Analyst & Investor Day

Analyst & Investor Day

Strategy - Outlook for 2015 and Beyond

1

Mr. Ergün Yorulmaz

Deputy Chief Executive

32 years at İşbank

Legal Counsellorship, Financial Analysis,

Commercial and Corporate Loans and Retail Loans Monitoring and Recovery Management

Mr. Yılmaz Ertürk

Deputy Chief Executive

28 years at İşbank Economic Research,

International Financial Institutions Mr. İlhami Koç

Deputy Chief Executive

29 years at İşbank

Equity Participations, Capital Markets,

Cross Border Banking and Foreign Branches Ms. Senar Akkuş

Deputy Chief Executive

24 years at İşbank Treasury Management,

Corporate Communications Management

Mr. Rıza İhsan Kutlusoy

Deputy Chief Executive

27 years at İşbank

Human Resources, Enterprise Architecture,

Strategy and Corporate Performance Management and Talent Management

Mr. Yalçın Sezen

Deputy Chief Executive

28 years at İşbank

Consumer Loans, Card Payment Systems, Retail Banking Marketing, Sales and Product

Management, Private Banking Marketing and Sales Management

Mr. Ertuğrul Bozgedik

Deputy Chief Executive

29 years at İşbank

Corporate Loans, SME Loans, Commercial Loans and Consumer Loans Underwriting, Loan Portfolio Management

Mr. Levent Korba

Deputy Chief Executive

29 years at İşbank

Operations, Support Services and Purchasing, Foreign Trade and Commercial Loan Operations, Internal Operations Management, Construction and Real Estate Management, Branch Network Development

Mr. Hakan Aran

Deputy Chief Executive

25 years at İşbank Digital Banking,

Information Technologies and Data Management Mr. Suat İnce

Deputy Chief Executive

28 years at İşbank

Corporate, Commercial and SME & Micro

Business Banking Marketing, Sales and Product Management, Free Zone Branches

Mr. Mahmut Magemizoğlu

Deputy Chief Executive 32 years at İşbank

Financial Management, Investor Relations, Managerial Reporting and Internal Accounting Mr. Adnan Bali

Director and Chief Executive Officer

29 years at İşbank

2

GDP and Loan Growth (%) CPI and Interest Rates (%)

Changing Environment - Evolving Trends

• Transformation from a high to a more balanced and sustainable economic growth cycle • Improved CAD/GDP ratio from high single digit levels to 5%

• Continued prudent fiscal stance

• Decreasing inflation and interest rates

• More stable and predictable operating environment for banks • Reasonable loan growth

2009 2010 2011 2012 2013 2014 2015F 2016F 2017F 6.9 9.2 _8.8 2.1 4.1 3.0 -4.8 33.9 29.9 16.4 31.8 18.5 _{16.0 16.0 17.0} 2009 2010 2011 2012 2013 2014F 3.5 4.0 4.5 2015F 2016F 2017F Real GDP Growth Loan Growth CPI Interest Rate*

(*) Annual compounded yield in Turkish treasury auctions

Source: CBRT, Turkstat, Treasury, BRSA (F) İşbank Forecasts

6.5 _6.4 10.4 6.2 7.4 8.2 7.0 6.3 _6.0 13.6 8.7 8.4 9.6 _6.9 10.3 _{8.0 7.4 7.2}

Annual Growth (%) - Banking Sector

3

Our Core Strengths

Leadership In Local Market

• Leader among private banks • Large ATM and branch network • Strong and trusted brand

• Large customer base with sustained loyalty

Diversified Earnings Focus

• Leader in customer reach and convenience • Strong organic growth

• Serving a well-segmented, wide customer base • Expansion in the region

Stable & Diversified Funding Base

• Large deposit funding

• Significant share of demand deposits

• Large amount of small - size retail deposits • International fund raising capability based on

relationship and financial strength

Enhanced Risk Discipline

• Diversified loan portfolio • Prudent risk management

• Effective alignment of craftsmanship and technology

High Quality Services

• Strong customer focus

• Efficient multiple distribution channels

• Effective leverage of customer digital foot print

• Adaptation of technology and embracing innovation

Strong Corporate Culture

• Reliable employer - Loyal employees • Business ethics

• Social responsibility • Trust and reputation

4

Strategic Approach - 2012 and Onwards...

