COMCEC FINANCIAL OUTLOOK 2014 Fırat YILMAZ 2nd Meeting of COMCEC Finance Working Group March 27th, 2013 Ankara, Turkey
OUTLINE Recent Financial Developments Financial Outlook of COMCEC Region 2
RECENT FINANCIAL DEVELOPMENTS 3
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
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
Real GDP Growth Rates 10% 8% 6% 4% 2% 0% 2009 2010 2011 2012 2013-2% -4% Advanced economies Emerging market and developing economies OIC World Source: Calculated by using IMF Database 6
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% 2013 2014 2012 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% 2013 2014 2012 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% 2013 2014 2012 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% 2013 2014 2012 Sept Forecast 2013 Sept Forecast Souce: IMF World Economic Outlook 7
FINANCIAL OUTLOOK OF COMCEC REGION 8
Selected Stocks of COMCEC Member States 200 180 160 Malaysia-Bursa 140 Egypt-EGX 100 120 Qatar -QE 100 Turkey-BIST 100 80 Bahreyn-BHSEASI 60 MXEF Index 40 20 JAKARTA COMPOSITE INDEX 0 1.1.2008 1.7.2008 1.1.2009 1.7.2009 1.1.2010 1.7.2010 1.1.2011 1.7.2011 1.1.2012 1.7.2012 1.1.2013 1.7.2013 1.1.2014 Source: Bloomberg 9
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
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 100.000 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
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 19 15 16 7 Source: World Bank 12
FINANCIAL DEPTH FINANCIAL ACCESS FINANCIAL EFFICIENCY FINANCIAL STABILITY 13
FINANCIAL DEPTH FINANCIAL ACCESS FINANCIAL EFFICIENCY FINANCIAL STABILITY 14
FINANCIAL DEPTH Private Credit to GDP Ratio Bank Deposits to GDP Ratio Stock Market Capitalization to GDP 15
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 2009 2010 W-UMIC 2011 W- LIC Source: Calculated by using World Bank Database 16
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 2010 2011 W-LIC Source: Calculated by using World Bank Database 17
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 2009 2010 2011 W- UMIC W-LIC Source: Calculated by using World Bank Database 18
Analysis of Financial Depth 140 LBN 120 MYS MDV 100 JOR MAR Bank deposits to GDP (%) 80 60 40 20 0 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 0 20 40 60 80 100 Private credit to GDP (%) Source: Calculated by using World Bank Database SAU KWT UAE TUN 2011 19
FINANCIAL DEPTH FINANCIAL ACCESS FINANCIAL EFFICIENCY FINANCIAL STABILITY 20
FINANCIAL ACCESS Bank Accounts per 1,000 Adults Bank Branches per 100,000 Adults Adults Saving at a Financial Institution 21
Bank Accounts per 1,000 Adults 1.200 1.100 W-HIGH 1.000 900 800 700 600 500 W-UMIC 2009 2010 2011 400 300 200 100 W-LIC 0 OIC-LIG OIC-LMIG OIC-UMIG OIC-HIGH WORLD Average OIC Average Source: Calculated by using World Bank Database 22
Bank Branches per 100,000 Adults 30 28 26 24 22 20 18 16 14 12 10 8 6 4 2 0 OIC-LIG OIC-LMIG OIC-UMIG OIC-HIGH WORLD Average OIC Average W-HIGH W-UMIC W-LIC 2009 2010 2011 Source: Calculated by using World Bank Database 23
Adults Saving at a Financial Institution to Total Adults 40% 35% W - HIGH 30% 25% 20% 2011 15% 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
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 0 10 20 30 40 50 60 2011 Source: Calculated by using World Bank Database Bank branches per 100,000 adults 25
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
FINANCIAL DEPTH FINANCIAL ACCESS FINANCIAL EFFICIENCY FINANCIAL STABILITY 27
FINANCIAL EFICIENCY Net Interest Margin Stock Market Turnover Ratio 28
Net Interest Margin Rates 8% 7% W-LIC 6% 5% 4% 3% W-UMIC 2009 2010 2011 2% W- HIGH 1% 0% OIC-LIG OIC-LMIG OIC-UMIG OIC-HIGH WORLD Average OIC Average Source: Calculated by using World Bank Database 29
Stock Market Turnover Ratio, 2011 100% 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
FINANCIAL DEPTH FINANCIAL ACCESS FINANCIAL EFFICIENCY FINANCIAL STABILITY 31
FINANCIAL STABILITY Z-Score Non-Performing Loans Capital Adequacy Ratio 32
Z-Scores 24 22 20 18 16 14 12 10 8 W-HIGH W-UMIC W-LIC 2009 2010 2011 6 4 2 0 OIC-LIG OIC-LMIG OIC-UMIG OIC-HIGH WORLD Average OIC Average Source: Calculated by using World Bank Database 33
Non-Performing Loans (NPL) 14% 13% 12% 11% 10% 9% W-LIC 8% 7% 6% 2009 2010 2011 5% 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
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) 2011 5% 0% Source: Calculated by using World Bank Database 35
Analysis of Financial Stability and Depth 120 Private credit by deposit money banks and other financial institutions to GDP (%) 100 80 60 40 20 MYS LBN MAR UAE TUR OMN IDN MOZ UGA GAB JOR EGY NGA PAK SLE ALB KAZ 2011 0 0 5 10 15 20 25 30 35 Bank non-performing loans to gross loans (%) Source: Calculated by using World Bank Database 36
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
Thank You 2 nd Meeting of COMCEC Finance Working Group March 27th, 2014 Ankara, Turkey