annual report 2012 neu/en... · strawinskylaan 841, tower c, level 8 1077 xx amsterdam tel. + 31 /...

İşBank aG Offices in eurOpe

Frankfurt (Head Office)

Roßmarkt 9

60311 Frankfurt am Main

Tel. + 49 / 69 / 2 99 01- 0

Fax + 49 / 69 / 28 75 87

Telex 4189 385

S.W.I.F.T.-Code: ISBKDEFX

Frankfurt (Branch)

Roßmarkt 9


Tel. + 49 / 69 / 2 99 01- 0

Fax + 49 / 69 / 28 75 87

Telex 4189 385

Berlin (Branch)

Müllerstraße 150

13353 Berlin

Tel. + 49 / 30 / 254 22 70

Fax + 49 / 30 / 254 22 777

Berlin-Kreuzberg (Branch)

Kottbusser Straße 2

10999 Berlin

Tel. + 49 / 30 / 616 95 50

Fax + 49 / 30 / 614 89 88

München (Branch)

Goethestraße 21

80336 München

Tel. + 49 / 89 / 5 30 79 23

Fax + 49 / 89 / 5 38 03 02

Düsseldorf (Branch)

Graf-Adolf-Straße 70

40210 Düsseldorf

Tel. + 49 / 211 / 38 80 10

Fax + 49 / 211 / 38 80 130

Mannheim (Branch)

U 1,8

68161 Mannheim

Tel. + 49 / 621 / 397 49 80

Fax + 49 / 621 / 156 994 22

Gelsenkirchen (Branch)

Arminstraße 11

45879 Gelsenkirchen

Tel. + 49 / 209 / 177 073 14

Fax + 49 / 209 / 177 073 19

Hamburg (Branch)

Ballindamm 8

20095 Hamburg

Tel. + 49 / 40 / 30 29 01 0

Fax + 49 / 40 / 30 29 01 22

Köln (Branch)

Unter Sachsenhausen 35

50667 Köln

Tel. + 49 / 221 / 91 38 21 0

Fax + 49 / 221 / 91 38 21 20

Köln-Mülheim (Branch)

Genoveva Str. 16 –18

51065 Köln

Tel. + 49 / 221 / 29 77 41 0

Fax + 49 / 221 / 29 72 04 19

Karlsruhe (Branch)

Amalienstraße 23

76133 Karlsruhe

Tel. + 49 / 721 / 920 90 40

Fax + 49 / 721 / 266 24

Stuttgart (Branch)

Friedrichstraße 9 –11a

70174 Stuttgart

Tel. + 49 / 711 / 22 29 91 6

Fax + 49 / 711 / 22 29 91 77

Nürnberg (Branch)

Am Plärrer 6

90429 Nürnberg

Tel. + 49 / 911 / 92 99 53 80

Fax + 49 / 911 / 92 99 53 82 0

Paris (Branch)

13, Place Kossuth, 75009 Paris

Tel. + 33 / 1 / 43 12 93 70

Fax + 33 / 1 / 48 78 02 70

S.W.I.F.T.-Code: ISBKDEFXPAR

Amsterdam (Branch)

World Trade Center

Strawinskylaan 841, Tower C,

Level 8

1077 XX Amsterdam

Tel. + 31 / 20 / 5 30 63 33

Fax + 31 / 20 / 5 30 63 40

S.W.I.F.T.-Code: ISBKNL2A

Zürich (Branch)

Bodmerstraße 14, 8002 Zürich

Tel. + 41 / 44 / 2 26 41-00

Fax + 41 / 44 / 2 26 41-09

S.W.I.F.T.-Code: ISBKDEFXZUR

Sofia (Branch)

2, Pozitano Sq.

Perform Business Center

1000 Sofia

Tel. + 359 2 402 20 00-02

Fax + 359 2 402 20 15

Roßmarkt 960311 Frankfurt am MainTel. +49 / 69 / 2 99 01-0Fax +49 / 69 / 28 75 87www.isbank.de

Bank iM Wandel: MehRWeRT FüR unseRe kunden

cOntents

key figures 5-year comparison

01 statement03 report of the supervisory Board04 Our product portfolio12 Management13 Management report 24 Our services 27 Balance sheet 36 executive Bodies auditors’ report

Offices Legal notice

ANNUAL REPORT 2012

PRESENT ON THE MARKET,CLOSE TO THE CUSTOMER.

»here for you«

BİZ SİZİZ

Due from customers in thousands EUR

Total assets in thousands EUR

Capital and reserves in thousands EUR

key fiGures

Dec. 31, 2011in thousands EUR


Changein %

Total assets 931,565 1,015,605 9.02

Capital and reserves 106,772 111,390 4.33

Tangible assets 17,244 17,450 1.19

Cash funds 13,915 16,598 19.28

Bonds and securities 37,969 14,553 –61.67

due from banks 302,261 335,753 11.08

due from customers 556,161 624,702 12.32

due to banks 108,864 128,061 17.63

due to customers 708,605 767,615 8.33

Risk-weighted assets 888,462 961,575 8.23

interest income 39,808 48,970 23.02

Commission income 10,877 10,525 –3.24

net income for the year 6,084 6,618 8.78

% %

equity ratio 11.30 10.80

Return on equity before taxes 8.80 9.06

Return on equity after taxes 6.06 6.38

5-year cOMparisOn

400,246

72,438

65,725

68,734

540,029

684,068

4,085

4,509

341,476

371,761

414,730

460,298

793,969 5,832

550,639

106,772

111,390

Net retained profit in thousands EUR

Due to customers in thousands EUR

931,566

1,015,605

6,084

6,618

556,161

624,702

708,605

767,615

Offices wOrLdwide türkiye İş Bankasi a.ş. Offices wOrLdwide

Germany

Bulgaria

Georgia

United Kingdom

Turkey

Turkish Republic of Northern Cyprus

Netherlands

Switzerland

France

Iraq

Bahrain

China

Head Office

İş Towers

Büyükdere Cad.

Pembegül Sok.

34330 Levent-İstanbul

Turkey

Tel. + 90 / 212 / 316 00 00

Fax + 90 / 212 / 316 09 00

www.isbank.com.tr

1,250 Branches in Turkey

Central Foreign Department

Tel. + 90 / 212 / 316 28 02

Fax + 90 / 212 / 316 08 28

Turkish Republic of

Northern Cyprus

Central Office

Girne Cad. No: 9

Lefkoşa

Tel. + 90 / 3 92 / 228 31 33

Fax + 90 / 3 92 / 227 83 15

14 Branches in Cyprus

United Kingdom

Princes Court

8, Princes Street

London EC2R 8 HL

Tel. + 44 / 207 / 606 71 51

Fax + 44 / 207 / 726 25 66

Egypt

Nile City Towers

2005 C Cornish El Nil

North Tower, 27th Floor

Cairo

Tel. + 20 / 22 461 98 13-14

Fax + 20 / 22 461 98 10

Bahrain

Al Jasrah Tower, 8th Floor

Diplomatic Area

Pbx: 10205 Manama

Tel. + 973 / 17 549 222

Fax + 973 / 17 549 218

Irak

Gulan Street

Ainkawa Road

Duty Free Complex

Erbil

Tel. + 964 / 66 / 225 33 04

China

4407 Jin Mao Tower

88 Century Boulevard

200121 Pudong New Area

Shanghai

Tel. +86 / 2150 / 47 08 82

Fax +86 / 2150 / 47 08 85

Georgia

L. Asatiani Cd./Rustaveli Cd. No: 1/25

Batum

Tel. + 995 / 422 242 950

Kosova

Rruga UCK No: 43

Pristina

Tel. + 381 / 38 245 245

Fax: + 381 / 38 224 542

CJSC İşbank

Hauptverwaltung

Nametkina Str. 13 D

117420 Moskau

Tel. + 7 / 495 / 232-12-34

İşbank AG

Head Office

Roßmarkt 9


Tel. +49 / 69 / 299 01-0

Fax +49 / 69 / 28 75 87

Legal Notice

Published by:İŞBANK AGRoßmarkt 960311 Frankfurt am MainTel. +49 / 69 / 2 99 01-0Fax +49 / 69 / 28 75 87www.isbank.de

Concept, editorial, design:thema ag, Offenbach am Main

Photography:Norbert Miguletz, Uwe Nölke

Production: printmedia, Frankfurt

This annual report is also available in German.

© İŞBANK AG, 2012Printed in Germany. All rights reserved. No reproduction in any form without permission.

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Annual Report 2012 01

2012We work consistently according to oneprinciple: BI

.Z SI

.ZI.Z.

After all, it’s our clientswho matter most to us.And that’s a promise.

Like no other, İşbank AG is positioned to promote economic trade between western Europe and Turkey. But we also aim to exploit business opportunities at home that have arisen from the withdrawal of a number of banks from certain business areas. We plan to expand our client base as well as our range of products and services, and for this reason we are investing in the relationships with our clients and plan to further optimise our branch network and to open further branches in Germany.

