Ziraat Bank has set its financial management strategy as:

• holding shareholders equity that is aligned with the size of the balance sheet,
• increasing the  relative  share of  loans,     
• attaining an effective and diversified funding resource base.

 

Ziraat Bank applied an extensive change and transformation project with a view to fulfilling the financial needs of its customers through the right channels, at the right time, and with the right value propositions. Through this change and transformation project, the Bank intends to achieve increased efficiency and productivity in its customer relationships, its lending processes and in its policies.
Molding its activities in a manner which ensures a well-balanced balance sheet structure, Ziraat Bank had TL 207.5 billion of total assets at the end of 2013. Working with its target of ensuring sustainable profitability - an important component of shareholders’ equity - the Bank posted a year-end net profit of TL 3,330 million, an increase of 26% YoY.

The Bank notched up a considerable increase in profitability and productivity ratios, which are the key success indicators for the Bank. The return on equity (RoE) increased from 17.6% in 2012 to 18.5% in 2013. Likewise, the return on assets (RoA) also increased from 1.7% in 2012 to 1.8% in 2013.

Total lending, which stood at TL 71 billion at the end of 2012, increased by 55% YoY to TL 111 billion in 2013. The Bank’s total deposits amounted to TL 142 billion at the end of 2013, marking an increase of 19% YoY, and the share of deposits in total liabilities was 68%. Savings deposits accounted for the largest portion of deposits, with a 44% share.

Expanding the domestic service network
Ziraat Bank, which provides services to almost every point in Turkey, structured its widespread branch network in line with the Bank’s customer definition and new business model strategies. The Bank took significant steps towards providing an effective service to customers as well as the most optimal working environment for its employees. The Bank opened 150 new branches in 2013, its 150^th anniversary year, and continued to single handedly fulfill the banking needs of its customers at 400 locations in Turkey.

The renewed website serves as a good example of the ongoing investments undertaken for the purpose of developing external-branch channels. Efforts were stepped up with the aim of delivering effective banking to a larger audience.

At the end of 2013, the Bank had a total of 1,636 domestic branches, including the 5 corporate branches, 27 commercial branches and 81 entrepreneurial branches - in addition to the 1,521 bank branches and two mobile branches.

Within the scope of its efforts to expand its domestic branch network, Ziraat Bank will continue to open new branches in the future, with a particular focus on Istanbul and districts where no other bank is present, and continue to contribute to the country’s employment.
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Restructuring process in the scope of the new business model
Under the scope of the new customer focused business model, Ziraat Bank continues to meet the banking services and product needs of its corporate and individual customers at the right point, the right time and with the most appropriate conditions.

In 2013 the Bank initiated multiple projects in line with its redefined business model, customer segmentation, and the organization of its domestic and overseas subsidiaries.

Individual Decision Making Module
The Individual Decision Making Module came in to effect to be applied at all branches on 25 March 2013, with the aim of facilitating objective loan allowance decisions through a rating system, that will enable the measurement of risk, enabling all departments to be aware of the Bank’s risk appetite of the Bank.

Credit Evaluation Modules
Credit Evaluation Modules, constructed through Finart IT systems structure, assist in the measurement of credibility of corporations applying for a loan.

SME and enterprise analysis reports prepared using the system will help to;

• Create an appropriate executive credit risk management environment,
• Ensure effective monitoring, credit risk measurement and credit evaluation, and a sound decision-making process,
• Apply an early warning mechanism in the risk control and portfolio management processes,
• Set up a credit management IT system for effective auditing.

The aforementioned modules entered effect throughout the Bank in 2013.

Project to Revise the Credit Process
In the project, the processes of extending loans, collections and the use of credit monitors was revised and updated in order to speed up processes and increase efficiency. This also brought time savings in the branches and collection departments.

“Başak Model” Evaluation Methodology
The Başak Model is used to evaluate loan needs of unlimited companies with up to TL 50,000 in capital and which are active in agricultural sector.

Evaluations are conducted by using information connected to customers which is available on the system and criteria dependent on the sectors in which they operate. Sector criteria are rated by the system automatically facilitating a more simplified conclusion of the evaluation process.

The evaluation system enabled the more rapid finalization of application procedures for agricultural producers applying for loans of up to TL 50,000 - which total 70% of the whole agricultural sector portfolio.

Ziraat Bank, celebrating its 150^th anniversary in 2013, is moving forward step by step towards realizing its targets with the dynamism brought about by its restructuring, and is striving unwaveringly to gain the corporate structure needed in today’s modern banking.

Entrepreneurial Banking

Ziraat Bank is determined to adapt to the necessities of the new financial era brought about by the international conjecture, and plays a progressive role in the country’s long-term development and improvement process.

Within the scope of diversifying its resource base and providing the most suitable products to its customer’s at the most appropriate costs and maturities, Ziraat Bank unwaveringly works to improving its service and the quality of the products that are provided for the use of its customers.

