Annual Report 2022 The strength to progress on the path to success under challenging conditions
Contents Part One: General Information 10 Performance of A&T Bank in 2022 11 2022 Highlights 12 About A&T Bank 14 Annual Report Compliance Opinion 15 Shareholding Structure and Paid-In Capital 15 Amendments to the Articles of Association 16 Financial Indicators 18 Assessment of Financial Strength, Profitability and Debt Repayment Capacity 20 Summary Financial Highlights for the Past Five Years 20 Ratings of the Bank 21 Research and Development Implementations for New Services and Activities 22 Vision, Mission and Values 24 Milestones 26 Message from the Chairman 30 Message from the General Manager 34 2022 Performance of the Global Economy and Türkiye’s Economy 36 Turkish Banking Industry in 2022 38 A&T Bank in the Turkish Banking Industry 40 Operations in 2022 42 Treasury 44 Financial Institutions 46 Sales, Marketing and Digital Banking 48 Credits 50 Information Technologies Management 52 Operations 54 Human Resources Management 56 Support Departments and Units 60 Subsidiary: A&T Finansal Kiralama A.Ş. Part Two: Management and Corporate Governance Practices 62 Board of Directors Report Submitted to the General Assembly 64 Board of Directors 68 Senior Management 69 Group Managers 70 Managers in Charge of Internal Systems Departments 71 Report of the Audit Committee on the Internal Systems of the Bank 73 Risk Management Policies 74 Relations with the Bank’s Risk Group 75 Committees 77 Individuals and Institutions Offering Support Services 78 Other Regulatory Explanations Part Three: Unconsolidated Financial Information 83 Independent Audit Report 90 Unconsolidated Financial Report Part Four: Consolidated Financial Information 205 Independent Audit Report 212 Consolidated Financial Report Addresses
We left behind a year in which the world’s agenda went through rapid changes, negative developments affecting life and economies were frequently encountered, and the banking sector got affected from all these developments. In 2022, in which we faced difficult conditions, we continued to move forward on our route to success with our strength, accurate predictions and experience. Thanks to our changing organization, transformation initiatives and the efforts of our determined staff, we have increased our maneuverability and strength, and this allowed us to continue our way in reaching locations where others cannot, and opening new trade routes. We keep moving forward under challenging conditions Icebreakers Icebreakers have thicker and more durable bodies when compared to those of ordinary ships and they are used for reaching difficult areas and for road opening. These ships are equipped with machines that provide great power even at low speed, and have one or two extra propellers on both sides of the foreship in addition to the propellers that push the ship forward. These features allow these ships to break through thick layers of ice with string maneuverability.
Continuing to move forward in adverse geopolitical conditions on a global scale requires an impulse constituted with durable structure, experience and goals. Emerging stronger from every crisis, as A&T Bank, we overcome difficulties with our human resources, correspondent network and strong financial structure, and we take a leading role in trade transactions. What matters is moving forward even under challenging conditions TL 11.4 billion Total assets
Every adverse condition uncovers various opportunities. Even though adverse conditions are experienced around the world, the appeal of our operating region, North Africa, continues to increase. The year-on-year real-term increase in Türkiye’s exports to this region in 2022 demonstrates this appeal. We share the excitement of our customers regarding the investments they have made in this region, and we are proud of the satisfactory results. Sailing towards safe harbours USD 615 million A&T Bank 2022 Foreign Trade Volume
A&T Bank customers know that their bank will help them to reach their goals under all conditions. We have built this trust by fulfilling our promises for nearly half a century. We are able to shorten the service processes with our digital infrastructure investments and stand by our customers no matter where they are. We support our customers during their journey to success with our cash and non-cash loan volume, which we have made sure to grow in a healthy way. A companionship that is based on trust TL 11.2 billion Total Loan Volume (cash + non-cash)
As A&T Bank, we deliver a determined performance with our experienced and expert staff, and make a difference in our products and services. With the continuous progress goal, we update our organizational structure according to time and conditions, strengthen our correspondent bank network, and bring our attention and care to different geographies. A day and night journey TL 213.5 million Net profit
Part One: General Information 10 Performance of A&T Bank in 2022 A&T Bank’s total assets grew 316% over the past 10 years and reached TL 11.4 billion. Total Assets Türkiye-Libya Total Trade Volume (2022) 316% increase in total assets over the past 10 years First choice of Turkish entrepreneurs in target markets with strong potential, particularly in North Africa TL 11.4 billion USD 3.6 billion Non-Cash Loans A bank specialized in non-cash loans with tailored solutions for clients’ financing needs TL 7.8 billion Net Profit Capital Adequacy Equity Size Profitability-based growth Capital adequacy at the banking industry average level Strong equity structure and a business model focused on sustainable profitability TL 213.5 million 21.45% TL 1,833 million
Annual Report 2022 11 2022 Highlights “Currency Conversion Protected TL Time Deposit Account”, “Yuvam TL Time Deposits Account”, “Currency Protected TL Time Deposit Account” products were developed. Debit card efforts reached the final stage The Debit Card product, which was conceived based on customer needs, is projected to go live in the first quarter of 2023. Operations Group was established All banking operations continued to be performed in accordance with “service excellence” approach. Ongoing improvements in digital channels Existing features were improved while new solutions were added in all digital channels, particularly in Mobile Banking which was rolled out last year, in an effort to enhance the customer experience. New deposit products were launched “Currency Conversion Protected TL Time Deposit Account”, “Yuvam TL Time Deposit Account”, “Currency Protected TL Time Deposit Account” products were developed in order to attract customer savings.
