CEO's Message

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Esteemed Stakeholders,

While successfully completing our Bank’s first three-year strategy period from 2015 through 2017; we have embarked on our second three-year strategy period in 2018, our Bank has embedded "Integrity", "Quality", "Collaboration", "Responsibility" and "Profitability" values in its working culture, recording many important steps and significant developments.

Despite the fact that, 2018 was a tough year due to reflections of turbulence experienced in global economy on our economy, PASHA Bank achieved a gross operating profit of 68.7 million TL and an asset size of 1.35 billion TL

Our Bank purchased a property to be used as the Head Office on Büyükdere Avenue, at the heart of business and finance in Istanbul. In parallel with developments in the Turkish economy, the Bank closed the year with a net period loss of 3.5 million TL, as a result of the decrease in the value of tangible assets by 42.1 million TL and allocation of 17.7 million TL as general reserves as per IFRS 9. This investment undertaken in such a challenging year encouraged by our shareholders is a development which is an indication of PASHA Bank’s advancements with a stable strategy and render PASHA Bank even more visible.

PASHA Bank increased its paid-in capital to 500 million TL with PASHA Holding LLC's 245-million-TL direct investment last year after it embarked upon its journey to become the "top of the mind brand in the region". This is a clearl indication of  confidence of our main shareholders, PASHA Bank OJSC and PASHA Holding LLC, in our country, and in the Turkish economy.

Evaluating last year from an economic perspective, we note a rather rattling year both for global markets and the Turkish economy. Having achieved 6% growth in the first half of the year thanks to household consumption expendituresand public spending, the Turkish economy witnessed a deceleration in growth as of the second half of the year. In a year where we had  early elections, both political and geopolitical risks led to sharp fluctuations in exchange rates and steep rises in interest rates. Globally, it was a turbulent year where previously supply of abundant liquidity ground to a halt; central banks continued with their  interest rates hikes; trade war concerns ; Brexit developments and sanctions on Iran; protests in Europe, and tumbling oil prices. Following interest rate hike September interest rate hike  at higher levels than expected by the CBTR; positive steps taken towards the normalization in international diplomatic relations; and actions were rapidly implemented as part of the recently-announced New Economic Program since September- all paved way for a recess in interest  rates and exchange rates. However, with deteriorating balances,  recovery in inflation and growth is likely to take some time. Weanticipate the Turkish economy togrow 3% annually , with the shrinkage projected in the last quarter.We expect the inflation  to be around 14-15% for the next year, and CBRT  to maintain its tight monetary policy stance to achieve price stability in 2019. As for the banking sector, I reckon the pace of credit growth, which has decelerated in the recent period, to pick up again next year, and record an annual rise of 10%.

In the light of these projections and the financial data, I have no doubt that PASHA Bank will continue to grow and walk firmly towards its goals over the coming years. Indeed, the Bank's achievements and progress in the previous period provide the greatest testament for this belief.

Our Bank issued the second Eurobond in 2018, following the first Eurobond issue in Azerbaijan as a foreign organization in 2017. Upon issuing the second Eurobond, amounting to 25 million US Dollars, with a maturity of 3 years and 3 months, PASHA Bank provided funds of up to 50 million US Dollars from the Azerbaijani Capital Markets. Our TL-denominated bond issues in Turkey continue steadily.

It is also a source of pride for us to see that PASHA Bank's achievements are confirmed by international academic circles. Case studies on PASHA Bank's strategy were recorded on DIVA, the inter-university database in Sweden, and published at the Case Centre, an independent case house operating for more than 40 years with over 500 partners, and on SAGE Business Cases.

At PASHA Bank, we furthered our mission of being a commercial and cultural bridge in 2018, through the project we co-ran with Atlas magazine entitled "neighbouRoute: One Road, Three Neighbors; Baku, Tbilisi, Kars", covering the Turkey-Azerbaijan-Georgia triangle in which we operate. As part of the project, routes on the Iron Silk Road, which will connect trade between three countries, were photographed. Impressive photos published on the digital channels of PASHA Bank will also be featured in the first 2019 issue of Atlas magazine.

2018 was an introspective year during which we focused on internal communication efforts. Our efforts on 'Mission', 'Vision' and 'Corporate Values' with PASHA Holding LLC were a guiding light for all of us, while helping all PASHA Bank employees to internalize the values of 'Integrity, Quality, Collaboration, Responsibility and Profitability'.

We have launched two important projects in 2018 to serve our customers at the highest level: We intend to update all the processes, related policies, guidelines, procedures and work flows of our Bank, and improve our service quality, while minimizing operational risk.

Another significant project was launched to equip Information Systems with cutting edge technology; a must in our era, and a key tool in the delivery of banking services. The initiatives  we have undertaken  to boost our Bank's competitive edge and serve at the highest levels are ongoing, and we will renew our IT infrastructure, starting from the core banking system in 2019.

Despite any and all challenges that may arise globally, in Turkey's economy, or in the banking sector, PASHA Bank will continue its financial support of investors, encouraging investment and guiding them in related decision making, thereby fostering trade in the Turkey-Azerbaijan-Georgia triangle in next year, too. We will continue to support entrepreneurs and our economy through our services and products, by providing funding with our long-term financial products, through investment projects that add value to our country, and through our strong capital structure, qualified workforce and advanced infrastructure. We will be as delighted and excited as we have been thus far in supporting corporate social responsibility projects that contribute to our country in social, cultural and educational terms.

I would like to thank, from the bottom of my heart, my colleagues who will continue to serve customers by fully embodying our corporate culture and values, and the Members of the Board of Directors, our customers and investors for the confidence in, and invaluable contributions they have made to our Bank.

Sincerely Yours,

General Manager and Board Member