Turkiye Is Bankasi A.S.

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Turkiye Is Bankasi A.S.

Is Kuleleri, 34330 Levent
Istanbul
Turkey
Telephone: 90 212 316 00 00
Fax: 90 212 316 09 00
Web site: http://www.isbank.com.tr

Public Company
Incorporated: 1924
Employees: 16,135
Total Assets: $18.69 billion (2003)
Stock Exchanges: Istanbul London
Ticker Symbol: TIBD
NAIC: 522110 Commercial Banking

Few banks can be as closely identified with the development of their country as Turkiye Is Bankasi A.S. (Isbank). Created by Mustafa Kemal, the founder of modern-day Turkey, Isbank has emerged from state control in the 2000s as Turkey's largest publicly held private-sector bank, and, through its array of industrial investments, one of Turkey's top three corporations, representing more than 6 percent of the total market value of the Istanbul Stock Exchange. Isbank operates more than 830 branches throughout Turkey, and directly controls seven foreign branches. German subsidiary Isbank GmbH adds another 16 branches, serving that country's large Turkish population. In Turkey, Isbank is also present through a national network of nearly 2,300 automated teller machines, and nearly 400 Internetconnected Netmatik machines. Isbank has also been an advanced integrator of automated customer service systems, offering both telephone and online services providing access to nearly 130 types of transactions—ranging from account opening to stock brokerage services. The company, which is a main shareholder along with Italy's TIM in leading Turkish mobile telephone provider Aria, also offers banking services via WAPcapable mobile telephones. In addition to its banking services, Isbank has long played a central role as a motor for the development of Turkish industry. Isbank maintains stakes in more than 80 primarily Turkish companies, ranging from insurance provider-Anadolu Anonim Türk Sigorta Şirketi, to glass Manufacturer Türkiye Şişe ve Cam Fabrikalari A.Ş. (Sisecam), to oil company Petrol Ofisi A.Ş. Isbank's total assets in 2003 stood at nearly $18.7 billion. The company is led by CEO and Deputy Chairman H. Ersin Özince.

Founding a National Bank in the 1920s

Turkey's emergence from the ashes of the Ottoman empire in the years following World War I culminated in the abolition of the monarchy, the overthrow of the Allied occupation and the creation of a new, secular republic in 1923 under Mustafa Kemal—who became known as Ataturk, or "father of the Turks" a decade later when the government decreed that all of its citizens must adopt surnames. Ataturk quickly recognized the need for the creation of a national bank not only to rebuild the country's industrial infrastructure, but also to give the young republic a degree of financial stability. In a speech in July 1924 Ataturk stated: "Paramount among measures that will liberate and augment the nation is the establishment of a bank, utterly modern and national in identity, born directly out of the people's respect and confidence."

The mission for forming the bank was turned over to one of Ataturk's close aides and a minister of the new government, Celal Bayar, who became the bank's first president. Yet the financial backing for the creation of the bank came largely from Ataturk himself. During the fight for independence, Ataturk had personally been given as much as TRL 600,000 by Muslim supporters in the future Pakistan and other countries. Most of that money went to support the war effort. Following the war, some TRL 380,000 was returned to Ataturk, who then donated TRL 250,000 as the bank's starting capital. In a further show of support, Ataturk transferred the rest of his funds, some TRL 207,000, into his bank account at the new bank.

After debate in choosing a name—among the candidates was "Banque d'Affaires de Turquie"—the new Turkiye Is Bankasi was founded in August 1924. Isbank, as it came to be called, began operations in rented quarters in Ankara. The bank immediately began fulfilling its role as a venue for Turkey's economic and industrial growth. In 1925, Isbank backed the launch of Turkey's first insurance company, Anadolu Sigorta, which remained one of the country's insurance leaders into the next century. By 1925, the bank's quick growth led it to move to new, larger headquarters overlooking the city's Youth Park.

Isbank itself became closely associated with the Turkish government's economic policies, both during Ataturk's regime and following his death in 1938. The bank prospered as the government promulgated an economic system based on liberal exchange—and especially following 1929, when the government began taking an increasingly protectionist and interventionist role in the country's economic life. That year marked as well the construction of the bank's first permanent headquarters, designed by Italian architect Mongeri. The move coincided with the development of the bank's first advertising campaign—among the bank's most popular efforts was the launch of money boxes used to encourage the Turkish people to save their earnings. The campaign was later extended in 1937 when the bank gave away children's piggybanks, creating a new generation of savings-conscious Turks.

The protectionist trade policies put into place following the economic crash of 1929 led Isbank to step up its role as an industrial motor. In 1934, Ataturk turned to the bank with the request that it back the creation of a new glassmaking company, Tu®rkiye Şişe ve Cam Fabrikalari A.Ş., or Sisecam, which later grew into one of the major European glassmakers.

