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									Istanbul, 28 July 2004 AKBANK T.A.S. Earnings Release First Half 2004 Results (BRSA)

“Time for real banking”
Akbank’s loan book continued to improve, capturing more than 12% of the loan market and recording over 14% growth in the second quarter. TL loans, which are mostly made up of higher margin SME and consumer loans, now constitute the majority of the total loan portfolio. More importantly, SME loans increased faster than consumer loans in the second quarter, due to the high capacity utilization of the manufacturing sector. Meanwhile, consumer loans remained robust and its share in total loans slightly improved from 25.3% to 25.8%. Anticipated lifting of the state guarantee on deposits spurred a flightto-quality in the sector and TL deposits rose by 11% q-o-q, surpassing the sector’s 3%. Net fees and commissions income increased to TL 184trn (USD 123mn), almost reaching the 2003 annual figure in just 6 months. Strong volume growth in credit cards, which was the main driver behind this impressive performance, pushed Akbank one level higher to third position in terms of “issuing” among the big four banks in 2Q04.
(USD 1=TRL 1,500,050)

• Securities
Securities portfolio slightly rose by 6%, while its proportion to total assets shrunk to 47% q-o-q. Contrary to the previous quarter, the currency composition of the portfolio moved towards FX securities, making up 52% of the total portfolio. Due to the limited Eurobond position (USD 336mn), markto-market losses affecting the P&L were minimal.
(TL trillion)

Trading securities Available for sale-securities Held-to-Maturity Equity Total

Fix 5,127 5,225 13 10,365

Floating 276 3,534 322 4,132

Total 5,403 8,759 322 13 14,497

• Loans
The pick up in economic activity hasn’t lost its momentum. Hence, the loans to assets ratio further increased to 34% from 33% last quarter. Akbank’s TL loans market share reached 11.1% from 10.6%, constituting 52% of total loans versus 50% in the previous quarter. Overall, the total loan book grew 14.2% and reached TL 10,557trn (USD 7,038mn) q-o-q. With interest earning assets well in excess of interest bearing liabilities, Akbank enjoys the benefit of a good level of free capital (USD 2,873mn) that

allows for long term financing and subdues the negative impact of rising rates. This places the Bank in the advantageous position of having the power to offer bigger amounts of TL loans with longer maturities, and grow its assets more aggressively than competitors. 1H04 5,512 3,363 1Q04 4,606 3,433 Change (%) 19.7 -2.0

TL loans (TL trillion) FX loans (USD million)*

*FX loans are stated with the exchange rates effective at respective dates

In line with the strategy of shifting focus to higher yielding loan products, the share of retail and SME loans in total reached 25.8% and 17.2%, respectively.

29.7% 28.6%


22.9% 19.5%









8.4% 9.0% 6.6% 10.5%
Dec-02 Mar-03

12.5% 10.7%



25.3% 16.2%

25.8% 17.2%

13.1% 16.0%
Sep-03 Dec-03




Project Finance

o SME Loans Commercial loans finally started to gain ground as more and more companies have been undertaking capacity investments in 2004. Consequently, Akbank’s commercial loans portfolio soared 20.9% q-o-q and reached TL 1,815trn (USD 1,210mn) by June. The annual increase came at an impressive 145.3% as a result of the focus given to partnership opportunities with small businesses in such sectors as pharmaceuticals, agriculture and tourism. In 2003, Akbank introduced a new SME product called “biz.card”, which is a cash management tool (smart-card) for payments and collections between the producers, distributors and retailers. The number of “biz.card” customers reached 36,705, including in its system 62 major companies such as Coca Cola, Exxon Mobil, Philip Morris, Ipragaz (LPG) and Istanbul Pharmacist Cooperative. Akbank aims to increase the share of its SME loans in its total loan portfolio up to 24% from 17.2% by the end of 2004. o Retail Loans and Mutual Funds Credit card, mortgage and overdraft loans were the winners of the second quarter in terms of growth, while growth in other types of retail loans such as auto and general purpose have slowed down due to the temporary rise in

interest rates. Auto loans stood at TL 1,674trn (USD 1,116mn) registering a 9.6% jump q-o-q. General-purpose loans including the overdraft loans were TL 599trn (USD 399mn) improving 13.6% q-o-q. Albeit from a small base, mortgage loans were the most impressive performer with 40.4% q-o-q growth, reaching TL 309trn (USD 206mn) by June 2004. Credit card loans’ performance was also salient. Credit card loans reached TL 1,131trn (USD 754mn) rising 30.4% q-o-q. On top of the interest income, consumer loans represent a significant contribution to the Bank’s commission income and a perfect opportunity to cross-sell. The size of mutual funds stood at TL 3,124trn (USD 2,083mn), indicating a 0.4% increase y-t-d. The slowdown in the mutual fund growth is mainly owed to the investor preference towards government bonds as they generally offered higher yields than funds in the second quarter, albeit Akbank’s better than sector fund management performance. Akbank ranked second among all fund managers in Turkey.
(Market share)

