Hüseyin Aydın
Member of the Board of Directors and General Manager

Esteemed Shareholders,

2012 has been a year when we have taken significant distance in the project of change and transformation that is in progress at Ziraat Bank that has been pursuing operations for 149 years as a major asset of our country.

Being a young bank celebrating its 150th anniversary, we are targeting to increase our contribution to our country with our identity as a strong and competitive service provider that is leading in its sector and operating on global scale.

The global crisis and volatilities of recent years revealed that the banking industry is a key component of economies, and that banks with robust shareholders’ equity help the respective countries gain some level of immunity against the crisis.

Within the frame of the basic assets and liabilities management principle, Ziraat Bank has focused on solid shareholders’ equity and on sustainable profitability and productivity. Along this line, while no expansion was registered in the balance sheet in 2012, improvements were attained in profitability and productivity ratios pursuant to the strategy of maintaining a balance sheet aligned with the shareholders’ equity.

Our shareholders’ equity grew by 30% during 2012, a result driven also by the net profit. Although the share of shareholders’ equity within the balance sheet went up from 8% to top 10%, the process of strengthening the shareholders’ equity needs to be persisted.

In an effort to diversify the sources of funding and to increase their effectiveness, weight was given to loans
obtained from international institutions and banks, and to bonds and bills issues within the country. While ensuring resource diversification, transactions in short-term money markets were reduced, and focus was concentrated on core deposits, thereby rendering a more effective funding resource.

Our plans for 2013 include arranging the first syndication loan and realizing the first eurobond issue.

In keeping with the target of switching from a structure that finances the public to a “customer-oriented” structure that extends greater support to the real sector, our marketable securities portfolio was narrowed down, and lending followed a flat course. As the share of marketable securities in the balance sheet declined from 44% to 40%, the share of loans remained in the region of 44%.

Ziraat Bank has focused on solid shareholders’ equity and on sustainable profitability and productivity.

We will remain the greatest supporter of the agricultural sector based on the foresight that agriculture will become a business line that is equally important as energy in the future.
Our project of change and transformation is being carried out on two main axes: the infrastructural transformation has been completed in the structuring of the business model, as well as financial structuring, and the change and transformation projects in corporate and global aspects have been initiated. In the process of switching to a structure that is market- and customer-oriented, we have finalized customer segmentation for the sake of right value propositions, as well as branch segmentation for the sake of offering more efficient service to customers. Thanks to the macro customer segmentation we have undertaken, we will be managing the agricultural sector more effectively.

While no expansion was registered in the balance sheet in 2012, improvements were attained in profitability and productivity ratios pursuant to the strategy of maintaining a balance sheet aligned with the equity.

Our branches, regional directorates and head office units have been reorganized in a dynamic structure within the frame of the separation of powers principle. The projects directed towards improving non-branch channels are carried on within the scope of customer relationship management at Ziraat Bank that possesses a significant customer base.

An operations center was set up within the framework of scale economy for the purpose of alleviating the operational load and increasing productivity at branches so as to enable them to maintain a customer-focus and offer high quality and high level of service. It is targeted to increase the efficiency of centralized operations by way of separating sales and operations. Work is underway to gradually transfer the banking transactions to the center, and the number of transactions handled by the center on a daily basis was nearly 40 thousand in the last quarter of 2012. The centralization ratio of banking transactions had exceeded 50% by the end of the year.

Centralized allocation and loan evaluation modules were introduced within the scope of institutionalized risk appetite and risk management. We are targeting to outperform the overall sector in credit expansion in 2013 on the back of our efforts to capture a robust balance sheet structure, and upon completion of the infrastructural transformation in lending.

In the process of switching to a structure that is market- and customer-oriented, we have finalized customer segmentation for the sake of right value propositions, as well as branch segmentation for the sake of offering more efficient service to customers.

Ziraat Bank continues to offer service to the entire country at 1,425 domestic branches, and it is the sole provider of banking services at 404 locations.
Under the change and transformation project, 1,234 branches switched to the “Bank Customer Business Model” with the goal of enabling our branches to offer more efficient and higher quality service; in the first quarter of 2013, the transition of all our branches to the new model will be completed. In addition, we are planning to open 150 more branches with a particular emphasis on İstanbul and the big cities in Anatolia in 2013 when we will be celebrating our 150th anniversary.

As we have taken on restructuring in our overseas banks and branches in addition to our branches in Turkey, we have redesigned our plans to penetrate the Balkans, Far East, Middle East and North Africa.

“Ziraat Finance Group” will be the ultimate output of our change and transformation project.
We are striving to realize a large-scale change and transformation project utilizing internal resources with the aim of offering the fastest and the highest quality service to Ziraat Customers at all our domestic and overseas branches and subsidiaries, while increasing our contribution to our country’s growth.

We are aiming at offering the fastest and the highest quality service to Ziraat Customers at all our domestic and overseas branches and subsidiaries, while increasing our contribution to our country’s growth.

I would like to extend my heartfelt thanks to all of our stakeholders for supporting us with our change and transformation project that is designed to make Ziraat a global bank besides Turkey’s leading bank, to appeal not only to our customers’ minds, but also to their hearts, to be the first name to be recalled, and to be “More than a Bank” for our country, and for contributing to our efforts for building a Ziraat Bank that is taken as reference in the industry with its banking practices.

Yours sincerely,

Hüseyin Aydın
Member of the Board of Directors and General Manager