Banking
From The Report: Turkey 2012
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The Turkish banking sector learned hard lessons from the country’s financial crisis in 2001-02, and as a result, it was among the most stable and secure through the global financial crisis of 2008, remaining a safe harbour for foreign and domestic investors alike. The sector is very competitive, and profits declined during 2011 on the back of reduced margins from loans, however the stability of the sector remains one of the key elements driving the nation’s overall economic growth. With the nation rapidly developing, online and mobile services have enabled banks to attract more customers while developing adaptive offerings to utilise funds that are in flux. While tightening monetary policy has posed a distinct challenge to banks, they are readily adaptable, and the nation’s vast infrastructure and energy project pipeline offer significants opportunities for long-term returns.

The chapter features interviews with Mehmet Şimşek, the Minister of Finance; Central Bank Governor Erdem Başçı; Adnan Bali, the CEO of Iş Bank; Hüseyin Aydin, the General Manager of Ziraat Bank; and Martin Spurling, the CEO of HSBC Turkey.

Articles from this Chapter

Overview

Strong strategies, good growth: As banks expand their financial practices, the sector benefits
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While some peers have struggled following the global economic crisis, Turkey’s banks have grown rapidly in recent years. Moreover, they remain healthy, liquid and well capitalised. Profits declined in 2011, particularly at the larger banks, as interest margins fell due to competition for loans and increased funding costs. However, there is still plenty of room for sector expansion, with a growing population that is increasingly turning to banks to finance their purchases of consumer goods,…

Interview

Fiscal discipline: OBG talks to Mehmet Şimşek, Minister of Finance
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Interview: Mehmet Şimşek How did the government perform in fiscal terms during 2011, and what steps have been taken to reduce the trade deficit? MEHMET ŞİMŞEK: On the fiscal front, our core achievements since 2002 have been a significant reduction in debt and the deficit. We lowered the general government deficit from 10.8% of GDP in 2002 to 0.6% in 2011. Similarly, gross public sector debt fell to 39.4% of GDP from 74% in 2002. Thanks to the restoration of fiscal health, we have improved…

Viewpoint

Erdem Başçı, Governor, Central Bank of the Republic of Turkey (CBRT), on measures to preserve financial stability
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The expansionary monetary policies which were adopted by central banks of developed countries to contain the impact of the global financial crisis had significant reverberations on developing economies. The Turkish economy was no exception in this regard. During this period, the availability of ample low-cost and short-term foreign financing led to rapid credit expansion and an appreciation of the Turkish lira. This caused an accumulation of macro-financial risks and rising external imbalances…

Analysis

Alternatively growing: Online and mobile banking cast a wide net for new customers
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In the last decade, Turkey’s lenders invested heavily in developing alternative banking practices, starting with ATMs and recently expanding to internet and mobile platforms. Moving transactions out of the branches actually increased contact between banks and their customers, who now have nearly constant access to their accounts. This has helped banks reduce costs, attract new customers and tap into alternative revenue sources. PRODUCT DIFFERENTIATION: The availability of robust internet…

Analysis

Big lenders: Important changes and promising signs of growth
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The top five Turkish lenders in account for nearly 60% of the assets in the banking sector. The state has ownership stakes in three of Turkey’s top 10 banks; and the second-largest bank, Ziraat, is 100% state-owned. While domestic players account for eight of the 10 biggest lenders in the country, four of these are at least partially owned by foreign banks. Financial performance in 2011 was characterised in general by falling profits at the larger banks, while smaller institutions saw improvements.…

Interview

Well-managed growth: OBG talks to Martin Spurling, CEO, HSBC Turkey; Adnan Bali, CEO, İş Bankası; and Hüseyin Aydın, General Manager, Ziraat Bankası
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Interview: Martin Spurling, Adnan BaliHüseyin Aydın The Central Bank of the Republic of Turkey (CBRT) implemented unconventional policies in 2011, lowering the interest rate but raising reserve and capital requirements. How did this affect banks? MARTIN SPURLING: Some of the central bank’s more “unorthodox” policies can make it more difficult for banks to plan for the period ahead, as these make funding costs more volatile and unpredictable. This is not unusual, however, for many…

Analysis

As the market swings: The sector’s response to a rapidly shifting monetary policy
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The downside to the growth in retail lending in Turkey in 2010 and 2011 was a rapid increase in the current account deficit as consumers took advantage of greater access to credit to purchase imported products that were previously out of reach financially. At the same time, the lira, buoyed by strong capital inflows, strengthened, making imports less expensive and raising the cost of Turkish exports. The government thus faced a dilemma that was not uncommon for emerging markets during 2010 and…