Turkish banking sector to weather storm, remain strong in 2009
Posted by meb at March 22nd, 2009
The 2008 year-end figures released by banks in Turkey one after another with positive numbers on their balance sheets show that the finance sector in Turkey has maintained its health amid a forced slowdown in economic activities due to the ongoing global financial crisis.
Analysts now suggest that these figures have also enhanced confidence in and increased the security of Turkish banks since many of them boasted an increase in net profit, though by smaller margins than expected. As Turkish Central Bank Vice Governor Mehmet Yörükoğlu recently stated, the Turkish banking system is in extremely good condition now, thanks largely to the “successful regulations adopted after the 2001 economic crisis.” Turkey’s financial system has been able to steer clear of radical measures such as cash injections, unlike those of many developed nations.
A “wealth amnesty” program introduced by the government that allowed Turkish expatriates to bring in money held outside the Turkish banking system without being subjected to questions concerning the source of their funds, which recently ended successfully, having attracted TL 13.5 billion, has caused Turkish banks some relief as some of this money has been transferred into their coffers. Everyone is now hopeful that this will also help solve a major loan problem that the Turkish market has been suffering from since the emergence of the crisis. Banks in Turkey will be able to extend loans to the non-financial sector, whose companies have long been complaining about banks’ refusal to extend loans, plunging them into financial trouble as they could not pay their debts.
Sengül Dağdeviren, the chief economist at ING Bank, said they expected that banks in Turkey would not see a remarkable decline in their profits for the first half of the year despite stagnation in the economy and an increase in unpaid loans. The main factor behind this, argued Dağdeviren, is that banks were caught well prepared against the crisis and did not have serious liquidity problems. She also noted that the central bank’s moves to cut interest rates contributed greatly to the strength of the Turkish banking system.
Regarding the second half of the year, she noted that the state of the economy would mainly depend on whether consumer and investor confidence in the markets is maintained. Dağdeviren said the biggest problem that banks in Turkey would face this year will be a remarkable number of unpaid loans. However, as the central bank governor recently noted, the capital adequacy ratios of Turkish banks will not fall below the legally required level of 8 percent even in the event of a 15-point increase in overdue receivables. As of the end of February, the average capital adequacy ratio of Turkish commercial banks was around 18 percent. The Banking Regulation and Supervision Agency (BDDK) announced that this number was around 3.6 percent at the end of 2008. “This is a key indicator that the Turkish financial sector will make it through 2009, maintaining its strength,” the ING chief economist noted.
Sudi Apak, a retired professor of economics, said banks in Turkey owed their success and increase in profits despite the crisis in 2008 mainly to the fact that they earned huge profits in the first three months of the year. “This helped banks weather the storm to a great extent. But I think they will have some problems in 2009,” he noted, adding that some banks in Turkey face the threat of seeing losses through the end of the year. Stating that Citibank and Fortis, two foreign banks operating in Turkey, are facing serious financial problems, he said these banks’ branches had seen dramatic losses abroad, which would affect their branches in Turkey in 2009. Citing a recent speech by International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn, Apak said the crisis has now entered its third phase, this time striking the non-financial sector. “There should be production; domestic demand should be revived. The financial and non-financial sectors depend on one another,” he said. Apak noted that some negative developments, such as shrinking exports and the Turkish lira losing value against the US dollar, would delay the swift recovery expected in the market. Discussing the money that came into the country due to the wealth amnesty program, he said the program was a good move and would help ease the burden on banks, if only slightly. The amount of the incoming funds banks will use as loans, he said, would be around $3 billion.
Halkbank Vice General Manager Süleyman Aslan told Sunday’s Zaman that the Turkish banking sector was in good shape and that their profits would continue increasing, though not by as much as in 2008. “There is no problem as regards liquidity. There will be a 5 to 10 percent decline in banks’ profits in 2009,” he said, emphasizing that even in the worst-case scenario, they expected a 10 to 15 percent increase in the amount of loans extended by banks. “At this point, the interest rate cuts by the central bank have been very helpful in averting problems for the banking sector. We hope the central bank will cut interest rates further,” he said, also warning that there would be an increase in failure to repay loans during the course of the year.
“Residue from the crisis will be cleansed one way or another; we expect recovery after the second half of the year, which will stir the economy up again. We are hopeful the positive outlook will continue,” he noted.
The central bank has taken necessary precautions with its interest rate cuts. Discussing the state of foreign banks in 2009, he said he did not expect any losses for these, either. Local or foreign, the banks in Turkey are in good shape, he stressed. “The share of foreign banks in the Turkish banking sector is very low. Turkish banks will preserve their strength. The necessary arrangements have been made.”
In regard to the amount of money brought into the economy due to the wealth amnesty program, he said around $4 billion had been brought to Turkey so far, while $13.5 billion was only the amount people had declared. “We hope all the money will enter the banking system,” he said, noting that it was too early to calculate exact figures. The net amount will be known only after March 15, when banks are expected to release their financial statements to the Revenues Administration (GİB).
Banks still in safe waters amid turbulence
Yapı Kredi announced on Friday that the bank had increased its consolidated net profit by 45 percent to TL 1.26 billion, high above the average profit figures of banks in Turkey. In an exclusive interview with Sunday’s Zaman, Yapı Kredi General Manager Tayfun Bayazıt said the main problem currently prevailing in the Turkish banking sector was non-performing loans. “We have seen deterioration in bank asset quality, and around 4 to 5 percent of loans are unpaid in general,” he said, adding that loans extended to small businesses, in particular, would see a remarkable drop in 2009. “Credit cards will also pose some problems for the sector,” he noted. Bayazıt, however, stressed that despite any obstacles, banks in Turkey have strong capital adequacy ratios for the time being and expressed belief that they would eventually manage to emerge from the trouble safe and sound.
Turkey’s largest public bank, Ziraat Bank, recorded a net profit of YTL 2.13 billion for 2008, marking a 9 percent fall from the previous year. The profits of Albaraka Türk, a leading participation bank operating in Turkey’s interest-free banking industry, grew by 60 percent in 2008 over the previous year, reaching YTL 136.2 million. Its total assets increased by 30 percent to YTL 4.78 billion. Bank Asya, Turkey’s leading participation bank, announced that its net profits for 2008 rose to YTL 247 million, a 12 percent jump over 2007, when profits totaled YTL 221 million. DenizBank’s net profits grew by 15 percent in 2008 compared to the previous year, to YTL 342 million, while Şekerbank noted a boost of 17 percent in net profits last year to YTL 144 million. Garanti Bankası, a leading player in the Turkish banking industry, released its numbers for 2008 on Thursday, announcing a 15 percent rise in net profit. Akbank recorded YTL 1.78 billion in net profits in 2008, and the bank’s assets reached YTL 93 billion, a 29 percent increase from 2007. The amount in loans extended by the bank reached YTL 49 billion, having grown by 49 percent over the preceding year. Türk Ekonomi Bankası (TEB) increased its consolidated net profits to YTL 187 million in 2008, a jump of 27 percent over 2007 figures. The loans extended by the bank increased by 21 percent in 2008 from the preceding year.
source: Sunday’s Zaman
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