2017 ANNUAL REPORT
PDF BNP PARIBAS GROUP CONTACT TÜRKÇE

MESSAGE FROM THE CHAIRMAN

In 2017, the Turkish economy registered a strong growth owing both to the authority’s incentives targeted at propping economic activity and to the low base year effect.

Esteemed shareholders,

Although political events in various parts of the world affected the global markets from time to time, global growth acquired a sweeping nature in 2017 after a long while.

Before presenting our annual report and financial results that sum up TEB’s performance in 2017, I would like to discuss the highlights of the year for the world, our country and our sector, and to present an overview of the progress achieved by our Bank.

2017 has presented a variable global agenda.

In President Trump’s first year in office, the US economy ended the year with a strong performance, whereas Europe had its hands full with general elections held in different countries. While the elections in Germany, Austria and the Netherlands indicated at the ascent of the right wing, Brexit remained on Europe’s agenda as another important item. The referendum result in favor of independence in the autonomous region of Catalonia in Spain, on the other hand, ignited yet another questioning of the EU’s future.

The additional highlights of the agenda included the political issues spreading in the Arabian Peninsula, as well as the internal war and other tensions in our neighboring Middle East. Another event that busied the world public opinion throughout the year and even kindled fear at times has been the North Korea’s ballistic missile tests and political lashes in this respect.

The performance of the world economy has inspired increased hope for the future.

As opposed to recent years, the world economy in 2017 registered a growth performance that surpassed the forecasts. The IMF revised its global growth estimations upwards in 2017.

While the US economy that grew by 2.6% in the fourth quarter of 2017 is estimated to have closed the year with a growth rate of 2.3%, growth is projected to persist and be registered in the order of 2.7% in 2018.

The indicators for the Eurozone are also positive. The performance criteria suggesting continued recovery in the area nurture the hopes for the future. The Eurozone recorded the strongest performance of the past decade and grew by 2.5%.

The far-reaching global growth attained is the outcome of the determined policies pursued by major central banks.

Monetary policies pursued by the major central banks have made up one of the most pronounced topics of the 10-year period that passed since the 2008 global crisis.

As we leave behind 2017, it is evident that supportive policies have played the lead role in reviving global and regional economic activity. The US Federal Reserve (the Fed), the European Central Bank (ECB) and Bank of Japan (BoJ) have all introduced monetary policies seeking to relieve the economy and revive activity, although at different times.

The Fed carried out three rate hikes in 2017, in line with its forecasts, and initiated scaling down its balance sheet. In the process, the labor market closed in on full employment, whereas 2% target remained elusive on the inflation front.

In its meeting on 14 December 2017, the ECB did not make any changes to its monetary policy, and kept the deposit facility rate constant. In his post-meeting statement, however, ECB President Draghi underlined that risks were balanced with respect to growth outlook in the Eurozone and hinted at the presence of potential upside surprises. Draghi also stated that despite the weak inflation outlook, the deflation risk is now eliminated for Europe.

The capital movements in global markets will set the course of the coming period.

The outlook and countries’ growth performances of the coming period will develop as a function of the appetite and capital movements in global capital markets. The direction and volume of capital flows will be telling for the performances of developing economies including Turkey.

It must be kept in mind that the policies of central banks, which are the lead actors of the global economy, affect developing economies through various outlets including direct investments, portfolio investments and debt instruments.

In our opinion, central banks in most of the developed countries will keep taking normalization steps in 2018. On the other hand, interest rates are predicted to remain at low levels. All these possibilities combined imply continued interest of investors in developing economies.

The Turkish economy recorded a strong growth in 2017.

In 2017, the Turkish economy registered a strong growth owing both to the authority’s incentives targeted at propping economic activity and to the low base year effect.

While the budget deficit enlarged in parallel with the increased public sector support to the economy, the ratio of the budget deficit to national income could be kept low with the help of the strong economic growth achieved.

It is critical to withdraw supportive measures and maintain the fiscal discipline in the medium-long term for securing sustainable development and establishing long-lived extensive welfare once the economy settles on stable growth path.

The sustainability of growth will likely be the most important topic of the coming year with respect to the Turkish economy. Continuation of healthy and balanced growth will be crucial also for improving the labor market conditions and for ensuring increased welfare.

