Yapi ve Kredi Bankasi : 2023 Integrated Annual Report

2023

INTEGRATED

ANNUAL REPORT

	From the	About	Business	Responsible	Innovative	Human	Corporate	Financial
Presentation	Model and	Annexes
Banking	Focus	Governance	Information
	Management	Yapı Kredi	Stakeholders	Growth

BİRWEASIRDIRARE PROUDULU ÖNDERTO WORKATATÜRK'ÜNTOWARDSGÖ TERDİĞİTHE FUTUREYOLDA,

CUMHUUNDERİYET'İNTHE GUIDANCEIŞIĞIYLA İLERLEMENİNOF ATATÜRKGURURANDVEIN THE

HEYECANINILIGHT OF THEYAŞIYORREPUBLICZ. FOR 100 YEARS.

KoçAs theTopluluğuKoç Group,larak,weCumhuriyetimizibelieve that thekutlamanınbest way ento güzelcelebrateyolunun, çalışmak,the Republicüretmekis to vework,en iyisiniproducebaşarmakand achieveolduğunatheinanıyoruzbest. .

Aware of our responsibility of preserving the values of the Republic Cumhuriyet değerlerini gelecek nesillere taşıma sorumluluğuyla hareket for future generations, we continue to serve with our love and ederek, memleketimize olan sevgi ve bağlılığımızla hizmet etmeye, devotion to our country and we are committed to protecting and Atatürk'ün bize emâneti olan Cumhuriyetimizi, ilke ve değerlerini defending our Republic, which Atatürk entrusted to us, and its muhâfaza ve müdâfaa etmeye aynı kararlılıkla devâm ediyoruz. principles and values.

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	From the	About	Business	Responsible	Innovative	Human	Corporate	Financial
Presentation	Model and	Annexes
Banking	Focus	Governance	Information
	Management	Yapı Kredi	Stakeholders	Growth

Contents

6 About the Report

PRESENTATION

8 Outlook

FROM THE MANAGEMENT

1. Chairman's Message

1. CEO's Message

ABOUT YAPI KREDI

28 About Yapı Kredi

1. Vision, Mission, Strategy and Values

1. Shareholding Structure

1. Milestones

1. Service Model

1. Subsidiaries of Yapı Kredi

1. 2023 Positioning
2. Summary Financials
3. Board of Directors

1. Yapı Kredi Received Major International Awards in 2023

1. Senior Management

1. Board of Directors and Committees

BUSINESS MODEL AND STAKEHOLDERS

74 Sustainability Management

78	Business Model and Strategy
82	Trends, Their Impact on the Sector and
4	Yapı Kredi's Response

94 Ethics and Compliance

97 Material Issues

100 Stakeholder Relations

104 Risk Management

RESPONSIBLE GROWTH

122 Responsible and Sustainable Finance

128 Enviromental Impact Management

136 Contribution to the Society

INNOVATIVE BANKING

1. Banking Activities
2. Retail Banking

1. Business Banking

1. Payment Systems

1. Private Banking and Wealth Management

1. Limitless Banking

1. Commercial and SME Banking

1. Corporate Banking

1. Yapı Kredi Asset Management

1. Yapı Kredi Invest

1. Yapı Kredi Leasing
2. Yapı Kredi Faktoring
3. Yapı Kredi Bank Nederland
4. Yapı Kredi Bank Azerbaijan
5. Treasury Management

Yapı Kredi 2023 Integrated Annual Report

198	Technology, Data and Process Management	285	Legal Disclosures
202	Banking Operations Management	286	Independence Declaration
204	Technological Risks and Cyber Security	287	Statement of Responsibility
208	Other Subsidiaries	288	Dividend Distribution Policy
			289	Note On 2023 Net Profit
		290	Independent Auditor's Report on the Board of
	HUMAN FOCUS
216	Customer Experience		Directors' Annual Report Originally Issued in Turkish

