Şekerbank Türk Anonim Şirketi and Its Financial Subsidiaries Consolidated Financial Statements As of and for the Three-Month Period Ended 31 March 2019 With Auditors’ Report Thereon (Convenience Translation of Consolidated Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish)
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Şekerbank Türk Anonim Şirketi and Its Financial Subsidiaries
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Şekerbank
Türk Anonim Şirketi and
Its Financial Subsidiaries
Consolidated Financial Statements
As of and for the Three-Month Period Ended 31 March 2019
With Auditors’ Report Thereon
(Convenience Translation of Consolidated
Financial Statements and Related Disclosures and Footnotes
Originally Issued in Turkish)
LIMITED REVIEW REPORT
FOR THE INTERIM FINANCIAL INFORMATION
To the General Assembly of Şekerbank T.A.Ş.
Introduction
We have reviewed the accompanying consolidated balance sheet of Şekerbank T.A.Ş. (“the Bank”) and
its consolidated financial affiliates (together will be referred as “the Group”) as at 31 March 2019, and the
consolidated statement of income, consolidated statement of income and expense items under
shareholders’ equity, consolidated statement of changes in shareholders’ equity and consolidated
statement of cash flows for the three-month period then ended, and a summary of significant accounting
policies and other explanatory notes. The Bank management is responsible for the preparation and fair
presentation of the accompanying interim financial information in accordance with “the Banking
Regulation and Supervision Agency (“BRSA”) Accounting and Reporting Regulations” including the
regulation on “The Procedures and Principles Regarding Banks’ Accounting Practices and Maintaining
Documents” published in the Official Gazette dated 1 November 2006 with No. 26333, and other
regulations on accounting records of banks published by the Banking Regulation and Supervision Board
and circulars and pronouncements published by the BRSA and Turkish Accounting Standard 34 “Interim
Financial Reporting” principles for the matters not legislated by the aforementioned regulations. Our
responsibility is to express a conclusion on this interim financial information based on our review.
Scope of Review
We conducted our review in accordance with the Independent Auditing Standard on Review Engagements
2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A
review of interim financial information consists of making inquiries, primarily of persons responsible for
financial reporting process, and applying analytical and other review procedures. A review of interim
financial information is substantially less in scope than an independent audit conducted in accordance with
Independent Auditing Standards and the objective of which is to express an opinion on the financial
statements. Consequently, a review of the interim financial information does not provide assurance that the
audit firm will be aware of all significant matters which would have been identified in an audit. Accordingly,
we do not express an audit opinion.
Basis for Qualified Conclusion
As of the balance sheet date, overdue 90 days cash and non-cash loans granted by the Parent Bank
amounting to TRL 587,908 thousand principal and TRL 87,782 thousands income accrual have not been
classified under "Non-performing Loans" in accordance with the Regulation on Procedures and Principles
for the Classification of Loans and the Provisions to be Provided for these Loans ("Regulation"). If the
Parent Bank had classified this portfolio as “Non-performing Loans”, non-performing loans would have
been TRL 587,908 thousands higher and expected credit loss would have been TRL 201,715 thousands
higher. On the other hand, the accompanying consolidated financial statements includes a general reserve
of total TRL 126,336 thousands of the Parent Bank for the possible effects of the negative circumstances
which may arise in economy of market conditions. As of the balance sheet date, if overdue 90 days loans
had been classified as non-performing loans with expected credit loss provisions provided and general
reserve had not been included, deferred tax asset would have been TRL 16,583 thousands higher and
current period net loss would have been TRL 58,796 thousands higher.
Qualified Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying
consolidated interim financial information does not present fairly, in all material respects, the financial
position of Şekerbank T.A.Ş. and its consolidated financial affiliates as at 31 March 2019, and of the
results of its operations and its cash flows for the three-month period then ended in accordance with the
BRSA Accounting and Reporting Regulations.
Report on Other Legal and Regulatory Requirements
Based on our review, nothing has come to our attention that causes us to believe that the interim financial
information provided in the Management’s interim report included in section seven of the accompanying
consolidated financial statements, is not presented fairly, in all material respects, and is not consistent with
the reviewed interim financial statements and the explanatory notes.
Additional paragraph for English translation:
The effect of the differences between the accounting principles summarized in Section 3 and the accounting
principles generally accepted in countries in which the accompanying financial statements are to be
distributed and International Financial Reporting Standards (IFRS) have not been quantified and reflected
in the accompanying financial statements. The accounting principles used in the preparation of the
accompanying financial statements differ materially from IFRS. Accordingly, the accompanying financial
statements are not intended to present the Bank’s financial position and results of its operations in
accordance with accounting principles generally accepted in such countries of users of the financial
statements and IFRS.
DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK AŞ
Member of DELOITTE TOUCHE TOHMATSU LIMITED
Yaman Polat
Partner
İstanbul, 17 May 2019
THE CONSOLIDATED FINANCIAL REPORT OF ŞEKERBANK T.A.Ş.
FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2019
The consolidated financial report the three-month period designed by the Banking Regulation and Supervision
Agency in line with Communiqué on Financial Statements to be Publicly Announced and the Related Policies and
Disclosures consists of the sections listed below:
GENERAL INFORMATION ABOUT THE PARENT BANK
CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF THE PARENT BANK
EXPLANATIONS ON THE CORRESPONDING ACCOUNTING POLICIES APPLIED
INFORMATION ON FINANCIAL POSITION AND RISK MANAGEMENT OF THE GROUP
WHICH IS UNDER CONSOLIDATION
EXPLANATORY DISCLOSURES AND FOOTNOTES ON CONSOLIDATED FINANCIAL
STATEMENTS
LIMITED REVIEW REPORT
INTERIM ACTIVITY REPORT
Subsidiaries whose financial statements have been consolidated in the consolidated financial report are as follows:
Subsidiaries
Şekerbank (Kıbrıs) Ltd.
Şekerbank International Banking Unit Ltd.
Şeker Faktoring A.Ş.
Şeker Yatırım Menkul Değerler A.Ş.
Şeker Finansal Kiralama A.Ş.
Şeker Finansman A.Ş.
Zahlungsdienste GmbH der Şekerbank T.A.Ş.
The consolidated financial statements for the three-month period and the explanatory footnotes and disclosures,
unless otherwise indicated, are prepared in Thousands of Turkish Lira, in accordance with the Communiqué on
Banks’ Accounting Practice and Maintaining Documents, Turkish Accounting Standards, Turkish Financial
Reporting Standards, related communiqués and the Banks’ records, have been independently reviewed and presented
as attached.
The consolidated 31 March 2019 financial statements are reviewed and they do not include any false explanation in
material subjects and absences that may result in misleading statements and fairly reflect the Bank’s financial
position, the risks faced and uncertainty.
Dr. Hasan Basri GÖKTAN
Erdal ERDEM Üzeyir BAYSAL
Chairman of The Board of
Directors
General Manager
Head of the Audit
Committee
Aidar RYSKULOV Çetin AYDIN Selim Güray ÇELİK Orhan ULUYOL
Member of the Audit
Committee
Member of the Audit
Committee
Executive Vice President
Group Head
Information related to responsible personnel for the questions about financial statements:
Name-Surname / Title : Oya SARI / Investor Relations and Structured Finance Manager
Address : Emniyet Evleri Mah. Eski Büyükdere Cad. No:1/1A
Umut Ülbegi Corporate and Commercial Banking Marketing
Salih Zeki Önder Financial Institutions
Ahmet Hakan Eken Credit Management
Aybala Şimşek Strategy and Human Resources
Aytay Tolga Şenefe Treasury
(*) According to Communiqué On Corporate Governance Principles of Capital Markets Board, No: II-17.1, Audit Committee members of the banks are accepted as independent members of the Board of Directors.
(**) General Manager Servet Taze has resigned from his duty as of 01 April 2019 and replaced by Erdal Erdem.
The Chairman of the Board of Directors Dr. Hasan Basri Göktan has total shares of 0.05 % in nominal, amounting
to TRL 577 Thousand; which is obtained from public offering.
IV. Information About the Persons and Institutions That Have Qualified Shares in the Parent
Bank:
Name/ Commercial Name
Amounts of
Share
TRL Thousand Share (%)
Paid in Capital
TRL Thousand Unpaid
Capital
Şekerbank T.A.Ş.
Personeli Munzam Sosyal Güvenlik ve Yardımlaşma Sandığı Vakfı 410,389 35.44 410,389 -
Samruk-Kazyna, the National Well-fare Fund of Kazakhstan 224,353 19.37 224,353 -
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
3
SECTION ONE (cont’d)
GENERAL INFORMATION (cont’d)
V. Summary on the Parent Bank’s Functions and Areas of Activity
Business line of the Parent Bank covers extending all kinds of cash and non-cash loans in Turkish Lira and foreign
currency and carrying out capital market transactions, accepting deposits in TRL and FC and providing other
banking services. As of 31 March 2019, the Parent Bank has 273 domestic branches (31 December 2018 - 273
domestic branches).
VI. Differences Between The Communiqué On Preparation Of Consolidated Financial
Statements Of Banks And Turkish Accounting Standards And Short Explanation About The
Institutions Subject To Line-By-Line Method Or Proportional Consolidation And
Institutions Which Are Deducted From Equity Or Not Included In These Three Methods
According to the Communique On Preparation Of Consolidated Financial Statements Of Banks, the Bank’s
subsidiaries Şekerbank (Kıbrıs) Ltd., Şeker Finansal Kiralama A.Ş., Şekerbank International Banking Unit Ltd.,
Şeker Yatırım Menkul Değerler A.Ş., Şeker Faktoring A.Ş., Şeker Finansman A.Ş. and Zahlungsdienste GmbH der
Şekerbank T.A.Ş. are included in the scope of consolidation by line-by-line method and Şeker Proje Geliştirme ve
Gayrimenkul Yatırım A.Ş. is not subject to consolidation as it is not a financial subsidiary.
Seltur Turistik İşletmeler Yatırım A.Ş. is not consolidated in the financial statements since the Parent Bank has no
control and it is not a financial subsidiary.
According to Turkish Accounting Standards, all financial and non-financial subsidiaries are consolidated.
VII. The Existing Or Potential, Actual Or Legal Obstacles On The Transfer Of Shareholders'
Equity Between The Parent Bank And its Subsidiaries Or The Reimbursement Of
Liabilities
There is no immediate transfer of the shareholders’ equity between the Parent Bank and its subsidiaries. Dividend
distribution from shareholders’ equity is done according to related regulations. There is no existing or potential,
actual or legal obstacle to the repayment of liabilities between the Parent Bank and its subsidiaries.
4
SECTION TWO
CONSOLIDATED FINANCIAL STATEMENTS
I. Consolidated Balance Sheet (Consolidated Statement of Financial Position)
II. Consolidated Statement of Off Balance Sheet Contingencies and Commitments
III. Consolidated Statement of Income
IV. Consolidated Statement of Profıt Or Loss And Other Comprehensive Income
V. Consolidated Statement of Changes in Shareholders’ Equity
VI. Consolidated Statement of Cash Flows
The accompanying explanations and notes form an integral part of these financial statements.
5
ŞEKERBANK T.A.Ş. CONSOLIDATED BALANCE SHEET (STATEMENT OF FINANCIAL POSITION)
TRL THOUSAND
Reviewed Audited
CURRENT PERIOD PRIOR PERIOD
ASSETS Note 31.03.2019 31.12.2018
Ref. TRL FC Total TRL FC Total
I. FINANCIAL ASSETS (Net) 1,655,381 3,965,244 5,620,625 2,029,685 3,106,942 5,136,627
1.1 Interest on Loans 944,637 764,926 1.2 Interest Received From Reserve Deposits 14,135 8,830 1.3 Interest Received From Banks 9,714 6,589 1.4 Interest Received From Money Market Placements 1,850 17,682 1.5 Interest Received From Marketable Securities Portfolio 85,534 91,102 1.5.1 Financial Assets at Fair Value Through Profit and Loss 1,869 1,401 1.5.2 Financial Assets at Fair Value Through Comperehensive Income 24,181 7,010 1.5.3 Financial Assets at Amortised Cost 59,484 82,691 1.6 Financial Leasing Income 13,171 12,427 1.7 Other Interest Income 10,806 4,247 II. INTEREST EXPENSE (-) (2) 866,286 549,216
2.1 Interest on Deposits 636,796 388,547 2.2 Interest on Funds Borrowed 53,871 40,060 2.3 Interest on Money Market Transactions 57,090 42,287 2.4 Interest on Securities Issued 82,160 63,941
IV. NET FEES AND COMMISSIONS INCOME 98,433 93,181 4.1 Fees and Commissions Received 127,667 113,461 4.1.1 Non-cash Loans 19,629 18,766 4.1.2 Other 108,038 94,695 4.2 Fees and Commissions Paid 29,234 20,280 4.2.1 Non-cash Loans 506 249 4.2.2 Other 28,728 20,031 V. DIVIDEND INCOME (3) 21 -
VI. NET TRADING INCOME/LOSSES (NET) (4) 15,666 (50,014)
6.1 Trading gains/ (losses) on securities (32,922) 3,129 6.2 Gains/(loses) on derivative financial transactions 158,380 44,793 6.3 Foreign exchange gains/ (losses) (109,792) (97,936) VII. OTHER OPERATING INCOME (5) 30,409 18,933
VIII. TOTAL OPERATING PROFIT (III+IV+V+VI+VII) 358,090 418,687
IX. EXPECTED LOSSES PROVISIONS (-) (6) 183,316 87,827
X. OTHER PROVISIONS (-) (6) 2,353 46,822
XI. PERSONNEL EXPENSES (-) 133,953 103,769
XII. OTHER OPERATING EXPENSES (-) (7) 145,668 156,105
XIII. NET OPERATING INCOME/(LOSS) (VIII-IX-X-XI-XII) (107,200) 24,164
XIV.
AMOUNT IN EXCESS RECORDED AS GAIN AFTER
MERGER - -
XV. GAIN / (LOSS) ON EQUITY METHOD - -
XVI. GAIN / (LOSS) ON NET MONETARY POSITION - -
XVII.