»here for you«

BİZ SİZİZ

Annual Report 201202


In the 2012 fiscal year the Supervisory Board met three times at the Bank’s Head Office in Frankfurt and twice at the Head Office of Türkiye İş Bankası A.Ş. in Istanbul. Several further verbal and written communications served to inform the Supervisory Board about the general course of business and developments of special importance thus allowing the Board a selfjudgment on the proper management of the Bank’s business.Developments in the world economy and the fluctuations in the financial markets and their possible effects on the Bank’s business and liquidity once again were the focus of the Board’s discussions with the Bank’s management. Eventual needs for adapting the Bank’s strategy as a result of the continuing market turmoil and the developing future environment of banking regulation were also regularly discussed with management. As every year, another focus of the Supervisory Board Meetings was the revision of the credit portfolio, the credit assessment, approval, supervision and risk management processes of the Bank and their ongoing refinement in response to market developments and new regulatory requirements. Enhancing the Bank’s profitability further while ensuring liquidity at all times in an environment of continuing crisis in Europe as well as relentless credit and risk management continue to be the primary concern of the Bank’s Supervisory Board and Board of Management.

The planned conversion of İşbank GmbH into a joint stock corporation which became effective on 2 August 2012 was another subject of the agenda between the Supervisory Board and management. In this context, the Supervisory Board was enlarged and new members appointed. This, at the same time, underpins the importance which Türkiye İş Bankası A.Ş. attaches to the business conducted under the roof of İşbank AG as part of its expansion strategy in Europe. The appointment of six members of Türkiye İş Bank’s Board of Management to the Supervisory Board also serves to generate additional synergy between parent bank and subsidiary.Opening a second branch office in Cologne, the Bank continued its expansion in the German market. In Zurich, the branch moved to new premises.In order to further improve the quality of the services rendered, the Bank has continued to review its human resources structure in 2012. Total number of personnel increased to 220 whereby the Bank emphasizes local employees thus ensuring proper knowledge of the markets in which the Bank operates.

We would like to thank the management of the Bank and all its employees for their dedicated commitment in a difficult and highly competitive environment.We would also like to thank our customers. Without their trust and support, İşbank AG would not have been able to again close the 2012 fiscal year successfully.

The accounts and the financial statements for the fiscal year 1 January to 31 December 2012 and the Management Report were audited by KPMG AG Wirtschaftsprüfungsgesellschaft, Frankfurt/Main, which issued an unqualified audit opinion. The Supervisory Report approved the results of the audit report and adopted both the financial statements as at 31 December 2012 and the Management Report.

Frankfurt/Main, 20 May 2013

Adnan BaliChairman of the Supervisory Board


2012The yearat a glance

»We grow together with our clients –even geographically.«Bayram Öztürk, CEO

July 2012 PRODUCT GROWTH In cooperation with external partners, clients can benefit from new products such as the ‘wedding savings plan’ or the ‘children plan’

December 2012 BRANCH GROWTH Following the opening of a second branch in Cologne, İşbank’s branch network now

comprises 17 branches

January 2012 ASSET GROWTH

İşbank’s total assets pass the ‘magic’ billion euro mark

September 2012 SYNERGY GROWTH By strengthening the Supervisory Board with the addition of new members, the Bank exploits synergies with its parent company

August 2012 GROUP GROWTH The change to a jointstock company now provides İşbank with the structure commensurate with its growth

MILESTONES

2012

»here for you«

BİZ SİZİZ


»İşbank has seen continued and stable development in the midst of a challenging environment.«Burkhard von Wallenberg, Member of the Management Board

2012in numbers

ATMsthroughout Germany

branchesin Europe

total assets throughout Europe

1 0,000

17

>1 billion


»We provide support at those important stages in life – both professionally and personally. We make our clients’ concerns our own.« Burkhard von Wallenberg, Member of the Management Board

The happiest day of your life

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»here for you«

BİZ SİZİZ


BI.Z SI

.ZI.Z_that means being

well advised in all matters of life.

LOOKING TO THE FUTURE TOGETHER – THE WEDDING SAVINGS PLAN As a longterm product for children to save for a wedding, the wedding savings plan offers two options: the savings plan can be paid out at the time of the wedding, or it can continue as a savings plan until retirement age. This product is based on a fundlinked annuity insurance policy. The plan can be taken out up to the age of 12, and additional payments can be made at any time.

Our WEDDING SAVINGS PLAN See what we can offer young couples at https://isbank.de/en/consumerbanking/ savingandinvesting/weddingsavingsplan/

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»The Bank acts according to our clients’ needs.« Selami Düz, Member of the Management Board

Property – stability even in turbulent times

»here for you«

BİZ SİZİZ


SOLID ADVICE – THE CORPORATE LOAN Our corporate client division provides support to entrepreneursin all matters – whether it’s by covering shortterm financing requirements by means of a working capital loan, providing support in the medium term with a business instalment loan or by making a discount loan by purchasing bills of exchange. We also provide bank guarantees to protect the liquidity of our corporate clients and assist them in their daytoday business in the face of tough competition.

BROKERING VARIETY – PROPERTY FINANCING In cooperation with online financing platforms and by using an independent system of preparing offers, it is possible to select from numerous financing partners.Fixed loan interest rates can be agreed for between 5 and 30 years. Forward loans are possible up to 36 months in advance. Even major projects, such as housing developments or commercial properties, can be financed.

Solid PARTNERSHIPS İşbank works together with Hypoport and PlanetHome in property financing.

BI.Z SI

.ZI.Z_to ensure

that businesses are flexible and property is stable.


»As a universal bank, we build bridges for economic trade between Turkey and the rest of the world.« Bayram Öztürk, CEO

The Bosporus Bridge in Istanbul

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BİZ SİZİZ


EXPERTISE FOR EXPORTS: TRADE FINANCE Trade and investment relationships between Turkey and Europe are growing rapidly – this is why İşbank has stepped up its activities in this area. By means of export prefinancing products, documentary credits, documentary credit with postfinancing, document collection or forfaiting, İşbank supports companies in their daytoday business. International companies also have the option of financing Turkish subsidiaries from Germany.

Everything for the INTERNATIONAL MARKET The full range of services can be found at https://isbank.de/en/corporatebanking/ tradefinance/

Source: German Federal Statistical Office, Turkey country profile 2011

GOODS IMPORTED to Turkey from Germany(2000/2010) in USD million

7,163 17,549GOODS EXPORTED from Turkey to Germany

(2000/2010) in USD million

5,171 11,487

Strong growth – trade relations between Turkey and Germany

BI.Z SI

.ZI.Z_because

we know all there is about international business.


Bayram Öztürk (Right)

CEO

Selami Düz (Left)

Member of the Management Board

Burkhard von Wallenberg (Middle)

Member of the Management Board

MAnAGEMEnT


Business and overall environment

2012 was defined by the persistent uncertainty in the eurozone, combined with tough moves towards consolidation for southern Europe. However, confidence in the markets did improve noticeably in the second half of the year, driven by the resolute measures taken by the member states and the European Central Bank to support the common currency.

The eurozone debt crisis also had a significant influence on the major economies over the course of the year. not only in the USA did the macroeconomic performance falter, but the major emerging markets also recorded a slowdown in growth over the course of the year.

With ongoing major divergences, the development of global trade was accordingly subdued, with a growth rate of less than 4% recorded for the year as a whole.

Compared with the rest of the eurozone, the German economy fared much better. It continued to grow on average in 2012, with the country’s gross domestic product (GDP) rising 0.7 % year on year after being adjusted for inflation. Foreign trade in Germany proved to be highly resilient in the face of a challenging global market environment, with a total of 4.1 % more goods and services being exported in 2012 (after inflation) than in the previous year, and imports rising by 2.3 %. A decline in the export of goods to European countries was offset by an increase in goods exports to countries outside the EU. While private expenditure rose 0.8 % year on year, there was a 5.2 % decline in gross investments, caused mainly by reduced investment in machinery and equipment.

MANAGEMENT REPORT


Turkey continued to grow in 2012 after the strong growth seen in 2010 and 2011, although the increase of 4.0 % was comparatively restrained. Foreign trade in Turkey rose 3.6 % to USD 389 billion in the past year. A drop in import volumes resulting from a decline in domestic demand reduced the foreign trade deficit by 20.7 % to USD 84 billion. Turkey sustained no lasting damage from the turbulence in the eurozone and the resulting loss of crucial export markets, or from the political unrest in neighbouring Syria.

Germany is Turkey’s most important trading partner and is the largest foreign investor in the country. While bilateral trading volumes reached a record high in 2011, they fell in 2012 by 9.9 %, coming to a total of USD 28 billion, although the number of German companies or Turkish companies with equity participation of German origin present in Turkey rose to 4,898. The country has a population of 74 million, of which more than 60 percent are aged 35 or under. The successive growth of purchasing power year by year has created strong domestic demand in the infrastructure, energy, automotive and financial sectors. It is precisely these areas in which German companies specialise, and it is for this reason that German businesses are investing in Turkey.

The Turkish banking sector continued to exhibit a robust capital structure and good profitability, which in turn had an impact on Turkey’s rating. In november 2012, the Fitch rating agency elevated the country’s credit rating to ‘investment grade’, with foreign currency bonds being upgraded to ‘BBB’ and bonds in domestic currency even being upgraded two levels to ‘BBB’.

Business development in 2012

The change of İşbank’s legal form from a limited liability company (GmbH) into a jointstock company (Aktiengesellschaft) with effect from 2 August 2012 marks the successful conclusion of the Bank’s longplanned transformation into a jointstock company. The new legal form accommodates the Bank’s sustained growth over recent years and provides flexibility from both a strategic and an operational point of view.

