Economy and Banking Sector in Turkey İstanbul June, 2012
Content Economic Outlook Banking sector Near-term expectations Turkish economy and banking sector 1
Turkish economy and banking sector 2 Economic Outlook
Member of G-20 Turkey has a functioning market economy, capital flows are free and there is no exchange rate restriction for residents and non-residents The Central Bank has been implementing a formal inflation-targeting framework under a floating exchange rate regime Sovereign credit rating, currently is BB with stable comment Long term average growth rate is about 4.5 percent. GDP is about USD 770 billion, 17th largest in the world, 6th in the Europe; 2nd in the region after Russia. Turkish economy and banking sector 3
Open economy and young population Income per capita is around USD 10,500 Services and industry have shares of 60 percent and 30 percent, respectively. Foreign trade volume to GDP is about 48 percent. Almost half of Turkey's total trade is with the EU. In terms of total assets of banks, Turkey is ranked the 15th in the EU. Population is about 74 million in which the group of 15-64 age has a share of 65 percent. Unemployment rate is about 9 percent, recently. Turkish economy and banking sector 4
High and rather stable growth 10 GDP growth (%) 8 6 4 2 0-2 -4-6 02-07 avg 08 09 10 11 12 pt 13 pt 14 pt Turkish economy and banking sector 5
Cost of growth (lack of savings) 15 10 5 0-5 2002 2008 2009 2010 2011-10 -15 Private Public Total Turkish economy and banking sector 6
Lower Government external debt 60 External debt (As % of Gdp) 50 40 30 20 10 0 02 03 04 05 06 07 08 09 10 Total Government Private Turkish economy and banking sector 7
TL began to apriciate in 2012 again, following a rapid depreciation in 2011 135 130 125 120 115 110 105 Real exchange rate (2003=100) 100 07 08 09 10 11 12 Turkish economy and banking sector 8
Less crowding out, more loans to private sector 45 40 35 30 25 Public sector domestic debt and loans (as % of Gdp) 02 03 04 05 06 07 08 09 10 11 Public sector debt Loans (right) 60 50 40 30 20 10 Turkish economy and banking sector 9
Turkish economy and banking sector 10 Banking sector
Financial sector; supervision and size Financial institutions Authorities Share in total assets* (%) Banks BRSA 88 Leasing companies BRSA 1 Factoring BRSA 1 Consumer finance companies BRSA 1 Capital market companies Mutual funds CMB 2 Securities dealer CMB 1 Real estate investment funds CMB 1 Pension funds CMB 1 Insurance companies Treasury 3 Payment system Central B. * As of December 2011 Source: BRSA Turkish economy and banking sector 11
Banks by functions Banks in Turkey (As of December 2011) Number of banks Share in total assets (%) Deposit banks 32 92 State-owned 4 28 Private 11 51 Foreign-owned* 17 13 Development and investment banks 12 3 Participation banks 4 8 Total 48 100 *Having more than 50% share in shareholders equity Turkish economy and banking sector 12
Foreign owned-banks share Ownership structure (%) Free flot Non residents' share* Non residents' share* in shareholders' equity in total assets 2002 5,4 3,2 2010 20,1 23,9 23,8 2011 19,9 24,7 24,8 *weighted share in non-public shares Turkish economy and banking sector 13
Number of Branches and Employees (Continuous organic growth) 10 200 190 9 180 170 160 8 150 140 7 130 120 6 02 08 09 10 11 110 100 Branch (left axis) Employee Turkish economy and banking sector 14
The largest ten account for 87% of total assets Concentration ratio* % 02 11 Change Largest five** Assets 58 61 3 Deposits 61 62 1 Loans 55 58 3 Largest ten** Assets 81 87 6 Deposits 86 91 5 Loans 74 87 13 * Deposit, investment and development banks ** According to total assets Turkish economy and banking sector 15
Rapid growth in banking sector 1.200 1.150 1.100 1.050 1.000 950 900 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 33 31 29 27 25 23 21 19 17 15 Total assets (left axis) Total assets growth rate Turkish economy and banking sector 16
Assets Million TL April 12 Annual change (prc) TL FX Total Liquid assets 53,033 96,483 149,516 12 Securities 237,616 44,972 282,588 3 Loans and Non Performing Loans (NPLs) (Net) 484,908 187,965 672,873 24 Loans 481,409 187,717 669,126 24 NPLs (Net) 3,499 248 3,747 41 a) NPLs 18,039 540 18,580 5 b) NPL provision (-) 14,540 292 14,833-2 Other assets 33,638 2,283 35,921 61 Total assets 854,148 343,005 1,197,153 17 Turkish economy and banking sector 17
Liabilities Million TL April 12 Annual change (prc) TL FX Total Deposit 437,854 223,524 661,378 11 Non deposit funds 124,641 175,613 300,254 28 -Funds borrowed 30,027 132,723 162,750 26 -Funds provided by repo agreements 70,528 28,639 99,168 13 Shareholder's equity 147,217 877 148,094 13 Current year income (loss) 7,349 0 7,349 10 Other liabilities 57,649 18.574 76,223 41 Total liabilities 774,032 423,121 1,197,153 17 Turkish economy and banking sector 18
