Annual Report 2023 Growing under difficult conditions
Part One: General Information 10 Performance of A&T Bank in 2023 11 2023 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 2023 Performance of the Global Economy and Türkiye’s Economy 36 Turkish Banking Sector in 2023 38 A&T Bank in the Turkish Banking Sector 40 Operations in 2023 42 Treasury 44 Financial Institutions 46 Sales, Marketing and Digital Banking 48 Credits 50 Information Technologies Management 52 Operations 54 Human Resources Management and Support Services 56 Compliance and Legislation 58 Support Departments and Units 62 Subsidiary: A&T Finansal Kiralama A.Ş. Part Two: Management and Corporate Governance Practices 64 Board of Directors Report Submitted to the General Assembly 66 Board of Directors 70 Senior Management 71 Group Managers 72 Managers in Charge of Internal Systems Departments 73 Report of the Audit Committee on the Internal Systems of the Bank 75 Risk Management Policies 76 Relations with the Bank’s Risk Group 77 Committees 79 Individuals and Institutions Offering Support Services 80 Other Regulatory Explanations Part Three: Unconsolidated Financial Information 84 Independent Audit Report 90 Unconsolidated Financial Report Part Four: Consolidated Financial Information 190 Independent Audit Report 196 Consolidated Financial Report Addresses Contents
We are the first Turkish bank that specializes in Türkiye’s trade relationships with the Middle East and Africa. We operate in challenging regions and pioneer trade in these regions. Despite the additional challenges brought about by economic uncertainties, wars, and global fluctuations in 2023, we strive to grease the wheels of trade under all circumstances thanks to our banking relationships and knowhow. Owing to our capability to adapt to challenging conditions and to the future, as well as our determination and aspiration, we continue to stay afloat and grow regardless of circumstances. Creating green shoots in good days and bad Increase in total assets in the last 10 years 326%
Considering the region in which we operate, we are the only bank in our field. We are making strong strides into the future with experience of nearly half a century. We are sustaining our ascent as a major point of reference and pathfinder in commercial transactions amid uncertain economic and geopolitical conditions. Being permanent
Total assets 14.3 TL billion
The regions in which we operate present both problems and major potential trade opportunities. Leveraging our strong and resilient organization, we create breathing room for commercial transactions and play an important role in increasing the volume of exports to the region. We are focusing on horizontal growth and broadening our base with the help of our robust capital structure. Safety zone
A&T Bank’s foreign trade volume in 2023 702 USDmillion
We are a crucial and large ecosystem for the growth of trade thanks to our extensive correspondent bank network. We continue to offer benefits to all of our stakeholders and customers. Despite challenges in access to credit, we make our resources available, maximize our support capabilities, and maintain our progress as the companion of our clients. Strength from uni y
Total loan volume (cash + non-cash) 16.6 TL billion
After setting out to strengthen Türkiye’s trade ties with the Middle East and Africa, we are also reaching new geographies. With a sphere of influence that also encompasses Asia now after Africa, we move more trade deals forward and serve as a solution partner for more clients. Expanding our sphere of influence with every new country we reach, we are increasing the number of deals which we bring to life. Breathing life in trade
Net profit 156.7 TL million
A&T Bank Annual Report 2023 10 Performance of A&T Bank in 2023 A&T Bank continued its support to customers with a foreign trade volume equivalent of USD 702 million in 2023. Support to customers in for ign trade Total Assets 326%increase in total assets over the past 10 years 14.3 TL billion Net Profit Profitability-based growth 156.7 TL million Capital Adequacy Capital adequacy at the banking sector average level 18.58% Equity Size Strong equity structure and a business model focused on sustainable profitability 2.1 TL billion Non-Cash Loans A bank specialized in non-cash loans with tailored solutions for clients’ financing needs Türkiye-Libya Total Trade Volume (2023) First choice of Turkish entrepreneurs in target markets with strong potential, particularly in North Africa 13.3 3.8 TL billion USD billion Foreign Trade Volume Expanding support to customers in foreign trade transactions 702 USDmillion
Part One: General Information 11 2023 Highlights As part of performance-focused improvements, a one-off project was implemented which enabled customers to perform limit increase transactions through A&T Bank digital channels without the need to visit a branch. A&T Bank entered the card payment systems market The prepaid debit card product, the development of which was initiated based on customer needs, was rolled out in August 2023 for use by customers. Ongoing improvements in digital channels Existing features were improved while new solutions were added to all digital channels, particularly in Mobile Banking, in an effort to enhance the customer experience. As part of performance-focused improvements, a one-off project was implementedwhich enabled customers to perform limit increase transactions through A&T Bank digital channels without the need to visit a branch. Newupgrades were rolled out for the iOS and Android operating systems as steps for improving the user experience. In addition, improvements were made at security checkpoints and the IB Back Office screens, used for management of digital channels, were updated. The A&T Bank debit card was integrated into theMobile Banking service in December 2023, which enabled customers to carry out their debit card transactions through Mobile Banking. Moreover, as a result of initiatives that were completed before the end of the year, debit card holders are now able to get digital receipts from their transactions using their debit cards on the Mobile Banking app. Our Interactive Voice Response (IVR) system continues to improve The InteractiveVoiceResponse (IVR) systemwas enhanced with the addition of a feature that provides self-directed service to customers regarding frequently encountered problems. Further, developments that will provide services on security, usage details and habits pertaining to the debit card product are in the final stages. Improvements continue unabated Strategic Customers Operating with a boutique business model that prioritizes corporate segment clients exporting to Africa and Middle East regions in general and primarily to North Africa since the day it was established, A&T Bank in 2023 accelerated the efforts to deepen its relations with manufacturer and exporter firms which the Bank positions as its strategic customers.
