.0 28.8 17.9 17-19
Coverage average 33.6 31.4 17.8 16.5
Sector 33.9 32.5 17.0

April 30, 2012
Source: Central Bank of Turkey
When analysing on a bank by bank basis, state banks were the front runners
earning the highest blended yields on their loan book. As of Dec-11 Halkbank
earned 9.97% and Vakifbank 9.31% on their lending book on a blended basis,
vs. the sector average of 9.28%. Following this state bank, Yapi Kredi earned
an 8.93% loan yield mainly driven by the credit card segment. We foresee
Halkbank (mainly driven by SME segment) and Yapi Kredi (driven by credit
cards) earning the greatest loan yield when compared to peers in 2012.
Source: Company data, Seker Securities estimates, BRSA
As observed from the latest loan rate increases, the Turkish consumer is not
sensitive to loan rate increases of up to 100bp. And segment-wise
commercial loans are more sensitive to a rate increase followed by GPL and
mortgage loans. According to weekly data published by the Central Bank of
Turkey the average yield on loans declined by 116bp (average of GPL, auto,
mortgage and commercial loans) from their highs in Jan 2012. Auto loans, on
a 2.5pp decline, saw the biggest downward re-pricing followed by mortgages
and GPLs. However, when looking at the 6th
of April data we observe that
there is a slight retreat and the average loan yield picked by 20bps
compared to March end data.
Figure 7: Change in loan yields (%)
Figure 8: Blended loan yields (%) as of Dec-11
GPL Auto Mortgage Commercial
June 2011 13.93% 11.51% 11.07% 10.62%
December 2011 19.78% 11.85% 14.35% 14.89%
Change Jun-Dec 2011 (pp) 5.85 0.34 3.29 4.26
January 2012 19.84% 15.27% 14.58% 14.05%
March 2012 18.73% 12.75% 13.21% 14.38%
6th April 2012 18.90% 13.21% 13.17% 14.73%
Change Jan-Mar 2012 (pp) -1.12 -2.51 -1.37 0.34
9.97
9.31 9.28
8.93 8.80
8.50
7.75
0.00
2.00
4.00
6.00
8.00
10.00
12.00
Halkbank Vakifbank Sector Yapi Kredi Isbank Garanti Akbank
State banks earned the
highest yield on their
loan book in 2012

April 30, 2012
Figure 9: Loan yield evaluation-
7.0%
9.0%
11.0%
13.0%
15.0%
17.0%
19.0%
21.0%
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
GPL AUTO MORTGAGE COMMERCIAL

April 30, 2012
FUNDING MARKET
Change in Funding Mix
Although Turkish Banks start using the alternative funding sources (TL bonds,
Eurobonds, syndication loans, repo financing) we believe deposit collection
will remain as a key funding source for Turkish Banks in the medium term.
As of Dec-11 deposits make up 57% of total assets in the system, vs. 61% in
2010. We forecast CAGR of 14.5% deposit growth for the sector 2012-2014.
And when considered as a saving instrument there are limited alternatives to
deposits in Turkey (currently only government bonds) and there is a limited
crossover between deposit and bond holding customers. Hence, we deeply
believe that deposit collection is there to remain as an important funding
source for banks over the coming years.
With the CBT beginning to apply a higher RRR for shorter maturities in 2011
there was a visible change in the maturity of deposits kept with the bank. As
readers may remember, last year the CBRT increased reserve requirement
rates in deposits of up to 1-month maturity and deposits of up to 3-month
maturity by 1,000bp and 700bp, respectively. Deposits maturing within 1
month in 2010 made up 26% of the total as opposed to 15% in 2011, while on
the other hand the percentage of deposits maturing within 3-6 months rose
to 8% from 4% a year ago.
Even though there has yet to be a solid development over withholding tax on
deposit interest in Turkey, we may soon see the application of a gradual tax
system depending on deposit maturity. Currently, there is a flat 15%
withholding tax applied to all maturities. With new inducement, it is
expected that the tax rate on longer term deposits will be lowered and
possibly reduced to zero for deposits of longer than three-year maturities.
This in our view would promote saving, and hence decrease the LDR ratio
going forward.
Source: BRSA
Figure 10 : Deposits maturities in the system
Demand
Deposits
up to 1 month
1-3
months
3-6
months
6-12
months
1 year and
longer
2005 20% 23% 39% 10% 3% 4%
2006 18% 28% 43% 6% 2% 3%
2007 16% 29% 45% 5% 2% 3%
2008 14% 31% 46% 3% 3% 3%
2009 16% 28% 49% 3% 2% 3%
2010 16% 26% 50% 4% 2% 3%
2011 17% 15% 53% 8% 2% 5%
Change 2005-2011 (pp) -3% -9% 14% -3% -1% 1%
Deposits to remain an
important funding source
Longer term deposits are
increasing
Regulatory changes on
the way to increase
deposit maturity in the
system

April 30, 2012
COVERAGE BANKS FUNDING MIX AS OF FY2011
AKBANK GARANTI
HALKBANK ISBANK
VAKIFBANK YAPI KREDI
LC deposits
46.3%
FX deposits
35.2%
LC
borrowings
0.9%
FX
borrowings
17.6%
TRY94.3bn
LC deposits
44.7%
FX deposits
34.4%
LC
borrowings
4.7%
FX
borrowings
16.2%
TRY106.9bn
LC deposits
60.5%FX deposits
30.1%
LC
borrowings
1.1%
FX
borrowings
8.3%
TRY73.1bnTRY73.1bn
LC deposits
54.0%
FX deposits
34.0%
LC
borrowings
0.9%
FX
borrowings
11.1%
TRY111.7bn
LC deposits
60.8%
FX deposits
24.9%
LC
borrowings
2.7%
FX
borrowings
11.6%
TRY71.1bn
LC deposits
44.5%
FX deposits
36.1%
LC
borrowings
1.9%
FX
borrowings
17.5%
TRY78.8bn

April 30, 2012
Funding Cost, should we be worried?
On the deposit cost side, according to data published by the Central Bank of
Turkey, the weighted average cost of deposits in the system on shorter
maturity deposits (maturing in 1 month) has been declining somewhat. Yet
we observe an increasing trend in 6M deposits, which saw a 117bp increase
between December 2011 and February 2012. Although not seen in the March-
end data, we may state that the latest data could be indicative of a slight
decline in NIM in 2Q12 as deposit cost is rising and loan yields remain stable.
Although there is an upside risk for deposit cost to increase further due to
funding concerns in the sector (low visibility on funding costs due to the
CBT’s volatile funding policy) we don’t expect the deposits to cost ratio to
fall further, but rather to stabilise at these levels going forward.
Figure 11 : Bp change in sector deposit yield Dec’11 vs. Feb’12
Figure 12 : Banking sector MA deposit yield curve (%)
5.0
7.5
10.0
12.5
15.0
1M 3M 6M 1Y
Dec-11 Dec-10 Feb-12
-76
15
117
-4
-100
-50
0
50
100
150
1M deposit 3M deposit 6M deposit 1Y deposit
1M deposit cost declined
by 76bp, whereas 6M
deposit cost rose by
117bp
We don’t expect a
decline in deposit cost
going forward
While loan yields have
been decreasing since
the start of the year
deposit cost has been on
the rise

April 30, 2012
Blended cost of deposits in the system stood at 5.61% as at Dec-11, and had
increased by 50bp from September’11 driven by aggressive deposit
competition drummed up by small and midsized banks. Garanti at 5% paid
the lowest cost for deposits on a blended basis, thanks to its highest share in
demand deposits and sensible pricing.
The share of demand deposits in the sector stood at 17.4% of the total as of
Dec-11, vs. 15.9% in 2010. This is an area where we expect banks to see stiff
competition due to the low maintenance cost of demand deposits (which
will then reduce overall cost of deposits). Garanti did well last year and
increased its demand deposit base via its cash management, cheque
processing, merchant deposits, acquisition of old POS networks and wide
variety of bill payments.
Figure 13: Blended cost of deposits (%) as at Dec-11
Figure 14: Demand deposit as % of total (inc. bank deposits) in 2012
5.00
5.21 5.22 5.31 5.38
5.50
5.61
2.00
3.00
4.00
5.00
6.00
Garanti Yapi Kredi Halkbank Isbank Vakifbank Akbank Sector
12.6%
14.9%
16.6%
17.4%
18.9%
20.0% 20.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Akbank Vakifbank Yapi Kredi Sector Halkbank Isbank Garanti

April 30, 2012
The banking sector blended loan yield stood at 9.28% as at Dec-11, vs.
blended deposit cost of 5.61%. The blended spread for 4Q11 is calculated at
3.67% down from 4.61% from a year ago. Within our banks coverage
Halkbank (476bp) and Vakifbank (392) earn the best spread followed by
Garanti (370bp), Yapi Kredi (370bp), and Isbank (360bp). Akbank on 240bp
earned the lowest spread. By our assumptions, state banks lead the way
earning the highest spread due to lower than sector deposit cost thanks to
their competitive advantage when it comes to pay-roll accounts.
Source: BRSA
The table below displays the in-branch deposit rates offered by Turkish
Banks (taken from websites as at 15 April, 2012). As we can see, mid-sized
banks are more aggressive when it comes to deposit collection and offer
higher rates compared to large cap peers as big banks are more rational and
profitability focused as they can tap other funding sources. When applied for
online, some banks are now offering around a 10-12% interest rate for
deposits, which is up by around 200bp on a year ago.
Figure 15: Banking sector blended loan-deposit spread (%)
Figure 16: Yearly deposit interest rate offered by Turkish Banks (%)
0.00
5.00
10.00
15.00
20.00
Yield on loans Yield on deposits
Halkbank earns the
widest loan-deposit
spread on a blended
basis
Sector’s blended loan
yield stood at 9.28%, vs.
blended cost of deposit
at 5.61% as at Dec-11
Small and midsized
banks are more
aggressive in deposit
pricing than their large
cap peers
1 month 3 months 6 months 12 months 18 months 24 months 36 months
Akbank 6.0% 6.3% 6.5% 7.0% 7.0% 7.0% 7.0%
Anadolubank 5.9% 6.9% 7.9% 7.9% 7.3% 7.3% 7.3%
Citibank 7.0% 7.0% 7.0% 9.0% 9.0% 9.0% 9.0%
Denizbank 7.0% 7.2% 7.2% 7.2% 7.2% 7.2% 7.2%
Eurobank Tekfen 7.0% 8.0% 8.5% 9.0% 9.0% 9.0% 9.0%
Fibabanka 6.8% 8.5% 8.8% 9.3% 9.3% 9.3% 9.3%
Finansbank 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8%
Garanti 6.5% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5%
Halkbank 5.8% 6.0% 6.0% 6.3% 6.5% 6.5% 6.5%
HSBC 6.5% 6.5% 6.5% 6.5% 6.5% 6.5% 7.0%
ING Bank 6.0% 6.8% 7.0% 7.0% 7.0% 7.0% 7.0%
T-Bank 6.0% 8.0% 7.0% 7.0% 7.0% 7.0% 7.0%
Isbank 6.0% 6.3% 6.8% 7.3% 7.3% 7.3% 7.3%
TEB 6.5% 6.8% 6.8% 7.1% 7.1% 7.1% 7.1%
Tekstilbank 8.5% 8.5% 8.7% 8.5% 8.5% 8.5% 8.5%
Turkishbank 7.0% 7.0% 7.0% 8.0% 8.0% 8.0% 8.0%
Vakıfbank 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
Yapı Kredi 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
Ziraat 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

April 30, 2012
Total syndication loans in the sector currently stand at TL16bn as of Feb-12.
The rollover of syndication loans in the sector reached approx. 120% in 2011,
although as widely expected, the rollover ratio could decline slightly, and
also there may be some deterioration in syndication loan cost, although we
don’t expect this to reach above 40-50bp. This was seen in Akbank and
Vakifbank, which recently obtained a syndication loan at a cost of
Libor/Euribor+145bp up from Libor/Euribor+110bp a year ago.
Source: Company announcements
Figure 17: Turkish Banks syndication maturity in 2012
Sector’s syndication
loans currently stand at
around USD15.2bn and
2.2% of total assets.
March
16%
April
12%
May
19%August
12%
September
25%
October
4%
November
11%
December
1%

