A RAPID IMPROVEMENT WAS OBSERVED IN MACROECONOMIC INDICATORS IN 2019 FOLLOWING THE REBALANCING PROCESS IN TURKISH ECONOMY. TURKISH ECONOMY DEMONSTRATED A PERFORMANCE BEYOND EXPECTATIONS, SIGNIFICANT REDUCTIONS WERE REALIZED IN INTERESTS AND INFLATION.

In 2019, trade wars showed their slowing impacts on global economy, particularly in China and USA. Despite some positive developments in trade wars, growth expectations for the global economy were revised downwards. US Central Bank (Fed) realized 3 interest reductions considering the slowing trend in the US economy.

With the re-appearance of recession concerns in European economy, European Central Bank (ECB) reduced the negative interest applied during the last quarter of the year by another 10 basis points. Poor growth indicators in Germany, Brexit discussions and political developments in Spain and Italy continued to have impacts on markets.

A rapid improvement was observed in macroeconomic indicators in 2019 following the rebalancing process in Turkish economy. Turkish economy demonstrated a performance beyond expectations, significant reductions were realized in interests and inflation. Foreign trade deficit decreased and current account balance ended with an annual surplus with the contribution of strong tourism revenues.

IN TERMS OF PROFITABILITY, BANKING SECTOR RECORDED A DECREASE OF 8% WHEREAS PARTICIPATION BANKING AND OUR BANK RECORDED INCREASES OF 16% AND 60%, RESPECTIVELY.

At the second half of the year, there have been significant declines in inflation thanks to base effect and single digit figures were observed. Within the frame of these developments, Central Bank decreased policy interest by 1,200 basis points. As Turkish economy was experiencing rapid interest reductions as a result of stabilization efforts, central banks of other developing countries such as Indonesia, India and Russia also reduced interest rates. It is anticipated that improvement of inflation will continue and Central Bank is expected to carry on interest reductions in the following period at a more moderate level.

In participation banking industry, providing resources at appropriate terms and costs from both domestic and foreign markets and allocating them in the most effective way for the economy is a strategic priority. Although there has been a slight deterioration of asset quality in the industry in comparison with the prior year, there was a noticeable increase in the asset size and profitability of the participation banking industry. In 2019, asset size of the banking sector increased by 16% whereas asset size of participation banking increased by 37% and our Bank recorded an increase of 64%. In terms of profitability, banking sector recorded a decrease of 8% whereas participation banking and our Bank recorded increases of 16% and 60%, respectively. In line with the objective of increasing the share of participation banking in the finance sector, this share increased from 5.3% to 6.3% in 2019.

In 2019, Ziraat Participation, as the first participation bank of Turkey, realized a first in Turkey by participating at Sürmegöz A.Ş. by 50% which purchased 57.8% of Yünsa A.Ş., a public company, through musharakah method. Ziraat Participation, following a rapid branching policy from the day of inception, reached 93 branches as of the end of 2019.

The Bank’s activities to open branches in other countries continue and the first foreign branch in Sudan is planned to be opened in 2020. Ziraat Participation wishes to carry on its rapid growth policy within the frame of its main strategy of “Growth through increasing the share of participation banking in finance industry”. Accordingly, the Bank aims to respond to its customers’ needs in the best way by developing new products. Ziraat Participation adopted efficiency-focused working and increasing its impact in the industry as its principles while targeting an increase in its branch network as well as the number of customers.

On behalf of myself and our Board of Directors, I would like to express my gratitude to all our stakeholders, particularly our employees who contribute to the success story of Ziraat Participation with their devoted efforts and ties of affection.

Hüseyin AYDIN
Chairman of the Board of Directors