220 Customer Communication Center

223	Personal Data Protection and Processing		FINANCIAL INFORMATION
226	Talented and Committed Employees	296	Publicly Announced Unconsolidated Financial
236	Awards		Statements and Related Disclosures at December 31, 2023
				Together with Auditor's Audit Report
		425	Publicly Announced Consolidated Financial Statements and
	CORPORATE GOVERNANCE
244	Support Services		Related Disclosures at December 31, 2023 Together with
245	Ordinary General Meeting Agenda		Auditor's Audit Report

246 Report of the Board of Directors

248	Audit Committee's Assessment on Internal		ANNEXES
	Audit, Internal Control and Risk Management Systems	558	Performance Tables
252	2023 Financial Review	564	United Nations Principles For Responsible Banking
254	Five-Year Summary Financials		Reporting Index
255	Credit Ratings	578	TCFD Disclosure Table
256	Declaration of Compliance with Corporate Governance Principles	580	UN Global Compact and WEPs Reporting Index
258	Corporate Governance Compliance Report	582	Reporting Principles
266	Corporate Governance Information Form	596	Limited Assurance Report
275	Sustainability Principles Compliance Framework	602	GRI Content Index
		610	Directory
		611	Legal Disclaimer

Yapı Kredi 2023 Integrated Annual Report	5

	From the	About	Business	Responsible
Presentation	Model and
	Management	Yapı Kredi	Stakeholders	Growth

GRI 2-1, GRI 2-2, GRI 2-3, GRI 2-5

About

the Report

Innovative	Human	Corporate	Financial	Annexes
Banking	Focus	Governance	Information

NATURE, PERIOD AND SCOPE

This report is the Integrated Annual Report of Yapı ve Kredi Bankası A.Ş. and its domestic and overseas affiliated subsidiaries ("Yapı Kredi" or "Bank"), covering 12-month activity period of Yapı Kredi starting on 1 January 2023 and ending on 31 December 2023. The report includes financial and non-financial data of Yapı Kredi and its domestic and overseas subsidiaries.

The Report will be presented to the 2023 Ordinary General Meeting of Yapı Kredi as an Integrated Annual Report.

CONTENT AND REGULATORY FRAMEWORK

The Report covers the integrated business model of Yapı Kredi that creates long-term value for all of its stakeholders, risk and opportunity management practices, future strategies, stakeholder communication, and ESG performance indicators and objectives. The Report also provides detailed information on the Bank's material issues identified with the broad involvement of stakeholders, approach to governance based on sectoral and global trends.

The report has been prepared in accordance with the GRI Standards and the International Framework of the Value Reporting Foundation. The reporting practices has taken into account Borsa Istanbul Sustainability Index Banking Criteria as well as United Nations Global Compact, United Nations Sustainable Development Goals, and Women's Empowerment Principles, of which Yapı Kredi is a signatory. The Report provides the statement table for the Task Force on Climate-Related Financial Disclosures (TCFD), of which Yapı Kredi is a supporter.

Moreover, the reporting of the United Nations Principles for Responsible Banking, founded with the participation of Yapı Kredi as a founding signatory to guide the future of sustainable banking is presented for the stakeholders.

AUDIT APPROACH

The financial information included in the report has been audited by PwC Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş., an independent auditing company. The Independent Auditor's Statements are available on pages 290-425.

Moreover, the same independent auditor also granted a limited assurance statement in line with ISAE 3000 (Revised) and ISAE 3410 standards for the selected environmental, social and governance indicators included in the report. The list and scope of indicators assured are given in the Independent Assurance Statement on page 596 of the Report.

Please send all your questions, comments, and suggestions related to the Report to [e-mail] and [e-mail]

SUSTAINABILITY INDEXES LISTING YAPI KREDI

The report has been prepared

AND INITIATIVES SUPPORTED BY THE BANK

in accordance with the GRI

Standards and the International

Framework of the Value

Reporting Foundation.

Please scan the QR code for the full version of

Yapı Kredi 2023 Integrated Annual Report.

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	From the	About	Business	Responsible
Presentation	Model and
	Management	Yapı Kredi	Stakeholders	Growth

Outlook

Innovative	Human	Corporate	Financial	Annexes
Banking	Focus	Governance	Information

CHANGES IN THE SECTOR

Despite the slowdown in the global economy, geopolitical uncertainties affecting the world and Turkey, and the negative effects of the major earthquake disaster in our country, 2023 was a challenging year with a growth of over 4.5%. Rising inflation and the changes in policy interest rates became important agenda items for both the Turkish economy and the banking sector.