Sustainable & Profitable Growth

5

6

Well-Balanced, Selective and Prioritized Growth

Strong core

deposit base Diversified loan portfolio

Commercial SME & Micro Business Affluent Mass Affluent Retail Commercial Private Corporate Mass Corporate High Net worth

Wide Product Portfolio

• Banking Services • Capital Markets • Treasury

• International Banking • Financial Subsidiaries

Well Segmented Customer Base(1)

Non-Retail Loan Growth Total Loan Growth

SME Growth Micro Growth

(Micro + SME) / Non-Retail Retail Loan Growth

GPL Growth

(including overdraft acc.)

2013 2014 2015E 26.4% 26.4% 20.4% 51.8% 22.3% 26.2% 32.6% 17.2% 15.2% 21.4% 17% - 18% 54.3% _~50% 24.9% 10.2% 22.8% 16% - 17% 16% - 17% 17% - 18% >18% ~27.7% 0.2% 34.0% 41.7% 24.1% 14.4% 15.6% 21.9% 48.1% Private Corporate Commercial Retail Share in Loans 2014 Share in Deposits

7

Transformation of Asset Structure for Profitable Growth

The largest asset base - #1 with 12.6% market share in 2014(3), TL 18.9 billion higher than the closest peer(4) • Successfully transformed asset mix – Loans/Total Assets 65%

• Effective risk management – 64 bps gross CoR

• Proactive management of securities portfolio – Sustained strong liquidity for sustainable and profitable growth with

loan growth stronger than peer average - CAGR 26.3%

Sustainable and profitable growth: • Relatively higher growth

• Relatively lower NPL

Asset Composition Loan Growth (TL bn)

2009 2010 2011 2012 2013 2014 7.4% 7.9% 6.9% 7.6% 6.8% 6.6% 42.7% 48.7% 56.7% 60.8% 64.1% 65.3% 34.7% 34.5% 26.5% 21.7% 17.5% 17.2% 15.2% 8.9% 9.9% 9.9% 11.7% 10.9% Liquid Assets(1) Securities Loans Other Assets 3.1% 2009 2010 2011 2012 2013 2014 Loans

Gross Cost of Risk(2)

Peer Average CA GR: 24.8% İşbank CAGR: 26.3% 48.3 64.2 91.6 106.7 134.8 155.3 1.4% _0.8% 0.6% 0.7% 0.6%

(1) Liquid assets include cash, Central Bank and banks items. (2) Specific Provisions / Average Loans

8

Sustained Superior Asset Quality

Gross Cost of Risk(2) Gross NPL Formation Rate(1)

2009 2010 2011 2012 2013 2014 Peer Average İşbank 1.1% 0.9% 0.6% 1.2% 2.7% 3.1% 1.4% 0.8% 0.6% 0.7% 0.6% 2009 2010 2011 2012 2013 2014 Peer Average İşbank 1.7% 1.8% 2.0% 1.5% 2.3% 4.8% 4.2% 1.8% 1.2% _1.2% 1.3% _1.2% Collection Rate(3)

(1) Gross NPL Formation / Average Loans (2) Specific Provisions / Average Loans

(3) Collections / (Prior period ending balance NPL + Additions) (4) (Specific Provisions - Released Provisions) / Average Loans

2009 2010 2011 2012 2013 2014 23.5% 28.5% 33.3% 24.3% 31.3% 28.8% 30.1% 30.0% 25.4% 20.0% _18.9% 16.5% İşbank Peer Average

• Significantly lower NPL generation compared to peer average • 47 bps lower gross NPL formation rate in 2014

• 157 bps better in group II loans/total loans

• Provisioning policy in line with the BRSA regulation and signficantly lower gross CoR compared to peer average – 50 bps

• Well-designed, well-managed collection system, effectively decreasing Net CoR (29 bps in 2014)(4)...

