Turkish Economy and Banking Sector. Correlative Growth

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1 Turkish Economy and Banking Sector Correlative Growth Tanju YÜKSEL February,

2 Turkey at a glance Size and economic situation Largest Emerging European market in terms of GDP and population Future growth potential Strong GDP growth prospects in the region 1 Declining interest rates and favorable inflation environment Political stability Stable majority single party government Commitment to reform and IMF compliance/eu accession IMF/EU anchors Continual focus on fulfilling IMF clauses/targets Prospect of potential, even though long term, accession to EU Underpenetrated banking sector Huge increase but still low penetration both loan & deposits Significant potential on development in retail banking 1 Emerging European countries: Poland, Hungary, Czech Rep., Slovenia, Slovakia 2

3 Macroeconomic Indicators Q 2007 GNP Growth Rate -7.5% 6% 4%* GNP (Billion $) * Per Capita GNP ($) 2,103 5,477 6,828* CPI (%) ** Current Account (Billion $) FDI (Billion $) Exports (FOB, Billion $) Imports (CIF, Billion $) Average Traded Value (ISE) mil. $ ,194 Budget Deficit (Billion $) ** Central Government Total Debt Stock ( Billion $) ** * End of year expectation ** End of year 3

4 Selected indicators in Turkish banking sector Dec 2007 Total Loans/Total Deposits Non Per. Loans/Total Loans Total Security Portf./Total Deposits Equity/Total Liability TRY Deposits/Total Deposits Capital Adequacy Standard Ratio ROE ROC Total Assets /GNP

5 The relationship between Turkish economic growth and banking sector total assets... Turkish banking sector total assets growth rate is generally above than Turkish economic growth in high economic growth periods. 5

6 Loans in banking sector and GNP growth move in tandem... %30 %51 6

7 Significant increase in credit card penetration... Banking sector expands the credit card customer base One of every two people holds a credit card! % 48,1 (Per cap. GNP,USD) Credit card loans are supporting the sustainability of economic activity 7

8 Also card usage has evolved Average of credit card transactions in every seconds is 45 during 2007! %42.5 Average of credit card transactions is over 20 and volume is about 2,000 TRY per person in Turkey! 8

9 Banking Sector growth is supported by the expansion of distribution channels... % 3 %8.4 %3,4 per year Increase in number of branches, ATMs and employees Aims to attract more people to become Bankable 9

10 Banking Sector discovers retail lending and targets household segment Growing trend embarks but numbers are still inadequate Upward trend continues with more significant amounts Creating added value to the economy and society through consumption support 10

11 The decision of purchasing automobile is closely linked to borrowing opportunities %32.3 Automobile sales are drastically influenced by the interest rates %16,6 Automobile dealers act as key intermediates between customers and banks 11

12 Home My sweet home! %106,2 A new era in housing market % 47,8 Since 2005, 681,656 people used mortgage through banking sector to become a house owner 12

13 Historically, high growth of Construction Sector is positively effected by improved borrowing circumstances... Construction sector becomes a dominant actor in the economic progress Cumulative growth between for the economy is %18.4, construction performance is %62 in the same period! Construction standarts improved to conform lending procedures 13

14 People no more postpone daily consumption %81,8 General purpose lending keeps consumption expenditures alive %24,1 During period more than 21 million people, about 30% of the Turkish population, used general purpose consumer loans 14

15 Households contact banks not only for borrowing purposes, but also for material progress on savings % 6,1 On average 1.2 accounts per person in Turkey Relatively small but solid deposit improvement 15

16 Beyond drastic improvements in Banking Sector, there is still room for significant growth... Penetration 2006 (%) Source: Central Bank 16

17 Much work to do about bancarisation and banking sector penetration... Banking Sector and Turkish economic growth move in tandem. Total Assets of Banking Sector/GDP ratio is 90% in Growth expectations for Turkish economy are 5.5% in 2008, 5.7% in 2009 and Within the next five years the Total Assets/GDP ratio for Banking Sector is expected to be 120%. Turkish Banking Sector aims its Total Assets to reach 1,000 billion USD by

18 Tanju YÜKSEL 18