From there, Isbank's investment ranged widely, and by the 1990s the bank counted more than 280 major Turkish corporations founded and developed through its financial backing. In keeping with its role as Turkey's national bank, Isbank had also begun developing an international network. In 1933, Isbank became the first Turkish bank to establish a foreign branch, in Hamburg, Germany, which was shortly followed by a branch in Alexandria, Egypt, as well. Meanwhile, at home, Isbank had been expanding its domestic branch network, and by the end of the 1930s boasted more than 50 branch offices.

Turkey maintained good relations with the Allied Forces during World War II, while its officially neutral status allowed it to escape the destruction of battle. The country therefore became an attractive investment market in the years following the war, and Isbank formed an important conduit for foreign capital investments in the country. In 1948, Isbank became the first Turkish-bank to form a joint venture with a foreign company, when it joined with General Electric in establishing a light bulb factory in Istanbul, marking its first industrial presence in Turkey. Unilever became another Isbank partner in Turkey, starting in 1950.

In 1964, Isbank partnered with Bank of America in the formation of Turk Dis Ticaret Bankasi, or Disbank. The partnership remained in place until 1981, when Isbank acquired full control of Disbank, after which 15 percent of the company was sold in a public offering. Isbank later sold off its 85 percent stake to Lapis Bank in 1993, but, when Lapis stumbled financially, Isbank retook its Disbank shares. Some 65 percent of the bank was sold to the Dogan Group in 1994.

In the meantime, Isbank had continued to assert itself as Turkey's preeminent bank. By the mid-1960s, Isbank boasted nearly 300 branches throughout Turkey. The bank had also increased its international presence, opening a new representative office in Frankfurt—in support of the growing Turkish population in that country—and two branches in the recently claimed "Turkish" half of Cyprus.

During the 1970s, Isbank became the first Turkish bank to form a Securities Department. By mid-decade the group's growth led to the construction of a new headquarters, which was completed in 1976. For the time being, the bank remained in its Ankara home, despite the emergence of Istanbul—positioned closer to Western Europe—as the country's financial and political center.

Isbank maintained its position as a primary banker for the country's industrial development. Among its major investments of the period the bank included the establishment of I.zmir Demir CÇelik Sanayi in 1975. Construction began on a rolling mill, completed in 1983, and the site was later expanded to include a meltshop in 1987. Another important Isbank investment came in 1976, when the bank backed the launch of Antgida Gida Tarim Turizm Enerji ve Demir CÇelik Sanayi Ticaret A.Ş., which, under the Zepa name, helped Turkey become one of the world's leading producers of olives. A more direct participation in the country's industrial development came in 1978 with the formation of engineering group Asmasş Ağir Sanayi Makinalari A.Ş.

Privatized Innovator for the 2000s

By 1983, Isbank's branch network had topped 900 branches. The bank had also continued to develop its foreign presence, opening offices in Cologne, Berlin, Munich, and Hamburg in Germany. At the same time, Isbank had crossed the channel, opening an office in London.

Through the 1980s, Isbank continued to develop new technologies, products, and services to serve its growing customer base. The bank was the first to introduce automated banking in Turkey, placing its first automated teller machine in Ankara in 1987. At the same time, Isbank launched the first debit card and then introduced credit card products as well. Isbank quickly developed a nationally operating network of ATMs, which numbered nearly 2,300 by the end of the century.

Company Perspectives:

Profitable growth of our business lines shall remain at the core of our business focus. Our efforts toward growth will be aided by efficient management of our operations via ongoing restructuring projects and the continued broadening of the Bank's sources of income for creating additional shareholder value. As we grow prudently, we shall continue to implement strict cost control measures to improve efficiency and capitalize on our widespread customer base, vast distribution network, and wide-ranging product and service portfolio. We shall increase our market shares further in all major areas and maximize income. One of the key pillars of our business remains our strong and growing deposit base, which speaks for the confidence that the banking public has in us.

Isbank also showed an innovative streak, as it broadened the range of services available through its ATM network—by the 1990s, Isbank customers were even able to conduct securities trading transactions through the bank's ATMs. In a related move, Isbank became the first in Turkey to launch a mutual fund in 1987. The success of that fund led the bank to roll out six additional mutual fund products in the 1990s and early 2000s.

Isbank's embrace of rapidly emerging technologies continued through the 1990s. In 1996, the bank became the first in the world to launch a fully automated, interactive telephone banking service. Unique to the world, the system enabled users to complete nearly 130 different financial transactions—including opening new accounts, bill-paying functions, completing loan applications and even trading stocks, currencies, and mutual funds shares—all without operator assistance.

The success of that service brought Isbank to the Internet in 1997, when it launched its online banking service. The company's web site scored a new first for the company among the Turkish banking sector, being the first to offer secure online transaction services.

Isbank had been a public company throughout its existence; yet the strong share held by the Turkish government, and the bank's role in implementing the government's industrial and economic policies, had earned it a reputation as a puppet of the government. Nonetheless, from the start, Isbank had sought to extend its shareholding, including granting stock to its employees—setting up the country's first pension fund, which grew to hold 45 percent of Isbank. By the late 1990s, the government's stake in the bank had dropped to below 13 percent.