• …which differentiates İşbank from its peers in NPL, contributing to lower NPLs: • İşbank 1.5%

• Closest peer 1.8% • Peer average 2.6%

1.1%

9

Decision Support Systems

Decision Support System Segment / Product

Rating

Corporate & Commercial Behavioral Scorecard SME & Micro Application Scorecard

SME & Micro Behavioral Scorecard Agri-business Application Scorecard

Retail Application & Behavioral Scorecard

Corporate, Commercial Corporate, Commercial SME, Micro SME, Micro Agri-business Mortgage, GPL,

Credit Card, Car Loan, Overdraft

Decision

Support

Systems

NPL Ratios by Loan Categories (2014)

Share of Group II Loans in Total Loans

2009 2010 2011 2012 2013 2014 4.8% 2.8% 2.1% 3.1% 3.3% 2.8% 4.5% 2.2% 1.6% 1.8% 1.5% 1.7% Peer Average İşbank İşbank Sector Total Loans Corp.&Comm. SME(1) Credit Cards Consumer 1.5% 0.8% 1.9% 4.0% 1.6% 2.8% 2.1% 3.1% 2.5% 6.2%

10

Proactive Funding Management - Deposits

TL Demand Deposits / TL Deposits(1)

Deposits Covered by SDIF Guarantee / Total Deposits(4)

2009 2010 2011 2012 2013 2014 Peer Average İşbank 13.6% 14.3% 14.7% 15.4% 17.9% 17.0% 15.2% 15.7% 16.8% 17.6% 22.0% 22.5%

• 10.4% growth in total deposits in 2014

• Continued focus on proactive management of the high-end of the

deposit base - Opportunistic utilization of alternative funding sources • … and sustained leadership – 12.7% market share in 2014(2)

• High and stable share of TL demand deposits – 22.5% in TL(1) deposits, significantly supporting the funding cost - ~170 bps in 2014(3)

• Highest share of retail deposits covered by SDIF guarantee in total deposits reflects wider spread of the deposit base – 548 bps above the closest peer • 2015 total deposits growth target - 16%-17%

2009 2010 2011 2012 2013 2014 Peer Average İşbank 23.1% 20.9% 18.7% _18.1% 21.7% 21.5% 28.2% 26.1% 24.7% 24.3% 30.4% 30.0%

Composition of Total Funding (TL bn)

2009 2010 2011 2012 2013 2014 2014 16 29 18 21 20 134 Deposits_56.2% Non-Deposits 63.7%

(1) Excluding interbank deposits.

(2) Among private banks. Market share calculation is based on weekly BRSA data. (3) MIS data

11

Proactive Funding Management – Non-Deposit Funding

• Effective funding base management by tapping different segments of the market for increasing cost optimization and maturity management: Share of Funds Borrowed + Securities Issued:

8.6% - 2009 17.3% - 2014 • Regular borrower in syndication and securitisation markets

• Increased cooperation with supranational financial institutions

• Securities Issued in TL and FX (inc. subordinated debt) as a new source of funding with leadership in the market

1 year

Syndication Securitisation Bilateral Loans Eurobonds - PublicOffering Eurobonds - PrivatePlacements Subordinated DebtIssuance 10 years

5 - 14 years 6 months - 15 years 5 - 7 years 3 months - 5 years

Evolution of Non-Deposit FX Funding Base (USD mn) Composition of Non-Deposit Funding (TL bn)

Subordinated Debt Issuance

Eurobonds - Public Offering

Securitisation

Eurobonds - Private Placements

Bilateral Loans Syndication 2009 2014 4,932 1,440 2,145 1,347 14,110 1,400 1,267 3,750 4,171 1,068 2,454 Funds Borrowed Shareholders’ Equity Securities Issued (Inc. Subdebt)

REPOs & Money Market

12

Outcomes of Our Strategy - 2012 and Onwards

• Highest reported net profit

• Highest CAR

• Lowest NPL

For the first time,

achieved at the same time*

13

Securities Portfolio

• Liquid securities portfolio managed proactively to benefit from changing interest rate environment. • Securities portfolio contribution to interest revenue TL 3,346 mn in 2014