Loans / deposit ratio (percent) Turkish economy and banking sector 19
Strong lending growth 45 Total loans (As fixed rates of 2010 December, y-o-y % chg) 40 35 30 25 20 15 10 5 0 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Total TL FX Turkish economy and banking sector 20
Loan distribution Million TL Loans NPL Total Share (percent) Total 734,183 19,962 754,146 100 Consumer 236,990 7,324 244,314 32 -Credit Cards 63,245 3,774 67,019 9 -Housing 76,165 628 76,793 10 -Automobile 7,324 261 7,585 1 -Others 90,257 2,661 92,918 12 Corporate 497,193 12,639 509,832 68 -SME 164,547 5,365 169,912 23 Turkish economy and banking sector 21
Continuous increase in credit & debit cards April 11 April 12 Annual change (prc) Total credit cards (thousand) 48,344 52,434 8 Total debit cards (thousand) 73,062 85,861 18 POS (thousand) 1, 879 2,003 7 ATM 28,618 33,500 17 Transaction volume of credit cards (billion TL)* 251 317 26 Transaction volume of debit cards (billion TL)* 231 275 19 *Annualized. Turkish economy and banking sector 22
NPLs have remanied at a rather low level % 4,5 4 3,5 3 2,5 2 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Consumer Corporate Total Turkish economy and banking sector 23
Stronger shareholders equity; enabled the banking sector to change its risk structure... 150 20 145 140 135 130 125 120 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 19 18 17 16 15 14 13 12 Shareholders' Equity (billion TL) CAR (right axis) Turkish economy and banking sector 24
Income statement (Annulized) Million TL 2012/IV 2011/IV Annual change Annual change (prc) Interest income 94,023 74,046 19,977 27.0 Interest expenditure 52,998 38,740 14,258 36.8 Net interest income (expenditure) 41,024 35,306 5,718 16.2 Non interest income 21,764 21,348 416 1.9 Fees and commission income (net) 522 796-274 -34.5 Banking services income 13,350 11,336 2,014 17.8 Other non interest income 8,930 9,104-175 -1.9 Operasional expenses 33,166 28,031 5,135 18.3 Other non interest income 11,902 10,663 1,238 11.6 Provisions 5,913 3,411 2,502 73.4 Non interest income (net) -11,402-6,683-4,719 70.6 Tax provision 5,454 4,738 716 15.1 Current year net profit (loss) 19,699 19,533 165 0.8 Turkish economy and banking sector 25
Annualized profit and ROE 21.500 21.000 20.500 20.000 19.500 19.000 18.500 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 17,0 16,5 16,0 15,5 15,0 14,5 14,0 13,5 13,0 Annualized profit (million TL, left axis) ROE (percent) Turkish economy and banking sector 26
Remarkable resilience to global crisis 1. Reasons No high risky assets Small investments in housing financing Well-diversified lending portfolio, mainly to private sector and G-securities High-capital adequacy level with 16% High-liquidity level Efficent supervision Turkish economy and banking sector 27
Remarkable resilience to global crisis 2. Results No change in deposit-quaranty limit, current level is TL 50,000 No financial support form the Government Banking sector has kept financing economic activities Decrease in NPLs following a slight rise in 2009 The years of 2009, 2010, 2011; became most profitable years (in the last decade) Turkish economy and banking sector 28
Turkey and G-20 countries Capital adequacy ratio (percent) ROE (average, percent) NPL / Loans (percent) 1. Brasil 17.3 1.Argentina 25.3 1.Canada 0.8 2. Turkey 16.5 2.Canada 22.5 2.Argentina 1.2 3.Australia 21.9 3.Korea 1.4 4.S.Africa 21.0 4.Australia 2.0 5.Turkey 18.9 5.Mexico 2.1 6.Indonesia 2.2 7.Turkey 2.7 Source: IMF, Financial Soundness Indicators, May 2012 Turkish economy and banking sector 29
High growth potantial Financial sector Selected indicators As % of GDP 2010 World EMs TR Bank assets 159 89 91 Capital markets 238 99 75 Market capitilization 88 58 43 Debt securities 151 41 32 Public 66 26 32 Private 85 16 1 Total 397 189 166 Source: IMF, Global Financial Stability Report, Spt 2011 Turkish economy and banking sector 30
Expectations for the near future Larger and deeper financial markets (Capital Markets Law) Lengthening the maturities of deposits and borrowing (issuing of bonds and measures to encourage lengthening the maturity of deposits) Higher lending to private sector (lower psbr) Intense competition in retail business Decline in interest margin with widening business activity Positive climate for foreign investors Turkish economy and banking sector 31
Thank you. Emre Alpan İnan: emre.inan@tbb.org.tr Şirin Mutlutürk: sirin.mutluturk@tbb.org.tr Turkish economy and banking sector 32