PASHA_BANK_ANNUAL REPORT 2022

27 PASHA Bank 2022 Annual Report General Information Information on Management and Corporate Governance Principles Financial Information and Risk Management Review Esteemed Stakeholders, It is a fact that the on-going Russian- Ukraine war has implications on the Turkish economy since the conflicting parts are trading partners of the country. But, it is not the only fact weighing on economic activity, the general picture is that the world is in a volatile period, economic, geopolitical, ecological changes all impact the current global economic stance and the outlook going forward. Nevertheless, deteriorating external environment is not only limiting export performance of the country, it is also returning as rising inflation due to price surge in commodities. Subsequent price increase in commodities and even historical high records at some are pushing up consumer and producer prices. Incoming macro and market data suggest that the country is able to manage economic implications of this external shock. In general, very proactive diplomatic efforts of the government is contributing positively in this regard. It is not a coincidence that the Turkish economy has performed 3.9% growth in the Q3 of this year. Despite the fact that early warning indicators show some sort of deceleration, the economy is expected to end the year in a positive growth zone. But, in addition to that, worsening global landscape, increasing concerns on possible recession scenario, rate hike cycle of main central banks are factors that in the end complicate the external environment feeding some downside risks. In this regard, it is worth to mention that last policy measures by the Government, like adjustment in the level of minimum wage is quite adequate which ultimately contributes to expanding aggregate demand in the economy, but of course, with the reservation that its potential impact to inflation spiral should be considered carefully. On the back of above mentioned economic landscape, the overall banking system succeeded to maintain risks within the acceptable levels, and profitability at two-digit territory. According to latest data, the total assets of the system in the last 12 month has increased by 56% as opposed to prior year and reached TL 14,344 billion. The same trend applies to credit portfolio. Total credits of the industry reached TL 7,972 billion with 53% increase. 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 73% to reach TL 6.156 million when compared to the prior year-end. Our gross cash loan and leasing receivables portfolio, comprising 59% of total assets, reached TL 3.638 million with a 50% 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 on-going war, 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 agile structure