An Assessment of 2011: Strategies, Developments and Targets for the Future

Having completed a successful operating period, Ziraat Bank continued in 2011 to provide customers from all segments of the community with products and services of increasing quality and diversity.

Its customer-oriented business model will allow Ziraat Bank, which currently offers tremendous growth potential in terms of market share, market penetration and sales volumes, to reflect such potential to its performance rapidly and in an increasing manner.

Broadly speaking,
•   Ziraat Bank’s corporate target is to demonstrate sustainable growth in its profitability and efficiency and to generate value for the nation and the banking industry, while remaining loyal to its primary mission.

•   In line with this target, the Bank has adopted a customer-oriented business model which aims to improve the bank’s working habits with customers and to respond to its customers’ financial needs in a more rapid and highly qualified manner. To this end, related efforts were launched at the headquarters, as well as in regional directorates and branches.

•   Its customer-oriented business model will allow Ziraat Bank, which currently offers tremendous growth potential in terms of market share, market penetration and sales volumes, to reflect such potential to its performance rapidly and in an increasing manner.

•   Ziraat Bank continued to expand its domestic branch network in 2011. The total number of branches, which stood at 1,379 at the end of 2010, rose to 1,434 in 2011 with the addition of 55 new branches during the year.

Ziraat Bank has all the qualifications necessary to grow, produce further added value and become the best service provider in the sector in 2012 and beyond.

•   Ziraat Bank’s founding mission was identified as contributing to economic development by providing the resources needed by the agricultural sector. The total volume of loans supplied to the agricultural sector increased by 39% in 2011 to more than TL 18.9 billion. Ziraat Bank supported hundreds of thousands of manufacturers in the agricultural sector and played a key role in increasing agricultural added value and efficiency through a number of distinct programs, agreements and practices.

•   Ziraat Bank continued to place priority on SME’s in its commercial lending operations in 2011. The volume of loans extended by the Bank to small enterprises increased from TL 5.3 billion in 2010 to TL 6.9 billion in 2011, corresponding to a 29% YoY increase in SME loans issued. In a clear indication of Ziraat Bank’s strength and scale, the total number of SMEs that had received loans from the Bank reached 129,000 at the end of 2011.

•   Retail customers account for Ziraat Bank’s largest customer mass. The Bank offers its retail customers a rich product portfolio, which includes an array of products ranging from consumer loans to credit cards. The Bank responds to the financing needs of an ever increasing number of individuals by offering tailor-made products and through competitive pricing. The total volume of retail loans provided by Ziraat Bank increased by 30% YoY to TL 30.5 billion in 2011.

•   Ziraat Bank commands the largest market share in deposits. Ziraat Bank’s total deposits amounted to TL 113.1 billion in 2011 and the Bank, with a 15.3% market share, maintained its leadership in the sector in terms of deposits, as in previous years.

•   Ziraat Bank rapidly expanded its loan volume in 2011, while achieving a significant reduction in its ratio of non-performing loans through its cautious and painstaking risk management policies. While the Bank’s total loan volume increased by 24% in 2011, the increase in its non-performing loan volume was less than 1%. As a result, Ziraat Bank’s non-performing loans ratio fell from 1.5% in 2010 to 1.2% by the end of 2011. This ratio is considerably lower than the sector average of 2.7%.

•   Ziraat Bank has all the qualifications necessary to grow, produce further added value and become the best service provider in the sector in 2012 and beyond.

Having established sustainable profitability and efficiency as its primary management strategy, Ziraat Bank's total assets rose to TL 161 billion by the end of 2011.

In the face of fierce competition, Ziraat Bank covered a significant amount of ground in its agricultural, commercial, corporate and retail banking business lines and expanded its transaction volume and number of its customers by further reinforcing its identity as a strong national bank.

Having completed a successful operating period, Ziraat Bank continued in 2011 to provide customers from all segments of the community with products and services of increasing quality and diversity.

Balanced balance sheet targets achieved in 2011
Having established sustainable profitability and efficiency as its primary management strategy, Ziraat Bank’s total assets rose to TL 161 billion by the end of 2011.

The Bank targeted a balanced balance sheet performance in 2011; in line with this target, it increased its cash loans by 24% and its total assets by 6%, while reduced its securities portfolio in parallel with its strategic preferences.

The bank’s loans (including rediscount) to assets ratio rose from 38% at the end of 2010 to 44% by the end of 2011, while the Bank’s securities to assets ratio fell from 51% to 44% during the same period.

In 2011, Ziraat Bank realized a pretax profit of TL 2,780 million and net a profit of TL 2,101 million. The Bank achieved a 1.3% return on assets and a 16.1% return on equity in 2011.

Continued organic growth in 2011
Having sustained its efforts to expand its service network in 2011, Ziraat Bank maintained its position of offering the widest branch network of any bank in Turkey.

The Bank opened 55 new branches in 2011, converted 21 special transaction centers (STC) into branches, renamed seven branches and opened seven additional service buildings. At the end of 2011, Ziraat Bank had reached a total of 1,434 points of service in Turkey that consisted of:
• 1,373 domestic branches,
• 32 special transaction centers,
• 27 bureaus,
• 2 mobile vehicles.

