HEYECANINI LIGHT OF THE YAŞIYOR REPUBLIC Z. FOR 100 YEARS.
KoçAs theTopluluğuKoç Gr o up,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.
Yapı Kredi 2023 Integrated Annual Report
Yapı Kredi 2023 Integrated Annual Report
6 About the Report
FROM THE MANAGEMENT
ABOUT YAPI KREDI
28 About Yapı Kredi
BUSINESS MODEL AND STAKEHOLDERS
74 Sustainability Management
Business Model and Strategy
Trends, Their Impact on the Sector and
Yapı Kredi's Response
94 Ethics and Compliance
97 Material Issues
100 Stakeholder Relations
104 Risk Management
122 Responsible and Sustainable Finance
128 Enviromental Impact Management
136 Contribution to the Society
Yapı Kredi 2023 Integrated Annual Report
Technology, Data and Process Management
Banking Operations Management
Technological Risks and Cyber Security
Statement of Responsibility
Dividend Distribution Policy
Note On 2023 Net Profit
Independent Auditor's Report on the Board of
Directors' Annual Report Originally Issued in Turkish
220 Customer Communication Center
Personal Data Protection and Processing
Talented and Committed Employees
Publicly Announced Unconsolidated Financial
Statements and Related Disclosures at December 31, 2023
Together with Auditor's Audit Report
Publicly Announced Consolidated Financial Statements and
Related Disclosures at December 31, 2023 Together with
Ordinary General Meeting Agenda
Auditor's Audit Report
246 Report of the Board of Directors
Audit Committee's Assessment on Internal
Audit, Internal Control and Risk Management Systems
2023 Financial Review
United Nations Principles For Responsible Banking
Five-Year Summary Financials
TCFD Disclosure Table
Declaration of Compliance with Corporate Governance Principles
UN Global Compact and WEPs Reporting Index
Corporate Governance Compliance Report
Corporate Governance Information Form
Limited Assurance Report
Sustainability Principles Compliance Framework
GRI Content Index
Yapı Kredi 2023 Integrated Annual Report
GRI 2-1, GRI 2-2, GRI 2-3, GRI 2-5
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.
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 yapikredi_investorrelations@yapikredi.com.tr and Sustainability@yapikredi.com.tr
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
Please scan the QR code for the full version of
Yapı Kredi 2023 Integrated Annual Report.
Yapı Kredi 2023 Integrated Annual Report
Yapı Kredi 2023 Integrated Annual Report
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.
Yapı Kredi 2023 Integrated Annual Report
Yapı Kredi 2023 Integrated Annual Report
FINANCIAL SECTOR PROSPECTS
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.
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.
Yapı Kredi 2023 Integrated Annual Report
Yapı Kredi 2023 Integrated Annual Report