Şekerbank Türk Anonim Şirketi Unconsolidated Interim Financial Statements For the Nine-month Period Ended 30 September 2016 With Auditor’s Review Report Thereon (Convenience Translation of Unconsolidated Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish) 8 November 2016 This report consists of 2 pages Auditors’ Review Report and 90 pages of financial statements and related disclosures and footnotes.
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Şekerbank
Türk Anonim Şirketi
Unconsolidated Interim Financial Statements
For the Nine-month Period Ended 30 September 2016
With Auditor’s Review Report Thereon
(Convenience Translation of Unconsolidated
Financial Statements and Related Disclosures and Footnotes
Originally Issued in Turkish)
8 November 2016
This report consists of 2 pages Auditors’ Review
Report and 90 pages of financial statements and
related disclosures and footnotes.
With Independent Auditors’ Review Report Thereon
With Independent Auditors’ Report Thereon Akis Bağımsız
Denetim ve Serbest
Muhasebeci Mali Müşavirlik
Convenience Translation of the Independent Auditors’ Review Report Originally Prepared and Issued in Turkish to English (See Note I in Section Three)
To the Board of Directors of Şekerbank T.A.Ş.;
Introduction
We have reviewed the unconsolidated balance sheet of Şekerbank T.A.Ş. (“the
Bank”) at 30 September 2016 and the related unconsolidated statement of income,
unconsolidated statement of income and expense items under shareholders’ equity,
unconsolidated statement of changes in shareholders’ equity, unconsolidated
statement of cash flows and a summary of significant accounting policies and other
explanatory notes to the unconsolidated financial statements for the nine-month-
period then ended. The Bank Management is responsible for the preparation and
fair presentation of interim financial statements in accordance with the
“Regulation on Accounting Applications for Banks and Safeguarding of Documents”
published in the Official Gazette no.26333 dated 1 November 2006, and other
regulations on accounting records of Banks published by Banking Regulation and
Supervision Agency and circulars and interpretations published by Banking
Regulation and Supervision Authority, (together referred as “BRSA Accounting and
Reporting Legislation”) and Turkish Accounting Standard 34 “Interim Financial
Reporting” for those matters not regulated by BRSA Accounting and Reporting
Legislation. Our responsibility is to express a conclusion on these interim financial
information based on our review.
Scope of Review
We conducted our review in accordance with the Standard on Review
Engagements (SRE) 2410, “Limited 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 performed in accordance with the 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.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying unconsolidated financial information does not give a true view of the financial position of the Bank at 30 September 2016 and of the results of its operations and its cash flows for the nine-month period then ended in all aspects in accordance with the BRSA Accounting and Reporting Legislation.
Report on other regulatory requirements arising from legislation
Based on our review, nothing has come to our attention that causes us to believe that the
financial information provided in the accompanying interim activity report in Section
VII, is not consistent with the unconsolidated financial statements and disclosures in all
material respects.
Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of KPMG International Cooperative Orhan Akova Partner, SMMM 8 November 2016 İstanbul, Turkey
Additional paragraph for convenience translation to English:
The accounting principles summarized in Note I Section Three, differ from the accounting principles generally accepted in countries in which the accompanying unconsolidated financial statements are to be distributed and International Financial Reporting Standards (“IFRS”). Accordingly, the accompanying financial statements are not intended to present the financial position and results of operations in accordance with accounting principles generally accepted in such countries of users of the unconsolidated financial statements and IFRS.
THE UNCONSOLIDATED FINANCIAL REPORT OF ŞEKERBANK T.A.Ş.
FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016
The unconsolidated financial report 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 BANK
UNCONSOLIDATED FINANCIAL STATEMENTS OF THE BANK
EXPLANATIONS ON THE CORRESPONDING ACCOUNTING POLICIES APPLIED IN
THE RELATED PERIOD
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT OF
THE BANK
EXPLANATORY DISCLOSURES AND FOOTNOTES ON UNCONSOLIDATED FINANCIAL
STATEMENTS
LIMITED REVIEW REPORT
INTERIM ACTIVITY REPORT
The unconsolidated financial statements 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 audited and presented as
attached.
The 30 September 2016 financial tables are audited 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 Servet TAZE Murat ISHMUKHAMEDOV
Chairman of The Board of
Directors
General Manager
Member of the Audit Committee
Victor ROMANYUK
Selim Güray ÇELİK Orhan ULUYOL
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
Telephone No : (212) 319 71 58
Fax No : (212) 319 71 62
Address : Emniyet Evleri Mah. Eski Büyükdere Cad. No:1/1A
Halil Can Yeşilada Corporate Governance Committee, Internal Systems
Üzeyir Baysal Independent Director, Remuneration Committee
Khosrow Kashani Zamani Corporate Governance Committee
Murat Ishmukhamedov (*) Corporate Governance Committee, Audit Committee
Halit Haydar Yıldız -
Zhanibek Saurbek -
Executive Vice Presidents Ali Güray Demir Credit Legal and Administrative Follow -up
Fatin Rüştü Karakaş Audit
Nihat Büyükbozkoyun Operations
Selim Güray Çelik
Financial Control, Budgeting and Strategic Planning,
Corporate Governance Committee
Gökhan Ertürk Retail Banking Marketing
Umut Ülbegi Corporate and Commercial Banking Marketing
Salih Zeki Önder Financial Institutions
Ahmet İlerigelen Credit Management
Aybala Şimşek Strategy and Corporate Communication
Murat Sabaz Small Enterprises and Agricultural Banking Marketing
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. Murat Ishmukhamedov and Victor Romanyuk are Audit
Committee Members of the Bank.
The Chairman of the Board of Directors Dr. Hasan Basri Göktan has total shares of 0.05 % in nominal,
amounting to TRL 577 Thousand, Khosrow Kashani Zamani who is the Board of Directors Member has total
shares of 0.013 % in nominal, amounting to TRL 148 Thousand which they obtained from public offering.
IV. Information About the Persons and Institutions That Have Qualified Shares in the 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 35.4395 410,389 - Samruk-Kazyna, the National Well-fare Fund of
Kazakhstan 224,353 19.3742 224,353 -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
3
V. Summary on the Bank’s Functions and Areas of Activity
Business line of the 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 30 September 2016, the Bank has 273 domestic branches (31 December 2015 – 301
domestic branches).
VI. Differences Between The Communique On Preparation Of Consolidated Financial
Statements Of Banks And Turkish Accounting Standards And Short Explanatıon 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
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 Mortgage Finansman A.Ş.
and Zahlungsdienste GmbH der Şekerbank T.A.Ş. are included in the scope of consolidation by line-by-line
method.
Seltur Turistik İşletmeler Yatırım A.Ş. is not consolidated in the financial statements and is recorded at cost
since the Bank has no control and it is not a financial subsidiary.
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 transfer of the shareholders‟ equity between the 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 payback of liabilities between the Bank and its subsidiaries.
SECTION TWO
UNCONSOLIDATED FINANCIAL STATEMENTS
I. Balance Sheet (Statement of Financial Position)
II. Statement of Off Balance Sheet Contingencies and Commitments
III. Statement of Income
IV. Statement of Profit and Loss Accounted for Under Equity
V. Statement of Changes in Shareholders‟ Equity
VI.
Statement of Cash Flows
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
12
SECTION THREE
ACCOUNTING PRINCIPLES
I. Basis of Presentation
The Bank prepares financial statements and notes according to Communiqué on Banks‟ Accounting Practice and
Maintaining Documents, other regulations, communiqués and circulars in respect of accounting and financial
reporting and pronouncements issued by the Banking Regulation and Supervision Agency (BRSA) and the
Turkish Accounting Standards (TAS) and the Turkish Financial Reporting Standards (TFRS) and the related
statements and guidances announced by the Public Oversight, Accounting and Auditing Standards Authority
(“POA”).
Additional paragraph for convenience translation to English
The effects of differences between accounting principles and standards set out by regulations in conformity with
Article 37 of the Banking Law No. 5411, accounting principles generally accepted in countries in which the
accompanying consolidated financial statements are to be distributed and the International Financial Reporting
Standards (“IFRS”) have not been quantified in the accompanying unconsolidated financial statements.
Accordingly, the accompanying unconsolidated financial statements are not intended to present the financial
position, results of operations and changes in financial position and cash flows in accordance with the accounting
principles generally accepted in such countries and IFRS.
II. Explanations on Usage Strategy of Financial Assets and Foreign Currency Transactions
The Bank aims to keep up its activities in every line of banking.
The Bank shapes its strategies for financial instruments depending on the source of funds, which mainly consists
of deposits. Investment instruments are selected among liquid instruments. A level of liquidity which allows for
covering obligations is kept.