Ziraat Bank is the sole provider of banking services at 414 points throughout Turkey. Ziraat Bank also continued to offer the most extensive reach in the international arena. Ziraat Bank operates at 78 points in 17 countries through:
• 16 international branches and 8 international sub-branches,
• 1 international representative office,
• 8 international banking subsidiaries and 53 branches.

Within the scope of activities to support the real sector…

Working with a mission of providing more resources and services to an increasing number of customers with each passing day, Ziraat Bank continued to provide financing to all segments of the Turkish economy in 2011, particularly in the agricultural sector.

Pursuing a balanced distribution strategy in retail, agricultural and commercial loans, the Bank recorded 39% growth in agricultural loans, 30% growth in retail loans and 4% growth in commercial loans in 2011.

Ziraat Bank extensively provides funds to the agricultural sector
One of Ziraat Bank’s primary targets is to ensure the development and growth of the agricultural sector and to ensure that the sector gains a competitive edge on a global scale. In parallel with this target, the Bank continued to extensively provide funds to the agricultural sector in 2011.

Having increased its agricultural loan volume by 39% to TL 18.9 billion in 2011, Ziraat Bank remained the biggest supporter of the agricultural sector in Turkey.

Subsidized loan practice continued in 2011
Launched in 2004, the subsidized loan practice continued in 2011. In such loans, the Bank applied an annual interest rate of between 0% and 5%, by applying discounts of 50% to 100% to current interest rates, depending on the sector, and extended TL 10,081.7 million in loans to a total of 961,629 manufacturers in 2011.

Ratio of agricultural investment loans in total agricultural loan volume reaches 45%
Ziraat Bank continued to increase its support for agricultural efficiency through investment loans and other banking products, in addition to agricultural enterprise loans. In 2011, the ratio of agricultural investment loans in total agricultural loan volume was realized at 45%.

Increase in interest-free agricultural irrigation loans
In 2011, the Bank continued to extend interest-free Agricultural Irrigation Loans, a practice that has been applied since 2007 in order to increase the number of areas where irrigated farming is performed and to minimize loss of water caused by reckless and uncontrolled irrigation.

In 2011, the Bank extended TL 273 million in investment loans to nearly 15,000 manufacturers through firms and cooperatives that work with the Bank based on protocols. With this result, Ziraat Bank has provided a total of TL 1.4 billion in loans to 93,000 manufacturers in the last 5 years, contributing significantly to the generalization of drip and sprinkler irrigation systems.

Working to widen the use of modern greenhouse cultivation in Turkey
In 2011, Ziraat Bank supplied a total of TL 391 million in loans to about 23,000 manufacturers, who operate in the field of greenhouse cultivation. By providing 73,000 manufacturers with TL 1.6 billion in loans in the last eight years, the Bank continued to support the establishment of new and modern greenhouses.

Contributing to Turkey’s agricultural machinery park by extending fixed interest rate tractor loans
Some 50% of the brand new tractors sold in our country in 2011 were financed with Fixed Interest rate Tractor Loans, a product offered by Ziraat Bank.

The Bank supplied TL 1 billion in tractor loans to more than 31,000 manufacturers in 2011. Within the scope of this service conducted since 2004, the total number of manufacturers supplied tractor loans reached 90,000, while the total loan volume rose to TL 2.6 billion.

One of Ziraat Bank's primary targets is to ensure that the agricultural sector gains a competitive edge on a global scale.

Supporting the development of stockbreeding and animal production through interest-free loans
Ziraat Bank has been extending Interest-free Stockbreeding Loans since August 2010 to support the development of domestic stockbreeding and to increase animal production. Within the framework of this loan program, which primarily aims to modernize and increase capacity of existing ovine and bovine, breeder and fattening enterprises and to support new stockbreeding enterprises, the Bank extended TL 2.3 billion in loans to 63,000 manufacturers in 2011.

The Bank transferred a total of TL 5.9 billion in funds to manufacturers in the last two years through interest-free stockbreeding loans. In the program, the loans were used to purchase a total of 4.3 million livestock.

A loan for thoroughbreds – a first in our country
In another groundbreaking development, Ziraat Bank began to offer solutions for the financial needs of thoroughbred breeders through agricultural enterprise and investment loans. In 2011, a total of TL 25.1 million in loans was supplied to breeders for more than 2,000 thoroughbreds.

Supporting a broader mass through diversified agricultural loans
In order to diversify and expand the volume of loans Ziraat Bank extends to manufacturers, as well as to enhance the competitive strengths of Ziraat Bank branches, to shorten and to accelerate loan procurement processes and to meet customer requests in the shortest possible time, the Bank:

• allowed the use of investment loans of up to TL 20,000 through loans on guarantee;
• allowed the use of agricultural loans against the letter of guarantee to be received from foreign banks;
• began to provide loans for tractors of the previous year's model, provided that they were new and unused; and
• added the "Poultry Sector" to the Parameters of Non-Project Investment Loans for the financing of machinery and equipment such as curb, feeder, ventilating fan, etc., which can be exclusively bought by poultry manufacturers.

Providing SMEs with all kinds of financial support and banking services, Ziraat Bank increased its support for SMEs in 2011.