It is predicted that high interest rates, decreasing money supply, increased number of regulations, climate change and geopolitical risks will make economic growth difficult in the world in 2024.

The IMF estimates that the global economic growth in 2024 will not exceed 3.1%, global inflation will fall down to 5.2%, but inflation will remain above the target in most countries. While the growth of developed countries such as the USA, European Union Countries, Japan and Canada is expected to be lower, it is predicted that the economies of developing countries such as India will grow further due to the young population and increasing demand. In the global banking sector, it is expected that more banks from India and the Middle East will enter the top 100 in the next decade and the balance will shift from the west to Asia and the Middle East.

In terms of sectoral developments, with the decrease in uncertainties after the general elections in Turkey, reconstruction work in the earthquake zone and accelerated urban transformation and infrastructure works before the local elections, the construction sector grew by 8% in 2023.

The financial sector also continued to support the economy thanks to its strong capital structure and ability to quickly adapt to change.

Retail sales volume index increased by 11.4% in December 2023 compared to 2022. (Source: TUIK)

The financial sector also continued to support the economy thanks to its strong capital structure and ability to quickly adapt to change. With the expected normalization in the loan and deposit markets in 2024, banks focus more effectively on their core areas of activity, thus further strengthening risk management and continuing their contribution to the economy.

CONSUMER BEHAVIOR AND THE IMPACT OF TECHNOLOGY

The consumers face more and more challenges as a result of the pandemic, political unrest, wars, increasing disasters due to the effects of the climate crisis and the decrease in purchasing power caused by increasing inflation due to economic difficulties in recent years. The expectations of people who seek to be happier and more peaceful also change rapidly.

In the future, in order to best understand this need, companies will have to increase all kinds of interactions with customers, understand their values, differentiate the communication language and offer interactive experiences with messages that inspire optimism and happiness. Moreover, it will be important to further develop personalized offers and services by better understanding and analyzing the traces the customers leave in the system. Being able to use the opportunities introduced by technology to meet these requirements, quickly transforming processes and policies with an agile and flexible approach, and reducing the burden of bureaucracy will provide a competitive advantage.

On the other hand, in an environment of high inflation, the rapid decrease in the purchasing power of consumers causes price to become an important parameter in every purchase, including sustainable and healthy products. Therefore, it will be important to offer consumers the right and personalized products and services at the right price in the coming period.

The growing climate crisis, increasing number of natural disasters and health problems and worsening effects on people increase the

With the expected normalization in the loan and deposit markets in 2024, banks focus more effectively on their core areas of activity, thus further strengthening risk management and continuing their contribution to the economy.

desire to contribute to this issue. Environment and sustainability continue to be the focus points of consumers. However,

this approach demands full transparency, which will require sharing concrete evidence of responsible business practices, demonstrating progress and presenting sustainable impact with data.

The impact of digital marketing will increase further to meet these expectations of consumers. Organizations will expand their opportunities to connect and engage with consumers using digital channels such as social media, email marketing, and content marketing.

With all these developments, the use of data will increase and customers will expect and question companies to use their data responsibly. Businesses will be expected to focus on data security and transparency.

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Presentation	From the
Management

FINANCIAL SECTOR PROSPECTS

About	Business	Responsible
Model and
Yapı Kredi	Stakeholders	Growth

Innovative	Human	Corporate	Financial	Annexes
Banking	Focus	Governance	Information

CLIMATE CRISIS

In line with this conjuncture and consumer expectations, the transformation in finance and banking will continue unabated. 2024 will be the year of technological developments, especially generative artificial intelligence, embedded finance, open banking, digital money, decarbonization, fraud and digital identity issues.

Generative Artificial Intelligence technology is expected to change the way of doing business very quickly with its human- like decision-making potential. With this technology, the financial sector and banks will be able to produce customer-specific offers faster and more accurately, and will improve process automation and service quality with easier, error-free and uninterrupted operations, thus increasing efficiency.

