2013 ANNUAL REPORT
MESSAGE FROM THE CEO
Esteemed shareholders, customers, business partners and colleagues,
Our ability to predict the future and accurately interpret the dynamics of change has also allowed us to maintain our strong market position throughout our 86th year of operation.
In 2013, our increasing profitability, growing asset base and rising business volumes have proven the relevance of our proactive strategy, and our success in executing a customer-oriented banking business in such a volatile market environment.
TEB’s strategy is to demonstrate long-term sustainable growth and attain high profitability by creating continuous value. Our financial and operational results in 2013 are a reflection of the successful steps we have taken towards our strategic vision.
Our policies, which are focused on efficient growth in all business lines, envisage balanced balance sheet growth. I am delighted to report that TEB’s total assets expanded by 23% when compared to the end of 2013 to reach TL 53.4 billion. In 2013, TEB not only expanded its balance sheet, but also significantly increased the total volume of resources allocated to its customers and the total value it generates for its stakeholders. The volume of funds provided by TEB to the real sector through cash and non-cash loans rose to TL 49.4 billion in 2013.
Our Bank generated TL 699 million in operating profit and a TL 535 million net profit in 2013, corresponding to a YoY increase of 8%. In the same period, TEB’s net banking revenues increased by 16% to TL 2.791 billion. In line with our improving efficiency in 2013, TEB improved its shareholders’ equity and return on assets broadly in line with the sector average rates. By the end of 2013, our shareholders’ equity had reached TL 5.3 billion and our capital adequacy ratio was realized as 14.23%.
Thanks to the balanced distribution of our loan portfolio across the sectors, the sum of cash and non-cash loans provided to any one sector does not exceed 10% of our total loan volume. Consumer loans, on the other hand, account for 27% of our total loan portfolio.
We achieved especially significant growth in the number of our deposit accounts in 2013. Our Marifetli Hesap (Skillful Account) product played a key role in our efforts to develop saving products, helping us gain 170,000 new accounts throughout the year. Our total deposits rose by 19% to TL 34.3 billion in 2013.
Our Bank continued to expand its branch network by opening 35 new branches in 2013. By the end of 2013, TEB was offering its products, services and solutions to more than 5 million customers and serves in 72 cities through 544 branches, with 10,000 employees, more than 1,600 ATMs, and a network of more than 120,000 POS devices and a wide range of alternative delivery channels
We are determined to maintain our loan supply activities in a volatile conjuncture
The growth performances of developed countries and emerging markets decoupled in the wake of the global crisis in 2008, but a new threshold was reached in 2013 as a result of a number of developments in the USA and Eurozone.
The signal of a change in USA financial policy precipitated capital outflows from emerging markets. During the same period, the currencies of emerging markets – including the Turkish Lira – were significantly devalued. These developments resulted in market volatility, forcing the CBT to tighten its monetary policy.
Moreover, a number of regulatory changes such as restrictions that have started to be imposed on the interest rates of overdraft accounts, gradual increases in general loan interest rates, higher credit risk weightings on some receivables and restrictions being applied to installments on a product and loan basis for sales on credit, have been introduced in 2013, . Also, rising funding costs have required the implementation of new strategies.
Under the circumstances that we have summarized, TEB continued to stand by the real sector and support the national economy in all circumstances during 2013. At the end of 2013, the share of loans – the largest item under the assets section of the balance sheet – in our overall balance sheet was realized at 71%. Our Bank continued to provide cash and non-cash loans to its customers, including SMEs, from various sectors.
By the end of 2013, the loans/assets ratio had climbed to 71% and the share of loans provided to SMEs in our total loan volume reached 45.33%. The Bank was actively working with more than 155,000 SMEs at the end of 2013. According to BRSA data, our bank commanded a 5.11% market share in terms of the number of customers. In the same period, TEB’s share in the cash loan market and non-cash loan market in the SME segment stood at 6.19% and 9.79%, respectively.
Export loans, an area in which we are the sector leader, remained a major business line for us in 2013. According to data as of September 30th, 2013, TEB was the leader of the Turkish banking industry in terms of the share of export loans to total loan volume (excluding personal loans). Our Bank assumed 3rd position in the sector in terms of total export loan volume.
As of end-2013, the number of customers served by TEB’s Private Banking unit reached 4.6 million. The Bank’ private client base grew by 18% year-on. While the sector grew by 18% when compared to the end of 2012 in terms of personal saving deposits, TEB achieved a 22% rate of growth and reached a 3.71% market share in this category.
