Muharrem Karslı
Chairman of the Board of Directors

Stepping into 2013 that marks its 150th year in service, Ziraat Bank is a dynamic, young and innovative bank.

Our Bank’s target for the year ahead is to crown its role as the driving force of the national economy with sustainable growth and profitability performance. Ziraat Bank possesses all the necessary internal dynamics and energy to attain this target.

Esteemed shareholders,

During 2012, signs of improvement in global economy increased; the challenges, however, lingered on.

While the recovery process in the aftermath of the global crisis continued, it lost pace. The rates of growth of developed economies were far from the level that would contribute the strength and dynamism to rectify unemployment and put the economies back on growth track. Growth rates declined also in emerging economies that had displayed solid growth performances in the prior year.

The post-crisis dynamics were responsible for this picture. Fiscal consolidation and the weak banking system restrain growth in developed economies. Although the fiscal consolidation process is on track in many countries, it will take time for its positive effects to reflect on the economy.

The global financial system is still not functioning productively. Many countries suffer from weak banks, as heavy borrowing terms imposed on customers and low growth rates hamper the banks’ efforts to improve their positions.

The Eurozone is strongly influenced by the shocks that any member country may go through. On another hand, relatively weaker banks operating in the Eurozone augment the shock waves. If these characteristics are accompanied also by fragilities in public finance, the issue gets even bigger in countries suffering from the shock and plagues other countries. The Eurozone is in need of a new financial architecture that will diminish the impacts of the shocks, and therefore, the magnitude of economic fluctuations.

The weak growth and uncertainty in developed economies affect emerging markets and economies through the trade and finance channels. On another wing, capital flows that vary depending on the risk exposure and quickly respond to policy revisions emerge as another factor that impacts the performances of emerging countries.

Drawing on the confidence derived from its robust financial structure and its customers, our Bank is undergoing both financial and operational innovations and change in line with its targets.

In 2012, the Turkish economy focused on creating the suitable ground for a soft landing with the target of healthy and sustainable growth.
In 2012, the economic rebalancing process became more evident. Inflation readopted a downward trend, while improvement was observed throughout the year in the current account balance. 8.5% in 2011, growth was 2.6% in the first three quarters of 2012. While the contribution of domestic demand to growth decreased, the contribution of net foreign demand turned to positive. This process resulted in a healthier outlook for the growth composition as compared with 2011.

In conjunction with the continued issues in the Eurozone, the Eurozone’s demand for Turkey’s export goods decreased, and the share of exports to European countries slimmed down. On the other hand, net exports to African and Middle Eastern countries contributed remarkably to annual growth.

The inflation declined during 2012. Having registered 10.45% in 2011 due to the depreciated Turkish lira, tax adjustments and the rise in food prices, the CPI stood at 6.16% in 2012 owing to the implemented policies, combined with the elimination of the base effect of the prior period.

During 2012, signs of improvement in global economy increased; the challenges, however, lingered on.

The measures adopted in 2012 in relation to the current deficit, a chronic issue of the Turkish economy, produced positive outcomes, and the current deficit declined on an annual basis and went down to USD 49 billion. In turn, the ratio of current deficit to the GDP is anticipated to decrease to the order of 6.5% as at year-end.

The actualizations of macroeconomic indicators that turned out to be more positive than forecasts have resulted in the upgrade of Turkey’s long-term credit rating to investment grade by Fitch Ratings. The improvement secured in the
credit rating is expected to steer other rating agencies in the same direction in 2013 and thereafter. It is believed that such a development will bear highly positively upon Turkey’s investment climate.

2013 is anticipated to be a more favorable year for the Turkish economy with respect to developments in growth, inflation and current deficit. Along this line, it is expected that 2013 will be a year when all economy authorities will be striving to move to a stable and sustainable growth that is backed by the monetary policy, focused on domestic demand provided that it is moderate, and watchful of the inflation trend, as well as of exports.

In 2012, the economic rebalancing process became more evident.

Ziraat Bank, the pioneer of banking in our country, continued with its development, focused on efficient and productive balance sheet management, and put into life its forward-looking preparations in 2012.
Drawing on the confidence derived from its robust financial structure and its customers, our Bank is undergoing both financial and operational innovations and change in line with its targets. While our primary goal is to ensure stability in our Bank’s operations, our efforts are ongoing to develop a structure that will allow us to more strongly back Turkey’s macroeconomic targets.

I would like to take this opportunity to share that we have progressed outstandingly in 2012 within the scope of our change management program that we have based on the principle “Together, to a Better Future”. Aimed at ensuring that the services required by our customers are fulfilled in the leanest manner, at the right time and with the right value proposition, the project strengthens the Ziraat Customer concept and enhances customer loyalty.

Ziraat Bank will keep standing by its customers and growing together with its stakeholders.

150 new branches that we plan to open in 2013 when we will be celebrating our 150th anniversary will serve as a clear indication of the fact that Ziraat Bank will continue to stand by its customers and to grow together with its stakeholders as a service provider that rises upon deep-rooted and solid foundations, yet that is equally young and dynamic.

The biggest share in Ziraat Bank’s success is attributable to our employees. Our human resource is our greatest guarantee in achieving new targets. I am fully confident that we will remain the pioneer of the industry in many more years to come, thanks to the trust of our customers and the contributions of our employees. On behalf of myself and the Board of Directors, I would like to thank our customers for their trust, our employees for their superior performance, and our correspondents and all our business partners for their invaluable cooperation.

Yours sincerely,

Muharrem Karslı
Chairman of the Board of Directors