In this vein, the Bank completed its customer and branch segmentation efforts and the Bank moved to portfolio management. In 2013 the Bank expanded its number of Entrepreneurial Banking branches to 81.

By transferring long-term sources to real sector, Ziraat Bank aims to enhance the competitiveness of Turkish firms in the external arena. The Bank also continues to support SMEs and other commercial firms.

Loans obtained from international finance corporations
Ziraat Bank cooperates with national and international corporations to provide more appropriate low-cost and long-maturity investment credit and to help finance the working capital requirements of SMEs and medium sized enterprises, which make up an important portion of Turkey’s commercial and industrial operations. Thus the Bank aims to support the economic improvement taking place in the country.

World Bank loans for SMEs and Medium Sized Enterprises
The World Bank’s loans are set apart from the other loans available in the sector in that they provide long-term, low-cost investment and operating finance with grace periods and flexible repayment terms. Ziraat Bank always supports its customers by providing value creating financial solutions and this type of loan is available for its customers.

Ziraat Bank continued to channel the loans secured from the World Bank to the SMEs in 2013, in a process which started in 2010.

To meet the energy efficiency investments financing needs of SMEs and commercial enterprises, a loan agreement for USD 67 million was signed with the World Bank in May 2013. Ziraat Bank also contributed to this project, using the Bank’s own resources, by adding 25% to the amount of the loan obtained from the World Bank.

The third agreement in the project to provide SMEs with access to financing was signed in August 2013. A USD 300 million long-term loan was made available, to be used by SMEs through leasing companies and banks which hold a leasing license.

Under the scope of this credit channel, all investments undertaken by SMEs will be financed, thus ensuring a contribution to the development of the national economy. Moreover, the leasing sector also has the opportunity to access medium and long term funding.

Loan from the European Investment Bank (EIB) for SMEs and Medium Sized Enterprises
Ziraat Bank arranged in 2012 a EUR 100 million loan from the European Investment Bank (EIB) with a maturity of 10 years. The loans extended in this framework are intended to fund investments that SMEs will undertake in Turkey, eliminate regional differences and to meet SME’s needs for operating capital in an effort to support the growth of SMEs by increasing their production, productivity and employment.

As a result of the high success ratio in the project, a new EUR 200 million loan was approved by the European Investment Bank. The agreement for the first EUR 100 million installment was signed in September 2013 and this resource was made available for the use of customers. The remainder will be accessible after completion of the first part of the project. In an extension of the previous project, medium sized enterprises may also access this loan.

“My First Business, My First Bank” loan collateralized by the European Investment Fund
A guarantee agreement incorporating collateral for the cash loan volume of TL 300 million was signed by the Bank and the European Investment Fund (EIF) in 2011 to finance the operations of SMEs at attractive costs without imposing the burden of additional collateral for their access to funds. The project’s success led to an extension of project, to TL 1.3 billion, and this amount has been put in use.
Under the agreement, the EIB- Collateralized “My First Business, My First Bank” SME Loan that will be allocated from the Bank’s resources is intended to back newly-established SMEs and tradesmen and, in particular, women entrepreneurs in need of collateral and start-up capital.

Within the scope of the collateral support program secured from the EIF, the Bank started allocating loans to small entrepreneurs seeking to start up a new business, or those whose businesses were established within the last 5 years against their personal guarantee. By helping those businesses that have only recently started operations access external funds, the project is intended to lend significant support to Turkey’s young and dynamic entrepreneur force.

SEP (Saudi Export Program) Loan
SEP extended a USD 50 million loan to finance the imports of goods originating from Saudi Arabia. Firms importing goods (excluding crude oil) from Saudi Arabia are eligible to access this loan, which offers low-cost financing with a maturity of up to 3 years. This opportunity will expire in 5 years.

Corporate/Commercial Banking and Project Finance

Ziraat Bank aims to ensure that its corporate and commercial banking products and services are competitive in the sector and meet customers’ needs.
With activities in corporate and commercial banking, the Bank creates costless resource and cross-sales opportunities. Efforts focused on financing the real sector and extending its commercial customer base continued in 2013. Marketing activities directed at commercial enterprises of a sub-corporate scale gained pace. Ziraat Bank continued to play a key role in financing effective projects during the year, which do not discriminate on the basis of sector and which contribute to the national economy, which offer high added value and which generate their own revenue.
In 2013, the Corporate and Commercial Banking segment recorded growth in excess of the sector average. Cash-loans expanded by 209% YoY to TL 35.1 billion and non-cash loans increased by 100% YoY to TL 24.7 billion.

High quality standards in banking services
In the framework of the change-transformation projects being applied, the new service model applied in all branches and the Bank’s customer focused approach, customers are provided services in the line of modern banking. Under the scope of ensuring high quality standards in the banking services, where every customer is accepted as a Ziraat Bank customer, solutions to meet customers’ financial needs through corporate and commercial branches have been provided, therefore ensuring high standards in banking services.