A&T Bank Annual Report 2023 12 About A&T Bank A&T Bank was founded in 1977 in accordance with the agreement between Libya and Türkiye regarding the establishment of a joint bank, whichwas 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 2023, A&T Bank has 258 employees. A&T Bank enjoys a special position in the Turkish banking sector 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 banking sector 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 46 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. As of the end of 2023, A&T Bank has 258 employees. 258 employees A&T Bank is a joint bank founded in 1977. 1977 year of establishment A&T Bank enjoys a special position in the Turkish banking sector thanks to its robust financial structure and the Bank’s expertise in intermediating the trade between Türkiye and North African countries. Special position in the sector
Part One: General Information 13
A&T Bank Annual Report 2023 14 Annual Report Compliance Opinion CONVENIENCE TRANSLATION INTO ENGLISHOF INDEPENDENT AUDITOR’S REPORT ON THE BOARDOF DIRECTORS’ ANNUAL REPORT ORIGINALLY ISSUED IN TURKISH To the General Assembly of Arap Türk Bankası A.Ş. 1. Opinion We have audited the annual report of Arap Türk Bankası A.Ş. (the “Bank”) for the 1 January 2023-31 December 2023 period. In our opinion, the financial information and the analysis made by the Board of Directors by using the information included in the audited financial statements regarding the Bank’s position in the Board of Directors’ Annual Report are consistent and presented fairly, in all material respects, with the audited full set financial statements and with the information obtained in the course of independent audit. 2. Basis for Opinion Our independent audit was conducted in accordance with the Independent Standards on Auditing that are part of the Turkish Standards on Auditing (the “TSA”) issued by the PublicOversight Accounting and Auditing Standards Authority (“POA”) and the scope of “Regulation on Independent Audit” published on theOfficial Gazette No.29314 dated 2 April 2015. Our responsibilities under those standards are further described in the Auditor’s Responsibilities in the Audit of the Board of Directors’ Annual Report section of our report. We hereby declare that we are independent of the Bank in accordance with the Ethical Rules for Independent Auditors (including International Independence Standards) (the “Ethical Rules”) and the ethical requirements regarding independent audit in regulations issued by POA that are relevant to our audit of the financial statements. We have also fulfilled our other ethical responsibilities in accordance with the Ethical Rules and regulations. We believe that the audit evidence we have obtained during the independent audit provides a sufficient and appropriate basis for our opinion. 3. Our Audit Opinion on the Full Set Financial Statements Weexpressedanunqualifiedopinion intheauditor’s reportdated21February2024onthe full set financial statements for the1January2023-31December2023period. 4. Board of Director’s Responsibility for the Annual Report The Bank management’s responsibilities related to the annual report according to Articles 514 and 516 of Turkish Commercial Code (“TCC”) No. 6102, Capital Markets Board’s (“CMB”) Communiqué Serial II, No:14.1, “Principles of Financial Reporting in Capital Markets” (the “Communiqué”) and “Regulation on Principles and Procedures Regarding Preparation and Promulgation of Annual Reports by Banks” published in Official Gazette No.26333 dated 1 November 2006 are as follows: a) to prepare the annual report within the first three months following the balance sheet date and present it to the general assembly; b) to prepare the annual report to reflect the Bank’s operations in that year and the financial position in a true, complete, straightforward, fair and proper manner in all respects. In this report financial position is assessed in accordance with the financial statements. Also in the report, developments and possible risks which the Bank may encounter are clearly indicated. The assessments of the Board of Directors in regards to these matters are also included in the report. c) to include the matters below in the annual report: - events of particular importance that occurred in the Bank after the operating year, - the Bank’s research and development activities, - financial benefits such as salaries, bonuses, premiums and allowances, travel, accommodation and representation expenses, benefits in cash and in kind, insurance and similar guarantees paid to members of the Board of Directors and senior management. When preparing the annual report, the Board of Directors considers secondary legislation arrangements enacted by the Banking Regulation and Supervision Agency, Ministry of Trade and other relevant institutions. 