Dear Stakeholders,

Ziraat Participation rounded off 2018 with a healthy financial performance.

In line with its vision of being the sector’s leading participation bank, Ziraat Participation maintained its rapid growth and completed 2018 with a healthy performance in line with its goal of profitability and productivity.

In 2018, a year in which the effects of the volatility in domestic markets were felt, as well as the negative effects of global economic factors and geopolitical developments, Ziraat Participation achieved its goals with its well-structured strategy, flexible business model and strong financial structure.

Ziraat Participation expanded its total assets by 55% YoY in 2018 and reached a balance sheet size of TL 22.2 billion. As a result of the successful implementation of the business cycle structured with a service approach which prioritizes customer satisfaction and productivity, Ziraat Participation closed 2018 with a profit of TL 322.6 million.

Another development supporting the healthy growth in our balance sheet in 2018 was the TL 500 million contribution from the Ministry of Treasury and Finance to the capital.

Ziraat Participation continued to support the financing of the real sector in 2018, especially SMEs, which are the lifeblood of the economy.

We maintain our strong support for the real sector.

Ziraat Participation continues to work in line with its vision of becoming an effective participation bank in international markets as well as in its region by responding to the needs and expectations of its customers by providing them with the most appropriate solutions and value propositions through the most accurate channels.

Ziraat Participation’s cash financing increased to TL 17.8 billion in 2018, marking a 52% increase when compared to the end of 2017, while non-cash financing grew by 68% to TL 10.3 billion.

While the total support extended by Ziraat Participation to the Turkish economy reached TL 28.1 billion, the share of cash financing in the balance sheet was stable at 80%.

As of the end of 2018, total current and participation accounts increased by 51% when compared to the previous year to reach TL 15.1 billion.

An approach focused on maintaining asset quality

Ziraat Participation adopted a growth strategy that aims to preserve and improve asset quality. Accordingly, the Bank’s allocation and fund disbursement processes, as well its as early warning and risk monitoring infrastructure, are being developed continuously.

In line with the financing oriented growth and customer based balance sheet strategy, the funds provided in 2018 continued to grow rapidly. In this period of uncompromising execution of risk management policies, the NPL ratio was well below the sector average and was realized at 1.5%. Ziraat Participation’s capital adequacy ratio stood at 12.8% in 2018.

Strong support for SMEs with the Breathing Space Loan

Ziraat Participation took an active part in the Breathing Space Loan program, which was implemented to ensure SMEs have access to financing with the most appropriate conditions.

The Breathing Space Loan, which was put into practice with the signing ceremony on 31 March 2018, was offered under the leadership of TOBB, with the contributions of the chambers and exchanges, with the guarantee of the Treasury-backed Guarantee Fund and the cooperation of six banks, including Ziraat Participation.

The scope of Breathing Space 2018 Project was aimed at providing TL 7.5 billion of financing to SMEs, and it was foreseen that 50,000 enterprises would benefit from this opportunity. The payment schedule of the Breathing Space Loan, which is prepared in a low cost and supportive manner for the real sector, was determined as an 18 month maturity with a grace period for the first 6 months (monthly profit rate paid).

Within the scope of the Breathing Space Credit program, which was completed on 4 July 2018, Ziraat Participation provided financial support to SME customers through a network of services spread throughout Turkey.

A breakthrough in the sector: The Joint Investments Model

In line with its establishment mission, Ziraat Participation also focuses on expanding the share of the participation banking sector in the overall banking market and reaching a wider audience of participation banking products and services. The development of alternative solutions and models in line with the principles of participation banking is an important objective in this respect.

In 2018, Ziraat Participation introduced the first joint investment model. In this context, FZK Mühendislik ve Sınai Yatırımlar A.Ş. was established in 50%-50% partnership with Fikssan Fikstür Sanayi ve Ticaret A.Ş., which serves both the public and private sectors in engineering and industrial fields such as the defense industry, rail systems and the automotive industry.

FZK’s main activity will be the production of domestic technological and industrial products needed by the defense industry, the automotive and railway sectors, and the mould and fixture sectors within our country’s borders.

This structure, where a participation bank and a manufacturing company come together on the basis of capital partnership in Turkey, is also a first in terms of our banking sector.

Our new partnership FZK’s main activity will be the production of domestic technological and industrial products needed by the defense industry, the automotive and railway sectors, and the mould and fixture sectors within our country’s borders.

A step towards protecting our national resources

In 2018, Ziraat Participation collaborated with SSTEK Savunma Teknolojileri A.Ş. to support small and medium-sized domestic companies operating in Turkey and which are capable of developing technology.

