Download 24.11.2005 Presentation by Ersin Özince, Chairman of the Banks

The Banks Association of Turkey
Recent Developments
in the Turkish economy
and
Turkish Banking System
Ersin Özince
Chairman of the Board
London, November 24, 2005
TBA tbb.org.tr
Turkish Banking System
November 24, 2005
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Outline
Economic outlook
• Short term outcomes
• Expectations for the near future
Turkish banking system
•
•
•
•
Main issues affecting banks
Operational environment
Short-term outcomes and selected indicators
Expectations for the near future
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Turkish Banking System
November 24, 2005
2
Economic outlook
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Turkish Banking System
November 24, 2005
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•Macro economic policies in conjunction with
a positive international environment led to
economic performance to improve
considerably since 2002.
•Disinflationary monetary and tight fiscal
policies supported by the structural reforms
created an environment for higher growth led
by the private sector.
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Turkish Banking System
November 24, 2005
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•Succesfully implemented free market
principles will further encourage private
sector and foreign investment enabling to
increase the international competitiveness.
•The start of accession negotiations will
further reinforce the dynamism of Turkey to
complete economic reforms enhancing
Turkey’s integration with the EU.
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Turkish Banking System
November 24, 2005
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Short-term outcomes
•Quick and sustainble recovery in growth led by private sector
•Savings gap widened due to rapid increase in private sector
fixed capital investments mainly in machineries while public
sector savings gap continued to narrow
•Strong fiscal adjustment led to dramatic decline in public
sector borrowing to 1 percent of GNP in 2005 down from 13
percent in 2002
•Less pressure from the Government on the financial markets
while financial assets to GNP also rises
TBA tbb.org.tr
Turkish Banking System
November 24, 2005
6
Short-term outcomes
•Sharp decline in inflation
•Stability sustained in money and capital markets; a
substantial fall in the cost of borrowing and real interest
rates
•Strong demand for TL both from domestic and foreign
investors
•Rapid growth in CB reserves and improvement in fx
position
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Turkish Banking System
November 24, 2005
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Short-term outcomes
•Jump in lending to private sector and consumer loans as well
as housing loans
•Expanding volume of foreign trade
•Widening current account deficit due to increase in
investments and energy prices
•Foreign investors’ interest on the banking sector
•Acceleration in privatisation
•Strengthening rating outlooks
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Turkish Banking System
November 24, 2005
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Improved economic performance positively reacted by
the investors in the Istanbul Stock Exchange
ISE, Market capitilzation (USD billion, as % of GNP)
40
130
35
110
90
30
70
25
50
30
20
02
03
04
Market capitilization
TBA tbb.org.tr
Turkish Banking System
05 Spt
As % GNP
November 24, 2005
9
Expectations for the near future
Should current program successfully implemented,
macroeconomic aggregates are likely to approach to
Maastricht criteria in a few years.
Thus, an atmosphere for well functioning of market
economy is likely to be further improved.
TBA tbb.org.tr
Turkish Banking System
November 24, 2005
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According to the Government programme public sector
deficit targeted to receed to 3 percent of GDP by 2008
Government deficit
As % of GDP
0
-1
-2
-3
-4
-5
-6
-7
-8
-9
-10
-11
-12
-13
-14
-15
-16
-17
-18
-19
-20
95
.
.
.
.
'00
.
Turkey
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.
.
.
'05
.
.
'08
EU-15
Turkish Banking System
November 24, 2005
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Inflation is down 4 percent in 2008
Inflation
100
75
50
25
0
95
.
.
.
.
'00
.
Turkey
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.
.
'05
.
. '08
EU-15
Turkish Banking System
November 24, 2005
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Government debt is likely to meet the EU level in
2008
Government debt
As % of GDP
120
110
100
90
80
70
60
50
40
95
.
.
.
.
'00
.
Turkey
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'05
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EU-15
Turkish Banking System
November 24, 2005
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Turkish Banking System
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Turkish Banking System
November 24, 2005
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• As a natural outcome of new transition
period, a new era of structural change has
emerged in the financial sector. Transition
of operational environment as well as
regulations related financial institutions
towards international standarts, a rapid
increase in capital inflows and accelerated
entries of foreign banks have stimulated
competition in the banking the sector.
TBA tbb.org.tr
Turkish Banking System
November 24, 2005
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Main issues affecting banks
•Since 2002, banks have been operating in a considerably less risky
atmosphere
•Decline in inflation and strong demand for TL stimulated the
competition and restructuring the balance sheet
•Government’s crowding out affect on financial markets lessened
•Regulation likely to meet the international standarts, notably to the
EU directives
•Supervision strengthened further
•Better expectations and vital activity stimulated consumer business
•Foreign investors’ interest intensified
•Basel II road map was announced
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Turkish Banking System
November 24, 2005
16
Operational environment
•Banks subject to Banking Act in their universal activities and to
Capital Market Act in capital market activities
•Banking Regulation and Supervisory Board is an autonomous
authority of the banking sector since 2000.