Despite the ongoing financial crisis, İşbank AG was able to expand its business activities, exceeding the billion euro mark for the first time with a 9.0 % rise in total assets to EUR 1,015.6 million.

The continued success of recent years also brought about a continued rise in profit after tax to EUR 6.6 million. Considerable growth in the lending business, financed largely by the equally rapidly growing deposit business, played a crucial role in this increase. This dynamic expansion in both the lending and deposit business in 2012 represented a seamless continuation of the positive performance of recent years. The equity and liquidity bases of İşbank AG also remained as fundamentally robust as before.

Due to the transformation into a jointstock company in the second half of the year, there was an increase in the number of Supervisory Board members. Six members of the parent company’s Management Board are now represented on the Supervisory Board, emphasising the support they provide to the business strategy of İşbank AG and the goal of realising greater synergies between the parent company and subsidiary. The Management Board comprises the former members of the General Management of İşbank GmbH.

2012 was also marked by changes in the organisational structure. In the course of improving operational procedures and achieving the desired increases in efficiency, a number of departments were either restructured (e.g. lending and financial management) or newly established (corporate governance).

İşbank’s transformation into a jointstock company coincided with the 20th anniversary of İşbank GmbH, which was founded in 1992 as a subsidiary of Turkey’s largest private bank, Türkiye İş Bankası A.Ş. However, the roots of the Bank go back to the 1970s, when it served as a representative office of Türkiye İş Bankası A.Ş.

While its business in the early years was defined by its traditional money transfer transactions for migrant workers, changes in the structure of the population, which had its roots in Turkey, and its economic activities within Europe as well as the growth in trade and investment relationships between Turkey and Europe gave rise to constant change, including at İşbank. Most notably, since the turn of the millennium İşbank has positioned itself as a universal bank specialising in TurkishEuropean business. The products and services offered by the Bank have undergone constant evolution and growth as part of this change, including through partnerships with external providers in the fields of insurance and lending.


As part of efforts to expand sales activities on the internet through the Bank’s website, which was completely revamped last year, the İŞWEB Credit product was launched in the second half of the year following the launch of the İŞWEB Account and the İŞWEB Time Deposit Account. It enables potential and existing clients to enjoy the flexibility of applying for a private loan online without needing to seek out a branch.

In addition, we now work together with Hypoport AG and Planet Home to offer our customers independent, longterm property financing with optimised interest rates in Germany through more than 40 financing partners.

In line with the Bank’s business strategy, the 2012 financial year also focussed on strengthening activities in the commission business. In partnership with HDI, we developed a new savings product tailored especially to the needs of Turkish clientele. With the ‘wedding savings plan’, parents can pay a small monthly amount into a savings account to start covering the high costs of their children’s most important life event – the wedding.

Our branches and employees

With 17 branches in Europe and in partnership with the more than 1,200 branches of the parent company in Turkey, İşbank is in a position that is second to none when it comes to promoting economic trade between western Europe and Turkey. For corporate clients, İşbank’s expertise in trade and investment financing with Turkey is of the utmost importance.

İşbank’s strategy demands not only growth in the range of products and services, but also optimisation of the network of branches. Over the last 20 years, more and more branches have been opened in major cities in Germany and Europe, in places where the Turkish population has its strongest presence. In the 2012 financial year, the German network grew with the opening of a second branch in the Cologne district of Mülheim, bringing İşbank AG’s presence in Europe to a total of 17 branches in five countries as at the end of the year under review. Future plans involve not only the expansion into new regions in Germany, but also the opening of secondary branches in metropolitan areas already covered.

Work to optimise the branches in terms of their equipment, premises and design continued in the 2012 financial year. In november, the Zurich branch moved into its new premises in the city’s banking district, and clients have at their disposal a new, larger branch that is designed to be more welcoming. İşbank AG has developed greatly over the last 20 years, not only with respect to its branch network, the services that it offers, its transaction volume and its net profit, but also in the quantity and quality of its employees. In line with the growth of the last five years, the number of employees has risen by 36 %, coming to 220 as at the end of 2012. The structure of the workforce has changed greatly, with an increasing number of young employees who have academic backgrounds and who have been raised bilingually, and often also speak another foreign language. At the same time, the number of employees sent from Turkey has fallen.

In the interests of successfully bringing the Bank’s business strategy to bear ‘at the customer’s end’, particular attention has been paid to providing employees with internal and external product and sales training in the year under review.

The Management Board would like to take this opportunity to thank all of its employees for their tireless dedication to achieving the Bank’s ambitious goals.


Annual financial statements as at 31 December 2012

Balance sheet

The transformation of İşbank GmbH into a jointstock company, which was announced last year, took legal effect with its entry in the German Commercial Register on 2 August 2012. There is no intention to list İşbank AG on the stock exchange.

İşbank continued its success in pursuing its strategy in 2012. As a result, total assets grew by 9.0 % and the billion euro mark was exceeded for the first time at EUR 1,015.6 million (2011: EUR 931.6 million). Transaction volume rose 9.3 percent to EUR 1,055.0 million as against EUR 964.9 million in 2011.

On the back of increased sales activity in the lending business and the intensification of its trade finance business, receivables from clients rose 12.3% to EUR 624.7 million as against EUR 556.2 million in the previous year.

Growth of 11.1 % was reported under the ‘receivables from banks’ item on the balance sheet, bringing this to EUR 335.8 million as at yearend 2012, compared with EUR 302.3 million in the previous year. This growth was driven by the strong rise in trade finance activity and the participation in syndicated financing. Bonds and other fixedincome securities came to EUR 14.6 million at the end of the year under review.

Despite the ongoing financial crisis, İşbank AG continued to have at its disposal various opportunities for refinancing new business.

At the balance sheet date, liabilities to clients of EUR 767.6 million were reported under equity and liabilities, representing growth of 8.3 % as against EUR 708.6 million in the previous year. This is attributable to growth in deposits arising from intensified marketing activities. Liabilities to banks rose 17.6 %, coming in at EUR 128.1 million as against the previous year’s value of EUR 108.9 million.

The Bank’s equity rose slightly by 4.3 % to EUR 111.4 million, which continues to provide a robust and adequate equity base for the planned development of the Bank.

Income statement

Alongside the growth in receivables from clients, net interest income also saw a yearonyear rise of 11.4 %, coming to EUR 29.9 million in 2012. Interest income rose by EUR 9.2 million, while interest expense grew by EUR 6.1 million. net commission income came to EUR 10.0 million, falling by 5.2 % as against 2011. This is the result of a EUR 0.4 million fall in commission income combined with parallel growth in commission expenses amounting to EUR 0.2 million.

Assets, Jan. 1, 2012 – Dec. 31, 2012 in EUR thousand

Due from customers

624,702

Due from banks

335, 753

Other assets

3,765Cash funds

16,598

Tangible assets

17,450

Securities

14,553


General administrative expenses rose by 9.5% to EUR 26.3 million in the year under review. Expenditure arising from branch renovations, the opening of new branches and investments in IT were the primary contributors to this development.

net risk provisions of EUR 5.2 million were recognised for the 2012 financial year, while these provisions came to EUR 2.7 million in the previous year. This consists primarily of a nonrecurring effect arising from the shortening of the term after which loans are designated as nonperforming.

İşbank AG’s success in its operating business in the 2012 financial year generated a profit on ordinary activities amounting to EUR 9.4 million, which represents growth of 6.3 % (2011: EUR 8.8 million). The 2012 financial year was concluded with net income for the year of EUR 6.6 million after taxes.

Liquidity situation

İşbank AG’s solvency was assured at all times throughout the 2012 financial year, and the liquidity ratios stipulated by supervisory law were maintained at all times.

Overall bank management and risk report

In the course of our business activities, we are exposed to a variety of risks that must be managed in order to be successful on the market. This is why great importance is attached to handling risk responsibly and to proactively and carefully managing risk within the context of İşbank AG’s business policies. Such a system of risk management ensures that all material risks for the Bank are handled appropriately.

İşbank AG has handled the challenging macroeconomic situation brought about by the financial and eurozone crises by means of a forwardlooking and selective risk policy for its banking activities and on the capital market. In light of its comfortable equity and liquidity resources in conjunction with a perpetually refined system of risk management, the Bank believes that it is still well equipped to handle the challenges of the future.

İşbank AG’s business policy pursues the goal of achieving continuous growth in income that is appropriate to the associated risk, ensuring at all times that it is able to bear these risks and thus also carefully assesses them. As part of this policy, the Bank deliberately concentrates on certain geographical and productrelated markets as well as on selected business partners in the corporate and banking sectors.

Liabilities, Jan. 1, 2012 – Dec. 31, 2012 in EUR thousand

Other liabilities

2,663

Due to customers

767,615

Due to banks

128,061

Provisions

3,242

Capital and reserves

111,390


Overall risk profile

The risk management system and the processes for identifying, measuring, assessing, managing, monitoring and communicating individual risk types are described in the İşbank AG Risk Manual and in additional operational guidelines. A materiality assessment has been documented for all risk types as well as, where relevant, for their individual manifestations. Counterparty default risk, market price risk and liquidity risk have been identified as major risk types. These risk types – together with operational risk in the course of accounting for riskbearing ability – are managed by means of limits.

