PASHA_BANK ANNUAL REPORT 2021

107 Annual Report 2021 PASHA Bank PASHA Bank defined its key strategic support points to reach its targets for the three‑year strategic period, which includes 2021‑2023, as regional visibility in foreign trade, re‑definition of credit products, diversified funding, guiding growth and innovation in investment banking. PASHA Bank’s total assets grew by 63% year‑over‑year to reach TL 3,563 million, due to the growth in loans. In the same period, the Bank’s liabilities increased to TL 2,956 million, and total shareholders’ equity rose to TL 607 million. Having attained a gross operating profit of TL 154.9 million according to the unconsolidated financials at the end of 2021, the Bank closed 2021 with a net period profit of TL 47.1 million. The total amount of cash loans and lease receivables (gross) rose by 62.3% year‑over‑year at the end of 2021, increasing from TL 1,493 million to TL 2,422 million, corresponding to 68% in the total assets. Non‑cash loans amounted to TL 732 million and the total credit risk exposure rose to TL 3,155 million with 72.8% increase. Cash, banks and liquid marketable securities consist of 25.48% of total assets. High liquidity state bonds and bills amount to 53.5% of the Bank’s total securities portfolio of TL 429 million with a 179.6% increase. The Bank’s non‑performing loans were realized as TL 45.8 million thousand and its ratio over total loans was 1.9%. The primary funding sources of the Bank are the shareholders’ equity with a 17.0% share, “Funds Borrowed” and “Due to Money Markets” with a 44.4% share, and “Debt Securities Issued” with a 34.3% share. Among debt securities issued, Eurobond issuances in Azerbaijan constitute the whole of total issuances in circulation as of the balance sheet date. Among debt securities issued and in circulation, amount of USD 83 million and EUR 3.2 million were issued in Azerbaijan as Eurobonds. Funding from the risk group constitutes 34.5% of total funding. Normal customer relations and market conditions are considered for relations with the risk group. Total operating expenses reached TL 53.1 million in parallel with the expansion in the operations of the Bank. Information on investments of the Bank in 2021 was disclosed in the Independent Audit Report Section 5/ I. Notes and disclosures to asset account in balance sheet. PASHA Bank exceeded its target by 44% in total assets set for the year 2021 budget objectives. Among the key financial indicators, capital adequacy ratio was 17.4% and total assets/ equity ratio was 5.9. Actions and projects supporting strategic goals are being studied by senior management through the committees they work in, reviewed by the Board of Directors and decisions are taken. Strategy and Budget Committee reviews the Bank’s strategy and its key pillars regularly, strategic initiatives and implementation plan is reviewed in meetings which are realized at Group level every six months. The Bank’s paid‑in‑capital amounting to TL 500 million was assessed for possibility of loss of capital within the scope of Article 376 of the Turkish Commercial Code. It was determined that there were no obstacles in front of PASHA Bank to continue its operations in a healthy manner thanks to its strong position in terms of capital adequacy ratio and debt structure and assets are at a sufficient level to meet liabilities. PASHA Bank analyzes its capital requirements in line with its strategic goals within the scope of the criteria defined in ‘‘Regulation on Banks’ Internal Systems and Internal Capital Adequacy Assessment Process’’ and ‘‘Guidance on ICAAP Report’’. Capital planning is done in accordance with ICAAP. A measurement and assessment process was established to cover risks specified within the scope of ICAAP. a. First structural pillar risks b. Second structural pillar risks that are significant and identified by the Bank. c. External risks arising from the economic environment, business environment and regulatory framework which are not covered above. Assessments on the Financial Condition, Profitability, Debt Servicing Capability and Realization of the Defined Strategic Objectives