April 30, 2012
ASSET QUALITY
NPL trend in 2011 and thus far in 1Q12
Sector NPL decreased by 100bp as at Dec-11, and came in at 2.7%, vs. 3.7%
in 2010. On a YoY basis Isbank (149bp), Vakifbank (118bp) and Garanti
(111bp) improved their NPL ratios above the sector, while Halkbank’s (93bp)
NPL improvement was in line with the sector, and Akbank (60bp) and Yapi
Kredi (44bp) stayed below it.
Source: Company data, BRSA
Among our banks coverage Halkbank, Yapi Kredi and Vakifbank reported
above sector NPL ratios, mainly due to their exposure to high NPL ratio
generating sectors (mainly SME and credit cards), on the other hand,
Akbank, Garanti and Isbank stood out for their below sector NPL. Please
bear in mind that state banks have a policy of no write-offs or sell-offs, and
hence a higher NPL ratio compared to the sector. Yapi Kredi on the other
hand sold TL290m worth of its NPL book for TL64m in Nov-11.
Figure 18: Change in NPL ratio between Dec-10 and Dec-11 (pp)
Figure 19: Turkish Banks NPL ratios as at Dec-11 vs. sector (%)
0.4
1.8 1.8
2.1
2.7 2.8 2.9 3.0 3.2
3.6
4.2
5.7
0.0
2.0
4.0
6.0
‐1.49
‐1.18
‐1.11
‐1.00
‐0.93
‐0.60
‐0.44
‐0.13
‐1.60
‐1.40
‐1.20
‐1.00
‐0.80
‐0.60
‐0.40
‐0.20
0.00
Weekly data signals
some pick up in NPL in
the sector
Vakifbank, Yapi Kredi
and Halkbank’s NPL
stayed above the sector
in 2011
Isbank reduced its NPL
ratio the most in 2011
thanks to above sector
volume growth
State banks have no NPL
sale or write off policy,
and hence larger NPL
stock

April 30, 2012
We follow NPL trends via weekly data published by BRSA (published with a
two week lag). According to the 30th
March 2012 data, the NPL ratio gained
10bp to now stand at 2.8%, vs. 2.7% in 4Q11. Looking into the details of the
NPL figures we observe that this is mainly coming from the consumer
segment (GPLs and credit cards). Total consumer loan NPL added 8.5% YTD
and has risen 3.6% YoY.
..... Will it be year of “NPL trouble”?
Although we don’t actually believe it will turn out be a year of “NPL
trouble” for the sector, we are much of the view that NPLs will be on the
rise for the rest of the year, and will start peaking towards 2H of 2013.
The banks have been enjoying collections for the past couple of years. We
expect these collections to continue albeit at a slower pace when compared
to 2011. Halkbank and Vakifbank have a large NPL stock compared to the
sector (mainly legacy NPL carried over from the 2001 crisis), and hence a
higher rate of collections when compared with their peers. We forecast the
sector’s NPL reaching 3.2% by end of this year and peaking in 2013 to 4% in
line with the rise in unemployment (as it is a main indicator of the NPL
ratio) and slower GDP growth.
Unemployment, according to the Bloomberg consensus, is expected to
increase to 10.7% in 2012 and to 10.5% in 2013 from 9.5% currently.
Consensus figures are close to those published in the Government’s Medium
Term Plan (10.4% and 10.2%, respectively).
Source: Actual NPL data is from the BRSA and estimates are those of Seker Securities.
Actual unemployment figures are from TurkStat and estimated figures for 2012-2013 are from
Bloomberg consensus data, and for 2014E from the Government’s Medium Term Plan.
Figure 20: NPL ratio vs. Unemployment (%)
We forecast the NPL
ratio reaching 3.2% in
2012, vs. unemployment
at 10.7%.
NPL ratio to peak in
2013
Weekly data signals
some pick up in NPLs in
the sector. NPL ratio
stands at 2.8% in 1Q12,
vs. 2.7 in 4Q12.
9.1
10.7
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
2012E
2013E
2014E
NPL Unemployment (lhs)

April 30, 2012
FEE and COMMISSION INCOME (FCI)
The banks enjoyed splendid fee income growth in 2011 mainly stemming
from:
1) High volume growth, 2) Introduction of new fees by banks that have
not been charging for services previously and increased fees for services
in place. 3) Cross-selling.
On the other hand, those segments to have driven growth were mainly:
credit cards, bancassurance, trade finance activities and money transfers.
In 2011 Halkbank’s fee growth (38.5% YoY) outpaced that of the sector and
peers as the bank started charging fees for services it hadn’t done so for
before, introducing higher fees to catch up with the rest of the sector.
However, we believe that this year due to the base effect and regulatory
changes we mention below, fee growth at Halkbank and also that of the
sector should be slower. And even though Halkbank management guides for
flat fee income growth for 2012 we believe the bank should be able to
deliver 7% growth in fees driven by non-cash loans and addition of new fees
as the bank announced its intention to charge fees for its internet banking
service going forward.
Source: Company data, BRSA
Although a large part of the population wouldn’t share our view, we
maintain that Turkish Banks charge relatively low fees when compared to
their European peers (for example when considering money transfer fees).
We believe the Turkish Banks still have room to increase their fee income as
they can exploit other areas they have not been charging fees for i.e.
internet banking.
Figure 21: Fee income growth as of Dec-2011 (%)
38.5
26.2
20.6
15.5 14.4
10.6
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Halkbank Vakifbank Akbank Isbank Yapi Kredi Garanti

April 30, 2012
Regulation-wise there will be two factors affecting fee and commission
income growth negatively, both of which became effective as of 2012 in the
sector.
1) Decreased fees from mutual funds,
2) Also the decline in fees on cash loans due to the change in accounting
methodology (now on an accrual basis).
Figure 22: Seker 2012 Fee growth estimate vs. management guidance
Two main regulatory
changes to affect fee
growth in 2012
2011A 2012E
2012
Management
guidance
Akbank 20.6 11.0 10.0
Garanti 10.6 12.1 Double digits
Halkbank 38.5 7.2 Flat
Isbank 15.5 7.3 10.0
Vakifbank 26.2 3.5 Flat
Yapi Kredi 14.4 7.6 Stable
Coverage average 21.0 8.1

April 30, 2012
OPEX
In light of the recent global credit crisis, the banking sector has paid more
attention to cost, and hence opened fewer branches and decreased the
amount of personnel hired over the past couple of years. During 2011 the
sector added 368 branches (vs. 436 in 2010) taking total branch number to
9,833. On the recruitment side the sector hired 1,380 new personnel (vs.
4,011 in 2010) whereby total headcount reached 181,418 people.
State banks (Halkbank, Vakifbank and Ziraat Bank) opened almost half of the
branches in the sector (having added 165 branches in 2011). As per
management guidance we receive from the banks, state banks are expected
to be more aggressive with their hiring plans in 2012 compared to their
private sector peers, and hence we forecast higher cost growth for that
group; Halkbank 16% and Vakifbank 17%, respectively.
Source: Turkish Bankers Association
Source: Management guidance
Figure 23: Banking sector recruitment and branch opening trends: net additions YoY
Figure 24: Coverage banks branch opening and recruitment trends
3,111
5,095
10,885
15,416
13,039
804
4,011 2,914
0
200
400
600
800
1,000
1,200
1,400
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2004 2005 2006 2007 2008 2009 2010 2011
Recruitment Branch additions (lhs)
Personnel
added in
2011
Branches
openned in
2011
2012 Hiring
target
2012 Branch
additions
target
Akbank 9 14 500 70
Garanti 98 55 <400 31
Halkbank 193 62 1,000 60
Isbank 943 59 Limited 40-45
Vakifbank 1,145 44 1,000 70
Yapi Kredi 448 39 1% increase 50-60
Sector 2,914 368
State banks top the
sector for branch
openings and hiring
targets in 2012

April 30, 2012
Opex on average among our banks coverage grew by around 9% in 2011 with
the exception of Halkbank and Vakifbank, which grew their cost by 15.5%
and 14.9%, respectively. We expect a similar trend to continue, and for
state banks to see cost rise above that of the sector in 2012. Even though we
expect banks to continue opening branches and adding to headcount, we
expect these activities to be modest with the exception of Halkbank and
Vaikfbank where the management is guiding to open 60-70 branches and hire
around 1,000 personnel in 2012.
With inflationary pressure on the rise we believe it will be challenging for
banks to contain opex growth during 2012. The BRSA weekly data for 30th
March 2012 confirms our view that personnel expenses grew in line with CPI,
although other opex rose by +20% YoY. The sector’s YTD opex expansion is
14%.
To be able to evaluate the banks in terms of their cost efficiency we created
the efficiency matrix below. In terms of their expense ratios we can divide
our coverage banks into two groups. Yapi Kredi, Akbank and Garanti
distinguish themselves as the most efficient banks when compared in terms
of fee coverage ratio.
• First group comprises Akbank, Garanti and Yapi Kredi.
• Second group comprises Halkbank, Vakifbank and Isbank.
Figure 25: 2012E Opex growth estimate vs. management guidance
Figure 26: Turkish Banks efficiency matrix as at Dec-11
Expense ratios % Akbank Garanti Halkbank Isbank Vakifbank Yapi Kredi
Cost to Income 44.6 45.6 39.1 55.3 55.6 55.1
Cost tp NII+Fees 43.7 47.9 41.1 58.1 56.2 52.4
Fees coverage of cost 64.8 62.6 42.2 41.0 28.8 67.9
Cost to Total assets 1.9 2.3 2.0 2.3 2.3 2.8
We expect Halkbank and
Vakifbank to grow cost
above the sector in 2012
Sector opex has grown
14% YTD driven by non-
HR cost
Yapi Kredi, Akbank and
Garanti are the most
efficient banks when
considering their fee
coverage cost ratio
2010 2011 2012E
2012
Management
guidance
Akbank 10.7 0.7 9.6 CPI
Garanti 18.3 5.4 8.9 CPI+2-3%
Halkbank 25.3 15.4 15.9 12-15%
Isbank 18.9 8.7 10.3 CPI+
Vakifbank 10.2 14.9 17.3 15.0%
Yapi Kredi 7.6 8.1 8.4 CPI
Coverage average 15.2 8.9 11.8

April 30, 2012
IMPLEMENTATION of BASEL II and AFTER EFFECTS
The Turkish banking sector has learnt important lessons from the crisis of
2001 since when regulations have been both stricter and proactive. In 2011
banking industry CAR declined 2.5 points, vs. 2010. However, in the last
quarter of 2011 the downward trend in CAR halted due to slowdown in loan
growth which began in 2H 2012.
Source: BRSA
Basel II will be in operation as of July 2012, and with its implementation we
expect the banking sector Capital Adequacy Ratio to decline by between
100-150bp from 16.5% in Dec-11. The banks that have more SME and
mortgage exposure should feel the Basel II effect to a lesser extent than the
rest, as the risk weighting of these segments was reduced. (SME’s were
reduced to 75% from 100% and mortgages were reduced to 35% from 50%
previously).
The banks under our coverage are guiding on an average 100bp-120bp
decline to their CAR ratio under Basel II.
When we adjust their CAR under Basel II we have 2 groups of banks:
• First group will feature Akbank and Garanti, where their robust
capital structure will not be affected under Basel II as much as the
peer group. (We forecast around 16% CAR for 2012). Strong capital
will contribute to solid expansion capability.
• Second Group will feature Halkbank, Vakifbank, Yapi Kredi and
Isbank with capital ratios ranging from 13.7% to 12.0%. Vakifbank
appears worse off among the group with its 12.0% reading when
adjusted for Basel II. Vakifbank management has discussed the
possibility of a non-core asset sale to beef up their CAR ratio during
the 4Q11 conference call. The bank mentioned that assets worth
TL350m book value, such as insurance subsidiary Gunes Sigorta,
could be up for sale.
Figure 27: Banking sector CAR (%)
We expect 100-150bp
decrease in sector’s
CAR due to Basel II
implementation
16.76%
10%
12%
14%
16%
18%
20%
22%
24%
Feb-07
May-07
Aug-07
Nov-07
Feb-08
May-08
Aug-08
Nov-08
Feb-09
May-09
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11
Nov-11
Feb-12

April 30, 2012
Yapi Kredi management during their year-end conference call also shared
possible scenarios under which to strengthen their capital ratios under Basel
II. 1) Obtaining sub-ordinate loans (the bank taken on USD585m subordinated
loan from parent UniCredit), 2) Optimisation of RWA (work in progress), 3)
Asset sale (regular rumours in local daily press regarding the sale of Yapi
Kredi Sigorta sale) 4) Rights issue (seems likely to be a last option).
Although we see a very low possibility, there is a likelihood of the BRSA
reducing the minimum CAR requirement for the sector from 12% to the
official 8% level (perhaps only for a limited spell until banks adjust to Basel
II). Under current practice the banks, in order to sustain branches, require
12% CAR, vs. the official CAR limit of 8%.
Figure 28: Coverage CAR ratios following Basel II
May BRSA reduce min
CAR ratio?
2010 2011 2012E Basel II affect
Akbank 20.6 17.0 16.5 -0.49
Garanti 19.6 16.9 16.4 -0.48
Halkbank 15.9 14.3 13.7 -0.62
Isbank 17.5 14.1 13.1 -0.96
Vakifbank 14.4 13.4 12.0 -1.36
Yapi Kredi 16.1 14.7 13.3 -1.38
Sector 19.0 16.6 15.1 -1.50

