Yapı ve Kredi Bankası A.Ş. - PDF

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Publicly announced consolidated financial statements and related disclosures at December 31, 2016 together with independent auditor s report (Convenience translation of publicly announced consolidated

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Publicly announced consolidated financial statements and related disclosures at December 31, 2016 together with independent auditor s report (Convenience translation of publicly announced consolidated financial statements and independent auditor s report originally issued in Turkish, See Note I. of Section three) (Convenience translation of the independent auditor s report originally issued in Turkish, See Note I. of Section three) Independent auditor report To the Board of Directors of Report on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of ( the Bank ) and its consolidated subsidiaries (together will be referred as the Group ) as at December 31, 2016, and the related consolidated income statement, consolidated statement of income and expense items accounted under shareholders equity, consolidated statement of cash flows and consolidated statement of changes in shareholders equity for the year then ended and a summary of significant accounting policies and other explanatory notes to the financial statements. Responsibility of the Bank s Board of Directors for the Consolidated Financial Statements Bank management is responsible for the preparation and fair presentation of the consolidated financial statement in accordance with Regulation on Accounting Applications for Banks and Safeguarding of Documents published in the Official Gazette no dated 1 November 2006 and other regulations on accounting records of Banks published by Banking Regulation and Supervision Agency (BRSA), circulars, interpretations published by BRSA and the provisions of Turkish Accounting Standards for the matters which are not regulated by these regulation; BRSA Accounting and Reporting Legislation and for such internal control as management determines is necessary to enable the preparation of the financial statement that is free from material misstatement, whether due to fraud or error. Independent Auditor s Responsibility Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with communique Independent Audit of Banks published by BRSA on the Official Gazette No dated April 2, 2015 and with the Independent Auditing Standards which is a part of Turkish Auditing Standards promulgated by the Public Oversight Accounting and Auditing Standards Authority ( POA ). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An independent audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the independent auditor s professional judgment, including the assessment of risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the independent auditor considers the internal control relevant to bank s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the bank s internal control. An independent audit also includes evaluating the appropriateness of accounting policies used by the reasonableness of accounting estimates made by the management as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion the accompanying consolidated financial statements presents fairly, in all material respects, the financial position of and its subsidiaries as at December 31, 2016 and the results of its operations and its cash flows for the year then ended in accordance with the prevailing accounting principles and standards set out as in accordance with BRSA Accounting and Reporting Legislation. Reports on arising from other regulatory requirements: In accordance with Article 402 paragraph 4 of the Turkish Commercial Code ( TCC ) no 6102; no significant matter has come to our attention that causes us to believe that the Bank s bookkeeping activities for the period January 1 December 31, 2016 are not in compliance with the code and provisions of the Bank s articles of association in relation to financial reporting. In accordance with Article 402 paragraph 4 of the TCC; the Board of Directors submitted to us the necessary explanations and provided required documents within the context of audit. Additional paragraph for convenience translation to English: As explained in detail in Note I. of Section Three, accounting principles and standards set out by regulations in conformity with BRSA Accounting and Reporting Legislation, accounting principles generally accepted in countries in which the accompanying consolidated financial statements are to be distributed and International Financial Reporting Standards ( IFRS ) have not been quantified in the accompanying consolidated financial statements. Accordingly, the accompanying consolidated 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. Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of Ernst & Young Global Limited Yaşar Bivas, SMMM Partner February 2, 2017 Istanbul, Turkey Convenience translation of publicly announced consolidated financial statements and independent auditor s report originally issued in Turkish, See Note I. of Section three THE CONSOLIDATED FINANCIAL REPORT OF YAPI VE KREDI BANKASI A.Ş. AS OF DECEMBER 31, 2016 Address : Yapı Kredi Plaza D Blok Levent, 34330, İstanbul Telephone number : Fax number : Web Site : The consolidated financial report for the year end which is prepared in accordance with the Communiqué Related to Publicly Announced Financial Statements of Banks and Explanations and Notes Related to these Financial Statements as regulated by the Banking Regulation and Supervision Agency includes the following sections. GENERAL INFORMATION ABOUT THE PARENT BANK CONSOLIDATED FINANCIAL STATEMENTS OF THE PARENT BANK EXPLANATIONS ON ACCOUNTING POLICIES APPLIED IN THE RELATED PERIOD INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT OF THE GROUP EXPLANATIONS AND NOTES RELATED TO CONSOLIDATED FINANCIAL STATEMENTS OTHER EXPLANATIONS INDEPENDENT AUDITOR S REPORT Investments in subsidiaries, associates and joint ventures, whose financial statements have been consolidated in these year end consolidated financial statements are as follows. Subsidiaries Associates Joint Ventures 1. Yapı Kredi Finansal Kiralama A.O. 2. Yapı Kredi Faktoring A.Ş. 3. Yapı Kredi Yatırım Menkul Değerler A.Ş. 4. Yapı Kredi Portföy Yönetimi A.Ş. 5. Yapı Kredi Holding B.V. 6. Yapı Kredi Bank Nederland N.V. 7. Yapı Kredi Bank Moscow 8. Stichting Custody Services YKB 9. Yapı Kredi Bank Azerbaijan CJSC 10. Yapı Kredi Invest LLC 11. Yapı Kredi Bank Malta Ltd. 1. Banque de Commerce et de Placements S.A. 2. Allianz Yaşam ve Emeklilik A.Ş. 1. Yapı Kredi Koray Gayrimenkul Yatırım Ortaklığı A.Ş. Although Yapı Kredi Diversified Payment Rights Finance Company (the Structured Entity) is not a subsidiary of the Bank, it has been included in the consolidation since the Bank has 100% control. The accompanying consolidated financial statements and notes to these financial statements which are expressed, (unless otherwise stated) in thousands of Turkish Lira, have been presented based on the accounting books of the Bank prepared in accordance with the Regulation on the Principles and Procedures Regarding Banks Accounting Applications and Safeguarding of Documents, Turkish Accounting Standards, Turkish Financial Reporting Standards and related appendices and interpretations of these, and have been independently audited. Y. Ali KOÇ H. Faik AÇIKALIN Massimo FRANCESE B. Seda ikizler Chairman of the Chief Executive Officer Chief Financial Officer Financial Reporting and Board of Directors Accounting Executive Vice President Wolfgang SCHILK Chairman of Audit Committee Adil G. ÖZTOPRAK Member of Audit Committee Contact information of the personnel in charge of the addressing of questions about this financial report: Name-Surname / Title : Aytuğ SADİ / Head of Consolidation Telephone Number : Fax Number : SECTION ONE General information I. History of the Parent Bank including its incorporation date, initial legal status and amendments to legal status, if any 1 II. Explanation about the Parent Bank s capital structure, shareholders holding directly or indirectly, collectively or individually, the management and controlling power and changes in current year, if any and explanations on the controlling group of the Bank 1 III. Explanations regarding the board of directors, members of the audit committee, chief executive officer and executive vice presidents and their areas of responsibility and shares if any 2 IV. Information on the individual and corporate shareholders having control shares of the Parent Bank 3 V. Summary information on the Parent Bank s activities and service types 3 VI. Differences between the communiqué on preparation of consolidated financial statements of Banks and Turkish Accounting Standards and short explanation about the entities subject to full consolidation or proportional consolidation and entities which are deducted from equity or entities which are not included in these three methods 4 VII. The existing or potential, actual or legal obstacles on the immediate transfer of shareholder s equity between the Bank and its subsidiaries or reimbursement of liabilities 4 SECTION TWO Consolidated financial statements I. Consolidated balance sheet (Statement of Financial Position) 5 II. Consolidated off-balance sheet commitments 7 III. Consolidated income statements 8 IV. Consolidated statement of income and expense items accounted under shareholders equity 9 V. Consolidated statement of changes in shareholders