The Bank controls risk by managing currency positions in harmony with market movements on the strength of
short-term strategies instead of carrying long-term currency positions in big amounts, in order to avoid risks which
might arise from floating currency (exchange rate) regime. A currency risk arising from customer transactions, the
Bank tries to close by carrying out counter-transactions.
Yield (return) and risk analyses are made in regard of maturity structure of balance sheet items, re-pricing periods
and interest rates, and appropriate investment decisions are made. Budget contains limits on maturity basis and
distributions of assets items are defined.
The Bank‟s off-balance sheet term transactions are managed by including such transactions in the Bank‟s total
currency and interest positions. Term transactions to be made by customers are carried out within loan and risk
limits established on customer basis. Currency swaps, in particular, being a larger part of the off-balance sheet
transactions, are carried out to manage the Bank‟s currency cash flow without causing currency and interest risks.
The Bank aims to get longer-term funds (resources) in order to be able to hedge itself against risks arising from
short-term character of deposits, while trying to increase the share of floating interest rate items in its assets.
III. Explanations on Foreign Currency Transactions
The foreign currency monetary assets and liabilities followed under balance sheet are converted into Turkish Lira
at exchange rate at the balance sheet date. The non-monetary accounts carried at fair value are converted from the
exchange rates at the time the fair value was determined. Exchange rate differences arising from monetary items
conversion is stated under the income statement.
IV. Explanations on Associates and Subsidiaries
Associates and subsidiaries are recorded at the cost of acquisition and provision is provided for any impairment in
value.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
13
V. Explanations on Forward and Option Contracts and Derivative Instruments The Bank‟s derivative instruments consist of foreign currency swaps, interest swaps, option and forward foreign
currency buy/sell transactions. Fair values of foreign currency forward and swap transactions are determined by
comparing the Bank‟s period end foreign exchange rates and current market foreign exchange rates to the balance
sheet date. The resulting gain or loss is reflected in the income statement. In calculation of fair values of the
interest swap contracts, interest amounts to be paid or received upon the fixed interest rate in the contract and
interest amounts to be received or paid upon the floating interest rates in the contracts have been recalculated and
discounted in accordance to valid interest rates in the current market and the differences have been reflected to
the current term income statement. Discounted values calculated using the interest rates between the transaction
date and repricing date are used in determination of the fair values of interest rate swaps. Some of the derivative
instruments, although made for economical hedging purposes, are accounted as trading transactions since they are
not qualified to be a hedging instrument as per “Financial Instruments: Recognition and Measurement” (“TAS
39”). Realized gains or losses on these derivative instruments are reflected in the statement of income.
VI. 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).
According to the related legislation, interest accruals and discounts on loans and other receivables which become
doubtful are cancelled and such amounts are recorded as interest income when they are collected.
VII. 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 then 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
instruments form a significant part of the Bank‟s operations. Financial instruments affect liquidity, market, and
credit risks on the Bank‟s balance sheet in all respects. The Bank trades these instruments on behalf of its
customers and on its own behalf.
Financial instruments expose, affect credit and interest risks and diminish the liquidity 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 Bank. Settlement date accounting requires (a) accounting of the asset when
acquired by the institution and (b) disposing of the asset out of the balance sheet on the date settled by the
institution; 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, available for sale financial assets and securities held for
trading, the Bank 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 for in the same way
as the acquired assets. Fair value differences are not accounted for assets presented at cost or amortized cost; gain
or loss of financial assets at fair value through profit and loss are reflected in the statement of income; gain or loss
of available for sale assets are accounted for in the shareholders‟ equity.
The financial instruments are mentioned below with regard to their accounts classified in the financial statements
and their valuations according to these classifications.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
14
VIII. Explanations on Financial Assets (cont’d)
Cash, Banks and Other Financial Institutions
Cash and cash equivalents comprise cash on hand, demand deposits, and highly liquid short-term investments
with maturity of 3 months or less following the purchase date, not bearing risk of significant value change, and
these investments that are readily convertible to a known amount of cash. The book values of these assets
approximate their fair values.
Financial Assets at Fair Value Through Profit and Loss Trading securities are securities which were either acquired to generate a profit from short-term fluctuations in
price or dealer‟s margin, or they are the securities included in a portfolio with a pattern of short-term profit
taking.
Trading securities are initially recognized at cost. Transaction costs of the related securities are included in the
initial cost. The positive difference between the cost and fair value of such securities is accounted for as interest
and income accrual, and the negative difference is accounted for as “Impairment Provision on Marketable
Securities”.
As well as customer deposits, the Bank is funding its growing long term and fixed interest rate TRL loan
portfolio through long term floating interest rate foreign currency resources provided from international markets.
The Bank transforms the foreign currency liquidity which is created by funds provided from international markets
to TRL liquidity through long term swap contracts, as a result of this situation the Bank can both provide TRL
funds for the long term fixed rate loans and provide protection against interest rate risk.
The Bank reflects swaps, used for funding long term and fixed interest rate TRL loan portfolio, with fair value in
the financial statements. The Bank has initially classified these long term and fixed interest rate TRL loan
portfolio funded through swaps as “financial assets at fair value through profit and loss” and follows them at fair
value in the financial statements.
TRL 8,235 Thousand of the housing, commercial instalment, consumer, vehicle and finance lendings‟ principal
amounts are classified as under the account of financial asset at fair value through profit and loss (31 December
2015 - TRL 11,657 Thousand).
Held to Maturity Investments, Financial Assets Available for Sale and Loans Investments held to maturity include securities with fixed or determinable payments and fixed maturity where
there is an intention of holding till maturity and the relevant conditions for fulfilment of such intention, including
the funding ability and excluding loans and receivables.
Available for sale financial assets include all securities other than loans and receivables, securities held to
maturity and securities held for trading.
The securities are initially recognized at cost including the transaction costs.
After the initial recognition, available-for-sale securities are measured at fair value and the unrealized gain/loss
originating from the difference between the amortized cost and the fair value is recorded in “Marketable
Securities Value Increase Fund” under the equity. Fair values of debt securities that are traded in an active market
are determined based on quoted prices or current market prices. In the absence of prices formed in an active
market, fair values of these securities are determined using the Official Gazette prices or other valuation methods
stated in TAS. In case there is no market price in an active market, the other methods explained in TAS 39 are
used for determination of the fair value.
The real coupon rates for government bonds indexed to consumer price index are fixed throughout maturities. As
per the statements made by the Turkish Treasury on the dates of issuance, such securities are valued taking into
account the difference between the reference index at the issue date and the reference index at the balance sheet
date to reflect the effects of inflation.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
15
VIII. Explanations on Financial Assets (cont’d)
Held to Maturity Investments, Financial Assets Available for Sale and Loans (cont‟d)
Loans and receivables are financial assets raised by the Bank providing money to debtors, other than assets held
for trading purposes or for the purpose of selling in the short-term.
After initial recognition held to maturity investments are measured at amortized cost by using effective interest
rate less impairment losses, if any.
The interests received from held-to-maturity investments are recorded as interest income.
There are no financial assets that have been previously classified as held-to-maturity investments but cannot be
currently classified as held-to-maturity for two years due to “tainting” rules.
The Bank classifies its securities as referred to above at the acquisition date of related assets.
Shares unquoted on the stock exchange amounting to TRL 9,639 Thousand are classified under “Other
Marketable Securities” of Financial Assets Available for Sale in the current period (31 December 2015 - TRL
7,236 Thousand).
Loans and Provisions for Impairment
Loans and receivables are initially recognized at cost according to their original balances, after the initial
recognition, they are accounted at amortized cost by using effective interest rate as stated in the TAS 39.
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.
Provision is set for the doubtful loans and the amount is charged in the current period income statement. The
provisioning amount for non-performing loans are determined by the Bank‟s management for compensating the
probable losses of the doubtful loan portfolio, by evaluating the quality of loan portfolio, risk factors and
considering the economy conditions, other facts and related regulations.
The Bank Management applies provision policy for the “non-performing loans” in accordance with the
requirements of the Turkish banking regulation adopted by the BRSA.
The provisions are reflected in the income statement under “Provision and Impairment Expenses - Specific
Provision Expense”. The collections made regarding these loans are first deducted from the principal amount of
the loan and the remaining collections are deducted from interest receivables.
