VKF_FRAE_2018_uyg11

VakıfBank Annual Report 2018 63 by instituting strong monetary tightening in September in order to support price stability. The one-week repo auction rate was raised from 17.75% to 24% and the entire funding again started to be delivered by weekly repo auctions. For the remainder of the year, the tight monetary policy stance remained unchanged. The steps taken by the CBRT were effective in dissipating the panic observed in financial markets from the previous quarter. As a result, pricing behavior in the markets became healthier. In third quarter, the contribution of domestic demand to annual GDP growth declined, while net export contribution increased. Despite the weak outlook in domestic demand, the deterioration in pricing behavior and the cumulative depreciation of the Turkish lira resulted in an increase in inflation. The slowdown in economic activity started to have a negative impact on employment figures. On the other hand, net exports positively contributed to growth while tourism experienced a strong rebound, key factors that limited the negative impact of weak domestic demand on economic activity. The current account deficit showed significant improvement especially in the second half of the year. While loan growth continued to slow, the interest rate differential between loans and deposits started to narrow in the fourth quarter. In the last months of the year, signs of economic stabilization became more evident. Flexible Liquidity Management In liquidity management, the Bank has adopted a flexible and dynamic structure upholding the principles of profitability and prudence. In 2018, VakıfBank pursued a flexible and dynamic approach to liquidity management by monitoring the monetary policy decisions of CBRT and other central banks, market interest rates, inflation expectations, domestic and international markets, and by evaluating pricing behavior. To derive maximum benefit from the cost advantage in liquidity management, the Bank adopted an approach of effectively capitalizing on alternative markets and CBRT’s and other central banks’ monetary policies. In 2019, the monetary policies of CBRT and other central banks, international developments and interest rate expectations will determine VakıfBank’s liquidity management strategy. Long-term Turkish lira and foreign currency borrowing transactions via swap transactions in international markets will continue in due consideration of prevailing market conditions. Dynamic Securities Portfolio VakıfBank aims to create a dynamic structure in portfolio management. The Bank’s dynamic securities portfolio management structure assesses domestic market conditions, international developments, and pricing behaviors. In consideration of the Bank’s budget targets and current market conditions, the structure of the securities portfolio is shaped according to interest rate, maturity and category. In 2019, the Bank plans to maintain the existing dynamic structure and formulate a balanced approach to boost the Bank’s commercial profit in capital market trading and foreign exchange transactions, based on effective risk management principles. VakıfBank’s total deposits increased to TL 179.4 billion in 2018. In 2018, VakıfBank continued to gain the trust of its customers with its customer- oriented services and upgraded technology infrastructure. VakıfBank increased its deposits, the most important funding source of the Turkish banking sector, to TL 179.4 billion, up 15.5% year-on-year. In 2018, VakıfBank’s total deposits amounted to TL 109.6 billion in Turkish lira and TL 69.8 billion in foreign currencies. Aiming to extend its deposits across a wider base while reducing costs and to boost customer satisfaction, VakıfBank increased its total deposits by 34.4% year-on-year to TL 87.8 billion in 2018. Savings deposits in TL was up by 25.6% to TL 53.9 billion, while foreign currency savings deposits grew 51.4% to TL 34 billion. Savings deposits accounted for 49% of total deposits in 2018, up from 42.1% in 2017. VakıfBank’s growth in demand deposits outpaced the sector average thanks to its product diversification. As of the end of 2018, total demand deposits increased 19.8% compared to the end of 2017 to TL 36.1 billion. Demand deposits accounted for 20.1% of total deposits in 2018. Demand deposits also remained a factor reducing the Bank’s cost of funding during the year. Financial solutions that address the needs of the customers have been implemented quickly. With its expert employees and robust systems infrastructure, VakıfBank maintained its competitive price structure across all its products, in line with developments and expectations in financial markets. As a result, the Bank quickly delivered financial solutions to meet the needs of customers. The Bank is one of the industry pioneers with the innovative products it offers corporate and commercial segment customers against exchange rate and interest rate risk. VakıfBank launched VAKIF FX-Foreign Exchange Trading Platform to allow customers in the commercial segment to undertake spot foreign exchange transactions more efficiently. The proprietary trading platform is built on high quality service provision and rapid solution formulation methods.