COMCEC STRATEGY. For Building an Interdependent Islamic World COMCEC FINANCIAL OUTLOOK Fırat YILMAZ. 2nd Meeting of COMCEC Finance Working Group

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1 COMCEC FINANCIAL OUTLOOK 2014 Fırat YILMAZ 2nd Meeting of COMCEC Finance Working Group March 27th, 2013 Ankara, Turkey

2 OUTLINE Recent Financial Developments Financial Outlook of COMCEC Region 2

3 RECENT FINANCIAL DEVELOPMENTS 3

4 Recent Financial Developments Since 2008 Non-stop quantitative easing Persistent low yields Buoyancy in US economy The FED s Signal What happened in May 2013 High asset prices until May 2013 A signal of tapering asset purchase program Serious capital outflows with a slowing growth 4

5 Recent Financial Developments 10 Year U.S. Treasury Bond Yields 4,5 4 QE1 QE2 QE3 05/22/13 Bernanke Speech 12/18/13 $10 Bln. Reduction 29/01/14 $10 Bln. Reduction 03/19/14 $10 Bln. Reduction 3,5 3 2,5 2 1,5 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 5

6 Real GDP Growth Rates 10% 8% 6% 4% 2% 0% % -4% Advanced economies Emerging market and developing economies OIC World Source: Calculated by using IMF Database 6

7 Economic Growth Rates (Forecast) 4,3% 4,1% 3,9% 3,7% 3,5% 3,3% 3,1% 2,9% 2,7% Global Growth Rate (%) 4,1% 3,6% 3,6% 2,9% Sept Forecast 2013 Sept Forecast 6,1% 5,9% 5,7% 5,5% 5,3% 5,1% 4,9% 4,7% 4,5% 4,3% Developing Countries Growth Rate (%) 5,9% 5,6% 5,1% 4,5% Sept Forecast 2013 Sept Forecast 1,5% 1,0% 0,5% 0,0% -0,5% -1,0% Euro Area Growth Rate (%) 1,2% 1,0% 0,2% -0,4% Sept Forecast 2013 Sept Forecast 3,2% 3,0% 2,8% 2,6% 2,4% 2,2% 2,0% 1,8% 1,6% 1,4% U.S.A. Growth Rate (%) 2,9% 2,6% 2,1% 1,6% Sept Forecast 2013 Sept Forecast Souce: IMF World Economic Outlook 7

8 FINANCIAL OUTLOOK OF COMCEC REGION 8

9 Selected Stocks of COMCEC Member States Malaysia-Bursa 140 Egypt-EGX Qatar -QE 100 Turkey-BIST Bahreyn-BHSEASI 60 MXEF Index JAKARTA COMPOSITE INDEX Source: Bloomberg 9

10 FINANCIAL DEPTH Measures the size of financial institutions and markets FINANCIAL ACCESS Measures to the degree to which individuals can use financial institutions and markets FINANCIAL EFFICIENCY Measures the efficiency of financial institutions and markets in providing financial services FINANCIAL STABILITY Measures the stability of financial institutions and markets 10

11 Selected Financial Data DEPTH FINANCIAL INSTITUTION Private Sector Credit to GDP Deposits to GDP FINANCIAL MARKETS Stock Market Capitalization Stock Traded to GDP ACCESS Account per Thousand Adults Bank Branches per adults Adults with an Account at a Formal Financial Institution to Total Adults % Adults Saving at a Financial Institution in the Past Year to Total Adults % 5 Bank Asset Concentration EFFICIENCY STABILITY Net Interest Margin Lending Deposit Spread (%) Non-interest Income to Total Income Z-Score Capital Adequacy Ratios Non-Performing loans (%) Stock Market Turnover Ratio Volatility of Stock Price Source: World Bank 11

