ATA INVEST- TR BANKS- UPDATE March 2015

Ata Finance Group
Turkish Banks
“Finding the Sweet Spot in Valuation”
27 March 2015
Derya Guzel
dguzel@atainvest.com
+90 (212) 310 62 89

Ata Finance Group 2
Turkish banks offer good value in terms valuation and continued healthy fundamentals. Turkish banking index is down
10% ytd in TL and is down 19% in US$ terms: current valuations are attractive and fundamentals are supportive for banks.
Turkish banks are currently trading at 0.96x P/BV and 7.7x P/E on our 2015 estimates. According to Bloomberg, Turkish
Banks at 1.0x P/BV are currently trading at 11% discount to MSCI EM Banks index. P/E multiples also indicate 8% discount.
Both on a 5-yr and 2-yr historic P/BV, the valuation indicates 26% and 15% discount respectively.
Banking Sector in 2015: Valuation signals a good entry point…
Xbank Index 1-yr Fwd P/BV (x) MSCI EM Banks Index 1-yr Fwd P/BV (x)
0.5
1
1.5
2
2.5
1 Yr Fwd P/BV (x) Average
+1 ST. Dev -1 ST. Dev
0.5
1
1.5
2
2.5
Risks for banking sector fundamentals. In 2015 we expect 5.5% CPI, 4% GDP growth and our current RfR stands at
8.25%. Lower than expected GDP growth, higher unemployment rate and worse than expected depreciation in TL are
downside risks to our asset quality estimates. Lower than expected lending growth due to macro sentiment and CBT rising
interest rates earlier than expected due to global macro trends could also pressure banks’ valuations.
Source: Bloomberg
Source: Bloomberg

Ata Finance Group 3
Banking Sector in 2015: Changes to our recommendatations…
We maintain our Outperform rating for Halkbank and Vakifbank however
removing the stocks from our top pick list. We reshuffle our top pick list, while not
changing our recommendations for Halkbank and Vakifbank (both rated Outperform)
we remove the stocks from our top pick list. On Halkbank, while the bank is trading at
deep discount both to its 5-yr historic valuation and peers, we believe the
postponement of insurance sale process from 2Q15 to 4Q15 creates downside risk to
completion of insurance sale even in 2015, which we previously indicated that would
have been positive for mending the investor confidence which was lost. We expect
15% ROE for Halkbank in 2015 vs management expectation of 20-22% ROE, which
includes the insurance sale. On Vakifbank, while we still believe on the way to SPO,
with current valuation gap, the stock looks attractive, however further delay and
continued uncertainty regarding share transfer between GDF and Turkish Treasury
could create headwinds and loss of investor confidence there. In Halkbank, completion
of insurance sale process in 2015 and in Vakifbank completion of share transfer would
act as positive catalyst.
We upgrade Akbank to Outperform, while adding both Akbank and Isbank to our
to pick list. We believe Isbank’s outperformance both on share price, EPS growth and
asset quality achievements to continue in 2015. We believe further progress within the
subsidiary restructuring could also act as value enhancing. We also upgrade Akbank
to Outperform on the back of valuation ground and recent relief which came following
Citi’s stake sale. Yapi Kredi currently is the least preferred bank within the banks we
cover. We highlight TSKB as a defensive and small cap name. As a development bank
which doesn't have exposure to retail. Yapi Kredi currently is the least preferred bank
within the banks we cover.
Recommendation Revisions
Cur. rating Prev. rating Price Current TP Prev TP Upside %
AKBNK OP MP 7.94 9.70 10.13 22.2
GARAN MP MP 8.63 9.90 10.80 14.7
HALKB OP OP 13.15 18.00 20.48 36.9
ISCTR OP OP 6.02 7.90 8.16 31.3
TSKB OP OP 1.97 2.58 2.82 33.7
VAKBN OP OP 4.41 6.28 7.00 42.4
YKBNK MP MP 4.16 5.05 5.96 21.3
Source: Bloomberg and Ata estimates
Ata ratings
EPS Revisions 2015-2016E
EPS Old New Change % Old New Change %
AKBNK 0.88 0.90 2% 1.02 1.02 0%
GARAN 0.91 0.88 -4% 1.05 0.99 -6%
HALKB 2.20 2.08 -5% 2.51 2.43 -3%
ISCTR 0.85 0.85 -1% 1.03 0.96 -6%
TSKB 0.30 0.28 -5% 0.38 0.33 -13%
VAKBN 0.76 0.75 -1% 0.91 0.89 -2%
YKBNK 0.51 0.47 -8% 0.60 0.55 -8%
Average 0.92 0.89 -3% 1.07 1.03 -4%
2016E2015E
We pencil in 13% EPS growth for banks under our coverage. Following full year
2014 results and 2015 budget announcements we have reduced our NI estimates for
2015 by 3% and for 2016 by 4%, mainly on the back of slower fee income growth
(regulatory effect). We have also cut our NIM expectation to y/y flat NIM from 20bps
improvement previously. While we foresee inflation to ease in 2015 to some extent, we
see volatility in FX rates and other non-HR related cost (i.e. fee reimbursement due to
Consumer Arbitration Committee) to pressure opex this year. We pencil in average
13.4% opex growth in 2015 following 13.8% in 2014 for banks under our coverage.

Ata Finance Group 4
Ata Invest 2015 Macro scenario…
Lower oil prices are supportive
Pressure on TL and rebound in oil prices Following the latest ECB quantitative easing decision, earlier than expected
recovery in Europe could be an upside risk
Geopolitical risks in the Middle East and Russia- Ukraine Conflict Acceleration in the pace of capital inflow, in particular, FDI
Deterioration in trade balance triggered by weak global demand Further delay in FED rate hikes
Downside Risks Upside Risks
Turkey is still vulnerable to sudden and sustained capital outflows Higher than expected growth while sustaining low inflation
Year-end US$/TL: 2.59
General Elections (7 June 2015)
Structural reforms and the Government's fiscal stance
Developments regarding the Peace Process- Kurdish Issue
Catalysts
Year-end Euro/TL: 2.85
Risk free rate: 8.25%
Inflation (CPI): 5.5% US FED tightening versus implication of ECB's quantitative easing
GDP Growth: 4%
CAD/GDP ratio: 4.8% Trends in inflation and CAD/GDP in 1H15
Significant decline in inflation is likely
Lower interest rates will help domestic demand and equities
Macro Estimates - 2015E
Higher GDP growth compared to previous year
Macro Perspective
FED rate hike concerns will be partially offset by ECB QE
Political landscape looks stable ahead of General Elections
Source: Ata Invest Estimates

Ata Finance Group 5
The ROE gap among the banks looks more distinct when the comparison is made using the returns that banks generate in excess of
the cost of equity (CoE). We have draw the P/BVs vs ROEs chart using the excess returns over and above cost of equity.
Coverage Banks ROE Gap study: Yapi Kredi looks worse while Halkbank and
TSKB look attractive…
In Figure B we repeated the same exercise using what the
implied price to book equity would be if the excess ROE was
perpetuity-discounted at the current yield on 10yr Turkey
treasury notes (risk free). This exhibits how wide the valuation
gap would have been had the shares been valued based only
on the ROE gap.
Figure A: P/BV (2015E) vs ROE in excess of CoE
Figure B: 1 + ((ROE – CoE)/RfR) v (ROE – CoE)
In Figure A we plot the current P/BV values against the forecast
period ROE in excess of the CoE across the banks we cover.
Akbank
Garanti
Halkbank
Isbank
TSKB
Vakifbank
Yapi Kredi
0.0x
0.2x
0.4x
0.6x
0.8x
1.0x
1.2x
1.4x
1.6x
-4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0
Akbank
Garanti
Halkbank
Isbank
TSKB
Vakifbank
Yapi Kredi
0.0x
0.2x
0.4x
0.6x
0.8x
1.0x
1.2x
1.4x
-4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0
Source: Bloomberg and Ata Invest Estimates
Source: Bloomberg and Ata Invest Estimates