PROFIT/(LOSS) FROM CONTINUED OPERATIONS
BEFORE TAXES (XIII+...+XVI) (8) (107,200) 24,164
XVIII. TAX PROVISION FOR CONTINUED OPERATIONS (±) (9) 17,892 4,761
Income on sale of associates, subsidiaries and jointly controlled
entities (Joint vent.) - - 20.3 Income on other discontinued operations - - XXI. LOSS FROM DISCONTINUED OPERATIONS (-) - - 21.1 Loss from assets held for sale - -
21.2 Loss on sale of associates, subsidiaries and jointly controlled entities (Joint vent.) - -
III. Adjusted Balances at the Beginning of the Period (I+II) (13) 1,158,000 1,834 - (165,654) 62,153 (13,199) - 10,219 5,953 - 1,403,852 (157,643) - 2,305,515 35,864 2,341,379
IV. Total Comprehensive Income - - - - - - - - - - - - 28,931 28,931 (6) 28,925
V. Capital Inrease in Cash - - - - - - - - - - - - - - - -
VI. Capital Inrease in Internal Sources - - - - - - - - - - - - - - - -
VII. Inflation Adjustment to Paid-in Capital - - - - - - - - - - - - - - - -
Balances at end of the period (III+IV…+X+XI) 1,158,000 1,834 - (165,578) 62,153 (13,199) - 11,439 2,227 - 1,761,924 (516,843) 28,931 2,330,888 35,629 2,366,517
Reviewed
CURRENT PERIOD
01.01.2019 - 31.03.2019
I. Balances at Beginning of Period 1,158,000 1,835 - (165,918) 78,122 (9,378) - 20,464 (5,120) - 1,762,682 (428,206) - 2,412,481 40,349 2,452,830
II. Correction Made as Per TAS 8 - - - - - - - - - - - - - - - -
III. Adjusted Balances at the Beginning of the Period (I+II) (13) 1,158,000 1,835 - (165,918) 78,122 (9,378) - 20,464 (5,120) - 1,762,682 (428,206) - 2,412,481 40,349 2,452,830
IV. Total Comprehensive Income - - - - - - - - - - - - (93,545) (93,545) 4,237 (89,308)
V. Capital Inrease in Cash - - - - - - - - - - - - - - - -
VI. Capital Inrease in Internal Sources - - - - - - - - - - - - - - - -
VII. Inflation Adjustment to Paid-in Capital - - - - - - - - - - - - - - - -
Balances at end of the period (III+IV…+X+XI) 1,158,000 1,835 - (165,918) 78,122 (9,378) - 22,785 (5,966) - 1,372,559 (38,083) (93,545) 2,320,411 44,683 2,365,094
12
ŞEKERBANK T.A.Ş. CONSOLIDATED STATEMENT OF CASH FLOWS
The Parent Bank terminates hedge accounting forward only if the hedging relationship (or part of it) no longer
meets the required criteria (after considering rebalancing). This also applies if the hedging item is expired or sold,
terminated or used.
V. Explanations on Interest Income and Expenses
The interest income and expenses are accounted by accrual basis of accounting using the effective interest rate
(the ratio that equalizes the future cash flow of financial assets and liabilities to the current net book value).
Starting from 1 January 2018, the Group has started accruing interest income on non-performing loans. The non-
performing loans are rediscounted at the effective interest rate on the net book value and the related amount is
classified between the “Expected Loss Provisions” account and the “Interest on Loans” account in the income
statement.
VI. Explanations on Fees and Commission Income and Expenses
Fees for various banking services are recorded as income when collected and prepaid commission income on cash
loans using the effective interest rate method and recorded as income in the related period.
Fees and commissions for funds borrowed paid to other financial institutions, as part of the transaction costs, are
recorded as prepaid expenses and using the effective interest rate expensed within the related periods.
The dividend income is reflected in the financial statements on a cash basis when the profit distribution is realized
by the associates and subsidiaries.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
17
SECTION THREE (cont’d)
ACCOUNTING PRINCIPLES (cont’d)
VII. Explanations on Financial Assets
In the framework of “TFRS 9 Financial Instruments”, which was effective as of 1 January 2018, the Group
classifies its financial assets as “Financial assets at fair value through profit or loss”, “Financial assets at fair value
through other comprehensive income” or “Financial assets at amortised cost”. This classification is made during
initial recognition based on the contractual cash flow characteristics with the business model of the financial assets
determined by management.
Financial assets are recognized or derecognized according to the provision ‘Taking into Financial Statements and
Excluding the Financial Statements’ of section three of TFRS 9.
Financial instruments have the feature of detecting, affecting and diminishing liquidity, credit and interest risks in
the financial statements. All regular way purchases and sales of financial assets are recognized on the settlement
date i.e. the date that the asset is delivered to or by the Group. Settlement date accounting requires (a) accounting
of the asset when acquired by the Group and (b) disposing of the asset out of the balance sheet on the date settled
by the Group; and accounting of gain or loss upon disposal. In case of application of settlement date accounting,
for the financial assets at fair value through profit and loss and financial assets at fair value through other
comprehensive income the Group accounts for the changes that occur in the fair value of the asset in the period
between trade transaction date and settlement date.
Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the
time frame generally established by regulation or convention in the market place. Changes in fair value of assets
to be received during the period between the trade date and the settlement date are accounted in the same way as
the acquired assets. Fair value differences are not accounted for financial assets presented at amortized cost; gain
or loss of financial assets at fair value through profit and loss is reflected in the statement of income; gain or loss
of financial assets at fair value through other comprehensive income is accounted for in the other comprehensive
income.
The following are details of the financial instruments that are classified in the financial statements.
Financial Assets at Fair Value Through Profit and Loss Financial assets at fair value through profit and loss are financial assets other than the ones that are managed with
business model that aims to hold assets to collect contractual cash flows or to collect cash flows that are solely
payments of principal and interest on the principal outstanding amount; and that are either acquired for generating
a profit from short-term fluctuations in prices or are financial assets included in a portfolio aiming to short-term
profit taking.
The fair value of financial assets at fair value thourgh profit and loss, which are traded in active markets, is
determined according to the price of the stock exchange and in the case that the stock market price is not available,
according to the price in the Official Gazette. Where there is no quoted price in an active market, the fair value is
determined by using other methods specified in TFRS 13.
Financial assets at the fair value through profit or loss are initially recognized at fair value. The positive difference
between the cost and fair value of such securities is accounted as interest and income accrual, and the negative
difference between the cost and fair value is accounted as loss accrual in the profit and loss.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
18
SECTION THREE (cont’d)
ACCOUNTING PRINCIPLES (cont’d)
VII. Explanations on Financial Assets (cont’d)
Financial Assets at Fair Value Through Other Comprehensive Income The financial assets, which are acquired with the aim to collect the contractual cash flows and to sell the financial
asset in future, are classified as financial assets at fair value through other comprehensive income.
The Bank’s management may retain both the contractual cash flows as well as the portfolio for sale, in order to
meet daily liquidity needs, maintain a certain level of interest income and align the maturity of financial assets
with the valuation of the financial liabilities for funding purposes.
Financial assets at fair value through other comprehensive income are initially recognized at fair value including
transaction costs.
The results of the subsequent changes in the fair value of financial assets at fair value through other comprehensive
income, namely unrealized gain or loss are recorded in “Other Comprehensive Income/Expense Items to be
Reclassified to Profit or Loss”. Accumulated fair value gain or loss, reflected in equity, is recorded to the income
statement when the said financial assets are disposed.
The fair value of financial assets at fair value through other comprehensive income, which are traded in active
markets is determined according to the price of the stock exchange and in the case that the stock market price is
not available, according to the price in the Official Gazette. Where there is no quoted price in an active market,
the fair value is determined by using other methods specified in TFRS 13. The financial assets at Fair Value
Through Other Comprehensive Income, that are unquoted on the stock exchange, amount to TRL 26,882 Thousand
(31 December 2018 - TRL 22,878 Thousand) and are classified under “Equity securities” in the current period.
Financial Assets at Amortised Cost
A financial asset is classified as a financial asset measured at amortized cost, if the financial asset is held within
the scope of a business model for the collection of contractual cash flows and the contractual terms of the financial
asset result in cash flows that include payments arising only from principal and interest on the principal amounts
on specific dates.
After the initial recognition, provision for impairment to be deducted, if any, financial assets at amortized cost are
measured at discounted value using effective interest method (internal rate of return).
Interest earned from financial assets measured at amortized cost is recorded as interest income.
The Group classifies financial assets in accordance with the classifications explained above during the acquisition
of the mentioned assets.
In the securities portfolio of the Parent Bank, consumer prices (CPI) indexed bonds are available. These securities
are valued and accounted using the effective interest rate method based on the real coupon rates of the CPI -
indexed government bonds and the reference inflation index at the issue date and the estimated inflation rate. As
stated in the Treasury and Finance Ministry's CPI Indexed Bonds Investor Guide, the reference indices used in the
calculation of the actual coupon and redemption amounts of these securities are calculated by interpolation with
the CPI of two months prior and the CPI of three months prior. The Parent Bank has started to determine the
estimated inflation rate accordingly. The inflation rate estimated by the Central Bank and the Parent Bank will be
updated when necessary. Accounting of coupon and redemption payments are made by considering the real
inflation indices.As of balance sheet date, the estimated inflation rate of consumer prices (CPI) indexed bonds had
a positive effect on the period loss amounting to TRL 45,926 Thousand.
SECTION THREE (cont’d)
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
19
ACCOUNTING PRINCIPLES (cont’d)
VII. Explanations on Financial Assets (cont’d)
Loans
Loans, other than those with intention to be sold, are the financial assets , the contractual terms of which result in
cash flows that include payments arising only from principal and interest on the principal amounts on specific
dates.
The Group initially recognises loans at the cost of the acquisition and accounts for at the amortized cost using the
effective interest method in subsequent periods besides Group reflects swaps, used for funding of long term fixed
interest rate TRL loan portfolio, with fair value in the financial statements. The Group has initially classified the
long term fixed interest rate TRL loan portfolio funded through swaps as “Loans at Fair Value Through Profit and
Loss” and follows it at fair value in the financial statements.
As of 31 March 2019, the fair value of these loans is TRL 215,011 Thousand and is shown under Financial Assets
at Fair Value Through Profit and Loss Other Financial Assets line in the balance sheet (31 December 2018 - TRL
221,879 Thousand) .
Foreign currency-indexed individual and commercial loans are shown under Turkish Currency (“TRL”) accounts
after having been converted into Turkish Lira at exchange rate at transaction date. Repayments are calculated at
exchange rate at date of payment and exchange rate differences encountered are reflected in profit and loss
accounts. Net foreign exchange gains of the foreign currency indexed loans are presented under foreign exchange
gain/loss.
VIII. Explanations on Impairment of Financial Assets
Expected Loss Provision
Starting from 1 January 2018, the Group recognizes the impairment in accordance with the TFRS 9 “Regulation
on the Procedures and Principles for Classification of Loans by Banks and Provisions to be set aside” published in
the Official Gazette No. 29750 dated 22 June 2016.
Within this framework, evaluation of the expected loss provisions is applied for the financial lease recievables,
contractual assets, credit commitments and financial guarantee contracts that are not measured at fair value through
profit or loss, financial assets measured at amortized cost and fair value through other comprehensive income.
The expected loss provisions measured and recorded at the initial recognition of the financial asset and updated
according to the rate of the impairment on the credit risk in accordance with measurement performed at each
reporting date to reflect changes in credit risk.
The basic principle of the expected credit loss model is to reflect the deterioration or improvement in credit risk to
the general pattern. The expected loss measurement is aimed to identify the degree of credit deterioration at the
first issuance of the loan and to reflect the changes in the expected credit loss during the lifetime of the related
loan.
Financial assets are classified into the following three categories based on the degree of the credit risks observed
at the initial recognition of financial assets:
12 Months Expected Loss Provision (First Stage):
For the financial assets at initial recognition or that do not have a significant increase in credit risk since initial
recognition, the expected credit loan loss provision is calculated for 12 months.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
20
SECTION THREE (cont’d)
ACCOUNTING PRINCIPLES (cont’d)
VIII. Explanations on Impairment of Financial Assets (cont’d)
Significant Increase in Credit Risk (Second Stage):
In the event of a significant increase in credit risk since initial recognition, the financial asset is transferred to Stage
2. Expected credit loss provision is determined by the expected credit loss for the life-time of the related financial
asset.
The main reasons for the significant increase in the credit risk and its transfer to the second stage are as follows:
Number of overdue loan dates exceeding 30 days.
The presence of loans under restructuring due to financial difficulties.
Suggesting to ‘Liquidate Risk’ to the customers by the Bank's early warning system.
Default (Third Stage):
The Parent Bank takes into account the following criteria for the classification of a financial asset as a default;
Overdue by more than 90 days
The Group’s observation that the debtor cannot fulfill his / her debts related to the loan although it is not
more than 90 days.
Includes financial assets that have objective evidence of impairment as of the reporting date. Life expectancy for
these assets is recorded as credit loss.
The Parent Bank measures the expected loss provisions for a financial asset to reflect the following:
A weighted and unbiased amount of loss based on probabilities of default determined taking into account
possible outcomes,
Time value of money,
Reasonable and supportable information on estimates of past events, current conditions, and future
economic conditions without undue cost or effort as of the reporting date.
IX. IX. Explanations on Offsetting of Financial Assets and Liabilities
Financial assets and liabilities are offset when the Group has a legally enforceable right to set off, and the intention
of collecting or paying the net amount of related assets and liabilities or the right to offset the assets and liabilities
simultaneously.
X. Explanations on Sales and Repurchase Agreements and Lending of Securities
The sales and purchase of government securities under repurchase agreements made with the customers are being
recorded in the balance sheet accounts in accordance with the Uniform Chart of Accounts. Accordingly in the
financial statements, the government bonds and treasury bills sold to customers under repurchase agreements are
classified under Financial Assets at Fair Value Through Profit and Loss, Financial Assets at Fair Value Through
Other Comprehensive Income and Financial assets at amortised cost depending on the portfolio they are originally
included in and are valued according to the valuation principles of the related portfolios. Funds obtained from
repurchase agreements are classified as a separate sub-account under money market borrowings account in the
liabilities.
The income and expenses from these transactions are reflected in the “Interest Income on Marketable Securities”
and “Interest Expense on Money Market Borrowings” accounts in the statement of income.
As of 31 March 2019, the Group has no reverse repo transactions (31 December 2018 – None).
As of 31 March 2019 , the Group does not have marketable securities lending transactions (31 December 2018 -
None).
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
21
SECTION THREE (cont’d)
ACCOUNTING PRINCIPLES (cont’d)
XI. Explanations on Assets Held for Sale and Discontinued Operations
Assets held for sale are those assets or group of assets, which will be disposed under a plan prepared by the
management regarding the sale of those asset or the group of assets that have high probability of sale together with
an active program for determination of buyers and plan completion date. Those assets (or else the group of assets)
are marketed in conformity with its fair value. On the other hand, the mentioned sale is expected to be recorded at
the completed sale within one year after the classification date; and the necessary transactions and procedures to
complete the plan should demonstrate the fact that the possibility of making significant changes or cancelling the
plan is low.
As of 31 March 2019, the Group has TRL 393,289 Thousand assets held for sale (31 December 2018 - TRL
320,984 Thousand).
A discontinued operation is a division of a Group that is either disposed or held for sale. Results of discontinued
operations are included in the statement of income separately.
The Group does not have any discontinued operations.
XII. Explanations on Goodwill and Other Intangible Assets
There is no goodwill regarding the investments in associates and subsidiaries.
Intangible assets are accounted for at restated cost until 31 December 2004 in accordance with inflation accounting
and are amortized with straight-line method. After 31 December 2004 the cost of assets subject to amortization is
restated as the acquisition cost and any other costs incurred in order to make the intangible asset ready for use less
reserve for impairment, if any, are amortized on a straight-line method. The cost of assets subject to amortization
is restated after deducting the exchange differences, capitalized financial expenses and revaluation increases, if
any, from the cost of the assets.
Those items classified as intangible assets mainly consist of software. These items are determined to have 5 years
of amortization. Software is mainly outsourced and the related expenses are not capitalized.
There are no anticipated changes in the accounting estimates about the amortization rate and method and residual
values that would have a significant impact in the current and future periods.
The Group has no written-off intangible fixed assets, in the current period (31 December 2018 - None).