The collections related to loans for which provision is made in the current period are reversed from the
“Provision for Loans and Other Receivables” account in the income statement. The collections related to loans
written off or provisioned in prior years are recorded to “Collections Related to the Prior Period Expenses” under
“Other Operating Income” account and related interest income is credited to the “Interest Received from Non-
performing Loans” account.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
16
VIII. Explanations on Financial Assets (cont’d)
Loans and Provisions for Impairment (cont’d)
Within the framework of the regulation and principles referred to in explanations above, in addition to specific
loan loss provisions; the Bank records general loan loss provisions for loans and other receivables. Subsequent to
the change in the regulation on “Change in the Methods and Principles for the Determination of Loans and Other
Receivables to be Reserved for and Allocation of Reserves” published in the Official Gazette No. 26779 dated 6
February 2008; for the watch list loans the provision rate has been changed to 2 % for cash loans and 0.4 % for
non-cash loans. The Bank, as a consequence of the regulation published in the Official Gazette No. 27119 dated
23 January 2009 amending the “Regulation of Methods and Principles for the Determination of Loans and Other
Receivables to be Reserved for and Allocation of Reserves”, payment obligation arising from the Law No. 3167,
“Arrangements of the Payments Made Through Cheque and Protection of the Cheque Holders” and other related
regulations, applies one fourth of the related provision group rate for each leaf of the cheques given to loan
customers whose loans are in third, fourth or fifth groups, and for those cheques which were delivered at least
five years before the reporting period.
As a consequence of the regulation published in the Official Gazette No. 28789 dated 8 October 2013 amending
the “Change in the Methods and Principles for the Determination of Loans and Other Receivables to be Reserved
for and Allocation of Reserves” general loan provision ratio for export cash and non-cash loans followed under
standard loans is 0 % and general loan provision ratio for SME cash loans is 0.5 % and for non-cash SME loans
the ratio is 0.1 %.
IX. Explanations on Impairment of Financial Assets
At each balance sheet date, the Bank evaluates the carrying amounts of a financial asset or a group of financial
assets to determine whether there is an objective indication that those assets have suffered an impairment loss. If
any such indication exists, the Bank determines the related impairment.
A financial asset or a financial asset group incurs impairment loss only if there is an objective indicator related to
the occurrence (or non-occurrence) of one or more than one event (“loss event”) after the recognition of that
asset; and such loss event (or events) causes, an impairment as a result of the effect on the reliable estimate of the
expected future cash flows of the related financial asset and asset group. Irrespective of high probability, the
expected losses caused by the future events are not recorded.
X. Explanations on Offsetting of Financial Assets and Liabilities
Financial assets and liabilities are offset when the Bank 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.
XI. 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 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 securities held for trading, available for sale and held to maturity 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.
These transactions are short-term and consist of domestic public sector debt securities.
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 income statement.
As of 30 September 2016, the Bank has no reverse repo transactions (31 December 2015 - None).
As of 30 September 2016, the Bank does not have marketable securities lending transactions (31 December 2015
- None).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
17
XII. 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 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 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 30 September 2016, the Bank has TRL 78,600 Thousand assets held for sale (31 December 2015 - TRL
123,300 Thousand).
A discontinued operation is a division of a bank that is either disposed or held for sale. Results of discontinued
operations are included in the statement of income separately.
The Bank does not have any discontinued operations.
XIII. 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. As being different from determination of
other intangible assets‟ amortization periods, 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 Bank has no written off intangible fixed assets, which are fully amortized, in the current period (31
December 2015- None).
XIV. Explanations on Tangible Fixed Assets
Cost of the Bank‟s immovables has been adjusted for inflation until 31 December 2004. As of 31 December
2006, the 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
at 31 December 2015 reflected in the financial statements, accordingly. The difference between expertise value
and cost of immovables as of 30 September 2016 is TRL 186,569 Thousand gross (after net off deferred tax, net
amount is TRL 149,255 Thousand) (31 December 2015 gross: TRL 298,218 Thousand, net-off deferred tax
amount TRL 238,574 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 – 20
Leasehold improvements During the lease agreement
Gain or loss resulting from disposals of the tangible fixed assets is reflected to the income statement as the
difference between the net proceeds and net book value.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
18
XIV. Explanations on Tangible Fixed Assets (cont’d)
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 Bank reviews the residual value and the useful life of buildings at least at each financial year-end and, if
expectations differ from previous estimates, the changes accounted for as a change in an accounting estimate in
accordance with TAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
The Bank has no written off other fixed assets in the current period (31 December 2015 - TRL 1,751 Thousand).
XV. Explanations on Leasing Transactions
Tangible fixed assets acquired by financial leases are accounted for in accordance with TAS 17 “Leases”. 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 Bank‟s period end 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 Bank 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 %.
Operating lease payments are recognized as expenses in the income statement on a straight line basis over the
lease term.
The Bank does not have any leasing transactions as lessor.
XVI. 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 Bank‟s best expectation of expenses in fulfilling
the obligation, and discounted to present value if material.
XVII. Explanations on Liabilities Regarding Employee Benefits
Defined Benefit Plans
In accordance with existing social legislation in Turkey, the Bank 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 Bank 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 No: 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
Bank 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 published as at 1 January 2013, actuarial gain/losses are recorded under equity. As
of 30 September 2016 , the carrying value of employee benefit provisions is TRL 66,040 Thousand that consists
of employee termination benefit provisions amounting to TRL 61,554 Thousand and employee vacation pay
provisions amounting to TRL 4,486 Thousand (31 December 2015 - employee termination benefit provisions
was TRL 53,380 Thousand and employee vacation benefit provisions was TRL 3,959 Thousand).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
19
XVII. Explanations on Liabilities Regarding Employee Benefits (cont’d)
Defined Contribution Plans
Şekerbank T.A.Ş. Pension Fund, of which most of the 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, 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 Bank 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.
The above mentioned law also includes the following:
Through a commission constituted by the attendance of one representative separately from the Social
Security Institution, Ministry of Finance, Turkish Treasury, 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 9.8% 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
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 31 March 2011.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
20
XVII. Explanations on Liabilities Regarding Employee Benefits (cont’d)
Defined Contribution Plans (cont’d)
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” issued based on the Article 38. There was TRL 7,941 Thousand actuarial deficit in the actuary
report dated January 2016 which was prepared using a technical interest rate of 9.80 % in accordance with the
basis set out in the Council of Ministers decision no: 2006/11345 on 30 November 2006 (31 December 2015 -
TRL 7,941 Thousand deficit).
As of 30 September 2016, TRL 7,941 Thousand provision is recorded in the financial statements of the Bank (31
December 2015 - TRL 7,941 Thousand).
XVIII. Explanations on Taxation
Corporate tax
According to the Article 32 of the Corporate Tax Law No. 5520, accepted in the meeting of the Turkish Grand
National Assembly of Turkey on 13 June 2006 and announced in the Official Gazette dated 21 June 2006, the
corporate tax rate has been decreased from 30 % to 20 %, effective from 1 January 2006 as per the Article 37 of
the Corporate Tax Law.
The tax legislation requires advance tax payment of 20 % 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 (31
December 2015 - 20 %).
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 instalment 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 Bank 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.
As of 30 September 2016 and 31 December 2015, 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 Bank calculated deferred tax asset on all deductible temporary differences except for general
loan reserves, 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 are shown in the
accompanying financial statements on a net basis.
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 8,974 Thousand is stated
under the tax provision line in the income statement (30 September 2015 – TRL 13,109 Thousand deferred tax
benefit). The deferred tax liability of TRL 43,191 Thousand (31 December 2015 – TRL 42,522 Thousand
deferred tax liability) resulting from differences related to items that are debited or charged directly to equity is
netted with the related equity accounts.
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.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
21
XIX. 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 income statement in the period they are incurred.
The Bank‟s issued bills amount is TRL 66,814 Thousand as of 30 September 2016 (31 December 2015- TRL
425,588 Thousand).
The Bank issued Asset Covered Bond amounting to TRL 1,500,000 Thousand and details are shown in the table
below. The investors 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 Bank‟s SME loans
were used as collateral. Outstanding Asset Covered Bond amount is TRL 684,589 Thousand as of 30 September
2016 (31 December 2015 – TRL 764,218 Thousand).
Issue Date Series Investors Amount Outstanding Amount (*) Currency Maturity
27 February 2014 2014-1 Qualified Institutional
Investors 361,846 361,846 TRL 13.03.2017
18 December 2015 2015-1 EIB 319,400 319,400 TRL 12.03.2019
(*) Outstanding amounts do not include accruals.
The Bank has not issued convertible bonds.
XX. Explanations on Share Certificates
There are no share certificates issued by the Bank.
XXI. Explanations on Acceptances
Acceptances are realized simultaneously with the payment dates of the customers and they are presented as
probable commitments in off-balance sheet accounts.
XXII. Explanations on Government Incentives
There are no government incentives utilized by the Bank.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
22
XXIII. Explanations on Segment Reporting
The Bank primarily deals with and engages in corporate, retail and SME banking in line with its strategy.
