PASHA_BANK_ANNUAL REPORT 2022

107 PASHA Bank 2022 Annual Report General Information Financial Information and Risk Management Review Information on Management and Corporate Governance Principles 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 73% year‑over‑year to reach TL 6,156 million, due to the growth in loans. In the same period, the Bank’s liabilities increased to TL 5,340 million, and total shareholders’ equity rose to TL 816 million. Having attained a gross operating profit of TL 384 million according to the unconsolidated financials at the end of 2022, the Bank closed 2022 with a net period profit of TL 204 million. The total amount of cash loans and lease receivables (gross) rose by 50% year‑over‑year at the end of 2022, increasing from TL 2,422 million to TL 3,638 million, corresponding to 59% in the total assets. Non‑cash loans amounted to TL 785 million and the total credit risk exposure rose to TL 4,423 million with 40% increase. Cash, banks and liquid marketable securities consist of 37% of total assets. The securities portfolio, which reached TL 553 million with an increase of 29%, has a 9% share in total assets. The Bank’s non‑performing loans were realized as TL 16.6 million thousand and its ratio over total loans was 0.5%. The primary funding sources of the Bank are the shareholders’ equity with a 13% share, “Funds Borrowed” and “Due to Money Markets” with a 50% share, “Debt Securities Issued” with a 15% share, “Funds” with a 10% share and “Subordinated Loans” with an 8% share. Among FX-denominated 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 38.5 million and EUR 3.2 million were issued in Azerbaijan as Eurobonds. Funding from the risk group constitutes 26% of total funding. Normal customer relations and market conditions are considered for relations with the risk group. Total operating expenses reached TL 100 million in parallel with the expansion in the operations of the Bank. Information on investments of the Bank in 2022 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 48% in total assets set for the year 2022 budget objectives. Among the key financial indicators, capital adequacy ratio was 23.4% and total assets/equity ratio was 7.5. 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