As a Turkish Bank with a widespread international network, Ziraat Bank offered a competitive advantage in all arenas to customers active in national and international markets.

Thanks to corporate solutions and financial support backed by a strong technological infrastructure and correctly and effectively applied one-to-one customer relations management, Ziraat Bank gained a solid and trustworthy identity and become the most popular bank in all sectors.

The revision in the structure of corporate and commercial banking credit products was completed. A cash credit products infrastructure was established, paving the way for a shift to an FTF (Fund Transfer Pricing) based interest and commission pricing system. In accordance with the customer focused banking approach, efforts to simplify products, systems and legislative processes continue, along with relevant training continue with the aim of providing a high quality of service.

A Customer Oriented Approach
Ziraat Bank will continue to strive to expand and enrich its customer base by extending customer composition in the Corporate and Commercial Banking area in order to maintain sustainable growth in 2014. In this vein, the main strategies are set out as specializing in the customer base and maintaining the effectiveness of customer focused banking by gaining customer loyalty.

The Bank will continue to play a pioneering role in mediating between national and international finance corporations in order to support the real sector, both in domestic and international projects, without discrimination on the basis of industry.

Financing Of The Agricultural Sector

Financing all areas of the agricultural sector, from producer to manufacturer, in every link of the value chain
Within its primary targets, Ziraat Bank attaches the highest priority to strengthening producers and the agricultural sector, helping the sector gain modern financial products and achieve global competitive strength.

The Bank aims to contribute to the development of the agricultural industry by financing every link of the agricultural value chain.

Despite the efforts taken towards achieving capacity expansion and economies of scale in recent years, SMEs and industrial corporations could not reach the desired levels. The Bank seeks to create an organic bond between the aforementioned corporations by providing financing models which will add value by maintaining standardization in production, decreasing cost and increasing efficiency.

TL 22.3 billion loan to finance the agricultural sector
At the end of 2013, Ziraat Bank’s lending to the agricultural sector had amounted to TL 22.3 billion with a total of 566,665 credit customers.

Within these loans, the year-end balance of the loans extended from the Bank’s resources amounted to TL 19.4 billion, which was extended to 468,585 credit customers, while the balance in loans arranged from funds amounted TL 2.9 billion, being extended to 98,080 customers.

During 2013, a total of 342,978 real persons or legal entity customers received TL 11.8 billion worth of loans from the Bank’s resources, and 22,899 producers received TL 305.8 million worth of loans from fund resources.

47% of Ziraat Bank’s agricultural loan book is comprised of medium-long term investment loans with a balance of TL 9,039 million, with 53% of its loan book comprised of short-term operating loans worth TL 10,369 million.

Başakkart - Bringing ease in financing
A total of 180,000 producers used a TL 2.1 billion portion of the agricultural credit line of TL 2.9 billion with the Başakkart in 2013, to purchase agricultural inputs and services including fuel oil, seeds, fertilizers, pesticides, feeds and veterinary services from 12,320 member merchants with interest-free repayment terms of up to five months, thus easing the financial burden on their production processes.

Low interest agricultural loans
In May 2013, Ziraat Bank lowered its interest rates on its agricultural loans to single digit levels. In this framework, Ziraat Bank cut its interest rates to 8% on operating loans with terms of one year or less, to 10% on operating loans with terms of one to four years and to 11% for loans with terms of four years or longer.

Customers had the opportunity to obtain agricultural operating and investment loans with annual interest rates varying from 0% to 8.25% within subsidy ratios set on the basis of production scopes in relevant decrees. Accordingly, a total of TL 9.2 billion in loans were extended to 254,610 customers in 2013.

Financial Model Contribution to the integration of agriculture industry-producer
Protocols were signed with 18 companies operating in the seed, sugar beet, trout and poultry industries in 2013, and approximately 29,000 contracted producers of these companies were able to obtain operating and investment loans at attractive conditions and through a total credit line of TL 128 million.

Other services
During 2013, Ziraat Bank mediated in the payment of:

• TL 8,116 million in subsidies to 4,282,811 producers and associations,
• TL 1,347 million in costs for products by the Turkish Grain Board,
• TL 528 million by Türkiye Şeker Fabrikaları (Turkish Sugar Factories) for sugar beet advances/prices.

Interest-free stockbreeding loans
In August 2010, Ziraat Bank launched the Interest-Free Stockbreeding Loans to meet the modernization and capacity increase needs for existing cattle and small cattle husbandry and breeding enterprises, and to support new stockbreeding enterprises. Under the program, loans extended to 30,886 producers amounted to TL 579 million in 2013. Since the beginning of the program, interest-Free Stockbreeding Loans yielded a balance of TL 6.9 billion, with a total of 152,100 producers covered under the program at the end of 2013.

