(The following statement was released by the rating agency)MOSCOW/LONDON, May 28 (Fitch) Fitch Ratings has affirmed Iller Bankasi A.S.'s (Iller Bank) Long-term foreign currency Issuer Default Ratings (IDRs) at 'BBB-', Long-term local currency IDR at 'BBB', National Long-term rating at 'AAA(tur)' and Short-term foreign currency IDR at 'F3'. The Outlooks on the Long-Term ratings are Stable.KEY RATING DRIVERSIller Bank's ratings are aligned with those of the Turkish sovereign (BBB-/BBB/Stable) and reflect the high probability of support the bank may receive from the state in light of its special status and strategic importance. The ratings also reflect the bank's unique funding model leading to strong capitalisation, low debt, strong liquidity and sound asset quality. However, the ratings also factor in moderate concentration of the loan portfolio and accelerated loan portfolio growth in 2013. Fitch uses its public-sector entities criteria and applies a top-down approach in its analysis of the bank. Special Status Development BankIller Bank's shareholders are all Turkish municipalities. The bank was established in 1933 with the objective to provide financial services, as well as project development, engineering, technical and consultancy services to the municipalities. Strong CapitalisationIller Bank's key strength is its exceptionally strong capitalisation. Equity accounts for about 70% of total assets. In accordance with national law, Iller Bank receives monthly capital injections at 2% of tax revenue of all Turkish municipalities distributed by the Ministry of Finance. The bank's equity increases by about TRY750m (USD360m) annually as a result of monthly equity injections. At end-2013 total equity was TRY10.2bn (2012: TRY9.3bn) versus total assets of TRY14.7bn (2012: TRY12.6bn).Low DebtIller Bank is a non-deposit-taking bank and non-equity liabilities are represented by long-term loans from international banks and international financing institutions (IFIs). At end-2013 the bank had an equivalent of TRY552m foreign currency loans, equivalent to 12% of total liabilities ( excluding the equity cap). These loans are guaranteed by the national Treasury. IFI funds are on-lent to municipalities mirroring maturities and currencies, mitigating liquidity, interest rate and currency risks faced by Iller Bank. At 30 April 2014, Iller Bank had TRY1.7bn liquidity. Sound Asset QualityIller Bank provides loans to local governments and entities covered with municipal guarantees. It has no non-performing loans, but has restructured loans (2013: 2.1% of gross loans), which are serviced by the debtors. The bank can ensure timely collection of dues from the borrowers as a large portion of tax revenue is distributed to all Turkish municipalities through Iller Bank.Moderate Loan ConcentrationThe bank has a moderate loan portfolio concentration. The top 20 borrowers accounted for 28.7% of total loans at end-2013 (2012: 34.4%). These consist of large metropolitan municipalities such as Istanbul (BBB-/Stable), Izmir (BBB-/Stable) and Bursa (BB/Stable). Fitch estimates that about 80% of Turkey's population resides in 30 metropolitan municipalities. Thus, there are objective reasons for the moderate concentration of the loan portfolio as the 2,000 small townships have low debt absorption capacity.Accelerated Loan Portfolio GrowthIller Bank's annual loan portfolio growth accelerated to 27% in 2013 (2012: 15%). The loan portfolio balance increased to TRY11.4bn - equivalent to 111% of the bank's total equity or 77% of total assets by end-2013. The balance was TRY9bn - equivalent to 96% of the total equity or 71% of total assets at end-2012. As a result the bank's liquidity position has slightly weakened, albeit from strong levels. Fitch believes this is a temporary issue related to the election season in Turkey. The bank has access to urgent loans from the Treasury and the Central bank. RATING SENSITIVITIESIller Bank's ratings mirror those of the Turkish sovereign. A positive rating action would result from an upgrade of Turkey. Conversely, any negative rating action on Turkey or weakening of operating, strategic and financial links of Iller Bank with the state would lead to a downgrade. A credit analysis on Iller Bank is available at 
  www.fitchratings.com.
 Contacts:Primary AnalystBehruz IsmailovAssociate Director+7 495 956 9980Fitch Ratings CIS Limited26 Valovaya StreetMoscow, 115054 Secondary AnalystNilay AkyildizDirector+49 69 768 076 134Committee ChairpersonVladimir RedkinSenior Director+7 495 956 9901Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com.Additional information is available at 
  www.fitchratings.com.
 Applicable criteria, 'Tax-Supported Rating Criteria', dated 14 August 2012 and 'Rating of Public Sector Entities Outside the United States', dated 4 March 2014, are available at 
  www.fitchratings.com.
 Applicable Criteria and Related Research: Rating of Public-Sector Entities - Outside the United States
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=738077
 Tax-Supported Rating Criteria 
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015
 Additional Disclosure Solicitation Status 
  http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=831987
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