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CORPORATE GOVERNANCE
İŞBANK
ANNUAL REPORT 2014
65
SUMMARY REPORT OF THE BOARD OF DIRECTORS
Esteemed shareholders,
Welcome to our Bank’s 91
st
Ordinary General Meeting.
As we present the Board of Directors’ Report and the Income Statement showing our 2014-year results for your review and approval, we respectfully greet all
of you here today.
In 2014, the overall picture of the global economic activities had differences among the countries. While the economic activity in Eurozone was weak in 2014,
in Japan – which is another developed economy – the policies implemented to fight with deflation did not have the anticipated impacts. On the other hand,
with its increasing growth performance the U.S. economy differentiated from the other developed countries. In contrast, it was observed that the growth
rates in the developing countries slowed down.
In 2014, there was an obvious slowdown in domestic demand in Turkey. The strict monetary policy of the Central Bank of the Republic of Turkey (CBRT) and
the restrictions on consumer loans had impacts on this development. Thus, in Turkey’s overall growth composition net export had a major role. With 2.6 points
net export made the highest contribution to the 2.8% economic growth in the first 9 months of 2014.
As of 2014 year end, trade deficit was USD 84.5 billion, decreasing by 15.4% compared to previous year. Furthermore, within the year, the ratio of Turkey’s
export to European Union countries increased in the total export figure while Turkey’s export to Middle East decreased due to the political turmoil in that
region. As a result of the already weak domestic demand conditions and developments in the foreign trade balance, in 2014, there was a significant decrease
in the current deficit. As of 2014 year end, annual current deficit dropped to USD 45.8 billion.
As a consequence of declining domestic demand, in 2014, although tax revenue increase lost momentum, the government budget continued its positive
performance. The higher inflation rate caused by the decreasing TL value and increasing food prices lost momentumwith the impact of the decline in the oil
prices in the second half of the year. The annual inflation was 8.17% according to the Consumer Prices Index.
At the beginning of 2014, as a result of the increasing uncertainties in the country and fluctuations in global markets, TL lost value significantly. CBRT, initially
taking strict steps to eliminate concerns about price stability, reduced the policy interest rate by 175 base points to 8.25% in May-July period in parallel to the
recovering risk perception towards Turkey.
The size of the banking sector’s assets continued to grow also in 2014 in terms of new opening branches and recruitment of new employees. As of 2014
yearend, the total assets of the banking sector reached TL 1.890 billion increasing by 15.5% compared to 2013 yearend.
In 2014, the declining internal demand caused the momentum of increase in the volume of loans to slow down. While the macro economic measures caused
pressure on the increase in consumer loans, the decision taken by the CBRT at the beginning of the year to increase interest rates caused an increase in the
funding costs in the sector within the first quarter. On the other hand, with the impact of the reduction made in the interest rates afterwards, funding costs in
the overall sector had a declining course compared to the first quarter, but still remained above 2013 figures.
In 2014, deposits continued to be the main funding resource of the banking sector while the additional funding requirement in the sector was met with
foreign resources, funds from repo transactions and alternative instruments.
For İşbank, 2014 was a year where we showed strong performance in terms of business volume and profitability figures.
As of December 31, 2014, compared to the previous yearend,
• Our loans reached TL 155,315 million increasing by 15.2%,
• Our deposits reached TL 133,551 million increasing by 10.4%,
• Our assets reached TL 237,772 million increasing by 13.0%,
• Our shareholders equity reached TL 29,311 million increasing by 24.3%
while our net profit reached TL 3,382 million.
In 2014, policies continued to diversify funding resources and to extend maturity structure. Regarding placements, the share of loans in total assets continued
its increasing trend and reached 65.3% as of the yearend. In 2014, the ratio of the non-performing loans decreased to 1.5%with the impact of the solid and
selective loan growth , strong performance of debt collection and sales from the NPL portfolio realized below sector average which is 2.7%.
As of yearend, the capital adequacy ratio of the Bank – reaching 16.0% – was well above the legal margin while our Bank’s return on assets and return on
equity figures were 1.5% and 13.1% respectively.
In 2015, it is expected that the volatility of the international capital flows within the framework of the steps FED will take, will have impacts on developing
countries. Developments in Turkey’s major export markets, EU countries, in particular, will have significant impacts on the direction of the economic activities
in the upcoming period.
This year, the growth in Turkish economy will be different from 2014 and will again have a structure where domestic consumption and investment
expenditure will gain importance. Banking sector is expected to sustain a reasonable growth rate in 2015 as a consequence of the macroeconomic policies
that are carried out.
Esteemed shareholders,
We hereby submit our Annual Report, Balance Sheet and Income Statement pertaining to our 2014 activities for your review and approval. We would like
to take this opportunity to express our gratitude to the Turkish public for their steadfast trust in our Bank, to the institutions of the Turkish State for their
continuous support, to our employees for their dedicated efforts; and we extend our respects to you, our valued shareholders, for having honored this General
Meeting with your presence.
TÜRKİYE İŞ BANKASI A.Ş. BOARD OF DIRECTORS