Ata Finance Group 6
• The banking sector NPL ratio realized at 2.8% in 2014, indicating 10bps increase
from 2013. Although we anticipate some deterioration in NPL ratio especially
coming from unsecured lending segments (i.e. credit cards) we believe collections
(as we expect 4% GDP growth) should offset some part of the negative.
• On the FX side we saw +10% depreciation in TL/US$ since the start of the year.
While this might put some pressure on assets, we don’t foresee FX depreciation
directly to hit asset quality in short term, at least at those levels. We believe NPL
ratio in Turkey very much linked to GDP growth and unemployment rate. Hence
we don't foresee a weakness going forward in our assets quality.
• For this year we only pencil in 20bps increase and foresee NPL ratio for the sector
to be in a range between 3.0%-3.1%. Please remember that, in Turkey, consumers
can not borrow in FX hence don’t carry currency risk. On the other hand, the
majority of retail loans are fixed rate and TL dominated. When looking at the loan
segments, only 38% of SME loans in the sector based on FX (those are mainly
larger size SMEs) and 44% of the corporate book is in FX (mainly large size
companies and blue chips) hence in the short term, we don’t foresee rapid
increase in NPLs.
Asset quality: We don’t expect NPLs to peak in 2015…
-8%
-4%
0%
4%
8%
12%
0%
2%
4%
6%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015E
2016E
NPL % GDP growth (rhs)
Banking sector NPL ratio vs GDP growth %
NPL ratios vs coverage ratios as of 4Q14
NPL ratios 2015E
100%
94% 94%
81%
73%
71%
65%
94%
0%
20%
40%
60%
80%
100%
120%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
TSKB AKBNK ISCTR GARAN Sector YKBNK HALKB VAKBN
NPL ratio % 2013 NPL ratio % 2014 Coverage % 2014
2.0%
2.6%
3.4%
1.7%
3.0%
0.2%
3.5%
3.7%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
AKBNK GARAN HALKB ISCTR Sector TSKB VAKBN YKBNK
Source: Company data and Ata Invest Estimates

Ata Finance Group 7
• To be able to evaluate the banks in terms of their cost efficiency we
created the efficiency matrix below. Below we see two sets of distinctive
ratios one belong to state banks and other is private banks. However
when looking at the banks as a whole, Akbank and Garanti distinguish
themselves as the most efficient banks when compared with the rest of
the Tier-1 banks.
• With the recent investment cycle Yapi Kredi’s opex realized at 18% y/y
hence its expense ratios now look the weakest among the private peers.
Its fee coverage of cost ratio drop to 56% from 60% in 2013 while its
cost to revenues increased to 53% from 49% respectively. We expect
deterioration of expense ratios to continue in 2015E as we expect the
investment cycle to continue.
• On average we expect 13% opex growth for banks under our coverage.
As we mentioned above, we foresee Yapi Kredi to post highest cost
growth (2015E 17.5%) while we expect Akbank to post below peers
(2015E 9.3% vs peers 13%). While we foresee inflation to ease in 2015,
we see volatility in FX rates and other non-HR related cost (i.e. fee
reimbursement due to Consumer Arbitration Committee) to pressure
opex this year.
Efficiency comparison: Turkish Banks efficiency ratios in context…
Cost to assets (%) 2014 and 2015E
Turkish Banks efficiency metrics as at Dec’14
Fee coverage of cost (%) 2014 and 2015E
Expense ratios % AKBNK GARAN HALKB ISCTR VAKBN YKBNK Average
Cost/Revenues 40.5 46.2 48.3 59.1 55.7 53.2 50.5
Cost/NII+ fees 40.0 45.4 48.7 60.2 58.0 50.3 50.4
Fees/Cost 63.5 62.6 34.2 35.2 22.8 56.0 45.7
Cost/Assets 1.9 2.2 2.0 2.5 2.1 2.4 2.2
Source: Company Data and Ata estimates
64 63
34 35
23
56
46
64
56
33 34
22
50
43
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
AKBNK GARAN HALKB ISCTR VAKBN YKBNK Average
2014 2015E
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
AKBNK GARAN HALKB ISCTR VAKBN YKBNK
2014 2015E Opex growth % 2015E

Ata Finance Group 8
• Figure below shows foreign institutional ownership in
Turkish banks to reflect the interest in the shares.
• Garanti Bank, the most liquid and largest weight stock
among the Turkish banking sector shares as well as the
broader Turkish market itself, is a good reference point
to gauge the level of interest by institutions in the banks.
• Foreign institutions currently own 70.9% of the free float
in Garanti, down from 72.8% in Dec’14.
• When looking at the other banks, ytd Vakifbank and
Yapi Kredi were heavily sold where Akbank’s share
increased. 7.8ppt increase in Akbank mainly came
following the Citi exit in the bank.
Foreign institutional ownership share in Turkish banks free float: Yapi Kredi
and Vakifbank look heavily sold off while Akbank gained…
Date ISE ALL AKBNK GARAN HALKB ISCTR VAKBN YKBNK TSKB
31/12/12 65.7 45.3 74.6 76.2 66.7 70.7 55.5 53.1
30/05/13 65.5 46.0 75.3 86.7 68.4 82.3 59.7 57.2
31/12/13 62.4 45.0 73.3 76.2 59.0 70.7 55.5 53.1
31/12/14 63.8 49.3 73.5 75.0 67.2 69.7 62.2 57.4
30/01/15 64.3 50.4 72.8 81.5 68.5 74.1 59.9 56.9
27/02/15 63.0 50.7 72.0 78.7 65.5 69.9 56.4 55.8
18/03/15 62.7 57.0 70.9 74.1 63.3 61.4 55.0 55.6
ytd change -1.2 7.8 -2.6 -0.9 -4.0 -8.4 -7.2 -1.8
• Big chunk of the exit from the banks
came end of February.
• Although it share price has been
heavily sold off since 2013, Halkbank
maintained to have one of the highest
foreign ownership with 74.1%. Yapi
Kredi with 55.0% is the lowest, equal
to our small cap pick TSKB.
• We also expect some pick up in
Akbank’s foreign ownership with
recent upgrades.
Source: Central Securities Depository of Turkey
30
40
50
60
70
80
ISE ALL AKBNK GARAN HALKB ISCTR VAKBN YKBNK TSKB
31 December 2012 31 December 2013 31 December 2014 18 March 2015

Ata Finance Group 9
Where we stand vs consensus: We expect 13% EPS growth in 2015…
TP Net Income TP Net Income TP Net Income
AKBNK 9.48 3,499 9.70 3,591 2% 3%
GARAN 10.21 3,719 9.90 3,678 -3% -1%
HALKB 18.12 2,565 18.00 2,597 -1% 1%
ISCTR 7.55 3,686 7.90 3,810 5% 3%
TSKB 2.44 407 2.26 425 -7% 4%
VAKBN 5.98 1,794 6.28 1,883 5% 5%
YKBNK 5.35 2,208 5.05 2,061 -6% -7%
Bloomberg 2015E Ata 2015E Ata vs Bloomberg
AKBNK
GARAN
HALKB
ISCTR
TSKB
VAKBN
YKBNK
Net income
Bloomberg 2016E Ata 2016E Ata vs Bloomberg
4,081
4,142
3,042
4,330
2,229
-4%
3%
2%
7%
2,696 2,411
-11%
Net income %
4,091
4,300
2,955
2,085
0%
4,226
458 498 9%
EPS Old New Change % Old New Change %
AKBNK 0.88 0.90 2% 1.02 1.02 0%
GARAN 0.91 0.88 -4% 1.05 0.99 -6%
HALKB 2.20 2.08 -5% 2.51 2.43 -3%
ISCTR 0.85 0.85 -1% 1.03 0.96 -6%
TSKB 0.30 0.28 -5% 0.38 0.33 -13%
VAKBN 0.76 0.75 -1% 0.91 0.89 -2%
YKBNK 0.51 0.47 -8% 0.60 0.55 -8%
Average 0.92 0.89 -3% 1.07 1.03 -4%
2016E2015E
Ytd 2015E Bloomberg consensus EPS revisions
-0.54% -0.36%
-2.18%
3.70%
-1.78%
2.05%
-2.66%-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
Akbank Garanti Halkbank Isbank TSKB Vakifbank Yapi Kredi
Ata Invest vs Bloomberg 2016E Net Income estimate
Ata Invest vs Bloomberg 2015 TP & NI estimate Revisions to Ata Invest estimates (2015E and 2016E)
Source: Bloomberg

Ata Finance Group 10
TR Banks vs MSCI EM Banks: Trading at discount to both its 5-yr
historical average and MSCI EM Banks…
Price performance (US$ rebased 100) TR Banks 1Y fwd P/BV (x)
50
75
100
125
150
3/14 5/14 6/14 8/14 9/14 11/14 12/14 2/15 3/15
TR Banks ISE100 MSCI EM Banks
TR Banks vs MSCI EM Banks 1Y fwd P/BV (x) TR Banks vs MSCI EM Banks 1Y fwd P/E (x)
5
7.5
10
12.5
MSCI EM Banks 1Y Fw P/BV TR Banks 1Y Fw P/BV
0.5
1
1.5
2
2.5
MSCI EM Banks 1Y Fw P/BV TR Banks 1Y Fw P/BV
Source: Bloomberg
0.5
1
1.5
2
2.5