Part One: General Information 12 About A&T Bank A&T Bank operates with a total of seven branches in Istanbul, Ankara, Gaziantep, Kayseri and Konya. A&T Bank was founded in 1977 in accordance with the agreement between Libya and Türkiye regarding the establishment of a joint bank, which was signed in Tripoli, Libya on August 11, 1975, to foster trade between the two countries. The Bank is 62.37% Libyan-owned, 36.01% Turkish-owned and 1.62% Kuwaiti-owned. Libyan Foreign Bank, a fully-owned subsidiary of the Central Bank of Libya, represents the entirety of Libyan capital in A&T Bank. Türkiye İş Bankası A.Ş. and T.C. Ziraat Bankası A.Ş. hold 20.58% and 15.43% of the Bank’s paid-in capital, respectively. Kuwait Investment Company holds a share of 1.62%. A&T Bank, which is headquartered in Istanbul, operates with a total of seven branches in Istanbul (Main, Kozyatağı, and Güneşli), Ankara, Gaziantep, Kayseri, and Konya. As of the end of 2022, A&T Bank has 260 employees. A&T Bank enjoys a special position in the Turkish banking industry thanks to its robust financial structure and the Bank’s expertise in intermediating the trade between Türkiye and North African countries. The Bank plays an important role in helping boost Türkiye’s industry and trade. A&T Bank makes significant contributions to the country’s industrial sector and commerce, by financing trade to the target regions, securing funds from overseas, performing treasury transactions, extending corporate loans. In addition, the Bank’s subsidiary A&T Finansal Kiralama A.Ş.’s helps support Türkiye’s real economy. As a result of the steady growth built thanks to the banking relations, experience, and knowledge of its founders and personnel with the region for 45 years, A&T Bank has become an important player in this special region with its characteristics. With its mission of becoming a bridge of value between Türkiye and North Africa, the Bank will continue to add value to our country by supporting the real economy with quality information, expertise and effective financing, as it was in the past. 260 1977 employees year of establishment As of the end of 2022, A&T Bank has 260 employees. A&T Bank is a joint bank founded in 1977.
Annual Report 2022 13 A&T Bank enjoys a special position in the Turkish banking industry thanks to its expertise in intermediating the trade between Türkiye and North African countries.
Part One: General Information 14 Annual Report Compliance Opinion CONVENIENCE TRANSLATION INTO ENGLISH OF INDEPENDENT AUDITOR’S REPORT ON THE BOARD OF DIRECTORS’ ANNUAL REPORT ORIGINALLY ISSUED IN TURKISH To the Shareholders of Arap Türk Bankası Anonim Şirketi Opinion We have audited the annual report of Arap Türk Bankası Anonim Şirketi (the “Bank”) for the period between 1 January 2022 and 31 December 2022, since we have audited the complete set consolidated and unconsolidated financial statements for this period. In our opinion, the consolidated and unconsolidated financial information included in the annual report and the analysis of the Board of Directors by using the information included in the audited consolidated and unconsolidated financial statements regarding the position of the Bank are consistent, in all material respects, with the audited complete set of consolidated and unconsolidated financial statements and information obtained during the audit and provides a fair presentation. Basis for Opinion We conducted our audit in accordance with “Regulation on Independent Audit of the Banks” published in the Official Gazette No.29314 dated 2 April 2015 by Banking Regulation and Supervision Agency (“BRSA Auditing Regulation”) and Standards on Auditing which is a component of the Turkish Auditing Standards published by the Public Oversight Accounting and Auditing Standards Authority (“POA”) (“Standards on Auditing issued by POA”). Our responsibilities under those standards are further described in the Auditor ’s Responsibilities for the Annual Report section of our report. We declare that we are independent of the Bank in accordance with the Code of Ethics for Auditors issued by POA (including Independence Standards) (POA’s Code of Ethics) and the ethical requirements in the regulations issued by POA that are relevant to audit of financial statements, and we have fulfilled our other ethical responsibilities in accordance with the POA’s Code of Ethics and regulations. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Auditor’s Opinion on Complete Set of Consolidated and Unconsolidated Financial Statements We have expressed an unqualified opinion on the complete set of consolidated and unconsolidated financial statements of the Bank for the period between 1 January 2022 and 31 December 2022 on 23 February 2023. Board of Directors’ Responsibility for the Annual Report In accordance with the Articles 514 and 516 of the Turkish Commercial Code numbered 6102 (“TCC”) and Regulation on the Principles and Procedures Concerning the Preparation of and Publishing Annual Reports by the Bank (“Regulation”) published in the Official Gazette dated 1 November 2006 and Numbered 26333, the Bank’s management is responsible for the following regarding the annual report: a) The Bank’s management prepares its annual report within the first three months following the date of statement of financial position and submits it to the general assembly. b) The Bank’s management prepares its annual report in such a way that it reflects the operations of the year and the consolidated and unconsolidated financial position of the Bank accurately, completely, directly, true and fairly in all respects. In this report, the financial position is assessed in accordance with the Bank’s consolidated and unconsolidated financial statements. The annual report shall also clearly indicates the details about the Bank’s development and risks that might be encountered. The assessment of the Board of Directors on these matters is included in the report. c) The annual report also includes the matters below: - Significant events occurred in the Bank after the reporting period, - The Bank’s research and development activities. - Financial benefits such as wages, premiums and bonuses paid to board members and key management personnel, appropriations, travel, accommodation and representation expenses, benefits in cash and kind, insurance and similar guarantees. When preparing the annual report, the Board of Directors also considers the secondary legislation arrangements issued by the Ministry of Trade and related institutions. Auditor’s Responsibility for the Audit of the Annual Report Our objective is to express an opinion on whether the consolidated and unconsolidated financial information included in the annual report in accordance with the TCC and the Regulation, and analysis of the Board of Directors by using the information included in the audited consolidated and unconsolidated financial statements regarding the position of the Bank are consistent with the audited consolidated and unconsolidated financial statements of the Bank and the information obtained during the audit and give a true and fair view and form a report that includes this opinion. We conducted our audit in accordance with BRSA Auditing Regulation and Standards on Auditing issued by POA. Those standards require compliance with ethical requirements and planning of audit to obtain reasonable assurance on whether the consolidated and unconsolidated financial information included in the annual report and analysis of the Board of Directors by using the information included in the audited consolidated and unconsolidated financial statements regarding the position of the Bank are consistent with the consolidated and unconsolidated financial statements and the information obtained during the audit and provides a fair presentation.