5. Independent Auditor’s Responsibility in the Audit of the Annual Report Our aim is to express an opinion and issue a report comprising our opinion within the framework of TCC, Communique and “Regulation on Independent Audit of Banks” published on the Official Gazette No.29314 dated 2 April 2015 provisions regarding whether or not the financial information and the analysis made by the Board of Directors by using the information included in the audited financial statements in the annual report are consistent and presented fairly with the audited financial statements of the Bank and with the information we obtained in the course of independent audit. Our audit was conducted in accordance with the TSA. These standards require that ethical requirements are complied with and that the independent audit is planned and performed in a way to obtain reasonable assurance of whether or not the financial information and the analysis made by the Board of Directors by using the information included in the audited financial statements in the annual report are consistent and presented fairly with the audited financial statements and with the information obtained in the course of audit. PwC Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. DidemDemer Kaya, SMMM Independent Auditor Istanbul, 21 February 2024
Part One: General Information 15 Shareholding Structure and Paid-In Capital Amendments to the Articles of Association There were no changes in the shareholding structure and paid-in capital of A&T Bank in 2023. 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 * Emek İnşaat ve İşletme A.Ş. has a 0.0000014% share of the paid-in capital with a value of TL 6.20. No amendments were made to the Bank’s Articles of Association during the 2023 operating year. Insider Holdings Neither the Chairman nor Members of the Board of Directors, the General Manager, or Assistant General Managers hold any shares in A&T Bank. T.C. Ziraat Bankası A.Ş. 15.43% Libyan Foreign Bank 62.37% Türkiye İş Bankası A.Ş. 20.58% Kuwait Investment Company 1.62%
A&T Bank Annual Report 2023 16 Financial Indicators 2023 14,278,244 2022 11,442,014 2021 9,706,492 Total Assets (TL Thousand) 24.8%growth 2023 13,312,661 2022 7,828,900 2021 6,392,159 Total Guarantees and Suretyships (TL Thousand) 70.0%growth 2023 2,140,240 2022 1,832,553 2021 1,334,796 Shareholders’ Equity (TL Thousand) 16.8%growth 2023 18.58 2022 21.45 2021 25.63 Capital Adequacy (%) A&T Bank maintained its robust financial performance in 2023 with successful results. Robust financial performa ce
Part One: General Information 17
A&T Bank Annual Report 2023 18 Assessment of Financial Strength, Profitability and Debt Repayment Capacity Assets At the end of 2023, the Bank’s total assets increased by 24.8% compared to the previous year and amounted to TL 14,278 million. In the period examined, the major items of the Bank’s placements consist of net financial assets amounting to TL 6,381 million with 44.7% share, and net financial assets as measured by the amortized cost of TL 6,658 million with 46.6% share. In 2023, net financial assets increased by TL 2,200 million, while net financial assets measured at amortized cost increased by TL 153 million. Change Total Assets (TL Thousand) 2022 Share (%) 2023 Share (%) Amount % Financial Assets (Net) 4,180,691 36.5 6,380,578 44.7 2,199,887 52.6 Financial Assets Measured at Amortized Cost (Net) 6,505,059 56.9 6,658,308 46.6 153,249 2.4 Assets Held for Sale Purpose and Related to Discontinued Operations (Net) 1,000 0.0 0 0.0 -1,000 -100.0 Equity Investments 140,199 1.2 153,696 1.1 13,497 9.6 Tangible Assets (Net) 553,068 4.8 946,397 6.6 393,329 71.1 Intangible Assets (Net) 2,751 0.0 10,931 0.1 8,180 297.3 Deferred Tax Assets 0 