I respectfully greet our valued partners honoring our Bank’s Ordinary General Assembly Meeting for 2011.

Before evaluating TEB's operations in 2010, I would like to share my findings regarding the developments in both the global and the Turkish economy.

Exit strategies from the crisis and the results of the policies implemented were the most important matters on the agenda of the world economy in 2010.
The recovery observed in the economic indicators, especially in the last two quarters of the year, paved the way for 2010 to be a year of emerging from the crisis. A variety of measures were taken by governments in a bid to ease the impacts of the global economic crisis, while central banks aimed to support these measures by means of expansionary monetary policies throughout the year.

During this period, structural differences between developed and developing economies increased significantly, giving rise to wide margins between growth rates among different countries.

Developing economies generally demonstrated a stronger economic performance, remaining to be the driving force of the global economy.

Having contracted by 0.6% in 2009, the world economy is believed to have grown by 4.2% in 2010.

A challenging year for US and Euro Zone economies
Low levels of employment remained a fundamental problem for the US and Euro Zone economies in 2010. The unusual rise in the value of the Euro was another development to affect the Euro Zone.

While the FED (US Federal Reserve) focused on loose financial policies, the ECB (European Central Bank) preferred tightening policies as a tool in reducing public deficits.

Public debts increased rapidly in several EU member countries, particularly Greece, in 2010. As a result, CDS values of some EU countries rose as credit ratings narrowed. US and Euro Zone economies are estimated to have grown by 1% and 2.5%, respectively during 2010. On the other hand, developing economies are estimated to have recorded 5% growth, on average, led by China with a 9% growth rate. Growth rates are expected to rise to 3% in the USA and 2.5% in Europe in 2011. During this period, it will be one of the key factors behind sound growth if reflation is triggered and leads to increasing asset prices. On the other hand, it will be of great importance that inflation is kept under control via economic policies in developing countries, especially in China.

With the ability to effectively manage global fluctuations, Turkey was one of the few countries to have been able to overcome the crisis rapidly.
The first sign that the Turkish economy was emerging from the crisis came in the form of the 6% growth rate in the last quarter of 2009. This was followed by growth rates of 11.8% in the first quarter of 2010, 10.2% in Q2 and 5.5% in Q3, demonstrating a high economic performance that won acclaim from international rating institutions, which revised Turkey’s credit ratings upwards.

Having climbed at the beginning of 2010, the rate of inflation fell to 6.4% by the end of the year, and is on course to continue its descent in 2011 as well. The rate of unemployment, which rose during the crisis, declined to 11.2% in November 2010 as the impacts of the crisis diminished.

Despite rising domestic demand, weak foreign demand and rising energy-commodity prices drove up the foreign trade deficit. The foreign trade deficit reached US$ 71.563 billion in 2010, in turn driving up the current deficit, which reached 5.2% of Turkey’s GDP in September 2010.

The CBT (Central Bank of Turkey) continued to cut interest rates throughout the year, while announcing a series of measures in Q4/2010 aimed at tackling the booming hot money inflow. The CBT raised the required reserve ratios but at the same time cut the overnight borrowing interest rate by 5 percentage points from 6.5% to 1.5%.

A strong performance for the Turkish banking sector in 2010, thanks to its robust infrastructure
Having been subject to a series of restructuring efforts in many areas since the economic crisis in 2001, the Turkish banking system successfully overcame the global economic crisis. The sector’s total assets rose by 20.8% in 2010 when compared to the end of 2009 and reached TRY 1,007.6 billion. Rising credit volumes and high repayment rates in non-performing loans supported the fall in the ratio of non-performing loans. The capital adequacy ratio of the banking sector stood at 19.0% at the end of the year, while its total shareholders’ equity reached TRY 134.5 billion.

When the year is considered as a whole, 2010 was a successful year for the banking industry. In this period, the banking industry continued to support SMEs, which had been most affected by the economic crisis, thus playing a key role in the reinvigoration of the real sector and the Turkish economy as a whole.

TEB continues to generate added value by putting its competitive advantages to the best use. Having concentrated on reading international and national market dynamics, TEB maintained its financial health and successfully reached its 2010 targets by managing its strong and widespread service structure thanks to the implementation of contemporary risk management practices.
2010 was a milestone year for TEB. Apart from the figurative growth in the balance sheet, qualitative developments in products and services reinforced customer satisfaction. By placing priority on efforts to enhance the quality of its operations, TEB succeeded in reaching its customers through a wider range of products in 2010.

The Bank gave priority to marketing-oriented efforts aiming to raise product and service quality and diversity through its nationwide branch network and alternative delivery channels and satisfied its customers’ financial needs in corporate, commercial, retail and SME banking by means of an effective pricing policy as well as other banking instruments.

TEB fulfilled its responsibilities to its customers as part of the most fundamental function of traditional banking, by canalizing its assets to efficient areas, and unstintingly meeting the demands of its credit customers as much as the demands of its depositors. Within this framework, TEB applied loan-granting policies which addressed its entire loan customer portfolio in 2010, significantly raising its credit volume.

Moving forward with strong shareholder support, TEB met all the requirements of a project which is of great importance for our banking industry in 2010, and merged with Fortis on February 14th, 2011, completing all legal procedures.

TEB is a service provider that has enjoyed a superior trend of success within the competitive Turkish banking industry. With the merger which has now been completed, both operationally and physically, I have full confidence that TEB will grow stronger and cement its strength to generate added value.

Achieving ever greater scale, TEB will continue to expand its operations in the Turkish market, which offers tremendous growth potential while at the same time serving as a strategic lever of growth for BNP Paribas.

Our post-merger goal is to be a leader among the second tier of banks in Turkey. Our business lines and staff will not waiver in their duties of successfully completing the TEB-Fortis integration, and will assume the most important tasks to realize our future targets, continuing to execute their jobs with passion.

TEB completed 2010, a busy year for the Bank, with significant growth by demonstrating a strong financial performance without deviating from its primary mission. Our aim is to offer the best services to our customers and to continue to grow profitably and efficiently while offering an ever greater contribution to Turkey’s economic growth in the coming periods.

In an organizational structure that supports sectoral competition, we are steadily progressing towards being a more productive and profitable bank. We would like to take this opportunity to express our gratitude to all of our employees who know no boundaries in providing service, and also our respects to our esteemed shareholders and investors.

Yavuz Canevi
Chairman of the Board of Directors

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