In 2013, another area where our Bank grew more rapidly than the sector was in credit cards: TEB raised its market share in this category, chalking up 33% growth, against the 17% growth rate in the sector. Launched in 2006, TEB POS – another area where we are growing rapidly – served 120,000 locations by the end of 2013, while TEB, with a 6.15% market share, ranks as the 6th largest bank in this segment, where a total of 25 banks operate.
TEB attached significant importance to risk management and asset quality in 2013 as well. Our Bank succeeded in keeping its non-performing loans ratio below the sector average in 2013. The non-performing loans ratio, which stood close to 2.25% throughout 2013, is an indicator of the health of TEB’s loan stock and how TEB manages it in a risk-sensitive and sustainable manner.
One of the best three SME banks worldwide
Chosen by IFC as one of the best three SME banks worldwide in 2012, TEB continued to share its knowledge and experience with other banks in emerging markets by participating in a number of events held by the IFC in 2013. In the same context, we also participated in the annual ADFIMI meeting held by the Islamic Development Bank in Tajikistan. We have also shared our experience in the SME segment with the BNP Paribas Group. In 2013, we conducted a series of workshops with BNP Paribas Poland where we were able to share our vision of becoming the consultant bank for SMEs.
More success for the TEB SME Academy
Conducting its activities since 2005 under the motto, "KOBİ nerede, TEB orada" (where there is SME, there is TEB); TEB provides consultancy services to SMEs throughout Turkey within the framework of the TEB SME Academy. The TEB SME Academy continued to hold conferences in 2013, reaching 1,500 people in total in 6 cities. In the 8 years since the academy entered service, we have reached 20,000 SME representatives in 41 cities through a total of 71 events.
In 2014, our Bank unwaveringly will continue its efforts to raise the level of financial literacy of SMEs and to offer the differentiated services that they require.
Another exciting development for us in 2013 was to receive the Most Innovative SME and Enterprise Banking award within the scope of the Turkish Innovation Week, organized by the Turkish Exporters Assembly (TIM). Considering innovation as a topic that closely concerns all segments of the community and must be strategically dealt with, the award demonstrates TEB’s progress on the right track and the added value it generates for its shareholders.
Carrying out the most comprehensive enterprise banking program in Turkey
Within the scope of its efforts in the area of enterprise banking, TEB supports entrepreneurs with its financial and non-financial products and lays the foundations of the SMEs of the future. We provided financial support to 17,000 entrepreneurs in the space of just 10 months, through consultancy and training programs, we reached 3 thousand entrepreneurs.
In context of our approach, we attach special importance to the economic potential of the business ideas of our entrepreneur customers and evaluate loan supply decisions based on the potential of the business idea in question. In Turkey, an average of 260,000 enterprises are established and 140,000 enterprises are closed each year, so we are well aware of the importance of the support we offer in the area of enterprise banking.
Through the support project that we have restructured under the name, “TEB Enterprise House”, we have played a key role in the realization of ideas of thousands of entrepreneurs, breaking new ground in the Turkish banking industry.
In the TEB Enterprise House, which was opened in Istanbul, we focused on listening to everyone who came to us saying “I have a business idea”. In the Enterprise House, we not only provided training and consultancy services, but also listened to 273 project owners during the year before mobilizing the facilities of our Business Incubator for 31 projects. Our target is to introduce angel investors with the projects that are accepted to the Business Incubator and to support their implementation with our banking products and services.
Before starting the enterprise banking business, TEB aimed to reach 13,000 entrepreneurs every year within the scope of a 5-year roadmap. The realizations in 2013 indicate that we exceeded our annual target. Our target mass is entrepreneurs. We are determined to meet more frequently with people who has value added, sustainable business ideas and offer them our support. We also consider this also an element of our social responsibility and adopt it as a requirement for modern responsible banking.
Promoting an awareness of saving, accessing banking services, financial literacy and TEB Family Academy
Building an awareness of saving and a sustainable savings ratio are crucial in economic development. Our country has not yet reached the desired level in terms of propensity to save. We believe that banks must play a key role and assume responsibility in this area. TEB aims to grow more assertive in savings banking, a largely untouched area in terms of product diversity and richness, and to support initiatives that would improve individuals’ awareness to save.
To this end, we launched the TEB Family Academy – TEB’s national platform that aims to improve financial literacy. Having reached 20,000 people in 2012, TEB Family Academy provided training on financial literacy to 105,000 people, exceeding the Bank’s targets in 2013. The free training sessions, that have attracted a great deal of attention from participants, have primarily focused on the profit-loss balance of individuals and families, proper use of banking products and customer rights in the banking industry. As part of our efforts, we have reached children through in-class training and the TEB Children website (including the associated application, at www.tebcocuk.com) prepared to furnish children with an awareness of saving in a way that is enjoyable for them.
