2012 Annual Report
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Ziraat Bank's Subsidiaries in 2012

Ziraat Bank aims at offering the means whereby Ziraat Customers can fulfill any financial need effortlessly via domestic and overseas subsidiaries.

Ziraat Bank’s policy for subsidiaries is to deliver contemporary and modern financial services to its customers in and out of Turkey in the best and most profitable manner, to derive cost advantages and to secure competitive superiority by attaining product diversification.

While formulating its subsidiary policy, Ziraat Bank set its main objectives as follows:


The primary developments in the Bank’s subsidiary organization in 2012 are summarized below:

 
Foreign Subsidiaries

ZIRAAT BANK INTERNATIONAL A.G.

Ziraat Bank International A.G. is one of the largest banks backed by Turkish capital operating in the European Union.
Ziraat Bank’s largest international subsidiary, the bank is active in corporate, commercial, and retail banking.

Ziraat Bank International A.G.’s corporate and commercial banking services are mainly concentrated in cash and non-cash credit transactions related to financing the foreign trade between Turkey, Germany and other EU countries as well as firms operating in Germany and multinational firms.

In addition to corporate, commercial and retail banking services, Ziraat Bank International A.G. has been mediating the money transfers of Turkish citizens living in Germany to Turkey for 49 years with a modern and rapid technical infrastructure.

Continually improving its retail banking activities, Ziraat Bank International A.G.’s “Ingenious Account”, one of the Bank’s retail banking products, has been rated “Constantly Good” five times consecutively by “Stiftung Warentest/Finanztest”, the most respectable independent consumer foundation in Germany.

Making use of the internet as an effective delivery channel, Ziraat Bank International A.G. offers its customers comprehensive internet banking services. During 2012, the bank included EBICS (Electronic Banking Internet Communication Standard) protocol in its internet banking service, which gave commercial and corporate customers access to faster, more secure and more professional internet banking service.

Included in the savings deposit insurance fund of Bundesverband deutscher Banken e.V. (Banking Association of Germany), Ziraat Bank International A.G. is also a member of Entschädigungseinrichtungdeutscher Banken GmbH (the deposit protection fund of Germany) and of the Association of Foreign Banks in Germany (Verband der Auslandsbanken in Deutschland).

Ziraat Bank International A.G. services a broad base of customers via its ten branches operating in Frankfurt, Hamburg, Cologne, Hannover, Berlin, Duisburg, Stuttgart, Munich, Nurnberg and Essen.

As of 31 December 2012, Ziraat Bank International A.G.’s paid-in capital was worth EUR 108 million, shareholders’ equity EUR 158 million, total assets EUR 972 million, loans EUR 635 million and its deposits amounted to EUR 804 million.

Having registered 7% expansion in its total assets, the bank employs a total of 140 people.

TURKISH ZIRAAT BANK BOSNIA d.d.

Having started operations in 1997, Turkish Ziraat Bank Bosnia d.d. is the first bank backed fully by foreign capital in Bosnia & Herzegovina.
The bank provides an entire suite of banking products and services to its corporate, commercial, and retail banking customers through 23 service units, 32 ATMs, 21,000 credit cards, 12,000 debit cards, and 745 POS devices across the Federation. The bank had 171 employees as at year-end 2012.

Turkish Ziraat Bank Bosnia d.d. succeeded in maintaining its profitability consistently in this country that has been severely hit by the global crisis. As of 31 December 2012, Turkish Ziraat Bank Bosnia d.d.’s total assets amounted to USD 155.2 million, with loans of USD 98.3 million, deposits of USD 78 million and shareholders’ equity of USD 48 million.

ZIRAAT BANK (MOSCOW) CJSC

Ziraat Bank (Moscow) CJSC started operations in Moscow in 1993.
Aiming to satisfy all of the banking needs of its Turkish and Russian customers, the bank adopts a customer-focused approach to service in the conduct of its activities.

Ziraat Bank (Moscow) CJSC offers rapid, high quality and modern banking services to Russian companies, as well as to Turkish companies operating in Russia, in areas of corporate and commercial banking and non-cash loans.