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
22
SECTION THREE (cont’d)
ACCOUNTING PRINCIPLES (cont’d)
XIII. Explanations on Tangible Fixed Assets
The cost of the Parent Bank’s immovables has been adjusted for inflation until 31 December 2004. As of 31
December 2006, the Parent Bank changed its accounting policy and adopted revaluation method on annual basis
under scope of Standard on Tangible Fixed Assets (TAS 16) with respect to valuation of immovables included in
its tangible fixed assets. Tangible Fixed Assets’ appraisal valuation was conducted by an independent valuation
company as of 31 December 2018 and reflected in the financial statements, accordingly. The valuation difference
of immovables under equity as of 31 March 2019 is TRL 98,195 Thousand gross (after net off deferred tax, net
amount is TRL 82,569 Thousand) (31 December 2018 - TRL 98,195 Thousand gross, net-off deferred tax amount
TRL 82,569 Thousand).
Other tangible fixed assets were accounted at their restated costs in line with inflation accounting until 31
December 2004; afterwards the acquisition cost and any other cost incurred to prepare the fixed asset for usage
are reflected less reserve for impairment, if any, and depreciated on a straight-line method. Depreciation of assets
held less than one year as of the balance sheet date is accounted for proportionately. There is no change in
amortization method in current period and the annual rates used, which approximate rates based on the estimated
economic useful lives of the related assets, are as follows:
%
Buildings 2
Motor vehicles 20
Furniture, fixtures and office equipment and others 2 – 33
Leasehold improvements During Leasehold
Gain or loss resulting from disposals of the tangible fixed assets is reflected to the statement of income as the
difference between the net proceeds and net book value.
Maintenance costs of tangible fixed assets are capitalized if they extend the economic useful life of related assets.
Other maintenance costs are expensed. There are no pledges, mortgages or other restrictions on the tangible fixed
assets.
There is no purchase commitments related to the tangible fixed assets.
The Group reviews the residual value and the useful life of buildings at each financial year-end and, if expectations
differ from previous estimates, the adjustments are accounted as a change in an accounting estimate in accordance
with TAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
The Group has no written-off tangible fixed assets in the current period (31 December 2018 - None).
XIV. Explanations on Leasing Transactions
Fixed assets acquired through financial leasing are recorded as assets in the assets of the Group and liabilities from
leasing transactions in liabilities. In accordance with this standard, the leasing transactions, which consist of
foreign currency liabilities, are translated to Turkish Lira with the exchange rates prevailing at the transaction dates
and they are recorded as an asset or a liability. The foreign currency liabilities are translated to Turkish Lira with
the Parent Bank’s period end exchange rates. Subsidiaries’ foreign currency liabilities are translated to Turkish
Lira wih the Central Bank of the Republic of Turkey’s exchange rates. The increases/decreases resulting from the
differences in the foreign exchange rates are recorded as expense/income in the relevant period. The financing cost
resulting from leasing is distributed through the lease period to form a fixed interest rate.
In addition to the interest expense, the Group records depreciation expense for the depreciable leased assets in
each period. The depreciation rate is determined in accordance with TAS 16 “Accounting Standard for Tangible
Fixed Assets” and the depreciation rate of these assets is 20 %.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
23
SECTION THREE (cont’d)
ACCOUNTING PRINCIPLES (cont’d)
XIV. Explanations on Leasing Transactions (cont’d)
With the “TFRS 16 Leases” standard which became effective as of 1 January 2019, the difference between the
operating lease and financial lease was removed and the lease transactions were started to be recognised under
“Tangible Fixed Assets” as an asset (tenure) and under “Liabilities from Leasing” as a liability. Impact and
application of TFRS 16 concerning the transition were explained in Section three, footnote XXIII.
The gross lease receivables including interest and principal amounts regarding the Group’s financial leasing
activities conducted by Şeker Finansal Kiralama A.Ş. as “Lessor” are stated under the receivables from the
financial leasing activities. The difference between the total of rent payments and the cost of the related fixed
assets are reflected to the “unearned income” account. The interest income is calculated and recorded to create a
constant rate of return over the lessor’s net investment on the leased item
XV. Explanations on Provisions and Contingent Liabilities
Provisions are recognized when there is a present obligation, it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of
the obligation. Provisions are determined by using the Group’s best expectation of expenses in fulfilling the
obligation, and discounted to present value if material.
XVI. Explanations on Liabilities Regarding Employee Benefits
Defined Benefit Plans
In accordance with existing social legislation in Turkey, the Group is required to make lump-sum termination
indemnities over a 30 day salary for each employee who has completed over one year of service, whose
employment is terminated due to retirement or for reasons other than resignation or misconduct. The Group is also
required to make a payment for the period of notice calculated over each service year of the employee whose
employment is terminated for reasons other than resignation or misconduct. Total benefit is calculated in
accordance with TAS 19 “Turkish Accounting Standard on Employee Benefits”.
Such benefit plans are unfunded since there is no funding requirement in Turkey. The cost of providing benefits
to the employees for the services rendered by them under the defined benefit plan is determined by independent
actuaries annually using the projected unit credit method.
In calculating the related liability to be recorded in the financial statements for these defined benefit plans, the
Group uses independent actuaries and also makes assumptions and estimation relating to the discount rate to be
used, turnover of employees, future change in salaries/limits, etc. These estimations are reviewed annually.
According to revised TAS 19 effective from 1 January 2013, actuarial gain/losses are recorded under equity. As
of 31 March 2019, the carrying value of employee benefit provisions is TRL 95,952 Thousand that consists of
employee termination benefit provisions amounting to TRL 85,089 Thousand and employee vacation pay
provisions amounting to TRL 10,863 Thousand (31 December 2018 - total employee benefit provision was TRL
88,041 Thousand, employee termination benefit provisions was TRL 79,953 Thousand and employee vacation pay
provisions was TRL 8,088 Thousand).
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
24
SECTION THREE (cont’d)
ACCOUNTING PRINCIPLES (cont’d)
XVI. Explanations on Liabilities Regarding Employee Benefits (cont’d)
Defined Contribution Plans
Şekerbank T.A.Ş. Pension Fund, of which most of the Parent Bank’s employees are members, is established in
accordance with the provisional Article 20 of the Social Security Act No: 506. As per the provisional article No:
23 of the Banking Law No: 5411, the Bank pension funds, which were established within the framework of Social
Security Institution Law, should be transferred to the Social Security Institution within 3 years after the issuance
of the related law. Methods and principles related to the transfer have been determined as per the Cabinet decision
no: 2006/11345 made on 30 November 2006. However, the related article of the act has been cancelled upon the
President’s application filed on 2 November 2005 by the Supreme Court’s order no: E.2005/39, K.2007/33 issued
on 22 March 2007, which was published in the Official Gazette No: 26479 on 31 March 2007 and the execution
of the decision was ceased as of the issuance date of the order.
After the justified decree related to cancelling the provisional article 23 of the Banking Law was announced by
the Constitutional Court in the Official Gazette dated 15 December 2007 and numbered 26731, the Turkish Grand
National Assembly started to work on establishing new legal regulations, and after it was approved at the General
Assembly of the TGNA, the Law numbered 5754 “Emendating Social Security and General Health Insurance Act
and Certain Laws and Decree Laws”, which was published in the Official Gazette dated 8 May 2008 and numbered
26870, came into effect. The new law decrees that the contributors of the Banks’ pension funds, the ones who
receive salaries or income from these funds and their rightful beneficiaries will be transferred to the Social Security
Institution and will be subject to this Law within 3 years after the release date of the related article, without any
need for further operation. The three year transfer period can be prolonged for maximum 2 years by the Cabinet
decision. However, related transfer period has been prolonged for 2 years by the Cabinet decision dated 14 March
2011, which was published in the Official Gazette dated 9 April 2011 and numbered 27900.
In addition, by the Law “Emendating Social Security and General Health Insurance Act”, which was published in
the Official Gazette dated 8 March 2012 and numbered 28227, this period of 2 years has been raised to 4 years
after that related transfer period has been prolonged for one more year by the Cabinet decision dated 08 April
2013, which was published in the Official Gazette dated 3 May 2013 and numbered 28636 also this period has
revalidated one more year by the Cabinet decision dated 24 February 2014, which was published in the Official
Gazette dated 30 April 2014 and numbered 28987. The Council of Ministers has been lastly authorized to
determine the transfer date in accordance with the last amendment in the first paragraph of the 20th provisional
article of Law No.5510 implemented by the Law No. 6645 on Amendment of the “Occupational Health and Safety
Law and Other Laws and Decree Laws” published in the Official Gazette dated 23 April 2015 and numbered
29335. This authority was transferred to the President with the delegated legislation No.703 which was published
in the repetitive Official Gazette No. 30473 dated 9 July 2018.
The above mentioned law also includes the following:
Through a commission constituted by the attendance of one representative separately from the Social
Security Institution, the Presidency Ministry of Treasury and Finance, State Planning Organization,
Banking Regulation and Supervision Agency, Savings Deposit Insurance Fund, one from each pension
fund, and one representative from the organization employing pension fund contributors, related to the
transferred persons, the cash value of the liabilities of the pension fund as of the transfer date will be
calculated by considering their income and expenses in terms of the lines of insurance within the context
of the related Law, and technical interest rate of 9.80% will be used in the actuarial calculation of the
value in cash,
And that after the transfer of the pension fund contributors, the ones who receive salaries or income from
these funds and their rightful beneficiaries to the Social Security Institution, these persons’ uncovered
social rights and payments, despite being included in the trust indenture that they are subject to, will be
continued to be covered by the pension funds and the employers of pension fund contributors.
SECTION THREE (cont’d)
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
25
ACCOUNTING PRINCIPLES (cont’d)
XVI. Explanations on Liabilities Regarding Employee Benefits (cont’d)
On the other hand, the application made on 19 June 2008 by the Republican People’s Party to the Constitutional
Court for the annulment and motion for stay of some articles, including the first paragraph of the provisional article
20 of the Law, which covers provisions on transfers, was rejected in accordance with the decision taken at the
meeting of the afore-mentioned court on 30 March 2011.
The technical financial statements of the Pension Fund are reviewed by an actuary registered audit company in
accordance with the Article 21 of the Insurance Law numbered 5684 and the requirements of the “Actuary
Regulations”. There was TRL 159,499 Thousand actuarial deficit in the actuary report which was prepared using
a technical interest rate rate of 9.80 % in accordance with the basis set out in the Council of Ministers decision no:
26377 on 15 December 2006 (31 December 2018 - TRL 159,499 Thousand actuarial deficit).
As of 31 March 2019, TRL 159,499 Thousand provision is recorded in the financial statements (31 December
2018 - TRL 159,499 Thousand).
XVII. Explanations on Taxation
Corporate tax
According to the Article 37 of the Corporate Tax Law, starting from 1 January 2006 earnings of companies will
be taxed by %20. In accordance with the regulation numbered 7061, “Amendments to Certain Tax Laws and Other
Certain Other Laws”, the tax rate has been set as 22 % for 2018, 2019 and 2020. The Council of Ministers is
authorized to reduce this rate up to 20% anytime.
The tax legislation requires advance tax payment to be calculated and paid based on earnings generated for each
quarter. The amounts thus calculated and paid are offset against the final tax liability for the year .
Annual tax returns are required to be filed between the first and twenty fifth day of the fourth month following the
balance sheet date and paid in one installment until the end of the related month.
Tax provision related with items that are credited or charged directly to equity are charged or credited to equity.
According to the Corporate Tax Law, tax losses can be carried forward for a maximum period of five years
following the year in which the losses are incurred. Tax authorities can inspect tax returns and the related
accounting records for a retrospective maximum period of five years.
Deferred Tax Liability / Asset
The Group calculates and reflects deferred tax asset or liability on timing differences which will result in taxable
or deductible amounts in determining taxable profit of future periods.
In accordance with TAS 12 “Turkish Accounting Standard on Income Taxes” and the changes in the circular of
the BRSA numbered BDDK.DZM.2/13/1-a-3 dated 8 December 2004, the Group calculated deferred tax asset on
all deductible temporary differences, if sufficient taxable profit in future periods to recover such amounts is
probable; as well as deferred tax liability on all taxable temporary differences. Deferred tax assets and liabilities
calculated for the subsidiaries subject to consolidation are shown netted in their financial statements. In accordance
with TAS 12, deferred tax assets and liabilities arising from the different subsidiaries subject to consolidation are
presented separately in the financial statements on a consolidated basis, without netting. The net deferred tax asset is reflected under the deferred tax asset and the net deferred tax liability is reflected
under the deferred tax liability in the balance sheet. The deferred tax benefit of TRL 71,895 Thousand (31 March
2018 – TRL 32,743 Thousand) is stated under the tax provision line in the income statement, the deferred tax
expense of TRL 41,743 Thousand is presented in the deferred tax expense effect line in the income statement (31
March 2018 - TRL 26,964 Thousand).
Furthermore, as per the above circular of the BRSA, deferred tax benefit balance resulting from netting of deferred
tax assets and liabilities should not be used in dividend distribution and capital increase.
Effective from 1 January 2018, deferred tax assets have started to be calculated over the expected losses that are
temporary differences according to TFRS 9.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
26
SECTION THREE (cont’d)
ACCOUNTING PRINCIPLES (cont’d)
XVIII. Additional Explanations on Borrowings
The borrowing costs related to purchase, production, or construction of qualifying assets that require significant
time to be prepared for use and sale are included in the cost of assets until the relevant assets become ready to be
used or to be sold. Financial investment income obtained by temporary placement of undisbursed investment loan
in financial investments is offset against borrowing costs qualified for capitalization.
All other borrowing costs are recorded to the statement of income in the period they are incurred.
As of 31 March 2019 outstanding issued bonds amount of the Group is TRL 490,646 Thousand (31 December
2018 – TRL 516,302 Thousand).
Issuer Issuance Date Issuance Amount Maturity
Şekerbank T.A.Ş. 08.02.2019 50,000 77 days
Şekerbank T.A.Ş. 28.02.2019 132,000 91 days
Şeker Finansal Kiralama A.Ş. 17.04.2018 15,205 350 days
Şeker Finansal Kiralama A.Ş. 07.06.2018 9,931 350 days
Şeker Finansal Kiralama A.Ş. 05.09.2018 4,591 350 days
Şeker Finansal Kiralama A.Ş. 18.01.2019 37,577 98 days
Şeker Finansal Kiralama A.Ş. 18.01.2019 37,424 119 days
Şeker Finansal Kiralama A.Ş. 21.01.2019 7,603 95 days
Şeker Finansal Kiralama A.Ş. 21.01.2019 17,398 116 days
Şeker Finansal Kiralama A.Ş. 22.02.2019 50,000 119 days
Şeker Faktoring A.Ş. 24.05.2018 25,891 364 days
Şeker Faktoring A.Ş. 07.09.2018 1,000 364 days
Şeker Faktoring A.Ş. 22.03.2019 60,000 364 days
Şeker Yatırım Menkul Değerler A.Ş. 06.03.2019 16,580 98 days
Şeker Yatırım Menkul Değerler A.Ş. 19.03.2019 9,825 73 days
As of 31 March 2019 outstanding issued marketable securities amount of the Group is TRL 17,597 Thousand and
details are shown the in table below (31 December 2018 – TRL 25,532 Thousand).