Current Period
Corporate SME
Retail
Other
Total
Net Interest Income 146,687 365,960 140,099 159,212 811,958
Net Fees and Commission Income and Other Operating Income 68,315 214,031 33,255 90,705 406,306
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
23
SECTION FOUR
INFORMATION RELATED TO FINANCIAL POSITION AND RISK
MANAGEMENT
I. Explanations Related to 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 effective since 1 January 2014. The Bank‟s unconsolidated capital adequacy
ratio in accordance with the related communiqués is 12.92 % (31 December 2015 – 13.66 %).
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 are 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, non-cash loans and contingent liabilities. 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. While simple approach is taken into
account for banking book items, the Bank 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.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
24
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
I. Explanations Related to 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 1,278 - Reserves 1,197,572 - Gains recognized in equity as per TAS 210,475 - Profit 91,256 - Current Period Profit 53,935 - Prior Period Profit 37,321 - Shares acquired free of charge from subsidiaries, affiliates and jointly controlled partnerships and cannot be
recognised within profit for the period 0 - Common Equity Tier 1 Capital Before Deductions 2,658,581 -
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 37,070 - Improvement costs for operating leasing 33,820 - Goodwill (net of related tax liability) 57,036 - 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) 437 - 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 - - 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 304,359 - Total Common Equity Tier 1 Capital 2,354,222 -
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) - - Additional Tier I Capital before Deductions - -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
25
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 (-) 38,024 - 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 (-) 292 - Deductions to be made from common equity in the case that adequate Additional Tier I Capital or Tier II
Capital 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) 2,315,906 -
TIER II CAPITAL Debt instruments and share issue premiums deemed suitable by the BRSA - - Debt instruments and share issue premiums deemed suitable by BRSA (Temporary Article 4) 1,126 - Debt instruments and share issue premiums deemed suitable by the BRSA 149,648 - Tier II Capital Before Deductions 150,774 -
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 150,774 - Total Capital (The sum of Tier I Capital and Tier II Capital) - - 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 8,017 - Other items to be defined by the BRSA (-) 11,381 -
In transition from Total Core Capital and Supplementary Capital (the capital) to Continue to
Download 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 - - 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 - -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
26
TOTAL CAPITAL Total Capital (The sum of Tier I Capital and Tier II Capital) 2,447,282 - Total risk weighted amounts 18,935,445 -
CAPITAL ADEQUACY RATIOS Core Capital Adequacy Ratio (%) 12.43 - Tier 1 Capital Adequacy Ratio (%) 12.23 - Capital Adequacy Ratio (%) 12.92 -
BUFFERS Bank specific total Common Equity Tier 1 Capital requirement (%) 0.007 - Capital conservation buffer requirement (%) 0.006 - Bank specific counter-cyclical buffer requirement (%) 0.001 - 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
(%) - 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 - - Remaining Mortgage Servicing Rights - - Amount arising from deferred tax assets based on temporary differences - -
Limits related to provisions considered in Tier II calculation General provisions for standard based receivables (before tenthousandtwentyfive limitation) - - Up to 1.25% of total risk-weighted amount of general reserves for receivables where the standard approach used 149,648 - 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 January 1, 2018 and January 1, 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” and taken into consideration at the end of transition process.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
27
Prior Period
COMMON EQUITY TIER I CAPITAL
Paid-in Capital to be Entitled for Compensation after All Creditors 1,158,000
Share Premium 1,278
Share Cancellation Profits -
Legal Reserves 1,090,958
Other Comprehensive Income according to TAS 240,331
Profit 106,614
Net Current Period Profit 102,649
Prior Period Profit 3,965
Provisions for Possible Losses -
Bonus Shares from Associates, Subsidiaries and Joint-Ventures not Accounted in Current Period‟s
Profit -
Common Equity Tier I Capital Before Deductions 2,597,181
Deductions From Common Equity Tier I Capital
Current and Prior Periods' Losses not Covered by Reserves, and Losses Accounted under Equity
according to TAS (-) 70,239
Leasehold Improvements on Operational Leases (-) 34,287
Goodwill and Intangible Assets and Related Deferred Tax Liabilities (-) 39,036
Net Deferred tax assets / liabilities (-) -
Shares Obtained against Article 56, Paragraph 4 of the Banking Law (-) -
Investments in own common equity (-) -
Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and
FinancialInstitutions where the Bank does not own 10% or less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital (-) -
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 (-) -
Mortgage Servicing Rights Exceeding the 10% Threshold of Tier I Capital (-) -
Net Deferred Tax Assets arising from Temporary Differences Exceeding the10% Threshold of Tier I
Capital (-) -
Amount Exceeding the 15% Threshold of Tier I Capital as per the Article 2, Clause 2 of the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks (-) -
The Portion of Net Long Position of the Investments in Equity Items of Unconsolidated Banks and
Financial Institutions where the Bank Owns 10% or more of the Issued Share Capital not deducted from Tier I Capital (-) -
Mortgage Servicing Rights not deducted (-) -
Excess Amount arising from Deferred Tax Assets from Temporary Differences (-) -
Other items to be Defined by the BRSA (-) -
Deductions from Tier I Capital in cases where there are no adequate Additional Tier I or Tier II Capitals (-) -
Total Deductions from Common Equity Tier I Capital 143,562
Total Common Equity Tier I Capital 2,453,619
ADDITIONAL TIER I CAPITAL
Preferred Stock not Included in Tier I Capital and the Related Share Premiums -
Debt Instruments and the Related Issuance Premiums Defined by the BRSA (Issued or Obtained after 1.1.2014) -
Debt Instruments and the Related Issuance Premiums Defined by the BRSA (Issued or Obtained before
1.1.2014) -
Additional Tier I Capital before Deductions -
Deductions from Additional Tier I Capital
Direct and Indirect Investments of the Bank on its own Additional Core Capital (-) -
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 (-) -
Deductions from Additional Core Capital in cases where there are no adequate Tier II Capital (-) -
Total Deductions from Additional Tier I Capital -
Total Additional Tier I Capital -
Deductions from Tier I Capital
Goodwill and Other Intangible Assets and Related Deferred Taxes not deducted from Tier I Capital as
per the Temporary Article 2, Clause 1 of the Regulation on Measurement and Assessment of Capital
Adequacy Ratios of Banks (-) 58,554
Net Deferred Tax Asset/Liability not deducted from Tier I Capital as per the Temporary Article 2, Clause 1 of the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks (-) -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
28
Total Tier I Capital 2,395,065
TIER II CAPITAL
Debt Instruments and the Related Issuance Premiums Defined by the BRSA (Issued or Obtained after
1.1.2014) -
Debt Instruments and the Related Issuance Premiums Defined by the BRSA (Issued or Obtained before
1.1.2014) 356,475
Pledged Assets of the Shareholders to be used for the Bank's Capital Increases -
General Provisions 177,980
Tier II Capital before Deductions 534,455
Deductions from Tier II Capital
Direct and Indirect Investments of the Bank on its own Tier II Capital (-) -
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 Core Capital and Tier II Capital of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or more
of the Issued Share Capital Exceeding the 10% Threshold of Tier I Capital (-) -
Other items to be Defined by the BRSA (-) -
Total Deductions from Tier II Capital -
Total Tier II Capital 534,455
CAPITAL
Loans Granted against the Articles 50 and 51 of the Banking 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 (-) 8,006
Loans to Banks, Financial Institutions (domestic/foreign) or Qualified Shareholders in the form of
Subordinated Debts or Debt Instruments Purchased from Such Parties and Qualified as Subordinated
Debts (-) 23,088
Deductions as per the Article 20, Clause 2 of the Regulation on Measurement and Assessment of
Capital Adequacy Ratios of Banks (-) -
Other items to be Defined by the BRSA (-) 7,800
The Portion of 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 not deducted from Tier I Capital, Additional
Core Capital or Tier II Capital as per the Temporary Article 2, Clause 1 of the Regulation (-) -
The Portion of Total of Net Long Positions of the Investments in Equity Items of Unconsolidated
Banks and Financial Institutions where the Bank Owns more than 10% of the Issued Share Capital
Exceeding the 10% Threshold of above Tier I Capital not deducted from Additional Core Capital or Tier II Capital as per the Temporary Article 2, Clause 1 of the Regulation (-) -
The Portion of Net Long Position of the Investments in Equity Items of Unconsolidated Banks and
Financial Institutions where the Bank Owns 10% or more of the Issued Share Capital, of the Net
Deferred Tax Assets arising from Temporary Differences and of the Mortgage Servicing Rights not deducted from Tier I Capital as per the temporary Article 2, Clause 2, Paragraph (1) and (2) and
Temporary Article 2, Clause 1 of the Regulation (-) -
EQUITY 2,890,626
Amounts lower than Excesses as per Deduction Rules
Remaining 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 -
Remaining Total of Net Long Positions of the Investments in Tier I Capital of Unconsolidated Banks
and Financial Institutions where the Bank Owns more than 10% or less of the Tier I Capital -
Remaining Mortgage Servicing Rights -
Net Deferred Tax Assets arising from Temporary Differences -
Components of items of shareholders’ equity subject to temporary applications
Amount Included in Equity
Calculation Total Amount
Debt Instruments and the Related Issuance Premiums Defined by
the BRSA (Issued before 1.1.2014) 1,126 12,836
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
29
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
I. Explanations Related to Equity (cont’d)
Details on Subordinated Liabilities:
Current Period
Issuer KFW (KREDİTANSTALT FÜR WİEDERAUFBAU)
Unique identifier
(eg CUSIP, ISIN or Bloomberg identifier for private placement) -
Governing law(s) of the instrument
Regulation on Equity of Banks (Published in the Official Gazette
Nr. 26333 dated 1 November 2006) Regulatory treatment
Subject to 10% deduction as of 1/1/2015 Yes
Eligible on Unconsolidated/ consolidated / both unconsolidated and
consolidated Valid on Consolidated and Unconsolidated Basis
Instrument type Subordinated Loan
Amount recognised in regulatory capital (Currency in million TRL, as
of most recent reporting date) 1.13
Par value of instrument (Million TRL) 12.83
Accounting classification 347
Original date of issuance 30.06.2008
Demand or time Time
Original maturity date 25.06.2018
Issuer call subject to prior supervisory approval Yes
Optional call date, contingent call dates and redemption amount 4,000
Subsequent call dates, if applicable 23.06.2015
Coupons / dividends
Fixed or floating dividend/coupon Fixed
Coupon rate and any related index 2% p.a.