equity 10 VI. Consolidated statement of cash flows 12 VII. Profit appropriation statement 13 SECTION THREE Accounting policies I. Explanations on basis of presentation 14 II. Explanations on strategy of using financial instruments and foreign currency transactions 15 III. Information on consolidation principles 16 IV. Explanations on forward and option contracts and derivative instruments 18 V. Explanations on interest income and expense 20 VI. Explanations on fee and commission income and expenses 20 VII. Explanations on financial assets 20 VIII. Explanations on impairment of financial assets 22 IX. Explanations on offsetting financial assets 22 X. Explanations on sales and repurchase agreements and securities lending transactions 22 XI. Information on assets held for resale and related to discontinued operations and explanations on liabilities related with these assets 23 XII. Explanations on goodwill and other intangible assets 23 XIII. Explanations on property and equipment 24 XIV. Explanations on leasing transactions 25 XV. Explanations on provisions, contingent asset and liabilities 26 XVI. Explanations on obligations related to employee rights 26 XVII. Explanations on taxation 28 XVIII. Explanations on borrowings 30 XIX. Explanations on issuance of share certificates 30 XX. Explanations on avalized drafts and acceptances 30 XXI. Explanations on government grants 30 XXII. Profit reserves and profit distribution 30 XXIII. Earnings per share 30 XXIV. Related parties 31 XXV. Explanations on operating segments 31 XXVI. Explanations on other matters 31 XXVII. Explanations on legal mergers under common control 31 SECTION FOUR Financial Position and Risk Management I. Explanations on consolidated own funds 33 II. Explanations on consolidated credit risk 40 III. Explanations on the strategies and policies of the risk management system 48 IV. Explanations on consolidated currency risk 66 V. Explanations on consolidated interest rate risk 69 VI. Explanation on share certificates position risk from banking book 71 VII. Explanations on consolidated liquidity risk and consolidated liquidity coverage ratio 72 VIII. Explanations on consolidated leverage ratio 77 IX. Explanations on the presentation of financial assets and liabilities at fair values 78 X. Explanations on hedge accounting 83 XI. Explanations on the activities carried out on behalf of others and fiduciary transactions 83 XII. Explanations on operating segments 83 SECTION FIVE Explanations and notes related to consolidated financial statements I. Explanations and notes related to consolidated assets 86 II. Explanations and notes related to consolidated liabilities 105 III. Explanations and notes related to consolidated off-balance sheet accounts 113 IV. Explanations and notes related to consolidated income statement 117 V. Explanations and notes related to consolidated statement of changes in shareholders equity 122 VI. Explanations and notes related to consolidated statement of cash flows 123 VII. Explanations and notes related to Group s merger, transfers and companies acquired by Bank 124 VIII. Explanations and notes related to Group s risk group 124 IX Explanations and notes related to the domestic, foreign, off-shore branches or associates and foreign representatives of the Bank 126 X. Explanations and notes related to subsequent events 126 SECTION SIX Other Explanations and Notes I. Other explanations on Group s operations 128 SECTION SEVEN Explanations on the independent auditor s report I. Explanations on independent auditor s report 128 II. Explanations and notes prepared by independent auditor 128 Notes to consolidated financial statements as of December 31, 2016 Section One General Information I. History of the Parent Bank including its incorporation date, initial legal status and amendments to legal status, if any: ( the Bank, Yapı Kredi or the Parent Bank ), was established and started operations on September 9, 1944 with the permission of the Council of Ministers No. 3/6710 as a private capital commercial bank authorised to perform all banking, economic, financial and commercial activities which are allowed by the laws of the Turkish Republic. The statute of the Bank has not changed since its incorporation. II. Explanation about the Parent Bank s capital structure, shareholders holding directly or indirectly, collectively or individually, the management and controlling power and changes in current year, if any and explanations on the controlling Group of the Bank: The Parent Bank s publicly traded shares are traded on the Borsa Istanbul ( BIST ) since 1987 and the representatives of these shares, Global Depository Receipts, are quoted at the London Stock Exchange. As of December 31, 2016, 18,20% of the shares of the Bank are publicly traded (December 31, 2015, - 18,20%). The remaining 81,80% is owned by Koç Finansal Hizmetler A.