0.0 0 0.0 0 - Other Assets (Net) 59,246 0.5 128,334 0.9 69,088 116.6 Total Assets 11,442,014 100.0 14,278,244 100.0 2,836,230 24.8 Liabilities At the end of 2023, 15.0% and 85.0%of the Bank’s total liabilities comprise from shareholders’ equity and external resources, respectively. Deposits (TL 6,915 million) and funds borrowed (TL 4,809 million) comprise the majority of external resources. As of the end of 2023, funds borrowed decreased by TL 1,048million, while deposits increased by TL 1,396million, compared to the previous period. Similarly, shareholders’ equity increased by TL 308 million and reached TL 2,140 million. Change Liabilities (TL Thousand) 2022 Share (%) 2023 Share (%) Amount % Deposits 5,519,004 48.2 6,914,946 48.4 1,395,942 25.3 Funds Borrowed 3,761,038 32.9 4,808,759 33.7 1,047,721 27.9 Interbank Money Market 37,162 0.3 0 0.0 -37,162 -100.0 Lease Liabilities (Net) 7,329 0.1 9,942 0.1 2,613 35.7 Provisions 138,151 1.2 194,315 1.4 56,164 40.7 Current Tax Liability 21,210 0.2 19,138 0.1 -2,072 -9.8 Deferred Tax Liability 34,971 0.3 77,840 0.5 42,869 122.6 Shareholders’ Equity 1,832,553 16.0 2,140,240 15.0 307,687 16.8 Other Liabilities 90,596 0.8 113,064 0.8 22,468 24.8 Total Liabilities 11,442,014 100.0 14,278,244 100.0 2,836,230 24.8
Part One: General Information 19 Off-Balance Sheet Items The Bank’s total off-balance sheet items increased by 70.0% compared to the end of the previous year and reached TL 13,313million at the end of 2023. Off-balance sheet items consist almost entirely of guarantees and warranties. The balance of letters of guarantee, which is the most important off-balance sheet item, increased by 70.1% to TL 10,082 million in the period examined. Change Off-Balance Sheet Items (TL Thousand) 2022 Share (%) 2023 Share (%) Amount % Guarantees and Warranties 7,828,900 100.0 13,312,661 100.0 5,483,761 70.0 Commitments 389 0.0 594 0.0 205 52.7 Derivative Financial Instruments 0 0.0 0 0.0 0 - Off-Balance Sheet Items 7,829,289 100.0 13,313,255 100.0 5,483,966 70.0 Profitability In 2023 the Bank’s net interest income increased by 17.7% to TL 567.5 million, and net fees and commissions income went up by 31.0% to TL 139.4 million. Net operating profit decreased by 62.2% to TL 103.9 million while the Bank finished the 2023 operating year with a net term profit of TL 156.7 million. At end-2023, the Bank reported return on assets of 1.28% and return on equity of 8.80%. A&T Bank’s capital adequacy standard ratio, 18.58%, 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) 2022 2023 Amount % Interest Income 641,340 852,339 210,999 32.9 Interest Expense (-) 159,382 284,835 125,453 78.7 Net Interest Income 481,958 567,504 85,546 17.7 Net Fees and Commissions Income 106,366 139,362 32,996 31,0 Dividend Income 14,060 13,594 -466 -3.3 Trading Gain/Loss (Net) (+/-) 21,932 7,426 -14,506 -66.1 Other Operating Income 14,365 22,872 8,507 59.2 Gross Operating Income 638,681 750,758 112,077 17.5 Expected Credit Loss (-) 4,534 61,859 57,325 1,264.3 Other Provision Expenses (-) 18,570 28,882 10,312 55.5 Personnel Expenses (-) 222,514 364,448 141,934 63.8 Other Operating Expenses (-) 117,871 191,647 73,776 62.6 Net Operating Income/Loss 275,192 103,922 -171,270 -62.2 Tax Provision (-) 61,700 -52,735 -114,435 -185.5 Net Profit for the Period 213,492 156,657 -56,835 -26.6
A&T Bank Annual Report 2023 20 Summary Financial Highlights for the Past Five Years Ratings of the Bank TL Thousand 2019 2020 2021 2022 2023 Total Assets 4,957,994 5,576,326 9,706,492 11,442,014 14,278,244 Marketable Securities Portfolio 822,059 1,945,144 3,465,268 4,565,176 5,494,275 Loans 1,730,243 1,724,581 2,661,837 3,404,852 3,290,502 Deposits 2,456,166 2,854,698 3,944,658 5,519,004 6,914,946 Funds Borrowed and Interbank Money Market 1,353,190 1,457,806 4,254,364 3,798,200 4,808,759 Shareholders’ Equity 1,052,917 1,152,814 1,334,796 1,832,553 2,140,240 Net Term Profit 166,427 96,575 160,336 213,492 156,657 Fitch Ratings, the international credit rating agency, reported in its rating report datedOctober 19, 2023 that, the Bank’s credit ratings are confirmed as follows: Rating Note FC Long Term FC BShort Term FC B TL Long TermTL BShort TermTL B Viability Rating bNational Long-TermNational Note A-(tur) Outlook Long Term FC Fixed Long TermTL Fixed Long-TermNational Note Fixed