Issuer Issuance Date Issuance Amount Maturity
Şeker Finansal Kiralama A.Ş. 02.05.2017 3,772 728 days
Şeker Finansal Kiralama A.Ş. 27.07.2018 2,895 420 days
Şeker Faktoring A.Ş. 05.07.2018 12,500 538 days
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
27
SECTION THREE (cont’d)
ACCOUNTING PRINCIPLES (cont’d)
XVIII. Additional Explanations on Borrowings (cont’d)
The Parent Bank issued Asset Covered Bond amounting to TRL 1,500,000 Thousand and details are shown in the
table below. Among the institutions and organizations investing up to this time are International Finance
Corporation (IFC), Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V. (FMO), UniCredit
Bank AG, European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD), KfW
Bankengruppe and qualified institutional investors. The transactions were conducted in line with the related
Capital Market Board regulation and the Parent Bank’s SME loans were used as collateral.
Issue Date Series Investors Amount
Remaining Principal
Amount Currency Maturity
25 November 2016 2016-1 IFC 180,000 180,000 TRL 13.09.2021
19 December 2017 2017-1 FMO 192,000 192,000 TRL 22.12.2020
As of 31 March 2019 the Group has the Asset Covered Bonds amounting to TRL 381,727 Thousand (31 December
2018 - TRL 701,850 Thousand).
The Group has not issued convertible bonds.
XIX. Explanations on Share Certificates
None.
XX. Explanations on Independent Guarantees and Acceptances
Acceptances are realized simultaneously with the payment dates of the customers and they are presented as
probable commitments in off-balance sheet accounts.
XXI. Explanations on Government Incentives
The Parent Bank’s subsidiary Şeker Finansal Kiralama A.Ş. has TRL 58,297 Thousand of unused investment
incentives as of 31 March 2019 (31 December 2018 – TRL 53,265 Thousand).
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
28
SECTION THREE (cont’d)
ACCOUNTING PRINCIPLES (cont’d)
XXII. Explanations on Segment Reporting
The Group primarily deals with and engages in corporate, retail and SME finance in line with its strategy.
Current Period
Corporate SME
Retail
Other
Total
Net Interest Income 93,908 160,008 98,634 (138,989) 213,561
Net Fees and Commission Income and Other Operating Income 32,352 65,859 11,380 19,251 128,842
(*) In accordance with TFRS 16, the Bank recognised prepaid rent payments amounting to TRL 1,114 Thousands under tangible assets as
right-of-use which were previously classified under other assets.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
30
SECTION FOUR
INFORMATION RELATED TO CONSOLIDATED FINANCIAL POSITION AND RISK
MANAGEMENT
I. Explanations Related to the Shareholders’ Equity
The method used for risk measurement in determining capital adequacy standard ratio; capital adequacy standard
ratio is calculated in accordance with the Communiqué on “Measurement and Assessment of Capital Adequacy of
Banks”, which was published on 23 October 2015 in the Official Gazette numbered 29511 and effective since 31
March 2016 and Communiqué on “Banks’ Equity” which was published on 5 September 2013 and in the Official
Gazette numbered 28756. The Group’s consolidated capital adequacy ratio in accordance with the related
communiqués is 12.65 % (31 December 2018 – 14.33 %).
In the computation of capital adequacy standard ratio, data prepared in accordance with statutory accounting
requirements are used. Additionally, the market risk exposure as well as the operational risk exposure are
calculated in accordance with the communiqué on the Communiqué on “Measurement and Assessment of Capital
Adequacy of Banks” and is taken into consideration in the capital adequacy standard ratio calculation.
The values deducted from the capital base in the shareholders’ equity computation are excluded while calculating
risk-weighted assets. Assets subject to depreciation and impairment among risk-weighted assets are included in
the calculations over their net book values after deducting the relative depreciations and provisions.
In the calculation process of credit risk, risk types are classified based on “Measurement and Assessment of Capital
Adequacy of Banks-Appendix 1” and financial collaterals taken into account according to the credit risk mitigation
techniques communiqué and classified in the related risk weight. According to the credit risk mitigation techniques
communiqué while simple approach is taken into account for banking book items, the Group uses comprehensive
approach for trading book items in the credit mitigation process
While calculating the basis of non-cash loans subject to credit risk, the net receivable amount from the counter
parties net of provision amount set in accordance with the “Communiqué on Methods and Principles for the
Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves” is multiplied by
the loan conversion rates presented in the Article 5 and related clauses of the Communiqué on “Measurement and
Assessment of Capital Adequacy of Banks”, and calculated by applying the risk weights presented in the Capital
Adequacy Analysis Form.
In the calculation of counterparty credit risk, the current exposure method is used according to the Communiqué
on “Measurement and Assessment of Capital Adequacy of Banks” the Article 21 and Appendix 2.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
31
SECTION FOUR (cont’d)
INFORMATION RELATED TO CONSOLIDATED FINANCIAL POSITION AND RISK
MANAGEMENT (cont’d)
I. Explanations Related to Consolidated Shareholders’ Equity (cont’d)
Current Period
Amounts related to
treatment before
1/1/2014(*)
COMMON EQUITY TIER 1 CAPITAL
Paid-in capital following all debts in terms of claim in liquidation of the Bank 1,158,000 -
Share issue premiums 1,835 -
Reserves 1,586,192 -
Gains recognized in equity as per TAS 70,219 -
Profit - -
Current Period Profit - -
Prior Period Profit - -
Shares acquired free of charge from subsidiaries, affiliates and jointly controlled partnerships and cannot be
recognised within profit for the period - -
Minorities’ Share 35,879 -
Common Equity Tier 1 Capital Before Deductions 2,852,125 -
Deductions from Common Equity Tier 1 Capital
Common Equity as per the 1st clause of Provisional Article 9 of the Regulation on the Equity of Banks - -
Portion of the current and prior periods’ losses which cannot be covered through reserves and losses reflected in equity in accordance with TAS 15,344 -
Improvement costs for operating leasing 68,632 -
Goodwill (net of related deferred tax liability) 110,088 -
Other intangibles other than mortgage-servicing rights (net of related deferred tax liability) - -
Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related deferred tax liability) 52,146 -
Differences are not recognized at the fair value of assets and liabilities subject to hedge of cash flow risk - -
Communiqué Related to Principles of the amount credit risk calculated with the Internal Ratings Based
Approach, total expected loss amount exceeds the total provison - -
Gains arising from securitization transactions - -
Unrealized gains and losses due to changes in own credit risk on fair valued liabilities - -
Defined-benefit pension fund net assets - -
Direct and indirect investments of the Bank in its own Common Equity 175,996 -
Shares obtained contrary to the 4th clause of the 56th Article of the Law - -
Portion of the total of net long positions of investments made in equity items of banks and financial institutions outside the scope of consolidation where the Bank owns 10% or less of the issued common share
capital exceeding 10% of Common Equity of the Bank - -
Portion of the total of net long positions of investments made in equity items of banks and financial
institutions outside the scope of consolidation where the Bank owns 10% or more of the issued common share capital exceeding 10% of Common Equity of the Bank - -
Portion of mortgage servicing rights exceeding 10% of the Common Equity - -
Portion of deferred tax assets based on temporary differences exceeding 10% of the Common Equity - -
Amount exceeding 15% of the common equity as per the 2nd clause of the Provisional Article 2 of the
Regulation on the Equity of Banks - -
Excess amount arising from the net long positions of investments in common equity items of banks and
financial institutions outside the scope of consolidation where the Bank owns 10% or more of the issued
common share capital 101,456 -
Excess amount arising from mortgage servicing rights - -
Excess amount arising from deferred tax assets based on temporary differences - -
Other items to be defined by the BRSA - -
Deductions to be made from common equity due to insufficient Additional Tier I Capital or Tier II Capital - -
Total Deductions From Common Equity Tier 1 Capital 422,206 -
Total Common Equity Tier 1 Capital 2,429,919 -
ADDITIONAL TIER I CAPITAL -
Preferred Stock not Included in Common Equity and the Related Share Premiums - -
Debt instruments and premiums approved by BRSA - -
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
32
Debt instruments and premiums approved by BRSA(Temporary Article 4) - -
Third parties’ share in the Additional Tier I capital - -
Third parties’ share in the Additional Tier I capital (Temporary Article 3) - -
Additional Tier I Capital before Deductions - -
Deductions from Additional Tier I Capital - -
Direct and indirect investments of the Bank in its own Additional Tier I Capital - -
Investments of Bank to Banks that invest in Bank's additional equity and components of equity issued by
financial institutions with compatible with Article 7. - -
Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial
Institutions where the Bank Owns 10% or less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital - -
The Total of Net Long Position of the Direct or Indirect Investments in Additional Tier I Capital of
Unconsolidated Banks and Financial Institutions where the Bank Owns more than 10% of the Issued Share
Capital - -
Other items to be defined by the BRSA - -
Transition from the Core Capital to Continue to deduce Components - -
Goodwill and other intangible assets and related deferred tax liabilities which will not deducted from
Common Eguity Tier 1 capital for the purposes of the first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds (-) - -
Net deferred tax asset/liability which is not deducted from Common Eguity Tier 1 capital for the purposes of
the sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds (-) - -
Deductions to be made from Tier I Capital in the case that adequate Additional Tier II Capital or is not
available (-) - -
Total Deductions From Additional Tier I Capital - -
Total Additional Tier I Capital - -
Total Tier I Capital (Tier I Capital=Common Equity+Additional Tier I Capital) 2,429,919 -
TIER II CAPITAL
Debt instruments and share issue premiums deemed suitable by the BRSA 928,414 -
Debt instruments and share issue premiums deemed suitable by BRSA (Temporary Article 4) - -
Third parties’ share in the Tier II Capital - -
Third parties’ share in the Tier II Capital (Temporary Article 3) - -
Provisions (Article 8 of the Regulation on the Equity of Banks) 29,916 -
Tier II Capital Before Deductions 958,330 -
Deductions From Tier II Capital
Direct and indirect investments of the Bank on its own Tier II Capital (-) - -
Investments of Bank to Banks that invest on Bank's Tier 2 and components of equity issued by financial institutions with the conditions - -
Portion of the total of net long positions of investments made in equity items of banks and financial
institutions outside the scope of consolidation where the Bank owns 10% or less of the issued common share
capital exceeding 10% of Common Equity of the Bank (-) - -
Portion of the total of net long positions of investments made in Additional Tier I Capital item of banks and
financial institutions outside the scope of consolidation where the Bank owns 10% or more of the issued common share capital exceeding 10% of Common Equity of the Bank - -
Other items to be defined by the BRSA (-) - -
Total Deductions from Tier II Capital - -
Total Tier II Capital 958,330 -
Total Capital (The sum of Tier I Capital and Tier II Capital) 3,388,248 -
Deductions from Total Capital - -
Deductions from Capital Loans granted contrary to the 50th and 51th Article of the Law - -
Net Book Values of Movables and Immovables Exceeding the Limit Defined in the Article 57, Clause 1 of the Banking Law and the Assets Acquired against Overdue Receivables and Held for Sale but Retained more
than Five Years - -
Other items to be defined by the BRSA 6,912 -
In transition from Total Core Capital and Supplementary Capital (the capital) to Continue to
Deduction Components
The Sum of net long positions of investments (the portion which exceeds the 10% of Banks Common Equity)
in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued common share capital of the entity
which will not deducted from Common Equity Tier 1 capital, Additional Tier 1 capital, Tier 2 capital for the
purposes of the first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds - -
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
33
The Sum of net long positions of investments in the Additional Tier 1 capital and Tier 2 capital of banking,
financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued common share capital of the entity which will not deducted from Common
Equity Tier 1 cap7ital, Additional Tier 1 capital, Tier 2 capital for the purposes of the first sub-paragraph of
the Provisional Article 2 of the Regulation on Banks’ Own Funds - -
The Sum of net long positions of investments in the common stock of banking, financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of
the issued common share capital of the entity, mortgage servicing rights, deferred tax assets arising from
temporary differences which will not deducted from Common Eguity Tier 1 capital for the purposes of the first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds - -
TOTAL CAPITAL
Total Capital (The sum of Tier I Capital and Tier II Capital) 3,381,337 -
Total risk weighted amounts 26,726,927 -
CAPITAL ADEQUACY RATIOS
Core Capital Adequacy Ratio (%) 9.09 -
Tier 1 Capital Adequacy Ratio (%) 9.09 -
Capital Adequacy Ratio (%) 12.65
BUFFERS
Total additional Common Equity Tier 1 Capital requirement ratio (a+b+c) 2.56 -
a) Bank specific total common equity tier 1 capital ratio 2.50 -
b) Capital conservation buffer requirement 0.06 -
c) Systemically important bank buffer ratio (**) 0.00 -
The ratio of Additional Common Equity Tier 1 capital which will be calculated by the first paragraph of the
Article 4 of Regulation on Capital Conservation and Countercyclical Capital buffers to Risk Weighted Assets 3.09 -
Amounts below the Excess Limits as per the Deduction Principles
Portion of the total of net long positions of investments in equity items of unconsolidated banks and financial
institutions where the bank owns 10% or less of the issued share capital exceeding the 10% threshold of
above Tier I capital - -
Portion of the total of investments in equity items of unconsolidated banks and financial institutions where the bank owns 10% or less of the issued share capital exceeding the 10% threshold of above Tier I capital - -
Amount arising from deferred tax assets based on temporary differences - -
Limits related to provisions considered in Tier II calculation - -
Limits related to provisions considered in Tier II calculation
General provisions for standard based receivables (before limit of one hundred and twenty five
per ten Thousand) 29,916 -
Up to 1.25% of total risk-weighted amount of general reserves for receivables where the standard approach used - -
Excess amount of total provision amount to credit risk Amount of the Internal Ratings Based Approach in
accordance with the Communiqué on the Calculation - -
Excess amount of total provision amount to 0,6% of risk weighted receivables of credit risk Amount of the
Internal Ratings Based Approach in accordance with the Communiqué on the Calculation - -
Debt instruments subjected to Article 4
(to be implemented between 1 January 2018 and 1 January 2022)
Upper limit for Additional Tier I Capital subjected to temprorary Article 4 - -
Amounts Excess the Limits of Additional Tier I Capital subjected to temprorary Article 4 - -
Upper limit for Additional Tier II Capital subjected to temprorary Article 4 - -
Amounts Excess the Limits of Additional Tier II Capital subjected to temprorary Article 4 - -
(*) Amounts in this column represent the amounts of items that are subject to transition provisions in accordance with the provisional Articles
of “Regulations regarding to changes on Regulation on Equity of Banks” effectuated on 1/1/2014 and taken into consideration at the end of transition process.
