Financial Condition, Profitability and Solvency
In 2011 İşbank increased its total assets by 22.7% to TL 161.7 billion.
In 2011 İşbank grew faster than the sector average, increasing its total lending by 42.6% year-on-year to TL 91.6 billion. During the reporting period, TL-denominated loans were up by 34.2% while the growth in foreign currency loans was 60.8% due to the movements in exchange rates. The rise in foreign currency assets in terms of US dollars was 31.7%.
Despite the strong rise in lending, İşbank’s 93.2% ratio of total loans to total deposits was below those of other privately-owned banks and that of the sector as a whole. This indicates that the Bank has the potential to achieve still more growth on the lending front.
The ratio of the Bank’s non-performing loans ratio, which was 3.6% in 2010, edged down to 2.1% in 2011. This was the result of an ongoing decline in the incidence of NPL formation, strong performance in collection and sales made from the Bank’s NPL portfolio. In 2011, İşbank also continued to abide by its policy of setting aside provisions to cover 100% of its NPL exposure.
In order to keep pace with strong demand for loans and paralleling also the ongoing improvement in asset quality in 2011, İşbank decided to generate additional funding by reducing the overall size of its securities portfolio by 5.9%. One outcome of this was that the ratio of the Bank’s total loans to total assets, which was 48.7% in 2010, reached 56.7% by the end of 2011.
İşbank’s total deposits increased by 11.4% in 2011 and reached TL 98.3 billion. During the reporting period, the growth in the Bank’s Turkish Lira deposits was limited to 1.2%; while the foreign currency deposits increased 8.5% in terms of US dollars.
Deposits, which accounted for a 60.8% share of total liabilities, remained the primary source of İşbank’s funding in 2011. In order both to better manage costs and to diversify funding resources, greater recourse was had to non-deposit alternatives–funds borrowed, repo transaction and securities issued–to finance assets than has been the case for the previous years. There was an 88.9% year-on-year rise in the Bank’s non-deposit funding last year, while their share in the Bank’s total liabilities went from 13.8% in 2010 to 21.3% in 2011.
In order to reduce the Bank’s interest rate risk exposure arising from maturity mismatch by creating longer-term resources, İşbank tapped markets by issuing domestic borrowing instruments worth TL 4.8 billion and international borrowing instruments worth USD 500 million.
Turkey’s biggest privately-owned bank in terms of shareholders’ equity in 2011, İşbank’s capital adequacy ratio at year-end was 14.1%. Well above the legally mandated minimum, this level of capital adequacy is what will ensure that the Bank’s healthy growth will remain sustainable in the period ahead as well.
A 24.2% rate of growth in the Bank’s interest-earning assets and an increased share of loans among its total assets led to a flat in net interest income figure compared to previous year, despite slimmer net interest margins in 2011.
On the other hand, 15.5% and 127.3% increases respectively in the Bank’s net fee and commission income and net trading income items in 2011 also contributed favorably to İşbank’s overall profitability last year.
While gross profit before provisions remained essentially unchanged on a year-on-year basis, net profit declined by 10.6% to TL 2,667 million. “Return on Average Equity” in 2011 amounted to 15.2%.