Consumer loans Auto loans Home loans Credit card loans Credit cards (volume) Credit cards (# of cards)* Mutual funds
*Including Amex

1H04 1Q04 16.5% 19.0% 24.5% 28.5% 14.0% 15.1% 12.5% 11.6% 12.5% 11.9% 2,553,950 2,375,640 13.9% 14.0%

Despite the rapid loan growth, NPL ratio stayed flat at 1.2%. Akbank continues to provide full provisioning for its NPLs.

• Deposits and Bonds under Custody
Although Akbank’s TL deposits rates are historically lower than the average, which reflects favourably on its cost structure, the anticipated lifting of the unlimited state guarantee on deposits initiated a flight-to-quality towards safer banks in the sector. Consequently, Akbank’s TL deposits (excluding bank deposits) increased 12.3% y-t-d, which is over the sector’s 10.4%. FX deposits continued to lose ground as customer preference for high yield TL assets resulted in a switch from FX deposits to either TL deposits or to highyield fixed income debt instruments. 1H04 7,224 8,187 14,271 1Q04 6,487 8,508 13,346 Change 11.4% -3.8% 6.9%

TL deposits (TL trillion) FX deposits (USD)* Bonds in custody

*FX deposits are stated with the exchange rates effective at respective dates

Akbank continued to exploit the shift in customer investment preferences towards government bonds. Client’s bonds under custody reached TL

14,271trn (USD 9,514mn), which constitutes around one fifth (21.1%) of the market.

• Income Statement
Net fees and commissions income of Akbank reached TL 184trn (USD 123mn) versus TL 80trn (USD 50mn) y-o-y, indicating a 130% increase. The significant increase was primarily driven by the growth in fee generating products such as consumer loans, mutual funds and credit cards. Especially, credit cards commissions peaked as the issuing volume increased faster than the competition. Commissions earned improved by 13%, while commissions paid increased 6% q-o-q. Contribution of net fees to the operating income rose to 16% from 6% y-o-y.
(Fees and commissions revenue contribution)*

Money transfer fees Asset management fees Credit cards commissions Consumer loan related Other
*excluding commissions from cash and non-cash loans

(%) 7 25 51 6 11

Akbank posted TL 527trn (USD 351mn) of net profit, maintaining around 20% ROE as targeted. While there are quarterly improvements in net interest and commission income, the diminishing trading gains and FX loss incurred in the second quarter kept the bottomline figure the same compared to June 2003.
(TL trillion)

Operating income Income from associates Monetary loss Income before tax Taxes Net income
*2003 figures are restated by the WPI of 1H04

1H04 1,075 29 (341) 763 (236) 527

1H03* 1,222 6 (328) 900 (360) 540

According to the June WPI figure of –1.1%, the annual WPI inflation rose to 10.5%. Based on the tax laws in Turkey, if the annual inflation exceeds 10% and the 3-year cumulative inflation reaches 100%, monetary loss becomes tax deductible for the whole year. Therefore, approximately TL 180 trillion of tax saving is expected by the end of 2004. Apparently, Akbank benefits the most from this inflation-adjusted taxation due to its high free equity.

Key Ratios
30.06.2004 31.12.2003 Interest Earning Assets / Total Assets Interest Bearing Liabilities / Total Liabilities NPL / Gross Cash Loans Allowance for Loan losses / NPL Gross Cash loans / Deposits Deposits / Total Assets Gross Cash Loans / Total Assets Liquid Assets* / Total Assets 91.4% 79.4% 1.2% 100.0% 54.8% 63.5% 34.8% 57.7% 87.0% 79.2% 1.3% 100.0% 46.2% 64.8% 29.9% 58.2%

30.06.2004 30.06.2003 NIM ROAA ROAE Net Fees and Commissions / Operating Expense Net Fees and Commissions / Operating Income Operating Expense / Income Operating Expense / Total average Assets 6.5% 3.4% 19.5% 46.1% 16.1% 34.9% 2.6% 9.6% 3.8% 25.5% 21.7% 6.3% 29.3% 2.6%

*Liquid assets include cash, banks and other financial institutions, money market, securities and reserve requirements

Appendices: BRSA Financial Statements Further information can be obtained from: Mr. Cenk Goksan Mr. Şehsuvar Aladağ IR Manager 90 212 280 13 35 IR Officer 90 212 279 07 61 This press release is available on the Internet at where you would also find our latest investor presentation

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