12 Categorization of COMCEC Member States Categories Countries Number of Countries OIC-Low group US$ 1035 or less income OIC-Lower middle income group US$ 1,036 to US$ 4,085 OIC-Upper income middle US$ 4,086 to US$12,615 OIC-High income group US$ 12,616 or more Afghanistan, Bangladesh, Benin, Burkina Faso, Chad, Comoros, The Gambia, Guinea, Guinea Bissau, Kyrgyz Republic, Mali, Mozambique, Niger, Sierra Leone, Somalia, Tajikistan, Togo, Uganda Cameroon, Côte d'ivoire, Djibouti, Egypt, Guyana, Indonesia, Mauritania, Morocco, Nigeria, Pakistan, Senegal, Sudan, Syria, Uzbekistan, Yemen Albania, Algeria, Azerbaijan, Gabon, Islamic Republic of Iran, Iraq, Jordan, Kazakhstan, Lebanon, Libya, Malaysia, Maldives, Suriname, Tunisia, Turkey, Turkmenistan Bahrain, Brunei Darussalam, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates Source: World Bank 12

13 FINANCIAL DEPTH FINANCIAL ACCESS FINANCIAL EFFICIENCY FINANCIAL STABILITY 13

14 FINANCIAL DEPTH FINANCIAL ACCESS FINANCIAL EFFICIENCY FINANCIAL STABILITY 14

15 FINANCIAL DEPTH Private Credit to GDP Ratio Bank Deposits to GDP Ratio Stock Market Capitalization to GDP 15

16 Private Credit to GDP Ratios 100% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% OIC-LIG OIC-LMIG OIC-UMIG OIC-HIGH WORLD Average OIC Average W- HIGH W-UMIC 2011 W- LIC Source: Calculated by using World Bank Database 16

17 Bank Deposits to GDP Ratios 100% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% OIC-LIG OIC-LMIG OIC-UMIG OIC-HIGH WORLD Average OIC Average W-HIGH 2009 W-UMIC W-LIC Source: Calculated by using World Bank Database 17

18 Stock Market Capitalization to GDP 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% OIC-LIG OIC-LMIG OIC-UMIG OIC-HIGH WORLD Average OIC Average W-HIGH W- UMIC W-LIC Source: Calculated by using World Bank Database 18

19 Analysis of Financial Depth 140 LBN 120 MYS MDV 100 JOR MAR Bank deposits to GDP (%) SLE YEM GAB AFG TCD DZA GMB UGA CMR AZE PAK CIV MLI COM NGA MOZ SEN IDN BEN EGY BRN QAT ALB GUY OMN KAZ TUR BGD Private credit to GDP (%) Source: Calculated by using World Bank Database SAU KWT UAE TUN

20 FINANCIAL DEPTH FINANCIAL ACCESS FINANCIAL EFFICIENCY FINANCIAL STABILITY 20

21 FINANCIAL ACCESS Bank Accounts per 1,000 Adults Bank Branches per 100,000 Adults Adults Saving at a Financial Institution 21

22 Bank Accounts per 1,000 Adults W-HIGH W-UMIC W-LIC 0 OIC-LIG OIC-LMIG OIC-UMIG OIC-HIGH WORLD Average OIC Average Source: Calculated by using World Bank Database 22

23 Bank Branches per 100,000 Adults OIC-LIG OIC-LMIG OIC-UMIG OIC-HIGH WORLD Average OIC Average W-HIGH W-UMIC W-LIC Source: Calculated by using World Bank Database 23

24 Adults Saving at a Financial Institution to Total Adults 40% 35% W - HIGH 30% 25% 20% % 10% 5% W-UMIC W - LIC 0% OIC-LIG OIC-LMIG OIC-UMIG OIC-HIGH WORLD Average OIC Average Source: Calculated by using World Bank Database 24

25 Analysis of Financial Access 120,0% Adults with an account at a formal fin. inst. to total adults (%) 100,0% 80,0% 60,0% 40,0% 20,0% 0,0% KWT OMN IRN MYS QAT UAE TUR SAU KAZ MOZ BGD MAR LBN DZA TUN NGA ALB JOR UZB UGA GAB IDN CMR AZE TCD PAK SDN SEN GIN KGZ TJK YEM Source: Calculated by using World Bank Database Bank branches per 100,000 adults 25

