2010 Annual Report
General Manager's Message
Dear shareholders, customers and colleagues,
First, I would like to briefly present our 2010 performance.
As of year-end 2010, VakıfBank’s total assets went up 14% on an annual basis to reach TL 74 billion, and net profit after provisions was worth TL 1,157 million.
As one of the key stones of the Turkish banking system, our Bank always stands by its customers, and resolutely remains the greatest supporter of the real sector and households also in times of crisis and negative conjuncture, as it does in good times. Loans lent the biggest support to the growth we achieved in 2010, and the Bank’s credit placements grew 30% to TL 45 billion. Retail loans and commercial loans grew 46% and 23%, respectively, with the key drivers of expansion in the former being mortgage and consumer loans.
During 2010, our Bank kept preserving and developing its shareholders’ equity. While our shareholders’ equity climbed to TL 8.6 billion, our capital adequacy ratio was 14.35%. The Bank’s average RoE was 14.5% and RoA was 1.7%. Moving ahead sure-footedly, VakıfBank will continue to produce “the best” for its shareholders, customers and employees.
Economic conjuncture and VakıfBank
In 2010, signals of recovery in the wake of the deep crisis the world economy suffered gradually became more evident. There was improvement in liquidity conditions that were deteriorated during the crisis, and growth performances continued in the economies of major countries.
One of the relatively less affected countries by the contraction in the global conjuncture, Turkey displayed a strong growth performance in 2010, thanks to the vibrant domestic demand and the increasing production power in the real sector. Having edged closer to pre-crisis levels owing to revived commercial life and high investment outlays, industrial production points at a growth in the region of 8% in 2010.
It can be seen that our country’s young population is a key driving force in the consumption-driven growth performance. In an environment of strong domestic demand, our export companies continued to explore new markets while keeping on with price competition, which prevented a significant decline in our exports performance despite sustained risks in relation to foreign demand.
The CBRT’s decisions on the monetary policy constituted another important element that determined the macroeconomic conjuncture during 2010. Successfully managing the crisis period on the back of determined and accurate policies, the CBRT maintained its focus on price stability also in its 2010 policies. Amid the decrease in risks threatening price stability, the CBRT gave the foreground to financial stability in the last quarter of the reporting period, with the objective of avoiding deterioration in current account balance and the sharp rise in short-term fund flows.
Despite the presence of vulnerabilities and risk elements, we believe that the world economy will continue to grow and the Turkish economy will, in 2011, display a similar macroeconomic performance to that in 2010. Despite the upcoming elections in 2011, Turkey will continue to proceed in its path without compromising from sustainable economic growth.
2010 economic data, developments and potential future risks are addressed in detail in the relevant sections of the present annual report. Therefore, my comments and evaluations will, for the most part, relate to our Bank’s fundamental strategies, current position, and sectoral outlook.
VakıfBank is carefully watching the crisis-exit process and Turkey’s getting back on economic growth track. The recuperation that started in the last quarter of 2009 and continued throughout 2010 harbored its own internal dynamics, and at the same time, opportunities. VakıfBank is concentrated on optimally capitalizing on the opportunities to be presented by the recovery process and the subsequent period, and our Bank possesses all necessary organizational qualities and energy to do just that.
VakıfBank will remain committed to its long-established strategy of standing by the real sector and households under any economic condition, and keep financing projects that are of importance to our country’s development.
Headed towards this primary strategic goal, VakıfBank will always give the priority to profitability, productivity and sustainable growth criteria in order to fulfill its commitment to produce added value for its shareholders. The principal objective of our Bank is to contribute to the national economy and to our shareholders. I am fully confident that the entire VakıfBank community will walk with quick and determined steps towards this goal in the future, as we have always done in the past.
VakıfBank will remain committed to its long-established strategy of standing by the real sector and households under any economic condition, and keep financing projects that are of importance to our country’s development.
Dear shareholders, customers and colleagues,
Acting in line with its vision of “being the primary banking partner of its customers”, VakıfBank kept growing in corporate, commercial, SME and retail banking segments.
During 2010, VakıfBank intensified its customer-focused activities in the corporate banking segment. Achieving significant improvement in this department through new customer acquisition and increasing the share it takes from the transactions of existing customers, our Bank attained 30.5% growth in corporate cash loans, and 20.6% in non-cash loans in the reporting period. VakıfBank pursued an active policy regarding the financing of its corporate customers’ high value-added projects that support production and employment, and provided competitive funding facilities through its long-term cash and non-cash loans for its customers’ investments, with a special emphasis on energy, privatization and real property investments.
During 2010, various solutions have been offered aimed at corporate customers’ numerous financial needs from loans to foreign trade transactions. Our Bank continued to lend support to all of the national sectors that create added value. Particular areas of focus in 2010 included non-cash loans and foreign trade financing; the Bank outdid the sector’s average growth in both fields.
Our activities targeted towards the financing needs of the SMEs, which represent a major asset for the national economy with the employment they provide and the vibrancy contributed to the economy, continued to increase in 2010.