April 30, 2012
Sector themes 2011 vs. 2012E
What happened in 2011
Net Income: Bottom-line declined by 10% YoY.
Cost of Equity: Lira depreciating and worries
over higher inflation pushed yields above 11%
levels.
Loan growth: 32.5% growth in total loans even
though the CBRT and BRSA had closely
monitored banking sector credit expansion.
Loans to assets and securities to assets: Share
of securities fell, whereas size of loan book
within total assets increased.
OPEX: Banks did well on the opex front with
many growing cost by less than CPI. Size of staff
recruitment and branches opened was limited
compared to 2010.
CAR: In preparation for Basel II implementation
the sector sustained its well capitalized stance.
Sector CAR stood at 16.5% as of Dec-11.
ROE: Banking sector closed the year on 15.4%
ROE, vs. 20.1% in 2010.
NIM: Even though starting with the banks’
guided bearish view on NIM sector’s margin
trend wasn’t as bad as feared, year-end average
NIM was around 4%.
Asset quality and CoR: With a growing
economy it was a year of collections. NPLs
started to show signs of worsening in the last
quarters of the year, and the sector’s 2011 NPL
stood at 2.7%.
What we expect from 2012
We expect 3.5% net income growth.
We expect benchmark bond yields to stay at
around 8.5-9.5% levels during 2012.
Market expects 15% loan growth for the sector
this year and leading banks are guiding 15-20%,
our expectation is for 17% loan growth.
We anticipate similar trends in balance sheet
mix to continue this year too, and securities to
be replaced by higher yielding loans.
Banks will continue utilizing resources carefully
this year too. Lower staff hiring and limited
branch expansion. However, this year we
expect cost growth to realise above CPI.
With implementation of Basel II in July 2012,
sector CAR is expected to decrease by
between 100-150bp.
We expect sector ROE to stay between 15-16%
this year.
All depends on cost of funding; nevertheless our
expectation is for limited margin expansion this
year. We expect the banking sector to
improve NIM by 20-30bps.
We expect slower growth to lead some
deterioration in asset quality and slowdown in
collection ability. We estimate NPL ratio rising
to 3.2% for the sector and increased CoR.

April 30, 2012
Turkish Banks SWOT Analysis
Strengths
• Turkish banks are relatively protected against
international shocks due to focus on the
domestic market.
• Turkish banks are heavily regulated since
financial crisis of 2000-2001.
• Turkish banks are well capitalized compared to
their EMEA and EU peers.
Weaknesses
• Low Savings/GDP rate.
• Relatively high LDR.
• Volatility and low visibility in funding cost.
• High CAD.
Opportunities
• An under-banked population.
• Possible M&A activities and consolidation in
2012.
• Turkish Banks expanding in and around CEE.
Threats
• Economic slowdown.
• Increase in funding costs, especially on repo
funding side.
• Increased bad loans.
• Low saving rate.

April 30, 2012
Turkish Banks in EMEA context
Although Turkish Banks have relatively outperformed their EMEA peers since
the beginning of the year based on the Bloomberg consensus, they currently
trade at a deep discount on 2012 and 2013 estimates (On PBR 42% and 44%,
respectively and PER 26% and 33%).
The tables below display our comparison of Turkish Banks, vs. EMEA peers.
Source: Bloomberg
Source: Bloomberg
Figure 29: Turkish Banks vs. EMEA peers Net Income and Dividend Yield consensus (USDm)
Figure 30: Turkish Banks vs. EMEA peers PER and PBR consensus
2010 Y 2011 Y 2012 Y 2013 Y 2014 Y 2010 Y 2011 Y 2012 Y 2013 Y 2014 Y
AKBANK T.A.S. 3.30 2.22 2.57 3.30 2.68 1,865 1,451 1,448 1,656 1,884
TURKIYE GARANTI BANKASI 2.23 2.07 2.09 2.54 2.73 2,057 1,716 1,732 1,955 2,253
TURKIYE VAKIFLAR BANKASI T-D 2.44 0.80 0.74 1.02 1.48 694 707 689 777 861
TURKIYE HALK BANKASI 3.06 2.64 2.64 3.12 3.09 1,265 1,143 1,208 1,311 1,438
ASYA KATILIM BANKASI AS 2.00 0.30 0.00 0.00 - 164 126 134 159 201
YAPI VE KREDI BANKASI 0.54 0.00 0.00 0.54 0.32 1,359 1,101 1,090 1,278 1,514
TURKIYE SINAI KALKINMA BANK 2.74 2.50 3.31 4.03 2.66 133 138 151 166 186
TURKIYE IS BANKASI-C 4.03 2.79 2.75 3.32 4.03 1,829 1,338 1,395 1,571 1,781
TURKISH BANKS' AVERAGE 2.54 1.66 1.76 2.23 2.43 1,171 965 981 1,109 1,265
BANCO DO BRASIL S.A. 6.92 7.58 6.73 7.21 7.75 5,889 6,532 6,271 6,961 8,049
BANCO BRADESCO SA-PREF 3.37 3.49 3.63 4.09 4.84 5,753 6,532 6,479 7,354 8,301
ITAU UNIBANCO HOLDING SA 3.35 3.03 3.77 4.38 5.13 7,692 8,444 8,684 9,923 11,550
BANCO SANTANDER (BRASIL) SA - - - - - - - 2,775 - -
KOMERCNI BANKA AS 6.39 6.14 7.20 7.78 8.00 717 568 688 740 804
PKO BANK POLSKI SA 4.18 4.58 4.68 5.32 6.49 1,157 1,237 1,229 1,349 1,506
BANK ZACHODNI WBK SA 2.17 3.78 4.01 5.29 6.11 319 372 408 470 503
BANK PEKAO SA 5.26 4.47 5.71 6.57 7.59 898 913 936 1,014 1,136
SBERBANK - - - - - 5,622 10,987 10,849 12,162 13,500
BANK MOSKVY OJSC 0.24 - - - - 424 - - - -
VTB BANK OJSC 0.00 0.00 0.00 0.00 0.00 1,752 3,346 3,261 4,398 5,408
PEERS' AVERAGE 3.54 4.13 4.47 5.08 5.74 3,022 4,326 4,158 4,930 5,640
DIV YLD NET INCOME
2010 Y 2011 Y 2012 Y 2013 Y 2014 Y 2010 Y 2011 Y 2012 Y 2013 Y 2014 Y
AKBANK T.A.S. 7.88 10.07 10.21 8.95 8.31 1.37 1.41 1.33 1.20 1.10
TURKIYE GARANTI BANKASI 7.70 9.19 9.05 8.08 7.14 1.57 1.56 1.41 1.26 1.10
TURKIYE VAKIFLAR BANKASI T-D 6.40 6.13 6.42 5.64 5.28 0.84 0.81 0.76 0.66 0.62
TURKIYE HALK BANKASI 6.91 7.52 7.16 6.55 5.96 1.88 1.74 1.49 1.27 1.13
ASYA KATILIM BANKASI AS 5.43 7.09 6.58 5.62 7.14 0.74 0.75 0.66 0.60 0.59
YAPI VE KREDI BANKASI 5.85 7.32 7.35 6.28 5.44 1.25 1.17 1.04 0.89 0.79
TURKIYE SINAI KALKINMA BANK 7.29 7.08 6.78 5.79 5.66 1.28 1.24 1.13 1.00 0.94
TURKIYE IS BANKASI-C 5.48 7.52 7.40 6.56 5.83 0.98 0.99 0.91 0.81 0.75
TURKISH BANKS' AVERAGE 6.62 7.74 7.62 6.68 6.34 1.24 1.21 1.09 0.96 0.88
BANCO DO BRASIL S.A. 6.18 5.54 5.82 5.19 4.49 1.26 1.09 1.06 0.93 0.81
BANCO BRADESCO SA-PREF 10.42 9.61 9.57 8.43 7.41 2.10 1.91 1.77 1.56 1.37
ITAU UNIBANCO HOLDING SA 9.84 9.22 8.76 7.63 6.62 2.17 1.90 1.76 1.54 1.32
BANCO SANTANDER (BRASIL) SA - - - - - - - - - -
KOMERCNI BANKA AS 9.37 11.60 9.75 9.11 8.46 1.60 1.63 1.50 1.42 1.32
PKO BANK POLSKI SA 11.01 9.98 10.02 9.16 8.12 1.65 1.65 1.57 1.43 1.31
BANK ZACHODNI WBK SA 16.48 14.14 13.22 11.57 11.12 2.32 2.45 2.05 1.90 1.66
BANK PEKAO SA 12.74 12.46 12.27 11.35 10.24 1.65 1.70 1.63 1.57 1.61
SBERBANK - - - - - - - - - -
BANK MOSKVY OJSC 13.79 9.23 7.34 - - 1.51 - - - -
VTB BANK OJSC - - - - - 1.08 1.08 1.08 0.72 0.72
PEERS' AVERAGE 11.23 10.22 9.59 8.92 8.06 1.70 1.68 1.55 1.38 1.27
DISCOUNT/PREMIUM -70% -32% -26% -33% -27% -38% -39% -42% -44% -44%
P/E P/BV

April 30, 2012
Source: Bloomberg
Figure 30: Turkish Banks vs. EMEA peers ROE and ROA consensus
2010 Y 2011 Y 2012 Y 2013 Y 2014 Y 2010 Y 2011 Y 2012 Y 2013 Y 2014 Y
AKBANK T.A.S. 2.79 2.11 1.83 1.82 1.60 19.11 14.52 13.45 13.88 14.21
TURKIYE GARANTI BANKASI 2.93 2.17 1.91 1.94 1.80 22.32 17.73 16.75 16.64 16.51
TURKIYE VAKIFLAR BANKASI T-D 1.58 1.50 1.26 1.27 1.10 14.29 13.63 12.20 12.55 12.47
TURKIYE HALK BANKASI 3.06 2.42 2.10 2.05 1.97 30.26 25.31 21.81 20.82 19.33
ASYA KATILIM BANKASI AS 2.08 1.50 1.40 1.44 - 14.67 10.85 10.50 11.70 11.33
YAPI VE KREDI BANKASI 3.06 2.02 1.69 1.71 1.70 23.68 17.65 15.06 15.62 15.29
TURKIYE SINAI KALKINMA BANK 3.04 2.86 2.83 2.74 - 19.03 18.27 17.94 18.04 17.34
TURKIYE IS BANKASI-C 2.40 1.65 1.44 1.44 1.30 20.96 13.00 12.84 13.23 13.69
TURKISH BANKS' AVERAGE 2.62 2.03 1.81 1.80 1.58 20.54 16.37 15.07 15.31 15.02
BANCO DO BRASIL S.A. 1.34 1.28 1.17 1.14 1.16 22.81 20.61 19.59 19.71 19.64
BANCO BRADESCO SA-PREF 1.72 1.59 1.51 1.49 1.53 21.35 21.59 20.37 20.06 20.05
ITAU UNIBANCO HOLDING SA 1.92 1.73 1.81 1.81 1.84 23.25 22.20 21.64 21.64 21.74
BANCO SANTANDER (BRASIL) SA - - - - - - - 12.50 - -
KOMERCNI BANKA AS 1.90 1.40 1.71 1.80 1.90 18.14 15.09 16.02 16.30 16.62
PKO BANK POLSKI SA 1.92 2.12 1.99 2.05 2.03 15.13 17.20 16.31 16.30 16.43
BANK ZACHODNI WBK SA 1.73 - 2.00 2.30 2.40 14.74 17.88 16.97 18.26 18.10
BANK PEKAO SA 1.95 2.07 1.94 2.05 2.10 13.37 13.94 13.39 13.98 14.61
SBERBANK 2.00 3.38 2.88 2.63 2.67 17.61 27.39 22.22 20.27 19.71
BANK MOSKVY OJSC 1.35 - - - - 12.27 15.50 16.50 - -
VTB BANK OJSC - 1.85 1.68 1.80 1.93 10.17 15.57 15.10 15.62 16.27
PEERS' AVERAGE 1.76 1.93 1.85 1.90 1.95 16.88 18.70 17.33 18.02 18.13
ROEROA