Annual Report 2022 15 Shareholding Structure and Paid-In Capital Amendments to the Articles of Association A&T Bank’s paid-in capital is TL 440 million as of the end of 2022. Libyan Foreign Bank Türkiye İş Bankası A.Ş. T.C. Ziraat Bankası A.Ş. Kuwait Investment Company Insider Holdings 62.37% 20.58% 15.43% 1.62% There were no changes in the shareholding structure and paid-in capital of A&T Bank in 2022. No amendments were made to the Bank’s Articles of Association during the 2022 operating year. * Emek İnşaat ve İşletme A.Ş. has a 0.0000014% share of the paid-in capital with a value of TL 6.20. Neither the Chairman nor Members of the Board of Directors, the General Manager, or Assistant General Managers hold any shares in A&T Bank. Shareholders* Paid-in Capital (TL Thousand) Libyan Foreign Bank 274,426 Türkiye İş Bankası A.Ş. 90,534 T.C. Ziraat Bankası A.Ş. 67,900 Kuwait Investment Company 7,140 440,000
Part One: General Information 16 Financial Indicators A&T Bank’s capital adequacy standard ratio is 21.45%. Total Assets (TL Thousand) Total Guarantees and Suretyships (TL Thousand) Shareholders’ Equity (TL Thousand) Capital Adequacy (%) 2019 4,957,994 2019 4,068,221 2019 1,052,917 2019 21.53 2020 5,576,326 2020 4,341,516 2020 1,152,814 2020 27.64 2021 9,706,492 2021 6,392,159 2021 1,334,796 2021 25.63 2022 11,442,014 2022 7,828,900 2022 1,832,553 2022 21.45 17.9% growth 22.5% growth 37.3% growth
Annual Report 2022 17 A&T Bank’s total guarantees and suretyships rose 22.5% compared to the previous year and reached TL 7.8 billion in 2022.
Part One: General Information 18 Assessment of Financial Strength, Profitability and Debt Repayment Capacity Assets At the end of 2022, the Bank’s total assets increased by 17.9% compared to the previous year and amounted to TL 11,442 million. In the period examined, the major items of the Bank’s placements consist of net financial assets amounting to TL 4,181 million with 36.5% share, and net financial assets as measured by the amortized cost of TL 6,505 million with 56.9% share. In 2022, net financial assets decreased by TL 220 million, while net financial assets measured at amortized cost increased by TL 1,580 million. Change Total Assets (TL Thousand) 2021 Share (%) 2022 Share (%) Amount % Financial Assets (Net ) 4,400,878 45.3 4,180,691 36,5 -220.187 -5 Financial Assets Measured at Amortized Cost (Net) 4,925,417 50.7 6,505,059 56.9 1,579,642 32.1 Assets Held for Sale Purpose and Related to Discontinued Operations (Net) 1,000 0 1,000 0 0 0 Equity Investments 126,202 1.3 140,199 1.2 13,997 11.1 Tangible Assets (Net) 207,657 2.1 553,068 4.8 345,411 166.3 Intangible Assets (Net) 3,744 0 2,751 0 -993 -26.5 Deferred Tax Assets 8,673 0.1 0 0 -8,673 -100 Other Assets (Net) 32,921 0.3 59,246 0.5 26,325 80 Total Assets 9,706,492 100 11,442,014 100 1,735,522 17.9 Liabilities At the end of 2022, 16% and 84% of the Bank’s total liabilities comprise from shareholders’ equity and external resources, respectively. Deposits (TL 5,519 million) and funds borrowed (TL 3,761 million) comprise the majority of external resources. As of the end of 2022, funds borrowed decreased by TL 493 million, while deposits increased by TL 1,574 million, compared to the previous period. Similarly, shareholders’ equity increased by TL 498 million and reached TL 1,833 million. Change Liabilities (TL Thousand) 2021 Share (%) 2022 Share (%) Amount % Deposits 3,944,658 40.6 5,519,004 48.2 1,574,346 39.9 Funds Borrowed 4,254,364 43.8 3,761,038 32.9 -493,326 -11.6 Interbank Money Market 0 0 37,162 0.3 37,162 - Lease Liabilities (Net) 6,220 0.1 7,329 0.1 1,109 17.8 Provisions 81,044 0.8 138,151 1.2 57,107 70.5 Current Tax Liability 22,418 0.2 21,210 0.2 -1,208 -5.4 Deferred Tax Liability 0 0 34,971 0.3 34,971 - Shareholders’ Equity 1,334,796 13.8 1,832,553 16 497,757 37.3 Other Liabilities 62,992 0.6 90,596 0.8 27,604 43.8 Total Liabilities 9,706,492 100 11,442,014 100 1,735,522 17.9
Annual Report 2022 19 Off-Balance Sheet Items The Bank’s total off-balance sheet liabilities increased by 22.5% compared to the end of the previous year and reached TL 7,829 million at the end of 2022. Off-balance sheet liabilities consist almost entirely of guarantees and warranties. The balance of letters of guarantee, which is the most important off-balance sheet item, increased by 13.2% to TL 5,928 million in the period examined. Change Off-Balance Sheet Liabilities (TL Thousand) 2021 Share (%) 2022 Share (%) Amount % Guarantees and Warranties 6,392,159 100 7,828,900 100 1,436,741 22.5 Commitments 386 0 389 0 3 0.8 Derivative Financial Instruments 0 0 0 0 0 - Off-Balance Sheet Liabilities 6,392,545 100 7,829,289 100 1,436,744 22.5 Profitability In 2022 the Bank’s net interest income increased 45,3% to TL 482 million, and net fees and commissions income rose 55,9% to TL 106.4 million. Net operating profit increased 31.9% to TL 275.2 million while the Bank finished the 2022 operating year with a net term profit of TL 213.5 million. At end-2022, the Bank reported return on assets of 1.95% and return on equity of 15.83%. A&T Bank’s capital adequacy