İşbank 2009 Annual Report

Before presenting İşbank’s annual report and independently audited accounts for your review, I would like to share our view on the economic transformation that took place in the world and in our country during 2009, the initiatives our Bank undertook, and our expectations for the future.

The year 2009 saw the global economy in contraction and stagnation at the same time.
The global crisis deepened in the second half of 2008 and its effects on the Turkish
economy were felt more severely in the first six months of 2009. Throughout the world, industrial production, trading volumes, and employment rates have all dropped significantly.

The contraction in demand caused inflation rates in some of the developed countries to actually become negative. Meanwhile, this contraction resulted in uncommonly low inflation rates in developing economies that have been battling with chronically high rates of inflation in the recent past.

The major difference between the 2008 economic crisis and similar past experiences is that central banks, governmental authorities and treasuries have quickly implemented extraordinary monetary and fiscal policies, most of which were in a simultaneous and coordinated fashion. This uniform approach played a significant role in shortening the expected post-crisis recession period and we began to see the first signs of recovery in the first half of 2009. Though varying between countries, the monetary and fiscal policies implemented globally have all been based on the rapid reduction of interest rates and rescuing the financial services sector from problematic assets. Data obtained in the second and third quarters of 2009 have led many to believe that the worst part of the crisis has passed. Having achieved positive growth in the third quarter of 2009, the United States and the Euro Zone have technically come out of the recessionary period.

High levels of public debt in the developed countries, some ongoing problems with the credit markets, and high rates of unemployment by the end of 2009 are all indicators that permanent solutions to the problems of global economy will take a long time.

Since the fourth quarter of 2008, domestic macroeconomic performance and risks associated with it have been in parallel with global developments.
Having foreseen a sharp decline in inflation rates, the Central Bank of Turkey has focused on limiting the negative effects of global crisis on economic performance.

A balanced liquidity policy was administered while short-term interest rates were rapidly pulled down and eliminating the bottleneck in the credit market was set as the main objective. The Central Bank cut its policy rate from 16.75% to 6.50% between November 2008 and November 2009. Hence, Turkey’s policy rates have approached the average of developing countries which practice inflation targeting.

Recent data from the Turkish economy indicate that economic activity continues to recover moderately. Nevertheless, following the abolishment of the tax relief initiative, a slowdown, albeit minor, in private consumption has been observed.

Taking into consideration the uncertainty in the market conditions and low industrial capacity utilization rates, regarding the partial recovery of investment in the second half of 2009, it is forecast that it will take a long time for the level of expenditures to reach that of pre-crisis period.

Though tightened due to the crisis, credit conditions have shown signs of recovery in the second half of 2009. An improvement regarding the tightened financial conditions in this period and the ongoing downward trend in credit rates have strengthened the expansionary effect of the monetary policy. Credit demand has revived starting from the third quarter of 2009.

In a year when there has been macroeconomic contraction, our Bank, having reached its goals to a great extent in its major business lines by using its competencies effectively, has sustained its material growth and realized the highest employment in the banking sector.

İşbank has successfully managed to tackle the impact of the global crisis on the Turkish economy and on our sector.
No matter how difficult the conditions were, İşbank continued to contribute to the national economy in 2009, much as it has done for the past 85 years. In a year when there has been macroeconomic contraction, our Bank, having reached its goals to a great extent in its major business lines by using its competencies effectively, has sustained its material growth and realized the highest employment in the banking sector.

İşbank has continued to improve the capabilities and resources necessary to understand its customers better and to make a difference in their lives.
Understanding customers and their needs, establishing long-term and respectful relationships with them, and providing them in a simple way with products and solutions that will make a difference in their lives through the service channels they prefer…

These three tenets summarize the fundamental philosophy behind İşbank’s customer centric transformation in recent years. The Customer Centric Transformation Program we began to implement at the end of 2006 aimed to further improve İşbank’s ability to provide services with the mission of being the closest bank to customers.

In this three-year period, we have finished the majority of the multifaceted improvement and development initiative for İşbank’s organizational structure, processes, products, and technologies; and we can proudly say that the transformation is now complete. This transformation has started yielding important gains in productivity and efficiency while equipping our Bank with stronger tools on the eve of a new growth phase.

We are well aware that the geography surrounding Turkey will continue to carry political risks in 2010. Caucasia and the Middle East will continue to be on the global agenda. Nonetheless, we are also well aware that Turkey is in the center of a region that is our natural area of significant future economic development and that is home to many growth opportunities.

With the help of our growth-centered approach and the momentum we currently have, we intend to carry the unique brand we have formed in Turkey to neighboring countries and become an even stronger regional player. İşbank has the necessary scale, human resources, know-how, and most importantly the strong and unwavering support of our shareholders to make that happen.

İşbank is determined to increase its presence multi-directionally in the economic cycle through its nation-wide branch network, technological infrastructure, and customer centric service capabilities in 2010.

Dear shareholders,

Investing in the future of Turkey, as prescribed by Atatürk, the Great Leader, during our establishment, has always formed the foundation of our social responsibility projects.
We live in a world where the success of companies is measured by not only their achievements in their sector, but also by their contribution to sustainable social development and where social responsibility is becoming increasingly important.

Since its establishment, our Bank has been aware of its corporate social responsibility and has constantly worked to fulfill the needs of this responsibility. İşbank has carried out its social responsibility activities in the fields of education, environment, and arts and culture with a corporate philosophy that is summed up in the phrase “Turkey’s Bank.” This philosophy,

Contributes to enhancing social development and the quality of life of the Turkish people,
Contributes to the preservation and development of social values established by the Republic,
Supports raising the generations that will carry our country to a highly developed level,
Creates opportunities for Turkish arts and culture to develop and to be represented worldwide,
Aims to preserve sustainable living and the environment.

Our Bank carries out large-scale social projects that have a wide societal impact while encouraging participation and sharing. We will continue these social responsibility projects in 2010 with the same sensitivity we have always shown.

New achievements to come in 2010...
We have optimistic forecasts for both the global and Turkish economies in 2010. We believe the recession brought on by the crisis will linger on for a while longer; however, recovery will begin much sooner than expected.

Having products and services that are used by millions and that can reach all economic activities in Turkey, İşbank is determined to increase its presence multi-directionally in the economic cycle through its nation-wide branch network, technological infrastructure, and customer centric service capabilities in 2010.

We have full faith in Turkey, Turkish people, and Turkish entrepreneurs. As long as the Turkish people’s hardworking and entrepreneurial spirit endures, İşbank will continue to achieve new successes in domestic and international markets and to further its leadership. We would like to thank the Turkish people for trusting İşbank for generations, our employees, our customers who preferred us, and to you, our distinguished shareholders.

Yours sincerely,

Caner Çimenbiçer
Chairman of the Board of Directors