(**) According to the paragraph 4 of the Article 4 of the Regulation on Systemically Important Banks only Systematically Important Bank,
which are not obligated to prepare consolidated financial statements, shall calculate this ratio and the rest banks shall report it as zero.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
34
SECTION FOUR (cont’d)
INFORMATION RELATED TO CONSOLIDATED FINANCIAL POSITION AND RISK
MANAGEMENT (cont’d)
I. Explanations Related to Consolidated Shareholders’ Equity (cont’d)
Prior Period Amounts related to treatment before
1/1/2014 (*)
COMMON EQUITY TIER 1 CAPITAL
Paid-in capital following all debts in terms of claim in liquidation of the Bank 1,158,000 -
Share issue premiums 1,835 -
Reserves 1,705,427 -
Gains recognized in equity as per TAS 69,591 -
Profit 89,398 -
Current Period Profit 89,398 -
Prior Period Profit - -
Shares acquired free of charge from subsidiaries, affiliates and jointly controlled partnerships and cannot be recognised within profit for the period - -
Minorities’ Share 29,315 -
Common Equity Tier 1 Capital Before Deductions 3,053,566 -
Deductions from Common Equity Tier 1 Capital
Common Equity as per the 1st clause of Provisional Article 9 of the Regulation on the Equity of Banks - -
Portion of the current and prior periods’ losses which cannot be covered through reserves and losses reflected
in equity in accordance with TAS (14,498) -
Improvement costs for operating leasing 70,935 -
Goodwill (net of related tax liability) 94,111 -
Other intangibles other than mortgage-servicing rights (net of related tax liability) - -
Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of
related tax liability) 69,529 -
Differences are not recognized at the fair value of assets and liabilities subject to hedge of cash flow risk - -
Communiqué Related to Principles of the amount credit risk calculated with the Internal Ratings Based Approach, total expected loss amount exceeds the total provison - -
Gains arising from securitization transactions - -
Unrealized gains and losses due to changes in own credit risk on fair valued liabilities - -
Defined-benefit pension fund net assets - -
Direct and indirect investments of the Bank in its own Common Equity 175,996 -
Shares obtained contrary to the 4th clause of the 56th Article of the Law - -
Portion of the total of net long positions of investments made in equity items of banks and financial
institutions outside the scope of consolidation where the Bank owns 10% or less of the issued common share capital exceeding 10% of Common Equity of the Bank - -
Portion of the total of net long positions of investments made in equity items of banks and financial
institutions outside the scope of consolidation where the Bank owns 10% or more of the issued common
share capital exceeding 10% of Common Equity of the Bank - -
Portion of mortgage servicing rights exceeding 10% of the Common Equity - -
Portion of deferred tax assets based on temporary differences exceeding 10% of the Common Equity - -
Amount exceeding 15% of the common equity as per the 2nd clause of the Provisional Article 2 of the Regulation on the Equity of Banks - -
Excess amount arising from the net long positions of investments in common equity items of banks and financial institutions outside the scope of consolidation where the Bank owns 10% or more of the issued
common share capital 66,028 -
Excess amount arising from mortgage servicing rights - -
Excess amount arising from deferred tax assets based on temporary differences - -
Other items to be defined by the BRSA - -
Deductions to be made from common equity due to insufficient Additional Tier I Capital or Tier II Capital - -
Total Deductions From Common Equity Tier 1 Capital 396,073 -
Total Common Equity Tier 1 Capital 2,657,493 -
ADDITIONAL TIER I CAPITAL
Preferred Stock not Included in Common Equity and the Related Share Premiums - -
Debt instruments and premiums approved by BRSA -
-
Debt instruments and premiums approved by BRSA(Temporary Article 4) - -
Third parties’ share in the Additional Tier I capital - -
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
35
Third parties’ share in the Additional Tier I capital (Temporary Article 3) - -
Additional Tier I Capital before Deductions - -
Deductions from Additional Tier I Capital
Direct and indirect investments of the Bank in its own Additional Tier I Capital - -
Investments of Bank to Banks that invest in Bank's additional equity and components of equity issued by
financial institutions with compatible with Article 7. - -
Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or less of the Issued Share Capital Exceeding the 10% Threshold of
above Tier I Capital - -
The Total of Net Long Position of the Direct or Indirect Investments in Additional Tier I Capital of
Unconsolidated Banks and Financial Institutions where the Bank Owns more than 10% of the Issued Share
Capital - -
Other items to be defined by the BRSA - -
Transition from the Core Capital to Continue to deduce Components
Goodwill and other intangible assets and related deferred tax liabilities which will not deducted from
Common Eguity Tier 1 capital for the purposes of the first sub-paragraph of the Provisional Article 2 of the
Regulation on Banks’ Own Funds (-) - -
Net deferred tax asset/liability which is not deducted from Common Eguity Tier 1 capital for the purposes of
the sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds (-) - -
Deductions to be made from Tier I Capital in the case that adequate Additional Tier II Capital or is not
available (-) - -
Total Deductions From Additional Tier I Capital - -
Total Additional Tier I Capital - -
Total Tier I Capital (Tier I Capital=Common Equity+Additional Tier I Capital) 2,657,493 -
TIER II CAPITAL
Debt instruments and share issue premiums deemed suitable by the BRSA 898,885 -
Debt instruments and share issue premiums deemed suitable by BRSA (Temporary Article 4) - -
Third parties’ share in the Tier II Capital - -
Third parties’ share in the Tier II Capital (Temporary Article 3) - -
Provisions (Article 8 of the Regulation on the Equity of Banks) - -
Tier II Capital Before Deductions 898,885 -
Deductions From Tier II Capital
Direct and indirect investments of the Bank on its own Tier II Capital (-) - -
Investments of Bank to Banks that invest on Bank's Tier 2 and components of equity issued by financial institutions with the conditions - -
Portion of the total of net long positions of investments made in equity items of banks and financial
institutions outside the scope of consolidation where the Bank owns 10% or less of the issued common share
capital exceeding 10% of Common Equity of the Bank (-) - -
Portion of the total of net long positions of investments made in Additional Tier I Capital item of banks and financial institutions outside the scope of consolidation where the Bank owns 10% or more of the issued
common share capital exceeding 10% of Common Equity of the Bank - -
Other items to be defined by the BRSA (-) - -
Total Deductions from Tier II Capital - -
Total Tier II Capital 898,885 -
Total Capital (The sum of Tier I Capital and Tier II Capital) 3,556,377 -
Deductions from Total Capital - -
Deductions from Capital Loans granted contrary to the 50th and 51th Article of the Law - -
Net Book Values of Movables and Immovables Exceeding the Limit Defined in the Article 57, Clause 1 of the Banking Law and the Assets Acquired against Overdue Receivables and Held for Sale but Retained more
than Five Years - -
Other items to be defined by the BRSA 5,780 -
In transition from Total Core Capital and Supplementary Capital (the capital) to Continue to
Deduction Components
The Sum of net long positions of investments (the portion which exceeds the 10% of Banks Common Equity) in the capital of banking, financial and insurance entities that are outside the scope of regulatory
consolidation, where the bank does not own more than 10% of the issued common share capital of the entity
which will not deducted from Common Equity Tier 1 capital, Additional Tier 1 capital, Tier 2 capital for the purposes of the first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds - -
The Sum of net long positions of investments in the Additional Tier 1 capital and Tier 2 capital of banking,
financial and insurance entities that are outside the scope of regulatory consolidation, where the bank does not
own more than 10% of the issued common share capital of the entity which will not deducted from Common Equity Tier 1 capital, Additional Tier 1 capital, Tier 2 capital for the purposes of the first sub-paragraph of the
Provisional Article 2 of the Regulation on Banks’ Own Funds - -
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
36
The Sum of net long positions of investments in the common stock of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, where the bank does not own more than 10% of the issued common share capital of the entity, mortgage servicing rights, deferred tax assets arising from
temporary differences which will not deducted from Common Eguity Tier 1 capital for the purposes of the
first sub-paragraph of the Provisional Article 2 of the Regulation on Banks’ Own Funds - -
TOTAL CAPITAL
Total Capital (The sum of Tier I Capital and Tier II Capital) 3,550,598 -
Total risk weighted amounts 24,785,039 -
CAPITAL ADEQUACY RATIOS
Core Capital Adequacy Ratio (%) 10.72 -
Tier 1 Capital Adequacy Ratio (%) 10.72 -
Capital Adequacy Ratio (%) 14.33
BUFFERS
Total additional Common Equity Tier 1 Capital requirement ratio (a+b+c) 1.933 -
a) Bank specific total common equity tier 1 capital ratio 1.875 -
b) Capital conservation buffer requirement 0.058 -
c) Systemically important bank buffer ratio (**) 0.000 -
The ratio of Additional Common Equity Tier 1 capital which will be calculated by the first paragraph of the
Article 4 of Regulation on Capital Conservation and Countercyclical Capital buffers to Risk Weighted Assets 4.72 -
Amounts below the Excess Limits as per the Deduction Principles
Portion of the total of net long positions of investments in equity items of unconsolidated banks and financial
institutions where the bank owns 10% or less of the issued share capital exceeding the 10% threshold of above Tier I capital - -
Portion of the total of investments in equity items of unconsolidated banks and financial institutions where
the bank owns 10% or less of the issued share capital exceeding the 10% threshold of above Tier I capital - -
Amount arising from deferred tax assets based on temporary differences - -
Limits related to provisions considered in Tier II calculation - -
Limits related to provisions considered in Tier II calculation
General provisions for standard based receivables (before limit of one hundred and twenty five per ten Thousand) - -
Up to 1.25% of total risk-weighted amount of general reserves for receivables where the standard approach
used - -
Excess amount of total provision amount to credit risk Amount of the Internal Ratings Based Approach in
accordance with the Communiqué on the Calculation - -
Excess amount of total provision amount to 0,6% of risk weighted receivables of credit risk Amount of the Internal Ratings Based Approach in accordance with the Communiqué on the Calculation - -
Debt instruments subjected to Article 4
(to be implemented between 1 January 2018 and 1 January 2022)
Upper limit for Additional Tier I Capital subjected to temprorary Article 4 - -
Amounts Excess the Limits of Additional Tier I Capital subjected to temprorary Article 4 - -
Upper limit for Additional Tier II Capital subjected to temprorary Article 4 - -
Amounts Excess the Limits of Additional Tier II Capital subjected to temprorary Article 4 - -
(*) Amounts in this column represent the amounts of items that are subject to transition provisions in accordance with the provisional Articles of “Regulations regarding to changes on Regulation on Equity of Banks” effectuated on 1/1/2014 and taken into consideration at
the end of transition process.
(**) According to the paragraph 4 of the Article 4 of the Regulation on Systemically Important Banks only Systematically Important Bank, which are not obligated to prepare consolidated financial statements, shall calculate this ratio and the rest banks shall report it as zero.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
37
SECTION FOUR (cont’d)
INFORMATION RELATED TO CONSOLIDATED FINANCIAL POSITION AND RISK
MANAGEMENT (cont’d)
I. Explanations Related to Consolidated Shareholders’ Equity (cont’d)
Information on borrowing instruments to be included in the equity calculation:
for private placement) TRSSKBK52818 XS1626188491 TRSSKBKA2716
Governing law(s) of the
instrument
Subject to Turkish Regulations. It is issued within the scope of the Debt
Instruments Disclosure of the Capital
Markets Board and the Regulation on Equities of Banks of the BRSA.
Subject to Turkish Regulations. It is issued within the scope of the
Debt Instruments Disclosure of the
Capital Markets Board and the Regulation on Equities of Banks of
the BRSA.
Subject to Turkish Regulations. It is issued within the scope of the Debt
Instruments Disclosure of the Capital
Markets Board and the Regulation on Equities of Banks of the BRSA.
Regulatory treatment
Subject to 10% deduction as of
1/1/2015 No No No
Eligible on
Unconsolidated/
consolidated / both unconsolidated and
consolidated
Valid on Consolidated and
Unconsolidated Basis
Valid on Consolidated and
Unconsolidated Basis
Valid on Consolidated and
Unconsolidated Basis
Instrument type Subordinated Liabilities (Securities)
Subordinated Liabilities
(Securities)
Subordinated Liabilities (Securities)
Amount recognised in regulatory capital
(Currency in million
TRL, as of most recent reporting date) 150 478.4 300
Par value of instrument
(Million TRL) 150 478.4 300
Accounting
classification 346 347 346
Original date of
issuance 24.05.2018 12.06.2017 22.12.2017
Demand or time Maturity Maturity Maturity
Original maturity date 11.05.2028 12.06.2027 10.12.2027
Issuer call subject to
prior supervisory
approval Yes Yes Yes
Optional call date, contingent call dates
and redemption amount
17 May 2023, TRL 150 Million (10
year maturity with early redemption option in the 5th year, subject to
BRSA approval)
13 June 2022, USD 85 Million (10
year maturity with early redemption option in the 5th year,
subject to BRSA approval)
16 December 2022, TRL 300 Million (10
year maturity with early redemption option in the 5th year, subject to BRSA
approval)
Subsequent call dates,
if applicable - - -
Coupons / dividends
Fixed or floating dividend/coupon
Variable interest (The Borrowing
instrument will make coupon payments from the beginning of the
maturity to the date of redemption
(including the redemption date) once a month (variable days).) Fixed
Variable interest (The Borrowing
instrument will make coupon payments from the beginning of the maturity to the
date of redemption (including the
redemption date) once a month (variable days).)
Coupon rate and any
related index
5 Years Term Indicator + 475 bps on
government securities 9.75% p.a.
5 Years Term Indicator + 475 bps on
government securities
Existence of a dividend
stopper - - -
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
38
Fully discretionary,
partially discretionary or
mandatory Mandatory Mandatory Mandatory
Existence of step up or
other incentive to redeem - - -
Noncumulative or cumulative Noncumulative Noncumulative Noncumulative
Convertible or non-convertible
If convertible,
conversion trigger (s) - - -
If convertible, fully or
partially - - -
If convertible,
conversion rate - - -
If convertible, mandatory or optional
conversion - - -
If convertible, specify
instrument type convertible into - - -
If convertible, specify
issuer of instrument it
converts int - - -
Write-down feature
If write-down, write-
down trigger(s)
According to the Article 8 (2) (ğ) of
the Regulation on Equities of Banks,
the bonds have a write-off option. If, in accordance with the related
regulation, there is a possibility of
abolishing the bank's operating permit
or transferring it to the SDIF in the
framework of the Article 71 of the Banking Law due to the losses it
incurs, The Bank can write down
these bonds from the related financial records with the decision of the
BRSA, in the event of the bankruptcy
Due to the losses incurred, in the
framework of Article 71 of the
Banking Law that: (1) the removal and liquidation of the Bank's
operating permit or (2) the rights
of all its shareholders (except to
dividends), and the management
and supervision of the Bank, are to be transferred to the SDIF on the
condition that losses are deducted
from the capital of existing shareholders , the bonds can be
written-down.
According to the Article 8 (2) (ğ) of the
Regulation on Equities of Banks, the bonds have a write-off option. If, in
accordance with the related regulation,
there is a possibility of abolishing the
bank's operating permit or transferring it
to the SDIF in the framework of the Article 71 of the Banking Law due to the
losses it incurs, The Bank can write down
these bonds from the related financial records with the decision of the BRSA, in
the event of the bankruptcy
If write-down, full or
partial Partially or fully Partially or fully Partially or fully
If write-down,
permanent or temporary Continuously Continuously Continuously
If temporary write-down, description of
write-up mechanism - - -
Position in
subordination hierarchy in liquidation (specify
instrument type
immediately senior to instrument)
In priority of debt and comes after deposits and all other receivables
In priority of receivables, it comes
after the debt instruments which are nonsubordinated loans
In priority of debt and comes after deposits and all other receivables
Whether conditions
which stands in article
of 7 and 8 of Banks’ shareholder equity law
are possessed or not
The instrument is in compliance with
article number 8.
The instrument is in compliance
with article number 8.