standard ratio, 21.45%, is above the minimum rate set out in the relevant legislation by virtue of the Bank’s strong capital structure, ability to tap external sources of funding and effective risk management implementation. Thus, the Bank is able to meet its liabilities by its liquidity. Change Income Statement (TL Thousand) 2021 2022 Amount % Interest Income 389,468 641,340 251,872 64.7 Interest Expense (-) 57,747 159,382 101,635 176 Net Interest Income 331,721 481,958 150,237 45.3 Net Fees and Commission Income 68,234 106,366 38,132 55.9 Dividend Income 10,039 14,060 4,021 40.1 Trading Income/Loss (Net) (+/-) 8,983 21,932 12,949 144.2 Other Operating Income 5,236 14,365 9,129 174.4 Gross Operating Income 424,213 638,681 214,468 50.6 Expected Credit Loss (-) 9,669 4,534 -5,135 -53.1 Other Provision Expenses (-) 21,959 18,570 -3,389 -15.4 Personnel Expense (-) 124,007 222,514 98,507 79.4 Other Operating Expenses (-) 59,900 117,871 57,971 96.8 Net Operating Income/Loss 208,678 275,192 66,514 31.9 Tax Provision (-) 48,342 61,700 13,358 27.6 Net Profit for the Period 160,336 213,492 53,156 33.2
Part One: General Information 20 Summary Financial Highlights for the Past Five Years Ratings of the Bank TL Thousand 2018 2019 2020 2021 2022 Total Assets 5,995,076 4,957,994 5,576,326 9,706,492 11,442,014 Marketable Securities Portfolio 873,415 822,059 1,945,144 3,465,268 4,565,176 Credits 2,000,092 1,730,243 1,724,581 2,661,837 3,404,852 Deposits 4,400,534 2,456,166 2,854,698 3,944,658 5,519,004 Funds Borrowed and Interbank Money Market 634,524 1,353,190 1,457,806 4,254,364 3,798,200 Shareholders’ Equity 866,788 1,052,917 1,152,814 1,334,796 1,832,553 Net Term Profit 100,978 166,427 96,575 160,336 213,492 Fitch Ratings, the international credit rating agency, reported in its rating report dated November 28, 2022 that, the Bank’s credit ratings are confirmed as follows: Rating Note FC Long Term FC BShort Term FC B TL Long Term TL BShort Term TL B Viability Rating bSupport Note ns National Long-Term National Note A-(tur) Outlook Long Term FC Negative Long Term TL Negative Long-Term National Note Fixed
Annual Report 2022 21 Research and Development Implementations for New Services and Activities In 2022, A&T Bank prioritized customer satisfaction and customer experience in its digital channels by investing in technology infrastructure while increasing the diversity of services and products rendered to customers by completing the development of banking solutions that are not yet offered by the Bank in 2022. The Bank carried out its efforts in 2022 with the goal of meeting customer needs both at the branches and through all digital channels in a simple and comprehensible manner, and addressing new demands shaped by changing market conditions. A number of improvements and developments made in the Mobile Banking channel, which was launched last year, in response to user demands and regulatory requirements led to an upgrade of the application that made it more user friendly. To this end, in an effort to render an enhanced digital experience to its customers, the Bank improved the existing features of its digital channels while also adding new solutions. The developments projects that were completed successfully during the operating period for a simpler, faster and more convenient customer experience include the capability to share the receipts of transactions performed on digital channels; switching to numeric passcodes for easier entry; commencement of operation of the new IVR system that provides recommended solutions to customers calling into the Digital Banking Support Line without connecting to a customer representative; and posting a video on visual and audio presentation of steps to access digital channels that also offers the sign language option for hearing impaired customers. In addition to these technological developments, A&T Bank also launched new banking products in 2022. “Currency Conversion Protected TL Time Deposit Account”, “Yuvam TL Time Deposit Account”, and “Currency Protected TL Time Deposit Account” were added to the Bank’s product lineup and rolled out for the benefit of the customers. After obtaining an operating license from the BRSA and becoming a member of the Interbank Card Center (BKM), A&T Bank acquired the capability to issue and market a Debit Card. After carrying out intensive efforts during the year, the Bank reached the final stage of this project in conjunction with related stakeholders. The Debit Card product that the Bank will roll out in early 2023 is aimed at enabling customers to perform their financial transactions from any corner of the world more easily, faster and more conveniently. Efforts are under way to integrate this new product to all digital banking processes through the self-service infrastructure. A&T Bank will continue to leverage the opportunities made possible by digital transformation in 2023 in an attempt to provide most fitting financial solutions for the banking needs of its customers, and to render the highest quality customer experience to them while providing these solutions.