Fixed-interest tractor loans
Under the Fixed-Interest Tractor Loan Product, the Bank extended TL 1,052 million in loans to 25,133 producers in 2013. Within the scope of this implementation conducted since 2004, a total of TL 4,294 million in loans were made available to a total of 133,937 producers.

Greenhouse cultivation loans
Under this heading, Ziraat Bank extended TL 306 million in loans to 5,327 producers. The loans supplied to a total of 83,559 producers in the last 10 years for financing greenhouse construction, modernization, cultivation activities and similar needs amounted to TL 2.1 billion.

Retail Banking

Ziraat Bank runs retail banking operations through a wide range of distribution network including branches, internet banking and a call center aiming to provide most suitable products and services to different customer groups through the channels most appropriate to their needs.

With the aim of restructuring its Retail Banking operations, efforts to meet the different needs and trends of various retail banking segments continued, and customer focused operations gained pace in 2013.

The highlights of Ziraat Bank’s operations in the retail banking segment in 2013 are provided below;

• Retail Banking customers were reclassified according to their usage criteria of value added individual product usage size and re-segmented on an analytic banking approach. Therefore, a basis for the optimization and differentiation of service models was formed.
• Housing loans displayed a remarkable 49% growth. Efforts towards new housing projects and campaigns aimed at the target audience gained momentum.
• Between 22 April and 17 May, 2013 a total of 3,907 housing and individual business loans worth TL 197.7 million were extended as part of the TOKİ discounted closing campaign.
• A total of TL 742 million in housing loans were provided to 8,379 customers through the “Transfer Housing Credit” campaign between 3 June - 15 July 2013.
• Our mortgage loan product was introduced on 24 June 2013 and the “Specific Housing Loan for OYAK Members” was introduced on 9 September 2013.
• Ziraat Bank maintained its leading position in bancassurance production during 2013. The Bank realized TL 1,551 million of premium production and TL 231 million in commission revenue from transactions related to loans and insurance.
• In order to support the development of the 10 year old private pension system, and with the aim of increasing savings and the number of participants, employees of the Bank also encouraged to take part in the system, along with the employer contribution. At the same time, the Bank has entered into agreements with corporations and institutions to provide private pension products to its customers.
• The “unity loan” for pension customers, “contribution fee education loan” and “2/B land purchase loan” products were provided.
• The “Four Season Product Package” was revised to take account of customer expectations.
• In a bid to bring gold held “under the mattress” into the economic system, the “Gold Time” events, which started in 2012, continued in 2013.

 

Sustained growth in the retail banking segment
Ziraat Bank maintains its position as the sector’s leader in terms of the number of retail customers.

Ziraat Bank supplied TL 28.8 billion worth of credits to its 1,704,390 retail customers in 2013.

An average of TL 553.7 million worth of retail loans was extended to 32,776 customers each week, while an average of TL 110.7 million in credit was extended to 6,555 customers each day, with an average of TL 13.8 million of credit allocated to 820 customers each hour.

At the end of March 2013, in order to score the credit applications from a centralized base, all Ziraat branches started to use the Central allocation system. Allocation decisions are now being made by the Headquarters Allocation Center using the Decision Module.
In 2013, the allocation center allocated;

• a total of TL 10.6 billion to 362,107 customers,
• corresponding to TL 203.9 million worth of credit to 6,964 customers per week, and
• TL 40.8 million in credit to 1,393 customers each day.

In 2013, a total of 4,246 credits, totaling TL 61.5 million, were reconstructed in order to extend the maturities and renew customers' payment plans.

Electronic service channels
Besides its wide branch network, Ziraat Bank also serves its retail customers through electronic services channels.

Banking cards

• Sustaining its sector leadership in terms of debit cards in circulation.
  The sector’s leader in terms of the number of debit cards in circulation, Ziraat Bank increased the number of its Bankkart (Ziraat debit cards) cards by 14.6% during 2013.

  The number of Bankkart cards increased by 2,768,280 when compared to the end of 2012 and reached 21,762,750, while the number of TSK (Turkish Armed Forces) chip debit cards rose to 933,416. In the same period, the total number of debit cards in the sector increased by 9.5% to 100,164,954.

  The Bank derived TL 3.6 billion of turnover on its Bankkart cards, marking an increase of 63.7% compared to the end of 2012. This outperformance of the sector was also positively reflected to market share, which increased from 13.5% to 16.3%. The Bank took also led the sector in terms of turnover in November 2013, with TL 335 million of turnover, and TL 365 million of turnover in December 2013. The sector also grew by 35.7% during 2013, reaching a volume of TL 22.2 billion.

• 17.2% expansion in credit card turnover.
  While the number of Ziraat Bank credit cards slid by 104,762 to 3,319,054 in 2013, its turnover on credit cards increased by 17.2% to TL 11.5 billion, an absolute increase of to TL 1.7 billion. In the same period, the sector posted an increase of 4.6% in the number of credit cards in circulation to 56,835,221, with an increase of 17.3% in turnover to TL 423.9 billion.