April 30, 2012
Valuation and Recommendation
Ticker AKBNK GARAN HALKB ISCTR VAKBN YKBNK XBANK
Current share price 6.70 6.64 12.40 4.08 3.19 3.37 115,647
12M Target price 6.50 7.59 14.70 4.22 3.55 3.97 129,346
Upside (%) -3.0 14.3 18.5 3.5 11.3 17.9 11.8
YTD share performance % (TL) 12.97 12.54 25.25 26.74 30.20 25.28 17.11
YTD share performance % (USD) 21.69 21.23 34.92 36.53 40.26 34.95 26.15
Rating Underperform Outperform Outperform Market Perform Market Perform Outperform Market Perform
Key Data (TLm)
Market cap 27,040 28,056 15,688 18,630 8,150 14,867 114,238
Market cap US$m 15,371 15,949 8,918 10,591 4,633 8,451 64,941
Assets 133,552 146,642 91,124 161,669 89,184 108,103 739,730
Loans 70,306 83,813 56,216 91,621 57,309 67,780 433,413
Deposits 76,814 84,543 66,247 98,313 60,939 63,517 450,374
EPS (TL)
2008 0.43 0.42 0.81 0.34 0.30 0.24 0.38
2009 0.68 0.71 1.30 0.53 0.50 0.31 0.61
2010 0.71 0.75 1.61 0.66 0.46 0.47 0.71
2011 0.60 0.73 1.64 0.59 0.49 0.43 0.69
2012F 0.66 0.78 1.84 0.55 0.46 0.46 0.73
2013F 0.78 0.91 2.09 0.63 0.56 0.53 0.84
BVPS (TL)
2008 2.80 2.25 3.43 2.10 2.27 1.58 2.20
2009 3.55 3.17 4.61 3.00 2.95 1.90 2.93
2010 4.39 3.92 5.96 3.78 3.42 2.37 3.63
2011 4.39 4.18 6.91 3.98 3.72 2.69 3.94
2012F 4.92 4.77 8.47 4.39 4.04 3.08 4.52
2013F 5.54 5.45 10.25 4.86 4.43 3.53 5.18
PER (x)
2008 15.7 15.9 15.2 12.2 10.6 14.1 9.91
2009 9.8 9.4 9.5 7.7 6.4 10.8 6.41
2010 9.4 8.9 7.7 6.2 6.9 7.1 5.48
2011 11.2 9.1 7.6 6.9 6.5 7.9 5.63
2012F 10.2 8.6 6.7 7.5 7.0 7.4 5.37
2013F 8.5 7.3 5.9 6.5 5.7 6.4 4.60
PBR (x)
2008 2.39 2.95 3.61 1.94 1.41 2.14 2.41
2009 1.89 2.09 2.69 1.36 1.08 1.77 1.81
2010 1.53 1.69 2.08 1.08 0.93 1.42 1.45
2011 1.53 1.59 1.79 1.02 0.86 1.25 1.34
2012F 1.36 1.39 1.46 0.93 0.79 1.09 1.17
2013F 1.21 1.22 1.21 0.84 0.72 0.96 1.03
Key ratios (Dec 2011) %
LDR 91.53 100.95 84.86 93.19 94.04 106.71 95.03
NPL 1.76 1.80 2.88 2.12 3.63 2.98 2.22
Loans as % assets 52.64 57.15 61.69 56.67 64.26 62.70 60.35
CAR 16.98 16.89 14.30 14.07 13.38 14.69 15.63
ROA 1.91 2.19 2.37 1.76 1.44 1.84 2.05
NIM (%)
2008 4.53 4.06 4.47 4.07 4.17 4.23 4.28
2009 5.08 5.23 5.50 4.62 5.26 5.42 5.00
2010 4.10 5.11 4.81 3.74 3.81 4.29 4.28
2011 3.24 4.68 4.22 3.11 3.58 3.43 3.78
2012F 3.56 4.36 4.53 3.31 3.78 3.56 3.87
2013F 3.53 5.36 4.47 3.47 3.97 3.77 4.08
ROE (%)
2008 15.8 21.1 24.0 15.9 14.0 17.6 17.8
2009 21.3 25.2 31.5 20.2 18.6 17.2 21.8
2010 17.9 23.5 30.5 19.5 14.4 21.4 20.7
2011 13.9 23.4 25.1 15.0 13.5 16.5 18.1
2012F 14.2 21.9 23.9 13.0 11.8 15.9 17.2
2013F 15.0 22.9 22.3 13.6 13.2 15.9 17.5

April 30, 2012
Share Price Performances
1 Week 1 Month
3 Months 6 Months
12 Months Year to Date
2.2
1.8
1.4 1.2 1.2
0.9 0.9
0.4
‐1.7
‐4.0
‐3.0
‐2.0
‐1.0
0.0
1.0
2.0
3.0
4.0
vakbn akbnk xu100 isctr halkb tskb ykbnk xbank garan
‐0.4
‐1.1
‐2.3
‐3.0
‐3.2 ‐3.3
‐3.6
‐4.4 ‐4.5
‐5.0
‐4.5
‐4.0
‐3.5
‐3.0
‐2.5
‐2.0
‐1.5
‐1.0
‐0.5
0.0
halkb tskb akbnk xu100 garan isctr xbank vakbn ykbnk
17.7
14.0
12.6
8.7
6.5
4.3
3.6
2.7
0.0
10.0
20.0
vakbn tskb isctr halkb xu100 xbank ykbnk garan akbnk
15.7
9.8 9.7 9.4
8.2
7.4 7.2
4.6 4.6
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
halkb garan tskb xu100 akbnk xbank vakbn isctr ykbnk
‐2.3
‐8.8
‐11.5
‐13.8 ‐14.7
‐17.1
‐18.6
‐19.7
‐28.6
‐35.0
‐30.0
‐25.0
‐20.0
‐15.0
‐10.0
‐5.0
0.0
halkb tskb xu100 garan akbnk xbank vakbn isctr ykbnk
33.1
28.6
27.1 26.8 26.5
18.6 18.4
14.2 14.0
0.0
10.0
20.0
30.0
40.0
vakbn isctr ykbnk halkb tskb xbank xu100 garan akbnk

April 30, 2012
Turkish Banks PER and PBR comparison
2012F PBR (x)
2012F PER (x)
1.48
1.41 1.38
1.18
1.11
0.94
0.81
0.0
0.5
1.0
1.5
2.0
10.2
8.7
7.6 7.5
7.1
6.8
5.4
0.0
3.0
6.0
9.0
12.0

April 30, 2012
COMPANY PAGES

April 30, 2012
“Still a bet on CPI”
Akbank is poised to stand out with its high CAR ratio and
low LDR compared to the sector in 2012. Although we
consider it positive for Akbank in the long term, Citi’s
stake sale news will weigh on stock performance in the
short term. We rate the stock a Underperform with a 12M
target price of TL6.50. It is trading at a premium to its
peers, despite its below average ROE. On our assumptions,
the shares are trading at 1.4x 2012F P/BV and 10.2x
2012F P/E.
Pickup in inflation and 2011’s loan re-pricing and growth
in higher yielding segments should support NIM in
2012...Annual CPI inflation remained elevated (10.43%) in
March, which indicates that annual inflation may be at
double-digit levels beyond May until the last quarter
according to our projections before declining to 7.3% by
year-end, mainly owing to base effects, well above the CBT’s
year-end target of 5%. This should, in our view, spell positive
news for Akbank as CPI linked bonds make up 35% of the
bank’s security portfolio (vs. 30% a year ago and
management guidance of an increase to 40% in 2012). With a
new CEO on board, Akbank management is more upbeat over
growing in high yielding segments such as SMEs, and over
increased retail segment market share going forward.
Management bullish on fee income growth...Despite
regulatory changes set to negatively affect the sector’s fee
income generation, Akbank management is bullish when it
comes to fee generation and guides on 10% YoY growth
supported by the bank’s credit card franchise, vs. our
forecast of 12% growth. Akbank saw a 110bp market share
gain in credit card issuance volume in 2011 and generated
the highest fee via its banking payment systems. The
decrease in the max rate that banks can charge on cards, and
further regulations pose downside risk to our estimate here.
Highest securities to asset ratio (32% as of Dec-11) will
allow Akbank to fund its loan growth...as was the case in
2011, we expect Akbank to fund lending growth via
redemptions in 2012. As a result, the share of securities
within total assets fell to 32% in Dec-11, vs. 43% in the same
quarter a year ago. We forecast flat deposit growth for
Akbank and further reduction in the share of deposits within
overall funding. In line with management guidance, we
estimate Akbank growing its loan book slightly above the
sector this year driven (19% Akbank, vs. 17% sector) mainly
supported by growth in SME and consumer segments.
Risks...Faster than expected NPL deterioration (-), higher
than expected deposit cost (-) and lower than expected
volume growth (-) pose downside risk to our valuation.
Although we deem Akbank defensive, Sabanci Family
members’ share sale, coupled with Citi’s 10% disposal sale
should create share overhang risk on the stock.
STOCK DATA
Reuters AKBNK.IS
Bloomberg AKBNK TI
Avg. Daily Volume (1Y) (mn) 66.9
Free Float (%) 29%
Target Mcap (TRY mn) 26,000
Current Mcap (TRY mn) 26,240
Current Mcap (USD mn) 14,672
Float Mcap (TRY mn) 7,513
Exchange Rate 1.77
Current Price 6.76
12M Target Price 6.50
No. of Shares in Issue 'mn 4,000
52-Week Range 5.52 - 7.98
Weight in ISE-100 8%
Beta (2 year, weekly return) 1.15
SHAREHOLDER STRUCTURE %
Sabanci Holding 44%
Citibank O.I.C. 20%
Sabanci Family 7%
Akbank – AKBNK
Underperform
T-Price: TRY 6.50
T-Mcap: TRY 26,000mn
80
85
90
95
100
105
110
115
120
125
130
02‐Jan‐12
09‐Jan‐12
16‐Jan‐12
23‐Jan‐12
30‐Jan‐12
06‐Feb‐12
13‐Feb‐12
20‐Feb‐12
27‐Feb‐12
05‐Mar‐12
12‐Mar‐12
19‐Mar‐12
26‐Mar‐12
02‐Apr‐12
09‐Apr‐12
16‐Apr‐12
23‐Apr‐12
XBANK AKBNK
SNAPSHOTS 2010A 2011A 2012E
Net Earnings 2,857 2,395 2,639
Total Assets 113,183 133,552 147,357
ROE 12M rolling basis % 17.9 13.9 14.2
ROA % 2.7 1.9 1.9
NPL % 3.2 1.8 2.1
P/BV 1.5x 1.5x 1.4x
P/E 9.5x 11.3x 10.2x
EPS 12-m 0.71 0.60 0.66

April 30, 2012
AKBANK-FINANCIALS SUMMARY
2007 2008 2009 2010 2011 2012F 2013F 2014F
Net Interest Income (NII) 3,242 3,488 4,593 4,277 3,993 5,006 5,514 5,706
Fees and comm 946 1,092 1,280 1,309 1,579 1,753 1,952 2,280
Trading income (18) (120) 326 471 72 (32) (45) 428
Foreign exchange gains 167 165 (171) (438) (191) (140) (156) (175)
Bank revenues 4,337 4,624 6,028 5,619 5,452 6,587 7,264 8,238
Staff cost (616) (834) (818) (878) (960) (1,053) (1,183) (1,314)
Other cost (1,080) (1,354) (1,263) (1,436) (1,364) (1,482) (1,666) (1,851)
Total OPEX (1,696) (2,187) (2,081) (2,313) (2,325) (2,535) (2,849) (3,165)
Operating Income 2,641 2,437 3,948 3,306 3,128 4,052 4,416 5,073
Associates 32 30 43 27 50 53 56 58
Other income 507 741 525 864 581 281 578 701
Income before provision 3,181 3,208 4,516 4,196 3,759 4,386 5,049 5,833
Provisions for loan losses (625) (999) (994) (348) (302) (763) (844) (1,004)
Other provisions (94) (150) (123) (171) (346) (191) (184) (219)
Depreciation and amortisation (104) (109) (103) (104) (110) (133) (150) (167)
Pre Tax Income 2,358 1,951 3,296 3,574 3,001 3,298 3,872 4,444
Taxes (467) (355) (570) (718) (607) (660) (736) (800)
Net income 1,891 1,595 2,726 2,857 2,395 2,639 3,136 3,643
Balancesheet Summary
Cash and alike 2,762 7,684 4,740 6,096 13,876 15,264 16,790 18,470
Due from banks 1,333 4,104 2,960 1,784 2,819 3,101 3,411 3,752
Trading securities 4,843 220 314 1,032 960 1,056 1,162 1,278
Fixed income securities 20,231 26,846 45,009 48,848 42,695 44,489 46,491 48,583
Loans 37,016 44,374 39,718 52,896 70,306 82,318 97,958 116,570
Total IEA 66,186 83,228 92,741 110,655 130,657 146,227 165,812 188,652
Fixed assets 699 800 792 888 786 841 900 963
Assets total 68,205 85,655 95,309 113,183 133,552 147,357 164,999 185,703
Deposits 41,044 52,182 55,851 67,167 76,814 87,568 98,076 114,749
Interbank funds 4,415 8,105 13,431 11,211 12,785 14,106 15,795 17,777
Funds borrowed 8,855 11,299 8,152 10,375 16,770 17,004 17,539 18,240
Int bearing liabilities 54,313 71,586 77,435 88,753 106,369 118,678 131,411 150,767
Other liabilities 3,291 2,861 3,684 6,865 9,628 9,013 11,413 9,845
Shareholders Equity 10,601 11,208 14,191 17,565 17,554 19,665 22,175 25,091
Per share data and valuation metrics
BVPS (TL) 2.65 2.80 3.55 4.39 4.39 4.92 5.54 6.27
EPS (TL) 0.50 0.43 0.68 0.71 0.60 0.66 0.78 0.91
PER 13.6x 15.9x 9.9x 9.5x 11.3x 10.2x 8.6x 7.4x
PBR 2.6x 2.4x 1.9x 1.5x 1.5x 1.38x 1.2x 1.1x
Yield (%) 0.39 0.60 1.29 1.43 1.20 1.32 1.57 1.82
Established in 1948, Akbank is the fourth largest Turkish bank by asset size. The bank also has overseas operations via its subsidiaries in
the Netherlands (Akbank NV), Germany (Akbank AG) and Dubai (Akbank Dubai Ltd), along with a branch in Malta. Headquartered in Istanbul,
as of March 2012 the bank had 936 branches and 15,476 employees. Sabanci Holding has a 40.8% stake in Akbank, while Citigroup has a
20.0% stake. Recently Citigroup annouced their intention to reduce their stake by 10%.