At the end of 2012, the bank’s total assets amounted to USD 73.6 million, with loans of USD 50.6 million and shareholders’ equity of USD 32.2 million. Its total assets and lending expanded by 37.8% and 19.7% year-on-year, respectively.

KAZAKHSTAN ZIRAAT INTERNATIONAL BANK

The Kazakhstan-Ziraat International Bank was incorporated as the first foreign capital-owned bank in Kazakhstan in 1993.
Headquartered in Almaty, Kazakhstan-Ziraat International Bank continues to offer services through three branches located in Almaty, Astana and Shymkent.

As of 31 December 2012, the bank’s total assets amounted to USS 148.7 million, with shareholders’ equity of USD 111.6 million and a profit of USD 3.4 million for the period.

The bank’s loan book was worth USD 64 million in 2012, representing a year-on surge by 131%, and the bank’s paid-in capital was raised by 48%. The bank launched a new banking software and internet banking application in July 2012.

AZER-TÜRK BANK ASC

Incorporated in 1995, Azer-Türk Bank ASC is a joint venture of Ziraat Bank and Agrarkredit QSC (Republic of Azerbaijan).
The Bank provides services through five different units, with four branches: Central, Baku, Ganca and Nakhchivan and the Customer Services Department under the Head Office organization.

As of 31 December 2012, Azer-Türk Bank’s total assets amounted to USD 108.6 million, with shareholders’ equity of USD 17.1 million and a net profit for the year of USD 1.5 million.

Owing to its various qualities including a service concept with a focus on customer satisfaction and transparency of its activities, the bank maintains its position as a trustworthy and prestigious enterprise within the Azeri banking system. The bank will further cement its position in the sector with the raise to be realized in shareholders’ equity in line with the requirement of the Central Bank of the Republic of Azerbaijan.

TURKMEN TURKISH JSC BANK

The Turkmen Turkish Joint Stock Commercial Bank has been operating in Turkmenistan as a subsidiary of Ziraat Bank since 1993.
Enjoying the capability to provide a full-scale banking service, the bank has taken on a significant role in advancing economic, commercial and social relations between Turkmenistan and Turkey since its foundation and has also become one of the ports linking Turkmenistan with the rest of the world.

With its 5 exchange offices, the bank is the country’s most active bank in terms of foreign currency transactions. In addition, five Western Union points operated by the bank handle a large volume of WU transactions.

At the end of 2012, the bank’s total assets amounted to USD 69.5 million, with shareholders’ equity of USD 13.4 million and a net profit of USD 5.4 million.

UZBEKISTAN-TURKISH BANK (UTBANK)

Uzbekistan Turkish Bank (UTBANK) was founded in 1993 in Tashkent as a joint venture between Ziraat Bank and Agrobank (Uzbekistan), with each controlling an equal stake.
Serving its customers in all business lines of banking, UTBANK’s total assets were worth USD 64.8 million at the end of 2012. The bank’s deposits amounted to USD 22.7 million, its shareholders’ equity to USD 23 million and its net profit to USD 1.9 million.

The bank endorsed its institutional strength with “A” credit rating assigned by the national credit rating agency in June 2012; the outlook of the rating was “positive”.

Domestic Subsidiaries

ZİRAAT SİGORTA A.Ş.

Founded on 11 May 2009, and having started its insurance operations in 2010, Ziraat Sigorta achieved all of its targets in 2012. The premiums that amounted to TL 378,763,559 at the end of the year represent a year-on rise by 19%, which outdid the average premium rise of 17% attained by the overall non-life insurance industry in the same period. The company had 2.33% market share in 2012. Ziraat Sigorta remained the company with the highest RoE percentage in the sector in 2012, when it also increased its production. Succeeding in attaining sustainable growth and profitability since the first year it was founded, Ziraat Sigorta has become an exemplary company in the sector.

Agriculture insurance made up the key production branch for Ziraat Sigorta in 2012, in which the company sustained its leadership in premium production in the sector. Commanding 50% share in the company’s portfolio for the past two years, this branch is anticipated to maintain the same weight in the years coming. Thanks to the alternative sales channels that are planned to be introduced in 2013, a remarkable growth is expected in personal accident and unemployment insurance products, as well as in the sales of Compulsory Earthquake Insurance (in Turkish: DASK) policies that represent a significant production item.