Existence of a dividend stopper -
Fully discretionary, partially
discretionary or mandatory Mandatory
Existence of step up or other incentive to redeem -
Noncumulative or cumulative 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) -
If write-down, full or partial -
If write-down, permanent or temporary -
If temporary write-down, description of write-up mechanism -
Position in subordination hierarchy in liquidation (specify instrument
type immediately senior to instrument) Before core capital, after all creditors
Whether conditions which stands in article of 7 and 8 of Banks‟
shareholder equity law are possessed or not Yes
According to article 7 and 8 of Banks' shareholders equity law that are not possessed 8-2-(a), (ç), ( e), (ğ)
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
30
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
I. Explanations Related to Equity (cont’d)
The Bank, 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 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 Bank 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 Bank‟s 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 Bank‟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 Bank‟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
Bank‟s risk appetite. The revised “Risk Limits” and “Key Risk Indicators” all take effect upon the approval of the
Board of Directors.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
31
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
II. Explanations Related to Currency Risk
Currency risk is the possibility of loss that the Bank may face, in its total on- and off-balance sheet accounts and
positions in foreign currencies, arising from changes in exchange rates.
The 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 Bank‟s Board of Directors.
The Board 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 Bank‟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 Bank‟s strategies.
Within the context of Capital Adequacy, the Bank‟s currency risk exposure is calculated through the use of the
“Standard Method” in line with the legislation. In these calculations, the Bank‟s foreign currency assets and foreign
currency liabilities together with the forward transactions and gold position are all taken into consideration.
Within the Bank, 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 “Variance Covariance Method” also known as the “Parametric Method” is used in
reporting, while the “Historical Simulation” and the “Monte Carlo Simulation” methods, on the other hand, are used
for comparison, in times when volatility increases a great extent. VaR measurements are based on an observation
period covering the last 250 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 Bank‟s internal model is tested by using back tests on a
daily basis.
As of 30 September 2016, the Bank's balance sheet short position is TRL 1,464,072 Thousand (31 December 2015 –
TRL 2,487,802 Thousand short) and the long off balance sheet position amounts to TRL 1,273,076 Thousand (31
December 2015 - TRL 2,475,373 Thousand long), resulting in total net short position of TRL 190,996 Thousand (31
December 2015 - TRL 12,429 Thousand total net short).
The announced current foreign exchange buying rates of the Bank at 30 September 2016 and the previous five
Non-Cash Loans 580,764 1,408,108 278 1,989,150 About Currency Risk Table as of 30 September 2016;
The principal amount of currency indexed loans amounting TRL 796,017 Thousand and accruals amounting TRL 144,856 Thousand are shown under loans.
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
Marketable securities value increase fund: TRL 638 Thousand
Financial Derivative Asset amount includes TRL 80,056 Thousand forward asset purchase commitment and TRL 317,825 Thousand option contracts.
Financial Derivative Liabilities amount includes TRL 42,570 Thousand forward asset selling commitment and TRL 521,797 Thousand option contracts.
About Currency Risk Table as of 31 December 2015;
The principal amount of currency indexed loans amounting TRL 849,568 Thousand and accruals amounting TRL 142,735 Thousand are shown under loans.
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
Other Liabilities 289,448 37,726 95,346 14,352 - 2,815,473 3,252,345
Total Liabilities 10,378,659 5,128,147 2,100,422 457,173 37,005 4,744,647 22,846,053
Balance Sheet Long Position - - 1,578,806 4,729,396 362,177 - 6,670,379
Balance Sheet Short Position (2,670,354) (3,460,851) - - - (539,174) (6,670,379)
Off-Balance Sheet Long Position - - - - - - -
Off-Balance Sheet Short Position - - - - - - -
Total Position (2,670,354) (3,460,851) 1,578,806 4,729,396 362,177 (539,174) -
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
36
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
III. Explanations Related to Interest Rate Risk (cont’d)
Information related to the interest rate sensitivity of assets, liabilities and off-balance sheet items (based on
repricing dates) (cont’d):
(*) The Bank classified Loans and Receivables amounting to TRL 11,657 Thousand, under financial assets at fair value through profit and loss. Non performing loans classified as “Financial assets at fair value through profit and loss”amount to TRL 2,209 Thousand and Specific provision amounts
to TRL 1,274 Thousand.
Prior Period Up to 1
Month 1-3 Months 3-12 Months 1-5 Years
5 Years and
Over
Non-Interest
Bearing Total
Assets
Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques
Purchased) and Balances with the Central
Bank of Turkey 154,954 - - - - 2,626,222 2,781,176
Due From Other Banks and Financial
Institutions 42,518 - - - - 44,088 86,606
Financial Assets at Fair Value Through
Profit and Loss 36,212 14,743 36,489 55,989 4,722 79 148,234
(*) 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 asset qualified accounts and equity
accounts are classified under undistributed.
(**) Overdraft Loans are presented in 1-3 months period.
(***) The Bank has classified Loans and Receivables amounted to TRL 8,235 Thousand, under financial assets at fair value through profit and loss in the
current period. Non performing loans classified as “Financial assets at fair value through profit and loss”amount to TRL 1,266 Thousand (31 December 2015 – TRL 2,209 Thousand) and Specific provision amount to TRL 647 Thousand (31 December 2015 – TRL 1,274 Thousand).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
45
SECTION FOUR (cont’d)
INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT (cont’d)
VI. Explanations Related to Leverage Ratio
The Bank‟s unconsolidated leverage ratio calculated according to “Regulation on Measurement and Assessment of
Leverage Ratios of Banks” is 7.89 % (31 December 2015 – 7.37 %). Change in the leverage ratio is mainly due to
the increase in the amount of on balance sheet items. Regulation has set the minimum leverage ratio as 3 %.
On-balance sheet assets Current Period (*) Prior Period (*)
The amount of the discount threshold under the equity
(subject to a 250% risk weight) - - -
24 Floor adjustment - - -
25 Total (1+4+7+8+9+10+11+12+16+19+23+24) 18,935,445 21,163,367 1,514,836
VIII. Explanations Related to Transactions Made on Behalf of Others and Transactions Based
On Trust
The Bank performs buying and selling transactions on behalf of customers, but does not provide custody,
administration and consultancy services. There are no transactions made with other financial institutions within trust transaction contract and direct financial services provided within this scope.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
47
SECTION FIVE
EXPLANATIONS AND DISCLOSURES ON
UNCONSOLIDATED FINANCIAL STATEMENTS
I. Explanations Related to the Assets
1.a) Information on Cash and Balances with the Central Bank of Turkey:
Current Period Prior Period
TRL FC TRL FC
Cash in TRL/Foreign Currency 132,572 80,762 117,429 56,272
Balances with the Central Bank of Turkey 962,899 880,742 430,210 2,177,261
Other - 4 - 4
Total 1,095,471 961,508 547,639 2,233,537
b) Information related to the account of the Central Bank of Turkey:
The reserve deposits include TRL 875,599 Thousand of FC unrestricted demand deposit (31 December 2015 – TRL 1,814,028 Thousand) and TRL 954,903 Thousand of the TRL unrestricted demand deposit (31 December 2015 – TRL 430,149 Thousand). TRL unrestricted demand deposit
includes the reserve deposit amount that is held in the Central Bank of the Turkish Republic on average.