April 30, 2012
AKBANK RATIO ANALYSIS
2007 2008 2009 2010 2011 2012F 2013F 2014F
Balance sheet ratios (%)
Loans/Total assets 54.3 51.8 41.7 46.7 52.6 55.9 59.4 62.8
Consumer loans/Total assets 18.5 16.8 15.7 17.4 18.8 21.2 23.5 25.9
Home loans/Total assets 5.6 5.4 4.6 5.3 5.5 6.0 6.4 6.9
Securities/Total assets 29.7 31.3 47.2 43.2 32.0 30.2 28.2 26.2
Loans/Deposits 90.2 85.0 71.1 78.8 91.5 94.0 99.9 101.6
Shareholders' funds/Total assets 15.5 13.1 14.9 15.5 13.1 13.3 13.4 13.5
Shareholders' funds/RWA 18.9 17.8 22.3 21.2 16.2 15.5 15.1 14.7
Asset quality (%)
NPL 2.65 2.50 4.30 3.23 1.76 2.10 2.10 2.30
Total cost of risk 2.15 2.75 2.57 1.08 1.03 1.25 1.20 1.20
Expense ratios (%)
CIR 39.1 47.3 34.5 41.2 42.6 38.5 39.2 38.4
Fees coverage of cost 55.8 49.9 61.5 56.6 67.9 69.1 68.5 72.0
Cost/Total assets -2.6 -2.7 2.2 2.0 1.7 1.7 1.7 1.7
Spreads and margins
Loan spread 5.4 3.8 5.2 3.0 2.2 2.4 2.2 2.2
Bond spread 5.3 4.8 4.8 4.0 4.2 4.0 4.0 3.1
Average spread 5.4 4.2 5.0 3.5 3.0 3.0 2.8 2.5
NIM % 5.0 4.3 5.2 4.0 3.2 3.6 3.5 3.3
Net fees/Total assets % 1.5 1.4 1.4 1.2 1.3 1.2 1.3 1.3
ROE % 20.3 15.8 21.3 17.9 13.9 14.2 15.0 15.4
ROA % 3.1 2.1 3.1 2.7 1.9 1.9 2.1 2.2
Growth measures (%)
Loans 30.6 19.9 -10.5 33.2 32.9 17.1 19.0 19.0
Deposits 20.0 27.1 7.0 20.3 14.4 14.0 12.0 17.0
Assets 19.1 25.6 11.3 18.8 18.0 10.3 12.0 12.5
Net interest income 27.6 7.6 31.7 -6.9 -6.6 25.4 10.1 3.5
Fees and comm 17.3 15.4 17.2 2.3 20.6 11.0 11.4 16.8
Cost 7.5 28.9 -0.1 10.7 0.7 9.6 12.4 11.1
Net income 24.6 -14.5 59.9 4.8 -16.2 10.2 18.9 16.2
Capital (TRYm)
RWA 56,160 62,927 63,634 83,035 108,079 127,072 146,850 170,804
Capital 10,618 11,452 14,315 17,115 18,350 20,952 24,093 27,810
CAR (%) 18.9 18.2 22.5 20.6 17.0 16.5 16.4 16.3
Tier-1 Capital 10,254 11,128 13,581 15,952 17,791 19,683 21,897 24,430
Tier-1 (%) 18.3 17.7 21.3 19.2 16.5 15.5 14.9 14.3

April 30, 2012
“Guaranteed” choice for profitability &
stability
As a “price setter” of the Turkish Banking sector and the
most efficient player amongst its peers, we believe the
bank will be able to deliver an average 18% ROE 2012-
2014F. The stock remains our top pick with a 12M TP
TRY7.59 offering 14% upside from current levels. By our
assumptions, the shares are trading at 1.40x 2012F P/BV
and 8.6x 2012F P/E. The sources of risks include: further
increase in NPLs (-), higher than expected provisioning (-
), higher than expected fee growth (+).
March quarter recap: Income Statement highlights…
Garanti published its 1Q12 last week. Accordingly, March
quarterly net income came in at TRY861.7m, up 9% QoQ
and c.1% YoY. The bottom line exceeds both our and the
consensus estimate (Seker 1Q12 TRY830m and consensus
TRY827m). The QoQ increase in net income was driven by a
20% rise in trading & currency gains that Garanti booked
during the March quarter (1Q12 trading gains TRY89m, vs.
TRY74m in 4Q11) and lower provisioning. Fees were also
strong, as net fee and commission income climbed 6% QoQ,
but was down c.4% YoY due to the change in accounting
and cap on mutual fund fees. Opex increased 17% YoY,
although management maintains their CPI+2-3% cost growth
guidance for the full year.
Balance sheet highlights… On the lending side Garanti’s
loan growth lagged the sector this quarter when looked at
on an FX unadjusted basis. The loan book declined by 1%,
vs. the sector’s 2.3% growth (YoY loan growth came in at
18%). Deceleration in lending book growth was driven by
corporate loans, which shed 2% QoQ. Consumer loans, on
the other hand, grew 2% thanks to 4% growth in GPL loans
and 2% growth in mortgages. On an FX adjusted basis TL
loans grew by 2.1% and FX loans grew by 2%. Despite some
pick up in the blended cost of deposits, the bank managed
to keep the loan–deposit spread stable during the March
quarter.
On the funding side deposits on a QoQ basis declined 2%,
vs. the sector’s 0.5% increase in 1Q as Garanti relinquished
costly big ticket corporate deposit holders to keep the cost
of deposits in check. The share of loans within total assets
decreased to 56%, vs. 57% in FY2011, whereas that of
securities rose to 25% from a quarter ago.
Asset quality trends… Despite a slight deterioration in
asset quality, all seems to be in place for now. The NPL
ratio stood at 1.88% in 1Q12, vs. 1.80 in 4Q11, due to
slower collections and new NPL inflow. Note that during
their conference call management emphasized possible
asset quality problems in the SME segment going forward.
CAR and ROE…Visible RWA optimization from Garanti and
CAR ratio seems stable, at 16.92%, vs. 16.89% in 4Q11. ROE
on a 12M rolling basis came in at 17.5%, vs. 18.5% in 1Q11.
Garanti Bank - GARAN
Outperform
Target Price: TRY 7.59
Target Mcap: TRY
31,878mn
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XBANK GARAN
Net Earnings 3,145 3,071 3,260
Total Assets 123,963 146,642 163,766
ROA % 2.8 2.2 2.3
NPL % 2.9 1.8 1.9
P/BV 1.7x 1.6x 1.4x
P/E 8.9x 9.1x 8.6x
EPS 12-m 0.75 0.73 0.78
STOCK DATA
Reuters GARAN.IS
Bloomberg GARAN TI
Free Float (%) 29%
Exchange Rate 1.77
Current Price 6.74
52-Week Range 5.54 - 8.18
Dogus Group 24%
BBVA 25%
Other 22%

April 30, 2012
GARANTI BANK- FINANCIALS SUMMARY
2007 2008 2009 2010 2011 2012F 2013F 2014F
Fees and comm 1,198 1,441 1,643 1,816 2,008 2,250 2,259 2,640
Trading income (71) 529 502 240 (21) 264 521 587
Foreign exchange gains (65) (278) 379 124 353 466 521 587
Bank revenues 3,866 4,870 7,603 6,934 7,029 8,408 9,665 10,562
Staff cost (700) (963) (994) (1,161) (1,248) (1,359) (1,556) (1,751)
Other cost (1,124) (1,412) (1,409) (1,721) (1,797) (1,958) (2,241) (2,522)
Total OPEX (1,823) (2,375) (2,403) (2,882) (3,045) (3,317) (3,797) (4,272)
Associates 49 102 79 5 6 6 6 6
Other income 1,018 298 279 638 903 155 174 978
Provisions for loan losses (191) (419) (1,212) (387) (309) (752) (920) (1,086)
Pre Tax Income 2,626 2,162 3,779 3,952 3,908 4,075 4,726 5,726
Taxes (457) (412) (816) (807) (838) (815) (898) (1,031)
Net income 2,170 1,750 2,962 3,145 3,071 3,260 3,828 4,695
Cash and alike 7,228 5,572 7,866 7,510 8,261 9,087 9,996 10,996
Due from banks 3,133 4,801 8,334 8,321 14,344 15,778 17,356 19,092
Trading securities 146 666 915 980 1,657 1,823 2,005 2,205
Loans 37,218 49,907 49,733 64,827 83,813 98,418 116,133 137,037
Total IEA 64,771 85,910 102,289 119,869 141,661 161,211 183,942 210,281
Fixed assets 940 1,085 1,143 1,201 56 59 64 68
Other assets 1,021 707 288- 954 3,393 3,452 2,384- 5,516-
Assets total 67,578 88,941 105,381 123,963 146,642 163,766 183,828 207,231
Deposits 39,098 52,715 62,808 72,658 84,543 96,379 110,836 127,461
Interbank funds 8,177 10,703 10,535 11,254 10,955 12,234 13,733 15,481
Funds borrowed 8,559 10,843 13,007 16,633 20,524 22,920 24,228 25,813
Per share data and valuation
BVPS (TL) 1.64 2.25 3.17 3.92 4.18 4.77 5.45 6.29
EPS (TL) 0.55 0.42 0.71 0.75 0.73 0.78 0.91 1.12
PER 12.2x 16.2x 9.6x 9.0x 9.2x 8.7x 7.4x 6.0x
PBR 4.1x 3.0x 2.1x 1.7x 1.6x 1.4x 1.2x 1.1x
Yield (%) 0.37 0.78 1.23 1.41 1.50 1.46 1.55 1.83
Turkey’s third largest bank with assets of TL149bn (as of March 2012). Garanti Bank operates via 820 branches and has a headcount
of 17,000. The Bank’s head office is located in Istanbul. Doğuş Holding has a 24.2% stake in Garanti, while BBVA has a 25.0% stake.