Part One: General Information 21 Research and Development Implementations for New Services and Activities In 2023, 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 being offered by the Bank. The Bank’s efforts in 2023were centered onmeeting 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. Customers’ need for a fast and reliable card product increased during the pandemic. This need was further accelerated by the finance industry’s digital transformation. A&T Bank entered Türkiye’s rapidly growing card payment ecosystemwith the debit card which was developed by the Bank for the benefit of its retail customers. The prepaid debit card product, the development of which was initiated based on customer needs, was rolled out in August 2023 for use by customers. As a result of this step in the card payment systems segment, A&T Bank’s retail customers gained the opportunity to execute financial transactions in every corner of the world. In addition to obtaining a debit card operating license from the Banking Regulation and Supervision Agency of Türkiye, A&T Bank became a member of the international payment network Mastercard as well as the Interbank Card Center. This enables retail customers to access their accounts at the Bank via ATMs in Türkiye and across the globe, and to use their cards for all purchases. As a result of the special agreement made with Türkiye İş Bankası A.Ş., a shareholder of A&T Bank, the Bank’s customers can use more than 6,500 İş Bankası ATMs across the country for their ATM transactions without paying any fees. The Bank entered into an agreement with the sector’s leading firmpertaining to the debit card product’s basic payment solutions, processing services, and use security. PayCore, a financial technology company which holds more than 30 international awards and exports technology to more than 30 countries as a solution partner, became A&T Bank’s most important stakeholder for the debit card. The A&T Bank debit card is offered to customers under three different product formats: named, anonymous, and virtual cards. Some customers of the Bank prefer the debit card with their names on it. For other customers, particularly foreign nationals, anonymous debit cards are in stock at A&T Bank branches as an alternative that does not require a delivery period and can be handed over at the time of application. The virtual debit card is available through the digital channels as ameans to facilitate customers’ secure e-commerce shopping. A number of improvements and developments made in the Mobile Banking channel in response to user feedback 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 functionalities. A one-off project was implemented which enabled customers to perform limit increase transactions through A&T Bank digital channels without the need to visit a branch. New upgrades were rolled out for the iOS and Android operating systems as initiatives for improving the user experience. In addition, projects were carried out geared toward making improvements at security checkpoints, and the IB Back Office screens, used for management of digital channels, were updated. The A&T Bank debit card was integrated into theMobile Banking service in December 2023, which enabled customers to carry out their debit card transactions through Mobile Banking. Further, debit card holders are now able to get Digital Receipts from their transactions using their debit cards on the Mobile Banking app. A&T Bank will continue to leverage the opportunities made possible by digital transformation in 2024 in an attempt to provide most convenient financial solutions for the banking needs of its customers, and to render the highest quality customer experience to themwhile providing these solutions.
A&T Bank Annual Report 2023 22 Vision, Mission and Values 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. 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 performancemanagement 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. 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. Our Vision Our Values Our Mission 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. TeamSpirit We place emphasis on team spirit and believe that success can be achieved through cooperation, mutual trust and respect.
