78 VAKIFBANK
ANNUAL REPORT 2015
SUMMARY REPORT OF THE BOARD OF DIRECTORS
Dear Shareholders,
In the year 2015 the US economy grew 2.4%,
whereas annual inflation materialized as 0.7%,
remaining below the 2% target designated
by the Fed. In view of developments in
employment and inflation, the Fed postponed
its rate rise until december 2015, when it
increased its policy rate. The Fed raised the rate
by 25 basis points to the interval of 0.25-0.50%
and announced that it would gradually increase
the rate in the coming period.
The Euro Zone, on the other hand, grew 1.6%
in the third quarter in line with expectations,
owing to the rise in private consumption
and public expenditure; however, due to the
sluggish performance of the global economy,
European exports had a negative effect on the
growth rate. The inflation rate, which stood at
negative 0.2% in 2014, closed the year 2015
at 0.4%. Despite deflationary worries about the
region, 2015 painted a more positive picture
for inflation compared to the previous year.
In march 2015, the European Central Bank
(ECB) announced a EUR 60 billion bond-buying
program to continue until september 2016.
During the year it was argued that the program
could be extended and that the interest rates
could be lowered further, and at its december
meeting ECB brought down the deposit interest
rate by 10 basis points from -0.20% to -0.30%,
and extended the bond-buying program until
march 2017. The volume of bond-buying was
kept unchanged at EUR 60 billion.
The Turkish economy, on the other hand, grew
by 4% year-on-year in the third quarter of
2015, which followed 2.5% in the first and
3.8% growth in the second quarters. In total,
the economy grew by 3.4% year-on-year in the
first nine months of the year 2015 in real terms.
As such, growth was seen to gain momentum
in the first nine months of 2015 compared to
the same period in 2014. The rise in household
consumption spending was an important factor
behind this development. The end of electoral
uncertainty gave impetus to investments, and
the construction sector and exports picked
up, which could be expected to have spill-
over effects across the economy as a whole.
In november 2015, according to 12-monthly
cumulative figures, the current account deficit
fell to USD 34.7 billion. The fall in the oil price,
and as a result in Turkey’s import bill, was
particularly important in bring down the deficit.
Due to the ongoing fall in the oil price and
favorable developments on the inflation front
in the first two months of 2015, the Central
Bank of Turkey (CBT) lowered the one-week
repo rate -its policy rate- by 75 basis points,
to 7.5%. The rise in the exchange rate from
the second quarter onwards, the uncertainty
of the inflation outlook, and questions on Fed’s
rate rise led to an increase in market interest
rates. In august, CBT announced that it would
simplify its monetary policy and wait for the
Fed’s interest rate decision before taking the
first steps in simplification. The Fed started
to increase the rate in its december meeting,
and CBT, at its Monetary Policy Board meeting,
announced its decision to keep the interest rate
unchanged at 7.50%; besides, the upper limit of
the interest rate corridor, the marginal funding
rate remained fixed at 10.75% and the lower
limit at 7.25%. At the Monetary Policy Board
meeting of december, the CBT signaled that it
would initiate monetary simplification in January
2016, in case the Fed’s interest rate decision led
to a permanent reduction in market fluctuations.
The total assets of the Turkish banking sector
went up by 18.2% in december 2015 on an
annual basis to reach TL 2 trillion 358 billion.
The ratio of the sector’s total assets to the GDP
materialized as 126.6% in the third quarter of
2015. Loans continued to be a determinant
factor in asset growth in 2015 as the ratio of
loans to total assets climbed to as high as 63%.
The annual growth rate of total assets went
up from 18.5% in december 2014 to 19.7% in
december 2015. Total loans, on the other hand,
stood at TL 1.485 billion as of december 2015.