Coverage Banks: 1Y fwd P/BV vs both 5-yr and 2-yr historical average
points to favourable valuation…
Akbank Garanti Halkbank
Isbank Vakifbank Yapi Kredi
0.5
1
1.5
2
2.5
0.5
1
1.5
2
2.5
0.5
1
1.5
2
2.5
3
0.5
1
1.5
2
0.5
1
1.5
Series1 Series2
0.5
1
1.5
2
2.5
Source: Bloomberg

Ata Invest Turkish Banks Valuation metrics…
Ticker AKBNK GARAN HALKB ISCTR VAKBN YKBNK TSKB
Current share price 7.94 8.63 13.15 6.02 4.41 4.16 1.97
12M Target price 9.70 9.90 18.00 7.90 6.28 5.05 2.58
Upside (%) 22.2 14.7 36.9 31.3 42.4 21.3 30.8
Rating OP MP OP OP OP MP OP
Key Data (TLm)
Market cap 31,760 36,246 16,438 27,090 11,025 18,084 2,955
Market cap US$m 12,231 13,959 6,330 10,433 4,246 6,964 1,138
Assets 195,190 203,622 143,767 219,599 138,539 158,276 13,903
Loans 118,050 123,111 92,187 139,321 91,800 105,672 9,666
Deposits 107,920 110,538 93,892 125,257 84,206 93,687 N/M
EPS (TL)
2013 0.74 0.72 2.20 0.70 0.63 0.46 0.22
2014 0.79 0.76 1.76 0.75 0.70 0.42 0.25
2015E 0.90 0.88 2.08 0.85 0.75 0.47 0.28
2016E 1.02 0.99 2.43 0.96 0.89 0.55 0.33
BVPS (TL)
2013 5.33 5.38 11.32 5.24 5.05 3.98 1.26
2014 6.28 6.19 13.23 6.51 5.91 4.40 1.53
2015E 7.09 6.87 14.89 7.15 6.66 4.87 1.75
2016E 8.00 7.66 16.84 7.87 7.55 5.43 2.02
P/E (x)
2013 10.80 12.06 5.98 8.56 6.95 9.03 9.06
2014 10.05 11.33 7.45 8.01 6.29 9.80 8.00
2015E 8.84 9.86 6.33 7.11 5.85 8.77 6.96
2016E 7.78 8.75 5.40 6.26 4.95 7.50 5.93
P/BV (x)
2013 1.49 1.60 1.16 1.15 0.87 1.04 1.57
2014 1.26 1.39 0.99 0.92 0.75 0.95 1.29
2015E 1.12 1.26 0.88 0.84 0.66 0.85 1.12
2016E 0.99 1.13 0.78 0.76 0.58 0.77 0.98
Key ratios (4Q'14) %
LDR 111.1 114.2 98.1 116.7 114.0 116.1 111.1
NPL 1.8 2.4 3.5 1.5 3.7 3.4 0.2
Loans as % assets 61.3 61.2 65.5 65.6 66.1 67.3 69.9
CAR 15.2 15.2 13.6 16.0 14.0 15.0 18.0
Quarterly ROE 14.6 12.2 11.0 11.7 19.2 11.2 14.7
Quarterly ROA 1.60 1.53 1.48 1.40 1.20 1.20 2.14

Ata Invest Turkish Banks Estimates at a glance…
Akbank Garanti Halkbank Isbank Vakifbank Yapi Kredi TSKB
2014
Loan grow th 13.8 13.0 19.9 15.2 20.6 27.0 19.7
Deposit grow th 7.7 13.0 2.9 10.4 12.5 21.8 N/M
Asset grow th 11.8 11.2 11.1 13.0 16.8 21.7 21.6
NII grow th 12.1 17.1 5.9 12.0 -2.9 20.2 12.3
Fees & commissions grow th 9.0 12.8 10.0 4.4 3.3 9.7 4.3
Opex grow th 7.7 12.1 12.5 14.8 18.3 17.7 56.1
Net income grow th 7.4 6.5 -19.8 6.9 10.6 -7.9 13.3
ROE 13.6 12.2 14.4 12.8 12.8 10.1 17.7
CAR 14.2 15.2 13.6 16.0 13.8 15.0 18.0
LDR 111.1 114.2 98.1 116.7 114.0 116.1 N/M
NPL ratio 1.8 2.4 3.5 1.5 3.7 3.4 0.2
2015E
Loan grow th 15.3 13.6 17.0 17.3 20.4 20.0 17.0
Asset grow th 11.3 9.7 12.0 13.0 14.9 15.0 16.4
NII grow th 15.2 14.2 19.8 15.1 19.1 23.3 18.5
Opex grow th 9.3 14.7 13.0 11.2 14.8 17.5 -10.8
Net income grow th 13.7 14.9 17.7 12.6 7.4 11.7 15.0
ROE 13.4 13.4 14.8 12.4 12.0 10.2 17.3
CAR 14.4 15.6 13.1 15.8 14.1 15.1 18.9
LDR 112.4 112.0 101.6 120.0 120.4 119.0 N/M
NPL ratio 2.0 2.6 3.4 1.7 3.5 3.7 0.2
2016E
Loan grow th 16.6 15.8 16.2 17.4 18.0 19.8 18.0
Asset grow th 12.4 11.5 11.9 13.5 13.3 15.4 17.4
NII grow th 12.6 12.9 15.1 14.3 18.8 14.6 14.9
Opex grow th 7.7 10.4 10.3 8.5 16.8 19.1 16.9
Net income grow th 13.6 12.6 17.1 13.7 18.4 17.0 17.3
ROE 13.4 13.4 14.8 12.4 12.0 10.2 17.3
CAR 14.5 16.5 12.6 16.3 14.4 15.0 19.4
LDR 114.9 114.8 104.5 124.7 124.6 121.8 N/M
NPL ratio 2.2 2.5 3.4 1.8 3.7 3.7 0.2
Source: Ata Invest estimates
Banks under coverage assumptions %

COMPANY PAGES

Ata Finance Group
Valuation
Current Price, TL 7.94
12-mth Target Price, TL 9.70
Expected Dividend Yield 1.9%
Expected Price Appreciation 20.3%
Total Upside 22.2%
Stock Data
MCap, TL mn 31,760
MCap, US$ mn 12,233
Free float, % 52%
Average Daily Turnover, TL mn 232.4
Financials, TL mn 2013 2014 2015E 2016E
Total Assets 183,737 205,451 228,592 256,833
Loans 110,676 125,978 145,253 169,306
Deposits 105,277 113,373 129,246 147,340
Net Income 2,942 3,160 3,591 4,081
ROE 13.6% 13.6% 13.4% 13.5%
ROA 1.7% 1.6% 1.7% 1.9%
P/E 10.8x 10.1x 8.8x 7.8x
P/BV 1.49x 1.26x 1.12x 0.99x
Share Perf. 1M 3M 1Y
Absolute -6% -8% 21%
Relative to ISE100 -1% -4% 1%
15
Akbank (AKBNK TI/AKBNK.IS) Outperform
Earlier than planned Citi exit comes as a breather…
• Citi sold its 9.9% share in the bank earlier than expected, which we believe the sale came as a
relief to uncertainty surrendering the Citi’s stake.
• The most efficient bank on cost ratios and well above the sector asset quality.
• We expect 14% EPS growth in 2015 and also in 2016.
Upgraded to Outperform on the back of good valuation and solid fundamentals…Trading
24% discount to its 5-yr historic P/BV points attractive spot to be invested. The bank also trades
below its -1 standard deviation P/BV of 1.12x. While the bank trades +10% premium to the
sector, this is in line with the historic premium the bank has given its weighting. We expect
Akbank to deliver 13.4% ROE and 1.7% ROA in 2015, which is in line with the peers. Following
Citi’s exit Akbank’s free float increased to 51.1% vs 41.2% previously. Following the increase in
free float, its weighting in MSCI Turkey Index as of 10th March increased to 10.7% vs 9.4%.
The bank stands out on cost efficiency ratios and we expect this to hold in mid term.
Akbank posted c.9% opex growth during last 6 years vs Tier-1 average of 13.4% cost growth. On
1) fee coverage of cost Akbank stands at 63.5% vs peer average of 45.7%, 2) cost to total assets
Akbank 1.9% vs 2.2% peer average and 3) cost to NII+fees stands at 40% vs 50% peer average
and 4) cost to total revenues 40.5% vs peers 50.5%.
Highest coverage ratio (94% vs sector 74%) and strong asset quality (1.8% vs sector
2.9%). The bank currently covers 94% of its NPL book vs sector average 74%. Akbank’s ROE
would have been higher by 90bps, provided low risk coverage to the level of the industry. While
we don’t expect immediate ease on the coverage ratio, this provides an upside risk to future
earnings. The bank also has TL200mn free provision that put aside which can be used if/when
needed.
We estimate 14% EPS growth in 2015 driven by 15% NII growth and 9% fee
growth…Following 14% loan growth in 2014 we see 15% loan growth in 2015 and 14% deposit
growth. We also expect NII to increase by 15%, thanks to switch in asset mix (share of SME &
micro enterprise lending to go up) and higher weight of TL assets in balance sheet coupled with
increased demand deposits share.