April 30, 2012
GARANTI BANK- RATIO ANALYSIS
2007 2008 2009 2010 2011 2012F 2013F 2014F
Loans/Deposits 95.2 94.7 82.7 91.9 100.9 102.1 104.8 107.5
Asset quality (%)
NPL 2.22 2.42 4.30 2.90 1.80 1.85 1.90 1.75
Expense ratios (%)
CIR 47.2 48.8 31.6 41.6 43.3 39.5 39.3 40.4
Spreads and margins
Loan spread 3.8 3.2 5.4 3.8 3.5 3.8 4.0 3.8
Bond spread 5.6 5.6 6.4 5.4 5.4 5.8 4.6 4.4
Average spread 4.4 4.0 5.8 4.4 4.0 4.3 4.1 3.9
NIM % 4.7 4.0 5.2 4.2 3.3 3.5 3.7 3.5
Net fees/Total assets % 2.0 1.8 1.7 1.6 1.4 1.5 1.3 1.4
ROE % 36.3 21.1 25.2 20.5 18.1 17.3 17.8 19.1
ROA % 3.9 2.2 3.0 2.8 2.2 2.3 2.3 2.5
Growth measures (%)
Loans 36.1 34.1 -0.4 30.4 29.3 17.4 18.0 18.0
Deposits 29.7 34.8 19.1 15.7 16.4 14.0 15.0 15.0
Assets 34.4 31.6 18.5 17.6 18.3 11.7 12.3 12.7
Fees and comm 18.1 20.3 14.0 10.5 10.6 12.1 0.4 16.8
Cost 24.5 39.4 1.1 18.3 5.4 8.9 14.5 12.5
Net income 117.7 -24.4 69.2 6.2 -2.4 6.2 17.5 22.7
Capital (TRYm)
RWA 47,027 62,265 64,501 85,810 115,170 138,704 160,794 187,406
Capital 7,231 10,048 13,673 16,839 19,454 22,828 26,901 32,027
CAR (%) 15.4 16.1 21.2 19.6 16.9 16.5 16.7 17.1
Tier-1 Capital 6,235 8,394 11,396 14,203 16,843 19,034 21,581 24,665
Tier-1 (%) 13.3 13.5 17.7 16.6 14.6 13.7 13.4 13.2

April 30, 2012
“Delivering the highest ROE repeatedly”
We like Halkbank’s solid management and ability to
generate the highest ROE in the Turkish Banking
universe. Higher retail focus should enable the bank to
improve NIM above the sector this year, along with the
advantages afforded by being the leading SME bank in
Turkey. The sources of upside risk include the
continuation of NPL recoveries and non-core asset sale.
On the other hand, higher than expected NPL generation
and lower than expected volume growth presents
downside risk to our valuation. We rate the stock
“Outperform”, with a new target price of TR14.70.
Based on our assumptions, it is trading at 1.5x 2012F
P/BV and 6.8x 2012F P/E.
Halkbank to own credit card brand...Retail loans were the
main driver of loan growth during 2011. Being an SME bank,
and now with additional focus on high margin retail lending
(especially GPL, mortgages and credit cards) we expect
Halkbank to improve NIM above the sector in 2012.
Although it would initially come at a cost, Halkbank’s plan
to create its own credit card would increase volumes and
support revenue line in the long term.
Other income to get a boost from non-core asset sale and
continuation of bad loan collections...Halkbank’s REIC
subsidiary is expected to be listed in 2H of 2012, and the
asset transfer between REIC and bank, in our view, should
support the other income line. The bank is also getting
ready to enter the factoring sector. Now with a wider
subsidiary network, we expect Halkbank to increase
dividend income in the medium term. Asset quality doesn’t
look as bad as it is, and without legacy NPLs (which make
up 31% of total NPL book) Halkbank’s NPL ratio, at 2.0%, is
below sector levels. With a relatively larger gross NPL book
we expect collections to continue unlike the reverse trend
in the sector. This should, in our view, create upside risk to
our net income estimate for the bank in 2012.
Low total fees in banking revues indicate growth
potential... Halkbank increased its fees by 39% last year in
an attempt to catch up with peers on fees charged for
services rendered. However, fees make up 17% of total
revenues as of Dec-11, vs. the 23% average of large cap
peers, indicating room for expansion. Despite management
guidance for flat growth, we believe that the introduction
of additional fees (such as internet banking) should help
fee growth this year. And while gaining presence in the
credit card segment marks a longer term positive, it should
also support fees and commissions going forward.
Risk... NPL recoveries (+), non-core asset sale (+), and
higher than expected NPL generation (-).
Halkbank - HALKB
Outperform
T-Price: TRY 14.70
Net Earnings 1,944 1,967 2,298
Total Assets 72,942 91,124 103,937
ROA % 2.9 2.4 2.8
NPL % 3.8 2.9 3.2
P/BV 2.1x 1.8x 1.5x
P/E 7.8x 7.6x 6.8x
EPS 12-m 1.61 1.64 1.84
STOCK DATA
Reuters HALKB.IS
Bloomberg HALKB TI
Free Float (%) 100%
Exchange Rate 1.77
Current Price 12.55
52-Week Range 9.26 -13.40
Privatization Adminstration 75%
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XBANK HALKB

April 30, 2012
HALKBANK- FINANCIALS SUMMARY
2007 2008 2009 2010 2011 2012F 2013F 2014F
Fees and comm 296 370 461 526 728 780 893 1,026
Trading income (258) 357 92 188 51 39 45 51
Foreign exchange gains 216 (551) (76) (73) 156 (98) (112) (128)
Bank revenues 2,007 2,303 3,585 3,832 4,409 5,139 5,814 7,121
Staff cost (449) (507) (595) (670) (732) (848) (1,065) (1,224)
Other cost (399) (495) (542) (825) (993) (1,051) (1,321) (1,517)
Total OPEX (848) (1,002) (1,137) (1,495) (1,725) (1,899) (2,386) (2,741)
Associates 19 39 11 56 49 51 54 56
Other income 452 363 261 575 594 482 670 769
Provisions for loan losses (131) (243) (434) (316) (211) (360) (363) (451)
Pre Tax Income 1,358 1,223 2,017 2,443 2,559 2,872 3,220 4,059
Taxes (276) (248) (386) (499) (592) (574) (612) (731)
Net income 1,083 975 1,631 1,944 1,967 2,298 2,608 3,328
Cash and alike 3,521 3,009 3,416 4,770 7,272 8,000 8,800 9,680
Due from banks 1,162 2,119 1,136 989 1,475 1,623 1,785 1,963
Trading securities 480 115 56 89 128 141 155 171
Loans 18,121 25,836 32,458 44,296 56,216 66,824 79,788 94,948
Total IEA 38,748 49,298 58,383 70,262 88,310 102,011 118,367 137,245
Fixed assets 642 892 1,139 945 1,011 1,016 1,021 1,026
Assets total 40,234 51,096 60,650 72,942 91,124 103,937 119,317 137,121
Deposits 30,841 40,271 43,950 54,782 66,247 75,522 86,095 99,009
Interbank funds 1,703 2,390 5,762 3,155 4,905 4,929 4,954 4,978
Funds borrowed 937 1,522 2,032 3,824 6,291 7,176 6,738 6,243
BVPS (TL) 3.51 3.43 4.61 5.96 6.91 8.47 10.25 12.51
EPS (TL) 0.90 0.81 1.30 1.61 1.64 1.84 2.09 2.66
PER 13.8x 15.3x 9.6x 7.8x 7.6x 6.8x 6.0x 4.7x
PBR 3.6x 3.6x 2.7x 2.1x 1.8x 1.5x 1.2x 1.0x
Yield (%) 0.67 0.62 2.23 1.74 1.77 1.99 2.25 2.88
Halkbank is the sixth largest bank in terms of asset size, with TL91bn as of FY2011. It operates via 784 branches and employs 13,500
people. The Turkish Privatization Administration agency owns 75% of the bank, with a possibility of an SPO or block sale in the medium
term.The Bank’s head office is located in Istanbul.

April 30, 2012
HALKBANK RATIO ANALYSIS
2007 2008 2009 2010 2011 2012F 2013F 2014F
Loans/Deposits 58.8 64.2 73.9 80.9 84.9 88.5 92.7 95.9
Asset quality (%)
NPL 5.39 4.62 4.89 3.82 2.88 3.20 2.70 2.70
Expense ratios (%)
CIR 42.2 43.5 31.7 39.0 39.1 37.0 41.0 38.5
Spreads and margins (%)
Loan spread 4.6 4.6 6.5 5.3 4.8 4.8 4.5 5.0
Bond spread 4.1 4.3 4.3 4.2 4.0 4.0 4.0 4.0
Average spread 4.4 4.5 5.6 5.0 4.5 4.5 4.4 4.8
NIM 4.6 4.5 5.5 4.8 4.0 4.5 4.5 4.8
Net fees/Total assets 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8
ROE 28.7 24.0 31.5 30.5 25.1 23.9 22.3 23.4
ROA 3.0 2.2 2.9 2.9 2.4 2.8 2.7 3.0
Growth measures (%)
Loans 55.6 42.6 25.6 36.5 26.9 18.9 19.4 19.0
Deposits 13.4 30.6 9.1 24.6 20.9 14.0 14.0 15.0
Assets 16.9 27.0 18.7 20.3 24.9 14.1 14.8 14.9
Net interest income 28.0 21.3 46.2 2.6 8.8 27.2 12.9 23.7
Fees and comm 27.9 25.0 24.4 14.2 38.5 7.2 14.5 14.9
Cost 17.2 18.2 19.1 25.3 15.4 15.9 25.6 14.9
Net income 31.0 -10.0 60.2 23.3 1.7 12.4 13.5 27.6
Capital (TRYm)
RWA 21,360 29,844 35,600 46,436 65,408 84,723 108,542 139,316
Capital 4,279 4,324 5,706 7,400 9,353 11,587 14,170 17,486
CAR (%) 20.0 14.5 16.0 15.9 14.3 13.7 13.1 12.6
Tier-1 Capital 4,042 4,107 5,390 6,956 8,961 10,567 12,333 14,497
Tier-1 (%) 18.9 13.8 15.1 15.0 13.7 12.5 11.4 10.4

April 30, 2012
“More restructuring efforts are awaited”
We would like to see further developments on the
restructuring efforts begun in 2010, especially on
insurance and glass subsidiaries before adopting a more
positive view of the stock. Sources of risk include the
continuation of NPL recoveries (+) non-core asset sale
(+)further restructuring (+), and higher than expected
NPL (-) and increased cost of deposits (-). We expect
Isbank to post the highest opex among the private
banking peers driven by personnel cost. We rate the
stock “Marketperform”, with a new target price of
TRY4.22. On our assumptions, the stock is trading at
0.9x 2012F P/BV and 7.6x 2012F P/E.
Asset restructuring efforts and possible asset sale &
IPO... Before we adopt a positive view on the stock we
would like to see visible developments in restructuring
efforts such as an IPO to list Milli Re on the ISE, and a
reduction in its stake in the glass business. We believe such
efforts would brighten the view on Isbank, as many
investors would like to see the bank doing core business,
rather than its holding structure.
Deceleration in pace of collections, hence reduced other
income line in 2012...90% of Isbank’s other income has
comprised NPL collections for the past two years, this year
we expect slower collections, and hence decreased other
income. On the other hand, slower volume growth, vs. a
year ago would result in NPL ratio deterioration and higher
provisioning, which will result in lower income, vs. a year
ago.
Isbank looks worse off when compared on expense
ratios...When compared to its large cap private peers,
Isbank appears worse off with is 55% CIR, vs. 45% at Akbank
and Garanti. And we don’t expect 2012 to be any different
due to inflationary pressure. We forecast Isbank growing
opex by 15% in 2012, vs. CPI+2/3ppt at private bank peers
driven by staff cost. When compared on fee coverage cost,
Isbank also lags the peer group with its 41% fee/cost, vs. an
average 65% at Akbank, Garanti and Yapi Kredi, and with
lower fees this year we forecast a 36% fee/cost ratio for
Isbank, vs. 60% at private peers.
Basel II adoption to reduce CAR ratio...Based on our
calculations, Isbank will end up with a CAR ratio of 12.9% in
2012, vs. 14.1% a year ago, thus one of the lowest among
large cap private peers (Akbank and Garanti 16%, and Yapi
Kredi 13% when adjusted for Basel II). The market has
started to price in the rights issue for the bank, although
we consider the asset sale option more likely at this point,
as the market would prefer to see further restructuring
efforts from the bank.
Isbank - ISCTR
Market Perform
T-Price: TRY 4.22
T-Mcap: TRY 18.990mn
STOCK DATA
Reuters ISCTR.IS
Bloomberg ISCTR TI
Free Float (%) 31%
Exchange Rate 1.77
Current Price 4.14
52-Week Range 3.12 - 5.33
Isbank Pension Fund 40%
Ataturk's Shares 28%
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XBANK ISCTR
Net Earnings 2,982 2,667 2,459
Total Assets 131,796 161,669 178,929
ROA % 2.4 1.8 1.7
NPL % 3.6 2.1 2.3
P/BV 1.1x 1.0x 0.9x
P/E 6.2x 7.0x 7.6x
EPS 12-m 0.66 0.59 0.55