The instrument is in compliance with
article number 8.
According to article 7
and 8 of Banks’ shareholders equity law
that are not possessed
The instrument is not in compliant
with article numbered 7.
The instrument is not in compliant
with article numbered 7.
The instrument is not in compliant with
article numbered 7.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
39
SECTION FOUR (cont’d)
I INFORMATION RELATED TO CONSOLIDATED FINANCIAL POSITION AND RISK
MANAGEMENT (cont’d)
I. Explanations Related to Consolidated Shareholders’ Equity (cont’d)
Information on borrowing instruments to be included in the equity calculation (cont’d):
The Group, within the framework of its capital adequacy assessment process, determines limits for risks (credit
risk, market risk and operational risk) covered under the Capital Adequacy calculations as well as for risks
(concentration risk, interest rate risk in the banking book, liquidity risk, etc.) which are not covered under these
calculations. Thus, the Parent Bank determines its “Risk Limits” and with the help of these limits and by means
of applying stress tests and scenario analyses, it evaluates the adequacy of its capital level against a background of
its current and also projected activities.
The Group determines “Key Risk Indicators” as “early warning signals” within the context of the “Risk Limits”.
Both the “Risk Limits” and “Key Risk Indicators” are determined by taking into consideration the annual budget
and strategy; its risk appetite; the volume, qualifications and complexity of its products/services; its experience
and prior performance as well as the market conditions. The “Risk Limits” and “Key Risk Indicators” are
determined through risk based amounts and nominal amounts. In this scope, regulatory limits and applications,
Basel Committee applications, international best practices, concentrations and tolerance levels as well as criteria
based on the Group’s capital levels are used. In any case, the “Risk Limits” and “Key Risk Indicators” cannot
violate the Banking Law and related regulations.
The “Risk Limits” and “Key Risk Indicators” are reviewed and revised at least annually by the senior management
with respect to market conditions and changes in the Group’s strategies. The review process aims to determine
whether the current “Risk Limits” and “Key Risk Indicators” are meaningful and sufficient enough compared to
the risk appetite. The revised “Risk Limits” and “Key Risk Indicators” become effective upon the approval of the
Boards of Directors.
Reconciliation of capital items to balance sheet
The difference between Total Capital and Equity in the balance sheet mainly arises from expected credit loss
provisions arising from loans classified under stage 1 and stage 2 and subordinated loans. In the calculation of
Total Capital, up to 1.25% of the expected credit loss provision from stage 1 and stage 2 over the credit risk
amount and subordinated loans are taken into consideration as Tier II Capital. On the other hand, in the calculation
of the Total Capital, improvement costs for operating leases followed under tangible assets in the balance sheet,
intangible assets and related deferred tax liabilities, other items defined by the regulator are taken into
consideration as amounts deducted from Total Capital.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
40
SECTION FOUR (cont’d)
INFORMATION RELATED TO CONSOLIDATED FINANCIAL POSITION AND RISK
MANAGEMENT (cont’d)
I. Explanations Related to Consolidated Shareholders’ Equity (cont’d)
Information on borrowing instruments to be included in the equity calculation (cont’d):
T T-1 T-2 T-3 T-4
TOTAL CAPITAL
Common Equity Tier 1 Capital 2,429,919 2,332,214 2,234,509 2,136,804 2,429,919
Transition Process Not Applied Common Equity Tier 1 Capital (*) 2,136,804 2,136,804 2,136,804 2,136,804 2,136,804
Tier I Capital 2,429,919 2,332,214 2,234,509 2,136,804 2,429,919
Transition Process Not Applied Tier I Capital (**) 2,136,804 2,136,804 2,136,804 2,136,804 2,136,804
Total Capital 3,381,337 3,370,544 3,359,750 3,348,956 3,381,337
Transition Process Not Applied Total Capital (***) 3,348,956 3,348,956 3,348,956 3,348,956 3,348,956
TOTAL RISK WEIGHTED AMOUNTS
Total risk weighted amounts 26,726,927 26,726,927 26,726,927 26,726,927 26,726,927
CAPITAL ADEQUACY RATIOS
Common Equity Tier 1 Capital Adequacy Ratio (%) 9.09 8.73 8.36 8.00 9.09
Transition Process Not Applied Common Equity Tier 1 Capital
Adequacy Ratio (%) (****) 8.00 8.00 8.00 8.00 8.00
Tier 1 Capital Adequacy Ratio (%) 9.09 8.73 8.36 8.00 9.09
Transition Process Not Applied Tier 1 Capital Adequacy Ratio (%)
(****) 8.00 8.00 8.00 8.00 8.00
Capital Adequacy Ratio (%) 12.65 12.61 12.57 12.53 12.65
Transition Process Not Applied Capital Adequacy Ratio (%) (****) 12.53 12.53 12.53 12.53 12.53
LEVERAGE RATIO
Leverage ratio total risk amount 42,286,897 42,286,897 42,286,897 42,286,897 42,286,897
Leverage ratio 5.75 5.52 5.28 5.05 5.75
Transition Process Not Applied Leverage ratio (%) (*****) 5.05 5.05 5.05 5.05 5.05
(*) Amount of Common Equity Tier 1 Capital in case of non-application of Provisional Article 5 of the Regulation on Equities of Banks.
(**)Amount of Tier I Capital in case of non-application of Provisional Article 5 of the Regulation on Equities of Banks.
(***)Amount of Total Capital in case of non-application of Provisional Article 5 of the Regulation on Equities of Banks. (****)Amount of capital adequacy ratios calculated with equity componentsin case of non-application of Provisional Article 5 of the
Regulation on Equities of Banks.
(*****)Amount of leverage ratio calculated with equity components in case of non-application of Provisional Article 5 of the Regulation on Equities of Banks.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
41
SECTION FOUR (cont’d)
INFORMATION RELATED TO CONSOLIDATED FINANCIAL POSITION AND RISK
MANAGEMENT (cont’d)
II. Explanations Related to Consolidated Currency Risk
Currency risk is the possibility of loss that the Group may face, in its total on- and off-balance sheet accounts and
positions in foreign currencies, arising from changes in exchange rates.
The Parent Bank’s policies and procedures related to currency risk are in line with the “Regulation on Internal
Systems and Internal Capital Adequacy Asessment Process” and the “Regulation on Measurement and Evaluation
of the Capital Adequacy of Banks” and approved by the Parent Bank’s Board of Directors.
The Boards of Directors has approved limits (position limits, stop-loss limits) compliant with the regulatory
“Foreign Exchange Net General Position / Equity Standard Ratio” and based on the Group’s capital. These limits
are monitored on a daily basis and reviewed and revised at least once a year, with respect to market conditions and
changes in the Group’s strategies.
Within the context of Capital Adequacy, the Group’s currency risk within the market risk exposure is calculated
through the use of the “Standard Method” in line with the legislation. In these calculations, the Group’s foreign
currency assets and foreign currency liabilities together with the forward transactions and gold position are all
taken into consideration.
Within the Group, currency risk exposure is measured, monitored and reported on a daily basis. In this context,
“Value-at-Risk (VaR) Methods” are applied as internal model. Among these methods, the “Parametric Method”
that is also called as ‘’Variance Covariance Method’’ is used among the VaR Methods; while the “Historical
Simulation” and the “Monte Carlo Simulation” methods, on the other hand, are used for comparison, in times
when volatility increases to a great extent. VaR measurements are based on an observation period covering the
last 252 workdays and a 99 % confidence level. In “Economic Capital” measurements based on VaR, a 10-day
holding period is applied.
Additionally, stress tests and scenario analyses are applied in order to measure and monitor the impact of adverse
movements in the markets, while the effectiveness of the Parent Bank’s internal model is tested by using
retroperspective tests on a daily basis.
As of 31 March 2019, the Group’s balance sheet short position is TRL 1,329,782 Thousand (31 December 2018 –
TRL 1,649,176 Thousand short) and long position on the off balance sheet amounting to TRL 1,624,484 Thousand
(31 December 2018 - TRL 1,861,972 Thousand long), resulting in total net long position of TRL 294,702 Thousand
(31 December 2018 - TRL 212,796 Thousand total net long).
The announced current foreign exchange buying rates of the Parent Bank at 31 March 2019 and the previous five
The principal amount of currency indexed loans amounting TRL 668,173 Thousand and accruals amounting TRL 540,449 Thousand are shown under loans.
The principal amount of currency indexed funds borrowed amounting to TRL 22,116 Thousand and accruals amounting TRL 98 Thousand are shown in the Funds Provided From Other
Financial Institutions line.
According to the regulation about Foreign Currency Net General Position / Equity Standard Ratio Calculation, Foreign Currency amounts that are not shown in the present currency risk
table are as follows: Derivative Financial Assets Held-for-Trading: TRL 98,474 Thousand
Unearned income from installment sale of assets: TRL 4,145 Thousand, Receivables from foreign currency in equity: TRL 29,136 Thousand
Financial Derivative Asset amount includes TRL 319,132 Thousand forward asset purchase commitment and TRL 382,604 Thousand option contracts.
Financial Derivative Liabilities amount includes TRL 214,977 Thousand forward asset selling commitment and TRL 375,176 Thousand option contracts.
(**) Securities Issued includes also the issuances of subordinated debts amounting to TRL 492,305 Thousand which are shown under subordinated loans line in the balance sheet
About Currency Risk Table as of 31 December 2018;
The principal amount of currency indexed loans amounting TRL 758,949 Thousand and accruals amounting TRL 549,655 Thousand are shown under loans.
The principal amount of currency indexed funds borrowed amounting to TRL 21,098 Thousand and accruals amounting TRL 307 Thousand are shown in the Funds Provided From Other
Financial Institutions line. According to the regulation about Foreign Currency Net General Position / Equity Standard Ratio Calculation, Foreign Currency amounts that are not shown in
the present currency risk table are as follows: Derivative Financial Assets Held-for-Trading: TRL 383,219 Thousand
Unearned income from installment sale of assets: TRL 3,965 Thousand, Receivables from foreign currency in equity: TRL 24,511 Thousand
Financial Derivative Asset amount includes TRL 34,411 Thousand forward asset purchase commitment and TRL 305,606 Thousand option contracts.
Financial Derivative Liabilities amount includes TRL 39,522 Thousand forward asset selling commitment and TRL 305,136 Thousand option contracts.
(**) Securities Issued includes also the issuances of subordinated debts amounting to TRL 451,050 Thousand which are shown under subordinated loans line in the balance sheet
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
43
SECTION FOUR (cont’d)
INFORMATION RELATED TO CONSOLIDATED FINANCIAL POSITION AND RISK
MANAGEMENT (cont’d)
III. Explanations Related to Consolidated Interest Rate Risk
Interest rate risk is the possibility of loss that the Group may face, in relation to its structural position arising from
adverse movements in interest rates.
The Parent Bank’s policies and procedures related to interest rate risk are in line with the “Regulation on Internal
Systems and Internal Capital Adequacy Asessment Process” and the “Regulation on Measurement and Evaluation
of the Capital Adequacy of Banks” and approved by the Board of Directors.
Within the context of Capital Adequacy, the Group’s interest rate risk within the market risk exposure is calculated
through the use of the “Standard Method” in line with the legislation.
The Group takes interest rate risk positions in both the trading book and banking book. The interest rate risk arising
from the trading book is evaluated within the scope of market risk, and thus, measured, monitored, and managed
in line with market risk policies and procedures.
Within the Parent Bank, interest rate risk exposure is measured, monitored and reported on a daily basis. In this
context, “Value-at-Risk (VaR) Methods” are applied as internal model.
Among these methods, the “Parametric Method” that is also called as ‘’Variance Covariance Method’’ is used
among the VaR Methods; while the “Historical Simulation” and the “Monte Carlo Simulation” methods, on the
other hand, are used for comparison, in times when volatility increases to a great extent.
VaR measurements are based on an observation period covering the last 252 workdays and a 99 % confidence
level. In “Economic Capital” measurements based on VaR, a 10-day holding period is applied.
Additionally, stress tests and scenario analyses are applied in order to measure and monitor the impact of adverse
movements in the markets, while the effectiveness of the Parent Bank’s internal model is tested by using back tests
on a daily basis.
The interest rate risk arising from the Group’s banking accounts is measured, monitored and managed within the
scope of assets and liabilities risk. In this context, gap analyses, duration and economic value analyses as well as
sensitivity analyses are evaluated on a weekly basis by the Parent Bank’s Asset Liability Committee. Simulations
on net interest income are performed according to macroeconomic indicator estimations in the Parent Bank’s
budget targets, while the potential negative impact of adverse movements in market interest rates on the financial
position and cash flows is minimized through target revisions. The Group management monitors the market
interest rates on a daily basis, and is able to change the interest rates applied by the Group whenever it is necessary
by ALCO decisions.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
44
SECTION FOUR (cont’d)
INFORMATION RELATED TO CONSOLIDATED FINANCIAL POSITION AND RISK
MANAGEMENT (cont’d)
III. Explanations Related to Consolidated Interest Rate Risk (cont’d)
Average interest rates applied to monetary financial instruments
EUR USD JPY TRL
Current Period (*)
Assets
Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques
Purchased) and Balances with the Central Bank of Turkey - - - -
Banks 0.01 2.35 0.52 25.74
Financial Assets at Fair Value Through Profit and Loss 2.68 5.39 - 7.64
Money Market Placements - - - 27.30
Financial Assets at Fair Value Through Other Comprehensive Income - - - 16.48
Loans 6.66 9.35 2.80 21.29
Financial Assets at Amortised Cost - 5.05 - 4.75
Liabilities
Bank Deposits 1.04 2.57 - 25.04
Other Deposits 1.94 3.81 0.91 20.43
Money Market Borrowings - - - 24.45
Sundry Creditors 0.36 2.35 - -
Securities Issued - 6.82 - 8.27
Funds Provided From Other Financial Institutions 1.48 4.17 - 10.82
(*) Interest rates belong to the Parent Bank.
(*) Interest rates belong to the Parent Bank.
EUR USD JPY TRL
Prior Period (*)
Assets
Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey - - - -
Due From Other Banks and Financial Institutions 0.01 2.19 0.50 13.50
Financial Assets at Fair Value Through Profit and Loss 2.12 5.33 - 10.97
(*) Those assets such as tangible assets, investments in subsidiaries and associates, office supply inventory, prepaid expenses and non-performing loans,
which are necessary for continuation of banking activities, unavailable for conversion into cash in a short term and other assets account and equity accounts are classified under “Undistributed”.
(**) Overdraft Loans are presented in 1-3 months period.
