Interest rate cuts favor Turkish banks
Posted by meb at February 18th, 2008
Akbank, İşbank and Garanti, Turkey’s three largest banks, reported record profits for 2007, mainly due to an increase in lending which stemmed from a decrease in interest rates.
Türkiye İş Bankası, or İşbank, the country’s largest lender, said profit rose 53 percent last year after the central bank cut interest rates, boosting revenue from lending.
Net income at İşbank advanced to YTL 1.7 billion ($1.42 million) in 2007 from YTL 1.11 billion a year earlier, the bank said in an e-mailed statement Friday. İşbank was expected to earn YTL 1.65 billion, according to the median estimate of 24 analysts surveyed by Bloomberg.
Turkish banks boosted loan portfolios last year after the Central Bank cut interest rates in the third and fourth quarters, invigorating demand for credit. Loan growth had slowed after the Central Bank raised rates three times in mid-2006.
“There has been a very significant increase in loans and lending growth rates at İşbank and across Turkey’s banking sector in general, which are now very appealing to investors,” said Nergis Kasabalı, an analyst at Istanbul’s Ata Invest.
İşbank’s income from loans in 2007 rose 25 percent from a year earlier, the bank said.
Akbank’s profits:
Akbank, Turkey’s second-largest company in market value, said 2007 profit rose 29 percent from a year earlier as lending jumped.
Net income climbed to YTL 2.04 billion ($1.7 billion) from YTL 1.58 billion in 2006, Akbank said in an e-mailed statement Friday. Those figures are consolidated, including the bank’s units. Unconsolidated profit was forecast at YTL 2 billion, according to the median estimate of 23 analysts surveyed by Bloomberg.
Fourth-quarter consolidated profit was YTL 425 million, up from YTL 335 million a year earlier. Those figures were calculated by subtracting nine-month figures from full-year profits. The bank did not announce fourth-quarter numbers.
Akbank returned to growth in the fourth quarter, expanding its loan book by 11 percent, after stalling in the previous three months. The bank’s shares have fallen 30 percent, about one-third more than Turkey’s benchmark stock index, since it published lower-than-expected third-quarter earnings on Nov. 7.
“We see stronger growth rates in consumer lending” in the fourth quarter, said Bülent Şengönül, an analyst at Ekspres Invest. “In the third quarter, the management wasn’t aggressive.”
Akbank said its consolidated loan portfolio rose to YTL 40 billion at the end of last year, giving it a 13 percent share of the market. Consumer loan volumes grew by 43 percent in 2007, Akbank said.
Akbank is one of the main beneficiaries when rates fall because it can cut deposit costs while continuing to earn more on loans with longer maturity, said Şengönül.
Citigroup last year bought a 20 percent stake in Akbank, and Hacı Ömer Sabancı Holding is its main shareholder.
Garanti net profit jumps:
Meanwhile, Türkiye Garanti Bankası, or Garanti, Turkey’s third-biggest publicly traded bank, said 2007 profit more than doubled from a year earlier as lending grew and the bank sold units.
Net income rose to YTL 2.42 billion ($2.2 billion) in the period, the bank said in an e-mailed statement Friday. That figure is consolidated, including the bank’s units.
Unconsolidated profit was forecast at YTL 2.26 billion, according to the median estimate of 20 analysts surveyed by Bloomberg.
Garanti raised about $800 million last year by selling units including stakes in two insurance companies, and also increased its share of consumer loan markets.
“There’s some slowdown in growth rates in the fourth quarter, the management wasn’t so aggressive this time,” said Şengönül. “But there’s no major weakness in their loan book.”
Garanti’s loans grew 7 percent in the last three months of the year to YTL 38.7 billion.
Lending among all Turkish banks grew about 8 percent. Deposits increased about 13 percent in the quarter to YTL 43.6 billion.
Garanti is owned by Turkey’s Doğuş Group and General Electric’s consumer finance arm. The Turkish Central Bank started cutting its benchmark rate in September after keeping it at 17.5 percent for more than a year to rein in inflation. The bank has reduced the rate to 15.25 percent in six consecutive cuts since September. The cuts have enabled banks to lower the interest rates they pay depositors while earning fixed rates of interest from lending to consumers, boosting profits.
Source: Turkish Daily News
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