Starting from 09.09.2016, reserve deposit ratios for TRL deposits are regulated as follows: - Unrestricted, TRL deposit call accounts and special current accounts are 10.5%,
- Deposits up to one month (including one month) are 10.5%,
- Deposits up to three month (including three month) are 10.5%, - Deposits up to six month (including six month) are 7.5%
- Deposits up to one year are 5.5%,
- Deposits/participation accounts with 1-year and longer maturity and cumulative deposits/participation accounts are 4%, - Other TRL liabilities up to one year (including one year) are 10.5%,
- Other liabilities up to 3-year maturity (including 3-year) are 7%
- Other liabilities longer than 3-year maturity are 4%.
• Starting from 24.05.2013, reserve deposit ratios for the FC deposits and precious metal deposits are regulated as follows: - Unrestricted FC deposit call accounts, special current accounts and precious metal deposit accounts and deposits up to one month, up to three
month, up to six month, up to one year FC deposits, FC participate accounts and precious metal deposits are 13%,
- FC Deposits, precious metal deposit and FC participate accounts and FC accumulated accounts and FC participate accounts longer than one year (including one year) are 9%.
Starting from 09.10.2015, reserve deposit ratios for FC other liabilities are regulated as follows: - Other liabilities up to one year (including one year) are 25 %,
- Other liabilities up to two year (including two year) are 20 %,
- Other liabilities up to three year (including three year) are 15%, - Other liabilities up to five year (including five year) are 7 %,
- Other liabilities longer than five year are 5%.
Starting from 09.10.2015, reserve deposit ratios for FC other liabilities that will occur after 28.08.2015 are regulated as follows:
- Other liabilities up to one year (including one year) are 20 %,
- Other liabilities up to two year (including two year) are 14 %, - Other liabilities up to three year (including three year) are 8%,
- Other liabilities up to five year (including five year) are 7 %,
- Other liabilities longer than five year are 6 %.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
48
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
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 2015 - None).
ii. Financial assets at fair value through profit and loss subject to repurchase agreements:
None (31 December 2015 - None).
Net book value of unrestricted financial assets at fair value through profit and loss is TRL 12,280 Thousand
(31 December 2015 – TRL 9,970 Thousand).
iii. Positive differences related to derivative financial assets held-for-trading:
Derivatives Held for Trading
Current Period Prior Period
TRL FC TRL FC
Forward Transactions - 1,964 - 1,119
Swap Transactions 62,075 21,326 92,910 43,847
Futures Transactions - - - -
Options 154 9,482 69 319
Other - - - -
Total 62,229 32,772 92,979 45,285
iv. Loans at fair value through profit and loss
Current Period Prior Period
Opening Balance 11,657 22,229
Additions (+) - -
Change in Interest Rates (*) 215 (988)
Change in Credit Risk (**) 516 965
Impairment Provision (627) (1,097)
Collections (-) (3,526) (9,452)
Net Balance 8,235 11,657
(*) 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 30 September 2016, TRL 8,235 Thousand (31 December 2015 – TRL 11,657 Thousand) of loans which are
classified as Financial Assets at Fair Value Through Profit and Loss have amortised cost of TRL 7,954 Thousand
(31 December 2015 - TRL 11,852 Thousand).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
49
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
3. Information on banks:
Current Period Prior Period
TRL FC TRL FC
Banks 274 130,801 17,243 69,363
Domestic 273 90,975 17,225 25,471
Foreign 1 39,826 18 43,892
Branches and head office abroad - - - -
Total 274 130,801 17,243 69,363
4. Information on financial assets available-for-sale:
a.1) Information on financial assets available-for-sale given as collateral or blocked:
Current Period Prior Period
TRL FC TRL FC
Share certificates - - - -
Bonds, Treasury bills and similar investment
securities 380,959 - 68,384 -
Other - - - -
Total 380,959 - 68,384 -
a.2) Financial assets available-for-sale subject to repurchase agreements:
Current Period Prior Period
TRL FC TRL FC
Government bonds 474,022 - 1,119,230 -
Treasury bills - - - -
Other public sector debt securities - - - -
Bank bonds and bank guaranteed bonds - - - -
Asset backed securities - - - -
Other - - - -
Total 474,022 - 1,119,230 -
Net book value of unrestricted financial assets available-for-sale is TRL 557,086 Thousand (31 December 2015 -
TRL 536,154 Thousand).
b) Information on financial assets available for sale portfolio:
Current Period Prior Period
Debt securities 1,418,694 1,748,258
Quoted on a stock exchange 1,418,694 1,748,258
Not quoted on a stock exchange - -
Share certificates 11,621 9,218
Quoted on a stock exchange - -
Not quoted on a stock exchange 11,621 9,218
Impairment provision(-) (18,248) (33,708)
Total 1,412,067 1,723,768
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
50
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
5. Information on loans:
a) Information on all types of loans and advances given to shareholders and employees of the Bank:
(*) The Bank has classified Loans and Receivables amount to TRL 8,235 Thousand, under financial assets at fair value through profit and loss in the current period.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
51
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
5. Information on loans (cont’d) :
Current Period Prior Period
Number of Amendments
Related to the Extension of
the Payment Plan
Standard loans and
other receivables
Loans and other
receivable
under close monitoring
Standard loans and
other receivables
Loans and other
receivable
under close monitoring
Extended for 1 or 2 times 403,582 828,313 384,449 658,641
Extended for 3,4 or 5 times 1 - 683 -
Extended for more than 5
times 52,322 - 5,037 -
Current Period Prior Period
The Time extended via the
Amendment on Payment
Plan
Standard loans and
other receivables
Loans and other
receivable
under close monitoring
Standard loans and
other receivables
Loans and other
receivable
under close monitoring
0-6 Months 21,873 48,887 30,636 38,242
6 Months- 12 Months 449 63,941 67,408 18,244
1-2 Years 3,254 131,633 15,978 113,240
2-5 Years 74,006 464,629 276,147 479,482
5 Years and More 356,323 119,223 - 9,433
c) Loans and other receivables according to their maturity structure:
Standard Loans and Other Receivables
Loans and Other Receivables Under Follow-Up
Loans and Other
Receivables (*)
Amendments on
Conditions of Contract
Loans and Other
Receivables (*)
Amendments on
Conditions of
Contract
Short-term loans and other receivables 6,474,734 77,100 282,568 35,342
(*) The Bank has classified Loans and Receivables amount to TRL 8,235 Thousand, under financial assets at fair value through profit and loss in the current period.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
52
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
5. Information on loans (cont’d):
d) Information on consumer loans, individual credit cards, personnel loans and credit cards given to personnel:
Direct loans granted to subsidiaries and associates 24,718 26,266
Indirect loans granted to subsidiaries and associates - -
Total 24,718 26,266
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
54
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
5. Information on loans (cont’d):
i) Specific provisions provided against loans:
Specific Provisions (*) Current Period Prior Period
Loans and receivables with limited collectability 27,058 21,865
Loans and receivables with doubtful collectability 106,385 99,784
Uncollectible loans and receivables 341,182 424,311
Total 474,625 545,960
(*) Specific provision amounting to TRL 647 Thousand for loans classified as “Financial assets at fair value through profit and loss” at the current period (31 December 2015- TRL 1,274 Thousand).
j) Information on non-performing loans (Net):
j.1) Information on loans and other receivables included in non-performing loans which are restructured or
rescheduled:
III. Group: IV. Group: V. Group
Loans and receivables
with limited
collectability
Loans and receivables
with doubtful
collectability
Uncollectable loans
and receivables
Current period
(Gross amounts before the specific reserves) - 9,337 53,628
Loans and other receivables which are restructured - - -
Rescheduled loans and other receivables - 9,337 53,628
Prior period
(Gross amounts before the specific reserves) - 4,218 60,320
Loans and other receivables which are restructured - - -
Rescheduled loans and other receivables - 4,218 60,320
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
55
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
5. Information on loans (cont’d):
j.2) The movement of non-performing loans:
III. Group IV. Group V. Group
Loans and
receivables with
limited
collectability
Loans and receivables
with doubtful
collectability
Uncollectable
loans and receivables
Prior period end balance 165,581 274,067 571,986
Additions (+) 536,040 18,687 11,642
Transfers from other categories of non-performing loans (+) - 477,763 377,408
Transfers to other categories of non-performing loans (-) (477,763) (377,408) -
Collections (-) (23,611) (90,626) (49,641)
Write-offs (-) - (1,505) (366,962)
Corporate and commercial loans - (507) (312,937)
Retail loans - (10) (42,112)
Credit cards - (988) (11,913)
Current period end balance (*) 200,247 300,978 544,433
Specific provision (-) (*) 27,058 106,385 341,182
Net Balances on Balance Sheet 173,189 194,593 203,251
(*) Non performing loans amounting to TRL 1,266 Thousand (31 December 2015 – TRL 2,209 Thousand) and specific provision amounting to TRL 647 Thousand (31 December 2015 – TRL 1,274 Thousand) are classified as “Financial assets at fair value through profit and loss” in the
current period.