Ata Finance Group
AKBNK FINANCIALS
AKBNK
Income Statement (TL mn) 2010 2011 2012 2013 2014 2015E 2016E
Net Interest Income (NII) 4,277 3,993 5,200 6,174 6,921 7,974 8,978
Fees and comm 1,309 1,579 1,735 2,164 2,359 2,604 2,864
Net trading income & FX gains 33 -119 400 468 -111 -109 -121
Bank revenues 5,619 5,452 7,336 8,805 9,169 10,470 11,720
Staff cost -878 -960 -1,164 -1,379 -1,437 -1,570 -1,691
Other cost -1,539 -1,474 -1,734 -2,069 -2,276 -2,488 -2,678
Total OPEX -2,417 -2,434 -2,898 -3,448 -3,713 -4,058 -4,369
Operating Income 3,202 3,018 4,438 5,357 5,457 6,411 7,351
Associates 27 50 56 29 28 29 31
Other income 864 581 417 371 607 543 607
Income before provision 4,093 3,649 4,911 5,758 6,091 6,983 7,989
Provisions for loan losses -348 -302 -657 -1,067 -1,520 -1,904 -2,208
Other provisions -171 -346 -450 -838 -533 -415 -481
Pre Tax Income 3,574 3,001 3,803 3,854 4,038 4,664 5,300
Taxes -718 -607 -853 -912 -878 -1,073 -1,219
Net income 2,857 2,395 2,950 2,942 3,160 3,591 4,081
Balance sheet (TL mn)
Cash and alike 6,096 13,876 16,663 18,223 21,140 23,254 25,580
Due from banks 1,784 2,819 2,698 4,945 4,756 5,232 5,755
Trading securities 1,032 960 551 1,772 1,407 1,548 1,702
Fixed income securities 48,848 42,695 45,558 44,595 48,871 52,738 56,926
Loans 52,896 70,306 87,656 110,676 125,978 145,253 169,306
Total IEA 110,655 130,657 153,126 180,211 202,153 228,024 259,269
Assets total 113,183 133,552 155,854 183,737 205,451 228,592 256,833
Deposits 67,167 76,814 86,105 105,277 113,373 129,246 147,340
Interbank funds 11,211 12,785 19,714 22,399 27,441 30,531 34,303
Funds borrow ed 10,375 16,770 14,038 18,117 20,989 21,853 23,053
Int bearing liabilities 88,753 106,369 119,857 145,793 161,803 181,630 204,696
Other liabilities 6,865 9,628 14,084 16,606 18,536 18,618 20,120
Shareholders Equity 17,565 17,554 21,913 21,339 25,112 28,344 32,017

Ata Finance Group
AKBNK SELECTED RATIOS
Selected ratios (%) 2010 2011 2012 2013 2014 2015E 2016E
Loans/Total assets 46.7 52.6 56.2 60.2 61.3 63.5 65.9
Securities/Total assets 43.2 32.0 29.2 24.3 23.8 23.1 22.2
Loans/Deposits 78.8 91.5 101.8 105.1 111.1 112.4 114.9
NPL 3.2 1.8 1.3 1.5 1.8 2.0 2.2
LLP/NPL 27.2 23.9 58.9 63.6 65.2 65.5 60.7
CIR 43.0 44.6 39.5 39.2 40.5 38.8 37.3
Fees coverage of cost 54.2 64.8 59.9 62.8 63.5 64.2 65.6
Cost/Total assets 2.1 1.8 1.9 1.9 1.8 1.8 1.7
NIM 4.2 3.4 3.8 3.8 3.8 3.7 3.7
Net fees/Total assets 1.2 1.3 1.2 1.3 1.2 1.2 1.2
ROE 18.0 13.6 14.9 13.6 13.6 13.4 13.5
ROA 2.7 1.9 2.0 1.7 1.6 1.7 1.9
Total CAR (%) 20.6 17.0 18.0 15.0 14.2 14.4 14.5
Growth measures (%)
Loans 33.2 32.9 24.7 26.3 13.8 15.3 16.6
Deposits 20.3 14.4 12.1 22.3 7.7 14.0 14.0
Assets 18.8 18.0 16.7 17.9 11.8 11.3 12.4
Net interest income -6.9 -6.6 30.2 18.7 12.1 15.2 12.6
Fees and comm 2.3 20.6 9.9 24.7 9.0 10.4 10.0
Cost 10.7 0.7 19.0 19.0 7.7 9.3 7.7
Net income 4.8 -16.2 23.2 -0.3 7.4 13.7 13.6
Per share data and valuation metrics
BVPS (TL) 4.39 4.39 5.48 5.33 6.28 7.09 8.00
EPS (TL) 0.71 0.60 0.74 0.74 0.79 0.90 1.02
P/E 11.1x 13.3x 10.8x 10.8x 10.1x 8.8x 7.8x
P/BV 1.81x 1.81x 1.45x 1.49x 1.26x 1.12x 0.99x
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AKBNK XBANK
Share price performance (Rebased to 100)

Ata Finance Group
Valuation
Total Upside 14.7%
Stock Data
MCap, TL mn 36,246
MCap, US$ mn 13,961
Free float, % 48%
Total Assets 196,896 218,919 240,230 267,881
Loans 118,671 134,058 152,290 176,412
Deposits 106,474 120,308 135,948 153,617
Net Income 3,006 3,200 3,678 4,142
ROE 13.3% 12.2% 13.4% 13.6%
ROA 1.6% 1.5% 1.6% 1.8%
P/E 12.1x 11.3x 9.9x 8.8x
P/BV 1.60x 1.39x 1.26x 1.13x
18
Garanti (GARAN TI/GARAN.IS) Marketperform
BBVA soon to take solo control of Garanti…
• BBVA bought further 14.89% of Garanti in Nov’14. With this acquisition BBVA will hold the
control of the bank, while change of CEO is expected sometime in 2015.
• We believe Garanti to continue to be the key stock in any Turkish portfolio thanks to its solid
fundamentals, however based on valuation grounds we maintain our Marketperform
recommendation.
• While we expect some asset quality worsening, it shouldn’t be troublesome on NPL front.
While trading 22% discount to its 5-yr average P/BV the bank currently trades at 30%
premium to the peer average. Trading at 1.26x P/BV and 9.9x P/E on our 2015 estimates,
c.30% premium on both valuation parameters. While we believe Garanti is the key stock within
banking universe we feel current multiples are not favorable.
Although the bank is the most bearish on fee growth, we pencil in 4% fee growth in 2015.
While the bank was quite downbeat on fee front (slight decline is budgeted), mainly due to the
recent regulatory actions. However we believe, Garanti should be able to post 4% fee growth in
2015 driven by; 1) increase in project finance loan fees, 2) non-cash loan fees and 3) insurance
related fees, 4) money transfer fees.
We foresee 20bps NPL ratio deterioration in 2015 and expect NPL ratio of 2.6%. In line with
the management guidance we foresee 20bps increase in NPL ratio. Garanti also guided that,
couple of NPL files to be collected sometimes in 2015 and collections/NPL sales will offset some
of the negative effect coming from fresh NPL inflow especially on retail segments. Coverage ratio
of the bank stands at 81%, what is above the sector average of 73%. In short term we don’t
expect reduction in the coverage ratio.
Current CEO Mr. Ozen to retire sometimes this year and new CEO will be appointed by
BBVA as the bank will hold the majority following further share acquisition. When current
CEO Mr. Ozen step down new CEO will be selected by BBVA sometimes during this year. While
this might come with some uncertainty, we believe new CEO appointment should not create any
downside risk for Garanti’s operations as a whole.