The progress in the digitalization of Retail Banking will continue with personalized applications that differentiate the experience. With the support of new regulations, the number of initiatives for the digitalization of corporate banking products and services, especially foreign trade transactions will be increased. In addition, there will be works on modernizing B2B payments with real-time payments (RTP).

The effectiveness and use of Open Banking applications are expected to be improved, which are still in the early stages and allow individuals to share their information with non-traditional financial institutions and other banks within the framework of secure financial data exchange. Statista predicts that Open Banking will reach 132 million users worldwide in 2024.

The increase in the number of these applications will boost competition and enable fintech companies to improve various services such as budgeting, expense tracking, financial planning and lending.

As banks increase their technological investments in this process, it is expected that there will be more collaborations with fintechs

2024 will be the year of

technological developments, especially generative artificial intelligence, embedded finance, open banking, digital money, decarbonization, fraud and digital identity issues.

as well as strategic partnerships with actors in technology and other non-financial sectors.

The improving effectiveness of data-based digital services and artificial intelligence will increase the importance of data security and general cybersecurity investments.

Like all sectors, the finance sector will reshape its talent pools while managing these developments. Companies will attach importance to training their employees according to new expectations, and to external talent acquisition and retention. The mobilization of the global workforce by remote working programs will boost the competition in this field.

ALWAYS PEOPLE-FOCUSED

As Yapı Kredi, we always improve our business model by managing internal and external changes in an effective and rapid manner, and by constantly investing in the most up-to-date technologies and our dedicated employees. Adding value to all our stakeholders with our people-focused approach will continue to be our priority. Our values on this path are customer focus, "Being One, Being Together, We Are One", being a pioneer, competitiveness, goal orientation, agility, innovation, efficiency, durability and sustainability. All our short-, medium- and long-term strategic initiatives are nourished and prioritized by these values.

International organizations and nations are expected to step up and focus on the critical steps in the fight against the climate crisis in the coming period. With the establishment of the Loss and Damage Fund, an important outcome of COP28, countries that are sensitive to climate change will begin to receive financial support against climate change-related disasters as of next year. However, considering the economic size of the losses and damages in developing countries, estimated to be between USD 290 and 580 billion by 2030, countries will be required to make much greater commitments and mobilize innovative financing resources to meet the needs of climate-affected communities. As a result of the global situation assessment calling on countries to submit new Nationally Determined Contributions (NDC) well before COP30 in 2025, countries are expected to update their 2030 targets and present new targets for 2035 at the next COP. Moreover,

it is suggested that NDCs will reflect the transformation across multiple sectors, including nature conservation, clean energy, road transportation, etc. Regarding Turkey, the draft Climate Law, prepared to form the legal basis for Turkey's climate policies in 2023, is expected to be submitted to the Grand National Assembly in 2024 for approval.

Considering all these expectations, the banking sector, a critical player in the fight against climate change, experiences a period where organizations intensified the work on determining greenhouse gas reduction targets and strategies. In order to fulfill their net-zero commitments, banks are expected, in the coming years, to expand the coverage of emissions reduction to include more sectors in their loan portfolios, and focus on efforts to decarbonize their portfolios. Moreover, it is envisaged that banks will not only act as financiers, but also play a guiding role in the transformation of their customers. Thus, taking into account the ongoing serious investment and financing gap in tackling the climate crisis, in order to create competitive opportunities in green transformation, it is expected that the banks will diversify

Adding value to all our stakeholders with our people-focused approach will continue to be our priority.

their sustainable product and service groups, and the sustainable borrowing market will become more active. In addition, as a result of the expansion of primary investments, private capital is expected to play an important role in climate finance.

Biodiversity, which is considered among the most important global risks and is of critical importance for the protection of ecosystems, became one of the hot topics in 2023. The investment need for biodiversity, estimated to be around USD 700 billion annually

at the global level, is expected to be a significant force driving banks to start including it in the product range offered for climate change. Along with the blue finance, which is a new topic in Turkey, covering issues such as access to clean water, protection of water resources and securing marine ecosystems, it is anticipated that there will be a diversification of new financial instruments such as blue loans and blue bonds in international capital markets.