  As a result of the credit line increase operations carried out through the alternative distribution channels, the average credit card limit per customer increased by 56% from TL 2,020 in 2012 to TL 3,156 in 2013.

• Number of POS devices reaches 116,000.
  The number of POS devices number in the sector increased by 7% to 2,283,715 in 2013, while the number of POS devices provided by Ziraat Bank reached 115,971. The turnover of member merchants, on the other hand, grew by 26.6% to reach TL 9,468 million. The sector’s POS turnover, on the other hand, recorded an increase of 18.2% and reached TL 413,281 billion.

Measures to boost operating efficiency
Efforts to bring down transaction costs to ease the operational burden and increase operational efficiency continued in 2013.
Established to this purpose, Operations Center started to carry out liability payments, SME card application entry, cheque-bond entry, business card applications transactions in addition to the already available 53 transactions.

The entry of loan agreements to the system and the updating of transactions in the system, as well as non-matching EFT transactions and delivery of first notice of unpaid mortgage loans automatically from the center were brought into the pilot application scheme.

104 million transactions were executed by the Operations Center in 2013 and the increasing trend, indicating the general centralization rate, reached 89% in December.

In order to reflect the efficiency gained from the process of centralized operations to other processes, the Bank continued to integrate external transaction operations and centralized operations. Operations Center which, works under a framework of maximum efficiency, has been the lowest cost servicing channel, apart from internet banking and ATMs.

Quality service and modern products in cash management
Under the scope of cash management modules, Ziraat Bank continues to develop its relations with customers in the corporate, commercial and entrepreneurial segment by providing quality services and modern products. Meanwhile, costumer focused, effective and efficient cash management applications press ahead at full pace.

The following measures were carried out under the scope of the efforts to develop the cash management module.

• Corporate collection protocols are being drawn up, targeting intermediate corporations' payments and collection transactions.
• General banking services agreements and protocols have been organized regarding corporations’ general banking transactions.
• E-commerce products for Corporate, Commercial and Entrepreneurial segment customers were developed and technical and operational sections were managed.
• E-solutions oriented to corporations were produced to enable electronic file transfers on some transactions, while setting up accounting integrations applications with corporations.

The number of corporations/enterprises which have collection, payment, general banking and direct lending protocols was realized at 598 in 2013.

During the stated period, a TL 90.2 million portion of the TL 98.4 billion in total collections was completed through corporate collection systems. Meanwhile, in the framework of easing the work load on branches, various transactions were directed to external-branch channels and the non-cashier’s desk usage ratio was realized at 65.3%.

Highlights of Ziraat Bank’s operations traffic

• In 2013, total of 16.7 million of the TL 2,016 billion of messages were from Ziraat Bank to other banks, and total of 19.8 million of the TL 2,423 billion messages were sent from other banks to Ziraat Bank.
• KEY payments worth TL 16 million to 55,993 individuals were completed.
• A total of TL 8,132 million in agricultural support payments were completed in 4,282,811 transactions.
• Under the scope of several decrees, a total of TL 1,504 million in revenue loss offsetting transactions were carried out on loans allocated by Ziraat Bank and the Turkey Agriculture Credit Cooperatives Federation.
• A total of 53,358,409 income payment transactions, worth a total of TL 58,183 million, and 782,790 transactions, worth a total of EUR 307 million, were made to the SGK (Social Security Association) through branches in 2013.
• The signatures of 1,874,165 customers were transferred to the system. The total number of signatures on the system stands at 21,626,418.
• A total of 3,313,135 customer ID’s were scanned into the system. The total number of scanned customer ID’s was 14,310,938.

Alternative Delivery Channels

Ziraat Bank’s New Generation Internet Site
Ziraat Bank’s website was redesigned to provide a faster, easier and more functional internet banking experience for its customers. The Bank’s website is equipped with information, infrastructure, concepts and new generation information technology to provide the easiest and most user friendly way to carry out internet banking through new user friendly and useful properties.

The new generation website aims to enable customers to realize banking transactions more effectively, provides an opportunity to reach necessary information and transactions as well as setting future dated reminders through added screen and calendar applications.

The new generation internet site aims to meet customer expectations through its easily accessible and responsive categorized menu structure. Thanks to its modern design, the site can be used easily from both computers and smart phones, regardless of location and time considerations.

A 50% increase in the number of internet banking customers
The number of Ziraat Bank’s registered internet banking customers grew by 50% to reach 2.7 million by the end of the year. In parallel with this, financial transactions performed over the internet branch increased by 12.9%, from 31 million during 2012 to 35 million during 2013, while the volume of financial transactions performed over the internet branch jumped by 51.5% to reach TL 90.9 billion.

