Halkb Ank 2012 Annual Report
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HALKBANK 2012 ANNUAL REPORT HALKBANK A YEAR OF BREAKTHROUGHS www.halkbank.com.tr Halkbank Dialog 444 0 400 2012 ANNUAL REPORT CONTENTS INTRODUCTION 04 Corporate Profile 05 Halkbank in Brief 06 Shareholding Structure 07 Amendments to the Articles of Association in 2012 10 Key Financial Indicators 12 Halkbank’s Position in the Sector 14 Halkbank’s Vision, Mission, Objectives, Strategies and Corporate Values 18 Halkbank’s Historical Development 22 Halkbank Milestones 28 Chairman’s Assessment 30 Board of Directors and the Audit Board 32 General Manager’s Assessment 36 Pioneering Products 40 Review of Operations in 2012 72 Halkbank’s Subsidiaries and Affiliates 77 Annual Report Compliance Statement MANAGEMENT AND CORPORATE GOVERNANCE 78 Board of Directors and the Audit Board 80 Senior Management 82 Organizational Structure 84 Committees 91 Executives of the Internal Systems Units 92 Report of the Board of Directors 93 Human Resources Practices 95 Transactions with the Risk Group 95 Information on Support Services Providers 96 Report of the Audit Board 98 Corporate Governance Principles Compliance Report FINANCIAL INFORMATION AND ASSESSMENT ON RISK MANAGEMENT 110 Audit Committee’s Assessment on the Operation of the Internal Control, Internal Audit and Risk Management Systems and Information about Its Activities in 2012 114 Financial Standing, Profitability and Debt-Servicing Capability 116 Risk Management Policies by Risk Types 117 Five-Year Summary Financial Information 119 Unconsolidated Independent Auditor’s Report 237 Consolidated Independent Auditor’s Report 352 Directory INTRODUCTION GROWING WITH RECORDS WE LEFT BEHIND A RECORD-BREAKING YEAR IN TERMS OF GROWTH AND PRODUCTIVITY. AS THE CONSISTENTLY GROWING, PIONEER AND REPUTABLE BRAND OF EMERGING TURKEY, WE ARE PROUD OF OUR ACHIEVEMENTS. 2012 WAS ESPECIALLY MEANINGFUL FOR US, AS WE CONTINUOUSLY PUSHED OUR LIMITS. THE ACHIEVEMENTS WE COULD FIT IN THESE PAGES AND CERTAIN KEYWORDS PROVIDE CLUES ABOUT OUR FUTURE. 1 COURAGE EXPANDING OUR PLEDGE We launched our own credit card, Paraf. Our objective is to increase our share in the credit card market up to 6% in five years. COURAGE HALKBANK 2012 ANNUAL REPORT CORPORATE PROFILE Our activities are based on the principle of standing by our clients and providing support at all times and under all circumstances. Believing that the social conditions and prosperity of Turkey can best improve in a robust, productive environment, Halkbank has operated with the mission of providing support to the producers of the economy since its founding. We are the Bank of those who create value. At Halkbank, we see the client as the most important players in the real economy; we conduct our operations understanding that they are the drivers of the economic growth that has increased national income and raised living standards in Turkey in recent years. Our activities are based on the principle of standing by our clients and providing support at all times and under all circumstances. The best proof of this commitment is our steadily increased lending and new branch openings, even during the economic crisis. Halkbank knows its customers, as well as their businesses, their challenges and their needs, completely and thoroughly. As a result, the Bank is able to offer customers the most appropriate loan products and the best banking services, easily and quickly. SMEs in Turkey are producing, growing and looking to the future with hope, thanks to the support of Halkbank. Their success is our success... Halkbank’s success is the success of growing and developing Turkey. 4 INTRODUCTION HALKBANK IN BRIEF Halkbank operates with a global vision through innovative products and services. Halkbank was founded in 1938 to support craftsmen and tradesmen and to accelerate the country’s economic development. The Bank’s core business strategy has not changed in its 74 year history. Halkbank sees every craftsman, farmer and small, medium or large size enterprise owner that creates value and generates employment as a business partner; the Bank strongly believes its duty is to support these economic producers with its entire financing capability in both good days and in bad. Allocating 37.8% of its total loans to SMEs, Halkbank continues to be their primary supporter in Turkey. Halkbank operates with a global perspective, through 816 domestic and 5 overseas branches, 1 overseas liaison office, 2,554 ATMs, telephone and internet banking platforms, mobile banking applications; the Bank’s innovative products and services provide customers with an unparalleled banking experience. Some 48.9% of Halkbank’s outstanding shares are publicly held and the Bank boasts the highest return on equity (ROE) among its peers thanks to its highly efficient use of capital. Halkbank today is a steadily growing, 74-year-old brand that ranks among the longest established, pioneering and respected in progressing Turkey… 5 HALKBANK 2012 ANNUAL REPORT SHAREHOLDING STRUCTURE Türkiye Halk Bankası A.