Based on the conviction that the issues and needs of the SMEs can be best identified on location, close relationships were established and protocols were made with the Chambers of Trade and Industry in a large number of provinces. Furthermore, the Commercial Initiative Center (in Turkish: TAM) concept was launched aiming to merge the services offered to the SMEs under a brand name. Under this concept, each one of our branches was defined as a TAM, SME portfolio managers were appointed to the branches, and an intense marketing activity targeting the SMEs was initiated. These efforts resulted in significant increases in the volume of loans extended to the SME segment and the number of customers in the same segment.
In 2010, during which we have increased product and service variety in the retail banking segment, we kept responding to the needs of different customer segments based on an efficient and lean approach to service. Our Bank followed a more cautious approach as compared with the overall sector in retail loan placements in the first half of 2010, whereas the market share was increased based on a rate of growth that surpassed the sector’s average in the second half of the year. At year-end 2010, VakıfBank’s total consumer loans significantly grew with 46.9% to TL 13,503 million and made a valuable contribution to our Bank’s total lending volume.
In addition to our core businesses I have tried to outline above, our Bank performed successfully in other departments including treasury operations, derivative markets, credit and debit cards, capital markets, alternative delivery channels, and international trade intermediation services.
We penetrated a new market by opening our Arbil branch in 2010.
In the last months of 2010, we took a step that we believe will prove to be significant in the future, and opened our first branch in Iraq, the city of Arbil.
Our short-term objective is to contribute to the furtherance of the existing trade between Turkey and Iraq via our Arbil branch, and to fulfill all financial needs of the Turkish entrepreneurs active in the region.
In the long-term, the region presents a very high potential in terms of banking, provided that political stability is ensured. Arbil branch will play a key role in enabling our Bank to take optimum advantage of this potential in the years coming.
We have expanded our operations with Private Banking in 2011.
One of the strongest representatives of modern banking in Turkey since its foundation, VakıfBank added a new link to its products and services in line with its strategic development plan.
Stepping into private banking and taking part in the competition in this segment, our Bank is determined to make a difference also in this field on the back of the products and services to be developed. Through private banking our goal is to offer solution-oriented approaches that highly surpass the customary banking understanding.
Our first branch that will offer service in this segment started operations in Ankara at the start of 2011, which will be followed by İstanbul, İzmir, Bursa and Antalya where we plan to open private banking branches. On the other hand, I would like to state that we consider our extensive branch network and broad customer base in Anatolia as a great potential in terms of private banking, and that each one of the Bank’s branches will undertake an active marketing role in this respect.
Our Bank followed a more cautious approach as compared with the overall sector in retail loan placements in the first half of 2010, whereas the market share was increased based on a rate of growth that surpassed the sector’s average in the second half of the year.
Within the frame of our commitment to social responsibility, we continue to extend support to the Sultans of the Net.
We have started sponsoring Turkey’s Women’s National Volleyball Team in 2010.
Giving support to volleyball in Turkey for 25 years and serving as a major contributor to the training of athletes, our Bank carried this mission to the apex with the sponsorship agreement signed in 2010. We do not regard the sponsorship of Women’s National Volleyball Team as a short-term relationship. I would like to underline that our support to this sport will continue at an increasing degree.
I wish that the VakıfBank logo on the jerseys of the Sultans of the Net will bring good luck to our National Team in their matches in 2011.
2011 will be a tough year for the banks in terms of growth and profitability.
When the outlook of the banking sector in 2011 is evaluated, several considerations take to the fore. First, the growth in lending will be lower than it was in 2010 due to the fact that policymakers and regulatory and supervision agencies of the sector are introducing measures that preclude the excessive rise in loans that drive demand, taking economic stability into consideration. Second, banks will resort to methods such as bonds issue in an attempt to diversify their funds and to extend the maturities of their funds. Last, interest margins will continue to shrink.
Despite the projected difficulties in 2011, the Turkish banking sector will preserve its decoupling in the positive sense from other countries in the world, thanks to its strong capital base.
In the latest Financial Stability Report published, the CBRT points out that the capital base available to the banking system is strong enough to withstand even simultaneous maximum shocks in interest rates, exchange rates, Eurobond returns, and NPLs.
So long as the global economy, and in turn, the Turkish economy continue to produce positive results, the Turkish banking sector will continue along its course of sustainable growth.
In line with these macroeconomic forecasts, VakıfBank, as one of Turkey’s leader banks, will keep responding to the financial needs of the real sector and households. Raising the bar even higher every year, VakıfBank will proceed in line with its mission, getting momentum also from the major economic power it represents in conjunction with its subsidiaries.
In 2011, during which our project to relocate our Head Office to İstanbul will gain speed, we are anticipating growth in all of our business lines. While increasing the depth of our relationships with our customers, “new customer acquisition” will be another focal point for us. Requiring provision of our banking products and services to our customers in a lean and accessible manner, our approach to service will set us apart and carry us to success.
I would like to take this opportunity to thank all my colleagues who have supported me with their invaluable time and work in 2010 when I started serving as the Bank’s General Manager. I would also like to extend my heartfelt gratitude to our Board of Directors for their valuable contribution and our customers for working with us.
VakıfBank is intent on growing and developing hand in hand with Turkey described as one of the “world’s rising economies”.
Süleyman Kalkan
General Manager