More ATMs
At the end of 2013, the number of the Bank’s active ATMs had increased by 26.5% YoY to 5,353, while the number of its ATMs offering the cash deposit facility had reached 2,749.

New generation ATMs had started to be installed in June 2012; a total of 1,276 of the 1,500 had been brought into operation by the end of 2013. Location plans are ready for the remaining 224 ATMs.

As well as offering the cash deposit facility, new ATMs were enabled with the facility to accept “CP Piliç” transactions, Yurtiçi Kargo, “saving” bank cards, prepaid and credit card bill payments, and Motor Vehicle Tax payments. Efforts on developing the menus were completed.

Ziraat Bank’s New Generation internet site receives “best in its class” reward in the financial services category, from the Interactive Media Awards.
Assessments were carried out into the design, content, functions, ease of use, standards convenience and cross-browser adequacy criteria. Ziraat Bank’s site gained a score of 492 out of 500 at 5 categories, and qualified for the IMA “Best in its Class” certificate.

Treasury and Strategy Management

The main function of the Treasury and Strategy Management Group is to manage the risks carried on the balance sheet; determine interest rate, exchange rate and liquidity scenarios; implement the policies determined; revise the policies in line with the changing internal and external conditions, and offer centralized pricing service for treasury and investment instruments to all branches.

In addition, the objectives of the Treasury and Strategy Management Group include the creation, development and management of the central treasury function of the international branches, banks and domestic subsidiaries within the framework of the Ziraat Finance Group, which is in the process of restructuring.

Ziraat Bank realized the dynamic treasury management in parallel with economic and political developments in Turkey and the world in 2013, consistent with monetary policies.

The aim of treasury management, sustainable profitability and customer weighted balance sheet management is to protect the balance sheet from market and interest rate risk. Shifting from a security weighted structure to a real sector financing weighted structure is accepted as the main strategy. The share of securities in total assets declined from 40% at the beginning of the year to 30% by the end.

As a market maker bank in the Turkish bonds and bills market, as determined by the Undersecretariat of the Treasury of the Republic of Turkey, Ziraat Bank successfully maintained its market maker position in 2013. The Bank maintained its 3rd position in terms of the volume of transactions traded on the Borsa Istanbul bonds and bills market.

With the support of its widespread branch network and business model under the “Customer Relations Management” approach, Ziraat Bank’s FX transactions volume increased by 89% in 2013.

The Bank’s main liabilities management strategy is based on widening the deposits base and diversifying non-depository sources. With the support provided in maintaining diversification in the resource structure and extending average funding maturity, the Bank carried out TL type bond and bill issues. Against TL 5.7 billion of redemptions in 2013, the Bank realized TL 6.4 billion of borrowing.

The nominal value of TL bonds and bills issued by the Bank since 2012 and which are currently trading stands at TL 2.9 billion.

In the coming period,

• The Board of Directors allowed the headquarters to issue up to TL 15 billion in bonds within the country and
• Bills of different types and maturities by one or more methods of issue, to issue up to USD 3 billion in the form of foreign currency, TL bonds and bills or similar borrowing products.

Ziraat Bank has enhanced its operations in gold banking with the aim of diversifying resources and increasing the effectiveness of products which encourage saving. In the first 11 months of 2013, the banking sector achieved a 42% expansion in terms of gold deposits, while the Bank secured 147% growth. Along with the Bank’s target of expanding its gold deposits, 1.3 tonnes of gold was brought into the banking sector through the Gold Time product, which transforms customers’ physical gold into a savings product. Ziraat Bank continues its gold buy-sell transactions within the scope of investment transactions.

Growing trading volumes in Treasury products
Ziraat Bank's efforts to develop new treasury products and widen its product diversification continue with the support of its widespread branch network and the continuous development in alternative delivery channels. The Bank expanded its customer trading volumes in 2013 thanks to its competitive pricing and effective customer relations approach.

The Ziraat Finance Group Investment Funds, established to effectively meet the needs of customers with different risk/return profiles, also continued to diversify and grow in 2013. The number of investment funds created by the Ziraat Finance Group, which includes Ziraat Bank, Ziraat Investment, Ziraat Life and the pension businesses, reached 26. The total volume of funds offered to customers under the slogan of “a fund especially for you” increased by 20.1% YoY to TL 1.82 billion.

In the framework of the Bank’s strategy to diversify investment funds, the “Investing in Inflation indexed Assets Bonds and Bills” and “Growing Children” funds were introduced in 2013.

The “Investing in inflation indexed assets bonds and bills” fund, which is the first portfolio in Turkey where the largest proportion is composed of inflation indexed assets, targets customers seeking to hedge the risk of inflation uncertainties on revenues, and thus enable to longer investment terms.

The “Growing children fund”, which was IPO’ed in August 2013, is aimed at those seeking to secure their children’s future. The fund may also be given as a gift and has a savings feature through regular buy orders. By the end of 2013, the fund had 734 investors, 208 of which had issued regular buy orders.

