Ziraat Bankası 2011 Faaliyet Raporu

Our Bank continued to produce value for its customers, employees and business partners during this period, in which the global financial crisis moved to a new phase with global banking markets increasingly coming under financial stress.

Esteemed shareholders,

2011 will go down in our corporate history as a year in which Ziraat Bank launched a key project of change and transformation in order to prepare itself for the competition-service cycle of the future. Within the framework of this project, which fully complies with the Bank’s vision and mission, we attach importance to the best practices in the sector in order to promote a universal and balanced banking approach that offers value to both our individual and corporate customers in all of our business lines.

Based on our project of change and transformation, we aim to ensure Ziraat Bank’s performance is sustainable and based on such tenets as efficiency, productivity and profitability.

Founded on the values that reflect Ziraat Bank’s deeply rooted past, this project will allow us to adopt a value-based product-service approach that places customers at the heart of each activity at every level and every corner of our organization.

This project will also equip Ziraat Bank with the competencies and organizational attributes that best fit the new competitive environment in the markets which will emerge when the current global financial crisis gives way to ordinary and stable market conditions.

Highlights from our financial performance
Ziraat Bank’s total assets reached TL 161 billion at the end of 2011, a year in which we focused on balanced, effective, efficient and highly risk-sensitive balance sheet management. With this result, Ziraat Bank commanded a 13.2% market share, with loans constituting 44% of the Bank’s assets. The Bank’s total credit volume increased by 24% while its total placements reached TL 71.4 billion during 2011. With its extensive product and service portfolio, Ziraat Bank continued to support millions of individuals and corporations involved in the manufacturing-trade-consumption cycle, particularly in the agricultural sector.

The breakdown of Ziraat Bank’s loan portfolio is as follows: 46% of the loans are individual, 29% are agricultural and 25% are commercial loans. The ratio of non-performing loans was 1.2%, at the end of the year - considerably lower than the sector average of 2.7%. Ziraat Bank held a 15.3% market share in terms of deposits in 2011, remaining the most popular bank in this category with a total deposit volume of TL 113 billion. During the year, the Bank generated TL 2,101 million in profit with a return on equity of 16.1% - about 2 points higher than the sector average.

In 2011 Ziraat Bank strategically opted to balance its cost structure as optimally as possible through balanced and efficient balance sheet management and implemented its investment and funding policies and practices accordingly. In this context, our Bank continued to fulfill both its sectoral mission and responsibility and succeeded in balancing its cost structure at the right point by demonstrating both an extremely elaborate and cautious approach in deposit interest rates.

In line with its strategic decision concerning its balance sheet management, Ziraat Bank also began to utilize non-deposit resources in 2011.

The Bank maintains its efforts to expand its resource diversity, an important element in bringing resource costs down. Resource diversity and depth also has an important bearing on interest risk management.

On the other hand, Ziraat Bank aims to enrich the products and services that it offers to its customers in a manner that encourages saving. This is especially important in countries such as Turkey where savings are limited.

We have begun to build the Ziraat Bank of the future with our call “Together, to a better future”.
Our Bank began to apply a customer-oriented business model in a bid to improve our working habits with our customers and to respond to our customers’ financial needs rapidly and in a qualified manner. This model will allow Ziraat Bank to progress on principles of sustainable profitability and efficiency and to reinforce its position in the market.

Our project of change envisages the simultaneous completion of a number of projects at our headquarters, regional directorates and branches. At the end of 2011, we had already embarked on these measures which are based on the principle, “Together, to a better future”.

Our project of change, whose initial practices began to be implemented with the voluntary support and strong participation of our employees, essentially aims to update Ziraat Bank’s 148-year corporate culture in light of the current market conditions while remaining true to our deeply rooted values.

As a service provider that has always existed with and worked for its customers, our Bank started to take the “customer” concept to a new dimension through a project of change and transformation. In this context, we plan to reinforce the concept of “Ziraat customer”, to crown our brand – a classic name in the Turkish banking industry – with customer loyalty and to make a difference in the sector.