j.3) Informations on non-performing loans and other receivables in foreign currency: None (31 December
2015 – None).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
56
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
5. Information on loans (cont’d):
j.4) Information regarding gross and net amounts of non-performing loans with respect to user groups:
III. Group IV. Group V. Group
Loans and
receivables with
limited collectability
Loans and
receivables with
doubtful
collectability
Uncollectable
loans and
receivables
Current Period (Net) (*)
Loans to Real Persons and Legal Entities (Gross) 200,247 300,978 544,433
Specific provision (-) (27,058) (106,385) (341,182)
Loans to Real Persons and Legal Entities (Net) 173,189 194,593 203,251
Banks (Gross) - - -
Specific provision (-) - - -
Banks (Net) - - -
Other Loans and Receivables (Gross) - - -
Specific provision (-) - - -
Other Loans and Receivables (Net) - - -
Prior Period (Net) (*)
Loans to Real Persons and Legal Entities (Gross) 165,581 274,067 571,986
Specific provision (-) ( 21,865) ( 99,784) ( 424,311)
Loans to Real Persons and Legal Entities (Net) 143,716 174,283 147,675
Banks (Gross) - - -
Specific provision (-) - - -
Banks (Net) - - -
Other Loans and Receivables (Gross) - - -
Specific provision (-) - - -
Other Loans and Receivables (Net) - - -
(*) Non-performing loans amounting to TRL 1,266 Thousand (31 December2015 – TRL 2,209 Thousand) and specific provision amounting to
TRL 647 Thousand (31 December2015 – TRL 1,274 Thousand) are classified as “Financial assets at fair value through profit and loss”.
k) Main principles of uncollectable loans and receivables:
The Bank Management applies provision policy for the “non-performing loans” in accordance with the
requirements of the Turkish banking regulation adopted by the BRSA.
l) Explanations on write-off policy:
On 29 September 2016, the Bank sold uncollectable non-performing loans amounting to TRL 139,587
Thousand for total cash amount of TRL 7,150 Thousand to Final Varlık Yönetim A.Ş. and Mega Varlık
Yönetim A.Ş. (31 December 2015 – On 30 March 2015 the Bank sold uncollectable non-performing
commercial and consumer loans including credit cards amounting to TRL 209,057 Thousand for total cash
amount of TRL 15,100 Thousand, in particular, for TRL 2,200 Thousand to Güven Varlık Yönetim A.Ş., for
TRL 7,200 Thousand to Destek Varlık Yönetim A.Ş. and for TRL 5,700 Thousand to Final Varlık Yönetim
A.Ş.. On 20 May 2015, the Bank sold TRL 2,814 Thousand of the non-performing commercial loans to RCT
Varlık Yönetim A.Ş. for TRL 675 Thousand in cash. On 16 December 2015 the Bank sold uncollectable non-
performing consumer loans including credit cards amounting to TRL 29,944 Thousand for TRL 3,600
Thousand in cash to Destek Varlık Yönetim A.Ş.)
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
57
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
I. Explanations Related to the Assets (cont’d)
6. Information on held-to-maturity investments:
a.1) Information on held-to-maturity investments given as collateral or blocked:
Current Period Prior Period
Treasury Bill - -
Bond and Similar Securities 239,334 236,337
Other - -
Total 239,334 236,337
a.2) Held-to-maturity investments subject to repurchase agreements are TRL 635,394 Thousand (31 December
2015 – 802,357 Thousand).
b) Information on public sector debt investments held-to-maturity:
Current Period Prior Period
Government Bonds 1,059,788 1,268,303
Treasury Bills - -
Other Public Sector Debt Securities - -
Total 1,059,788 1,268,303
Net book value of unrestricted held-to-maturity investments is TRL 185,060 Thousand (31 December 2015 – TRL
229,609 Thousand).
c) Information on held-to-maturity investments:
Current Period Prior Period
Debt Securities 927,037 1,119,996
Quoted on a stock exchange 927,037 1,119,996
Not quoted on a stock exchange - -
Impairment Provision (-) (688) (1,191)
Accruals 133,439 149,498
Total 1,059,788 1,268,303
d) Movement of held-to-maturity investments:
Current Period Prior Period
Beginning Balance 1,118,805 1,222,792
Foreign currency differences on monetary assets 11 81
Purchases during year - -
Disposals through sales and redemptions (192,971) (104,523)
Grand Total 506 53,536 653,132 20,738 14,843 31,002 44 773,801
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
82
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
IV. Explanations Related to the Income Statement (cont’d)
3. Information on dividend income:
Current Period Prior Period
Trading Securities - -
Financial assets at fair value through profit and loss - -
Available-for-sale securities - -
Other 5,001 7,350
Total 5,001 7,350
4. Information on net trading income:
Current Period Prior Period
Income 5,832,458 9,347,750
Profit on capital market operations 28,698 5,871
Profit on derivative financial instruments 730,076 1,063,425
Foreign exchange gains 5,073,684 8,278,454
Losses (-) 5,929,180 9,511,415
Losses on capital market operations 422 575
Losses on derivative financial instruments 852,879 961,627
Foreign exchange losses 5,075,879 8,549,213
5. Information on other operating income:
The information on the factors affecting the Bank‟s income including new developments, and the explanation
on nature and amount of income earned from such items:
As of 30 September 2016, TRL 196,281 Thousand stated under other operating income in the statement of
income includes TRL 145,216 Thousand prior years‟ expense and provisions reversal income and TRL
51,065 Thousand other operating income.
As of 30 September 2016, prior years expense and provision reversal income includes TRL 53,187 Thousand
collection and reversal of specific provisions of cash loans, TRL 14,882 Thousand reversal of non-cash
provisions, TRL 2,624 Thousand of securities impairment provision reversal and TRL 74,523 Thousand
reversals of legal case provision and other provisions.
As of 30 September 2015, TRL 181,762 Thousand stated under other operating income in the income
statement includes TRL 109,669 Thousand prior years‟ expense and provisions reversal income and TRL
72,093 Thousand other operating income.
As of 30 September 2015, prior years expense and provision reversal income includes TRL 65,881 Thousand
collection and reversal of specific provisions of cash loans, TRL 21,959 Thousand reversal of non-cash
provisions, TRL 544 Thousand of securities impairment provision reversal and TRL 21,285 Thousand
reversal of legal case provision and other provisions.
Visa Europe Ltd, the payment systems company to which the Bank was also a member, has been transferred
to Visa Inc. operating in the same field, and TRL 14,225 Thousand that accrue for the Bank from this
transaction, has been credited with the Bank's accounts. Within the scope of the said sales, the Bank has also
acquired 1,574 units of C type shares of Visa Inc. which were recorded in the value of TRL 4,559 Thousand.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
83
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
IV. Explanations Related to the Income Statement (cont’d)
6. Provision expenses of banks for loans and other receivables:
Current Period Prior Period
Specific provisions for loans and other receivables 350,849 251,765
III. Group Loans and Receivables 72,430 55,425
IV. Group Loans and Receivables 98,145 80,672
V. Group Loans and Receivables 180,274 115,668
General loan loss provision expenses - 16,871
Provision expenses for possible losses - -
Marketable securities impairment losses 3,244 333
Financial assets at fair value through profit and loss 142 116
Investment securities available for sale 3,102 217
Impairment provision expense 1,096 303
Associates - -
Subsidiaries - -
Entities under common control - -
Investments held to maturity 1,096 303
Other (*) 40,470 47,561
Total 395,659 316,833
(*) Other provisions include TRL 21,172 Thousand unindemnified non-cash loans provision (30 September 2015 – TRL 12,041
Thousand unindemnified non-cash loan).