(***) The subordinated loans in balance sheet also includes the TRL 944,480 Thousand bonds issued as subordinated loans.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
54
(****) TRL 215,011 Thousand of loans is shown under Financial Assets at Fair Value through Profit and Loss in the financial statements.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
55
SECTION FOUR (cont’d)
INFORMATION RELATED TO CONSOLIDATED FINANCIAL POSITION AND RISK
MANAGEMENT (cont’d)
VI. Explanations Related to Consolidated Leverage Ratio
a. Information on subjects that causes difference in leverage ratio between current and prior
periods
The Group’s consolidated leverage ratio calculated according to “Regulation on Measurement and Assessment of
Leverage Ratios of Banks” is 5.78 % (31 December 2018 – 6.27 %). Change in the leverage ratio is mainly due to
the increase of the on balance sheet assets. The minimum leverage ratio set by the above mentioned regulation is
3 %.
b. Comparison table of total assets and total risk amounts in the financial statements
prepared in accordance with TAS :
Current Period (**) Prior Period (**)
Total assets in the consolidated financial statements prepared in accordance with TAS (*) 33,028,923 34,496,650
Differences between the total assets in the consolidated financial statements
prepared in accordance with TAS and the total assets in the consolidated financial statements prepared in accordance with Communique on Preparation of
Consolidated Financial Statements of the Banks 221,563 76,512
Differences between the balances of derivative financial instruments and the
credit derivatives in the consolidated financial statements prepared in accordance
with the Communique on Preparation of Consolidated Financial Statements of the
Banks and their risk exposures (114,847) (262,411)
Differences between the balances of securities financing transactions in the consolidated financial statements prepared in accordance with the Communique
on Preparation of Consolidated Financial Statements of the Banks and their risk
exposures 52,180 4,380
Differences between off- balance sheet itmes in the consolidated financial statements prepared in accordance with the Communique on Preparation of
Consolidated Financial Statements of the Banks and their risk exposures 2,854,549 2,881,188
Other differences in the consolidated financial statements prepared in accordance with the Communique on Preparation of Consolidated Financial Statements of the
Banks and their risk exposures - -
Total Risk 42,286,897 42,062,407
(*) The consolidated financial statements as of 31 December 2018 in current period and 31 December 2017 in prior period prepared in
accordance with the sixth paragraph of the Article 5 of the Communique on Preparation of Consolidated Financial Statements of the Banks.
(**) The arithmetic average of the last 3 months in the related periods.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
56
SECTION FOUR (cont’d)
INFORMATION RELATED TO CONSOLIDATED FINANCIAL POSITION AND RISK
MANAGEMENT (cont’d)
VI. Explanations Related to Consolidated Leverage Ratio (cont’d)
c. Disclosure of Leverage Ratio template
On-balance sheet assets Current Period (*) Prior Period (*)
The reserve deposits include TRL 1,272,972 Thousand of FC unrestricted demand deposit (31 December 2018 – TRL 1,034,773 Thousand)
and TRL 335,001 Thousand (31 December 2018 – TRL 793,416 Thousand) of the TRL unrestricted demand deposit. TRL unrestricted
demand deposit includes the reserve deposit amount that is held in the Central Bank of the Turkish Republic on average.
CBRT amounts include the funds of Şekerbank (Kıbrıs) Ltd. held with the Central Bank of Turkish Republic of Northern Cyprus. The Central
Bank of Turkish Republic of Northern Cyprus amount is TRL 59,143 Thousand and it includes TRL 18,477 Thousand reserve deposit amount
(31 December 2018 – TRL 41,932 Thousand Central Bank amount and it includes TRL 17,047 Thousand reserve deposit amount).
In accordance with the principles of the Communiqué numbered 2013/15 of The Central Bank of Turkey on "Required Reserves” the required
reserve ratios to be held in the Central Bank of Turkey vary according to the currency denomination and term of the liabilities subject to the
reserve requirements. Thus, the reserve requirement rate range between 1% - 7% (31 December 2018 – -1.5% - 8%) is applied for TRL
deposits, participation funds and other liabilities and 4% - 20% (31 December 2018 – 4% – 20%) for FX deposits, participation funds and other liabilities.
The Central Bank of the Turkish Republic of Northern Cyprus, with the decision of the Board of Directors numbered 2018/1005, Legal
Reserves Ratiosubjected to separation According to the Deposit Maturity Group,TRL and FC deposits and other liabilities are applied in
the range of 4% - 7%.
2. Information on financial assets at fair value through profit and loss (net):
i. Information on financial assets at fair value through profit and loss given as collateral or blocked:
None (31 December 2018 – None).
ii. Financial assets at fair value through profit and loss subject to repurchase agreements:
Net book value of unrestricted financial assets at fair value through profit and loss is TRL 75,164 Thousand
(31 December 2018 – TRL 85,589 Thousand).
iii. Positive differences related to derivative financial assets held-for-trading:
Derivative financial assets held for trading are classified in the financial statements as Fair Value of
Derivative financial assets through profit and loss.
Derivatives Held for Trading
Current Period Prior Period
TRL FC TRL FC
Forward Transactions - 46,481 - 53,261
Swap Transactions 142,882 42,213 160,213 152,620
Futures Transactions - - - -
Options 19 9,780 106 10,153
Other - - - -
Total 142,901 98,474 160,319 216,034
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
59
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Consolidated Assets (cont’d)
iv. Loans at fair value through profit and loss:
Current Period Prior Period
Opening Balance 221,879 266,683
Additions (+) 7,796 16,239
Change in Interest Rates (*) (45,798) (15,056)
Change in Credit Risk (**) 53,759 (3,369)
Impairment Provision (628) (152)
Collections (-) (21,997) (42,466)
Net Balance 215,011 221,879
(*) Change in interest rates shows the effect of TRLIBOR (basic interest rate) difference on loans at fair value through profit and loss between
two periods.
(**) Change in credit risk shows the effect of the difference of basic interest rates and similar loans interest rates on loans at fair value through profit and loss.
As of 31 March 2019, the value of the loans amounting to TRL 215,011 Thousand (31 December 2018 – TRL
221,879 Thousand) and classified as Financial assets at Fair Value Throught Profit and Loss discounted using the
effective interest rate method is TRL 252,703 Thousand (31 December 2018 – TRL 235,302 Thousand).
3. Information on banks:
Information on banks account:
Current Period Prior Period
TRL FC TRL FC
Banks 230,529 467,169 34,699 171,320
Domestic 230,527 329,724 34,676 64,767
Foreign 2 137,445 23 106,553
Branches and head office abroad - - - -
Total 230,529 467,169 34,699 171,320
4. Information on Financial Assets at Fair Value Through Other Comprehensive Income:
a.1. Information on financial assets at fair value through other comprehensive income given as collateral or
blocked: None (31 December 2018 - 171,631).
a.2. Financial assets at fair value through other comprehensive income subject to repurchase agreements:
None (31 December 2018 - None).
Net book value of unrestricted financial assets at fair value through other comprehensive income is TRL 524,397
Thousand (31 December 2018 - TRL 406,051 Thousand).
b. Information on financial assets at fair value through other comprehensive income portfolio:
Current Period Prior Period
Debt securities 541,679 563,641
Quoted on a stock exchange 541,519 563,481
Not quoted on a stock exchange 160 160
Share certificates 28,704 24,700
Quoted on a stock exchange - -
Not quoted on a stock exchange 28,704 24,700
Impairment provision(-) (45,986) (10,659)
Total 524,397 577,682
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
60
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Consolidated Assets (cont’d)
5. Information on loans:
a. Information on all types of loans and advances given to shareholders and employees of the Group:
(*) TRL 203,836 Thousand of loans is shown under Financial Assets at Fair Value through Profit and Loss in the financial statements (31 December 2018 – TRL 211,520 Thousand).
g. Domestic and foreign loans:
Current Period Prior Period
Domestic loans 22,808,822 22,186,916
Foreign loans 53,932 53,228
Total 22,862,754 22,240,144
(*) TRL 203,836 Thousand of loans is shown under Financial Assets at Fair Value through Profit and Loss in the financial statements(31
December 2018 – TRL 211,520 Thousand).
h. Loans granted to subsidiaries and associates: None (31 December 2018 - None).
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
64
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Consolidated Assets (cont’d)
5. Information on loans (cont’d):
i. Impaired Loans (Stage 3) provisions provided against loans:
Current Period Prior Period
Loans with limited collectability 25,728 40,689
Loans with doubtful collectability 146,331 125,649
Uncollectible loans 889,355 820,144
Total 1,061,414 986,482
j. Information on non-performing loans (Net):
j.1. Information on non-performing loans and restructured loans:
III. Group: IV. Group: V. Group
Loans with limited collectability
Loans with doubtful collectability
Uncollectable loans
Current Period
Gross amounts before Provisions(*) 70,312 267,049 1,071,395
Loans which are restructured 7,231 25,002 22,192
Prior Period
Gross amounts before Provisions(*) 99,764 230,961 1,014,952
Loans which are restructured 6,189 27,250 22,699
j.2. The movement of non-performing loans:
III. Group IV. Group V. Group
Loans with
limited
collectability
Loans with doubtful
collectability
Uncollectable loans
Prior period end balance 99,764 230,961 1,014,952
Additions (+) 114,393 36,011 15,052
Transfers from other categories of non-performing loans (+) - 124,442 83,244
Transfers to other categories of non-performing loans (-) (124,442) (83,244) -
Collections (-) (19,403) (41,121) (41,853)
Write-off (-) - - -
Sold (-) - - -
Corporate and commercial loans - - -
Retail loans - - -
Credit cards - - -
Current period end balance (*) 70,312 267,049 1,071,395
Provision (-) (*) 25,728 146,331 889,355
Net Balances on Balance Sheet 44,584 120,718 182,040
(*) TRL 11,175 Thousand (31 December 2018- TRL 10,359 Thousand ) net non-performing loans have been classified under “Financial Assets at Fair Value through Profit and Loss”have been made.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
65
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Consolidated Assets (cont’d)
5. Information on loans (cont’d):
j.3. Informations on non-performing loans and other receivables in foreign currency: In the current period
the Group has TRL 9,825 Thousand non-performing foreign currency loans and specific provision
for these loans amounting to TRL 9,825 Thousand (31 December 2018- TRL 9,219 Thousand non-
performing foreign currency loans and TRL 9,219 Thousand specific provision).
j.4. Information regarding gross and net amounts of non-performing loans with respect to user groups:
III. Group IV. Group V. Group
Loans with limited
collectability
Loans with doubtful
collectability
Uncollectable loans
Current Period (Net) (*)
Loans to Real Persons and Legal Entities (Gross) 70,312 267,049 1,071,395
Provision (-) 25,728 146,331 889,355
Loans to Real Persons and Legal Entities (Net) 44,584 120,718 182,040
Banks (Gross) - - -
Provision (-) - - -
Banks (Net) - - -
Other Loans (Gross) - - -
Provision (-) - - -
Other Loans (Net) - - -
Prior Period (Net) (*)
Loans to Real Persons and Legal Entities (Gross) 99,764 230,961 1,014,952
Provision (-) 40,689 125,649 820,144
Loans to Real Persons and Legal Entities (Net) 59,075 105,312 194,808
Banks (Gross) - - -
Provision (-) - - -
Banks (Net) - - -
Other Loans (Gross) - - -
Provision (-) - - -
Other Loans (Net) - - -
j.5. Information on interest accruals for non-performing loans, rediscounts and valuation differences and
their provisions regarding the banks that allocate expected loan loss provisions according to TFRS
9:
III. Grup IV. Grup V. Grup
Loans with limited
collectability
Loans with doubtful
collectability
Uncollectable loans
Current Period (Net)
Interest accruals, rediscounts and valuation differences 8,538 24,751 7,488
Provisions (-) 8,538 24,751 7,488
Prior Period (Net)
Interest accruals, rediscounts and valuation differences 6,812 15,415 2,449
Provisions (-) 6,812 15,415 2,449
k. Main principles of uncollectable loans and receivables:
The Parent Bank Management applies provision policy for the “non-performing loans” in accordance with
the requirements of the Turkish banking regulation adopted by the BRSA.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
66
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Consolidated Assets (cont’d)
5. Information on loans (cont’d):
l. Explanations on write-off policy:
None. (31 December 2018 - The Parent Bank sold uncollectable non-performing loans amounting to
TRL 92,492 Thousand for total cash amount of TRL 2,150 Thousand to Birleşim Varlık Yönetim A.Ş.
As of 28 November 2018, Şeker Faktoring A.Ş sold its receivables amounting to TRL 10,013 Thousand
through its revenue share agreement for total cash amount of TRL 64 Thousand to Sümer Varlık Yönetim
A.Ş. On 26 September 2018, Şeker Faktoring A.Ş. liquidated TRL 52 Thousand from its non-performing
receivables in accordance with the decision of the Board of Directors).
6. Information on Financial Assets at Amortised Cost:
a.1. Information on investments at amortised cost given as collateral or blocked:
Current Period Prior Period
Treasury Bill - -
Bond and Similar Securities 880,300 957,904
Other - -
Total 880,300 957,904
a.2. Financial assets at amortised cost subject to repurchase agreements are TRL 476,636 Thousand (31
December 2018 - TRL 131,270 Thousand).
b. Information on public sector debt investments at amortised cost:
Current Period Prior Period
Government Bonds 1,952,278 2,447,744
Treasury Bills 307,737 293,076
Other Public Sector Debt Securities - -
Total 2,260,015 2,740,820
Net book value of unrestricted financial assets at amortised cost is TRL 1,639,826 Thousand (31 December 2018
- TRL 2,339,548 Thousand).
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
67
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Consolidated Assets (cont’d)
6. Information on Financial Assets at Amortised Cost (cont’d):
c. Information on financial assets at amortised costs:
Current Period Prior Period
Debt Securities 3,014,072 3,435,585
Quoted on a stock exchange 2,278,530 2,749,702
Not quoted on a stock exchange 735,542 685,883
Impairment Provision (-) (17,310) (6,863)
Total 2,996,762 3,428,722
d. Movement of financial assets at amortised costs:
Current Period Prior Period
Beginning Balance 3,428,722 1,355,739
TFRS 9 Impact - 1,136,612
Foreign Exchange Differences in Monetary Assets 64,360 215,449
Purchases during the year - 367,015
Disposals through Sales and Amortisation (368,455) (3,686)
Total 1,060 5,851 42,032 7,017 3,628 9,700 - 69,288
Grand Total 1,234 82,624 381,794 109,220 26,607 35,107 210 636,796
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
91
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
IV. Explanations Related to the Consolidated Statement of Income (cont’d)
3. Information on dividend income :
Current Period Prior Period
Financial assets at fair value through profit and loss - -
Financial assets at fair value through other comprehensive income 21 -
Other - -
Total 21 -
4. Information on net trading income :
Current Period Prior Period
Income 5,450,270 2,828,435
Profit on capital market operations 54 4,127
Profit on derivative financial instruments 757,601 450,678
Foreign exchange gains 4,692,615 2,373,630
Losses (-) 5,434,604 2,878,449
Losses on capital market operations 32,976 998
Losses on derivative financial instruments 599,221 405,885
Foreign exchange losses 4,802,407 2,471,566
5. Information on other operating income :
The information on the factors affecting the Group’s income including new developments, and the explanation on
nature and amount of income earned from such items :
As of 31 March 2019, TRL 30,409 Thousand (31 March 2018 - TRL 18,933 Thousand) stated under other
operating income in the statement of income includes TRL 19,952 Thousand (31 March 2018 - TRL 7,243
Thousand) prior years’ provisions reversal income and TRL 10,457 Thousand (31 March 2018 - TRL 11,690 Thousand) other operating income.