To be the bank that is preferred most and does provide the best service in banking transactions between Türkiye and Africa & Middle East countries by ensuring sustainable and profitable growth in the domestic market. To be a bank that • always keeps internal and external customer satisfaction at the highest level thanks to the reliable and high-quality service, • close to customers and easy to work with, • operates by taking ethical values and social responsibility awareness into consideration, • open to innovation and improvements, • takes sustainable growth into basis without compromising effective risk management and, • distinctly and continuously increase the value it adds to its customers, employees, shareholders and the economy. Vision, Mission and Values Our Vision Our Mission Part One: General Information 22
Customer Oriented Our priority in all of our operations and efforts is the satisfaction of our customers. For this purpose, we always offer honest, respectful, solution-oriented and cheerful service. Satisfaction of Employees We value our employees and support their personal and professional development. We place emphasis on delegation and encourage our staff to take initiative. We believe that a fair performance management system is essential to increase efficiency. Openness to Change We always question the way we do business with our customers and business partners and carry on efforts to make our business more efficient and more dynamic. Considering our clients’ expectations and necessities, we invest in technology and strive for increasing our service quality. Reliability We establish confidence and loyalty among our customers, colleagues and business partners thanks to our experience, expertise and knowledge in banking services as well as our commitment to corporate values; whereas we keep our promises timely and completely without compromising prudence. Transparency As being A&T Bank employees, we clearly and in a timely manner share the required information with the related third parties on the basis of transparency principles and we ensure the availability of information. Meanwhile, we encourage all of our staff to share their thoughts in a constructive and open manner in accordance with accepted banking practices. Team Spirit We place emphasis on team spirit and believe that success can be achieved through cooperation, mutual trust and respect. Our Values Annual Report 2022 23
Part One: General Information 24 Milestones In 2022, efforts on the debit card project reached the final stage. 1975 The agreement to establish a joint bank between Libya and Türkiye was signed in Tripoli, Libya. 1977 Arab-Turkish Bank was founded within the framework of the 1975 agreement. 1980’ler A&T Bank became one of the first banks in Türkiye to perform international money-market transactions and foreign-exchange operations. It was also one of the few banks in the country to finance export transactions to North Africa and Middle East countries. 1997 The Bank’s subsidiary A&T Finansal Kiralama A.Ş. was established to carry out leasing operations. 2009 The Bank was restructured and reinvigorated, with new branches opening in Kayseri, Konya and Gaziantep in accordance with its strategy of leveraging and promoting closer ties between Turkish companies and their counterparts in the MENA Region. The new corporate name and rebranded identity were communicated to the public via a nationwide launch campaign. 2012 The Bank opened its seventh branch in Güneşli, Istanbul. Substantial progress was achieved in line with the target of sustainable and healthy growth. The Bank capped the year with a return on equity ratio of 16.58%, exceeding the industry average rate of 15.64%. 2014 A&T Bank’s Internet Branch became operational. At a time when the industry’s return on equity dropped to 12.23%, A&T Bank’s return on equity stood at 15.28%. 2000-2005 The Turkish economy faced the most destructive twin financial crises of its history at the beginning of the 2000s. The number of banks in Türkiye decreased from 79 to 48 in this period. Thanks to its strong capital structure, effective management and the full support of its main shareholder, A&T Bank was not affected by this severe financial turmoil. In addition, by using its ability to access external sources and injecting them into the financial system, the Bank continued to fulfill its duty of supporting the economy, thereby successfully emerging from this very difficult period, while extending its sustainable growth trajectory. 2008 The Bank unveiled a new strategic plan to reposition itself in the Turkish banking industry. The Bank’s paid-in capital increased 485.4%, from TL 41 million to TL 240 million.