7. Information on other operating expenses:
Current Period Prior Period
Personnel expenses 265,797 271,554
Reserve for employee termination benefits 8,174 8,181
Bank social aid provision fund deficit provision - -
Impairment losses on fixed assets - -
Depreciation expenses of fixed assets 19,525 17,652
Impairment losses on intangible assets - -
Goodwill impairment losses - -
Depreciation expenses of intangible assets 22,899 15,813
Impairment for investments accounted for under equity method - -
Impairment losses on assets held for resale 396 51
Depreciation expenses of assets held for resale 8,727 9,656
Impairment losses on assets held for sale - -
Other operating expenses 238,277 213,602
Services Rent expenses 54,186 41,442
Maintenance expenses 13,305 10,211
Advertisement expenses 6,824 9,330
Other expenses (**) 163,962 152,619
Loss on sales of assets 243 84
Other (*) 98,486 77,372
Total 662,524 613,965
(*) “Other” includes TRL 32,458 Thousand premiums paid to the Saving Deposit Insurance Fund, TRL 3,574 Thousand legal case
provision and TRL 7,500 Thousand premium provision (30 September 2015 – TRL 18,500 Thousand to the Saving Deposit Insurance
Fund premium provision and TRL 1,640 Thousand legal case provision). (**) Other expenses include TRL 18,194 Thousand communication expenses, TRL 24,211 Thousand computer usage expenses, TRL
4,492 Thousand promotion applications related with credit cards and banking services (30 September 2015 - TRL 19,130 Thousand
communication expenses, TRL 13,054 Thousand computer usage expenses, TRL 4,245 Thousand promotion applications related with credit cards and banking services).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
84
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
IV. Explanations Related to the Income Statement (cont’d)
8. Information on profit/ (loss) from continued and discontinued operations before taxes:
Profit before tax of the Bank has increased by 13.81 % for the period ended 30 September 2016 as compared
to the related prior period. In comparison with the related prior period, the Bank‟s operating income increased
by 13.69 %, net fees and commissions‟ income increased by 1.86 %, provision expenses increased by 24.88
%, other operating income increased by 7.99 % and other operating expenses increased by 7.91 %.
9. Information on tax provision for continued and discontinued operations:
a) As of 30 September 2016, current tax charge is TRL 23,399 Thousand (30 September 2015 – TRL 2,956
Thousand current tax charge) and deferred tax benefit is TRL 8,974 Thousand (30 September 2015– TRL
13,109 Thousand deferred tax benefit).
b) Deferred tax benefit on temporary differences is TRL 8,974 Thousand (30 September 2015 – TRL 13,109
Thousand deferred tax benefit).
10. Information on net profit/ (loss) from continued and discontinued operations:
The net profit of the Bank decreased for the period ended 30 September 2016 by 23.19 % as compared to the
related prior period profit.
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 Bank's performance for the period: None.
b) Effect of changes in accounting estimates on income statement for the current and, if any, for subsequent
periods: None.
c) If the other items in the income statement exceed 10 % of the income statement 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 211,021 198,642
Other Fees and commissions given Current Period Prior Period
Fees and commissions given to Banks 8,788 8,797
Fees and commissions given for Credit Cards 22,514 16,729
Other 17,400 14,941
Total 48,702 40,467
d) 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.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
85
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
V. Explanations on the Risk Group of the Bank
1. Volume of related party transactions, income and expense amounts involved and outstanding loan and
deposit balances:
a) Current 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 and other receivables
Balance at beginning of period 26,266 21,219 398,308 47,233 - -
Balance at end of period 24,718 17,669 398,439 49,065 - -
Interest and commission income 3,825 143 19,629 437 - -
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 and other receivables
Balance at beginning of period 46,270 18,730 355,511 42,241 - -
Balance at end of period 26,266 21,219 398,308 47,233 - -
Interest and commission income 4,828 105 19,034 262 - -
c.1) Information on related party deposits balances:
Related parties Subsidiaries and Associates
Direct and Indirect
Shareholders of the Bank
Other Entities Included
in the Risk Group
Deposits
Current
Period
Prior
Period
Current
Period
Prior
Period
Current
Period
Prior
Period
Balance at beginning of period 166,173 85,903 53,626 90,946 - -
Balance at end of period 137,531 166,173 117,326 53,626 - -
Interest on deposits 3,396 2,754 7,591 4,837 - -
c.2) Information on forward and option agreements and other similar agreements made with related parties:
Related Parties Subsidiaries and Associates
Direct and Indirect
Shareholders of the Bank
Other Entities Included
in the Risk Group
Current
Period
Prior
Period
Current
Period
Prior
Period
Current
Period
Prior
Period
Transactions Held for Trading
Beginning Balance 394,816 369,385 - - - -
Ending Balance 395,747 394,816 - - - -
Total Profit/Loss (*) (59,607) (82,938) - - - -
(*)The Bank and its subsidiaries do not conduct derivative transactions “for-profit”, derivative transactions for hedging is carried out in the
framework of subsidiaries’ risk management policy. The risks arising from derivative transactions conducted with subsidiaries are covered by the derivative transactions with third parties.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
86
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
V. Explanations on the Risk Group of the Bank (cont’d)
2. Disclosures for related parties:
a) The relations of the Bank with the entities controlled by the Bank and its related parties, regardless of
whether there are any transactions or not:
In the normal course of its banking activities, the Bank conducted various business transactions with related
parties at commercial terms and at rates which approximate market rates.
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 423,157 2.60
Non-cash loans 66,734 1.44
Deposits 254,857 1.72
Forward transactions and option agreements 395,747 3.31
These transactions are priced in accordance with the general pricing policies of the 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 Bank enters into lease agreements with Şeker Finansal Kiralama A.Ş. As of 30 September 2016 the total
leasing obligations related to those agreements amounted to TRL 136 Thousand (31 December 2015 - TRL
484 Thousand). Additionally, the Bank provides agency services for Şeker Yatırım Menkul Değerler A.Ş.
through its branches.
With-in the limits of the Banking Law, the Bank renders cash and non-cash loans to its related parties and the
ratio of these loans to the Bank‟s total cash and non-cash loan portfolio is 2.34 % as of end of the reporting
period. Details of these loans are explained in the Section V, Note VII 1a.
As of 30 September 2016 the Bank 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 top management personnel during current period amount to TRL 11,047 Thousand (30
September 2015 - TRL 16,606 Thousand).
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
87
SECTION FIVE (cont’d)
EXPLANATIONS AND DISCLOSURES ON FINANCIAL STATEMENTS (cont’d)
VI. Explanations and notes related to subsequent events:
None.
SECTION SIX
AUDITORS’ REVIEW REPORT
I. Explanations on the Auditors’ Review Report:
The unconsolidated financial statements for the nine-month period ended 30 September 2016 were audited by Akis
Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik AŞ (the Turkish member firm of KPMG International
Cooperative, a Swiss entity) and Auditors‟ Review Report dated 8 November 2016 is presented in the introduction
of this report.
II. Other Footnotes and Explanations Prepared by Independent Auditors:
None.
ŞEKERBANK T.A.Ş.
NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE THE INTERIM PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016 (Amounts expressed in thousands of Turkish Lira (TRL) unless otherwise stated.)
88
SECTION SEVEN (cont’d)
INFORMATION ON INTERIM ACTIVITY REPORT
I. Board of Directors Chairman’s Assesments on Interim Report
Esteemed Shareholders,
The global economy, especially in developed countries, has been experiencing a growth problem for a long time and
this stagnancy in world commerce cannot be overcome. Despite all political risks and global fluctuations, Turkey,
having 4 percent growth, has succeeded in becoming the fourth fastest growing G-20 country in 2015. Although in
the Medium Term Program the 2016 the growth goal was revised as 3.2% and the 2017 goal was revised as 4.4%,
these rates indicate a strong performance compared to developing countries and the world growth.
Despite all international prejudices, the whole world has seen again how strong the Turkish economy is with all the
main economic indicators going back to normal after our government and our people united to eliminate the heinous
coup attempt of July 15.
The necessary measures taken promptly by the Government and the rulers of the finance sector, like the Central
Bank and the Banking Regulation and Supervision Agency, as well as the unity of the business society and citizens
along with the government enabled Turkey to get back into normal stance in a short span of time. The Turkish
economy has attained great gains in the last 15 years. The financial stability, the relatively low rates of indebtedness,
strong financial system and growth potential have made Turkey‟s economy strong. In this context Turkey continues,
despite the recession in the global economy, to be one of the safest ports for international investors with its strong
history of growth and potential.
The government has recently introduced a broad reform program aimed atsavings increase, finance growth,
maintenance of the budget balance, and increase of the technology part in the industrial production, increase of
export and local and foreign direct investments through improving the investment environment. The “Turkey
Wealth Fund” that will provide long term affordable financing for large infrastructure investments, the “Automatic
Individual Retirement System” comprising the second leg of public social security, the new tax and R&D
regulations have been gone into effect. Also, applications like the incentive system focused on medium and high
technologies will forge the path for the Turkish economy and accelerate production.
As for Şekerbank, following our responsible banking approach for 63 years since its foundation, we have been
always considering ourselves as a whole with our customers and our country, we have always strived to show our
devotion under any circumstances and continue our activities today with this same sense of responsibility. In the
upcoming period we will continue to support production, commerce, investments and export financing with the
same decisiveness to reach the sustainable growth speed that will reveal the potential of Turkey.