In Turkey, which will be most affected by the Carbon Border Adjustment Mechanism, after China and Russia, it is expected that the work on the national emissions trading system will be sped up in order to minimize economic losses and maintain competitiveness, and specific tools will be developed to help exporters calculate and report carbon emissions. Such practices will especially affect exports and carbon-intensive sectors and will naturally increase the need for resources for operational expenses and investments in the real sector. Therefore, it will be critical for the banking sector to determine actions for these sectors in net zero transition strategies.

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	From the	About	Business	Responsible
Presentation	Model and
	Management	Yapı Kredi	Stakeholders	Growth

Innovative	Human	Corporate	Financial	Annexes
Banking	Focus	Governance	Information

With the banking sector-specific regulations implemented on green transformation in 2023, 2024 will be a year where there will be more transparent reporting and more competition in green transformation. Published by the Banking Regulation and Supervision Agency (BRSA) in 2023 in order to direct investments in Turkey to green areas and to increase the flow of resources from international markets to the real sector, the Green Asset Ratio will be calculated for the first time by banks operating in Turkey in 2024. With the calculation of this ratio, in order to increase competition among banks towards green transformation, there will be new indicators to be monitored such as the contribution level of each bank to the fight against climate change and the transparent disclosure of the management level of the climate risks in the banks' portfolios.

The BRSA published the "Draft Guide on the Effective Management of Climate-Related Financial Risks by Banks" in order to determine the principles that will form the basis of the policies and practices to be carried out to enable banks to effectively manage the climate-related financial risks they are or will be exposed to. In the context of this draft, the focus will be on measuring, analyzing and managing the financial risks posed by climate change as well as the risks that will affect the banking sector and other financial institutions during the transition to a low-carbon economy.

The Turkish Sustainability Reporting Standards, which came into force as on January 1, 2024, following the EU's Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), mark the start of a new, more comprehensive era for corporate sustainability reporting. The Public Oversight Authority (KGK) published

Along with the blue finance,

it is anticipate that there will be a diversification of new financial instruments such as blue loans and blue bonds in international capital markets.

"Turkey Sustainability Reporting Standards" in 2023 under the name TSRS 1 and 2, in compliance with the international IFRS S1 and S2 Standards. With the implementation of these standards, businesses are expected to evaluate their financial situations, performances and cash flows in the short, medium and long term regarding sustainability, with respect to governance, strategy, risk management and climate-related risks and opportunities. In such an environment, sustainability will require going beyond voluntary reporting habits.

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	From the	About	Business	Responsible
Presentation	Model and
	Management	Yapı Kredi	Stakeholders	Growth

Yapı Kredi

Advocate for Volunteering!

YAPI KREDI VOLUNTEERS ARE GOODWILL AMBASSADORS WHO WANT TO ADD VALUE TO SOCIETY, ARE SENSITIVE TO WHAT IS HAPPENING AROUND THEM, LOOK FOR OPPORTUNITIES TO MAKE A DIFFERENCE; AND BRING THEIR SPIRIT, EXPERTISE AND SKILLS WHEREVER THEY GO. SOMETIMES THEY CREATE THEIR OWN PROJECTS TOGETHER WITH NGOs, AND SOMETIMES THEY SUPPORT OTHER PROJECTS. THEY PROMOTE GOODNESS "TOGETHER".

+2,000

Volunteers

"SPEAKING FROM THE HEART", "PROUD TO SUPPORT -

DOWN SYNDROME AWARENESS DAY", "AUTISM AWARENESS DAY", "VOYAGE OF SCIENCE TO ANATOLIA - ROLE MODEL TEACHERS PROGRAM", "AUDIOBOOK WORKSHOP" AND "SIMPLE AND BEST"

145

Innovative	Human	Corporate	Financial	Annexes
Banking	Focus	Governance	Information

project

	From the		About	Business	Responsible	Innovative	Human	Corporate	Financial
Presentation		Model and	Annexes
	Banking	Focus	Governance	Information
	Management		Yapı Kredi	Stakeholders	Growth

Yapı Kredi Volunteers | Corporate

Social Responsibility Projects