Esteemed Stakeholders,
The global economy continues to undergo a significant transformation driven by advancements in AI adoption, ongoing geopolitical uncertainties, and rising trade protectionism. In light of these developments, global economic activity has moderated, with growth projected at around 3.3% for 2026. Furthermore, the ongoing Russia–Ukraine conflict and the escalation of the military confrontation between the US-Israel and Iran in early March 2026 have severely disrupted global energy markets, with the closure of the Strait of Hormuz triggering the largest oil supply disruption in the history of the global oil market, pushing Brent crude above $100 per barrel. These factors, coupled with elevated trade protectionism, create a particularly challenging geopolitical and macroeconomic environment for Turkiye, exacerbating the foreign exchange rate depreciation pressure, high inflation and energy import costs.
Despite these challenges, recent macroeconomic data show that Turkiye is able to manage economic implications of the shocks from the external situation. The diplomatic efforts of the government and the adjustments in banking regulation helped to maintain the macro-financial stability. Turkish economy grew by 3.6% in 2025, as private consumption and total investments growth accelerated. Construction and ICT sectors were the main drivers of growth. Looking ahead, the economy is projected to grow by 3.4% to 4.2% in 2026 according to international institutions, though the risks are tilted to the downside due to the ongoing conflict in the Middle East. Annual inflation eased to 30.9% in March 2026, as the disinflation trend continues albeit at a slower pace. The Central Bank held the policy rate steady at 37% in March, pausing its easing cycle in response to the geopolitical shock and elevated energy prices. In this regard, it is worth to mention that the Government’s continued commitment to conventional economic policies, maintaining positive real interest rates, and the simplification of the micro- and macroprudential framework remain quite adequate in supporting the disinflation process and financial stability. Following these positive developments in the preceding periods, rating agencies had raised the credit rating of Turkiye, contributing to the investment outlook in the country.
On the back of above-mentioned economic landscape, the overall banking system succeeded to maintain risks within the acceptable levels, and profitability at a robust level. According to the latest data, the total assets of the system in the last 12 months have increased by 42.2% as opposed to February 2025, amounting to TL 48,871 billion. A similar trend applies to the credit portfolio. Total credits of the industry reached TL 24,218 billion with 43.6% increase. In early 2026, the sector’s net income surged by 43.3% year-on-year, while the capital adequacy ratio stood at 16.8%. At the same time, the non-performing loan ratio has edged up to 2.6%, signaling the need for continued vigilance in asset quality management amid the high interest rate environment and the emerging geopolitical pressures.
It is a tradition, therefore, we are proud to say that PASHA Bank as a dynamic market player keeps going on its healthy expansion. In general, continuous investment onto strengthening of internal capabilities, starting from building core competencies for managing business to increasing human capital potential of the Bank, has already demonstrated its strategic return in the form of capable navigation through the stressful times. As a result, total assets of the Bank increased by 2% to reach TL 15,168 million at the end of 2026. Our gross cash loan and leasing receivables portfolio, comprising 58% of total assets, reached TL 8,760 million with a 2% increase.
Due to effective risk management framework, and prudent credit policy pursued by the Bank we have been successful in preserving low level of NPL in our balance sheet. It is worth to underline that flexible revisiting of credit policy, adjusting tactics of credit and underwriting policy to the current realities of macroeconomic environment etc. are forming substance of the overall risk approach of the Bank. Moreover, it is worth to underline that quick revisit of the loan portfolio due to the escalation of the military conflict in the Middle East and the associated oil price shock, and run of the relevant stress-testing process have also expanded the ability of the bank managing credit risks in a proper way. Regarding the latter, it has become more crucial how the Bank formulates its baseline scenario, and also how risk triggers are embedded into stress scenario framework, which ultimately end up with proper scenario formulation, advanced measurement and preparation of mitigation plan.
2026 is the last business year of the 2024-26 strategic period. In general, the 2024-26 strategy rises on the foundation of values like integrity, quality, collaboration, entrepreneurship and profitability, built up with the vision to create new and enduring values in the business world and society, focused as the mission to become a cross-border bank empowering its customers. As we approach the conclusion of this strategic cycle, we are pleased with the progress achieved and have already begun laying the groundwork for the next strategic period. It is worth to mention that strategically it has become very important to leverage on synergy opportunities in the Group, since the operations are going beyond countries and sectors, which in the end provides potential business opportunities.
This strategic period in its essence is characterized with strengthening the activity of the existing business segments, also with full dedication to the new initiatives. Coming to the latter, it actually concentrated on the growth of potential niche markets. Financing investment into the real estate market in the countries of operations via the mortgage lending, investment into the venture capital in order to materialize technological return in the greater scale of the entire Group business etc. are examples in this regard. About the real estate initiative, the Bank already introduced mortgage product in the 1st quarter of 2022 within the entire Group. In addition to diversifying its funding side, the strategic document also covered main business enablers which are actually the main assets of bank in the way of execution of the strategy. It is our privilege to state that, the proper strategy formulation has been the backbone of higher financial performance similar to the previous strategic periods.
While executing the strategy, we continue to make substantial investments to the information technologies, risk management, credit management, fund raising, talent acquisition etc. and development of our employees that are of foremost importance. In overall, agility and know-how regarding focus sectors are expected to be the outstanding capabilities of the Bank. It is worth to mention that the operational agility of the Bank yields its return even in the core operations. Of course, we totally understand that agility may require us to invest in operational systems which in the end provide system availability, from other hand accelerate transformation towards digitalization. It is the reason that the Bank has some strategic projects in this regard. Infrastructure enhancement for digitalization and new platforms, and advanced information security for digitalization are among them.
We will continue to make efforts to diversify the Bank’s funding structure and expand our correspondent network and investor base. In this regard, it is important to emphasize competitive advantage of the Bank which goes beyond the country borders, and comes with the strength of the Group’s presence across the region. It is really a privilege to us to witness expanding business opportunities on the back of increasing regional economic relationships after the great victory of Azerbaijan. Strengthening trade relations between Azerbaijan and Turkiye, increasing FDI flows, active participation of Turkish firms in reconstruction process of liberated areas etc. are the examples for the above-mentioned economic ties. In its turn, this expanding economic base is providing a feasible opportunity for the Bank to materialize promising business perspectives in this regard.
In addition to that, the Bank has opportunity to attract funding from both Azerbaijan and Georgia, in case it sees favorable interest rate developments there, and this potential can be materialized during the current strategic period. We will maintain our prudent approach to managing credit risks so that the asset quality of the Bank is not affected by the current environment characterized with increasing volatility in the market driven by the ongoing geopolitical tensions and energy price shock. 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 navigating through the current challenges together with all our stakeholders, capitalizing on the emerging opportunities, and building business relationships based on mutual interest that provide enormous benefit to all parties.
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