Ziraat Bank’s current B-Type liquid fund has been transformed to B-Type short-term bonds and bills fund. This aims to widen investors’ product diversification and has a liquidation period of 1 day. It is suitable for investors looking to make short-term investments in the money market and on interest rate changes.

For customers with a low risk appetite and a preference to be able to immediately convert their funds into cash, a new B-Type liquid fund was introduced in August 2013. This has fund reached 25,487 investors and has a size of TL 107 million.

Two different funds, which have also have been IPO’ed, provide face-value protection and offer investors the opportunity to gain profit from possible increases in gold prices during the course of the investment period. In the meantime face value protected investment fund was liquidated and payments were made to the fund’s investors.

International Banking

A USD 700 million syndication loan - a milestone for the Bank in the financing of external trade
The Bank undertook massive efforts to gain a higher share in the financing of external trade transactions, to improve, widen and increase the effectiveness of its international presence. The Bank took important steps in the change and the transformation process financed through its own resources, to prepare it for the competition, add value to the country’s economy and the banking sector, and to be Turkey’s pioneering and moral bank.

In the framework of its customer focused business model which has recently been applied at all branches and also allows improvement of agricultural sector financing, the highest quality service is provided in the Bank and in its domestic and international subsidiaries and branches.

In line with the Bank’s strategy on diversifying resources, a syndication loan was secured in 2013, representing a milestone in Ziraat Bank’s history. Syndication transactions are of great importance in the sense that they will support the Bank’s effectiveness in the international and capital markets. The syndication was realized in March 2013 with the participation of 40 banks from 20 different countries.

In parallel with the borrowing strategy, a syndication transaction contract with a 1 year maturity and a value of USD 865 million was concluded as USD 288.5 million and EUR 322.5 million, totaling around USD 700 million. The loan carried an interest rate of Libor+100 basis points and EURIBOR+100 basis points.

The syndication transaction, which was realized with more than the targeted number of participating banks and at a price which was higher than the target, affirms the increased interest and trust of international markets in Ziraat Bank.

Solid and deep-rooted international relations
Ziraat Bank has a network of sold, deep-rooted and extensive international relations all over the world. The Bank maintains its business partnerships with international finance institutions and corporations, and develops a correspondent bank network, product range and service opportunities in a manner that will ensure a competitive advantage for its customers.

At the end of 2013, Ziraat Bank had more than 1,500 correspondent bank relationships from more than 100 countries.

With Ziraat Bank’s sound balance sheet and its effective service, Ziraat Bank is one of the most popular banks in Turkey among foreign banks. With a wide subsidiary and overseas branch network, the Bank continues to increasingly provide correspondent bank services at abroad to foreign banks and to other banks in Turkey.

A global service network
With branches, representative office and subsidiary banks at 83 locations in 16 countries, Ziraat Bank maintains its position as having the largest international service network of any Turkish bank. The Bank’s global points of service continue to work actively with the mission of delivering a higher quality of service through launching new products and projects in the countries they are present in.

Ziraat Bank’s global service points;

• The New York Branch in the USA,
• The London Branch in the UK,
• The Tbilisi Branch, and Batumi Sub-Branch in Georgia,
• The Sofia Branch, and the sub-branches in Plovdiv, Kardzhali and Varna in Bulgaria,
• The Athens, Komotini, Xanthi and Rhodes branches in Greece,
• The Baghdad and Erbil branches in Iraq,
• The Jeddah Branch in Saudi Arabia,
• The Lefkoşa, Girne, Gazimağusa, Güzelyurt, Gönyeli, Akdoğan, Near East University, Çatalköy, Karaoğlanoğlu, Karakum and İskele branches in the Turkish Republic of Northern Cyprus (TRNC),
• The Tehran Representative Office in Iran, and
• Seven foreign banking subsidiaries, which have a total of 57 branches.

In parallel with the Bank’s international banking strategy and vision, global service points increase their effectiveness in the regions of operation. The Bank pursues its international structuring with the goal of contributing to the development of trade and economic relationships between these countries and Turkey, playing an important role in the financing of external trade - where it commands a high share - and providing fast, modern and high quality services to all customers, specifically to Turkish entrepreneurs and corporations.

The most solid and effective Bank in Turkey and the region
Ziraat Bank moves forward with its operations with the target of becoming the strongest and most efficient bank in Turkey and the region going forward, by capitalizing on potential opportunities at every location where it has a presence based on the analysis of developments in global markets. To this end, the Bank constantly undertakes examinations and assessments in line with its target of offering service and expanding its activities at every location that offers development potential and opportunities with respect to business volume and commercial relationships, with a special focus on the neighboring region, while taking account of forward-looking projections.

Efforts to open a Bank in Montenegro, two branches in Pristina and Prizren in Kosovo and a representative office in China are continuing, along with feasibility studies in Iraq, with the aim of increasing operations in the country.