The Başakkart financing facility – a modern practice that eases the financial burden on manufacturers
In 2011, a total of 296,000 manufacturers were supplied with TL 1,125 million in agricultural loans within the scope of Başakkart. Manufacturers holding the Başakkart purchased a total of TL 239 million of fuel oil, seeds, fertilizers and other agricultural inputs from more than 11,000 contracted merchants for a grace period of up to 6 months; this reduced the financial burden on manufacturers in production processes.

An opportunity to provide financing to an increasing number of manufacturers within the scope of collaborations with agricultural associations
In order to ease the pressure on manufacturers, who are members of agricultural associations, access credit facilities, Ziraat Bank signed protocols with the Association of Breeding Cattle Farmers, the Association of Dairies and the Association of Sheep / Goat Farmers. Within the scope of the protocols, a total of TL 211 million in loans was supplied to 54,000 manufacturers, while TL 28 million was granted to 26,000 manufacturers for product prices and TL 478 million was granted to more than 75,000 manufacturers as subsidies through the Bank.

As mediating services…
In 2011, Ziraat Bank mediated in:
• the payment of TL 6 billion in subsidies to 4.3 million manufacturers and associations,
• the payment of TL 431.7 million product prices by the Turkish Grain Board,
• the payment of TL 350.4 million by Türkiye Şeker Fabrikaları (Turkish Sugar Factories) for sugar beet prices, and
• the payment of TL 282.5 million for grants in line with the Rural Development Program.

Ziraat Bank hosts CICA's Central Committee Meeting
The Central Committee Meeting of the International Confederation for Agricultural Credit (CICA), which is organized in a different country each year, was held in İstanbul in 2011, hosted by Ziraat Bank.

The meeting, which is open to senior managers of the world's leading agricultural banks, as well as the major players of the Turkish agricultural sector and the representatives of corporations and institutions serving the sector, brought together more than 400 Turkish and foreign participants this year.

In a meeting held under the theme of "A Global Look at Agriculture: New Agricultural Strategies", topics such as the agricultural sector and agricultural financing, food safety, the use of renewable energy as well as the economic situation and expectations in Turkey and in the world were discussed.

The 2011 reports for work on project related to the GAP (Southeastern Anatolia Project) Region were completed
Within the framework of the GAP Action Plan, in which the Bank plays an active role, Ziraat Bank prepared quarterly reports that include the Bank’s activities in the cities in the GAP Region in 2011 and submitted them to the Southeastern Anatolia Project Regional Development Administration.

Cooperation with the World Bank for the financial needs of small and medium sized enterprises
Within the framework of the 2nd Access to Finance for Small and Medium Enterprises Project, the Bank continued to negotiate and carry out regulatory work with the World Bank in 2011 with respect to the best use of the resources provided from the World Bank to meet the financial needs of small and medium-sized enterprises.

The primary objective of the project is to expand and extend the facilities of access to include middle- and long-term finance for small and medium enterprises in Turkey and to increase employment.

In 2011, Ziraat Bank began to negotiate with respect to new credit lines to be provided by the World Bank.

Ziraat Bank offers its commercial products and services to a wide and diverse client base.

The Bank increased its support to the commercial sector by combining the advantages brought by its strong resource structure and its rich product and service portfolio, despite the volatile market circumstances of 2011.

Backed by the strength of a brand synonymous with trust, persistence and a deeply rooted past…
With its rich commercial banking product and service portfolio, Ziraat Bank serves a large and diverse mass of customers that range from large-scale multinational and national companies that use a large volume of loans to medium commercial enterprises and SMEs.

The Bank commands a leading position in the sector thanks to its widespread domestic and international branches, its low funding costs and liquidity advantage and its ability to meet the large-scaled financial needs of its customers.

The strength of the Ziraat Bank brand, which is synonymous with trust, persistence and a deeply rooted past, represents another competitive strength for the Bank in commercial banking.

Free-of-charge resources and cross sales facilities
Ziraat Bank aims to add a competitive edge to its products and services in the sector and to ensure that they meet the needs of the Bank’s customers. For this purpose, the Bank offers resources that are free to use along with cross sales facilities.

Pressing ahead in its efforts to expand its portfolio
In 2011, the Bank sustained its efforts to expand its commercial client portfolio, and improved and diversified its relations with corporations.

Executing its marketing activities to ensure that its customers capture a share of all banking transactions and cash flows, Ziraat Bank continued to make use of dealer, supplier and retailer networks of large-scaled corporations as a business area with high potential for the offering of its banking products and services.

Capturing market share in FX commercial loans during 2011
Ziraat Bank’s total commercial cash loan volume (TL) declined in parallel with market balances in 2011. Accordingly, the share of the Bank’s TL-based commercial cash loans fell from 66% in 2010 to 58% in 2011, while the share of its FX-based commercial cash loans increased from 34% to 42%.

The Bank increased the volume of cash loans provided to SMEs by 29% when compared to the end of 2010.

SMEs, the vital pillar of the Turkish economy, are Ziraat Bank’s primary customer mass
Providing SMEs with all kinds of financial support and banking services since 2008, Ziraat Bank increased its support for SMEs in 2011.

The Bank increased the volume of cash loans provided to SMEs by 29% when compared to the end of 2010. With this growth, the ratio of SME loans in total commercial loan volume reached 42%, while the share of SME loans in overall loan volume climbed to 10%.