26 Analysis of Financial Depth and Access 160% 140% LBN 120% MYS Bank deposits to GDP (%) 100% 80% 60% 40% 20% EGY TUR TUN JOR ALB KAZ PAK DZA SEN BEN MRT AZE MLI BFA NER COM GIN CMR GAB YEM AFG TCD MAR SLE IDN BGD UGA SAU MOZ UAE 0% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% OMN Adults saving at a fin. inst. in the past year to total adults (%) NGA QAT KWT 2011 Source: Calculated by using World Bank Database 26

27 FINANCIAL DEPTH FINANCIAL ACCESS FINANCIAL EFFICIENCY FINANCIAL STABILITY 27

28 FINANCIAL EFICIENCY Net Interest Margin Stock Market Turnover Ratio 28

29 Net Interest Margin Rates 8% 7% W-LIC 6% 5% 4% 3% W-UMIC % W- HIGH 1% 0% OIC-LIG OIC-LMIG OIC-UMIG OIC-HIGH WORLD Average OIC Average Source: Calculated by using World Bank Database 29

30 Stock Market Turnover Ratio, % Stock market turnover ratio (value traded/capitalization) (%) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% BGD (LIG) EGY (LMIG) CIV (LMIG) IDN (LMIG) JOR (UMIG) KAZ (UMIG) KWT (HIGH) LBN (UMIG) KGZ (LIG) SAU (HIGH) MYS (UMIG) PAK (LMIG) QAT (HIGH) MAR (LMIG) OMN (HIGH) NGA (LMIG) TUN (UMIG) UAE (HIGH) 2011 Source: Calculated by using World Bank Database 30

31 FINANCIAL DEPTH FINANCIAL ACCESS FINANCIAL EFFICIENCY FINANCIAL STABILITY 31

32 FINANCIAL STABILITY Z-Score Non-Performing Loans Capital Adequacy Ratio 32

33 Z-Scores W-HIGH W-UMIC W-LIC OIC-LIG OIC-LMIG OIC-UMIG OIC-HIGH WORLD Average OIC Average Source: Calculated by using World Bank Database 33

34 Non-Performing Loans (NPL) 14% 13% 12% 11% 10% 9% W-LIC 8% 7% 6% % 4% 3% W-HIGH W-UMIC 2% 1% 0% OIC-LIG OIC-LMIG OIC-UMIG OIC-HIGH WORLD Average OIC Average Source: Calculated by using World Bank Database 34

35 Capital Adequacy Ratios 35% 30% KGZ (LIG) SLE (LIG) Capital Adequacy Ratios (%) 25% 20% 15% 10% EGY (LMIG) IDN (UMIG) GAB (UMIG) ALB (UMIG) JOR (UMIG) MYS (UMIG) KAZ (UMIG) MOZ (LIG) OMN (HIGH) LBN (UMIG) NGA (LMIG) TJK (LIG) UZB (LMIG) UAE (HIGH) UGA (LIG) SAU (HIGH) TUR (UMIG) PAK (LMIG) % 0% Source: Calculated by using World Bank Database 35

36 Analysis of Financial Stability and Depth 120 Private credit by deposit money banks and other financial institutions to GDP (%) MYS LBN MAR UAE TUR OMN IDN MOZ UGA GAB JOR EGY NGA PAK SLE ALB KAZ Bank non-performing loans to gross loans (%) Source: Calculated by using World Bank Database 36

37 Overall Assessment Financial Depth Financial Access Financial Efficiency Financial Stability OIC-LIG Limited private credit opportunities Underdeveloped banking sector and security market Lower access to financial services Low saving rates Higher transaction/intermediation costs Limited liquidity in the security market Higher NPLs Higher probability of insolvency OIC-LMIG Underdeveloped banking sector and security market Lower access to financial services Lower saving rates Transaction/intermediation costs in line with world average Higher NPLs OIC-UMIG Better developed banking sector and security market Lower saving rates Usually low volumes of stock market in many countries Higher NPLs OIC-HIGH Better developed banking sector and security market Better access to financial services Higher saving rates Usually low volumes of stock market in many countries Lower transaction/ intermediation cost More resilient to shocks Lower NPLs 37

38 Thank You 2 nd Meeting of COMCEC Finance Working Group March 27th, 2014 Ankara, Turkey