JCR Eurasia Rating has affirmed Türkiye Halk Bankası A.Ş.’s Long Term National Grade as ‘AAA(Trk)’ and the Long Term International Foreign Currency Rating as ‘BBB-’ along with ‘Stable’ outlooks.

JCR Eurasia Rating evaluated Türkiye Halk Bankası A.Ş. in the highest investment-grade category and affirmed its Long Term National Rating as ‘AAA (Trk)’ along with a ‘Stable’ outlook. Long Term International Foreign and Local Currency Grades have been affirmed as ‘BBB-’. Other grades and details of the ratings are presented in the table below.

Long Term International Foreign Currency

:

BBB- /(Stable Outlook)

Long Term International Local Currency

:

BBB- /(Stable Outlook)

Long Term National Local Rating

:

AAA (Trk) /(Stable Outlook)

Short Term International Foreign Currency

:

A-3 /(Stable Outlook)

Short Term International Local Currency

:

A-3 /(Stable Outlook)

Short Term National Local Rating

:

A-1+(Trk)/(Stable Outlook)

Sponsor Support

:

1

Stand Alone

:

A

Halkbank, with a history of nearly 80 years, operates in the banking field supporting small and medium sized enterprises and craftsmen and tradesmen in line with its founding principles and makes a significant contribution to the development of the country’s economy. The Bank’s qualified shareholder is the Privatization Administration of the Turkish Prime-Ministry. Conducting operations with an above sector average net interest margin and profitability ratios, the Bank is consistently strengthening its equity via the retention of a very large part of generated internal resources. The Bank further increased its effectiveness in the Balkans through the acquisition of 76.76% of shares belonging to Cacanska Banka AD operating in Serbia in 2015. With a total of 895 branches at the end of FYE2014, Halkbank is an integrated financial institution consisting of foreign branches, subsidiaries and affiliates as well as its growing domestic branch network. In addition to the core banking activities, the Bank provides services in the fields of factoring, portfolio management, leasing, securities, private pensions and insurance. Following the realization of successful public offerings in the previous periods, the Bank attained a free float rate of 48.90%, indicating a high level and maintains a high level of compliance with Corporate Governance Practices.

The Bank’s below-sector average capital adequacy ratio decreased over the last two year period due to the robust loan growth while still preserving a level that is sufficient and compliant with legal regulations. The degree of the Bank’s capitalization is supported by a high internal equity generation capacity and stands at a level which could withstand the negative effects of contingent and unexpected risks arising from national and international markets. The NPL ratio of the Bank underwent a significant increase in 2014 from the previous year due to a one-off transaction. Despite the widespread adoption of sales of non-performing loans as such lowering NPL rates across the sector, Halkbank did not sell non-performing loans in FY2014 as in previous years. When the size of the sold and disposed NPL portfolio is taken into consideration, the Bank maintained its below sector average NPL ratio and as such is positively distinguished from the sector. The political scene in the aftermath of the 2015 general elections, increased domestic effects of rising unrest in the region, rising social tension, the conjecture accompanied by relatively low economic growth, the high level of depreciation of the Turkish Lira against foreign currencies and the volatility and erosion in the debt payment capacity of the real sector companies exert significant pressure on the upward risks. Given such a context, the NPL ratios of both the Bank and the sector are anticipated to increase to a certain extent.

Taking into consideration the Bank’s ability to access international funding resources, shareholder structure, rising effectiveness in the Balkans, return on equity and assets, capital adequacy ratio, widespread deposit base, country-wide branch network, asset size and composition and the possible effects of political and economic risks arising from global and local factors on the balance sheet, the Halkbank’s Long Term International Foreign and Local Currency Ratings have been assigned at the country ceiling level of BBB-.

The Bank’s Sponsor Support grade, indicating the willingness of the shareholders to lend support and financial strength, has been assigned as (1), denoting the “highest” level while the Stand Alone Grade, referring to the ability to manage the incurred risks regardless of shareholder support, has been affirmed as (A), indicating the “highest” level.

For more information related to the rating results you may visit our internet site http://www.jcrer.com.tr or contact our analyst Mr. Şevket GÜLEÇ.

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