Ever since its inception, Ziraat Sigorta has analyzed the data demand structure in the insurance market and has been active in profit-yielding branches rather than in those that produce losses. The composition of the company’s customer portfolio and its geographic distribution are of a nature that allows sustainable profitability and growth. Ever since its incorporation, the company has been developing innovative products so as to increase penetration in this area where it already possesses superiority, and has been striving to create additional capacities and to enlarge the existing pie. In addition, Ziraat Sigorta targets at a portfolio composition with a focus on profitability, and creates underwriting and pricing policies that are aligned with the insurance technique.

Having become a role model that is closely watched in the sector owing to its successful bancassurance activities, Ziraat Sigorta remained the highest premium generator in this field in 2012. It is aimed to carry the company up the rankings on the back of incentive implementations that will be launched so as to gain greater access to the Bank’s insurance potential and increased contribution of other distribution channels to premium production.

ZİRAAT HAYAT VE EMEKLİLİK A.Ş.

Ziraat Hayat ve Emeklilik A.Ş. received permission for incorporation on 11 May 2009 and entered operation in the life insurance and personal accident insurance branches at the beginning of 2010. Involved in the Private Pension System since July 2011, the company continued with its rapid ascent during 2012.

Based on the year-end premium production data published by the Association of the Insurance and Reinsurance Companies of Turkey (TSRŞB), the company was the sector’s leader in the life branch with premium production of TL 806 million, corresponding to a market share of 30% in 2011. The company maintained its leading position throughout 2012.

In view of the end-December 2012 data released by the Insurance Association of Turkey, Ziraat Hayat ve Emeklilik attained a premium production of TL 590.3 million in life and personal accident branches that corresponded to a market share of 20.72%, and closed 2012 as the sector’s leader, as it did in the previous years. The company paid approximately TL 403 million in compensation to its insured customers for 46,824 claims in 2012.

The total assets of Ziraat Hayat ve Emeklilik A.Ş., including pension mutual funds, rose from TL 900 million (TL 848 million excluding pension mutual funds) at the end of 2011 to TL 1,131 million including pension mutual funds (TL 962 million excluding pension mutual funds) by the end of 2012, corresponding to a year-on increase of approximately 26%. In addition, the company’s average RoE was 56% at end-December 2012.

Ziraat Hayat ve Emeklilik began its operations in the Private Pension System in July 2011, which has been developing rapidly in the recent years both in terms of legislation and social awareness. The company’s pension mutual funds in the system rose from TL 51.7 million to TL 169.7 million in the twelve months to end-2012.

Besides the amendments made to the law and regulations that regulate the Private Pension System, a new regulation was published and went into force on 01 January 2013, which introduced the “State Subsidy” concept. The expected growth that resulted in the private pension sector owing to these new requirements was considered also by the company, which forecasts that the amount of pension mutual funds will top TL 400 million by the end of 2013.

The company spent various efforts in an effort to vest its sales organization in a dynamic structure in parallel with the developments in the sector during 2012. Training programs were organized for preparing the Bank employees for the licensing exams given by the Pension Monitoring Center, so as to enable them to serve as Private Pension Intermediaries. Achieving a success rate of 95% at the exam, 129 employees earned the title Private Pension Intermediary.

As a result, the performance to be displayed by the Bank’s employees along with the company’s existing sales force under the “Ziraat Finance Group” roof will form the basis of the high amounts of pension mutual funds the company aspires to achieve.

Ziraat Hayat ve Emeklilik offers service to its customers through private pension plans and life insurance products.
Addressing a broad customer segment, the company’s primary private pension plans include, among others, “Güldüren Yarınlar Planı” (planning for a future that will make you smile) “Bereket Planı” (Plan for Plenty) designed for interest-rate sensitive customers, “Şemsiye Planı” (Umbrella Plan) that provides special advantages to newcomers who enter the System with their savings, and other plans that offer special advantages for various professions and that are utilized during campaign periods.