Ş. ( KFS ), a joint venture of UniCredit ( UCG ) and Koç Group. KFS was established on March 16, 2001 to combine Koç Group finance companies under one organisation and it became the main shareholder of Koçbank in On October 22, 2002, Koç Group established a strategic partnership with UCG over KFS. In 2005, the Bank s shares that were owned by Çukurova Group Companies and the Saving Deposits Insurance Fund ( SDIF ) were purchased by Koçbank. In 2006, Koçbank purchased additional shares of the Bank from BIST and an investment fund and, during the same year, all rights, receivables, debts and liabilities of Koçbank were transferred to the Bank pursuant the merger of the two banks. In 2006 and 2007, with the acquisition of Yapı Kredi and its subsidiaries, KFS Group launched structural reorganisation and the following subsidiaries is still under the control of group were legally merged: Merging entities Merger date Merged entity Yapı Kredi Koçbank October 2, 2006 Yapı Kredi Yapı Kredi Finansal Kiralama A.O.( Yapı Kredi Leasing ) Koç Leasing December 25, 2006 Yapı Kredi Leasing Yapı Kredi Faktoring A.Ş. ( Yapı Kredi Faktoring ) Koç Faktoring December 29, 2006 Yapı Kredi Faktoring Yapı Kredi Portföy Yönetimi A.Ş. ( Yapı Kredi Portföy ) Koç Portföy December 29, 2006 Yapı Kredi Portföy Yapı Kredi Yatırım Menkul Değerler A.Ş.( Yapı Kredi Menkul ) Koç Yatırım January 12, 2007 Yapı Kredi Menkul Yapı Kredi Bank Nederland N.V. ( Yapı Kredi NV ) Koçbank Nederland N.V. July 2, 2007 Yapı Kredi NV After the merger and the share transfer procedures in 2007 and of a capital increase by TL 920 million in 2008, KFS owns 81,80% of the shares of the Bank Notes to consolidated financial statements as of December 31, 2016 (continued) General information (continued) III. Explanations regarding the board of directors, members of the audit committee, Chief Executive Officer and executive vice presidents, and their areas of responsibility and shares if any: As of December 31, 2016, the Parent Bank s Board of Directors, Members of the Audit Committee, General Manager and Assistant General Managers are as follows: Board of Directors Members: Name Responsibility Y. Ali KOÇ Chairman Carlo VIVALDI Vice Chairman H. Faik AÇIKALIN Chief Executive Officer Niccolò UBERTALLI Deputy General Manager Adil Giray ÖZTOPRAK Independent Member Ahmet Fadıl ASHABOĞLU Member A. Ümit TAFTALI Member F. Füsun Akkal BOZOK Member Gianfranco BISAGNI Member Giovanna VILLA Independent Member Giuseppe SCOGNAMIGLIO Member Levent ÇAKIROĞLU Member Mirko D. G. BIANCHI Member Wolfgang SCHILK Independent Member Audit Committee Members: Name Wolfgang SCHILK Adil Giray ÖZTOPRAK Giovanna VILLA Responsibility Chairman Member Member General Manager and Deputy General Manager: Name Responsibility H. Faik AÇIKALIN Chief Executive Officer Niccolò UBERTALLI Deputy General Manager - 2 - Notes to consolidated financial statements as of December 31, 2016 (continued) General information (continued) Assistant General Managers: Name Akif Cahit ERDOĞAN Cemal Aybars SANAL Demir KARAASLAN Feza TAN Massimo FRANCESE Mehmet Erkan ÖZDEMİR Mehmet Gökmen UÇAR Mehmet Murat ERMERT Mert ÖNCÜ Mert YAZICIOĞLU Nurgün EYÜBOĞLU Patrick Josef SCHMITT Stefano PERAZZINI (1) Yakup DOĞAN Zeynep Nazan SOMER ÖZELGİN Responsibility Information Technologies and Operation Management Legal Activities Management Retail Credits Management Corporate and Commercial Banking Management Financial Planning and Administration Management Compliance and Internal Control / Consumer Relations Coordination Officer Human Resources and Organization Management Corporate Communication Management Treasury Management Private Banking and Asset Management Corporate and Commercial Credit Management Risk Management Internal Audit / Chief Audit Executive Alternative Distribution Channels Retail Banking Management (1) Based on the Board resolution dated 21 December 2016, Giovanni Battista Avanzi was appointed as Assistant General Manager in charge of Internal Audit as of 2 January 2017, replacing Stefano Perazzini who took another position within the UniCredit Group. IV. Information on the individual and corporate shareholders having control shares of the Parent Bank: Name/Commercial title Share amounts (nominal) Share percentage Paid-in capital (nominal) Unpaid portion Koç Finansal Hizmetler A.Ş ,07 %81, ,07 - Koç Finansal Hizmetler A.Ş. is a joint venture of Koç Group, UniCredit Group and Temel Ticaret ve Yatırım A.Ş. V. Summary information on the Parent Bank s activities and service types: The Parent Bank s activities summarized in the article 3 of the articles of association are as follows: The Paren
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