Ata Finance Group
GARAN FINANCIALS
GARAN
Fees and comm 1,816 2,008 2,008 2,615 2,949 3,053 3,277
Net trading income & FX gains 364 332 614 297 -194 -115 -127
Bank revenues 6,934 7,029 8,341 9,268 10,198 11,438 12,742
Staff cost -1,161 -1,248 -1,501 -1,666 -1,928 -2,212 -2,443
Other cost -1,880 -1,958 -2,040 -2,540 -2,785 -3,194 -3,528
Total OPEX -3,041 -3,206 -3,541 -4,206 -4,713 -5,406 -5,970
Associates 5 6 2 56 2 2 2
Other income 638 903 299 457 483 574 635
Provisions for loan losses -387 -309 -764 -853 -1,164 -1,452 -1,667
Pre Tax Income 3,952 3,908 3,923 3,951 4,162 4,839 5,379
Taxes -807 -838 -853 -946 -962 -1,161 -1,237
Net income 3,145 3,071 3,070 3,006 3,200 3,678 4,142
Balancesheet (TL mn)
Cash and alike 7,510 8,261 16,113 22,719 25,153 27,668 30,435
Due from banks 8,321 14,344 7,746 9,750 8,440 9,284 10,212
Trading securities 980 1,657 1,183 1,603 1,683 1,851 2,036
Loans 64,827 83,813 91,824 118,671 134,058 152,290 176,412
Total IEA 119,869 141,661 154,106 188,358 210,400 235,239 266,770
Assets total 123,963 146,642 160,192 196,896 218,919 240,230 267,881
Deposits 72,658 84,543 87,482 106,474 120,308 135,948 153,617
Interbank funds 11,254 10,955 13,500 14,584 11,386 12,494 13,932
Funds borrow ed 16,633 20,524 21,678 29,478 32,323 33,970 36,380

Ata Finance Group
GARAN SELECTED RATIOS
Loans/Deposits 91.9 100.9 107.4 113.8 114.2 112.0 114.8
NPL 2.9 1.8 2.3 2.1 2.4 2.6 2.5
LLP/NPL 1.0 1.1 1.3 1.5 1.5 1.3 1.3
CIR 43.9 45.6 42.5 45.4 46.2 47.3 46.9
NIM 3.9 3.3 3.8 3.7 3.8 3.7 3.8
ROE 17.4 18.2 14.6 13.3 12.2 13.4 13.6
ROA 2.8 2.2 2.0 1.6 1.5 1.6 1.8
CAR (%) 19.6 16.9 18.2 14.4 15.2 15.6 16.5
Growth measures (%)
Loans 30.4 29.3 9.6 29.2 13.0 13.6 15.8
Deposits 15.7 16.4 3.5 21.7 13.0 13.0 13.0
Assets 17.6 18.3 9.2 22.9 11.2 9.7 11.5
Fees and comm 10.5 10.6 0.0 30.3 12.8 3.5 7.3
Cost 18.3 5.4 10.4 18.8 12.1 14.7 10.4
Net income 6.2 -2.4 0.0 -2.1 6.5 14.9 12.6
BVPS (TL) 3.92 4.18 5.07 5.38 6.19 6.87 7.66
EPS (TL) 0.75 0.73 0.73 0.72 0.76 0.88 0.99
P/E 11.5x 11.8x 11.8x 12.1x 11.3x 9.9x 8.8x
P/BV 2.20x 2.06x 1.70x 1.60x 1.39x 1.26x 1.13x
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GARAN XBANK

Ata Finance Group
Valuation
Total Upside 36.9%
Stock Data
MCap, TL mn 16,438
MCap, US$ mn 6,331
Free float, % 49%
Total Assets 139,944 155,423 174,058 194,748
Loans 84,848 101,767 119,067 138,356
Deposits 100,756 103,708 117,190 132,425
Net Income 2,751 2,206 2,597 3,042
ROE 20.8% 14.4% 14.8% 15.3%
ROA 2.2% 1.5% 1.6% 1.6%
P/E 6.0x 7.5x 6.3x 5.4x
P/BV 1.16x 0.99x 0.88x 0.78x
Relative to ISE100 -9% -1% -12%
21
Halkbank (HALKB TI/HALKB.IS) Outperform
Capital increase to be executed soon, while insurance
sale delayed…
• We see downside risk in the insurance sale to be completed in 2015 since the bank delayed
the process to 4Q15.
• While NPL ratio is guided to improve in 2015.
• Current valuation indicates deep discount compared to both historic average and peers.
Offering healthy ROEs and trading on attractive valuation. We maintain our Outperform
rating. We expect stock to catch up with peers in price performance and valuation wise. Trading
at 0.88x P/BV and 6.3x P/E on our 2015 estimates, 9% and 18% discount to peers. The stock is
also trading 38% below its 5-yr average of P/BV 1.57x while offering 15% ROE vs 13% peer
average. Our current ROE estimate is slightly below Halkbank’s sustainable guidance of 16-18%.
Management expects 20-22% ROE in 2015, which includes the insurance sale gain.
Asset quality is set to improve. Due to the TL1bn one-off big ticket NPL, Halkbank’s NPL ratio
surged by 100bps to 3.7% in 3Q14. In 2015 the bank guides NPL ratio of 3.2-3.4%, implying an
improvement of 30-50bps. Our current estimate implies 20bps improvement in NPL ratio.
Halkbank’s guidance indicates some upside to our estimate on the asset quality side. While there
is possibility of collection of this particular NPL file in the future, we don’t incorporate this in our
model currently.
We see downside risk in the insurance sale to be completed in 2015 since the bank
delayed the process. The timeline as follow: TL1bn capital increase to be executed in 2Q15,
establishment of participation banking subsidiary in 4Q15, sale of insurance subsidiaries in 4Q15
vs previously 2Q15. However we see there is a downside risk that the sale to be fully completed
in 2016 rather than 2015. While our numbers didn’t included the possible gain from the sale, we
indicated that it would have been an upside risk and change in the overall shareholder sentiment.
We roughly calculate a sale price of TL1.71bn and income before tax of c.TL1.4bn. We deem
insurance sale as one of the positive catalysts for Halkbank when it happens.

Ata Finance Group
HALKB FINANCIALS
HALKB
Fees and comm 526 728 858 930 1,023 1,120 1,254
Net trading income & FX gains 115 208 555 244 56 49 37
Bank revenues 3,832 4,409 5,889 6,003 6,190 7,295 8,339
Staff cost -670 -732 -843 -1,084 -1,248 -1,411 -1,556
Other cost -825 -993 -1,255 -1,571 -1,740 -1,967 -2,169
Total OPEX -1,495 -1,725 -2,098 -2,655 -2,987 -3,377 -3,725
Associates 56 49 64 97 154 177 203
Other income 575 594 360 768 531 560 627
Provisions for loan losses -316 -211 -382 -436 -876 -596 -695
Pre Tax Income 2,509 2,637 3,329 3,365 2,727 3,329 3,900
Taxes -499 -592 -734 -614 -521 -732 -858
Net income 2,010 2,045 2,595 2,751 2,206 2,597 3,042
Cash and alike 4,770 7,272 12,500 19,976 20,276 22,304 24,534
Due from banks 989 1,475 2,619 1,849 1,284 1,412 1,553
Trading securities 89 128 105 164 156 171 188
Loans 44,296 56,216 65,894 84,848 101,767 119,067 138,356
Total IEA 70,262 88,310 103,967 135,232 150,171 170,977 194,056
Assets total 72,942 91,124 108,282 139,944 155,423 174,058 194,748
Deposits 54,782 66,247 79,974 100,756 103,708 117,190 132,425
Interbank funds 3,155 4,905 38 771 8,413 8,455 8,497
Funds borrow ed 3,824 6,291 7,303 13,615 12,630 12,645 12,648

Ata Finance Group
HALKB SELECTED RATIOS
Loans/Deposits 80.9 84.9 82.4 84.2 98.1 101.6 104.5
NPL 3.82 2.88 2.89 2.58 3.51 3.40 3.42
LLP/NPL 18.0 12.6 19.5 19.4 31.4 14.0 14.2
CIR 39.0 39.1 35.6 44.2 48.3 46.3 44.7
NIM 4.8 4.2 4.5 4.2 3.7 3.7 3.8
ROE 30.5 25.4 24.8 20.8 14.4 14.8 15.3
ROA 3.0 2.5 2.6 2.2 1.5 1.6 1.6
CAR (%) 15.9 14.3 16.2 13.9 13.6 13.1 12.6
Growth measures (%)
Loans 36.5 26.9 17.2 28.8 19.9 17.0 16.2
Deposits 24.6 20.9 20.7 26.0 2.9 13.0 13.0
Assets 20.3 24.9 18.8 29.2 11.1 12.0 11.9
Net interest income 2.6 8.8 28.9 7.9 5.9 19.8 15.1
Fees and comm 14.2 38.5 17.9 8.3 10.0 9.6 11.9
Cost 25.3 15.4 21.6 26.6 12.5 13.0 10.3
Net income 23.3 1.7 26.9 6.0 -19.8 17.7 17.1
BVPS (TL) 5.96 6.91 9.86 11.32 13.23 14.89 16.84
EPS (TL) 1.61 1.64 2.08 2.20 1.76 2.08 2.43
P/E 8.2x 8.0x 6.3x 6.0x 7.5x 6.3x 5.4x
P/BV 2.21x 1.90x 1.33x 1.16x 0.99x 0.88x 0.78x
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HALKB XBANK