23 Part One: General Information
A&T Bank Annual Report 2023 24 Milestones 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. 1980s 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. 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 sector. The Bank’s paid-in capital increased 485.4%, fromTL 41 million to TL 240 million. 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 sector average rate of 15.64%. 2014 A&T Bank’s Internet Branch became operational. At a time when the sector’s return on equity dropped to 12.23%, A&T Bank’s return on equity stood at 15.28%. 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 sector average of 11.65%. A&T Bank completed the debit card initiative, one of its technology-oriented transformation projects, and entered the world of card payment systems. Debit card initiative is c mpleted
25 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. 2023 While maintaining the focus of its banking operations in the North Africa market, A&T Bank continued to use its resources efficiently and improve its operational efficiency. The Bank completed the debit card initiative, one of its technology-oriented transformation projects, and entered the world of card payment systems. A&T Bank closed out 2023 with TL 14.3 billion assets and TL 156.7 million net profit for the period in a year where, from a financial performance perspective, asset quality wasmaintained, and effective risk and liquidity management was executed successfully. Part One: General Information
A&T Bank Annual Report 2023 26 We continue to be a solution partner of our customers A&T Bank’s equity size is TL 2.1 billion. 2.1 TL billion
Yasin ÖZTÜRK Chairman of the Board of Directors
A&T Bank Annual Report 2023 28 Message from the Chairman In 2023, A&T Bank accelerated its efforts to add new products and services to its existing lineup and increased the value added it generates for all stakeholders. Esteemed Stakeholders, Do not underestimate the resilience of Türkiye’s economy… As we celebrate the 100th of our anniversary Republic, steps are being taken toward enhancing the environment of stability and trust and ensuring a sustainable economy, with a particular focus on the future goals of Türkiye’s economy. Inflation, growth and geopolitical concerns were themost important agenda items during 2023 that was characterized by recovery efforts in the global economy. As global inflation began declining since the beginning of the year in response to tightening policies by the central banks, recession fears also subsided. As global economic recovery continued, economic policies of industrialized countries changed with the tensions between Russia and Ukraine turned into a war. In its latest World Economic Outlook Report, the International Monetary Fund (IMF) mentioned the continued improvement in inflation indicators while highlighting the lingering adverse effects of geopolitical risks on economic activity. Within this frame, the global growth forecast for 2023 remained at 3% while the global growth forecast for 2024 is 2.9%. We increased our value ad d Banking system’s cumulative profit is at TL 603.6 billion. 603.6 TL billion CBRT hiked its policy rate to 42.5%. 42.5%
Part One: General Information 29 For Türkiye, 2023 was a difficult year as the earthquake disaster that shook our country in February and the elections in May determined the course of the economic outlook. Despite these challenges, Türkiye’s economy performed successfully in the face of external and internal shocks and grew by 5.9% in the third quarter of the year, which was the strongest growth performance among the G20 countries. As part of the rapid normalization steps that were put into effect after the elections, the CBRT hiked its policy rate from 8.5% to 42.5% in an effort to address the deteriorating inflation outlook. The credit rating agencies upgraded the outlook of Türkiye’s economy from negative to neutral thanks to Türkiye’s developed financial markets, fiscal discipline, and robust banking system. The precipitous decline in the risk premium was accompanied by a notable improvement in capital inflows to our country. Turkish banking maintained its sustainable and profitable growth A glance at the Turkish banking sector reveals that effective action was taken promptly and the banking system had a productive year despite the challenging conditions. Owing to its dynamic and agile organization, the sector quickly adapted to the changes in monetary policy, macroprudential measures, and new laws and regulations throughout the year. Having rapidly integrated the opportunities brought about by digitalization into its services in terms of accessibility and customer experience in recent history, the Turkish banking sector will continue its transformation journey as a model for all other industries in the period ahead. The banking sector continued to prioritize growth while maintaining asset quality in 2023. According to the yearend data regarding the sector, bank balance sheets grew nearly by 64% on the heels of the record profit growth of 364% in 2022. In keeping with the forecasts for the normalization of the sector’s profits in 2023, the banking system’s cumulative profit reached TL 603.6 billion. In summary, our banking sector effectively and resolutely maintained its sustainable support for the economy and its development during 2023. A&T Bank recorded notable accomplishments in 2023 During this period characterized by inflationary pressures and financial fluctuations, A&T Bank continued to stand behind its customers as their solution partner while distinguishing itself in all business segments with its quality products and services. As it channeled resources to production and employment, and therefore to Türkiye’s sustainable development during the year, the Bank finished 2023 with successful results. As a respected player in the Turkish banking sector, A&T Bank grew its assets to TL 14.3 billion with a 24.8% increase on the previous, and its shareholders’ equity to TL 2,140 million with a 16.8% increase in 2023. Additionally, the Bank made a profit of TL 156.7 million at the end of the year. In 2023, A&T Bank accelerated its efforts to add new products and services to its existing lineup and increased the value added it