Annual Report 2018

2018 Annual Report Ziraat Bank 2 Ziraat Bank 2018 Annual Report Ziraat Bank Content Management Report for 2018 1. Ziraat Bank International AG in brief 2. Course of the fiscal year 2018 3. Assets, liabilities, financial position and earnings 4. Risk report 5. General economic conditions, business environment & opportunities 6. Annual Financial Statements 7. Notes to the Financial Statements 8. Auditor’s Report Ziraat Bank 2018 Annual Report 1 We are a European Bank, building bridges for more than half a century We serve to create additional value for German and Turkish economies by building bridges, filling he gaps and eliminating distances between Turkey, Germany and Europe. We support investments and international trade with our wide range of products and services 2 Ziraat Bank 2018 Annual Report Ziraat Bank 2018 Annual Report 3 Ziraat Bank Letter from the Chairman of the Supervisory Board Ziraat Bank International AG will continue to create value for its clients, shareholder, other stakeholders and to Turkish and German economies by providing financing to support economic relations and trade. Mr. Süleyman Türetken Chairman of the Supervisory Board 4 Ziraat Bank 2018 Annual Report Ziraat Bank International AG sailed Bank’s organizational structure to demand & growth but creating an through difficult weather in good part changing & developing macroeconomic, unaccommodative environment for the of 2018 but reached, as it always does, financial and regulatory environments financial system in the process. to its destination set at the beginning of have been what kept the whole Ziraat what was considered to be a promising Bank International AG Team, from the Law makers and regulators all around year. Board of Managing Directors to the the globe will, almost certainly, keep on freshman, busy all year. adding measures to ensure a healthy Unpredictable external factors and and solvent financial system even if that volatility in some of the core markets All these efforts on structure have means decimating the profitability of required extra attention and an even started to pay off and started to the industry by mounting costs. more conservative approach during contribute to the Bank’s journey for the course of the year. But even in sustainable growth and efficiency. The We emphasize our trust in our strategy this environment, the Bank posted yet adaptation of the Bank to new economic and the Management Board to steer again satisfactory results. The one word and regulatory environments, however, the Bank accordingly in these choppy that can explain the Bank’s results is shall be a perpetual dynamic process waters, on its sustainable path of “sustainability”. that will keep on going as long as the efficiency & profitability without ever Bank exists. As the Supervisory Board, compromising the conservative risk The main strategy is to steer the Bank we are dedicated to ensure the Bank’s approach. on a sustainable path on the basis journey in this path never halts and Ziraat Bank International AG will of corporate lending, financing trade flows uninterrupted. to achieve effective utilization of continue to create value for its clients, equity. However, though, to be able The Bank’s core business volume shareholder, other stakeholders and to achieve these quantitative targets, remained unchanged compared to the to Turkish and German economies by qualitative issues must be addressed on previous year although the total asset providing financing to support economic a continuous basis, in the dynamic and size diminished 12% thanks to clearance relations and trade. ever expanding regulatory environment. of inefficient items. The Bank has been extremely selective in generating good Therefore, the real success of Ziraat quality assets, especially in the second Bank International AG lays below the half of the year. Focus has been on quantitative results, the strong profit, secure & efficient lending which resulted the solid return on equity which has in €18.1 million in profits, matching the been over 8% 4th consecutive year; target set before the year began. The the real success is deep below in the nominal profit amount reflects 8.33% foundation, the structure, the core that net return on average equity, in line enables sustainable quantitative success with long term sustainable targets and as in high profitability and efficient highest among its peers. This has been optimum utilization of the equity. the 4 year in a row where the Bank achieved 8% or above RoAE and that’s As is the regulatory framework and where the real success lays. environment, the Bank’s battles in many fronts have been carried on The outlook for the year ahead is dark from the very first day of the year till & gloomy for the first half, perfect the last, without any disruption and weather for embracing even more to with the same level of determination; the conservative approach. ECB will IT infrastructure, Core Banking be far away from normalization and System, new and contemporary risk the accommodative monetary policies management approach, adapting