Organisation of risk management

Overall responsibility for risk management is borne by the Management Board as a whole. It is assisted by the risk management department, the risk committee, the asset and liability management committee and internal auditing in the implementation of risk management in the Bank’s operating business.

The risk management department handles the central management, monitoring and control of the Bank’s risk area, both domestically and abroad.

One of the core tasks of risk management is to inform the Management Board. The provision of information on all of the Bank’s material risk items on an ongoing basis makes it possible for the Management Board to fully assume overall responsibility for all risk areas and to promptly take any measures needed to manage and minimise these risks.

The risk management department prepares a risk report at regular intervals. This report describes the risk situation for the Bank as a whole, taking into account all material risk types, and also addresses key structural characteristics of the Bank’s lending business.

Monitoring the lending business as regards compliance with statutory requirements and internal competence regulations is the responsibility of the credit department, which reports directly to the Management Board member responsible for back office operations. It monitors the Bank’s trading activities using ITbased instruments and ensures compliance with specified trading limits. The department also maintains close contact with the corresponding departments of the parent company in Turkey, thus enhancing its own expertise, particularly in matters of counterparty default risk and market price risk in Turkey and in issues relating to country risk.

Risk-bearing ability and stress testing

The management and monitoring of material risks for the Bank as a whole is based on a riskbearing ability concept that is based on the income statement and on the ‘going concern’ principle. Limits are then defined for material risks and those risks are compared with the aggregate risk cover as well as the total limit derived from this.

Riskbearing capacity requires that the overall risk position is covered by risk coverage potential. The ratio of the overall risk position relative to the aggregate risk cover III as at 31 December 2012 came to 77 %, meaning that the Bank is capable of bearing risk.

Income, Jan. 1, 2012 – Dec. 31, 2012 in EUR thousand Expenses, Jan. 1, 2011 – Dec. 31, 2011 in EUR thousand

Interest income

48,970

Other income

108

Commission income

10,525

Interest expenses

19,094

Other expenses

33

Commision expenses

486

Personnel expenses

14,225

Administrative expenses

12,079

Write-downs and valuation allowances

7,790


İşbank AG performs regular stress tests for the risks that the Bank considers to be material, taking into account risk concentrations in the process. For this purpose, it makes use of suitable historical and hypothetical scenarios, taking into account the strategic direction of the Bank. Riskbearing ability is also assessed under stress situations on the basis of the extent to which risk cover potential is utilised.

Inverse stress tests are performed annually. These involve the definition of qualitative scenarios as well as the examination of other events that may jeopardise the Bank’s state as a going concern. The results of inverse stress testing are reflected in specific risk management measures.

Counterparty default risk

Counterparty default risk is generally understood to mean the risk of default on contractually agreed payments, particularly in the lending business. The Bank performs a detailed credit analysis of all borrowers and counterparties based on extensive directives and operational guidelines. The competence system is continually monitored with the aid of IT systems by the risk management department on the basis of type and amount and on the basis of country, sector and exposure size class limits. The Bank works with a risk classification system that is regularly reviewed and optimised. This enables the early detection of risk in order to protect the Bank.

The distinct separation of front and back office operations and the involvement of the parent company in the event that specific transaction volume limits are exceeded enables objective and risk appropriate credit decisions on the basis of detailed analyses and market observations.

ITbased monitoring systems enable existing contracts to be reviewed for compliance, and borrowers or counterparties to be assessed to determine their creditworthiness. In the event of default, standardised procedures are applied as set out in the operational guidelines. In those cases where payment will not be made, a risk provision is recognised.

The country risk is reduced by limiting business to a number of selected markets and assigning country limits. Country risk is assessed not only on the basis of internal evaluations, but also the credit ratings awarded by external rating agencies and analyses performed by the parent company’s economics department. The Bank also limits itself largely to trade and shortterm finance, which is why the country risk is deemed to be manageable.

Loans in EUR thousand

to Banksto CustomersLoans

2008 2009 2010 2011 2012

244,665

371,761

616,426

147,583

341,476

489,059

296,698

400,246

696,944

302,261

556,161

858,422

335,753

624,702

960,455


In addition to the predominantly German and European business, our business with Turkey also plays a significant role within our Bank. We analyse the economic and political risks associated with this by working closely with our parent company and developing suitable business strategies. A balanced business policy helps to minimise risk potential. We aim to continue with the expansion of our German, European and Turkish business, whereby our business in Turkey will concentrate on lending to Turkish and international businesses in the upper SME segment and on forfaiting receivables from these companies.

Liquidity risks

As part of liquidity risk management, high priority is given to ensuring stable refinancing capability and thus ensuring that the Bank is solvent at all times.

The Bank’s liquidity position is measured, analysed, monitored and managed both monthly as per the liquidity principle and on an ongoing basis by the trading department. There is also a liquidity risk management guideline that combines, and in some cases supplements, the existing guidelines.

The Bank also prepares a ‘liquidity report’, and this forms the basis for mediumterm liquidity planning and provides a static comparison of payment instruments and payment obligations as per their terms. An aggregate overall analysis is conducted on the basis of cash flows depicted separately for each currency.

In addition to this static analysis, the trading department is also responsible for performing scenario analyses on the basis of the static liquidity report. The dynamic analysis of the liquidity position is performed each quarter, taking into consideration the emergency liquidity plan in force and any possible fluctuations in value.

Market price risks

Market price risks arise mainly from trading and as a result of interest rate risks or price risks brought about by price changes in the bonds portfolio. As no strategic positions are generally held in foreign currencies, exchange rate risks are of lesser concern.

The market risks that arise from changes in market prices for foreign exchange and derivative transactions and risks arising from changes to interest rates or interest structures are monitored and managed by the trading department on an ongoing basis within prescribed limits.

In the past financial year, İşbank AG made its own investment in an investment fund denominated in euros, which in turn invests in shares denominated in Turkish lira. The money and foreign exchange department constantly tracks the current value of the shares held in the Türkisfund portfolio and reports on this, both as a whole and separately by subfund, in the course of regular lending and deposit business meetings.

Total Assets and Business Volume in EUR thousand

Total assetsBusiness Volume

2008 2009 2010 2011 2012

684,068

708,895

540,029

569,373

793,969 931,566

821,603 964,920

1,015,605

1,054,991


The risk management department conducts the ongoing monitoring of these risk positions and checks compliance with the prescribed limits, and this department reports to the Management Board member responsible for back office operations. The Management Board is promptly notified of current developments and of the profit and loss situation. The regularity of reports issued by the risk management department is increased in periods of unusual market activity and the competence hierarchy is adjusted accordingly. Derivatives are only used for hedging purposes. Such transactions were only conducted to a minor extent in the year under review. The Bank trades in securities as part of proprietary trading.

Interest rate risks are monitored by the risk management department. The different maturities of the receivables and liabilities from balance sheet transactions are the most significant source of risk.

Operational risks

Operational risk is understood to be the risk of loss incurred as a result of human error, inadequacy of internal processes and systems, and external events.

An annual selfassessment is performed to identify operational risks. This process of data collection is used to identify specific risks and estimate the potential loss and probability of occurrence.

Risks arising as a result of the inadequacy of internal processes or bad decisionmaking are minimised by means of the control system in place, through operational directives and clear competence regulations.

Furthermore, a loss database (dating from 2006) is maintained and is used to record and analyse actual losses incurred as a result of operational risks. It tracks all information on operational errors, including their type, reason, frequency and the amount involved. Measures to avoid operational risk in the department concerned are developed and introduced for the future in cooperation with the risk management department. The basic indicator approach as set out in the German Solvency Regulation is used to measure operational risk for the purposes of compliance with the German Solvency Regulation and determine the equity required to hedge operational risk.

Limitation of legal risk is a core task of the legal department, and such risk is limited with the use of standardised forms and contracts to the greatest extent possible. In the case of complex transactions, external consultants are called in to assist the legal and tax divisions with their expertise.

Technical risks fall mainly within the scope of IT. The Bank has accounted for these risks by establishing extensive operational guide lines and concluding appropriate contractual agreements with external providers. A backup system provides the required functionality in the event of an emergency. The IT systems are reviewed by external auditors at regular intervals.


Reputational risks

We consider reputational risk to be the risk of events occurring that may damage the public’s, the media’s, employees’, clients’ or business partners’ confidence in İşbank AG.

The operating business units and branches hold direct responsibility for reputational risks that may arise as part of their business activities.

Thanks to its name and its connection with the parent company Türkiye İş Bankası A.Ş., İşbank AG benefits in particular from the confidence of its clients already familiar with the Bank in Turkey. Even today, many clients continue to place great value in knowing who the shareholders are behind İşbank AG and what kind of confidence the Türkiye İş Bankası A.Ş. Group inspires. İşbank AG also has developed its own good reputation over the course of three decades.

In addition to the Bank’s good reputation among the Turkish population in Europe, the risk strategy of İşbank AG also accounts for reputational risk by mandating that all business partners be treated fairly and that no transactions be entered into with dubious partners.

Concentration risks

Concentration risk within İşbank AG is generally encompassed by counterparty default risk. A concentration in counterparty default risk occurs when the risk is intensified as a result of certain factors, causing the diversification of the portfolio to be limited. As per our risk strategy, the credit portfolio is diversified by means of defined limits for sector, country and exposure size, thus limiting concentrations for the most part. İşbank AG is mainly subject to concentration risk as a result of its dealings with Turkey. This concentra tion risk is monitored closely and deliberately assumed within the context of the business strategy.