Highlights of the special and preferential loan facilities offered to SMEs
• Ziraat Bank has been providing preferential products and services to the members of Chambers of Commerce/ Industry and Chambers of Merchants/Craftsmen, which have received extensive financing from the Bank in recent years and which have been collaborating with the Bank in order to support SMEs. The Bank revised and expanded the scope of these products and services in line with the prevailing economic conditions in 2011.

• Having already signed protocols with 520 chambers across Turkey, Ziraat Bank supplied TL 760 million in loans to a total of 36,200 SMEs in 2011 in line with such protocols.

• Ziraat Bank signed special protocols with Chambers of Industry and Commerce. In line with these protocols, the chambers would deposit their resources at the Bank, while the Bank, in turn, would provide financial support those SMEs which are members of such chambers. In 2011, Ziraat Bank diversified its products and services by extending loan facilities at attractive interest rates to such SMEs.

• Ziraat Bank received EIB (European Investment Bank)-funded loans from Türk Eximbank in 2011, while continuing to offer SMEs long-term FX loans, which were provided from the World Bank in 2010, in order to provide long-term financing to SMEs in a bid to encourage them to undertake investment, to contribute to their operating capital and to support their growth.

• Having demonstrated that it stands by SMEs at all times, Ziraat Bank signed a protocol with the Social Security Institution in order to ensure that employers pay their overdue premiums while offering SMEs the opportunity to pay these debts over the long-term, in line with the Law on the Restructuring of Receivables, the Law on Social Security and the General Health Insurance and Law no. 6111 on Undertaking Amendments to selective Legislative items and Statutory Decrees.

• Following the postponement of KOSGEB's (Small and Medium Enterprises Development Organization) new interest support program, which was expected to be launched in 2011, Ziraat Bank held a 1-month credit campaign under the KOSGEB "Bridge Loan Campaign", in June 2011 in order to respond to the financing needs of SMEs, which the Bank had established contact with during the preliminary work related to the postponed program. The Bank provided financing to 8,500 SMEs during the campaign.

• In order to contribute to regional economic and social development, Ziraat Bank continued its collaboration – which began in previous years – with Developmental Agencies and signed protocols with such agencies in 2011. The Bank provided "simultaneous financing" to those SMEs which were undertaking developmental projects, which had applied to the developmental agencies' financial Support Program and were deemed worthy of developmental grants.

• In order to support SMEs operating in the Turkish Republic of Northern Cyprus (TRNC), the Bank joined forces with the Ministry of Economy and Energy and Ministry of Tourism, Environment and Culture of the TRNC in 2011 and provided funds to enterprises operating in the republic.

• Having maintained its close relations with organizations that support SMEs in 2011, the Bank joined the practice known as micro loans for micro SMEs within the framework of the Credit Guarantee Fund's programs entitled "Rapid Guaranty Package for Micro SMEs" and "Loan Facilities for Growing Anatolia (BAKK)".

• Committed to standing by SMEs in difficult times, Ziraat Bank relieved the debts of SMEs which had suffered losses because of the Van earthquake, and participated in KOSGEB's interest support program aimed at such SMEs.

• In order to support and provide liquidity to customers who may have temporarily fallen into financial difficulty, Ziraat Bank successfully continued to restructure the debts of SMEs in 2011, a practice which the Bank has been applying since 2009.

• Aiming to serve all SMEs, Ziraat Bank continued with its occupational group based loan efforts in 2011 and added self-employed customers such as architects / engineers, accountants / freelance accountants, financial consultants / certified public accountants, notaries and vets to its customer portfolio.

• KOBİkart, the world's first Visa company credit card with pay wave, which also offers its users the advantages of Bankkart, became a highly popular payment method for SMEs in 2011. This development allowed Ziraat Bank to consistently increase its share in the company credit card market.

Ziraat Bank continued to expand its retail banking portfolio in terms of transaction volume, number of customers and placements, raising its market share in these categories. The Bank maintained its position as the most popular bank among real persons from different segments.

The total volume of retail loans extended by Ziraat Bank increased by 30% compared to the previous year.

Healthy growth in retail loan volume
The total volume of retail loans extended by Ziraat Bank increased by 30% from TL 23.5 billion to reach TL 30.5 billion by the end of 2011. The ratio of the Bank's retail banking loan volume in its total credit portfolio reached 46.4%, while Ziraat Bank attained a 13.6% market share in this category in 2011.

The breakdown of the retail loans provided by Ziraat Bank by type was as follows:
• housing loans rose by 13% to TL 7.9 billion;
• vehicle loans rose by 35% to TL 328 million;
• consumer loans rose by 38% to TL 20.2 billion; and
• credit card transaction volume rose by 35% to TL 1.6 billion.

The Bank's market shares in these loan categories were:
• housing loans: 10.6% (2010: 11.5%);
• vehicle loans: 4.5% (2010: 4.3%);
• consumer loans: 32.5% (2010: 32.0%); and
• credit cards: 2.8% (2010: 2.7%).

In 2011, Ziraat Bank succeeded in increasing its market share in all retail loan categories with the exception of housing loans. Ziraat Bank extended TL 21 billion in retail loans in a total of 1,912,509 transactions in 2011.