•No discretionary regulation for foreign banks operating in Turkey
•Regulatory capital for establishment of a bank is currently about
USD 15 million
•Financial sector is small and has low degree of deepening
•Despite gradual improvement, deposits have very short term
maturity
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Turkish Banking System
November 24, 2005
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Operational environment
•Traditionally banks occupy majority, 95 percent of
financial sector
•Financial services subject to various heavy tax burdens
increasing intermediation cost dramatically, although
some positive steps taken recently
•The share of fx or fx denominated items in the balance
sheet still high albeit shrinking recently
•High techonology utilization on services
TBA tbb.org.tr
Turkish Banking System
November 24, 2005
18
Short-term outcomes
•Strengthened confidence in the banking sector and rating
outlooks
•Banks gradually adopting to changing environment;
disinflation and recovery are likely support the sector
•Full guarantee on deposits limited
•Improvement in asset quality; NPLs’ contained and highly
provisioned
•Regulatory capital requirements met, economic and working
capital began to rise
TBA tbb.org.tr
Turkish Banking System
November 24, 2005
19
Short-term outcomes
•Earnings less dependent on windfall and inflationary gain
from the Governmet securities as interest margin and income
from fees and commission increased
•Improving return on equity is likely to encourage capital
growth
•Higher lending tendency to private sector
•Risks arising from fx and interest rates lowered but maturity
gap is still important
TBA tbb.org.tr
Turkish Banking System
November 24, 2005
20
Short-term outcomes
•Foreign banks’ share is increasing
•Concentration has risen
•Risk management improved
•Foreign borrowing accelerated
•Banks’ market capitalisation jumped
TBA tbb.org.tr
Turkish Banking System
November 24, 2005
21
Reduced pressure of Government on financial sector;
higher trend for TL deposits and
upward trend loans; notably from households
Government debt and selected financial assets
As % of GNP
2002
Public sector borrowing requirement
Domestic debt
Total deposits
TL deposits
FX deposits
Investment funds
Loans
Consumer
Credit cards
TBA tbb.org.tr
Turkish Banking System
2005 Spt.
13
55
48
21
27
2
18
1
1
1
52
44
28
16
4
28
5
3
November 24, 2005
22
Total assets grew rapidly in USD terms but remained
almost the same as percent of GNP
300
Total assets
USD billion
%
250
80
200
60
150
40
100
20
50
0
0
99
'00
'01
Total assets
TBA tbb.org.tr
'02
'03
'04
'05 J
As % of GNP
Turkish Banking System
November 24, 2005
23
Dramatic decline in number of banks
Number of banks
85
80
75
70
65
60
55
50
45
40
35
30
25
20
15
10
5
0
80
85
90
95
Total
TBA tbb.org.tr
99
'00
'01
'02
'03
'04 '05 J
Private dep banks
Turkish Banking System
November 24, 2005
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Structure of the banking system
Market structure
June 2005
Banks
EmploymentBranches Assets
Loans Deposits
% share % share % share
Deposit banks
State owned
Private
Fund
Foreign
Non-deposit taking banks
34
3
17
1
13
13
125.416
39.080
79.870
401
6.065
4.471
6.034
2.039
3.786
1
208
19
96,5
32,5
60,1
0,5
3,4
3,5
94,1
19,9
69,3
0
4,8
5,9
100
39,5
57,1
0
3,4
0
Total
47
129.887
6.053
100
100
100
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Turkish Banking System
November 24, 2005
25
Asset size getting larger
Bank total asset size
USD billion/number
40+
30-40
20-30
10-20
5-10
1-5
0,5-1
- 0,5
Total
TBA tbb.org.tr
99
'01
'02
'03
04
05 J
1
1
1
6
19
11
43
82
1
5
2
10
4
28
50
Turkish Banking System
1
5
1
12
5
26
50
1
2
4
1
13
3
26
50
2
4
4
11
1
25
48
November 24, 2005
1
2
2
2
5
10
2
24
48
26
Large banks increase their market share
Concentration
80
First five*
Asset
Deposits
Loans
First ten*
Asset
Deposits
Loans
* according to asset size
TBA tbb.org.tr
90
'00
05 J
63
69
71
54
59
57
48
51
42
61
65
54
82
88
90
75
85
78
69
72
71
84
89
78
Turkish Banking System
November 24, 2005
27
Assets and liabilities have been reshaped
Selected balance sheet items
As % share in total
2002
2005 June
Securities
Loans
Permanent assets
41
27
10
39
37
7
Deposits
TL
Fx
Non-deposits fund
Shareholders' equity
65
28
37
15
12
63
38
25
18
14
TBA tbb.org.tr
