2015 was characterized by high levels of uncertainty, both on a national and global scale. The course of the global economy was determined by uncertainties regarding the Fed’s monetary policy, the continued slowdown in developing countries led by China, plunging commodity prices, and major volatility in local currencies.
The Fed raised its policy rate in December in response to sustained recovery in the U.S. economy. The deflationary pressures and the extraordinarily accommodative monetary policies in the Euro Zone and in Japan resulted in a strong U.S. dollar globally during this period.
The Turkish economy registered mild growth in 2015 in the face of lackluster external demand, geopolitical risks, and the weakening Turkish lira. We expect Turkey to close 2015 with an economic growth rate of 3.7%. Turkey’s foreign trade and current account balances improved significantly due in large part to plunging oil prices and the macro-prudential measures put in place by the administration. In addition, non-energy imports declined aided by relatively weak investments. As a result of these developments, Turkey’s current account deficit shrank from USD 46.5 billion in 2014 to USD 32.2 billion in 2015. Inflation remained elevated throughout the year due to the loss of value in the Turkish lira and rising food prices.
The ratio of investments to national income was 18% in the third quarter while the savings-to-national income ratio was in the 14%-15% range. We project a 5% current account deficit if investments return to their trend level of 20%. Therefore, increasing total savings will continue to be a major issue for the Turkish economy.
The banking industry encountered challenges on multiple fronts during 2015. The expectation of a Fed rate hike loomed large for the entire year. The rate of return on equity (ROE) and the benchmark bond yield came very close to each other. The agenda of the banking industry was dominated by return on equity, capital adequacy ratio, asset quality, and the effects of the devaluation in the Turkish lira on the corporate sector throughout the year.
Akbank maintained its healthy and profitable growth performance while supporting the growth of the Turkish economy thanks to its solid capital structure and effective risk management during this period. The Bank’s total cash and non-cash loans registered an increase compared to year-end 2014 and reached TL 185 billion during this period. Consolidated assets grew 15% to TL 252 billion over the same period.
We continued to support Turkey’s high-value-added and export-oriented growth model this year, as our cash-loan support for the economy topped TL 153 billion. The Bank’s support for the real sector by way of SME and corporate loans surpassed TL 113 billion with a 22% increase compared to the end of last year. Akbank’s support for the growth of Turkish businesses was not limited to loans, either. We unveiled a number of new products in September to enable SMEs to conduct their banking transactions under attractive terms. As a result, many firms began receiving banking services under more advantageous conditions.
We kept our non-performing loan (NPL) ratio at a very low level of 2.2% while continuing to grow. We have set aside around 171% as provision for our non-performing loans taking into account the general loan provisions.
Akbank’s total deposits soared 22% in 2015 and topped TL 149 billion. In an environment where savings are scarce in Turkey, we focused on attaining a loans-to-deposits ratio in the neighborhood of 100%.
Akbank continued to expand the investor base and set the credit costs in syndicated loans. We secured a three-year, USD 335 million syndicated loan facility in August and became the first Turkish bank to obtain a three-year syndicated loan since the 2008 global crisis. While extending the maturity, this loan also expanded the investor base of the Turkish syndication market by gaining new participating banks from Asia and the Middle East. We secured another syndicated loan in August, a one-year USD 1.2 billion facility. This represents a rollover of the syndicated loan that the Bank had secured last August with a 15 basis point reduction in cost. We obtained this facility with the participation of 41 banks from 15 countries at a lower cost despite the volatility in the international markets. These accomplishments proved once again that Akbank sets the costs and pioneers the sector in syndicated loans.
As of year-end 2015, the Bank realized a gross profit of TL 4,179 million, corresponding to a net profit of TL 3,229 million after provisioning TL 950 million for taxes.
Akbank’s accomplishments continued to be commended by prestigious international publications and platforms in 2015. In a study conducted by Brand Finance, an international brand valuation company, Akbank took the top spot on the “Turkey’s Most Valuable Brands 2015” list. Akbank was voted the “Best Bank of Turkey” in the “2015 Excellence Awards,” a prestigious event in the international banking industry organized by the world’s leading financial publication group Euromoney. We won this award for the sixth time during the last 10 years.
Akbank was recognized with two Gold, three Silver, and three Bronze Stevie awards at the “International Business Awards” organized by Stevie Awards, which has been selecting the world’s best products, services and communication projects since 2002.
Akbank Private Banking, the first private banking unit in Turkey, received The Banker’s “Best Private Bank in Turkey” award. We became the first Turkish bank to win this award for two consecutive years.
We continue to prepare the Bank for the future. 92% of our transactions are executed outside of the branches. Mobile Banking constitutes one of the pillars of our strategy. We have ongoing intensive efforts in this area.
With an operating expense to revenues ratio of 39% and an operating expenses to assets ratio of 1.7%, Akbank is one of the best banks not just in Turkey, but also in emerging markets. Akbank earns this distinction thanks to its lean banking approach, high efficiency, and focus on technology. Digital banking, which used to be supplemental service in previous years, is now a core sales channel and a business model under Akbank’s new strategy. These channels are managed not just with an efficiency enhancement strategy, but also with an income and salesboosting strategy. The awards we win especially in the mobile banking area as well as Akbank’s high rankings in the independent surveys conducted in Europe are a direct consequence of these efforts.
We were recognized with the “World’s Best Mobile Banking App” award in the Consumer Banking category at the Global Finance Magazine’s “Global Finance The World’s Best Digital Bank Awards 2015.” As part of the “Global Finance the World’s Best Digital Bank Awards 2015,” Akbank also won the “Best Digital Bank in Western Europe” award. In addition, Akbank was voted “Turkey’s Best Digital Bank” with a total of six awards.
We believe in Turkey’s great potential and are improving our infrastructure uninterruptedly. Akbank will continue to make its presence and difference felt in the market in this area in 2016. We will continue to focus on digitalization and technology in 2016, as mobile banking and digitalization remain at the core of our strategies.
My esteemed colleagues, fellow “Akbankers,” were the ones who brought Akbank to its success today and shouldered the “Sustainable Leadership” that we have been carrying out since 2012. We are proud of them. The average age of Akbank staff is 34. 94% of our employees hold at least a bachelor’s degree, the highest ratio in the industry. In addition, 8% of the employees hold a postgraduate degree. Armed with this awareness, we continue to provide a full range of support and paths for their continuous development through an effective communication structure and extensive training opportunities. The Bank will transition to a new structure called “Next Generation Akbank” in 2016. “Akbankers” will once again be at the heart of Next Generation Akbank. This effort, which will completely reassess our business conduct and process, is also aimed to have a direct positive impact on the Bank’s performance.
Akbank continues to be among the leading banks in Turkey as well as in Europe thanks to its solid capital base, effective risk management practices, reliable deposit base and high-quality asset composition. I would like to thank our customers, shareholders, and employees for this strong performance.