Meanwhile, effective pricing policies carried out in a bid to increase non-interest income allowed Ziraat Bank to raise its commission revenues from banking services by 25% in 2011.

As of December 2011, Ziraat Bank's non-performing retail loans ratio was realized at 0.6%, lower than the 2010 level of 0.7% and the sector average of 2.9% at the end of 2011.

Ziraat Bank continued to produce new products and services in 2011.

Innovations, campaigns and attractive opportunities lead to satisfied customers
Ziraat Bank continued to produce new products and services in 2011 in order to increase its competitive strength in the sector and its revenues, to expand its client base and to meet its customers' requests with regard to how to make the best use of their savings.

• The Bank held general credit campaigns for its customers / customer groups, as well as special campaigns for various occupational groups and "target list" based credit campaigns, providing retail loans to a total of 1,351,008 people.

• Through these campaigns, the Bank gained 56,565 new customers.

• In 2011, Ziraat Bank offered loans to 152,436 customers for the first time, and issued a total of 662,634 credit cards. The Bank also identified a total of 60,566 users for internet banking and received a total of 30,320 standing payment orders and 57,633 automatic payment orders. The Bank opened overdraft accounts for 454,799 customers and accounts of salary advances for 418,223 customers.

• Ziraat Bank launched efforts to increase the use and activation of overdraft accounts. The overdraft and debit card sales automation entered operation for all retail loan applications. The Bank also evaluated accounts where the overdraft limit was insufficient, while also issuing the debit card to its overdraft customers, linking the overdraft with the debit card.

• A total of 60,703 customers benefited from the Discounted Overdraft Account Campaign that was organized for those customers, who have both overdraft account and active automatic payment orders.

• The product entitled "Baflak Account" was offered to those customers buying and selling funds automatically, and which is associated with the drawing account.

• "Ziraat Package for Young People" was prepared for university students in Turkey, investing in the future of the Bank by ensuring young customers benefit from the value offered by the Bank throughout their lives and to offer various advantages to the students within the framework of the Bank's social mission.

• In order to raise awareness of insulation and to contribute to energy efficiency initiatives in Turkey, the Bank offered its customers the "Energy Saving Package", with the technical consultancy of iZODER (Association of Thermal Insulation, Waterproofing, Sound Insulation and Fireproofing Material Producers, Suppliers and Applicators).

• Ziraat Bank added private pension plans to its insurance products portfolio and sold a total of 6,929 private pension contracts. Ziraat Bank maintained its leadership in the sector in terms of premiums in life and non-life insurance products sales performed through the Bank channel.

• Within the framework of the cooperation established with Ziraat Investment, Ziraat Bank branches throughout Turkey were responsible for book building of the following public offerings; Adese, Akfen GYO, Ataç inflaat, Bilici Yatırım, Bimeks, Bizim Toptan, Kiler, Kiler GYO, Rönesans Gayrimenkul Yatırım and Yaprak Süt in 2011.

• With the aim of raising the number of customers and the transaction volume of Ziraat Investment, as well as to increase the number of customers and the use of Maximum Card, Ziraat Bank implemented a campaign that allows stock trade commissions to be returned to Maximum Card as Maxipuan (Maxi-points).

• Within the framework of TOKİ (Housing Development Administration of Turkey) projects mediated by Ziraat Bank, the Bank was responsible for carrying out the sale of real estate and related follow-up procedures. The Bank was actively involved in the sale of 23,149 properties at a total price of TL 2,243.8 million and extended TL 180.7 million in housing loans to 3,720 people through the TOKİ projects.

• The Bank reached 206,000 customers through deposit accounts of advances, an original product developed by Ziraat Bank and a first in the sector, and 2 million customers through accounts of salary advances.

• The Bank began to provide retail loans to self-employed customers such as doctors, lawyers, notaries, financial advisors, architects, engineers and pharmacists, who do not answer to a specific employer, who are highly educated in their fields and who have scientific or occupational knowledge or expertise.

• Ziraat Bank began to provide the following products to its customers (including employees of public and private sectors, pensioners), who are Turkish citizens but do not reside or have any commercial activity in Turkey and who have been working for at least six months, in order to finance or refinance properties which they may have purchased or will purchase in Turkey: Housing Loans / Refinancing Loans/ Individual Workplace Loans / Common Workplace Loans / Common Housing Loans / "Buy To Rent" Housing Loans.

Ziraat Bank is the primary bank of a large mass of individuals ranging from students to pensioners, merchants to entrepreneurs, housewives to farmers.

The Bank aims to increasingly integrate its alternative delivery channels into its service offering process. Large and comprehensive projects conducted by Ziraat Bank for this purpose contribute continuously not only to the Bank’s cost basis but also to customer satisfaction.

Aiming to provide efficiency and customer satisfaction through alternative delivery channels
As the primary bank of a large mass of individuals ranging from students to pensioners, merchants to entrepreneurs, housewives to farmers, Ziraat Bank is determined to offer effective services to its individual customers through its branch network that reaches everywhere throughout Turkey, as well as through its diversified electronic service channels.

At the end of 2011, the Bank’s number of active ATMs rose by 30% to 3,820, while the number of its ATMs offering the cash deposit feature reached 1,095.

