VKF_FRAE_2017

PART I: INTRODUCTION 74 VakıfBank Annual Report 2017 VakıfBank became the most active bank in terms of utilizing Residential mortgage Covered Bond Programme through the issuance amounting TL 5 billion. REVIEW OF OPERATIONS IN 2017 VakıfBank has become the most active bank in terms of utilizing Residential Mortgage Covered Bond Programme amounting around TL 5 billion, having issued Turkey’s first Euro-denominated Covered Bond amounting EUR 500 million in 2016, and two TL-denominated Covered Bonds in 2017. »» RESIDENTIAL MORTGAGE COVERED BOND PROGRAMME In order to tap into alternative financing facilities in international debt capital markets, VakıfBank established on July 29, 2015 amounting EUR 3 billion of Residential Mortgage Covered Bond Issuance Programme composed of covered bonds, which have been in use for many years in developed markets such as Europe as a funding instrument, and are allowed in Turkey with the Communique on Covered Bond on 2007 issued by CMB. As part of the program, VakıfBank issued the first ever benchmark Euro- denominated Mortgage Covered Bond of Turkey amounting EUR 500 million residential mortgage covered bond with a five-year maturity on May 4, 2016. The order book in excess of EUR 3.2 billion from almost 300 investors; as a result, pricing of deal realized at MS+250 which is 30 bps below the initial price of target price of MS+280. The yield and the coupon rate of the issuance has been set as 2.578% and 2.375%, respectively. This coupon rate is the lowest one among all the issuances in Turkey including the issuances of Turkish Treasury. In October 2017, under its Residential Mortgage Covered Bond Programme, the Bank issued a 5.5 year bond amounting TL 1.3 billion based on international treasury transactions. The issuance through private placement is also the first TL-denominated Covered Bond transaction of Turkey apart from those made with multinational development banks. After this successful issuance, in December 2017, VakıfBank issued a 5-year Covered Bond amounting TL 1.3 billion based on treasury transactions, where HSBC Bank PLC was the investor. Together with the TL 1.3 issuance of October 2017, the Bank’s total issuances under its Residential Covered Bond Programme in 2017 exceeded TL 2.6 billion. Overall, VakıfBank became the bank issuing the highest amount of Covered Bond issuances among Turkish Bank with a total amount of approximately TL 5 billion, having issued Turkey’s first Euro- denominated Covered Bond amounting EUR 500 million in 2016, and two TL- denominated Covered Bonds in 2017. »» TWO MORE INTERNATIONAL AWARDS FOR COVERED BOND ISSUANCE VakıfBank became the first Turkish bank to win an award at the award ceremony organized following the “Covered Bond 2016 Conference,” organized by European Covered Bond Council (ECBC) and Euromoney for the 14 th time in September 2016. VakıfBank’s Covered Bond issuance was awarded the first award in the “Best Debut Deal of the Year” category. This bond issuance was entitled the first award in the same category at the award ceremony held in June 2016 by Covered Bond Investor Council (CBIC) and “The Covered Bond Report” magazine. VakıfBank’s Covered Bond issue won another first award from Global Capital, a prestigious and acclaimed media organization of international capital markets, in the “CEEMEA Financial Institution Deal of the Year” category in January 2017. VakıfBank won two more awards on top of these three prominent awards: The Bank was deemed worthy of “Best International Bond Issuance of the Year” and “Best Financial Institution Deal of the Year” awards at the “Bonds and Loans 2017”, one of the most prestigious award organizations of the Turkish capital markets and finance sector, thus crowning its success in Covered Bond deals with a total of five awards. INTERNATIONAL BANKING AND CORRESPONDENT BANKS VakıfBank was entitled to receive five separate awards on the international and national platforms with the first ever Euro- denominated Mortgage Covered Bond issuance of Turkey in 2016.