Annual Report 2022 25 2019 A&T Bank maintained asset quality while implementing effective liquidity management in 2019. A&T Bank’s shareholders’ equity topped TL 1 billion while net profit reached a record TL 166.4 million during the year. The Bank also achieved a historic success story with a 19.16% return on equity, which is significantly higher than the industry average of 11.65%. 2020 In 2020, the fight against the Covid-19 pandemic was the top agenda item globally. A&T Bank took immediate measures to ensure the health and wellbeing of its customers and personnel as well as the continuity of its business processes and services. Thanks to its quick action, A&T Bank maintained all its operations without any interruption. Work on the Mobile Banking application was completed during the year. Despite the unprecedented market conditions and increased risks, A&T Bank closed the fiscal year 2020 with total assets of TL 5.6 billion and a net profit of TL 96.6 million. 2021 The global economy in 2021 was dominated by pandemic-driven economic conditions globally, while fluctuations in financial markets were in the headlines in Türkiye. In this environment, A&T Bank continued to use the opportunities brought about by digitalization in enhancing operational efficiency and service efficacy. Launching the Mobile Banking app in early 2021, the Bank rolled out the Electronic Letter of Guarantee project in the second quarter of the year. In addition, the Banking Regulation and Supervision Agency expanded the Bank’s operating license to allow the provision of “debit card” services in the last quarter of the year. From a financial performance perspective, maintaining its asset quality and successfully continuing its effective risk and liquidity management in 2021, the Bank finished the year with TL 160.3 million in net term profit and 13.94% return on equity. 2022 One of the most important agenda items of A&T Bank’s 2022 business plan was the debit card project, which will enable our retail customers to perform their financial transactions from every corner of the world, and is planned to go live in early 2023. Despite all challenging conditions and increasing risks, the Bank maintained asset quality while implementing effective risk and liquidity management in 2022, and finished the year with an asset size of TL 11.4 billion and a net term profit of TL 213.5 million.
Part One: General Information 26 Message from the Chairman Esteemed Stakeholders, All indicators point to the risk of a global economic recession. After entering 2022 under the lingering effects of the pandemic even though the worst was behind us, the global economy began to be tested in new ways after the Russia-Ukraine war broke out in February. Geopolitical developments from this war are expected to delay the post-coronavirus pandemic economic recovery significantly. At this point, energy and food security concerns reached worrisome levels while commodity prices make new multi-decade highs on a global scale. The course of the war points to the possibility that the conflict and the strategic moves between the sides may be long lasting. In financial markets, global risk perception changed. Supply side shocks, alongside tightening monetary and financial conditions driven by rising interest rates, led to noticeable economic slowdown in both developed and developing countries. Global recession fears are being voiced loudly as a result of the rising global inflation and war-driven energy crisis. In its most recent World Economic Outlook Report, the International Monetary Fund (IMF) stated that the deterioration in inflation indicators continued and highlighted the ongoing detrimental effects of geopolitical risks on economic activity. Within this frame, the IMF maintained its 2022 global growth forecast at 3.2% while lowering its 2023 global growth projection from 2.9% to 2.7%. Türkiye continues to positively diverge from the world economies in growth Türkiye, one of the most important hubs of the global trade network, grew 7.5% in the first quarter, and then by 7.7% and 3.9% in the second and third quarters, respectively, owing to the contributions from strong domestic demand and foreign trade. As a result, the gross domestic product growth of Türkiye’s economy reached 6.2% during the January-September period. Domestic inflation rate continued to climb throughout the year due to global inflationary pressures particularly in energy and food prices. In the period ahead, in addition to the efforts toward establishing price stability, geopolitical developments, the course of the current account balance, and actions of the central banks of developed countries will continue to determine the course of Türkiye’s economy. It is considered that the global recovery may be delayed due to increasing geopolitical risks. 6.2% Türkiye’s economy grew 6.2% during the first 9 months of 2022. 56% increase Total assets of the banking sector grew 56% in 2022.
Annual Report 2022 27 On the back of its unique business model and its strategies devised based on a long-term perspective, A&T Bank is advancing on a sustainable growth trajectory.
Part One: General Information 28 Message from the Chairman The banking industry continued to post strong financial results and support Türkiye’s economy in 2022 The Central Bank of Türkiye implemented new macro-prudential measures as of the second quarter in an attempt to support financial stability and strengthen the monetary transmission mechanism. The regulations and new sets of rules that were effectuated as part of the Liraization strategy led to major structural changes in the functioning of the banking industry. Due to the global conditions, domestic dynamics and new regulations, 2022 has been a challenging year in terms of asset quality and funding capability. Nevertheless, the Turkish banking industry demonstrated its robust structure and its capability to overcome all challenges once again during this trying year. Total assets of the sector grew 56% in 2022 compared to end-2021 while shareholders’ equity increased 97%. The sector ’s capital adequacy ratio of 19.5% affirms strong equity position of the industry. The sector posted its most impressive performance in profitability, as net profit jumped 366% over the previous year to TL 433 billion in 2022. The sector ’s total loans and deposits stand at TL 7,581 billion and TL 8,862 billion, respectively. A&T Bank’s undertakings in 2022 enhanced its capacity to create value for its stakeholders and for the national economy On the back of its unique business model and its strategies devised based on a longterm perspective, A&T Bank is advancing on a sustainable growth trajectory. In 2022 the Bank continued to make direct contribution to the country’s prosperity with its products and services that “address customer needs from a broad perspective, that are high value added, and that meet the needs of the real sector.” Continuing to expand its correspondent network in its target markets, particularly its traditional market of North Africa, A&T Bank maintained its role in growing the exports from Türkiye to these regions. Despite rising risks and uncertainties on the global scale, A&T Bank supported its new projects and ventures and its successful performance with profitability in 2022. Raising its total assets and shareholders’ equity to TL 11.4 billion and TL 1.8 billion, respectively, the Bank posted year-end profit of TL 213.5 million. A&T Bank supported its new projects and ventures and its successful performance with profitability in 2022. 1.8 433 TL billion TL billion A&T Bank raised its total shareholders’ equity to TL 1.8 billion. Banking sector’s net profit reached TL 433 billion as of the end of 2022.