In Bulgaria, Ziraat Bank serves its customers through 4 branches; a central branch in Sofia, and sub-branches in Plovdiv, Kardzhali and Varna. The Bulgaria Directorate entered operation in the framework of shifting Ziraat to a customer business model on 22 July, 2013. Initiatives in branchless banking are ongoing, and the Bank plans to further expand the scope of operations by introducing credit cards, telephone banking and POS products in due course, in addition to the debit cards, ATMs and internet banking that have already been launched.

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

In the TRNC, where Ziraat Bank started to offer services in 1974, the TRNC Directorate entered operations on 11 February 2013 and sub-branches were transformed to branches in the framework of shifting to the Ziraat customer business model. In parallel with its steady expansion trend in recent years, the Bank has worked intensively with its wide range of product portfolio and service quality through its 10 branches on the island.

Agricultural loans, which started to be extended during 2011, were received with great interest and reached a volume of TL 62 million by the end of 2013. Total lending, on the other hand, amounted to TL 533 million. Offering all of the banking services available in mainland Turkey, the Bank’s branches in the TRNC rank among the best in the TRNC in terms of size and profitability, and contribute significantly to the national TRNC economy.

In Georgia, the Tbilisi Branch has been in operation since 2001. In addition, the Batumi Sub-Branch, reporting to the Tbilisi Branch, entered operation on 11 March 2013, in the framework of the Bank’s strategy of increasing its presence in the region and expanding in the nearby geographical region. As well as the ATM and debit card services launched in Tbilisi, an internet banking service is also planned to be introduced.

In Saudi Arabia, the Jeddah Branch started its activities on 14 March 2011. The branch has added momentum to its efforts to meet the needs of Turkish contracting companies for letters of guarantee, as well as meeting the banking needs of businessmen working in Saudi Arabia and Turkish citizens visiting Saudi Arabia for pilgrimages. At the end of the year, the non-cash lending volume of the branch had reached USD 268 million.

In Iraq, having entered service delivery in Baghdad in 2008, Ziraat Bank became the first Turkish bank to open a branch in Erbil on 14 February 2011. Having continued to mediate in the letters of guarantee requested by Turkish contracting companies operating in the region and in the money transfers of Turkish firms and workers at an increasing rate throughout 2013, the Erbil Branch reached a non-cash loan volume of USD 215 million in 2013.

Human Resources and Training

Ziraat Bank continued to apply a modern human resources management system in 2013, recognizing that Ziraat Bank owes its very special and prestigious position to high profile human resources with characteristics of peerless market knowledge and experience, enabling the Bank to provide the most accurate suggestions to its customers through the right channels at the right time.

Meeting the needs of the sector with its 24,725 employees at the end of 2013, despite the challenging competitive conditions, the Bank aims to provide modern and reliable banking services. Some 85% of the employees are university graduates and post-degree graduates with average age of 35, providing an average of 11 years of service.

In 2013, Ziraat Bank again provided unique opportunities to new graduates keen to build up a career in the banking sector. Positions are filled through a process of examinations and announcements enabling applicants to apply for positions in their preferred region and city. Meanwhile, the Bank provided employment opportunities to high school graduates and those with two-year university diplomas. A total of 4,276 new employee started work in 2013.

The following training programs were organized in 2013;

• “First Step” training, which helps newly-hired personnel to become acquainted with the Bank and to adapt to its corporate culture while also providing them with basic and essential knowledge and skills
• Certification training for assistant and executive positions were given to provide the knowledge, skills and competence required for their positions
• The “Management in periods of change” training program was held with the aim of supporting the development of executives’ competency skills, such as supporting executives during changing periods, understanding employees during the transformation process, being a part of the Bank’s strategies, using motivating tools appropriately and being able to solve arguments.
• In the framework of the Bank’s targets and strategies professional and legally required education is provided to inform employees of the Bank’s new products, services and deposit information.

A total of 21,278 employees received training during 2013, with an average of 52 hours of training provided per employee.

A total of 216,030 employees participated in e-training, supporting the in-class training. The e-training also enables the training of a greater number of employees at a lower cost, is less time consuming, does not cause any reduction in the workforce, is accessible from home and can be adjusted according the learning speed of the individuals.

In the framework of managerial structuring, a new payment system was applied in line with the Bank’s needs during 2013. At the beginning of 2014, employees received bonus payments according to promotion criteria, and taking into account the length of their service.

Ziraat bank will continue to provide training, career opportunities and a modern working environment throughout 2014. The Bank is considering applying the skills evaluation system in order to evaluate employees according to the required skills.

Besides, in an effort to create synergy between the Bank and domestic/ international subsidiaries and with the aim of enhancing the operational effectiveness of its international branches, the HR regulations of all international subsidiaries will be updated, an employee-job position matching payment system will be applied and the revisions to other personal benefits are expected to be completed in 2014.

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