As of 31 March 2019, prior years expense and provision reversal income include TRL 224 Thousand (31 March
2018 - TRL 2,562 Thousand) reversal of credit loss provisions due to collection of cash loans, TRL 179 Thousand
(31 March 2018 - TRL 1,956 Thousand) reversals of non-cash provisions, and TRL 19,549 Thousand (31 March
2018 - TRL 2,725 Thousand) reversal of legal case provision and other provisions.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
92
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
IV. Explanations Related to the Consolidated Statement of Income (cont’d)
6. Provision expenses of banks for loans and other receivables:
Current Period Prior Period
Expected Credit Losses 183,316 84,956
12-Month ECL (Stage 1) 26,955 3,065
Significant Increase in Credit Risk (Stage 2) 63,172 44,650
Impaired Credits (Stage 3) 93,189 37,241
Impairment Losses on Securities 1,960 1,416
Financial Assets Measured at Fair Value through Profit or Loss 138 114
Financial Assets Measured at Fair Value through Other Comprehensive Income 1,822 1,302
Impairment Losses on Associates, Subsidiaries and Joint-ventures - -
Associates - -
Subsidiaries - -
Joint-ventures (business partnership) - -
Other (*) 393 48,277
Total 185,669 134,649
(*) Other provisions also include provisions for non-cash loans.
7. Information on other operating expenses:
Current Period Prior Period
Reserve for employee termination benefits 5,136 4,177
Bank social aid provision fund deficit provision - -
Impairment losses on fixed assets - -
Depreciation expenses of fixed assets 23,346 7,521
Impairment losses on intangible assets - -
Goodwill impairment losses - -
Depreciation expenses of intangible assets 9,771 9,104
Impairment for investments accounted for under equity method - -
Impairment losses on assets held for resale - -
Depreciation expenses of assets held for resale - -
Impairment losses on assets held for sale - -
Other operating expenses 63,877 92,116
Lease Expenses Related to TFRS 16 Exemptions 1,920 19,082
Maintenance expenses 6,017 5,743
Advertisement expenses 641 1,722
Other expenses (**) 55,299 65,569
Loss on sales of assets 5 558
Other (*) 43,533 42,629
Total 145,668 156,105
(*) “Other” includes TRL 8,813 Thousand premiums paid to the Saving Deposit Insurance Fund, TRL 4,062 Thousand legal case provision (31 March 2018 - TRL 8,700 Thousand premiums paid to the Saving Deposit Insurance Fund, TRL 784 Thousand legal
case provision).
(**) Other expenses include TRL 4,194 Thousand communication expenses, TRL 8,649 Thousand computer usage expenses, TRL
2,666 Thousand promotion applications related with credit cards and banking services (31 March 2018 - TRL 4,540 Thousand communication expenses, TRL 11,894 Thousand computer usage expenses, TRL 2,626 Thousand promotion applications related with
credit cards and banking services).
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
93
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
IV. Explanations Related to the Consolidated Statement of Income (cont’d)
8. Information on profit/ loss from continued and discontinued operations before taxes:
As of 31 March 2019, the Bank has TRL 107,200 Thousand loss before tax (31 March 2018 - TRL 24,164
Thousand profit before tax), TRL 358,090 Thousand (31 March 2018 - TRL 356,587 Thousand) of
operating income, TRL 98,433 Thousand (31 March 2018 - TRL 93,181 Thousand) of net fees and
commissions income, TRL 185,669 Thousand of provision expenses (31 March 2018 - TRL 134,649
Thousand), TRL 30,409 Thousand (31 March 2018 - TRL 18,933 Thousand) of other operating income and
TRL 145,668 Thousand (31 March 2018 - TRL 156,105 Thousand) of other operating expense.
9. Information on tax provision for continued and discontinued operations:
As of 31 March 2019, the Group has TRL 12,260 Thousand current tax charge (31 March 2018 – TRL
1,018 Thousand current tax charge)and deferred tax benefit on temporary differences is TRL 71,895
Thousand (31 March 2018 – TRL 32,743 Thousand deferred tax benefit), deferred tax charge is TRL 41,743
Thousand(31 March 2018 – TRL 26,964 Thousand deferred tax charge).
10. Information on net profit/ loss from continued and discontinued operations:
The net loss of the Group for the period ended 31 March 2019 is TRL 89,308 Thousand.
11. The explanations on net profit/loss for the period :
a) The nature and amount of certain income and expense items from ordinary operations is disclosed if the
disclosure for nature, amount and repetition rate of such items is required for the complete understanding of
the Group's performance for the period : None.
b) Effect of changes in accounting estimates on statement of income for the current and, if any, for subsequent
periods : None.
c) Profit or loss attributable to minority shares: Loss attributable to minority shares is TRL 4,237 Thousand (31
March 2018 – TRL 6 Thousand).
d) If the other items in the statement of income exceed 10 % of the statement of income total, accounts amounting
to at least 20 % of these items are shown below :
Other Fees and commissions received Current Period Prior Period
Banking Services Income 101,123 84,358
Other 6,915 10,337
Total 108,038 94,695
Other Fees and commissions given Current Period Prior Period
Fees and commissions given to Banks 6,920 5,247
Fees and commissions given for Credit Cards 14,465 7,079
Other 7,343 7,705
Total 28,728 20,031
e) Nature and amount of changes in accounting estimates, which have a material effect on current period or
expected to have a material effect on subsequent periods : None.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
94
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
V. Explanations on the Risk Group of the Parent Bank
1. Volume of related party transactions, income and expense amounts involved and outstanding loan
and deposit balances:
a. Current Period:
Related Parties
Associates, Subsidiaries and Joint-
Ventures
Direct and Indirect
Shareholders of the Bank
Other Components in Risk
Group
Cash Non-Cash Cash Non-Cash Cash Non-Cash
Loans
Balance at beginning of period - - 898,986 18,697 - -
Balance at end of period - - 406,115 17,676 - -
Interest and commission income - - 6,751 49 - -
b. Prior Period:
Related Parties Subsidiaries and Associates
Direct and Indirect
Shareholders of the Bank
Other Entities Included
in the Risk Group
Cash Non-Cash Cash Non-Cash Cash Non-Cash
Loans
Balance at beginning of period - 11,754 575,004 16,912 - -
Balance at end of period - - 898,986 18,697 - -
Interest and commission income 242 18 17,843 42 - -
c.1. Information on related party deposits balances:
Related parties Associates, Subsidiaries and Joint-
Ventures Direct and Indirect
Shareholders of the Bank Other Components in Risk
Group
Deposits
Current
Period
Prior
Period
Current
Period
Prior
Period
Current
Period
Prior
Period
Balance at beginning of period 2,546 3,020 374,329 92,515 - -
Balance at end of period 2,888 2,546 310,714 374,329 - -
Interest on deposits 127 60 6,575 2,624 - -
c.2. Information on forward and option agreements and other similar agreements made with related parties:
None.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
95
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
V. Explanations on the Risk Group of the Parent Bank (cont’d)
2. Disclosures for related parties:
a) The relations of the Parent Bank with the entities controlled by the Parent Bank and its related parties,
regardless of whether there are any transactions or not :
In the normal course of its banking activities, the Parent Bank conducted various business transactions with
related parties at commercial terms and at rates which approximate market rates. Any transaction among the
Group subsidiaries and/or related parties are executed on arm-lengths conditions.
b) Nature of the transactions amount and ratio to the total volume of transactions, amount of major items and ratio
to all items, pricing policies and other factors :
Amount Shares %
Cash loans 406,115 1.85
Non-cash loans 17,676 0.29
Deposits 313,602 1.28
These transactions are priced in accordance with the general pricing policies of the Parent Bank and are in line
with market rates .
c) In cases separate disclosure is not necessary, in order to present the total impact on the financial statements,
total of similar items : Explained in b.
d) Transactions accounted under the equity method : None.
e) Disclosures related to purchase and sale of real estate and other assets, services given/received, agency
contracts, leasing contracts, transferring information as a result of research and development, license contracts,
financing (including supports in the form of loans, capital in cash and capital in kind), guarantees, and
management contracts :
The Parent Bank enters into lease agreements with Şeker Finansal Kiralama A.Ş. As of 31 March 2019 there
is no leasing obligations related to those agreements (31 December 2018 - None). Additionally, the Parent
Bank provides agency services for Şeker Yatırım Menkul Değerler A.Ş., Şeker Faktoring A.Ş. and Şeker
Finansman A.Ş. through its branches.
Within the limits of the Banking Law, the Group renders cash and non-cash loans to its related parties and the
ratio of these loans to the Group’s total cash and non-cash loan portfolio is 1.52%. Details of these loans are
explained in the Section V, Note V-1a.
As of 31 March 2019 the Group has no purchases and sale of real estate and other assets, transfer of information
as a result of research and development, and management contracts with the related parties.
f) Benefits provided to the top management of the Group during current period amount to TRL 7,413 Thousand
(31 March 2018 - TRL 12,023 Thousand).
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
96
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
VI. Explanations and notes related to subsequent events:
On 22 April 2019, The Board of Directors has decided to appoint Erdal Erdem who is Deputy General Manager
as General Manager of the Bank, provided that the approval of the Banking Regulation and Supervision Agency.
SECTION SIX
AUDITORS’ REVIEW REPORT
I. Explanations on the Auditors’ Review Report :
The consolidated financial statements for three-month period ended 31 March 2019 were reviewed by DRT
Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik AŞ (Member of Deloitte Touche Tohmatsu) and
Auditors’ Review Report dated 17 May 2019 is presented in the introduction of this report.
II. Other Footnotes and Explanations Prepared by Independent Auditors :
None.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
97
SECTION SEVEN
INFORMATION ON INTERIM ACTIVITY REPORT
I. Interim Period Reports Included the Board of Directors Chairman and General Manager’s
Assessments of the Bank for the Interim Activities
1. Board of Directors Chairman’s Assesments on Interim Report
Esteemed Shareholders,
The strong growth performance attained in global economy in 2017 and in the first half of 2018 began to slow
down as of the second half of 2018, with factors that had an impact on developed economies in particular.
With respect to developed countries, while the US economy maintained a robust outlook, the global growth started
to weaken above the expectations as a result of the deteriorating confidence indices in the EU, concerns around
the Italian economy, the unclosed deal of Brexit, and the slowdown in net external demand in Asian economies.
Facing such economic outlook, the European Central Bank (ECB) stated in March that interest rates would be kept
at minimum levels at least until the end of 2019 in an attempt to rejuvenate economy. ECB also announced a new,
two-year Targeted Longer-Term Refinancing Operations (TLTRO-III) program, which will start in September
2019 and end in March 2021. As for developing countries, the growth in China –with the greatest contributions to
the global growth – slowed down because the expansionary policy steps by the Chinese government in order to
support the internal demand brought about expectations for greater fragility on the banking sector, along with the
escalating tension in the Chinese-US relations.
In the first quarter of 2019, uncertainties arising from trade wars did not only worsen producer and consumer
confidence but also impaired the outlook in financial markets. This all resulted in a restricted access to financial
sources and, unsurprisingly, a pressure on the growth for developing countries.
The overall weakness in growth pushed the growth expectations for 2019 and 2020 to be revised. The International
Monetary Fund (IMF) anticipates a 3.6% growth globally for 2018, declining to 3.3% in 2019 and attaining the
levels of 2018 – 3.6% – only in 2020, in its recent global outlook report. The Organization for Economic
Cooperation and Development (OECD) underscores the slowdown in China and Europe and the weaker global
trade as two factors that pose a risk for the global economy, while anticipating a 3.3% and 3.4% growth for 2019
and 2020, respectively.
Despite high risks in the global economy, Turkey closed 2018 with a growth of 2.6%, with precursors for a
recovery in economy thanks to the required structural transformations that were undertaken. Q1 2019 indicators
confirm our expectations for a new momentum in economy, in the aftermath of shrinkage in the fourth quarter of
2018.
The balancing period in economy helped achieve a considerable improvement in the balance of payments, and the
current deficit dropped from USD 47.3 billion to USD 20.72 billion in 2018. The moderate outlook in the balance
of payments is ongoing, supported by export figures in the first quarter of 2019.
The rising inflation caused by the disproportionate depreciation in Turkish Lira – much higher than what was
revealed by macroeconomic indicators in the second half of 2018 – started to decline thanks to economy
authorities’ determined stance focused on stability and reform and economic balancing. We firmly believe that
this determination will be maintained and reassuring steps will be taken as necessary if Turkish Lira is exposed to
unhealthy movements.
The banking sector played a defining role in keeping the wheels of economy turning. Having maintained its robust
structure, the sector continued to finance investments in the first quarter of the year.
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
98
SECTION SEVEN
INFORMATION ON INTERIM ACTIVITY REPORT (cont’d)
I. Interim Period Reports Included the Board of Directors Chairman and General Manager’s
Assessments of the Bank for the Interim Activities (cont’d)
1. Board of Directors Chairman’s Assesments on Interim Report
Established 65 years ago in order to support agricultural industry, rural development and sustainable production,
Şekerbank has adopted the mission of responsible banking, a key theme for our sector. As required by this mission,
we have continued to support our customers during the times of economic fluctuations. In the first three months
of the year, accordingly, we have provided favorable financing facilities to SMEs and farmers in particular by
pushing our limits, and promoted the development journey of Turkey, just as we have done for 65 years.
Our Bank will keep expanding its broad customer base of farmers and SMEs, with whom it has been working for
generations, and continue unwaveringly to contribute to the Turkish economy through supporting production in
the upcoming period as well.
Kind regards,
Dr. Hasan Basri Göktan
Chairman of the Board of Directors
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
99
SECTION SEVEN (cont’d)
INFORMATION ON INTERIM ACTIVITY REPORT (cont’d)
I. Interim Period Reports Included the Board of Directors Chairman and General Manager’s
Assessments of the Bank for the Interim Activities (cont’d)
2. General Manager’s Assesments on Interim Report
Esteemed Stakeholders,
Our total credit volume reached TRL 24.3 billion, according to our Bank’s consolidated financial results dated 31
March 2019. In the first three months of 2019, we have continued to support our economy and provide funding to
production. We extended 59% of our loans to SMEs and farmers as of the end of March.
We increased our asset size by 5% year on year and reached TRL 33.9 billion as of 31 March 2019.
The unswerving destination of broad-based savings for 65 years, our Bank has seen a 20% year on year rise in the
size of deposits, attaining TRL 24.6 billion in the first three months of 2019.
We have cemented our brand recognition as a reliable bank through standing by our customers from all parts of
Turkey in good times and in bad times for 65 years. With the aim of carrying our deep-rooted customer base to
the future, we have expanded it and adopted a route of frontal thrusts comprising various end-to-end projects. We
have attained, and will further enrich, our broad-based balance sheet structure thanks to our well-established
network of branches, which remain where they are for a half century, and our human resources competent in local
banking. In the upcoming months, we are planning to take maiden steps into a new period during which we will
undertake a series of ‘firsts’ in our sector.
While carrying out our operations, we will keep making it a top priority to promote Turkey’s development journey
and enhance our people’s welfare, and standing by our SMEs and farmers as they are the backbones of production
and employment.
Kind regards,
Erdal Erdem
General Manager
ŞEKERBANK T.A.Ş. AND ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD FROM 1 JANUARY TO 31 MARCH 2019 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
100
SECTION SEVEN (cont’d)
INFORMATION ON INTERIM ACTIVITY REPORT (cont’d)
I. Interim Period Reports Included the Board of Directors Chairman and General Manager’s
Assessments of the Bank for the Interim Activities (cont’d)
3. Şekerbank by Numbers
The subsidiaries financial statements, which are consolidated within the framework of the reporting package, are