An article has been published and can be accessed HERE.AlBaraka Türk Participation Bank
Over 25 years of contribution to the Turkish Economy A vibrant Turkish economy bounced back from the fall of -4.75% of GDP in 2009 exhibiting a solid performance in 2010 and culminating in an estimated growth rate of 8.1%. The authorities’ quick and effective action in 2009, introducing early tax incentives and steadily reducing interest rates throughout the year, aided the expansion of credit demand, the beneficial effect of which continued through 2010, raising domestic demand for goods and services in an atmosphere of high consumer confidence and surging private sector investment. However, this did have an adverse impact on the rate of inflation, pushing consumer prices up by 8.6% year-on-year, significantly above 2009’s 6.5% and the 6.0% anticipated at the start of the year. The current account deficit, which had been successfully and steadily reduced to only about -1.9% of GDP by the end of 2009, trended upwards in 2010 to end the year at an estimated -6.4% of GDP. Fuelled by negative real interest rates, and despite an appreciating currency but with a stable political scenario, the Turkish economy is currently enjoying growth unequalled in the region and even rivalling the bigger global emerging economies. Nevertheless its very success exposes its weaknesses, as the divergence between the strong domestic performance and weak external demand continues to drive capital inflows, leading to an ever-widening current account deficit. It is likely, though, that 2011 will see a gradual falling off of the growth rate, encouraging a belief in an ultimately soft landing.
In 2010 Al Baraka - Turkey’s total assets rose by 27% in US dollar terms to $5.45 billion, as aggregate financings and investments rose by 30% to $4.36 billion. The impact of local currency devaluation on asset growth was around 3%. While the bank’s traditional murabaha business continued to expand, with related sales receivables increasing by 31% to reach $3.98 billion, the musharaka portfolio and non- trading investments also grew steadily, by 72% and 27% respectively, compensating for a 53% decline in the Ijarah Muntahia Bittamleek portfolio. The bank increased its liquid assets by 14% to $0.93
. The growth was funded mainly by a 29% increase in its customer deposits (including unrestricted investment accounts) to $4.70 billion together with the proceeds of a highly successful syndicated murabaha facility, which raised $240 million, reflecting the bank’s status as a major player on the Turkish banking scene.
Notwithstanding the portfolio growth, Al Baraka Turkey’s total income from jointly financed accounts and investments fell back a little, by 5% to $318 million. After distribution to the unrestricted investment account holders of their share of the income, amounting to $230 million, the same as in 2009, the bank’s share as fund owner and as Mudarib of $89 million was 16% lower than that for 2009. With the inclusion of income from its own sales and investments – which grew by 31% - and from banking services and other operating income, however, its total operating income was 3% higher at $281 million. After operating expenses, 14% higher at $127 million and mainly reflecting the bank’s continuing network expansion, net operating income was $154 million, 5% below that of the previous year. However, after accounting for significantly lower provisions and notwithstanding an increased taxation charge, the net profit realized was $94 million, 35% up on 2009’s result.
The unit also showed a significant increase in its Letters of Credit and Letters of Guarantee during the year, which in aggregate increased by 16% to reach $3.8 billion. Consequently, the revenue from banking services increased by 9%. On the other hand, there was little or no impact on 2010’s earnings from local currency devaluation against the dollar.
With Al Baraka Turkey’s continuing and steady growth over the past decade, reflected in 2010 by the opening of 8 new branches and the addition of 13 more ATMs, the bank has now passed the threshold of a small bank and can be said to qualify as a major player in the Turkish participation banking market. Reaching such maturity has prompted the bank to review both its Vision and its Mission, with a view to redefining its ambitions and future growth aspirations.
This exercise in turn has required that it revise its organizational structure and all
ts internal processes, a major task which will engage it for some time to come. It has commenced the restructuring by systematically centralizing all its operations, intending thereby to increase efficiency and productivity. Another outcome of the review has been the initiation of a major restructuring of its IT systems and hardware, while yet another is its embarkation on a new phase of organic growth, as it aims to expand its branch network from the present 109 to 200 within the next 5 years. In focusing on growth, Al Baraka Turkey intends to concentrate more on musharaka projects and retail credit, initially targeting a 30% increase in the latter category. It will also shortly be launching a new credit card, called ‘Albaraka World Card’, in addition to bringing in new services such as money transfer, bill payment and gold trading by Internet, participation accounts for children and minors and a Gold Participation account. New products already initiated include a Gold Deposit account, a Flexible Term Participation account and a variety of special funds to assist its customers in planning for retirement and saving towards their pension, in addition to facilities to enable payment of their utility bills and social security payments at any branch of the bank.
As its ongoing expansion will naturally require an increase in staff levels both centrally and in its branch network, thus leading to greater demand for space, the bank has moved to a new headquarters building in the last quarter of 2010, fully fitted out with state of the art technologies and facilities.
In July 2010 Al Baraka Turkey was proud to be able to announce that Standard & Poor’s had reaffirmed its long term counterparty credit rating of BB/B (Short Term), with Stable Outlook. S&P remarked that the ratings reflected the good track record of the bank in the participation banking market in Turkey, its adequate funding resources supported by a strong deposit franchise and limited market risk and that it expected the bank to maintain its asset quality and capitalization at current levels. S&P further pointed out that the bank’s ratings were themselves only constrained by the BB country rating of Turkey.
Source : http://www.uabonline.org/magazine/magazine-article.php?pageid=5&issueid=74&Aid=2115