The TEB Family Academy joined forces with the Boğaziçi University and conducted the first Financial Access Index study in Turkey in 2013. At the end of the study, a score of 43 out of 100 was achieved for accessing financial services by those who work with or who are able to work with banks in Turkey. The study shows that Turkish banking industry has limited access to young people, women and rural. TEB aims to reach these segments and to improve their financial literacy. TEB sees this not only as a business opportunity, but also as a responsibility.
Another activity that we are engaged in is to determine Turkey’s financial literacy index. As a result of our joint work with Finansal Okuryazarlık ve Erişim Derneği (Financial Literacy and Access to Financial Services Association – FODER), we determined the financial literacy index in Turkey to be 59.8.
TEB turned its branches into classrooms and branch managers into teachers, thus opening its doors to everyone to provide training on financial literacy. As a result of the strong interest that this scheme attracted, we moved these training sessions outside branches and began to train people in universities, public institutions, private sector companies, associations and chambers. In Ankara, we opened the TEB Family Academy House with a 100-person capacity. The size of the audience we reached in 2013 illustrates how accurate our vision is and how firmly we have progressed. We are determined to diversify our efforts within the TEB Family Academy and to reach broader masses.
A Bank That Transforms Technology into Service
Having devoted itself to innovation, TEB presses ahead in its efforts to improve non-branch banking services that are summarized under the motto, “A Bank That Transforms Technology into Service”.
We expanded the scope of our ATM network, invested TL 40 million, increase the number of TEB ATMs by 44% throughout Turkey compared to 2012. Moreover, we presented CEPTETEB (a new version specifically designed for iPads; there is another version for iPhone or Android-based devices) – our mobile banking practice – to our customers at the App Store in 2013.
Another important development in 2013 was the increasing rate of utilization of digital banking channels. The utilization rate of the alternative banking channel reached 80% in some financial transactions, such as money transfer and withdrawal and money deposits, while the user base in the internet banking channel grew by 33%. The fastest growing channel of the year was CEPTETEB that reached 120,000 active users in total.
Digitalization of banking transactions, a process we attach a great deal of importance to, continued in 2013. During the year, 55% of money deposit transactions, 83% of withdrawal transactions, 72% of credit card payments and 84% of money transfers were carried out through our digital banking channels.
By moving financial transactions from our branches to digital channels, we continue to reduce our operating costs. This process is important not only in terms of maintaining precise control of our cost curve, but also increasing the added value that we produce for our shareholders.
TEB’s efforts in the area of digital banking were crowned with various awards in 2013, while the Bank is determined to intensively carry out these efforts and to further invest in this area in 2014.
Looking ahead to 2014…
Today’s global and national economic conditions suggest that 2014 will be a volatile year. A cautious approach to liquidity and risk management will be again at the top of banking sector agenda.
We believe that the precautions taken by the CBT in 2013, which essentially aim to protect financial stability by rebalancing Turkey’s growth composition, will yield positive results for the Turkish economy in the medium term.
The Turkish banking industry, which has been comprehensively restructured and now offers a sound financial structure, is, despite the economic crisis, ready to provide all forms of support as required by the Turkish real sector in 2014, just like every year since 2008.
Despite the economic crises, comprehensively restructured Turkish banking system is ready to provide all forms of support to Turkish real sector in 2014 as it did since 2008.
During this period, TEB will continue to utilize its growth potential and the financial assets under its management with an approach for its shareholders to add more value.
Besides our sophisticated collaboration with our business partner BNP Paribas, so strongly believes in the future of the Turkish economy and considers the Turkish market as one of the three major centers of growth in the world it will play a key role in our growth.
We plan to expand our loan supply activities – which is our primary field of work – by maintaining the healthy structure of our loan portfolio. Each new customer who shares the same values with us will contribute to our success and make it easier for us to further improve our sound structure.
With its prestigious brand being synonymous with trust for depositors, companies, correspondent banks and business partners, TEB will continue to grow in full compliance with the law and ethical values.
I would like to extend my thanks to our shareholders who have raised the sustainability of the TEB brand with their precious and uninterrupted support, our customers who have bestowed their trust in us in all circumstances, our employees who have adopted our shared values from the bottom of their hearts, and our business partners who have never stinted in their support at different points of our business cycle.
Ümit Leblebici
CEO