Turkish Banking System
November 24, 2005
28
Breakdown of loans
Selected sectors, July 2005, %
Consumer loans and credit cards
Housing
Automobiles
Others
Credit cards
Wholesale and retail trade
Textiles
Food, beverage
Leasing and factoring
Construction
Communications and transportations
Metal
Manufactures of metal
Chemicals
Machinery
Tourism
Others
Total
TBA tbb.org.tr
Share
in total
18.1
6.0
5.6
3.7
2.8
12.9
8.0
5.3
5.1
4.7
4.6
4.5
4.5
3.2
2.6
2.6
23.9
76.1
Turkish Banking System
NPLs
share in total
0.7
0.1
0.2
0.2
0.2
0.8
19.3
7.0
1.8
6.4
4.5
3.5
3.5
0.1
2.7
0.1
49.6
50.4
November 24, 2005
29
Rather stable fx position;
met the requirements
Fx position* (Fx assets-fx liabilities)
5
Milyar dolar
0
-5
-10
-15
-20
88
90
95
Sector
'00
'01
'02
'03
'04 '05 H
Including fx indexed
* excluding fx indexed assets and liabilities
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Turkish Banking System
November 24, 2005
30
Stronger capital; thanks to the restructuring
program, recovery in economic activity and
profitability
Equity
USD billion
2002
Shareholders' equity
Working capital*
2005 June
15
2
35
19
* Shareholders' equity-permanents assets
TBA tbb.org.tr
Turkish Banking System
November 24, 2005
31
Working capital improved rapidly
20
Working capital*
USD billion
15
10
5
0
-5
99
'00
'01
Sector
'02
State-owned
'03
'04
'05 J
Private
* Shareholders' equity+current year net income-permanent assets
TBA tbb.org.tr
Turkish Banking System
November 24, 2005
32
From losses to sustained profitability;
likely to encourage investors
60
Return on equity (%)
%
40
20
0
-20
-40
-60
-80
-100
-120
'99
'00
'01
Sector
'02
'03
State-owned
'04
'05 J
Private
Figures in 2002-2004 are according to inflation accounting
TBA tbb.org.tr
Turkish Banking System
November 24, 2005
33
Positive developments in the banking system
positively reacted by the investors
Market Capitilization of financial institutions (USD million)
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
01
TBA tbb.org.tr
02
03
04
05
Turkish Banking System
Oct
November 24, 2005
34
Rapidly growing numbers of credit and debit cards
Selected inditacors
Thousands
2002
ATMs
POS machines
Credit cards
Debit cards
TBA tbb.org.tr
12
496
16
35
Turkish Banking System
2003
13
662
20
40
2004
14
912
27
43
November 24, 2005
35
Expectations for the near future
•Larger and deeper financial markets
•Lengthening the maturities
•Higher lending to private sector
•Sufficient earnings to feed capital
•Decline in margin with widening business activity
•Positive atmosphere for foreign investors
•Intense competition on behalf of depositors and borrowers
TBA tbb.org.tr
Turkish Banking System
November 24, 2005
36
Growth in the banking sector accelerated after 2002
300
Total Assets
USD billion
%
250
100
80
200
60
150
40
100
20
50
0
0
80
TBA tbb.org.tr
90
'00
'01
Total assets
'02
'03
As per. of GNP
Turkish Banking System
'04
June
'05
November 24, 2005
37
Substantial growth during the last years
Selected figures of deposit banks
80
USD
Shareholders' equity per bank
Assets over branch
16
2.854
Assets over employees
TBA tbb.org.tr
00
136
Turkish Banking System
05 II
101
873
18.963 40.427
898
2.044
November 24, 2005
38
Still low degree of banking on the basis of
inhabitants
Selected figures of deposit banks
(for inhabitants)
80
00
05 II
Number of banks (1000)
1.111
1.105
2.051
Number of branches
7.471
8.636 11.899
Number of employees
356
409
602
Assets (USD)
382
2.196
3.397
TBA tbb.org.tr
Turkish Banking System
November 24, 2005
39
High growth potantial compared to the EU
Selected banking sector indicators, 2004
MU 12
Income per capita
Total assets per capita
Total assets to GDP
Loans to GDP
Housing loans to GDP
Consumer credits to GDP
Loans to deposits
Number of credit institutions
Number of branches
Number of employment
Euro
Euro
24.681
65.520
%
%
%
%
%
per inhabitants
per inhabitants
per inhabitants
EU 25
22.508
63.027
Turkey*
3.401
2.361
265
117
34
7
121
280
118
40
8
123
69
23
1
2
52
48.689
1.857
143
54.965
2.306
151
1.513.872
11.653
560
* Figures fo banks
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Turkish Banking System
November 24, 2005
40
Thank you.
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Turkish Banking System
November 24, 2005
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