April 30, 2012
ISBANK- FINANCIALS SUMMARY
2007 2008 2009 2010 2011 2012F 2013F 2014F
Fees and comm 1,075 1,204 1,253 1,236 1,429 1,533 1,688 1,994
Trading income 546 (462) 765 443 448 28 (45) (47)
Foreign exchange gains (119) 935 (356) (309) (142) (170) (172) (177)
Bank revenues 4,461 5,295 6,528 5,953 6,296 7,027 8,047 8,837
Staff cost (1,085) (1,252) (1,405) (1,625) (1,819) (2,007) (2,280) (2,577)
Other cost (1,069) (1,568) (1,150) (1,432) (1,496) (1,642) (1,865) (2,108)
Total OPEX (2,154) (2,820) (2,555) (3,058) (3,315) (3,649) (4,144) (4,686)
Associates 503 285 325 369 556 583 613 643
Other income 911 652 1,073 1,569 1,311 920 948 1,072
Provisions for loan losses (582) (1,504) (1,471) (770) (597) (760) (789) (751)
Other provisions (1,036) (110) (815) (366) (786) (855) (964) (918)
Pre Tax Income 1,989 1,664 2,946 3,553 3,298 3,074 3,492 3,951
Taxes (401) (289) (573) (571) (631) (615) (664) (712)
Net income 1,588 1,375 2,372 2,982 2,667 2,459 2,829 3,239
Cash and alike 7,091 11,837 8,760 8,523 13,780 15,158 16,674 18,341
Due from banks 6,954 6,788 8,433 3,185 2,254 2,480 2,728 3,001
Trading securities 992 452 499 733 1,576 1,734 1,907 2,098
Loans 33,980 47,610 48,335 64,232 91,621 107,196 126,491 151,790
Total IEA 72,747 91,399 104,936 121,637 151,350 170,371 193,793 223,982
Fixed assets 1,922 1,878 1,862 1,832 1,860 1,990 2,129 2,278
Assets total 80,181 97,552 113,223 131,796 161,669 178,929 200,414 228,472
Deposits 48,533 63,539 72,177 88,260 98,313 113,060 131,150 153,445
Interbank funds 5,803 7,007 10,984 10,159 19,461 20,539 23,005 26,226
Funds borrowed 9,963 11,033 9,744 8,042 11,148 10,838 10,640 10,629
BVPS (TL) 2.36 2.10 3.00 3.78 3.98 4.39 4.86 5.40
EPS (TL) 0.38 0.34 0.53 0.66 0.59 0.55 0.63 0.72
PER 10.9x 12.3x 7.9x 6.2x 7.0x 7.6x 6.6x 5.7x
PBR 1.8x 2.0x 1.4x 1.1x 1.0x 0.9x 0.9x 0.8x
Yield (%) 0.56 0.77 1.87 2.16 1.93 1.78 2.05 2.35
With assets of over TL160bn as of FY2011, Isbank is Turkey’s largest private bank. The bank also has the largest branch network with 1,120
branches and 12% market share in branch nerwork. Isbank has around 25,000 staff, as of March 2012. The shareholding structure of the bank
is: Isbank Pension fund 40.5%, CHP 28.1%, and 31.5% free float.

April 30, 2012
ISBANK- RATIO ANALYSIS
2007 2008 2009 2010 2011 2012F 2013F 2014F
Loans/Deposits 70.0 74.9 67.0 72.8 93.2 94.8 96.4 98.9
Asset quality (%)
NPL 4.21 4.41 5.42 3.61 2.12 2.30 2.40 2.30
Expense ratios (%)
CIR 48.3 53.2 39.1 51.4 52.7 51.9 51.5 53.0
Loan spread 6.58 5.77 7.78 5.10 3.49 3.50 3.50 3.20
Bond spread 2.94 3.16 2.50 3.10 3.66 3.50 3.50 3.30
Average spread 5.08 4.88 5.43 4.27 3.54 3.50 3.50 3.22
NIM 3.8 4.0 4.6 3.7 3.0 3.3 3.5 3.3
ROE 16.5 15.9 20.2 19.5 15.0 13.0 13.6 14.0
ROA 2.2 1.7 2.2 2.4 1.8 1.7 1.7 1.6
Growth measures (%)
Loans 14.0 40.1 1.5 32.9 42.6 17.0 18.0 20.0
Deposits 4.6 30.9 13.6 22.3 11.4 15.0 16.0 17.0
Assets 6.6 21.7 16.1 16.4 22.7 10.7 12.0 14.0
Fees and comm 2.9 12.1 4.0 -1.3 15.5 7.3 10.1 18.1
Cost 15.9 30.9 -4.4 18.9 8.7 10.3 13.6 13.1
Net income 53.4 -11.3 57.2 25.7 -10.6 -7.8 15.1 14.6
Capital (TRYm)
RWA 52,762 70,046 76,266 96,857 132,476 160,763 185,859 219,685
Capital 10,834 10,638 13,963 16,996 18,643 21,076 23,940 27,298
CAR (%) 20.5 15.2 18.3 17.5 14.1 13.1 12.9 12.4
Tier-1 Capital 9,944 10,795 12,862 15,152 16,720 18,356 20,227 22,355
Tier-1 (%) 18.8 15.4 16.9 15.6 12.6 11.4 10.9 10.2

April 30, 2012
“Lacking a near term catalyst”
The stock is the cheapest in our coverage universe
although the lowest ROE ratio amongst the peer group
justifies this, in our view. Our 2012F ROE estimate
stands at 12% with a forecast period (2012-2014F)
average ROE of 13%. Although the stock has enjoyed a
good run since the start of the year to catch up with the
sector, we argue that Vakifbank lacks a near term
positive catalyst that could drive the share price further
through the remainder of the year. We have a
“Marketperform” rating for the stock and 12M target
price of TRY3.55. Based on our assumptions, the shares
are trading at 0.8x 2012F P/BV and 7.1x 2012F P/E.
Collections should outperform the sector... As opposed to
the general sector trend this year, while it will see a more
leisurely pace (20-30% lower compared to a year ago), we
believe that Vakifbank should be able to continue
collections due to its legacy NPL portfolio and relatively
large gross NPL book. Vakifbank’s structurally higher NPL
ratio when compared with the sector stems from no write-
off or sale policy with bad loans, and we don’t foresee this
changing in the near term. We estimate the NPL ratio
reaching 4.0%, driven by a lack of collections, lower
volume growth and higher NPL inflow.
Branch network additions and further hiring to increase
opex above the sector average in 2012. Vakifbank grew
its opex well above that of its peers last year due to its
head office relocation from Ankara to Istanbul (15% YoY).
We estimate that with the branch expansion and hiring
plan in place for this year personnel cost and branch
related expenses should rise over the coming quarters,
spelling higher expense ratios in 2012. Based on our
valuations opex growth at Vakifbank should outpace that of
its peers in 2012 (17% in Vakifbank, vs. 12% peer average,
on our 2012E assumptions), marking one of the worst
expense ratios among our banking coverage.
Basel II adoption to reduce CAR ratio to lowest among
our coverage...Based on our calculations Vakifbank will
end up with a CAR ratio of 12% in 2012, vs. 14% a year ago,
thus one of the lowest amongst large cap private peers
when adjusted for Basel II. And although we believe that
this will not create any danger for the bank in terms of
branch openings, we expect Vakifbank to tackle the issue
via a non-core asset sale (TRY350mn BV worth assets
expected to be on sale as per management guidance), the
possible sale of insurance arm (Gunes Sigorta) and a
potential sub-loan.
Risk... The continuation of NPL recoveries (+) and non-core
asset sale (+), higher than expected NPL inflow (-) and
lower than expected volume growth (-), increased cost of
deposits (-).
Vakifbank - VAKBN
Market Perform
T-Price: TRY 3.55
T-Mcap: TRY 8,875mn
STOCK DATA
Reuters VAKBN.IS
Bloomberg VAKBN TI
Free Float (%) 25%
Exchange Rate 1.77
Current Price 3.26
52-Week Range 2.24 - 4.08
State Foundations & Funds 75%
80
90
100
110
120
130
140
150
2‐Jan‐12
9‐Jan‐12
16‐Jan‐12
23‐Jan‐12
30‐Jan‐12
6‐Feb‐12
13‐Feb‐12
20‐Feb‐12
27‐Feb‐12
5‐Mar‐12
12‐Mar‐12
19‐Mar‐12
26‐Mar‐12
2‐Apr‐12
9‐Apr‐12
16‐Apr‐12
23‐Apr‐12
XBANK VAKBN
Net Earnings 1,157 1,227 1,142
Total Assets 73,962 89,184 100,666
ROA % 1.6 1.4 1.2
NPL % 4.8 3.6 4.0
P/BV 1.0x 0.9x 0.8x
P/E 7.0x 6.6x 7.1x
EPS 12-m 0.46 0.49 0.46

April 30, 2012
VAKIFBANK- FINANCIALS SUMMARY
2007 2008 2009 2010 2011 2012F 2013F 2014F
Fees and comm 360 466 466 443 559 579 665 778
Trading income 48 51 117 295 61 (152) (102) 107
Foreign exchange gains 146 38 61 21 (22) 47 49 52
Bank revenues 2,230 2,531 3,721 3,490 3,492 4,066 4,869 5,804
Staff cost (457) (557) (620) (683) (834) (979) (1,106) (1,264)
Other cost (537) (762) (810) (914) (1,007) (1,186) (1,339) (1,531)
Total OPEX (995) (1,319) (1,429) (1,598) (1,841) (2,164) (2,445) (2,796)
Associates 35 25 24 35 45 47 49 52
Other income 357 313 311 601 885 777 643 730
Provisions for loan losses (221) (389) (746) (664) (411) (846) (1,041) (1,367)
Pre Tax Income 1,185 835 1,542 1,463 1,575 1,428 1,720 1,978
Taxes (227) (172) (291) (306) (348) (286) (327) (356)
Net income 957 663 1,251 1,157 1,227 1,142 1,393 1,622
Cash and alike 3,206 5,306 6,450 6,748 7,327 8,060 8,866 9,753
Due from banks 2,746 2,557 2,739 1,272 2,130 2,343 2,577 2,834
Loans 23,470 30,502 34,573 44,861 57,309 68,026 80,271 94,719
Total IEA 40,408 49,866 62,265 70,977 86,051 98,495 112,694 129,450
Fixed assets 906 985 1,083 1,114 1,094 1,170 1,252 1,340
Assets total 42,408 52,193 64,798 73,962 89,184 100,666 113,805 129,396
Deposits 28,863 37,120 44,652 47,701 60,939 69,471 79,891 91,875
Interbank funds 2,076 1,687 6,143 8,128 5,940 6,704 7,579 8,618
Funds borrowed 4,693 5,770 4,366 6,327 8,237 9,298 9,011 8,746
BVPS (TL) 2.09 2.27 2.95 3.42 3.72 4.04 4.43 4.88
EPS (TL) 0.41 0.30 0.50 0.46 0.49 0.46 0.56 0.65
PER 7.9x 10.8x 6.5x 7.0x 6.6x 7.1x 5.8x 5.0x
PBR 1.6x 1.4x 1.1x 1.0x 0.9x 0.8x 0.7x 0.7x
Yield (%) 1.29 0.88 4.28 1.92 2.03 1.89 2.31 2.69
Vakifbank was established in 1954 and as of FY2011 with an asset size reaching around TL90bn it is Turkey’s seventh largest. The bank is 25.2%
owned by Vakifbank Pension Fund and 59% by The General Directorate of Foundations (GDF). It has 690 branches, a headcount of 12,200 (as of March
2012) and total customers of 12m.