In 1998, as part of a wider privatization of Turkey's financially troubled government-dominated industries, the Turkish government agreed to sell its stake in Isbank, which then became-a fully privatized, publicly listed entity. The privatization was a success, and Isbank took its place among Turkey's top three corporations in terms of market value. Indeed, Isbank's value represented more than 6 percent of the total value of the Istanbul Stock Exchange.

Isbank had also begun preparations for another significant change. In 1996, the bank launched construction of a new headquarters—this time located in Istanbul. Completed by 2000, the new structure symbolized Isbank's historical and financial importance, becoming, at 225,000 square feet, the country's largest building complex, and, with two 27-story towers, the tallest building in Turkey. At the same time, the choice of Istanbul placed Isbank in position to benefit from Turkey's long-sought-after admittance to the European Union.

Isbank remained an important motor for Turkey's economic development in the new century. In 2000, the company joined with other investors to take a stake in the privatization of the government's oil company, Petrol Ofisi. That purchase gave Isbank access to Ofisi's some $6 billion in annual cash-based sales from the company's network of service stations—as well as the potential for placing its ATMs in the more than 6,000 stations in the Ofisi network.

Similarly, Isbank joined with Italian mobile telephone operator, TIM, to bid for one of the country's GSM-based mobile telephone licenses, launching the Aria telephone service. By 2003, Isbank had rolled out a new service for customers—banking services using the WAP Internet protocol. In the meantime, reforms of Turkey's troubled banking sector—which featured some 81 different banks, many of which were increasingly insolvent—spelled a new era of consolidation in the country. As Turkey's largest bank, Isbank was expected to play a leading role in the consolidation of the industry, continuing its role as a motor for the Turkish economy into the next century.

Key Dates:

1924:: Mustafa Kemal (Ataturk) calls for the formation of a Turkish national bank, Turkiye Is Bankasi (Isbank).
1925:: Isbank backs establishment of first Turkish insurance company, Anadolu Sigorta.
1933:: Isbank opens foreign offices in Germany and Egypt.
1934:: Isbank backs establishment of Turkish glassmaking industry, starting with Sisecam.
1948:: Joint venture is formed with GE, which sets up a light bulb factory in Turkey.
1964:: Joint venture is formed with Bank of America, creating Disbank.
1987:: Isbank sets up first ATM in Turkey; launches first mutual fund.
1996:: Interactive telephone banking service begins.
1997:: Online banking service begins.
1998:: Isbank is fully privatized as Turkish government sells its remaining stake in bank.
1999:: Isbank moves headquarters to new office complex in Istanbul.
2000:: Company acquires stake in Petrol Ofisi and joins mobile telephone joint venture with TIM.
2003:: Company launches new Internet banking service for mobile telephone customers using WAP protocol.

Principal Subsidiaries

Anadolu Anonim Türk Sigorta Şirketi; Anadolu Cam Sanayii A.Ş.; Anadolu Hayat Emeklilik A.Ş.; Antgida Gida Tarim Turizm Enerji ve Demir Çelik Sanayi Ticarat A.Ş.; Asmaş Ağir Sanayi Makinalarý A.Ş.; Cam Pazarlama A.Ş.; Camiş Madencilik A.Ş.; Camiş Sigorta Hizmetleri A.Ş.; Camsar Sanayi Ara Mallarl Pazarlama A.Ş.; Camtaş Düzcam Pazarlama A.Ş.; Çaylrova Cam Sanayii ve Ticaret A.Ş.; İş Dublin Financial Services Plc.; İş Factoring Finansman Hizmetleri A.Ş.; İş Gayrimenkul Yatirim Ortakliği A.Ş.; İş Genel Finansal Kiralama A.Ş.; İş Yatirim Ortakliği A.Ş.; İşbank GmbH; İstanbul Porselen Sanayii A.Ş.; İzmir Demir Çelik Sanayi A.Ş.; Mepa Merkezi Pazarlama A.Ş.; Milli Reasürans T.A.Ş.; Paşabahçe Mağazalari A.Ş.; Soda Sanayii A.Ş.; Trakya Cam Sanayii A.Ş.; Türkiye Sinai Kalkinma Bankasi A.Ş.; Türkiye Şişe ve Cam Fabrikalari A.Ş. (Sisecam); Yatirim Finansman Menkul Değerler A.Ş.

Principal Competitors

Turkiye Halk Bankasi A.S.; Turkiye Cumhuriyet Merkez Bankasi A.S.; Turkiye Garanti Bankasi A.S.; Turkiye Cumhuriyeti Ziraat Bankasi; Yapi ve Kredi Bankasi A.S.; Turkiye Imar Bankasi TAS; Turkiye Vakiflar Bankasi TAO; Turkiye Ihracat Kredi Bankasi A.S.