Ata Finance Group
Valuation
Total Upside 31.3%
Stock Data
MCap, TL mn 27,090
MCap, US$ mn 10,434
Free float, % 31%
Total Assets 210,500 237,772 268,719 304,985
Loans 135,281 155,874 182,763 214,563
Deposits 120,975 133,551 152,248 172,041
Net Income 3,163 3,382 3,810 4,330
ROE 13.7% 12.8% 12.4% 12.8%
ROA 1.6% 1.4% 1.5% 1.5%
P/E 8.6x 8.0x 7.1x 6.3x
P/BV 1.15x 0.92x 0.84x 0.76x
24
Isbank (ISCTR TI/ISCTR.IS) Outperform
We expect value creation to continue as subsidiary
restructuring is not over yet…
• Attractive valuation, trading 13% discount to peers on P/BV and 7% discount on P/E on 2015E.
• NPL ratio stands as the lowest among the private peers and also below sector average NPL
ratio of 2.9%.
• Further restructuring of non-core assets acts as value enhancing in midterm.
Trading both discount to its 5-yr historic average and peer average (18% and 13%
respectively). Isbank is expected to earn an average c.13% ROE in our forecast period, 2015-
2016E, while we expect the bank to deliver 13% EPS growth during the same period. The stock is
currently trading at 13% discount to the peer group average on P/BV and 7% discount on P/E. We
believe further restructuring efforts will erase the valuation gap between Isbank and the rest of the
Turkish banking majors.
NPL ratio at 1.5% stands as the lowest among the private peers and also below sector
average NPL ratio of 2.9%. The bank improved its NPL ratio by 10bps in 2014 thanks to lower
NPL formation and higher NPL collection. In 2015 in line with Isbank guidance we expect 20bps
increase in NPL ratio to 1.7%. Currently the bank covers 77% of NPL book vs sector average of
73%. We don’t expect any decline in the coverage during 2015.
Disposal of Avea shares in 2015 and further restructuring of non-core assets via IPOs and
SPOs which we see as potentially value enhancing. Since 2000 Isbank increased the stake of
financial sector assets to 44% from 29% while decreased the share of non-core assets to 14%
from 28%. Currently the bank owns 7.44% and Isgroup owns total 10% of Avea stake. Isbank
carries its part on the books at TL655mn, with an independent estimation. 2015 is the final year for
TurkTelekom to purchase Avea stake. Isbank in recent years eliminated cross shareholdings in
Sisecam, the glass division. With this, Isbank’s direct ownership in Sisecam has increased to
65.5%. This move improved transparency at the group and, more importantly, sets the background
for future divestitures. We believe in the long term, (1) management continue to look for
opportunities to divest within glass business, possibly reducing its direct share in Sisecam via an
SPO, (2) An IPO Pasabahce where Sise have 84% share, (3) The bank also has 77% stake in
Milli Re, the reinsurance company, we think there is a reasonable chance that it will carry out an
IPO to list Milli Re in coming years.

Ata Finance Group
ISCTR FINANCIALS
ISCTR
Fees and comm 1,236 1,429 1,706 1,919 2,004 2,127 2,295
Bank revenues 5,953 6,296 8,225 8,798 9,643 10,844 12,192
Staff cost -1,625 -1,819 -1,821 -2,276 -2,456 -2,730 -2,963
Other cost -1,578 -1,662 -2,663 -2,687 -3,239 -3,601 -3,907
Total OPEX -3,203 -3,481 -4,484 -4,963 -5,695 -6,331 -6,870
Associates 369 556 418 450 595 625 656
Other income 1,569 1,311 1,172 1,038 1,012 1,064 1,291
Provisions for loan losses -770 -597 -601 -834 -915 -648 -805
Pre Tax Income 3,553 3,298 4,121 3,857 4,231 4,762 5,481
Taxes -571 -631 -811 -693 -849 -952 -1,151
Net income 2,982 2,667 3,310 3,163 3,382 3,810 4,330
Cash and alike 8,523 13,780 15,956 23,028 24,607 27,067 29,774
Due from banks 3,185 2,254 1,435 1,528 1,393 1,533 1,686
Trading securities 733 1,576 1,373 2,204 1,238 1,362 1,498
Loans 64,232 91,621 107,142 135,281 155,874 182,763 214,563
Total IEA 121,637 151,350 163,206 198,015 223,704 257,375 296,637
Assets total 131,796 161,669 175,444 210,500 237,772 268,719 304,985
Deposits 88,260 98,313 105,383 120,975 133,551 152,248 172,041
Interbank funds 10,159 19,461 13,519 20,916 17,696 19,999 22,698
Funds borrow ed 8,042 11,148 10,748 15,922 20,669 21,859 23,309

Ata Finance Group
ISCTR SELECTED RATIOS
Loans/Deposits 72.8 93.2 101.7 111.8 116.7 120.0 124.7
NPL 3.61 2.12 1.86 1.63 1.53 1.70 1.80
LLP/NPL 47.2 30.1 29.7 37.2 37.8 20.8 20.8
CIR 53.8 55.3 54.5 56.4 59.1 58.4 56.3
NIM 4.0 3.3 3.8 3.7 3.5 3.6 3.5
ROE 19.6 15.3 16.3 13.7 12.8 12.4 12.8
ROA 2.4 1.8 2.0 1.6 1.4 1.5 1.5
CAR 17.5 14.1 16.3 14.4 16.0 15.8 16.3
Growth measures (%)
Loans 32.9 42.6 16.9 26.3 15.2 17.3 17.4
Deposits 22.3 11.4 7.2 14.8 10.4 14.0 13.0
Assets 16.4 22.7 8.5 20.0 13.0 13.0 13.5
Fees and comm -1.3 15.5 19.4 12.5 4.4 6.2 7.9
Cost 18.9 8.7 28.8 10.7 14.8 11.2 8.5
Net income 25.7 -10.6 24.1 -4.4 6.9 12.6 13.7
BVPS (TL) 3.78 3.98 5.05 5.24 6.51 7.15 7.87
EPS (TL) 0.66 0.59 0.74 0.70 0.75 0.85 0.96
P/E 9.1x 10.2x 8.2x 8.6x 8.0x 7.1x 6.3x
P/BV 1.59x 1.51x 1.19x 1.15x 0.92x 0.84x 0.76x
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ISCTR XBANK

Ata Finance Group
Valuation
Total Upside 30.8%
Stock Data
MCap, TL mn 2,955
MCap, US$ mn 1,138
Free float, % 39%
Total Assets 12,911 15,701 18,270 21,448
Loans 9,172 10,981 12,847 15,160
Deposits 0 0 0 0
Net Income 326 369 425 498
ROE 17.6% 17.7% 17.3% 17.6%
ROA 2.6% 2.6% 2.5% 2.5%
P/E 9.1x 8.0x 7.0x 5.9x
P/BV 1.57x 1.29x 1.12x 0.98x
Relative to ISE100 4% 1% 9%
27
TSKB (TSKB TI/TSKB.IS) Outperform
Standing out from the crowd…
• A unique, sustainable and proven profitable business model deserves the premium.
• On our ROE gap study amongst the banks under our coverage, TSKB offers the best value
with ROE-CoE spread reaching 400bps (Page 5).
• Asset quality is proved to be resistant to economic crises.
Higher ROE (TSKB 17.7% vs sector 11.6%), higher CAR (18.1% vs sector 16.6%) , higher
NIM (4.1% vs sector 3.9%) and superior asset quality (0.2% vs 2.9%) and finally lower cost
to income (18.0% vs sector 45.3%) distinguishes the bank. The bank currently trades at 1.12x
P/BV and 7.0x P/E on our 2015 estimates. While TSKB currently trades 17% premium to the
sector on P/BV however its P/E indicates 9% discount. Having said that, preferably, we choose not
to compare TSKB to other commercial banks because of its unique business model and funding
structure as 91% of Supranational Funding guaranteed by Turkish Treasury hence cheaper
funding even at difficult global liquidity conditions. As a results of this, no currency mismatch and
positive duration gap between funding and lending (average loan duration 2.5 years and funding 6
years).
Asset quality is proved to be resistant to economic crises. NPL ratio averaged at 0.83% for
the last 10 years vs banking sector NPL ratio of 3.6% during the same period. Superior asset
quality is mainly due to: 1) An extensive knowledge of the loan segments the bank operates 2) Its
involvement throughout the project financing life cycle, 3) And finally absence of exposure to retail
lending. We expect 0.2% NPL ratio in 2015, flat y/y. TSKB has had no NPL write-off or sale policy
as well as 100% coverage (vs sector average of 73%) for the past twenty years, and short to mid
term we don’t expect bank to change its policy.
We expect 15% EPS growth in 2015, with ROE and ROA remaining stable at 17% and 2.5%
during the same periods. TSKB delivered 13.3% EPS growth in 2014 with 18% loan growth in
TL terms. We expect similar pace of growth on the loan book side. We foresee 4.0% NIM for the
bank in 2015, following 4.1% NIM in 2014.