April 30, 2012
VAKIFBANK- RATIO ANALYSIS
2007 2008 2009 2010 2011 2012F 2013F 2014F
Loans/Deposits 81.3 82.2 77.4 96.5 94.0 97.9 100.5 103.1
Asset quality (%)
NPL 4.64 4.56 5.78 4.81 3.63 4.00 4.50 4.50
Expense ratios (%)
CIR 44.6 52.1 38.4 45.8 52.7 53.2 50.2 48.2
Loan spread 3.88 3.93 6.80 4.74 3.92 3.80 3.80 3.80
Bond spread 2.38 3.82 4.18 2.64 2.84 3.40 3.90 3.40
Average spread 3.41 3.90 5.89 4.14 3.65 3.71 3.82 3.72
NIM 4.2 4.0 5.1 3.8 3.4 3.8 4.0 4.0
ROE 21.2 14.0 18.6 14.4 13.5 11.8 13.2 13.9
ROA 2.6 1.5 2.1 1.6 1.4 1.2 1.3 1.3
Growth measures (%)
Loans 30.1 30.0 13.3 29.8 27.7 18.7 18.0 18.0
Deposits 16.2 28.6 20.3 6.8 27.8 14.0 15.0 15.0
Assets 14.5 23.1 24.1 14.1 20.6 12.9 13.1 13.7
Net interest income 5.7 17.8 55.8 -11.3 6.0 24.1 18.5 14.4
Fees and comm 25.0 29.3 -0.1 -4.8 26.2 3.5 14.8 17.1
Cost 6.3 32.6 16.2 10.2 14.9 17.3 13.0 14.3
Net income 33.9 -26.9 66.1 -7.5 6.0 -6.9 22.0 16.5
Capital (TRYm)
RWA 31,268 37,682 44,352 56,186 71,862 89,439 104,615 123,246
Capital 4,800 5,390 6,838 8,065 9,616 10,749 12,164 13,861
CAR (%) 15.4 14.3 15.4 14.4 13.4 12.0 11.6 11.2
Tier-1 Capital 4,473 5,053 6,230 7,287 8,797 9,574 10,520 11,621
Tier-1 (%) 14.3 13.4 14.0 13.0 12.2 10.7 10.1 9.4

April 30, 2012
“Risks priced in, but could surprise on
the upside”
We like Yapi’s pure retail banking structure and believe
that investors are aware of the risks, which are mostly
priced in by now. The bank is proactively tackling issues
related to liquidity and adjusting its CAR to Basel II. The
sources of risk include the sale of non-core assets
(positive), deposit re-pricing (negative), and increased
regulation of the credit card industry (negative). We
reiterate our Outperform rating with a new target price
of TRY 3.97. Based on our assumptions, the shares are
trading at 1.11x 2012F P/BV and 7.5x 2012F P/E.
Selective deposit collection and optimization in deposit
cost with one-on-one pricing incentive...The project that
Yapi has been working on for 18 months is now live, and
the bank currently offers custom made rates for its deposit
holders depending on their user profiles (offering higher
rates for more loyal customers and vice versa). We believe
that in the medium term this new program will enable the
bank to maintain more stable deposit cost and preserve
LDR at steady levels. What’s more, releasing higher cost
big ticket corporate deposit clients and replacing than
them with smaller retail deposit holders should affect NIM
positively. We expect Yapi to carry on collecting deposits
in excess of the sector in 2012 as it did last year, in
addition to other expanding funding sources.
Non-core asset sale upside risk to our
estimates...Although denied by the management on
several occasions, there is a possibility of divesting the
insurance subsidiary. Should the bank sell its 74% stake in
Yapi Kredi Sigorta in 2012, this would predictably add an
estimated c.10% to its earnings, by our assumptions. We
also expect the bank to sell a portion of its NPL book as is
done almost every year; this would be a welcome
development for the NPL ratio too, in terms of upside risk
to our bottom line expectation in 2012.
Fee income generation and credit card regulation... The
Central Bank of Turkey increased the monthly interest rate
that the banks are allowed to charge on credit cards in
January of this year to 2.34% from 2.12% in Mar-11, in line
with the rise in loan rates. We believe that there is a
possibility of the CBT raising credit card interest rates
further should the rise in loan rates continue, which would
be positive for Yapi Kredi’s fee income. It also appears that
(as per official government announcements) the regulation
regarding a single credit card limit for each card holder
would not be applied in 2012.
Risks... The sources of risk include the sale of non-core
assets, i.e. Yapi Kredi Sigorta (positive), further NPL sales
(positive), deposit re-pricing (negative), and increased
regulation of the credit card industry (negative).
Yapi Kredi - YKBNK
Outperform
T-Price: TRY 3.97
STOCK DATA
Reuters YKBNK.IS
Bloomberg YKBNK TI
Free Float (%) 18%
Exchange Rate 1.77
Current Price 3.42
52-Week Range 2.55-4.88
Koc Financial Services 82%
80
90
100
110
120
130
140
150
2‐Jan‐12
9‐Jan‐12
16‐Jan‐12
23‐Jan‐12
30‐Jan‐12
6‐Feb‐12
13‐Feb‐12
20‐Feb‐12
27‐Feb‐12
5‐Mar‐12
12‐Mar‐12
19‐Mar‐12
26‐Mar‐12
2‐Apr‐12
9‐Apr‐12
16‐Apr‐12
23‐Apr‐12
XBANK YKBNK
Net Earnings 2,060 1,857 1,989
Total Assets 84,776 108,103 123,141
ROA % 2.7 1.8 2.1
NPL % 3.4 3.0 3.3
P/BV 1.4x 1.3x 1.1x
P/E 7.2x 8.0x 7.5x
EPS 12-m 0.47 0.43 0.46

April 30, 2012
YAPI KREDI- FINANCIALS SUMMARY
2007 2008 2009 2010 2011 2012F 2013F 2014F
Fees and comm 974 1,263 1,436 1,596 1,827 1,966 2,112 2,477
Trading income (201) 304 437 464- (469) 116 (109) (248)
Foreign exchange gains 274 (309) (97) 397 215 (173) (132) (155)
Bank revenues 3,170 3,673 5,255 4,729 4,882 6,027 6,850 7,684
Staff cost (788) (874) (883) (990) (1,138) (1,234) (1,341) (1,572)
Other cost (1,944) (1,485) (1,293) (1,362) (1,406) (1,536) (1,669) (1,958)
Total OPEX (2,732) (2,359) (2,176) (2,352) (2,544) (2,770) (3,010) (3,529)
Operating Income 437 1,314 3,079 2,377 2,338 3,257 3,840 4,154
Associates 39 206 143 155 128 135 141 148
Other income 803 367 195 1,207 811 496 396 774
Provisions for loan losses (238) (379) (1,267) (969) (456) (879) (975) (1,235)
Pre Tax Income 730 1,217 1,714 2,520 2,355 2,487 2,826 3,387
Taxes (144) (292) (359) (459) (498) (497) (537) (610)
Net income 586 925 1,355 2,060 1,857 1,989 2,289 2,777
Cash and alike 3,689 4,559 5,505 6,853 11,873 13,060 14,366 15,803
Due from banks 731 2,164 1,650 1,065 1,814 1,995 2,195 2,414
Loans 28,509 38,673 37,858 52,615 67,780 79,879 94,257 116,878
Total IEA 45,480 58,580 59,126 78,879 101,508 117,959 137,272 166,786
Fixed assets 1,068 1,143 1,086 1,105 1,009 1,080 1,156 1,237
Assets total 50,353 63,723 64,560 84,776 108,103 123,141 140,899 168,703
Deposits 32,167 41,705 40,833 52,725 63,517 73,045 85,463 102,555
Interbank funds 1,777 387 926 2,960 5,918 6,741 7,713 9,235
Funds borrowed 4,236 6,164 5,309 8,373 13,723 15,632 16,386 18,119
BVPS (TL) 1.13 1.58 1.90 2.37 2.69 3.08 3.53 4.07
EPS (TL) 0.16 0.24 0.31 0.47 0.43 0.46 0.53 0.64
PER 21.0x 14.3x 11.0x 7.2x 8.0x 7.5x 6.5x 5.4x
PBR 3.0x 2.2x 1.8x 1.4x 1.3x 1.1x 1.0x 0.8x
Yield (%) 0.71 0.67 2.34 1.87 1.69 1.81 2.08 2.52
Founded in 1944, Yapi Kredi is Turkey’s fourth largest bank by asset size, at over TL100bn as of FY2011. As of 1Q12 the bank had 908
branches and 15,000 employees. Yapi Kredi was the first bank to issue credit cards in Turkey and remains the leading bank in the Turkish
credit card business, with a market share of 18.3%. Yapi Kredi Bank is owned by Koc Financial Services (KFS) as a JV between UniCredit
and Koc Group. KFS holds an 81.8% stake in Yapi Kredi. The bank has 10.3% market share in loans and 9.2% in deposits as of FY 2011.

April 30, 2012
YAPI KREDI- RATIO ANALYSIS
2007 2008 2009 2010 2011 2012F 2013F 2014F
Loans/Deposits 88.6 92.7 92.7 99.8 106.7 109.4 110.3 114.0
Asset quality (%)
NPL 5.75 4.24 6.38 3.42 2.98 3.30 3.10 3.00
Expense ratios (%)
CIR 86.2 64.2 41.4 49.7 52.1 46.0 43.9 45.9
Loan spread 7.46 7.32 6.73 4.97 3.72 3.70 3.73 2.86
Bond spread 3.61 4.70 3.41 2.94 3.87 2.90 2.80 2.60
Average spread 6.30 6.68 5.87 4.46 3.76 3.52 3.53 2.81
NIM 4.3 4.1 5.4 4.3 3.3 3.6 3.8 3.6
ROE 17.2 17.6 17.2 21.4 16.5 15.9 15.9 16.8
ROA 2.3 1.8 2.1 2.7 1.8 2.1 2.1 1.9
Growth measures (%)
Loans 26.7 35.7 -2.1 39.0 28.8 17.9 18.0 24.0
Deposits 3.3 29.7 -2.1 29.1 20.5 15.0 17.0 20.0
Assets 3.0 26.6 1.3 31.3 27.5 13.9 14.4 19.7
Net interest income 20.7 13.8 44.0 -8.0 3.5 24.4 20.9 12.7
Fees and comm 14.3 29.7 13.8 11.1 14.4 7.6 7.5 17.3
Cost 36.7 -13.7 -1.9 7.6 8.1 8.4 8.7 17.3
Net income 38.4 47.0 29.9 52.1 -9.8 7.1 15.1 21.3
Capital (TRYm)
RWA 42,661 53,988 54,533 73,259 97,275 124,337 147,647 185,524
Capital 5,832 8,500 9,697 11,821 14,294 16,561 19,201 22,431
CAR (%) 13.7 15.7 17.8 16.1 14.7 13.3 13.0 12.1
Tier-1 Capital 3,371 6,879 6,879 6,879 6,879 7,697 8,617 9,705
Tier-1 (%) 7.9 13.0 12.6 9.4 7.1 6.2 5.8 5.2

April 30, 2012
Ş E K E R S E C U R I T I E S R E S E A R C H
Şeker Yatırım Menkul Değerler A.Ş. TEL: +90 (212) 334 33 33
İnönü Cad. Tumşah Han No: 36 Fax: +90 (212) 334 33 34
Beyoğlu – İSTANBUL E-mail: research@sekeryatirim.com
TURKEY Web: http://www.sekeryatirim.com/english/index.aspx
For additional information, please contact:
Research
Kadir Tezeller Head of Research +90 (212) 334 33 33 ktezeller@sekeryatirim.com
Derya Guzel Banking +90 (212) 334 33 33 x228 dguzel@sekeryatirim.com
Burak Demirbilek Utilities, Aviation, Iron-Steel, Beverage +90 (212) 334 33 33 x128 bdemirbilek@sekeryatirim.com
Selahattin Aydin Cement & Technical Analyst +90 (212) 334 33 33 x251 saydin@sekeryatirim.com
Ezgi Gulbas Autos, Oil & Gas, Retail +90 (212) 334 33 33 x201 egulbas@sekeryatirim.com
Volkan Dukkancik Telecoms, REITs, White Goods, Glass +90 (212) 334 33 33 x257 vdukkancik@sekeryatirim.com
Okan Uzun Banking, Insurance, Conglomerates +90 (212) 334 33 33 x245 okan.uzun@sekeryatirim.com
Engin Degirmenci Database Associate +90 (212) 334 33 33 x334 edegirmenci@sekeryatirim.com
Economy & Politics
Ibrahim Aksoy Economist +90 (212) 334 91 04 iaksoy@sekeryatirim.com
Institutional Sales
Batuhan Alpman Head +90 (212) 334 91 01 balpman@sekeryatirim.com
Atakan Andic Sales Trader +90 (212) 334 91 02 aandic@sekeryatirim.com
Selin Gursel Trader +90 (212) 334 91 03 sgursel@sekeryatirim.com
Hulya Oztan Kuru Sales Representative +90 (212) 334 33 33 x361 hkuru@sekeryatirim.com
Murat Senalp Sales Representative +90 (212) 334 91 05 msenalp@sekeryatirim.com
DISCLAIMER
I, Derya GUZEL, hereby certify that the views expressed in this research accurately reflect my personal views about the
subject securities and issuers. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to
the specific recommendations or views expressed in this report.
This report has been prepared by Şeker Yatırım Menkul Değerler A.Ş. (Şeker Securities, Inc.). The information and opinions
contained herein have been obtained from and are based upon public sources that Şeker Securities considers to be reliable. No
representation or warranty, express or implied, is made that such information is accurate or complete and should not be relied
upon, as such. All estimates and opinions included in this report constitute our judgments as of the date of this report and are
subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation
for the purchase or sale of a security. Investors must make their own investment decisions based on their specific investment
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Copyright © 2012 Şeker Securities, Inc.

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