In addition to Group Life and Group Personal Accident Insurance products designed for groups, Ziraat Hayat ve Emeklilik offers corporate solutions through Personal Private Pension Linked to Group or Employer Group Pension plans that are also targeted towards groups.

On the life insurance front, major products include “Hayata Dair Yıllık Hayat Sigortası” (Annual Life Insurance for Life) that pays an indemnity not only in the event of death or disability but also in the event of contracting one of the 12 dangerous illnesses that include cancer, stroke, heart disease, etc., and “Hayat Arkadaşım Yıllık Hayat Sigortası” (Annual Life Insurance for my Spouse) which offers various optional assurances in addition to death coverage.

In an effort to provide assurance for diverse risks against which its customers need protection, Ziraat Hayat ve Emeklilik continues to work on new and customized products such as education insurance, long-term life insurance, credit card protection, income protection and pension income plan. These products are planned to be introduced in the second half of 2013, depending also on the system infrastructure.

ZİRAAT FİNANSAL KİRALAMA A.Ş.

Founded in 1991, Ziraat Leasing has positioned itself as a stable, deeply rooted and powerful company in the sector. Working to a principle of producing the right financial solutions for the right projects since its inception, the company continued with its consistent growth in 2012.

In 2012, Ziraat Leasing increased its turnover by 15% year-on-year to TL 330 million.

Ever since its incorporation, Ziraat Leasing’s primary target has been providing financing to a wide array of sectors, including construction, healthcare, textiles, food, iron & steel, metal processing, printing and manufacturing industry, and supporting technological advancement in mechanization. Having played a pioneering role in promoting the use of financial leasing for agricultural machinery, Ziraat Leasing maintained its position as the leader in its sector in 2012 with the leasing transactions directed at the agricultural sector.

Ziraat Leasing’s mission is “to finance investments by producing effective and accurate solutions in order to contribute to the national economy and to the deepening of financial markets” and its vision is spelled out as “being the first choice of leasing company for investors and employees”. With Ziraat Bank’s support and experienced staff, the company moves forward to be one of the pioneering and leading companies in the sector.

ZİRAAT YATIRIM MENKUL DEĞERLER A.Ş.

An active participant in the capital markets with its professional team of 103 staff and its mission of providing an efficient service to its customers, Ziraat Yatırım Menkul Değerler started operations in 1997.

The company holds authorization certificates for Trade Brokerage, Public Offering Brokerage, Portfolio Management, Investment Consultancy, Trade on Credit, Short Sale and Borrowing-Lending, Options and Derivatives Transactions. The company is also engaged in the İstanbul Stock Exchange (ISE) Emerging Companies Market (ECM) as a market consultant. Providing services through 4 branches, 16 investment centers and 1 liaison office, Ziraat Yatırım Menkul Değerler makes use of all domestic branches of Ziraat Bank across the country as its agencies.

Ziraat Yatırım Menkul Değerler makes active use of alternative delivery channels. The company’s comprehensive delivery channels include the Company’s internet branch (e-Ziraat) at www. ziraatyatirim.com.tr; “Ziraat Trader”, which allows orders to be placed via mobile phones, tablet PCs and data screens; and the Customer Care Center on 44 44 979.

Ziraat Yatırım Menkul Değerler’s trade volume in the ISE equity market was worth TL 13.3 billion by the end of 2012. During the same period, the company recorded a total of TL 51 billion in repo-reverse repo transaction volume in and outside Borsa İstanbul (formerly called ISE), while its outright purchase and sale transaction volume in the bonds and bills market stood at TL 5.9 billion. As a leading participant of the derivatives market, Ziraat Yatırım’s total transaction volume on TurkDEX (Turkish Derivatives Exchange) was worth TL 9.1 billion in 2012.

ZİRAAT PORTFÖY YÖNETİMİ A.Ş.

Ziraat Portföy Yönetimi began operations in 2002. The company manages its clients’ investment portfolios of capital market instruments in the capacity of a commissioner.

Ziraat Portföy Yönetimi manages nine mutual funds owned by Ziraat Bank, four mutual funds owned by Ziraat Yatırım and six private pension funds owned by Ziraat Hayat ve Emeklilik.