Annual Report 2022 29 A&T Bank continues to combine its experience and knowhow with the power of technology. The Bank accelerated its digital transformation efforts during the 2022 operating period in an attempt to enhance both internal and external customer experience. A number of projects were carried out throughout the year to improve the Internet Banking channel as well as the Mobile Banking channel, which was launched last year to expand financial access. These projects enhanced the variety of digital solutions offered by these channels as well as customer convenience and ease of use, which in turn improved our capability to communicate with our clients. Efforts to launch a debit card constituted yet another agenda item in our business plan for 2022. We will have accomplished another major milestone in our digital banking journey with this product, which is mostly complete and currently being planned for rollout to our retail customers in the first quarter of 2023. A&T Bank aims to sustain its momentum in digital transformation, and to reach a broader customer base with its responsible banking approach and people-oriented services through physical branch and digital contact channels. We will continue to conduct our operations within the frame of increasing contributions to the domestic economy and value created for stakeholders, and ensuring sustainable healthy growth. I would like to take this opportunity to thank our shareholders, customers, employees and all stakeholders for contributing to our performance in 2022 and helping us to look to the future with confidence. Respectfully, YASIN ÖZTÜRK Chairman of the Board of Directors Momentum in digital transformation Combining experience with technology A&T Bank aims to sustain its momentum in digital transformation. A&T Bank continues to combine its experience and knowhow with the power of technology.
Part One: General Information 30 Message from the General Manager Esteemed Stakeholders, New risks were added to the ongoing ones in the global economy Inflationary pressures and the methods to combat them set the economic agenda across the globe in 2022. Central banks of the developed countries continued to tighten monetary policy through rate increases during this period. In addition, the global economy began to slide into a recession at a faster pace as a result of the energy supply shocks caused by the Russia-Ukraine war. This adverse outlook prompted international institutions to revise their global growth forecasts lower while revising inflation forecasts higher. As it became clear that the interest rate hike cycle will not terminate in the short term, this dynamic as well as rising geopolitical risks are projected to continue being a strong headwind against global economic activity. Türkiye recorded a significant growth performance in 2022 while continuing to pursue an economic model that prioritizes production and employment. The Central Bank of Türkiye strengthened its macro-prudential policy set through the measures it put in place during the year while lowering its policy rate to 9% with the interest rate cuts since August. We believe that the funding rate, which declined to single digits at the end of the interest rate cut cycle, will support the financial system. On the other hand, the high inflation rate and the loss of momentum in major export markets led to a slowdown in domestic economic activity. The dynamics to watch closely in the period ahead will continue to be inflation, current account, and budget balance indicators domestically; and global demand conditions, and prices of energy and other commodities internationally. Thanks to its strong financial structure and world-class risk management framework, Türkiye’s banking industry continues to fulfill its obligation of “creating funding for development” despite the risks surrounding its operating ecosystem. The sector maintained its resiliency as measured by liquidity, asset quality and capital adequacy while posting record profits in 2022. Furthermore, the Turkish banking industry demonstrated its excellent performance compared to the rest of the world during and after the pandemic in terms of technology level, service continuity, and financial inclusivity. 3.4 TL billion A&T Bank’s cash loans reached TL 3.4 billion. 9% In 2022 Türkiye continued to pursue an economic model that prioritizes production and employment. The Central Bank of Türkiye lowered its policy rate to 9%.
Annual Report 2022 31 We continue to create value and grow together with our customers, employees and business partners.
Part One: General Information 32 Message from the General Manager We are growing with the synergy we created with our stakeholders As a bank that derives its strength from 45 years of industry experience and long-lasting relationships with stakeholders, we continue to create value and grow together with our customers, employees and business partners. Our successfully-executed proactive liquidity and risk management approach allows us to maintain our resiliency at the utmost level in the face of fluctuations in financial and macroeconomic indicators. During the operating year of 2022 that witnessed rising volatility in local and global macroeconomic conditions, we continued to post sustainable healthy results in our priority areas of business despite the challenging environment. We increased our total assets by 17.9% to TL 11.4 billion in 2022. Our shareholders’ equity grew 37.3% to TL 1,833 million while return on equity reached 15.83%. As a result of our focus on profitability, we increased our net profit 33.2% on the previous year and reported TL 213.5 million net profit for the full year. Our capital adequacy standard ratio of 21.45% remains above the target ratio of 12%. Loans are the most tangible indicator of our contribution to Türkiye’s economy. Our loans increased 24.1% compared to the end of last year to reach TL 11.2 billion, which consist of TL 3.4 billion cash loans and TL 7.8 billion non-cash loans. Our customer deposits also grew to TL 3.6 billion. Net interest income, our largest income line item, reached TL 482 million with 45.3% increase on the previous year. Our non-performing loan (NPL) ratio of 0.09% is particularly informing as confirmation of the fact that we managed to protect our asset quality in the face of cyclical risks. In an attempt to meet the needs and expectations of customers and all other stakeholders more effectively, we made major changes in our organizational structure in 2022. We aim to manage operating expenses more effectively, increase profitability in all business lines, further enhance the Bank’s income generation capacity, and move forward with stronger and more confident strides under our new organization. We continue to deploy all of our resources to stand by our customers, which constitute the core of our business strategies, at all times. In line with our founding mission, we continued to be the closest business partner of our customers particularly in the foreign trade transactions in our active market of the North Africa region in 2022 thanks to our synergy with our main shareholder Libyan Foreign Bank and its subsidiary banks as well as our expanding correspondent banking network. Armed with the awareness of our responsibility to support Türkiye’s economy, we continued to offer our funding facilities to the service of the real sector at competitive prices. In addition to quantitatively expanding our customer base, we began touching their economic life cycles in new 11.4 TL billion Our total assets reached TL 11.4 billion. 15.83% Return on equity was 15.83% for the year. We continued to post sustainable healthy results in our priority areas of business.