Ziraat Bank began to accept card applications and card limit increase requests through alternative delivery channels in 2011. Of a total of 602,369 applications received through alternative delivery channels, 247,131 were applications for cards and 355,238 were applications to raise card limits.

In 2011, the number of POS devices provided by Ziraat Bank increased by 45%.

Ziraat Bank’s internet branch at www.ziraatbank.com.tr provides extensive services with a rich content. In 2011, the Internet Banking transaction volume and the number of internet branch users increased by 108% and 92%, respectively.

The sector leader in debit cards
As the sector leader in debit cards, Ziraat Bank raised the number of Bankkart cards by 18%, a rate of growth 3 points higher than the sector average of 15% in 2011.

The number of Bankkart cards increased by 2,556,169 compared to the end of 2010 and reached 16,512,976, while the number of TSK chip debit cards rose to 368,703.

Ziraat Bank provided one in every 4 debit cards issued in the sector in 2011 and one of every 5 debit cards used in 2011.

Growth in the number and turnover of credit cards in excess of the sector average
Ziraat Bank increased the number of its credit cards and its turnover from credit cards at a rate in excess of the sector rate during 2011. The number of the Bank’s credit cards grew by 13% and its credit card turnover by 40%

The number of credit cards issued by Ziraat Bank rose by 406,174 when compared to the end of 2010 to reach 3,481,247, while the Bank’s turnover from credit cards rose by TL 2,185.4 million to TL 7,658.8 million.

Launched on June 13th, 2011, cash advances with repayment through installment represented a new practice for Ziraat Bank customers, reaching a broad customer mass since the system’s infrastructure was completed rapidly and effectively.

As a result of this practice, the total volume of cash advances payable through installments reached TL 126.6 million, while the total number of transactions in this category was realized at 218,756.

In 2011, Ziraat Bank further strengthened its permanent and widespread deposit base by increasing its savings deposit volume.

The sector leader with a permanent and widespread deposit base
With 70% of its balance sheet liabilities comprised of deposits, Ziraat Bank focused on increasing its profitability by reducing resource costs through effective liabilities and deposit management in 2011, while maintaining its TL weighted deposit composition by taking its credit policies and asset composition into account.

Positioned as a bank that sets interest rates in the market through its rational pricing and competition strategy, Ziraat Bank painstakingly fulfills its role in the sector as a market maker.

In 2011, Ziraat Bank increased its savings deposit volume, strengthening its permanent and widespread deposit base. The weight of TL savings deposits in the Bank’s total deposits remained high, while at the end of 2011 savings volume composed 51% of total deposits excluding banking deposits.

Having concentrated on product development efforts in order to strengthen its permanent deposit base, Ziraat Bank began to offer the cumulative deposit account in 2011, while accelerating its efforts for other deposit products.

Ziraat Bank remained one of the active participants of money, FX and capital markets in 2011.

Liquidity and securities portfolio management
Ziraat Bank’s Treasury Management Group performs the management of risks in the Bank’s balance sheet, determines the Bank’s interest, FX and liquidity policies, performs central treasury management services for all branches and conducts the pricing service for investment instruments.

The primary function of the Treasury Management Group is to monitor and manage the financial risks in the Bank’s balance sheet, ensure product diversity and provide a qualified service by making use of the advantages of the Bank’s widespread branch network and to ensure that the Bank makes maximum profit.

Ziraat Bank remained one of the active participants of the money, FX and capital markets in 2011. The Bank stepped up its use of financial derivatives and diversified investment and funding facilities in order to manage the financial risks in the Bank’s balance sheet and its assets and liabilities composition more effectively and to offer alternative banking products to its customers.

As one of the market maker banks in the Turkish bond market as determined by the Undersecretariat of the Treasury of the Republic of Turkey, Ziraat Bank maintains its market maker position.

Market maker position
As one of the market maker banks in the Turkish bonds-bills market as determined by the Undersecretariat of the Treasury of the Republic of Turkey, Ziraat Bank maintains its market maker position. As one of the active participants in the primary and second bonds-bills markets, the Bank has achieved a significant increase in its profit from capital market transactions.

New products contributing to treasury transaction volume
Ziraat Bank expanded the diversity of its treasury products through a variety of measures taken in 2011. The Bank pursued competitive pricing policies through its widespread branch network and continuously improved alternative delivery channels, while designed new services that would increase customer satisfaction and effectively meet customers’ needs. As a result of these efforts, the Bank increased the transaction volume of its treasury products in 2011.

In 2011, Ziraat Bank began to offer a service to its customers where they could sell and purchase gold by the gram. The Bank also launched measures for trading gold through drawing accounts and started to offer customers gold checking accounts in the first quarter of 2012.

In 2011, the Bank began to release FX selling and buying rates for the Chinese Yuan for non-effective transactions.

New capital guarantee mutual funds
In order to effectively meet the needs of customers with different risk-income profiles, the Bank issued three Type B 100% Capital Guarantee Sub-Funds under the Capital Guarantee Umbrella Fund during 2011.

In line with customer requests, Ziraat Bank plans to continue offering capital guarantee mutual funds, the first of which was issued in February 2012.