Membership in associations

The Bank is a member of the Association of German Banks and of regional banking associations. It also belongs to the Association of Foreign Banks in Germany. As a member of the Auditing Association of German Banks, it participates in the German Deposit Protection Fund for private banks.

Significant events since the end of the financial year

There were no events of note that took place after the end of the financial year.


Opportunities and risks

The performance of the financial markets continues to be bound by great uncertainty. Regulatory measures that have either already been implemented or are being planned also impose strict demands upon the management of banks.

In view of this, İşbank AG expects continued moderate growth in 2013. We will continue to pursue our traditional riskaware business policy while closely observing credit and liquidity risks. We aim to continue exploiting potential in the private and corporate client sectors throughout Europe. We will pay particular attention to trade finance activities, as we did in the 2012 financial year. The primary goal in the product and services segment is to intensify commission business.

Dependency report

Our company received an appropriate consideration for each legal transaction on the basis of the circumstances that we were aware of at the time each legal transaction was conducted. There were no measures or legal transactions with third parties whose performance or lack of performance were at the behest of or in the interest of an associated company in the period under review.

Outlook

Turkey has recorded one of the highest sustained growth rates in the world. On this basis, average annual growth of up to seven percent is expected as of 2013. Given this, we also expect the already close trading and investment relationships between Turkey and Germany and, indeed, with Europe as a whole, to intensify even further. Because İşbank AG is positioned precisely in this niche sector, we expect to derive positive benefits from our business potential, in the same way that we expect to profit from exploiting the growing benefits of synergies with our parent company, Türkiye İş Bankası A.Ş.

Therefore, despite the persistent uncertainties in the market, we expect performance to remain positive in 2013 and to achieve an annual result above that of 2012.

Frankfurt am Main, 17 May 2013

Bayram ÖztürkCEO

Selami DüzMember of the Management Board

Burkhard von WallenbergMember of the Management Board


OuR sERvicEs

İşbank AG’s target clients are: _ Persons and businesses that are of Turkish origin and are based

in Europe_ Turkish businesses with trade and investment connections in Europe_ European businesses with trade and investment connections in Turkey

We provide our clients as standard with a broad range of banking services for their daytoday needs. This range of services is enhanced by products tailored specifically to the needs of these target groups.

Private clients

We offer our clients a free current account, for example, which they can use through our online banking service, providing them with access to their account balance, the ability to make payments, issue standing orders and much more – anytime, anywhere. Our traditional Turkish funds transfer can also be used through the online banking service, regardless of where the client currently is – and it’s cheaper than going into the branch, too. The benefits that the account provides are rounded off by the İşbank girocard and a credit card – now also with a new design. We also offer our clients time deposit services with attractive conditions and the ability to deposit money in an investment fund that invests solely in Turkish shares and bonds.

We provide overdraft facilities for shortterm loan needs. Our instalment loans are ideal for larger acquisitions. Rental deposit guarantees eliminate the need for inefficiently depositing cash for years on end.

Contracts for various products can also be conveniently concluded online without the need to find a branch. For example, it is possible to open an account (İŞWEB Account), a time deposit account (İŞWEB Time Deposit Account) or take out a loan (İŞWEB Credit) in this way.

Within the scope of our partnership with HDI, our clients can benefit from a variety of pension and insurance products at İşbank’s branches, including life insurance, pension plans, or even a ‘wedding savings plan’, which allows them to start saving up early for their children’s wedding.

Many of our clients have decided in recent years to buy a house or apartment in Germany. Within the scope of our partnerships with Hypoport and PlanetHome, we have been able to broker highly attractive property financing deals, selected from a range of over 40 financial institutions and on the basis of our clients’ specific needs. We are also in a partnership with BHW, Germany’s second largest provider in this area, enabling us to offer home loan and savings products.

In addition to property financing in Germany, another of İşbank’s traditional pillars is its financing of property in Turkey. Whether it’s a holiday home or a place to retire in Turkey – we provide our clients in Germany with favourable financing on the basis of a mortgage on the property in Turkey.


»İşbank AG has specialised in the particular requirements of a clientele who commute between Turkey and Europe, and offers a range of products and services tailored specifically to the needs of these clients.«

Corporate clients

We also provide our corporate clients with a wide range of services. The corporate current account forms the basis of any company’s financial transactions. These days, such accounts are usually bound to the online banking services, which makes it possible to keep a perspective on the current account balance at all times and to assign funds as necessary. With a variety of payment services, we ensure that all payments sent and received by our clients are processed as quickly and efficiently as possible, whether they are in euros or a foreign currency, domestic, SEPA or other foreign transactions. Our Turkish funds transfer service means that money gets to its destination very quickly thanks to our partnership with the more than 1,200 branches of Türkiye İş Bankası A.Ş. Of course, our clients can also make all of these payments themselves online anywhere, at any time, as well as create templates for recurring payments, set up standing orders and much more. Our POS devices are also of relevance to our clients who operate in retail.

Daily liquidity fluctuations can be overcome simply with our corporate overdrafts. Our commercial instalment loan is ideal for investments that involve larger and longerterm financing requirements. Our Bank is made unique by our ability to utilise assets located in Turkey (e.g. balances at our parent bank, mortgages on property in Turkey) as collateral for a loan. Inversely, it is also possible for collateral located in Germany or other countries in which İşbank AG is present to be utilised for loans to our clients’ subsidiaries in Turkey. We can also arrange for other services to be provided to our clients in Turkey in partnership with Türkiye İş Bankası A.Ş.

Trade between Turkey and Europe is growing year by year. Financial transactions take many forms. In addition to ordinary payments abroad, we also provide our clients with collection services, services related to letters of credit, including the granting and authentication of these, bill discounting, receivables purchasing and forfaiting services. We also provide surety bonds for commercial transactions (for deposits, guarantees, customs purposes, etc.) The provision of import postfinancing and export prefinancing for our clients engaging in international trade also aids them in conducting their business.

Capital market

In addition to our direct business with our private and corporate clients at our branches, we also participate in syndicated lending or acquire participations in such lending through secondary markets. Borrowers located in Turkey are the primary focus of our activities in this area.


SERvICES AT A GLAnCE

Consumer Banking Corporate Banking

ACCOunTS AnD CARDS ACCOunTS AnD CARDS

InSuRAnCE TRADE FInAnCE

SAVIng AnD InVESTIng SAVIng AnD InVESTIng

MORTgAgES MORTgAgES

PAyMEnTS AnD TRAnSFERS PAyMEnTS AnD TRAnSFERS

SERVICES SERVICES

LOAnS LOAnS


BAlANcE shEET As Of DEcEMBER 31, 2012


Assets

Dec. 31, 2012 in EUR Previous year in EUR

1. Liquid funds

a) Cash 3,511,626.38 3,166,146.71

b) Balances with central banks thereof with Deutsche Bundesbank: EUR 7,7937,45,76

(previous year: EUR 4,649,320,72) 13,086,357.16 10,749,027.00

16,597,983.54 13,915,173.71

2. Receivables from banks

a) Due at sight 10,046,338.31 5,444,018.57

b) Other receivables 325,706,832.92 296,816,834.97

335,753,171.23 302,260,853.54

3. Receivables from customers

thereof: secured by mortgages: EUR 453,238,276 (previous year: EUR 258,709,771,00)

loans granted by local authorities: EUR 0,00 (previous year: EUR 0,00)

624,702,127.08 556,161,422.25

4. Debentures and other fixed interest securities

Bonds and debt securities issued by public bodies thereof: eligible as collateral with Deutsche Bundesbank

EUR 0,00 (previous year: EUR 0,00) 0.00 10,377,901.87

Other securities thereof: eligible as collateral with Deutsche Bundesbank EUR 11,207,325,55

(previous year: EUR 17,092,707,07) 14,553,072.99 27,590,614.76

14,553,072.99 37,968,516.63

5. Shares and other non-fixed interest bearing securities 1,931,745.73 2,636,941.44

6. Intangible assets

concessions, industrial property rights and similar rights purchasedand licences for such rights and assets 750,470.13 181,175.68

750,470.13 181,175.68

7. Tangible fixed assets 17,449,536.28 17,244,093.15

8. Other assets 3,764,626.98 1,074,062.87

9. Prepaid and deferred assets 102,701.28 123,466.68

Total assets 1,015,605,435.24 931,565,705.95


Liabilities


1. Liabilities to banks

a) Payable on demand 12,584,906.24 11,434,490.44

b) With an agreed term or notice period 115,476,084.39 97,429,207.91

128,060,990.63 108,863,698.35

2. Liabilities to customers

a) Saving deposits aa) With an agreed notice period of up to three months ab) With an agreed notice period of more than three months

24,331,218.11 731,101.71

22,658,855.26 724,953.20

b) Other liabilities ba) Payable on demand bb) With an agreed term of notice period