• 20.8% of total interest revenue • Interest income from CPI linkers

• 2013: TL 1,334 mn • 2014: TL 1,249 mn

• Proactively increased share of TL fixed rate securities based on interest rate environment

Yield of Securities(1) 2012 2013 2014 FX TL 4.36% 4.49% 4.58% 11.22% 10.02% 10.03% Breakdown of Securities (TL mn) 2009 2013 2014 FX

TL Floating (excl. CPI Linkers)

14

Spread & Margin

(1) MIS data

2014

• Higher interest rates led to slight tightening in TL loan-deposit spread - 40 bps. • FX loan-deposit spread continued to support profitability by widening 15 bps. • Sustained yield of securities porfolio

• Resulting in slight contraction in NIM - 19 bps

Outlook for 2015

• Sustained NIM with continued focus on funding cost management and effective asset pricing

15

Fee & Commission Income

Gross F&C Income Compositon (TL mn) Components of Net F&C Income Growth

2009 2014 Lending Credit Cards Account Keeping Mutual Funds Fund Transfer Other 11.9% 14.7% 6.3% 9.2% 45.6% 7.0% 17.2% 7.6% 3.3% 38.9% 20.0% 18.3% 1,355 2,335

• Impact of retail-targeted new regulations and base effect of refinancing fees limited the growth of F&C income.

• Adjusted for refinancing fees, other F&C income growth was 6.6% in 2014

• Foreign trade transactions with more than 230 countries with 50 bps increase in market share in 2014 • Gross F&C income from digital channels has reached 13.6% of the total.

• Continued focus on growing F&C revenues 2015E 7% - 8%

16

Operational Efficiency

(1) Adjusted for non-recurring and other expense items.

• Average employee per branch brought down significantly, which is now close to peer average.

• Continuous effort to increase per employee loan and deposit volumes • migrating operations from branches to Op. Center

• increasing customer focus in branches

• Slight decline in cost-to-assets ratio in 2014, slightly increased C/I ratio driven mainly by • IT related and other operational expenses

• limited growth in F&C and decline in trading income • Focus on efficiency and cost-saving measures will continue

with an outlook of driving C/I ratio below 45% in 2015.

Employees per Branch Loans and Deposits per Employee (2014)

2009 2010 2011 2012 2013 2014 Peer Average İşbank 18.4 17.6 17.1 17.1 17.3 17.6 20.6 21.0 20.7 19.5 18.4 17.9

Cost / Income and Cost / Av. Assets

Cost/Income(1) Cost/Average Assests(1) 2012 2013 2014 2012 2013 2014 2.4% 2.4% _2.3% 44.6% 46.2% 41.2%

Deposits per employee

Loans per employee

17

Strong growth in usage of digital channels:

80.7%

Mobile banking transactions;(2) 1 in every 2 investment transactions

1 in every 3 bill payments

1 in every 4 financial transactions

Digital banking 2014;

1.8

2.2

Distribution Channels

(1) Only the transactions which can be carried through both branches and non-branch channels are taken into account. (2) Based on internet and mobile banking statistics of the Banks Association of Turkey.

Digital banking; Mobile banking Internet banking

• ATM: the largest network with 6,290 ATMs • More than 130 services

• POS: more than 380K

Transformation,

innovation and strong growth

Optimization

Cost Management

Number of Mobile Customers Number of Internet Customers Number of ATM Customers

Share of Non-Branch Channels(1)

80.7% 61.2% 2009 2014 102 1,452 1,280 2,220 6,316 8,160 2011 2012 2013 2014 Mobile Bankamatik (ATM) Internet Branch Branch Telephone Branch 25.2% _{22.4% 19.5% 19.3%} 30.3% _32.0% 31.1% 28.8% 4.7% _5.1% 4.4% _3.7% 37.6% _36.1% 35.7% 29.1% 2.2% _{4.3% 9.4%} 19.0%

18

Participations – Shift in Mix with a Strategic Focus

(1) Ratios are calculated using book value.

(2) Mark-to-market gains are excluded from the book value of participations. (3) Including companies booked under available for sale securities porfolio.