In 2011, Ziraat Bank intensively pursued its efforts to maintain its position of commanding the largest international service network of any Turkish bank.

Ziraat Bank commands a strong and respected position in the field of international banking, thanks to its widespread service network with robust foundations throughout the world, its strong correspondence relations with financial institutions and banks and its strong funding base.

In 2011, The Bank intensively pursued its efforts to maintain its position of commanding the largest international service network of any Turkish bank and to achieve stronger growth by increasing its efficiency.

Ziraat Bank operates at 78 points in 17 countries.

Global points of service
Ziraat Bank provides services through its branches, representative offices and banking subsidiaries at 78 points in 17 countries.

• The Bank's organization is composed of the following global points of service:
• The New York Branch in USA,
• The London Branch in the UK,
• The Tbilisi Branch in Georgia,
• The Sofia Branch, and Plovdiv, Kardzhali and Varna sub-branches in Bulgaria,
• The Athens, Komotini, Xanthi and Rhodes branches in Greece,
• The Baghdad and Erbil branches in Iraq,
• Jeddah Branch in Saudi Arabia,
• The Lefkoşa, Girne, Gazimağusa, Güzelyurt and Gönyeli branches, and the Akdoğan, Near East University, Çatalköy, Karaoğlanoğlu and İskele sub-branches in the Turkish Republic of Northern Cyprus (TRNC),
• The Tehran Representative Office in Iran, and
• Eight foreign banking subsidiaries, which have a total of 53 branches.

In line with Ziraat Bank's international banking strategy and vision, the Bank continued to restructure its global points of service in order to:
• increase their efficiency in the countries where they operate;
• contribute to the development of commercial and economic relations between Turkey and these countries;
• obtain a high share of foreign trade financing; and
• ensure that the Bank's global points of service offer rapid, modern, and qualified service to all of their customers, particularly Turkish entrepreneurs and companies.

Projects aimed at the regional expansion of the Bank
Accurately analyzing the developments in global markets, in the coming period Ziraat Bank will strive to make use of the possible opportunities in every area it operates, to provide a level of efficiency which is at least in line with the sector average, and to become the most powerful and efficient bank in Turkey and in the region.

To this end, the Bank continually conducts analysis and evaluations in line with its targets such as bringing service to any location or region with a specific business volume and a potential for developing commercial relations, particularly in the nearby geographical region, and expanding the scope of its activities.

Ziraat Bank serves its customers in Bulgaria through 4 branches: a central branch in Sofia, and sub-branches in Plovdiv, Kardzhali and Varna.

In Bulgaria, Ziraat Bank has recently developed and implemented various practices in branchless banking such as the debit card, ATM and internet banking. The Bank plans to expand the scope of its activities in Bulgaria by developing products such as credit cards, phone banking and POS devices in 2012.

Ziraat Bank serves its customers in Greece through four branches in Athens, Komotini, Xanthi and Rhodes.

Having begun to offer services in the TRNC in 1974, Ziraat Bank increased the number of its branches in the TRNC to 10, with the opening of 5 new points of service at the Near East University, Gönyeli, Çatalköy, Karaoğlanoğlu and İskele in the last two years. In parallel with its steady growth in recent years, the Bank worked intensively to expand its product portfolio and improve service quality. Most notably, agricultural loans, which were recently developed by the Bank, began to be extended to customers in the TRNC during 2011.

Offering all of the banking services available in mainland Turkey, the Bank’s branches in TRNC contribute significantly to the national TRNC economy by ranking as the number one among all banks operating in the TRNC in terms of size and profitability.

Having entered operation in Georgia in 2001, Ziraat Bank is undertaking necessary evaluations to structure its Tbilisi Branch as a foreign banking subsidiary and to open a sub-branch in Batumi. The Bank’s efforts to offer ATM and debit card services have now reached their final stage. The Bank plans to offer these products to its customers in Georgia in 2012.

In Saudi Arabia, Ziraat Bank opened its Jeddah Branch on March 14th, 2011. The branch has added momentum to its efforts to meet the needs of Turkish contracting companies for letters of guarantee, as well as to cover the banking needs of businessmen working in Saudi Arabia and Turkish citizens who visit Saudi Arabia for pilgrimage.

With its Baghdad Branch in Iraq which was opened in 2008, Ziraat Bank began to provide services under extraordinary circumstances. The Bank opened a branch in Erbil on February 14th, 2011 as the first Turkish bank. The Bank, which provides the letters of guarantee requested by Turkish contracting companies operating in the region and mediates intensively in the money transfers of Turkish firms and workers, plans to expand its activities in Iraq in 2012.

Reaching every spot on the globe through strong and well established correspondence relations
At the end of 2011, Ziraat Bank maintained its strong and well established correspondence relations with about 1,300 banks in 108 countries.

The Bank’s broad correspondent network is continuously improved and updated in parallel with customer needs and the conjuncture and trends in the world economy.

Working in close cooperation with export insurance agencies throughout the world, the Bank signed framework agreements with various correspondent banks in order to mediate the loans to be provided by these agencies to its customers.

Activity in foreign transaction operations…
With the largest international service network of any Turkish bank, Ziraat Bank provides global correspondence banking services through the nostro/vostro account relations it has built with other banks. Those Banks fortunate enough to have established correspondent account relations with Ziraat Bank benefit from banking services at global standards in their transactions in Turkey and all other countries in the world.

