• Presentation
  • Türkiye Finans in Brief
  • Our Vision, Our Mission, Our Corporate Values
  • Corporate Strategy
  • Strategic Priorities and Basic Initiatives for 2013
  • Awards and Recognitions
  • Summary Financial Information
  • Amendments to the Articles of Association and the Justifications for Them
  • Capital and Shareholder Structure
  • Shares Held by the Members of the Board of Directors and Managers
  • Chairman's Message
  • CEO's Message
  • Customer Constitution
  • Macroeconomic Outlook and Sectoral Developments
  • An Assessment of the Bank's Position in the Sector in 2013
  • An Assessment of Türkiye Finans' Activities in 2013 and their Results
  • Türkiye Finans's Plans for 2014
  • Research & Development; New Services and Activities
  • Compliance Opinion on the Annual Report
• Management and Corporate Governance Practices
  • Board of Directors and Audit Committee
  • Executive Vice Presidents
  • Unit Managers within Internal Systems and Directors
  • Organization Chart
  • Governing Bodies and Committees at the Bank, Participation of Bank Directors and Committee Members in Meetings
  • Information About General Meetings Held in 2013
  • Annual General Assembly Meeting Agenda
  • Summary of the Board of Directors Report Presented to the General Assembly
  • Information about Human Resources Practices
  • Information about the Related Party Transactions, the Bank Enters
  • Information about Consolidated Affiliates
  • Other Information
  • Activities for Which Support Services are Outsourced and the Persons and Organizations from Which They are Obtained
• Financial Information and Assessment on Risk Management
  • Audit Committee's Assessment of Internal Audit, Internal Control, Risk Management and Regulatory Compliance Functions; Committee Activities During the Reporting Period
  • Declaration Concerning the 2013 Annual Report
  • Independent Auditors' Report
  • The Unconsolidated Financial Report of Türkiye Finans Katılım Bankası A.Ş. For the Year Ended 31 December 2013
  • Independent Auditors' Report
  • The Consolidated Financial Report of Türkiye Finans Katılım Bankası A.Ş. For the Year Ended 31 December 2013
  • Information About the Bank's Dividend Policy
  • Assessment of Financial Position, Profitability and Solvency; Asset Quality and Profitability
  • Information About Risk Management Policies by Type of Risk
  • Information About Credit Rating Agency Rating Assignments and the Nature of Such Ratings
  • Summary Financial Information Pertaining to the Five-Year Period Including the Reported Period
  • Appendix: Amendments to Articles of Association
  • Directory

Summary of the Board of Directors Report Presented to the General Assembly

Esteemed Shareholders,

Welcome to the 23rd annual general assembly of our Bank. On behalf of the Board of Directors, we respectfully thank you for honoring the Bank’s 2013 general meeting with your presence.

Before passing on to the Board of Directors’ and the Statutory Auditors’ reports, the financial statements, and our assessment of the Bank’s 2013 results, we should first share with you a review of the year’s developments in the world and Turkish economies.

An Economic Overview of 2013 and the Outlook for 2014

The year 2013 will be considered as an important milestone for the global economy. Developed countries entered a period of recovery, while emerging markets began to demonstrate weaker economic figures. The volatility in capital inflows to emerging markets worsened as the FED (Federal Reserve Bank) raised the prospect of an exit from its supportive monetary policies, while there was also mounting uncertainty of the FED’s financial policies.

In addition to falling growth rates, emerging markets have also struggled with the challenges of the re-pricing period and the effects of the FED’s tapering strategy since mid-2013. Among emerging economies, those named as the “Fragile Five” which are burdened by a high current account deficit and/or budget deficit demonstrated a weak and fragile performance, while they were also forced to tighten their monetary policies.

Global economic activity is expected to grow stronger in 2014. On the other hand, a severe and uncontrolled slowdown in emerging markets could lead to a deterioration in global perceptions. Moreover, political difficulties arising in some emerging markets, as well as fragilities in developed countries and reviving concerns with respect to the debt problem in the Eurozone are deemed as other risk factors for the global economy. The need for foreign financing, credibility and predictability in monetary and financial policies and political stability will also stand as primary selection criteria in terms of capital flows.

The Turkish Economy in 2013

The improvement in Turkey’s credit rating and strong capital flows supported economic growth in the first half of the year. The Turkish economy grew by 3.8% YoY in this period while demonstrating a moderating inflation trend and an easing current account deficit. Encouraged by such a positive environment, the CBT aimed to keep the value of the TL under control by applying a flexible monetary policy and balanced liquidity policy.