Shift in Mix - Focus on Financial Sector(1) Portfolio Sales (2000-2014)

Dividend Income / Book Value of Participations(2)

2014 2000 19% 44% 29% 14% 28% 6% 17% 13% 8% 10% 42% 42% 8% 10% 6% 18% Banks Financial Institutions Telecom Insurance Glass Other • Strategic Outlook :

• Divestiture of other non-core, non-strategic companies • Sustain policy of enhancing the alignment and return

of the financial sector investments

• Ensuring a stable and satisfactory dividend revenue • Continue to unlock and communicate value through

restructuring within glass group

81 15% 70% 25 4% 33% No of Participations(3) 2000 2014 Participations / Total Assets Participations / Shareholders’ Equity Revenue USD 1,816 mn Profit USD 609 mn

Cash Dividend USD 759 mn Bonus Shares USD 1,852 mn

19

Strong Value Creation

• Strong value creation, highest among peers: 20%+ adjusted average equity growth for the last 5 years

• Highest dividend distribution among peers • Highest CAR among peers

Dividends Distributed to Shareholders (TL mn) Equity Growth – Dividends Reinvested at ROE (TL mn)

CAR & Tier I Ratio

2009 2010 2011 2012 2013 2014 CAGR: 20.1% 633 17,014 13,494 1,499 17,921 29,311 4,469 23,579 3,413 22,719 2,356 33,780 26,992 25,075 19,420 17,647 13,494 Shareholders’ Equity Cash Dividens Reinvested at ROE 2009 2010 2011 2012 2013 2014 18.3% _17.5% 14.1% 16.3% 14.4% 16.0% 17.0% 15.7% 13.0% 13.0% 11.6% 13.6% CAR Tier I Ratio Peer Average Payout Ratio

İşbank Payout Ratio

20

Outlook 2015 and Strategic Priorities Going Forward

Strategic Priorities

İşbank 2015 Expectations

• Sustained performance in superior asset quality

• Improving margin

• Focus on fee growth

• Effective cost management

• Capital Adequacy Ratio

• Net Interest Margin

• Net Fees & Commissions Growth

• OPEX Growth

• Return on Average Assets

• Net Branch Additions

16% - 17%

17% - 18%

16% - 17%

16% - 17%

~17%

+ 20 - 30 bps

85 - 95 bps

• Loan Growth

• Retail Loans

• Other Loans

• Deposit Growth

• Share of Securities in Total Assets

• NPL Ratio

• Gross Cost of Risk(1)

>15%

3.7% - 3.9%

7% - 8%

4% - 5%

1.4% - 1.6%

40 - 45

NPL %

NIM

Fees & Commissions / Total Banking Income

Cost/Income

2017

21

Appendix

Private Banking Business Unit

Assets Under Management (AUM) + Funds Under Management (FUM) ≥ 1 million TL or Maximum of the last 12 months' month-end balance + credit balance ≥ 1 million TL

Retail Banking Business Unit

Affluent

100,000 TL ≤ AUM or 200,000 TL ≤ AUM + FUM

Mass Affluent

40,000 TL ≤ AUM < 100,000 TL or 80,000 TL ≤ AUM + FUM < 200,000 TL

Mass

AUM < 40,000 TL and AUM + FUM < 80,000 TL

Corporate Banking Business Unit

Turnover ≥ 30 million USD or Credit Limit ≥ 10 million USD Alternative Criteria: AUM ≥ 12 million USD

Commercial Banking Business Unit

5 million USD ≤ Turnover < 30 million USD or 1 million USD ≤ Credit Limit < 10 million USD or 6,5 million USD ≤ Total Banking Industry Risk Alternative Criteria:

1 million USD ≤ AUM < 12 million USD

Small and Medium Size Enterprises

1 million USD ≤ Turnover < 5 million USD or 60,000 USD ≤ Credit Limit < 1 million USD or

400,000 USD ≤ Total Banking Industry Risk≤ 6,5 million USD

Alternative Criteria:

300,000 USD ≤ AUM < 1 million USD

Micro Business

Turnover < 1 million USD and Credit Limit < 60,000 USD

22

Disclaimer