Ata Finance Group
TSKB FINANCIALS
TSKB
Net Interest Income (NII) 298 364 431 486 546 647 743
Fees and comm 14 10 12 11 11 12 14
Net trading income & FX gains -4 -11 0 -13 15 7 15
Bank revenues 307 363 443 484 572 666 772
Staff cost -36 -33 -44 -47 -47 -42 -49
Other cost -27 -32 -29 -27 -68 -60 -71
Total OPEX -63 -65 -72 -73 -114 -102 -119
Operating Income 245 298 371 411 458 564 653
Associates 23 26 28 30 25 26 27
Other income 26 28 19 8 39 15 30
Income before provision 293 352 417 449 522 605 709
Provisions for loan losses -9 -1 0 -26 -26 -56 -66
Pre Tax Income 268 318 383 401 462 538 630
Taxes -57 -62 -76 -75 -92 -113 -132
Net income 212 255 307 326 369 425 497
Cash and alike 64 121 133 345 613 674 741
Due from banks 162 60 38 7 122 135 148
Loans 4,773 6,367 6,886 9,172 10,981 12,847 15,160
Total IEA 7,508 9,099 9,960 12,532 15,302 17,953 21,220
Assets total 7,912 9,456 10,290 12,911 15,701 18,270 21,448
Deposits 0 0 0 0 0 0 0
Interbank funds 1,186 948 1,255 1,609 2,162 2,516 2,954
Funds borrow ed 4,998 6,779 6,885 9,002 9,880 11,497 13,496
Other liabilities 464 363 395 415 1,371 1,630 1,972

Ata Finance Group
TSKB SELECTED RATIOS
Loans/Deposits 95.5 93.9 100.0 101.9 111.1 111.7 112.3
NPL 0.53 0.40 0.20 0.39 0.15 0.20 0.20
LLP/NPL 96.8 132.6 248.1 133.1 354.9 100.0 100.0
CIR 20.4 17.9 16.4 15.1 20.0 15.3 15.4
NIM 4.3 4.4 4.5 4.5 4.1 4.0 4.0
ROE 18.4 19.4 19.7 17.9 17.7 17.3 17.6
ROA 2.9 2.9 3.1 2.8 2.6 2.5 2.5
CAR (%) 22.7 19.1 20.4 18.2 18.0 18.9 19.4
Growth measures (%)
Loans 25.0 33.4 8.1 33.2 19.7 17.0 18.0
Deposits 15.5 35.6 1.6 30.8 9.7 16.4 17.4
Assets 14.6 19.5 8.8 25.5 21.6 16.4 17.4
Net interest income 16.6 22.4 18.2 13.0 12.3 18.5 14.9
Fees and comm 93.9 -26.8 23.5 -12.4 4.3 6.5 16.9
Cost 13.6 3.6 11.6 1.0 56.1 -10.8 16.9
Net income 21.0 20.7 20.3 6.1 13.3 15.0 17.3
BVPS (TL) 0.84 0.91 1.17 1.26 1.53 1.75 2.02
EPS (TL) 0.14 0.17 0.20 0.22 0.25 0.28 0.33
P/E 14.0x 11.6x 9.6x 9.1x 8.0x 7.0x 5.9x
P/BV 2.34x 2.16x 1.68x 1.57x 1.29x 1.12x 0.98x
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TSKB XBANK

Ata Finance Group
Valuation
Total Upside 42.3%
Stock Data
MCap, TL mn 11,025
MCap, US$ mn 4,247
Free float, % 25%
Total Assets 135,496 158,218 181,871 206,066
Loans 86,752 104,584 125,919 148,584
Deposits 81,533 91,757 104,603 119,247
Net Income 1,586 1,753 1,883 2,229
ROE 12.9% 12.8% 12.0% 12.6%
ROA 1.3% 1.2% 1.1% 1.1%
P/E 7.0x 6.3x 5.9x 4.9x
P/BV 0.87x 0.75x 0.66x 0.58x
Absolute -19% -10% 19%
30
Vakıfbank (VAKBN TI/VAKBN.IS) Outperform
We foresee transfer of shares delaying further…
• Wide discount, trading 31% discount to peers on P/BV.
• Release of accrued fee income and ease on the coverage ratio act as an upside risk to EPS.
• While we see SPO as long terms story, in short to mid-term both asset quality and earnings
improvements will keep the bank appealing.
Trading at 31% discount to peers based on P/BV multiple. The stock is currently trading at
0.66x P/BV on our 2015E, which indicates a c.30% discount to coverage average. While the bank
trades at 29% discount to its 5-yr historic average P/BV of 0.94x, we believe migration towards the
peer average will continue. Vakifbank posted 12.8% ROE in 2014 vs sector average of 11.6%. We
expect 12.0% ROE in 2015E vs the peer average of c.13%.
We expect continuation in asset quality improvement 2015. Thanks to collection of some files
during 2014 Vakifbank’s NPL ratio improved by 20bps while sector’s NPL ratio increased by
10bps. NPL ratio currently stands at 3.7% vs 3.9% in 2013. We expect NPL ratio to improve to
3.5% in 2015E.
We pencil in 7% EPS growth in 2015E following 11% EPS growth in 2014. As it might be
remembered Vakifbank’s 2014 EPS growth includes the one off after tax TL290mn gain from Visa-
Mastercard share sale. While its not included our numbers this year, TL190mn accrued fees and
potential ease of above sector coverage ratio upside risk to our 2015E NI. The bank has one of the
highest coverage ratio (94% vs sector 73%) which might be eased since the asset quality is
improving as aimed by the bank management. The bank also booked TL90mn general
provisioning in 2014, which was due to book in 2015.
Share transfer to the Treasury is delaying further and participation banking subsidiary to
be established under GDF. Law changes to allow share transfer to the Treasury has been
submitted to the Parliament in Oct’14. With the General elections taking place on 7 June 2015, we
foresee share transfers to be completed in 2H15 or even further. Which in return lengthens the
SPO process. Depending on the valuation and market conditions, we believe SPO doesn’t look
feasible in the medium term.

Ata Finance Group
VAKBN FINANCIALS
VAKBN
Fees and comm 443 559 448 687 709 777 862
Bank revenues 3,490 3,492 4,869 5,708 5,584 7,005 8,183
Staff cost -683 -834 -917 -1,112 -1,233 -1,406 -1,633
Other cost -1,007 -1,107 -1,344 -1,518 -1,877 -2,141 -2,486
Total OPEX -1,690 -1,941 -2,261 -2,630 -3,110 -3,547 -4,118
Associates 35 45 57 54 66 87 106
Other income 601 885 625 708 1,346 898 1,049
Pre Tax Income 1,463 1,575 1,885 1,983 2,214 2,430 2,838
Taxes -306 -348 -425 -397 -460 -511 -597
Net income 1,157 1,227 1,460 1,586 1,753 1,922 2,245
Cash and alike 6,748 7,327 12,328 18,968 21,885 24,073 26,481
Due from banks 1,272 2,130 1,955 2,639 2,571 2,828 3,110
Loans 44,861 57,309 68,133 86,752 104,584 124,141 146,486
Total IEA 70,977 86,051 100,883 130,487 152,597 176,492 203,071
Assets total 73,962 89,184 104,580 135,496 158,218 179,629 203,476
Deposits 47,701 60,939 67,242 81,533 91,757 104,603 119,247
Interbank funds 8,128 5,940 8,490 14,477 16,385 18,603 21,072
Funds borrow ed 6,327 8,237 7,475 11,405 14,927 15,447 15,998

Ata Finance Group
VAKBN SELECTED RATIOS
Loans/Deposits 96.5 94.0 101.3 106.4 114.0 120.4 124.6
NPL 4.8 3.6 3.8 3.9 4.1 3.5 3.7
LLP/NPL 43.0 19.0 27.0 35.7 42.1 23.8 22.7
CIR 48.4 55.6 46.4 46.1 55.7 54.3 53.8
NIM 4.1 3.7 4.4 4.1 3.3 3.3 3.4
ROE 14.5 13.7 13.8 12.9 12.8 12.0 12.6
ROA 1.7 1.5 1.5 1.3 1.2 1.1 1.1
CAR (%) 14.4 13.4 16.1 13.7 14.7 15.0 15.3
Growth measures (%)
Loans 29.8 27.7 18.9 27.3 20.6 20.4 18.0
Deposits 6.8 27.8 10.3 21.3 12.5 14.0 14.0
Assets 14.1 20.6 17.3 29.6 16.8 14.9 13.3
Net interest income -11.3 6.0 41.2 17.3 -2.9 19.1 18.8
Fees and comm -4.8 26.2 -20.0 53.3 3.3 10.3 11.6
Cost 10.2 14.9 16.5 16.3 18.3 14.8 16.8
Net income -7.5 6.0 19.0 8.6 10.6 7.4 18.4
BVPS (TL) 3.42 3.72 4.77 5.05 5.91 6.66 7.55
EPS (TL) 0.46 0.49 0.58 0.63 0.70 0.75 0.89
P/E 9.5x 9.0x 7.6x 7.0x 6.3x 5.9x 4.9x
P/BV 1.29x 1.19x 0.93x 0.87x 0.75x 0.66x 0.58x
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VAKBN XBANK