With TL 1.5 million of capital, total volume of assets managed by the company reached TL 1.528 billion as of year-end 2012. The company booked a net profit of TL 644 thousand and ranked 7th among the 35 asset management companies active in the sector with a market share of 3.1%.

FİNTEK FİNANSAL TEKNOLOJİ HİZMETLERİ A.Ş.

Founded in 2001, Fintek has been providing IT services to Ziraat Bank and its foreign branches and subsidiaries in the fields of infrastructure, integration, system management, support-operations, application development and technical consultancy. Holding the TS ISO/IEC 27001 Information Security Management System certificate, Fintek ranked among the top 100 IT companies in “Turkey’s Top 500 IT Companies Survey” conducted by İnterpromedya.

With its competent and dynamic staff of 590 people, and by employing its technology and expertise to the full, Fintek constantly aims to achieve more. The company continued to provide strong technological support to Ziraat Bank in 2012 with its innovative and up-to-date technological investments and products that comply with the TSE EN ISO 9001: 2000 criteria.

During the reporting period, the infrastructure was revised as necessitated by the new service model under Ziraat Bank’s “Together, to a Better Future” project.

The following were launched based on the need to be able to more efficiently manage customer communication:


During the same period, necessary work was carried out to set up the “Target and Performance Management System” aimed at measuring the productivity and efficiency of processes and employees.

In addition, work was taken on to harmonize the current technologies that support the Operations Center model to the Operations Center, which was set up in 2012 in keeping with the centralization concept that makes up a key element of industrialized banking.

In addition, in an effort to combine databank and credit culture for effective management of the credit risk, credit decision and decision support models were devised, “Company Evaluation System” was installed, and centralized allocation was introduced for retail loans.

Furthermore, efforts were concentrated on business intelligence solutions to ensure fast and efficient decision-making, which will help optimize the business performance by making the needed data available, and which will enable access to complete and accurate information on all of the Bank’s lines of business so as to allow quantification of the outcomes of decisions.

Weight was given to infrastructure work on alternative delivery channels to launch efficient and user-friendly applications, besides the Bankkart (Ziraat debit card) Product Voyage Project seeking to ensure innovative product and service delivery.

International Branches/Subsidiaries Basic Banking Software Implementation Projects were developed in order to provide better service to international branches and subsidiaries, as well as to Ziraat Bank. In this context, necessary work was initiated in the Bank’s subsidiaries in Kazakhstan and Turkmenistan, and in the Tbilisi branch in Georgia on the east. On the western front, necessary purchasing was realized for the Western Geography Basic Banking software, which covers the subsidiaries in Germany and Bosnia and the branches in London and New York. In addition, the Infrastructure Standardization Project is underway, which covers all international branches and subsidiaries.

The new GTP (Tradesoft) application implementation was brought to completion, which involves integration with the Bank (Finart) for Ziraat Yatırım Menkul Değerler. Accordingly, work was begun to relocate the servers that house all applications and peripheral systems of Ziraat Leasing and Ziraat Yatırım Menkul Değerler to the Fintek location, and maintenance service was launched so as to cover all related infrastructural components.

Fintek will continue to provide Ziraat Bank with a fast and superior technological infrastructure and hardware support in 2013 by increasing operational efficiency at the Bank and its subsidiaries while strictly maintaining quality, in line with the Bank’s purpose of gaining a competitive edge in the sector.

BİLEŞİM ALTERNATİF DAĞITIM KANALLARI VE ÖDEME SİSTEMLERİ A.Ş.

Bileşim Alternatif Dağıtım Kanalları ve Ödeme Sistemleri A.Ş. provides alternative delivery channel and payment system services to Ziraat Bank.

Servicing one of Turkey’s largest ATM networks, Bileşim A.Ş. ranked first in the category of “Income from Outsourced Services”, which is its primary field of activity, in the “Top 500 IT Companies - Turkey 2011” listing.

With its robust financial and technological infrastructure, personnel who are highly specialized in their fields, and its dynamism that allows the company to rapidly adapt to innovations, Bileşim A.Ş. maintained its leading position in the sector in 2012.