While the national economy is anticipated to keep up with its growth performance in 2018, the growth rate will possibly lose some pace as compared with 2017.

The key defeat of 2017 was experienced on the anti-inflation front.

Having adopted double-digit numbers from the start of 2017, the CPI hit its highest in November. The CPI closed the year at 11.92% with the effect of the rise in food and energy prices in particular.

Inflation closed a calendar year in two-digit figures for the first time since 2011, representing the negative reflection of rapid economic growth.


Rapid credit growth in the banking sector

The credit volume of the overall Turkish banking sector expanded by 21% on an annual basis, driven by the Credit Guarantee Fund (KGF) support. In keeping with the powerful rise in loans, the overall sector’s total assets also went up by 19.3% to reach TL 3,257 billion as at year-end.

Deposits continued to serve as the main funding source of the banking sector also in 2017. On the other hand, the market players kept diversifying their funding sources throughout the year with securities issues and syndicated loans.

15.5% at the end of 2016, the banking sector’s capital adequacy ratio was 16.9% at the end of 2017 despite the downgraded rating in January. Net profit available to the overall sector as at year-end 2017 was up by a powerful 30.9% year-on-year to TL 49.1 billion.

Achieving growth while observing asset quality will continue to make up the priority target for the Turkish banking sector in the year ahead, as it has been in recent years.

In 2017, TEB proudly celebrated its 90th anniversary.

Our Bank was incorporated under the name Kocaeli Halk Bankası on 6 June 1927 with the efforts of 83 tradesmen and local business owners. Having set the successful example of regional banking in Turkey in its early years, our Bank sustained its healthy development and growth over the years, and reached its 90th year under the TEB brand, being one of the most prestigious members of the sector.

A member of BNP Paribas Group, Europe’s biggest bank and the third biggest in the world, TEB is the union of two big powers, one national and the other global. TEB is not just a power growing in Turkey; it is a brand name that leads change in the world with its innovative ideals that make a big impact across the world.

Our Bank ended 2017 with a successful performance.

Distinguished in the market with its best practices, its strong muscle of internalizing innovation, high value-added products and services delivered to customers, TEB exhibited a successful performance also in 2017. Our Bank achieved 8% growth in 2017 and its total assets and total lending reached TL 85.8 billion and TL 63.3 billion, respectively.

Our loans accounted for 74% of our total assets, while our non-performing loan ratio of 3.02% stands as a tangible result of our strong lending policies and elaborate risk approach.

One other performance data I would like to share with you is from our subsidiaries, all of which ended 2017 with successful performances. Throughout the year, our subsidiaries enriched the product and service range we offer to TEB customers, improved cross- and complementary-service sales, and reinforced our strength in added value generation in their respective lines of business.

TEB makes a difference also on the social responsibility axis.

Our Bank generates far-reaching positive impact for the community through the comprehensive social responsibility initiatives it carries out. Strongly supporting the entire entrepreneurship universe with a special focus on the SMEs and women entrepreneurs, TEB also conducts widespread projects that are taken as models with respect to furthering financial literacy and raising increased awareness across the society.

It is my heartfelt belief that TEB will reach broader audiences as years go by, producing and giving back at even higher extents within the scope of its social mission. I would like to take this opportunity to thank all the non-governmental organizations and our social stakeholders with whom we collaborate.

Our future focus

TEB stands for trust and consistency in the eyes of its clients, and serves as the safe haven and sustainable supporter of the business world under any market condition.

TEB similarly boasts an enormous power also in the international arena. With its prestigious identity, the Bank represents the Turkish banking sector successfully on all platforms, and provides an exemplary international performance for our sector.

TEB will continue to rise upon this solid foundation and to work, produce and give back in keeping with the huge responsibility it shoulders in the future, as it has done in the past 90 years. So too in the future as it did in the past, we will firstly focus on enhancing the value proposition we offer to our clients, while we target to build on our prestige and at the final analysis, to constantly improve our shareholder value.

On behalf of our Board of Directors and myself, I would like to express my gratitude to all our stakeholders, in general, and to our clients and employees, in particular.

Yours sincerely,


                                                                                             
Yavuz Canevi
Chairman of the Board