117,964,725.26 624,587,771.63

114,321,827.83 570,899,294.33

767,614,816.71 708,604,930.62

3. Other liabilities 2,662,924.40 2,807,302.76

4. Deferred expenses and accrued income 2,279,328.18 1,887,183.77

5. Deferred tax liabilities 355,662.34 513,652.77

6. Accruals

a) Tax accruals 1,881,287.76 1,019,999.11

b) Other accruals 1,360,787.53 1,096,895.70

3,242,075.29 2,116,894.81

7. Equity

a) Subscribed capital 100,000,000.00 100,000,000.00

b) Capital reserves 315,292.40 315,292.40

c) Revenue reserves Other revenue reserves 4,456,750.46 372,254.23

d) Unappropriated earnings 6,617,594.82 6,084,496.23

111,389,637.68 106,772,042.86

Total liabilities and equity 1,015,605,435.24 931,565,705.94

1. Contingent liabilities

Contingent liabilities from guarantees indemnity agreements 27,276,175.80 25,518,322.95

2. Other liabilities

Irrevocable credit commitments 12,109,482.99 7,835,795.18

39,385,658.79 33,354,118.13


Statement of Income


1. Interest income from

a) Loans and money market transactions 47,470,868.95 37,689,190.03

b) Fixed-interest securities and debentures 1,499,250.74 2,119,036.86

48,970,119.69 39,808,226.89

2. Interest Expense 19,094,324.15 12,978,101.22

29,875,795.54 26,830,125.67

3. Commission Income 10,525,177.91 10,877,339.46

4. Commission Expense 485,552.66 281,428.89

10,039,625.25 10,595,910.57

5. Other operating income 107,606.68 340,218.46

6. general administrative expense

a) Personnel expenses aa) Wages and salaries ab) Social security contributions, pensions and

welfare expense thereof: pension expenses EUR 56,708.89) (Previous year: EUR 56,120.73)

12,270,140.19

1,954,584.63

10,996,564.37

1,747,125.17

14,224,724.82 12,743,689.54

b) Other administrative expenses 12,078,792.07 11,280,222.55

26,303,516.89 24,023,912.09

7. Write-downs and value adjustments on intangible and tangible fixed assets 1,336,042.84 924,636.27

8. Other operating expenses 32,804.06 47,488.84

9. Write-downs and value adjustments on receivables and certain securities, as well as allocations to provisions in the lending business 6,454,241.35 3,160,744.20

10. Income from reversals of write-downs of receivables and certain securities, as well as income from release of accruals relating to the lending business 772,540.42 497,081.85

–5,681,700.93 –2,663,662.35

11. Depreciation and value adjustments on participations, shares in affiliated companies and securities held as fixed assets 0.00 1,424,558.56

12. Income from participations, shares in affiliated companies and securities held as fixed assets

2,725,146.14 152,890.54

13. Result from ordinary operations 9,394,108.88 8,834,887.12

14. Taxes on income and earnings 2,676,346.52 2,670,694.10

15. Other taxes, unless shown under item 8 100,167.53 79,696.78

2,776,514.05 2,750,390.88

16. net Income for the year 6,617,594.82 6,084,496.23

17. net Retained Profit 6,617,594.82 6,084,496.23


Preliminary note

The annual financial statements of İşbank AG for financial year 2012 were prepared in accordance with the provisions of the Handelsgesetzbuch (HGB – German Commercial Code), the verordnung über die Rechnungslegung der Kreditinstitute und FinanzdienstleistungsInstitute (RechKredv – German Accounting Directive for Banks) and the Gesetz betreffend die Aktiengesellschaften (AktG – German Stock Companies Act).

Accounting Policies

Cash funds are carried at their principal amount.

Receivables are carried at their principal amount plus deferred interest. Specific valuation allowances or provisions and global valuation allowances are recognized for identifiable credit risks and transfer risks in the lending business.

Bonds and notes are classified as longterm investments. Total hold ings of EUR 14,553 thousand are valued at the lesser principle of the lower of cost and market. As of the balance sheet date hidden reserves of EUR 971 and hidden burdens of EUR 2 thousand existed. Fixedincome securities purchased at less than the par value are written back at the nominal value appropriate for the period, while fixedincome securities purchased above par are written off at the nominal value appropriate for the period.

Stock and other non fixedincome securities exist only in the form of shares in special investment assets, which are completely attribute

to fixed assets and whose investment objective is to achieve an appropriate longterm rate of return from equity growth and capital yield. These instruments are valued at the lower of cost and market.

Tangible assets and intangible assets with finite useful lives are depreciated and amortized over their expected useful lives. Intangible assets primarily consist of software acquired against payment. Minorvalue goods of up to EUR 150 are written off fully in the year acquired. Goods with a purchase cost of EUR 150 – 1,000 are capitalized and written back on a straightline basis over five years. Liabilities are carried at the amount to be paid plus deferred interest. If the amount to be paid of a liability is higher than the issuing amount, the difference is recognized as a prepaid expense in accordance with section 250 (3) HGB in conjunction with section 340e (2) sentence 3 HGB and reduced by annual amortization over the life of the liability. Deferred items are written back on a straightline basis over the service life of the liability. Tax provisions and other provisions take all recognizable risks into account and were calculated to the amount required in accordance with Section 253, Para. 1 of the German Commercial Code (HGB) as deemed necessary based on prudent commercial judgement.

The subscribed capital of EUR 100 million was carried at its notional amount.

Expenses and income were recognized in the period in which they arose. Account fees are recognized on a quarterly basis; loan charges are recognized immediately upon conclusion of the transaction.

A)

NOTEs TO ThE ANNuAl fiNANciAl sTATEMENTs fOR fiNANciAl YEAR 2012

B)


C) Balance Sheet Disclosures

Maturity structure of receivables, securities and liabilities. In accordance with section 11 RechKredv, the maturity structure includes ratable interest.

Assets and liabilities denominated in foreign currencies were translated at the mean spot rate as of the balance sheet date. Where residual maturities are less than one year the principle of the lower of cost and market is strictly applied.

The periodic approach (based on the income statement) was applied when measuring interestratebased transactions in the nontrading portfolio at the lower of cost or market value.

Investment shares in Türkisfund (cost of acquisition: EUR 2,000 thousand) were measured as of the reporting date, producing a reversal amounting to EUR 697 thousand. This amount was taken directly to profit and loss.

Intangible longterm assets mainly comprise computer software.

Receivables due from customers are secured by mortgage liens to an amount of EUR 453,238 (previous year EUR 258,710 thousand).

Other assets totalling EUR 3,765 thousand (previous year: EUR 1,074 thousand) are mainly made up of EUR 2,221 thousand in receivables from public tax offices and municipal authorities for claims to re imbursement of trade, sales and corporation tax and the solidarity surcharge, plus EUR 536 thousand of as yet unapproved customer orders, and, at EUR 448 thousand, the tenancy deposit for the buildings rented for the branches in Paris and Zurich.

Prepaid expenses amounting to EUR 103 thousand (previous year: EUR 123 thousand) include EUR 36 thousand in prepayments for the rent of the Amsterdam and Paris branches as well as advance payments of EUR 49 thousand on invoices and insurance premiums of EUR 18 thousand also paid in advance.

Tangible assets include land and buildings with an unamortized cost of EUR 13,619 thousand at yearend which are largely used by the company itself. To cover loans granted in USD, the Bank held three foreign exchange swaps at yearend (nominal value: EUR 13,835 thousand). As of the balance sheet date, these currency swaps resulted in a positive amount of EUR 193 thousand.

Dec. 31, 2012 in EUR thousand Previous year in EUR thousand

Due from banks

– Daily debt due 10.046 5.444

– Up to three months 113.631 141.777

– Three months to one year 211.567 154.676

– One to five years 509 364

– More than five years 0 0

Due from customers

– Up to three months 104.437 88.623

– Three months to one year 196.750 144.804

– One to five years 129.103 127.054

– More than five years 99.969 110.737

– Undated 94.443 84.943

Bonds and notes held

Issued by public-sector issuers – of which bonds and debentures sold under repo Agreements (book values)

00

10.3770

Issued by other issuers – of which bonds and debentures sold under repo Agreements (book values)

14.5530

27.5910

Maturing in the following year 1.166 4.207

* All securities are marketable and listed.

*

* *


Statement of changes in fixed assets as of December 31, 2012 in EUR thousand

Acquisition/manu fac-

toring costsBalance at

Jan. 1, 2012 Additions Disposals Transfers

Reversals of write-

downs for the year

Balance at Dec. 31,

2012

Amorti-zation for

the yearBalance at

Dec. 31, 2012

Depre-ciation for

the yearBalance at

Dec. 31, 2012

Book values

Balance at Dec. 31,

2012

Book values

Balance at Dec. 31,

2011

Intangible assets

Software 6,597 941 19 0 7,519 0 371 750 181

Tangible fixed assets

1. Office and operating equipment 10,822 1,170 3,545 0 8,447 0 638 3,831 3,299

2. Own-use land and buildings 19,864 0 0 0 19,864 0 327 13,619 13,945

30,686 1,170 3,545 0 28,311 0 965 17,450 17,244

Securities classified as long-term investments 40,605 9,959 33,901 0 0 697 -876** 16,484* 40,605

71,291 11,129 37,446 0 28,311 697 89 33,934 57,849


Due to banks

– Daily debt due 12,585 11,435

– Up to three months 99,640 83,209

– Three months to one year 10,793 14,016

– One to five years 5,043 204


Due to customers (saving deposits)


– Three months to one year 169 140

– One to five years 121 149


Due to customers (other liabilities)

– Daily debt due 117,965 114,322


– Three months to one year 299,097 280,274

– One to five years 157,569 114,667

– More than five years 11,314 11,070

Receivables from and liabilities to affiliated companies are included in the following items:

Due from banks – thereof from the shareholder

24,581 16,892

4,969 4,969

Due from customers 32,895 35,439

Due to banks – thereof to the shareholder

44,82640,799

49,987 49,987

Due to customers 2,283 2,316

Liabilities to banks include EUR 9,237 thousand which is hedged as part of openmarket transactions with the German Bundesbank through securities deposited in the Bundesbank’s custody account. The remaining liabilities to banks are not hedged.