After May, Turkey was one of the markets to lose significant value during the global selling wave initiated by the FED’s decision. Developments in Turkey during the summer months severely compromised foreign investor interest in Turkey and a new wave of selling began in December as the FED began to taper asset purchases, along with weak data from emerging markets. Again, the political developments in Turkey in December exacerbated sales in the financial markets by worsening the perception of political risk in the country. Although economic activity lost some momentum due to the volatility in financial markets and the CBT’s efforts to tighten the monetary policy to a limited extent, a strong trend was observed in the second half of 2013. Data related to the last quarter indicate that Turkey’s growth rate in 2013 was estimated to have reached 3.5-4%.

The TL demonstrated a weak performance with its risk premium considerably increased. The inflation rate started to edge higher due to fluctuating food prices and the fall in the TL, while the CBT began to apply a more cautious policy. Within the framework of this policy, CBT raised the upper band of the interest rate corridor by a total of 550 basis points, including the rate increase decision taken in the interim meeting in January 2014, proactively tightening its money policy. The bank raised the 1-week repurchase interest rate from 4.5% to 10% and began to essentially provide funding at this rate, instead of the upper band of the interest rate corridor. The CBT also started to sell FX and intervene in the foreign exchange market in order to provide the required FX liquidity and to avoid unhealthy price formations.

Uncertainty is expected remain rife in the periods to come, given the domestic and foreign factors at play. As a result, there is a risk that the Turkish economy may grow slower than the 4% rate projected in the Medium Term Program (OVP), and that inflation could be significantly higher than the CBT’s forecast of 5.3%. Under these circumstances, it is believed that the pressure on the exchange rate and downward pressure on market incomes could continue.

The Turkish Banking Industry and Türkiye Finans in 2013

In 2013, the banking industry’s total assets grew by 26% YoY to TL 1.732 trillion with collected funds increasing by 23% YoY to TL 946 billion, and supplied funds up by 32% YoY to reach TL 1.047 trillion and shareholders’ equity climbing 6.5% YoY to TL 194 billion. During the same period, the total assets of participation banks grew by 37% YoY to TL 96 billion with collected funds up by 28% YoY to reach TL 61 billion; supplied funds grew by 29% YoY to TL 62 billion and shareholders’ equity was up by 20% YoY, reaching TL 8.9 billion. The share of participation banks in the banking industry rose from 5.1% to 5.5% in terms of total assets, from 6.2% to 6.5% in terms of collected funds and from 4.1% to 4.6% in terms of shareholders’ equity, but declined from 6% to 5.9% in terms of supplied funds.

The average loans/deposits ratio continued to rise in the banking industry in the first half of the year, while its growth slowed down in the second half due to the measures taken by regulatory authorities in the face of the general economic developments. Despite this, the loans/deposits ratio reached 113% by the end of the year. Securities issued by the sector to domestic and foreign markets rose by 60% to TL 60.6 billion in 2013. Despite the strong growth in loan volume, the banking industry’s total profit rose by 5.1% to TL 24.7 billion while that of the participation banking sector increased by 17% to TL 1.1 billion because of the contraction in margins due to rising costs.

In addition to the Treasury’s sukuk bond issues, participation banks including Türkiye Finans also carried out sukuk bond issues during 2013. Despite the pressure that the financial markets were under, the Treasury’s and participation banks’ sukuk bond issues attracted strong demand.

In the second half of the year, a number of measures were taken in the banking industry: general provisions set aside by banks and risk weight weightings were raised, while credit card limits and the maturities of consumer loans were limited. The impact of some of these measures began to be observed in 2013.

On the other hand, the sector’s growth is expected to be limited in 2014 due to the measures taken for the banking industry, as well domestic and foreign developments. Despite rising funding costs, the banking sector’s profitability may also be limited by increasing provisions for troubled (non-performing) loans.

The average capital adequacy ratio of the banking industry declined from 17.9% at the end of 2012 to 15.3% by the end of 2013. The average capital adequacy ratio of participation banks edged up from 13.9% to 14% during the same period. Thanks to the developments in the Turkish economy and the positive contributions from our employees, our total assets grew by 43% YoY to TL 25 billion and our collected funds increased by 32% to TL 15.1 billion by the end of 2013. In the same period, the total volume of loans which we had extended increased by 40% YoY to TL 18.3 billion with non-cash loans up by 25% to TL 9 billion.

Our Bank’s net income rose by 16% to TL 329 million in 2013, while its capital adequacy ratio stood at 12.81% as of the end of 2013.

Esteemed Shareholders,

This completes our presentation of the annual report, balance sheet, and profit & loss statement showing the results of Türkiye Finans’ activities in 2013. We now submit these for your consideration and approval.

In closing and on behalf of the Board of Directors, we would like to take this opportunity to thank our shareholders, our employees, and our customers for their confidence in our bank. We respectfully thank you, our valued shareholders, for honoring our 2013 general meeting with your presence.

Yours sincerely,

TÜRKİYE FiNANS KATILIM BANKASI A.Ş.

BOARD OF DIRECTORS