generates for all stakeholders. The Bank launched its prepaid debit card product in accordance with the needs and expectations of its customers during the year, and successfully entered the world of card payment systems. A&T Bank continues to leverage the opportunities presented by digitalization and roll out innovative and sustainable solutions in all business segments. The Bank carried out a large number of initiatives during the year to improve the customer experience at all contact channels and to make banking transactions simpler and more practical for its customers. The Bank will continue to reinforce its delivery channels and diversify its digital capabilities in the period ahead. All of A&T Bank’s business strategies will continue to be centered on growing its multi-faceted support for Türkiye’s economy in the upcoming year. In accordance with this approach, we will continue to strengthen our cooperation with the global finance industry, expand our correspondent network, further increase our presence in our target markets with an emphasis on North Africa, and support the growth of exports fromTürkiye to these regions. I would like to take this opportunity to thank our shareholders, customers, and employees as well as all stakeholders for their contributions to our performance in 2023 and for helping us look to the future with confidence. Respectfully, Yasin ÖZTÜRK Chairman of the Board of Directors
A&T Bank Annual Report 2023 30 We grew our business volumes in all our business lines Our assets increased to TL 14.3 billion. 14.3 TL billion
Part One: General Information 31 Wail J. A. BELGASEM General Manager
A&T Bank Annual Report 2023 32 Message from the General Manager Esteemed stakeholders, Rebalancing is continuing The most recent mid-term Economic Evaluation Report from the OECD presents both the good news and the bad news. The Report highlights the fact that the clarifying effects of tight monetary policy and the underperformance of the recovery in China in relative to the expectations will weigh on global growth and global trade. The Report counts Türkiye as one of the four fastest growing countries. From a global perspective, even though we are undergoing a “rebalancing” process in the economic, social and political arenas which makes predictions challenging, we are observing that economies are continuing on the monetary tightening path during this period in response to inflationary pressures. In 2023, the U.S. economy sent clear recovery signals while the European economies continued their relatively weak performance. In addition, the risk of contagion of the geopolitical tensions in theMiddle East creates newuncertainties for the future of the global economy. Türkiye had a challenging year as a result of the most devastating earthquake disaster in our history in February. Despite the busy election schedule in the first half of the year, Türkiye’s economy outpaced market forecasts by growing 5.9% in 2023 and sustained its 13-year steady growth path. As also highlighted in the Medium-Term Plan, which was released in September, Türkiye’s economy will continue to focus on fighting inflation resolutely, production, high value-added investments, and development in the coming years. In accordance with its goal of establishing price stability, the Central Bank of the Republic of Türkiye (CBRT) began taking gradual normalization steps since June and raised its policy rate to 42.5% by the end of the year as part of its monetary tightening. The Turkish banking sector maintained its robust financial health despite the presence of many different dynamics affecting the operating environment. Macro-prudential measures and changing rules and regulations were at the top of the sector’s agenda during the period. Our banks successfully navigated that period of change thanks to their strong capital positions and effective risk management. Türkiye’s economy outpaced market forecasts by growing 5.9% in 2023. 5.9% Our capital adequacy standard ratio is 18.58%. 18.58% In terms of helping the real economy, access the funding it needs and supporting exports, we increased our presence, and broadened our client base. Broadened our cli nt base
Part One: General Information 33 We are moving forward with sound steps on the back of our strong shareholding structure and resources As A&T Bank, we also continued operating in line with our responsibility of creating value for the national economy and its stakeholders during this challenging period. Focusing on efficiency as much as on financial results, we made substantial gains during 2023. In terms of helping the real economy, access the funding it needs and supporting exports, the areas which represent our principal mission, we increased our presence, broadened our client base, and grew our business volumes in all our business lines. Our prudent risk policies and robust capital position were the primary factors that enabled our sustainable growth performance in 2023. Our assets increased by 24.8% to TL 14.3 billion in 2023 while our shareholders’ equity grew by 16.8% to TL 2,140 million. On the other hand, our net term profit reached the target level of TL 156.7 million despite the provisions set aside in line with our being prudent target. Our capital adequacy standard ratio of 18.58% is above the target of 12%. As of year-end 2023, we increased our lending support to the national economy to TL 16.6 billion, consisting of TL 3.3 billion in cash loans and TL 13.3 billion in non-cash loans. Funds borrowed and customer deposits, our largest sources of funding, rose to TL 4.8 billion and TL 4.6 billion, respectively. Net interest income, our largest income item, reached TL 568 million with a 17.7% increase on the previous year, while our net fees and commissions income increased by 31% to reach TL 139million. As a Bank that always prioritizes risk management and asset quality, wemanaged to keep our non-performing loan (NPL) ratio at 0.09%, significantly below the sector average. Our customers are our focus in every business we undertake As A&TBank, we always act with the knowledge that the road to success goes through establishing satisfaction-oriented long-lasting relationships with our customers. We focus on differentiating ourselves by offering affordable