Other liabilities amounted to EUR 2,663 thousand (previous year: EUR 2,807 thousand), primarily comprising as yet unapproved cus tomer orders worth EUR 1,725 thousand, liabilities to public tax offices as a result of EUR 98 thousand in taxes still to be paid and liabilities from salaries totalling EUR 242 thousand, as well as

*plus accrued interest in the amount of EUR 372 thousand

**Recognised premiums and discounts/changes in exchange rates and accrued interest on securities in the year under review


D) Statement of Income Disclosures

The statement of income is prepared using the vertical format.

Income is broken down by locations as follows:

no resolution has yet been adopted about the utilization of net profit for the year. The Shareholder’s Meeting will come to a decision on this issue at a later date.

Offices in germany

in EUR thousand

Office in the netherlands

in EUR thousand

Office in France

in EUR thousand

Office in Switzerland

in EUR thousand

Office in Bulgaria

in EUR thousandTotal

in EUR thousand

Interest Income 28,211 18,162 2,205 288 104 48,970

Commission Income 8,540 237 698 877 173 10,525

Net income for the year 607 5,726 811 -55 -471 6,618


Subscribed capital 100,000 100,000

Capital reserves 315 315

Revenue reserves 4,457 372

Revenue 6,618 6,085

111,390 106,772

outstanding flatrate withholding tax and solidarity surcharge payments of EUR 311 thousand.

Other provisions primarily concern annual leave entitlements (EUR 381 thousand), audit expenses (EUR 243 thousand, relating to the audit of the annual financial statements and special audits) and unsettled invoices (EUR 451 thousand).

Deferred income primarily consists of upfront fees of EUR 2,055 thousand related to syndicated loans bought in the secondary market.

The subscribed capital of İşbank AG is divided into 10,000,000 registered shares. There are no other types of share. Equity can be broken down as follows:

In foreign currencies:


Assets 107,668 93,450

Liabilities 93,407 73,785

The shareholder accounts for EUR 0 thousand of the guarantees and warranty agreements.

Cashbacked surety bonds in the year under review came to EUR 10,237.

The irrevocable loan commitments totaled EUR 12,109 thousand in 2012.

Deferred tax liabilities primarily result from differences in the valuation of land and property on the tax balance sheet. Deferred tax receivables (EUR 638 thousand) were netted with deferred tax liabilities (EUR 994 thousand). As of yearend, income of EUR 158 thousand was recognised. This valuation was carried out ap plying a tax rate of 31.64 %.

Liabilities on guarantees and warranty agreements are broken down as follows:


Letters of Credit 14,423 6,306

Warranties and guarantee agreements 12,853 19,212

27,276 25,518


Other operating income of EUR 108 thousand (previous year: EUR 340 thousand) was generated mainly from rental income amounting to EUR 86 thousand (previous year: EUR 86 thousand).

Other operating expenses mainly comprise the expenses incurred by company events, at EUR 16 thousand.

In the year under review, fees of EUR 120 thousand were invoiced for auditing services concerning the annual financial statements, EUR 23 thousand for other certification services, and EUR 40 thousand for miscellaneous services.

Allocation of the unappropriated profits for the year: By resolution of the Ordinary General Meeting of May 24, 2012, EUR 2,000,000 was disbursed to the parent company Türkiye İş Bankası A.Ş. The remaining figure of EUR 4,084,496.23 was allocated to the revenue reserves.

Special assets

Book value Dec. 31, 2012

in EUR

Market value Dec. 31, 2012

in EUR

Difference Market/

book valueDistribution

2012

Dailyrefunds

possibleOmitted

writeoffs

Türkisfund Equities class A 1,931,745.73 1,931,745.73 0.00 0.00 Yes No

Other financial obligations Other financial obligations can be broken down as follows:

E) Other Disclosures

Due to our membership in the deposit protection fund scheme of the Association of German Banks (Bundesverband deutscher

Banken e.v.), there exists a call liablity under certain circumstances. no call has been made so far.

Employees The Bank employed an average of 217 employees during the financial year, of which

The income of the Management Board members came to EUR 628 thousand in the past financial year (previous year: EUR 622 thousand). no provisions have been recognised by İşbank AG for the pensions of the Management Board members as no pension benefits have been granted. Loans amounting to EUR 14 thousand were granted to Management Board members.

The members of the Supervisory Board were paid expense allow ances during the financial year in accordance with section 285 no. 9a HGB amounting to EUR 120 thousand (previous year: EUR 71 thousand). no loans were granted to Supervisory Board members.

2012 Previous year

Prokuristen (authorised signatories) 17 21

Salaried employees 200 176

217 197

2013 in EUR thousand

2014 – 2015 in EUR thousand

ab 2016 in EUR thousand

Total in EUR thousand

Rental agreements 1,399 2,073 3,140 6,612

Leases 371 493 61 925

Other agreements 67 90 12 169

The share capital is EUR 100,000,000 and is divided into 10,000,000 noparvalue bearer shares.

Special assets:Overview according to Section 285 of the German Commercial Code (HGB) Para. 26:


group Relationships

İşbank AG, Frankfurt am Main, is a whollyowned subsidiary of Türkiye İş Bankası A.Ş., Büyükdere Cad. Pembegül Sok, 34330, LeventIstanbul, Turkey. The parent company Türkiye İş Bankası A.Ş. prepares consolidated financial statements as of December 31, 2012, which are also available from the parent company.

Auditor’s Report

We have audited the annual financial statements – comprising the balance sheet, the income statement and the notes to the annual financial statements – together with the bookkeeping system and the management report of İşbank AG, Frankfurt am Main, for the financial year from January 1 to December 31, 2012. The maintenance of the books and records and the preparation of the annual financial statements and management report in accordance with German commercial law are the responsibility of the Company’s management board. Our responsibility is to express an opinion on the annual financial statements, together with the bookkeeping system, and the management report based on our audit.

We conducted our audit of the annual financial statements in accordance with section 317 of the Handelsgesetzbuch (HGB – German Commercial Code) and the generally accepted German standards for the audit of financial statements promulgated by the Institut der Wirtschaftprüfer (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the annual financial statements in accordance with German principles of proper accounting and in the management

report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Company and evaluations of possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the internal control system and the evidence supporting the disclosures in the books and records, the annual financial statements and the management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by the management board, as well as evaluating the overall presentation of the annual financial statements and management report. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the annual financial statements comply with the legal requirements and give a true and fair view of the net assets, financial position and results of operations of the Company in accordance with German generally accepted accounting principles of proper accounting. The management report is consistent with the annual financial statements, as a whole provides a suitable understanding of the Company’s position and suitably presents the opportunities and risks of future development.

Frankfurt am Main, May 17, 2013

KPMG AGWirtschaftsprüfungsgesellschaft

Bors, Wirtschaftsprüfer neuser, Wirtschaftsprüfer

ExECUTIvE BODIES / GROUP RELATIOnSHIPS / AUDITOR’S REPORT

Management

Adnan Baliİstanbul/Turkey, Chairman, Chief Executive Officer at Türkiye İş Bankası A.Ş. (since 04.07.2012)

Suat İnce İstanbul/Turkey, Vice Chairman, Deputy Chief Executive at Türkiye İş Bankası A.Ş. (since 04.07.2012)

A. Erdal Aralİstanbul/Turkey, Deputy Chief Executive at Türkiye İş Bankası A.Ş. (until 22.02.2013)

Burhanettin Kantarİstanbul/Turkey, Divisional Director at Türkiye İş Bankası A.Ş.(until 22.02.2013)

Aziz Ferit Eraslan İstanbul/Turkey, Divisional Director at Türkiye İş Bankası A.Ş. (until 04.07.2012)

Fikret utku Özdemir İstanbul/Turkey,Group Manager at Türkiye İş Bankası A.Ş. (until 04.07.2012)

Ayşe gülenç Tunaİstanbul/Turkey, Divisional Director at Türkiye İş Bankası A.Ş. (until 04.07.2012)

Ebru Özşuca İstanbul/Turkey, Divisional Director at Türkiye İş Bankası A.Ş. (until 04.07.2012)

Murat Bilgiçİstanbul/Turkey, Divisional Director at Türkiye İş Bankası A.Ş. (since 11.09.2012)

yalçın Sezenİstanbul/Turkey, Deputy Chief Executive at Türkiye İş Bankası A.Ş. (since 04.07.2012)

Hakan Aranİstanbul/Turkey, Deputy Chief Executive at Türkiye İş Bankası A.Ş. (since 04.07.2012)

yavuz Erginİstanbul/Turkey, Advisor at Türkiye İş Bankası A.Ş. (since 11.09.2012)

Ömer Karakuşİstanbul/Turkey, Divisional Director at Türkiye İş Bankası A.Ş.(since 25.01.2013)

