Fitch Upgrades Yapi ve Kredi Bankasi's Ratings.

Business Editors

NEW YORK/LONDON/ISTANBUL--(BUSINESS WIRE)--July 31, 2003

Fitch Ratings, the international rating agency, has today upgraded Yapi ve Kredi Bankasi's ('YKB') Long-term foreign and local currency ratings to 'B- (B minus)' from 'CCC+', Short-term foreign currency rating to 'B' from 'C' and Long-term National rating to 'BBB+ (tur)' from 'BBB- (tur) (BBB minus (tur))'. Its Individual and Support ratings have been affirmed at 'E' and '5', respectively. The Outlook on the Long-term ratings remains Negative.

Because of the uncertainties surrounding the repayment of the loans made to the Cukurova Group (40% of the portfolio), YKB entered into an agreement with Banking Regulatory and Supervisory Agency to restructure the loans over a nine-year period. Under this agreement, the Cukurova Group must take all measures to prevent the bank's capital adequacy ratio (CAR) from falling below 10%. If the Cukurova Group fails to increase capital, the Savings Deposit Insurance Fund (SDIF) will provide the required increase. This agreement has the backing of the IMF and World Bank and underpins the upgrade in the Long-term ratings.

After sustaining substantial losses in 2001 due to both foreign exchange losses stemming from the TRL devaluation and large provisions for its loans to the Cukurova Group, YKB's profits rebounded in 2002. This was principally due to a reversal of previously established provisions although core results were relatively weak. Although the bank has managed to maintain public confidence and its deposit base despite the takeover of Pamukbank, its sister bank, asset quality remains poor. This is evidenced by a relatively high level of non-performing assets and considerable exposure to the Cukurova Group, whose repayment ability without asset sales is still unknown. YKB reported a consolidated regulatory capital ratio of 16.95% at end-2002 (2001: 11.90%). However, equity is impaired by a high level of permanent assets, including participations, fixed assets, and subsidiaries. When coupled with the shortfall in the loan loss reserve, YKB's free capital was negative. Management continues to seek buyers for non-strategic investments, but short-term sales appear difficult to achieve due to poor market conditions.

YKB is the fourth largest private commercial bank in Turkey with consolidated total assets of USD12.1 billion at end-2002. It is a leader in retail banking and other activities such as wholesale, international and investment banking. The bank is 45%-owned by the Cukurova Group - whose stake declined from 58% after the June 2002 takeover of YKB's sister bank - 13% by SDIF, with the remaining 42% publicly-traded. YKB's large size, major retail banking franchise, and the upgrade of the Long-term local currency rating warrant a two-notch upgrade in the National Rating.

Note to Editors: Fitch's Individual and Support Ratings for Banks Fitch's Individual ratings assess how a bank would be viewed if it were entirely independent and could not rely on external support. Its Support ratings deal with the question of whether a bank would receive support from its owners or from the state if it were to get into difficulty. These ratings are not debt ratings but rather, respectively, an assessment of the intrinsic strength of a bank and of any level of outside support that may, or may not, be available to it.

Fitch's National ratings for Banks provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(tur)' for National ratings in Turkey. Specific letter grades are not therefore internationally comparable.