We know that we must work hard to reach these ambitious targets in the Turkish financial services market, which has been recently been opened to international competition. However, the following factors will help us in our journey towards meeting these targets: our competencies, our scale, our human resources, our corporate culture and, most importantly, our values.

We believe our customers will choose to work with us and the Ziraat brand as long as they are offered value to an extent that complements the values of our brand in every product and/or service they receive.

Ziraat Bank’s infrastructure and organization has been rearranged in a customer-oriented manner in line with the principle of separation of powers.

With its management approach that places people on top of everything, Ziraat Bank aims at customer orientation and an approach in its human resources management in which employees are encouraged and rewarded.

We have demonstrated efforts to adopt a management approach that adds value to Turkey, Ziraat Bank and our stakeholders by making maximum use of the customer relations management facilities offered by our widespread branch network and our other distribution channels.

We are determined to provide our human resources with the dynamism required by modern banking. This way we will be able to establish a new Ziraat Bank which produces high added value, which is able to meet its customers’ expectations more rapidly and in a qualified manner, and which offers superior technological facilities.

Value will determine the competition, not pricing
We predict that the most important determinant factor of the competitive landscape in the near future will be offering value to customers. Companies that place customers at the heart of their business and give them the highest priority, and who are deeply committed to serving their customers, will enjoy success in this period and take the lead in the competition.

Our Bank attaches tremendous importance to the rendering of banking services required by our customers at the right time, through the right delivery channel and with the right value proposition. The main aim of our change and transformation project, which we launched at the end of 2011, is to accurately identify and structure the value which we offer our customers through our products and services. We believe our customers will choose to work with us and the Ziraat brand as long as they are offered value to an extent that complements the values of our brand in every product and/or service they receive.

This will ensure highly valuable sales facilities in the coming period, not only for our Bank, but also for our subsidiaries, which constitute our financial services group. Our project of change and transformation will also create an innovative and productive environment that will ensure our Bank – which has broken so much ground in the Turkish national banking industry throughout its corporate history – to increasingly perform the new best practices in 2012 and beyond.

As long as we complement financial accessibility with the right value proposition, Ziraat Bank will continue to progress on its path of sustainable and profitable growth with strong and firm steps.

Attaching great importance to equity management
As its primary management strategy, Ziraat Bank aims to grow with sustainable profitability and efficiency. Profitability is a crucial issue in equity management. One of the most crucial steps in the coming period will be to raise the return on capital. We consider sustainable equity growth as a necessity for healthy asset growth. We perform efforts to achieve significant improvements in non-interest income/expense management, which, besides the net profit margin, plays a key role in our Bank’s profitability.

We will raise the volume of resources we provide for the real sector, while continuing to provide unstinting support for households.

Going forward, our profit must be sustainable, solid and diversified. Our primary goal is to be big while meeting these criteria, not merely to compete to be bigger in size.
Ziraat Bank will continue to finance the agricultural sector, its primary mission, with new products and services and to transfer funds for the development and transformation of the Turkish agricultural industry. On the other hand, our Bank will begin to focus on extending greater support to the real sector in an environment of falling interest rates amid a declining borrowing need in the public sector.

After laying its foundations in 1863, Ziraat Bank’s 150th anniversary is now just two years away. We are determined to capitalize on this new era as a stepping stone for our Bank to rejuvenate itself and become more dynamic. Going forward, while we will build effective credit evaluation and allocation processes on a system which dynamically identifies the Bank’s risk appetite, in which we will increase the loans / assets and the loans / deposits ratios in line with the edicts of the institutions which regulate, audit and draw up the policies for the banking industry. In this vein, we will raise the volume of resources we provide for the real sector, while continuing to provide unstinting support for households.

Instead of setting short-term targets, Ziraat Bank is determined to keep a wide horizon with a sectoral outlook. As a transparent publicly-owned company, we are determined to share be at the public’s side in every step we take along this long path, and to experience the honor of our achievements altogether.

I would like to extend my thanks to all of those who have brought the Ziraat brand into the present and believed in the future of Ziraat, for their support and their valuable contributions.,

Hüseyin Aydın
General Manager