Annual Report 2022 33 business segments. Our sales and marketing teams pushed the limits of their branch regions and worked diligently to provide the privilege of A&T Bank service to a larger number of businesses and people from various provinces. As part of our effective customer relations approach, we strived to understand the needs of our customers correctly and in a timely manner while rendering solutions to them under the best experience becoming of our corporate reputation throughout the year. We renew and develop ourselves continuously and prepare for the future Banking is the leading industry in terms of rapidly internalizing the head-spinning pace of change driven by digitalization. Traditional banking services also gain new dimensions with each passing day through ever-diversifying digital practices. To this end, “making utmost use of technology to enhance customers’ banking experiences” was among the top priorities in our 2022 business plan. We rolled out a large number of innovations in a broad spectrum during the year, from increasing the number of products and services accessible without having to visit a branch, to enriching the functionality of our digital channels, to optimizing our business processes. In an effort to facilitate uninterrupted, easy, secure and fast customer transactions, we continuously improve the Internet Banking and Mobile Banking channels, which are the most important milestones of our digital transformation journey. We reached the last phase in our Debit Card project, which will represent our entry into the world of card payment systems. We plan to launch this product, which will facilitate financial transactions in every corner of the world, for the benefit of our retail customers in the first quarter of 2023. When this product is fully integrated with our digital banking channels, we will expand our presence in the financial lives of our customers. In 2022 we continued to enhance our operational efficiency through organizational restructuring as well as productivity-focused improvements. We integrated the opportunities presented by the digital world and many other innovations into our business model and processes with an agile approach while increasing our value added in every area. As part of our responsible banking approach, we continue to be an exemplary institution in terms of full compliance with laws and banking industry regulations. To this end, we coordinate with regulatory agencies at all times and raise the information and awareness levels of our employees through regular training. Our transformation journey will continue without interruption A&T Bank’s goal in 2023 is to maintain its healthy balance sheet and sustainable profitability while increasing the depth and dimensionality of its relationships with customers. In the upcoming period, as part of our medium-term strategy, we will prioritize better leveraging our nearly half-century experience in the North Africa market, using our resources efficiently, and enhancing our operational efficiency while undertaking a variety of technology-oriented transformation projects to increase the effectiveness of all of our contact channels and to expand financial access. I would like to take this opportunity to thank our shareholders for their continuous support, our employees for their subject matter expertise, and our esteemed customers for placing their trust with us. Respectfully, WAIL J. A. BELGASEM General Manager 482 TL million Net interest income reached TL 482 million. 7.8 TL billion Non-cash loans reached TL 7.8 billion. 213.5 TL million A&T Bank reported TL 213.5 million net profit.
Part One: General Information 34 2022 Performance of the Global Economy and Türkiye’s Economy The IMF projects that the global inflation rate will decline to 6.5% in 2023 after reaching 8.8% in 2022. Global Economy Record inflation levels, monetary tightening, supply chain disruptions, and growth concerns were the major headlines in the global economy in 2022. Reduction of Russian natural gas flows to Europe in response sanctions on Russia, and the ensuing energy crisis in Europe, were among the top geopolitical risks during the year. In particular, rapidly rising food and energy crisis due to Russia-Ukraine tensions continued to pose a risk for both developed and developing nation economies. Based on the rising inflation rates across the globe and the adverse effects of the Russia-Ukraine war on economic activity, the IMF kept its global growth forecast for 2022 at 3.2% but lowered its projection for 2023 from 2.9% to 2.7% in its final World Economic Outlook Report in 2022. The IMF projects that the global inflation rate will decline to 6.5% in 2023 after reaching 8.8% in 2022. The recently announced macroeconomic data in the United States revealed that the economy grew 3.2% as of the third quarter while the annual inflation rate declined to 6.5% in December. The Euro Zone economy posted 2.3% growth in the third quarter of 2022. However, the Zone’s inflation rate reached 9.2% at the end of the year. In response to continuing inflationary pressures on the global scale as of the last quarter of the year, the major central banks continue to tighten monetary policy at an accelerating pace. The Fed and the ECB raised their respective policy rates by 425 and 200 basis points in 2022. The monetary tightening actions by central banks, led by the Fed and the ECB, will continue to set the course for global economic activity and growth rates in the period ahead. Uncertainties surrounding China’s economy are an ongoing concern. As the restrictions pursuant to the “zero-Covid” policy continue to weigh on economic activity, China’s economy posted a lackluster performance in the third quarter and grew at an annual rate of 3.9%. Economic activity in Europe and in China continue to lose momentum noticeably, while the geopolitical developments and the energy crisis increase the risks concerning global growth. 3.2% 2.3% The United States economy grew 3.2% in the third quarter of the year. The Euro Zone grew 2.3% in the third quarter of 2022.
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