solutions to customer needs as well as through the quality, speed and widespread availability of our services. To this end, we continued to strengthen our synergy and diversify our partnerships with our main shareholder and its subsidiary banks in 2023. As a result, we expanded our capability to generate more effective and comprehensive solutions to customer needs thanks to our complimentary products and our global service network. For 46 years, we have been operating with the mission of increasing foreign trade with Africa, notably Northern Africa, and Middle East regions, and serving as a bridge in Türkiye’s trade with the region. In 2023, we positioned manufacturing and exporter firms as a strategic customer segment and focused on enriching their experiences in an attempt to be always by their side on the path toward their goals. We strive to be our strategic customers’ bank of first choice in all their financial transactions. In accordance with this objective, deepeningwithin the strategic customer segment will be our foremost priority in the upcoming period. In 2023, we continued to closely monitor the new and changing laws and regulations that directly affect our products, services and business processes and took swift action to achieve full compliance with laws and regulations. Our investments in digital technologies are continuing at an accelerating pace We launched our debit card product for use by our customers in August, which represents themain development that made 2023 a special year in A&T Bank’s corporate history. We obtained a debit card operating license from the Banking Regulation and Supervision Agency of Türkiye (BRSA) for this product, which was rolled out to render a secure payment service anywhere in the world. In addition, we became amember of Mastercard and the Interbank Card Center (BKM). To further streamline the user experience, we immediately began working on the integration of our debit card with our mobile channels during the period. As digitalization becomes a mega trend in every facet of life, the banking sector continues to lead the way in internalizing the transformation. Having a strong presence in the mobile world is an essential element of competition for financial institutions. As A&T Bank, we continue our digitalization journey on the axis of adding value to the lives of our customers. In 2023we continued to unveil many projects to increase the diversity of transactions offered through our mobile channels and to render an end-to-end, secure and simple experience. As A&T Bank, we laid sound foundations for our future goals with our strong performance in 2023. We will maintain our responsible growth without slowing down in the upcoming period on the back of our strong shareholding structure and our faith in Türkiye’s future. Our priorities in 2024 include cost management, efficiency, upgrading our digital services in line with state-of-the-art technologies and enabling our ever-expanding customer base to reach our high-quality products. With the support of our Board of Directors and the dedicated efforts of our employees, we will continue to strive to be worthy of our customers’ confidence in us. I would like to take this opportunity to thank our employees for their contributions to our success, and our shareholders, customers and all other stakeholders for their support and trust during 2023. Respectfully, Wail J. A. BELGASEM General Manager
A&T Bank Annual Report 2023 34 2023 Performance of the Global Economy and Türkiye’s Economy Global Economy The main agenda items during 2023 were inflation, interest rates, growth, and geopolitical concerns. While the U.S. economy grew by 2.5% in 2023, the inflation rate as of end-2023 declined to 3.4%. The Euro Zone economy grew at an annualized pace of 0.1% in the third quarter of the year. The Zone’s annual inflation rate is 2.9%. During this period themonetary policy meetings of developed and developing country central banks, particularly the U.S. central bank (Fed) and the European Central Bank (ECB), were also watched closely. In their last respective meetings of the year, the Fed left its policy rate unchanged at 5.25%- 5.50% and the ECB kept its policy rate at 4.5%. As the U.S. inflation, employment and other economic data came in weaker than anticipated in the final quarter of the year, expectations for the Fed to start cutting interest rates in the second half of 2024 strengthened and the global risk-taking appetite increased. China’s economy grew 5.2% in 2023. While supply and demand indicators point to a recovery in economic activity in China’s economy, inflation data show that deflation continued in the country. Even though inflation has been running high in the industrialized countries as well as across the globe in the aftermath of the Covid-19, China’s economy bucked this trend and posted an inflation rate of merely 0.2% for 2023. The IMF increased its 2024 global growth forecast by 0.2 points to 3.1%, emphasizing the reduced probability of a recession in developing economies. The Fund’s growth forecasts increased from 1.5% to 2% for the U.S., and from 4.2% to 4.6% for China, underlining the financial support in China. On the other hand, the growth forecast for the European economy declined from 1.2% to 0.9% due to elevated energy costs. The IMF’s 2024 global inflation forecast remained unchanged at 5.8%. The Fund expects global inflation to decline to 4.4% in 2025. The factors that weighed on oil prices in November include the prevention of the developments in the Middle East from spreading regionally and data releases pointing to the weakening of economic activity in the developed economies. In addition to the Russia-Ukraine crisis, a potential rise in energy prices due to the Israel-Palestine crisis in the Middle East which in turn would renew the upward pressure on inflation continue to be themost important agenda item that should be monitored in the coming year. According to the Medium-Term Plan (MTP) released in September, Türkiye’s economy is projected to continue growing steadily in the coming years. Steady growth will continue IMF’s global consumer price inflation forecast for 2024 is at 5.8%. IMF’s global growth forecast for 2024 is at 3.1%.
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