Ş.’s total paid-in capital is TRY 1,250,000,000. 99.999996207% of the Bank’s share capital, originally held by the Undersecretariat of Treasury of the Prime Ministry of the Republic of Turkey, was transferred to the ownership of the Privatization Administration of Turkey. Pursuant to Resolution No. 2007/08 of the Privatization High Council dated February 5, 2007; the Resolution of the Bank’s General Assembly dated April 19, 2007; and Resolution No. 16/471 of the Capital Markets Board of Turkey dated April 26, 2007, 24.98% of these shares were publicly listed on May 10, 2007. As part of the secondary public offering of the Bank’s shares pursuant to Resolution No. 2012/150 of the Privatization High Council dated October 4, 2012, shares owned by the Undersecretariat of Treasury of the Prime Ministry of the Republic of Turkey, representing 23.92% of the Bank’s capital, were successfully floated on November 21, 2012. The Bank’s controlling shareholder is the Privatization Administration of Turkey with an equity stake of 51.10604% (Address: Ziya Gökalp Cad. No: 80 Kurtuluş/Ankara). Neither the Chairman/Members of the Board of Directors nor the General Manager hold shares in the Bank. Shareholder Paid Capital (TRY) Shareholding (%) 1- Privatization Administration* 638,825,500 51.1060400 2- Free Float* 610,716,119 48.8572895 3- Other** 458,381 0.0366705 Total 1,250,000,000 100.00000000 * Of the shares owned by the Privatization Administration of Turkey, an amount corresponding to TRY 549,932 of share capital is eligible for trading on the stock exchange; along with these shares, 48.90% of the Bank’s outstanding shares are publicly traded. ** Merkezi Kayıt Kuruluşu A.Ş. (Central Securities Depository Institution of Turkey) shows records of 14,721 shareholders who have registered their shares under their own names/titles. Pursuant to Law No. 6327 dated June 13, 2012, as well as Provision 3 of Article 2 that was added to Law No. 4603, until their sale is finalized, these public sector-owned shares in the Bank shall be governed and represented by the Minister that the Bank reports to in accordance with the Turkish Commercial Code. 6 INTRODUCTION AMENDMENTS TO THE ARTICLES OF ASSOCIATION IN 2012 No amendments were made to the Bank’s Articles of Association in 2012. 7 PRIDE ADDING TO OUR SUCCESS We broke a record in public offerings. By selling TRY 4.5 billion in shares to the public, we successfully completed the largest public offering in ISE’s history and the third largest public offering in Europe in 2012. PRIDE 48.90% After 24.98% Before HALKBANK 2012 ANNUAL REPORT KEY FINANCIAL INDICATORS Halkbank’s total assets increased from TRY 91.1 billion to TRY 108.3 billion as of year-end 2012. Key Financial Indicators (TRY million) 2012 2011 Change (%) Total Assets 108,282 91,124 18.8 Liquid Assets 15,120 8,747 72.8 Loans 65,894 56,216 17.2 Securities 22,954 23,346 (1.7) Total Deposits 79,974 66,247 20.7 Shareholders’ Equity 12,323 8,640 42.6 Net Interest Income 4,476 3,473 28.9 Net Fee and Commission Income 858 728 17.9 Gross Profit 3,329 2,637 26.3 Net Profit 2,595 2,045 26.9 Key Ratios (%) Interest Bearing Assets/Total Assets 83.2 87.5 Loans/Total Assets 60.9 61.7 Non-performing Loans/Total Loans (Gross) 2.9 2.9 Demand Deposits/Total Deposits 20.1 20.1 Loans/Deposits 82.4 84.9 Average Return on Assets 2.6 2.5 Average Return on Equity 24.8 25.4 Capital Adequacy Ratio* 16.2 14.3 * The Capital Adequacy Ratio is calculated in accordance with Basel II as of year-end 2012 whereas it is calculated in accordance with Basel I at year-end 2011. 10 INTRODUCTION 10 72,942 18.8% 11 91,124 Total Assets 12 108,282 (TRY million) 10 20,207 (1.7)% 11 23,346 Securities 12 22,954 (TRY million) 10 44,296 17.2% 11 56,216 Loans 12 65,894 (TRY million) 10 54,782 20.7% 11 66,247 Total Deposits 12 79,974 (TRY million) 10 7,445 42.6% 11 8,640 Shareholders’ Equity 12 12,323 (TRY million) 10 2,010 26.9% 11 2,045 Net Profit 12 2,595 (TRY million) 11 HALKBANK 2012 ANNUAL REPORT HALKBANK’S POSITION IN THE SECTOR Halkbank sustained its strong growth in 2012 while continuing to generate a high return on equity (ROE). Halkbank’s Position in the Sector Market Share (%) 2012 2011 Total Assets 7.9 7.5 Loans 8.2 8.1 Securities 7.9 7.9 Deposits 10.3 9.5 Shareholders’ Equity 6.8 6.0 Profit 11.0 10.3 10 8.9 10.3% 11 9.5 Deposits Market Share 12 10.3 10 8.3 8.2% 11 8.1 Loans Market Share 12 8.2 * The sector data as of December 31, 2012 that are presented in the Report are the figures announced by the Banking Regulation and Supervision Agency of Turkey on February 13, 2013.