Within the framework of the cooperation that envisages the establishment of a profit-loss partnership, joint investments or subsidiary model and affiliated partnerships, the Company aims to support the defense industry’s activities abroad where there are limited manufacturing facilities in Turkey, with national funds.

Ziraat Participation considers this step as an important initiative to reduce the Turkish economy’s dependence on foreign resources and to provide a net contribution to the country’s economy.

Common ATM cooperation with public banks

In 2018, Ziraat Participation joined the Free Common ATM System to provide a better service experience for its customers.

Within the scope of the project, which brings together Ziraat Bank, Halkbank, VakıfBank, Ziraat Participation and Vakıf Participation, transactions to withdraw and deposit funds at around 15,000 ATMs across Turkey, as well as balance inquiries, started to be offered to our customers free of charge.

Issuance of leasing certificates reaches TL 3.5 billion

Ziraat Participation successfully completed the issuance of 19 lease certificates in 2018.

Ziraat Participation, which has been active in the capital markets as part of its strategy to enrich its resource structure, and its subsidiaries Ziraat Participation Varlık Kiralama A.Ş. and ZKB Varlık Kiralama A.Ş., obtained the approval of three separate lease certificate issuance licenses from the CMB in order to issue TL denominated lease certificates in the domestic market, amounting to TL 500 million, TL 2 billion and TL 4 billion. In this context, approximately TL 3.5 billion worth of issuances were realized in various amounts of allocations in 2018.

The first participation bank to issue the gold lease certificate

While Ziraat Participation was one of the first two banks to issue the gold lease certificate, it was the first and only bank among the participation banks to offer services in this field.

The first stage of the issuance of Gold Bond / Gold Lease Certificate, which was realized by the Ministry of Treasury and Finance and aimed at bringing gold under the mattress into the economy, was completed in September 2018. Ziraat Participation and Ziraat Bank, which are assigned as intermediary banks, offered lease certificates and gold bonds to investors throughout Turkey through their branches.

In the upcoming period, Ziraat Participation will continue to mediate in the issuance of Gold Lease Certificates and provide services to investors.

Investments in digital banking continue at full pace.

In 2018, Ziraat Participation continued to invest in digital technologies in order to enable simpler and faster banking transactions for customers.

To enable our customers to carry out real-time payments on E-Commerce sites, the Payment From Account (Direct Payment) function is now available over Participation Mobile. A live response application for seamless communication, available on a 24/7 basis has been added to Participation Mobile.

In this process, in which we developed our product and service diversity in our alternative distribution channels, the number of customers actively using internet banking increased by 100% thanks to the corporate vision based on customer satisfaction. New customers gained through the web channel were able to activate their accounts through the same media channel.

Ziraat Participation is committed to developing its Internet Branch, Participation Mobile and corporate website with innovative and user-friendly features in line with customer needs and using digital channels much more actively.

17 new branches were added to the Ziraat Participation branch network in 2018, taking the total number of branches to 80.

Enriching our human resources with new additions

Ziraat Participation developed its most valuable asset - its human resources - with new additions in 2018.

In our rapidly growing organizational structure, in line with the needs of our branches and head office units, 218 new colleagues joined us, bringing our number of employees up to 1,042 by the end of 2018.

Another development which gave us great satisfaction in 2018 was the growth we achieved in our branch network with 17 new branches added to the Ziraat Participation branch network in 2018, taking the total number of branches to 80. During the year, the Company also moved to the Maltepe Additional Service Building in order to bring together the Head Office Units serving in different locations and to increase working efficiency.

Work on TFRS-9 transition completed successfully.

Within the scope of the Turkish Financial Reporting System (TFRS), the BRSA introduced new regulations on the calculation of provisions for banks.

Ziraat Participation has completed its work in this vein and prepared accounting and system infrastructure for provision calculations in accordance with the regulation on new provisions to be applied from 1 January 2018.

Warmest thanks to everyone who contributed to our success 2018.

We continue to work with dedication to increase our contribution to the real economy in line with our values and ethical principles that are reflected in our well established corporate culture.

While we continue our projects with determination, firmly adhering to our mission to expand participation banking, our ultimate goal is to increase the value of the Turkish economy and to support sustainable development in a multi-faceted manner.

On behalf of the management team at Ziraat Participation, I would like to thank all of our stakeholders, especially our employees, who are walking with us on our way forward with determination to achieve higher targets and who have contributed so much to our successful performance.

Kind regards,

Metin ÖZDEMİR
CEO