Esteemed Stakeholders,

Despite the challenging and evolving environment, the Turkish economy has succeeded to perform very high growth which lifted the country to the group of top growing countries in the world. Growth build-up measures and reforms combined with improving external demand from EU has propelled domestic consumption and ultimately the economy over reached its potential growth. According to official statistics, the economy has performed 11.1% robust growth in the third quarter of the current year. The growth expectations for the remaining part of the year are quite strong. General consensus is that the Turkish economy would end up this year with growth rate around 7% and even above.

Meanwhile, the strong growth performance of the economy has been translated to the banking sector, where the industry has continued its resilient, balanced and healthy development. Total assets of the system have reached TL 3,258 billion by December 2017 and increased by 19.3% in comparison to the same period of the previous year, total loans expanded by 21% to reach TL 2,009 billion. Having higher loan portfolio growth compared to nominal growth of GDP has resulted in further penetration of the sector; the loan portfolio/GDP ratio which stood at 66% at year-end 2016 has jumped to 69% during a year. Despite the aggressive loan expansion, risks in the system are well balanced and managed. The fact that around 78% of loan expansion from the beginning of the year are placements in TL is a strong indicator of balanced risks in the time of high exchange rate volatility.

It is definitely our proud to say that PASHA Bank as a dynamic market player keeps going on its expansion with the pace of above the market. As a result, the market share of the Bank has gone up, and its total assets have reached TL 897 million which is 76% higher compared to the prior year end. Our cash loan and leasing receivables portfolio, comprising 79% of total assets, increased by 76% and reached TL 713 million. Due to effective risk management framework, and prudent credit policy pursued by the Bank we have been successful in preserving zero level of NPL in our balance sheet.

In general, 2017 was last year of our previous strategy which has envisaged a successful turnaround of the Bank. Key components of the strategy have been focus on select corporate customers, maintaining zero-NPL balance, creating awareness in the market, and optimizing liquidity risk through borrowings in longer-term. In the context of previous strategic period, the Bank has always been determined to apply best class corporate governance principles and is willing to manage this process dynamically and continuously. Corporate governance provides proper oversight and accountability, strengthens internal and external relationships, builds trust with our stakeholders and promotes the long-term interests of shareholders. PASHA Bank has further increased the corporate governance rating given on the basis of the principles set forth by the Capital Markets Board to 9.28 from 9.26 in the previous operating period.

During the period we have intensified our efforts to increase and diversify funding sources beyond equity and toward available market instruments. Successful bond issuances and sourcing low-cost funds from Azerbaijani market have provided some advantages in regard to competitiveness and profitability of the lending. Access to relatively cheaper resources in Azerbaijan has provided the Bank to offer lending with relatively lower rates.

For the coming 2018-2020 strategy period the objectives of the Bank has been set as continuing as an investment bank, leveraging up, increasing profitability and achieving diversification. To achieve strategic objectives, the Bank would need to quickly build its balance sheet up. This requires to move fast in 2018 and make a leap in balance sheet growth. This leap is critical to reaching 10% 3-year cumulative average RoAE target. By the end of new strategic period, in 2020, aggressive growth of the business is envisaged where project finance, sale and leaseback and cash loans are supposed to be main drivers.

In order to execute the strategy successfully we would allocate substantial investments in employee development and information technology to build up the required capabilities. In overall, agility and know-how regarding focus sectors are expected to be differentiating capabilities where the Bank would need to excel. Risk management, credit management, fund raising, talent acquisition etc. are the direct examples for the latter.

We will continue to make efforts to diversify bank's funding structure and expand our correspondent network and investor base. We will maintain our prudent approach to managing credit risks so that the asset quality of the Bank is not affected by the environment. We will support our operational profitability with new customer acquisitions and the controlled cost management created by our Group synergy. We shall continue our efforts of offering products and services that are tailored to our customers’ needs to make banking experience a gainful experience with PASHA Bank.
I am truly looking forward to have an operating environment supported with stability at macro level and shared prosperity of stakeholders at micro level. Therefore, I would like to take this opportunity to thank our valued employees and our management team for their dedicated professional work, our customers for their confidence in PASHA Bank and our shareholders and all business partners for their valuable support. It is definitely their goodwill that renews our belief in ourselves and our potential to be more.


Sincerely Yours,

Jalal GASIMOV
Chairman