Ata Finance Group
Valuation
Total Upside 21.3%
Stock Data
MCap, TL mn 18,084
MCap, US$ mn 6,965
Free float, % 18%
Total Assets 148,881 181,201 208,402 240,554
Loans 96,039 121,993 146,362 175,341
Deposits 86,308 105,120 122,991 143,899
Net Income 3,203 1,845 2,061 2,411
ROE 18.7% 10.1% 10.2% 10.8%
ROA 1.1% 1.1% 1.1% 1.1%
P/E 5.6x 9.8x 8.8x 7.5x
P/BV 1.04x 0.95x 0.85x 0.77x
Absolute -12% -15% 7%
33
Yapi Kredi (YKBNK TI/YKBNK.IS) Marketperform
Capital injection need could create pressure…
• Strong balance sheet expansion thanks to the accelerated loan growth.
• Mid-term capital injection needs may put pressure on the stock.
• While trading at discount to both its 5-yr historic P/BV and peers, Yapi Kredi offers tightest ROE
gap (ROE-CoE) among the peers (please see page 5) .
While trading 11% discount on P/BV, P/E indicates 14% premium. The stock is currently
trading at 0.85x P/BV and 8.8x P/E on our 2015E, which indicates a 11% discount and 14%
premium respectively when compared to coverage universe. We foresee ROE to stay flat in 2015
at 10%, which is the lowest among our coverage banks.
Although we expect recent regulatory adjustment to put pressure on fee generation, Yapi
Kredi will continue to have highest fee income share both in total banking revenues and in
total assets. Even though the bank generated 27% loan growth the fee income generation was at
9.7% y/y, mainly affected by sector wide fee regulation. In 2015E we expect 20% loan growth and
5% fee growth for the bank. In 2014 while fees/revenues stayed flat at 29% (peers 23%) share of
fees in assets declined to 1.3% (peers 1.0%) from 1.5% in 2013. We expect those ratios to come
down to 26% and 1.2%, respectively.
Lowest ROE and lowest Tier-1 ratio, capital increase is on the agenda. At 10% Yapi Kredi’s
ROE is one of the lowest in our coverage and also below the peer average of 13%. With 10.9%
Tier-1 CAR the bank has one of the lowest among the peers, where average is 13%. As guided by
the bank during 4Q14 call, currently there are various options (which includes Tier 2 alternative,
Tier 1 or capital increases) which have been considered to support the capital to continue the
robust growth going forward.
Efficiency wise, Yapi Kredi lags behind peers and we don’t expect this to change in short
term fuelled by strong growth initiative. Incorporating significant investment in 2014 Yapi’s
opex realised at 18% (above the peer average of 13%). On efficiency comparison; 1) fee coverage
of cost at 56% vs Tier-1 peer average of 50% however it the lowest among the private peers which
have 63%, 2) cost to total assets at 2.4% vs 2.1% peer average and and 3) cost to total revenues
53% vs peers 50% however well above the private banks average of 43%. In 2015, while we see
some improvement in cost/revenues we expect cost/asset to remain flat.

Ata Finance Group
YKBNK FINANCIALS
YKBNK
Fees and comm 1,596 1,827 1,761 2,006 2,201 2,318 2,581
Net trading income & FX gains -67 -255 -39 115 -416 -292 -112
Bank revenues 4,729 4,882 6,214 6,786 7,390 8,939 10,395
Staff cost -990 -1,138 -1,236 -1,330 -1,563 -1,836 -2,187
Other cost -1,499 -1,552 -1,756 -2,009 -2,367 -2,781 -3,313
Total OPEX -2,489 -2,690 -2,993 -3,339 -3,930 -4,617 -5,500
Associates 155 128 183 133 174 183 192
Other income 1,207 811 338 1,625 597 526 449
Pre Tax Income 2,520 2,355 2,449 3,729 2,370 2,609 3,091
Taxes -459 -498 -536 -526 -525 -548 -680
Net income 2,060 1,857 1,913 3,203 1,845 2,061 2,411
Adjusted NI 2,060 1,857 1,913 2,003 1,845 2,061 2,411
Balance Sheet (TL mn)
Cash and alike 6,853 11,873 13,807 21,677 24,538 26,991 29,690
Due from banks 1,065 1,814 2,721 3,002 2,395 2,635 2,898
Trading securities 882 448 840 1,665 1,197 1,317 1,448
Loans 52,615 67,780 75,769 96,039 121,993 146,362 175,341
Total IEA 78,879 101,508 113,685 141,948 173,729 203,742 238,989
Assets total 84,776 108,103 122,180 148,881 181,201 208,402 240,554
Deposits 52,725 63,517 68,044 86,308 105,120 122,991 143,899
Interbank funds 2,960 5,918 4,730 3,393 6,201 7,131 8,232
Funds borrow ed 8,373 13,723 12,420 16,428 18,122 19,342 20,826

Ata Finance Group
YKBNK SELECTED RATIOS
Balance sheet ratios (%) 2010 2011 2012 2013 2014 2015E 2016E
Loans/Deposits 99.8 106.7 111.4 111.3 116.1 119.0 121.8
NPL 3.4 3.0 3.2 3.6 3.4 3.7 3.7
LLP/NPL 58.2 37.3 51.2 41.5 43.0 50.0 50.0
CIR 52.6 55.1 48.2 49.2 53.2 51.6 52.9
NIM 4.3 3.4 4.1 3.6 3.7 3.5 3.5
ROE 22.2 16.9 13.4 18.7 10.1 10.2 10.8
ROA 2.8 1.9 1.7 2.4 1.1 1.1 1.1
CAR (%) 31.3 27.5 13.0 21.9 21.7 15.0 15.4
Growth measures (%)
Loans 39.0 28.8 11.8 26.8 27.0 20.0 19.8
Deposits 29.1 20.5 7.1 26.8 21.8 17.0 17.0
Assets 31.3 27.5 13.0 21.9 21.7 15.0 15.4
Net interest income -8.0 3.5 35.7 3.8 20.2 23.3 14.6
Fees and comm 11.1 14.4 -3.6 13.9 9.7 5.3 11.4
Cost 7.6 8.1 11.2 11.6 17.7 17.5 19.1
Net income (Adj) 52.1 -9.8 3.0 67.4 -7.9 11.7 17.0
BVPS (TL) 2.37 2.69 3.88 3.98 4.40 4.87 5.43
EPS (TL) 0.47 0.43 0.44 0.46 0.42 0.47 0.55
P/E 8.8x 9.7x 9.5x 9.0x 9.8x 8.8x 7.5x
P/BV 1.75x 1.55x 1.07x 1.04x 0.95x 0.85x 0.77x
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YKBNK XBANK

TURKEY
Emirhan Cad. No: 109 Atakule 34349 Istanbul – TURKEY Tel-PBX: 90-212-310-6200 www.atainvest.com
Sales Title Tel E-mail
Elif Erdem Director 90-212-310-6262 eerdem@atainvest.com
Mert Ozener Sales 90-212-310-6267 mozener@atainvest.com
Research Title Tel E-mail
Cemal Demirtas Head of Research 90-212-310-6428 cdemirtas@atainvest.com
DUBAI

Ata Finance Group
This material was produced by Ata Yatırım Menkul Kıymetler A.Ş. (“ATA”), or its Affiliates, solely for information purposes and for the use of the recipient. It is not to be reproduced under any circumstances, and is not
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Stock Ratings:
For the purposes of our research report, our rating system is defined as follows;
OUTPERFORM - The stock is expected to return above the benchmark index (ISE-100) over 12 months in the market, or else provides the best risk/reward ratio.
MARKETPERFORM - The stock is expected to return in line with the benchmark index (ISE-100) over 12 months in the market, or else does not offer a compelling risk/reward profile.
UNDERPERFORM - The stock is expected to return below the benchmark index (ISE-100) over 12 months in the market, or else with unacceptable risk relative to the potential reward.
NEUTRAL - There are crucial uncertainties surrounding stock performance preventing us from attaching a relative rating compared to the benchmark.
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ATA INVEST- TR BANKS- UPDATE March 2015

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