Ziraat Bank designed, developed and implemented a system known as DTR (FX Transfer), to be used in the FX transfers of banks in Turkey. By the end of 2011, 7 banks had joined the DTR. Thanks to the DTR system, the Bank has been able toprovide rapid and effective mediating services to FX transfers for banks in Turkey without recourse to correspondent banks abroad. Payments are completed without commission between those banks who participate in this system and become DTR members by opening vostro accounts in Ziraat Bank, while there is no delay or fault during existing payment processes. Moreover, those banks which are involved in this privileged system by opening accounts in Ziraat Bank enjoy the advantages of minimum costs and an easily understandable cost practice.

Banks involved in this system benefit from all types of correspondence services through the strong international network of Ziraat Bank, which has reached 50 nostro accounts and 61 vostro accounts including TL accounts as of December 31st, 2011. Services provided by Ziraat Bank through vostro accounts are not confined to FX payments, but also cover TL payments, which are sent by other banks to Ziraat Bank through the EFT system and which are then transferred by Ziraat Bank branches to other Turkish banks. With this system, these payments began to be made automatically.

The Bank’s foreign trade transactions are carried out by competent personnel who hold the Certificate in International Trade and Finance (CITF) (8 certificates) and the Certified Documentary Credit Specialist (CDCS) Certification (24 certificates).

Ziraat Bank maintains its efforts to develop products with high technological added value in order to gain a more effective and productive structure in foreign trade transactions.

In 2011, Ziraat Bank generated a total of TL 31.8 million in dividend income from subsidiaries.

Ziraat Bank's subsidiary policy and activities in 2011
Ziraat Bank's policy in relation to its subsidiaries is spelled out as follows:
• to establish new subsidiaries that will provide synergy for the Bank,
• to enter partnerships with existing companies,
• to ensure that the current subsidiaries provide an effective service,
• to promote domestic subsidiaries, which are parent companies where the Bank has control, to a leading position in their relevant sectors for the following purposes:
• to provide customers both in Turkey and abroad with contemporary financial services in the best and the most profitable manner,
• to gain cost advantages, and
• to provide a competitive edge through product diversification.

The primary developments in the Bank's subsidiary organization in 2011 are summarized below:

• Ziraat Hayat ve Emeklilik A.Ş., founded in early 2010 to offer services in private pension and life insurance branches, began its operations in the area of private pension in July 2011, having received an operating license in the private pension segment from the Undersecretariat of Treasury and registered its funds at the CMB.

• By purchasing shares held by the Ziraat Bank Personnel Foundation in Ziraat Yatırım Menkul Değerler A.Ş. (Ziraat Investment), the Bank increased its share in Ziraat Investment to 51%.

Ziraat Bank, which has maintained its contemporary human resource management system based on the principles as transparency, participation, efficiency and compliance with banking ethics, organized training programs aimed at improving the knowledge and skills of all of its employees.

• By purchasing the shares held by Başak Sigorta ve Başak Emeklilik's (Başak Insurance and Pension) Retirement and Provident Funds Foundation in Ziraat Finansal Kiralama A.Ş. (Ziraat Leasing), the Bank increased its share in Ziraat Leasing to 50.25%.

• By purchasing the share held by Groupama Sigorta A.Ş. (Groupama Insurance) and Licorne Gestion in Kazakhstan Ziraat International Bank, the Bank increased its share in the Kazakhstan Ziraat International Bank to 99.36%

• Ziraat Bank sold the shares of Elektronal Antrepo ve Lojistik Hizmetler Sanayi ve Dış Ticaret A.Ş. in the name of and on behalf of the Turkish Treasury. This company is a subsidiary of Mülga Odibank A.Ş., which was transferred to Ziraat Bank upon the Cabinet's decision no: 83/7242 and dated: October 27th, 1983.

• In order to raise the profitability and transaction volume of the subsidiaries, the Bank completed a capital increase of TL 50.2 million in its domestic subsidiaries and a capital increase of US$ 34.9 million and Eur 3.3 million in foreign subsidiaries.

• As of December 31st, 2011, the total amount of the Bank's subsidiary investments amounts to TL 1,027.5 million, of which TL 306.6 million is for domestic subsidiaries and TL 720.9 million for foreign subsidiaries.

• In 2011, Ziraat Bank generated a total of TL 31.8 million in dividend income from domestic subsidiaries (TL 29.3 million) and foreign subsidiaries (TL 2.5 million).

Detailed information concerning Ziraat Bank’s subsidiaries is given on 'Ziraat Bank's Subsidiaries in 2011' section of this report.

Ziraat Bank is aware that the most important means of setting itself apart in a competitive environment is its human resources. In 2011, the Bank pressed ahead with its intensive efforts and projects in a bid to maintain the highly qualified nature of its human resources.

The Bank, which has maintained its contemporary human resource management system based on the principles as transparency, participation, efficiency and compliance with banking ethics, organized training programs aimed at improving the knowledge and skills of all of its employees.

Copyright © 2012 Türkiye Cumhuriyeti Ziraat Bankası A.Ş.

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