the will still be in place to stimulate the Ziraat Bank 2018 Annual Report 5 6 Ziraat Bank 2018 Annual Report We are coming from a 155 years banking legacy. We are utilizing the synergy generated by our shareholder, Ziraat Bank’s 155 years of experience and deep-rooted structure to support invesments and trade between Germany and Turkey Ziraat Bank 2018 Annual Report 7 Ziraat Bank Letter from the Board of Managing Directors We will keep focusing on not only further growth and profitability but also structural and organizational issues to ensure the sustainability of the quantitative achievements AYTEN TÜRKMEN Chairman of the Managing Board & CEO ALİ KIVANÇ ÜNAL Member of the Management Board 8 Ziraat Bank 2018 Annual Report Elevated volatility, deteriorating risk-metrics, in late 2018 but Ziraat Bank International expanded business volume. Geographical declining aggregate demand, diminishing carried on with efforts on qualitative diversification has been on the agenda, as it confidence… What started as and supposed matters uninterrupted. These precious always has, but diversification in the funding to be a great year will be remembered with efforts paid in today enables the Board of has been a new development as enabled by these circumstances. Managing Directors to steer the Bank on the the domestic market conditions. The Bank, sustainable path. 2018 has been a year of two halves; the first the first time since the application of the half has been full of confidence, a period of Among these qualitative efforts, most New Strategy, achieved a healthier balance growth so much so that enable long time significant are; the implementation of between large ticket corporate funding dominating quantitative easing policies the second phase of the ZETA project and grainy retail deposits. The achieved being started to leave behind in favour of further enhancing the Bank’s risk & control profit target and 8.33% RoAE are tokens normalization. The Federal Reserve already capabilities, redesigning and improving proving the switch has been successfully announced and put in force a plan to cut risk measuring models, credit processes and smoothly achieved without pushing the its balance sheet by some $1.5 trillion whilst and almost all of the Bank’s applicable overall cost of funding to unfeasible levels. workflows. increasing short term policy rates in an The year ahead does not promise a better orderly fashion. ECB was expected to follow, These altogether, not only help minimize outlook from this point. But as they did albeit with some time-lag, its American credit, market and operational risks but in 2018, things may change. Consumers counterpart’s footprints. The bond purchase also ensured an elevated level of efficiency, will eventually adapt themselves to higher program which flooded Eurozone and the by reducing the operational burden and interest rates, investors will make peace with rest of the World with Euros scheduled to bringing out additional potential for further normalized monetary policies. One thing end with the year. expansion in the direction defined by the that won’t be changing is the conservative In line with policy makers, financial markets Strategy Document, whilst ensuring the and selective approach of Ziraat Bank ran ahead to anticipate higher interest highest quality service to our clients through International AG when it comes to prudent rates. Benchmark German 10 year bunds our branches. balance sheet management. Starting from hitting 0.60% p.a. while U.S. equivalent Since compliance, efficiency and this point, the Board of Managing Directors being traded above 3.20%, both multiple contribution to society and the economy set realistic targets for 2019. Profitability & year highs. Strong gains in equities lifted are indefinite targets for the Bank; these efficiency will still be the main drivers. We hopes up. Unemployment in almost all major investments and efforts will continue to are confident that the concrete path will economies fell to historic lows. be on the top of our agenda to ensure a allow the Bank achieve yet again a high Come second half, everything turned upside solid risk management approach, strict return on equity ranking amongst the top down. Equity markets started to struggle compliance policy, efficient capital allocation of the competition and if the circumstances with increasing interest rates. Consumers and top quality service to our clients. allow and positive outlook prevails, a conservative but healthy growth in the seem to be disturbed and taken aback by While putting all these efforts with a business volume may again be targeted. the pace of Central Banks’ normalization. small group of dedicated personnel, the Investors grew concerned about the conservative but selective approach in asset The Bank will continue to follow the path prospect of living without the cheap & easy generation proved fruitful and provided the outlined by the Strategy Document, which is money parachuted by Central Banks and quantitative success.

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