VKF_FRAE_2017

CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED UNCONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUEDIN TURKISH, SEE NOTE I. OF SECTION THREE TÜRKİYE VAKIFLAR BANKASI TÜRK ANONİM ORTAKLIĞI EXPLANATIONS AND NOTES RELATED TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) PART III: FINANCIAL HIGHLIGHTS AND RISK MANAGEMENT 162 VakıfBank Annual Report 2017 SECTION FOUR INFORMATION RELATED TO FINANCIAL POSITION AND RISK MANAGEMENT I. INFORMATION ON EQUITY ITEMS Calculation of Equity and Capital Adequacy Standard Ratio are calculated according to “Regulation on Bank's Capital Adequacy Assessment of the Measurement“, “Communique on Credit Risk Mitigation”,”BRSA Regulation on Bank’s Shareholder Equity”, “Regulations on Systemically Important Banks”, “Regulation on Capital Conservation and Cyclical Capital Buffer”. As of December 31, 2017 Bank’s capital adequacy ratio is 15.52% (December 31, 2016: 14.16%). Current Period December 31, 2017 Amount as per the regulation before 1/1/2014 (*) COMMON EQUITY TIER I CAPITAL Paid-in capital to be entitled for compensation after all creditors 2,500,000 Share Premium 723,918 Reserves 14,296,045 Income recognized under equity in accordance with TAS 2,245,222 Profit 3,723,383 Current Period’s Profit 3,723,383 Prior Period’s Profit - Bonus shares from associates, subsidiaries and joint-ventures not accounted in current period’s profit 91,823 Common Equity Tier 1 Capital Before Deductions 23,580,391 Deductions from Common Equity Tier 1 Capital - Valuation adjustments calculated as per the (i) item of first paragraph of Article 9 - - Net loss for the prior year losses and uncovered portion of the total reserves and losses that are recognized under equity in accordance with TAS 322,573 - Leasehold Improvements on Operational Leases 182,977 - Goodwill netted with deferred tax liability - - Other intangible assets netted with deferred tax liabilities except mortgage servicing rights 168,776 210,970 Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) - - Differences are not recognized at the fair value of assets and liabilities subject to hedge of cash flow risk - - Communiqué Related to Principles of the amount credit risk calculated with the Internal Ratings Based Approach, total expected loss amount exceeds the total provison - - Gains arising from securitization transactions - - Unrealized gains and losses due to changes in own credit risk on fair valued liabilities - - Defined-benefit pension fund net assets - - Direct and indirect investments of the Bank in its own Common Equity - - Excess amount expressed in the law (Article 56 4th paragraph) - - Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible long positions, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) - - Significant investments in the common stock of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible long positions (amount above 10% threshold) of Tier 1 Capital - - Mortgage servicing rights (amount above 10% threshold) of Tier 1 Capital - - Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability) - - Amounts exceeding 15% of Tier 1 Capital according to Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks (2nd article temporary second paragraph) - - Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible long positions, where the bank does not own more than 10% of the issued common share capital of the entity (amount above 10% threshold) - - Amounts related to mortgage servicing rights - - Excess amount of deferred tax assets from temporary differences - - Other Items Determined by BRSA - - The amount to be deducted from common equity tier 1 capital - - Total regulatory adjustments to Common equity Tier 1 674,326 Common Equity Tier 1 capital (CET1) 22,906,065 Additional Tier 1 capital: instruments - Premiums that are not included in Common Equity Tier 1 capital - Bank's borrowing instruments and related issuance premium -