Ilhami Koçİstanbul/Turkey, Deputy Chief Executive at Türkiye İş Bankası A.Ş. (since 22.02.2013)

yilmaz Ertürkİstanbul/Turkey, Deputy Chief Executive at Türkiye İş Bankası A.Ş. (since 22.02.2013)

Bayram Öztürk Frankfurt am Main,CEO

Selami DüzFrankfurt am Main,Member of the Management Board

Burkhard von WallenbergNeu-Isenburg,Member of the Management Board

Bundesverband deutscher Banken e.V., Berlin

Bankenverband in Hessen e.V., Frankfurt am Main

Verband der Auslandsbanken e.V., Frankfurt am Main

Prüfungsverband deutscher Banken e.V., Köln

Einlagensicherungsfonds des Bundesverbandes deutscher Banken e.V., Berlin

Supervisory Board Memberships

Due from customers in thousands EUR

Total assets in thousands EUR

Capital and reserves in thousands EUR

key fiGures



Changein %

Total assets 931,565 1,015,605 9.02

Capital and reserves 106,772 111,390 4.33

Tangible assets 17,244 17,450 1.19

Cash funds 13,915 16,598 19.28

Bonds and securities 37,969 14,553 –61.67

due from banks 302,261 335,753 11.08

due from customers 556,161 624,702 12.32

due to banks 108,864 128,061 17.63

due to customers 708,605 767,615 8.33

Risk-weighted assets 888,462 961,575 8.23

interest income 39,808 48,970 23.02

Commission income 10,877 10,525 –3.24

net income for the year 6,084 6,618 8.78

% %

equity ratio 11.30 10.80

Return on equity before taxes 8.80 9.06

Return on equity after taxes 6.06 6.38

5-year cOMparisOn

400,246

72,438

65,725

68,734

540,029

684,068

4,085

4,509

341,476

371,761

414,730

460,298

793,969 5,832

550,639

106,772

111,390

Net retained profit in thousands EUR

Due to customers in thousands EUR

931,566

1,015,605

6,084

6,618

556,161

624,702

708,605

767,615

Offices wOrLdwide türkiye İş Bankasi a.ş. Offices wOrLdwide

Germany

Bulgaria

Georgia

United Kingdom

Turkey

Turkish Republic of Northern Cyprus

Netherlands

Switzerland

France

Iraq

Bahrain

China

Head Office

İş Towers

Büyükdere Cad.

Pembegül Sok.

34330 Levent-İstanbul

Turkey

Tel. + 90 / 212 / 316 00 00

Fax + 90 / 212 / 316 09 00

www.isbank.com.tr

1,250 Branches in Turkey

Central Foreign Department

Tel. + 90 / 212 / 316 28 02

Fax + 90 / 212 / 316 08 28

Turkish Republic of

Northern Cyprus

Central Office

Girne Cad. No: 9

Lefkoşa

Tel. + 90 / 3 92 / 228 31 33

Fax + 90 / 3 92 / 227 83 15

14 Branches in Cyprus

United Kingdom

Princes Court

8, Princes Street

London EC2R 8 HL

Tel. + 44 / 207 / 606 71 51

Fax + 44 / 207 / 726 25 66

Egypt

Nile City Towers

2005 C Cornish El Nil

North Tower, 27th Floor

Cairo

Tel. + 20 / 22 461 98 13-14

Fax + 20 / 22 461 98 10

Bahrain

Al Jasrah Tower, 8th Floor

Diplomatic Area

Pbx: 10205 Manama

Tel. + 973 / 17 549 222

Fax + 973 / 17 549 218

Irak

Gulan Street

Ainkawa Road

Duty Free Complex

Erbil

Tel. + 964 / 66 / 225 33 04

China

4407 Jin Mao Tower

88 Century Boulevard

200121 Pudong New Area

Shanghai

Tel. +86 / 2150 / 47 08 82

Fax +86 / 2150 / 47 08 85

Georgia

L. Asatiani Cd./Rustaveli Cd. No: 1/25

Batum

Tel. + 995 / 422 242 950

Kosova

Rruga UCK No: 43

Pristina

Tel. + 381 / 38 245 245

Fax: + 381 / 38 224 542

CJSC İşbank

Hauptverwaltung

Nametkina Str. 13 D

117420 Moskau

Tel. + 7 / 495 / 232-12-34

İşbank AG

Head Office

Roßmarkt 9


Tel. +49 / 69 / 299 01-0

Fax +49 / 69 / 28 75 87

Legal Notice

Published by:İŞBANK AGRoßmarkt 960311 Frankfurt am MainTel. +49 / 69 / 2 99 01-0Fax +49 / 69 / 28 75 87www.isbank.de

Concept, editorial, design:thema ag, Offenbach am Main

Photography:Norbert Miguletz, Uwe Nölke

Production: printmedia, Frankfurt

This annual report is also available in German.

© İŞBANK AG, 2012Printed in Germany. All rights reserved. No reproduction in any form without permission.

2008

2009

2008

2011

2008

2012

2010

2009

2011

2008

2012

2011

2009

2010

2008

2010

2011

2009

2010

2011

2012

2009

2010

2012

Kosova

2012

Egypt

Russia

İşBank aG Offices in eurOpe

Frankfurt (Head Office)

Roßmarkt 9


Tel. + 49 / 69 / 2 99 01- 0

Fax + 49 / 69 / 28 75 87

Telex 4189 385

S.W.I.F.T.-Code: ISBKDEFX

Frankfurt (Branch)

Roßmarkt 9


Tel. + 49 / 69 / 2 99 01- 0

Fax + 49 / 69 / 28 75 87

Telex 4189 385

Berlin (Branch)

Müllerstraße 150

13353 Berlin

Tel. + 49 / 30 / 254 22 70

Fax + 49 / 30 / 254 22 777

Berlin-Kreuzberg (Branch)

Kottbusser Straße 2

10999 Berlin

Tel. + 49 / 30 / 616 95 50

Fax + 49 / 30 / 614 89 88

München (Branch)

Goethestraße 21

80336 München

Tel. + 49 / 89 / 5 30 79 23

Fax + 49 / 89 / 5 38 03 02

Düsseldorf (Branch)

Graf-Adolf-Straße 70

40210 Düsseldorf

Tel. + 49 / 211 / 38 80 10

Fax + 49 / 211 / 38 80 130

Mannheim (Branch)

U 1,8

68161 Mannheim

Tel. + 49 / 621 / 397 49 80

Fax + 49 / 621 / 156 994 22

Gelsenkirchen (Branch)

Arminstraße 11

45879 Gelsenkirchen

Tel. + 49 / 209 / 177 073 14

Fax + 49 / 209 / 177 073 19

Hamburg (Branch)

Ballindamm 8

20095 Hamburg

Tel. + 49 / 40 / 30 29 01 0

Fax + 49 / 40 / 30 29 01 22

Köln (Branch)

Unter Sachsenhausen 35

50667 Köln

Tel. + 49 / 221 / 91 38 21 0

Fax + 49 / 221 / 91 38 21 20

Köln-Mülheim (Branch)

Genoveva Str. 16 –18

51065 Köln

Tel. + 49 / 221 / 29 77 41 0

Fax + 49 / 221 / 29 72 04 19

Karlsruhe (Branch)

Amalienstraße 23

76133 Karlsruhe

Tel. + 49 / 721 / 920 90 40

Fax + 49 / 721 / 266 24

Stuttgart (Branch)

Friedrichstraße 9 –11a

70174 Stuttgart

Tel. + 49 / 711 / 22 29 91 6

Fax + 49 / 711 / 22 29 91 77

Nürnberg (Branch)

Am Plärrer 6

90429 Nürnberg

Tel. + 49 / 911 / 92 99 53 80

Fax + 49 / 911 / 92 99 53 82 0

Paris (Branch)

13, Place Kossuth, 75009 Paris

Tel. + 33 / 1 / 43 12 93 70

Fax + 33 / 1 / 48 78 02 70

S.W.I.F.T.-Code: ISBKDEFXPAR

Amsterdam (Branch)

World Trade Center

Strawinskylaan 841, Tower C,

Level 8

1077 XX Amsterdam

Tel. + 31 / 20 / 5 30 63 33

Fax + 31 / 20 / 5 30 63 40

S.W.I.F.T.-Code: ISBKNL2A

Zürich (Branch)

Bodmerstraße 14, 8002 Zürich

Tel. + 41 / 44 / 2 26 41-00

Fax + 41 / 44 / 2 26 41-09

S.W.I.F.T.-Code: ISBKDEFXZUR

Sofia (Branch)

2, Pozitano Sq.

Perform Business Center

1000 Sofia

Tel. + 359 2 402 20 00-02

Fax + 359 2 402 20 15

Roßmarkt 960311 Frankfurt am MainTel. +49 / 69 / 2 99 01-0Fax +49 / 69 / 28 75 87www.isbank.de

Bank iM Wandel: MehRWeRT FüR unseRe kunden

cOntents

key figures 5-year comparison

01 statement03 report of the supervisory Board04 Our product portfolio12 Management13 Management report 24 Our services 27 Balance sheet 36 executive Bodies auditors’ report

Offices Legal notice

ANNUAL REPORT 2012

PRESENT ON THE MARKET,CLOSE TO THE CUSTOMER.

»here for you«

BİZ SİZİZ

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