During the first half of 2012, the CBRT
implemented a tight liquidity policy to
restrict the secondary effects of the rise in
inflation, in line with its price stability target.
Frommid-year, the liquidity supplied to the
market was increased in conjunction with
the reduced global risk, thereby ensuring
that short-term interest rates followed a
course near the bottom band of the interest
rate corridor. Conversely, the reserve option
mechanism adopted within the framework
of the required reserves policy was aimed
towards mitigating the volatility capital
flows created on exchange rates and loans.
Active use of this tool allowed a gradual
reduction of the upper band of the interest
rate corridor.
DEVELOPMENTS IN FUNDING COSTS
DURING 2012
During the first half of 2012, short-term
interest rates followed a fluctuating course
as a result of tightening monetary policy
pursued by the CBRT, and funding costs
floated near the upper band of the interest
rate corridor. In the second half of the year,
however, the downturn in market interest
picked up speed: driven by the measures
taken in overseas markets in line with
global developments, the positive course
of domestic markets, Turkey’s upgraded
investment-grade credit rating, and the
monetary policies of the CBRT. Accordingly,
funding costs gradually decreased across
the banking industry as compared with the
previous year, which produced an overall
positive impact upon the profitability of the
banking sector.
CHANGES IN THE BANKING SECTOR’S
BALANCE SHEET COMPOSITION
Funding costs moved upward in the first
half of 2012 due to the financial stability
practices in place since 2011, combined
with the CBRT’s tightening monetary policy.
Despite the CBRT’s enforcement of policies
aimed at decreasing funding costs from
the second half of the year, the ongoing
negative outlook in the overseas markets
and weak domestic demand created a
restrictive effect on the growth trend of
the banking industry. Total assets of the
banking sector reached TL 1,371 billion as at
December 2012, with an increase of 12.6%.
The course of funding costs and
developments in economic activity have
led to a relative loss of pace in the credit
expansion of the banking sector in 2012 as
compared with the previous year. The loan
volume of the entire banking sector grew
16.4% year-on in December 2012, which
represented a marked decline as compared
to the climb in the twelve months to end
2011. Along this line, the share of total loans
to total assets showed a relatively limited
increase of 1.9 percentage points from year-
end 2011, and was registered as 58.0%.
In the same period, the total securities
portfolio of the sector declined by 5.3% as
compared with year-end 2011. The share of
securities portfolio to total assets slimmed
down by 3.7 percentage points and was
down to 19.7% year-on-year.
With growth of 12.7% in the 12 months
to end 2011, total assets available to the
banking industry
(*)
lost pace in 2012 and
increased by a year-on 11% in TL terms
in December 2012. While TL deposits
expanded by 13.1%, TL equivalent of FC
deposits grew 6.8%, and USD equivalent
of total FC deposits went up by 13.2%, as
compared with year-end 2011. The share of
deposits to liabilities declined from 57.1% at
year-end 2011 to 56.3% at the end of 2012.
Although the turn towards bank
securities, which represent an alternative
investment instrument to deposits,
somewhat restricted expansion in deposits
volume in 2012, it also paved the way
for diversification of funding resources,
reduction of funding costs, and alleviation
of maturity mismatches on the part of the
TOTAL ASSETS OF THE
BANKING SECTOR REACHED
TL 1,371 BILLION AS AT
DECEMBER 2012, WITH AN
INCREASE OF 12.6%.
(*)
Excluding interbank deposits.
INTRODUCTION
ACTIVITIES
CORPORATE GOVERNANCE
FINANCIAL INFORMATION AND RISK MANAGEMENT
47
İŞBANK
ANNUAL REPORT 2012
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