Bad year’s rating is good – Capital

In 2019, bankers put the toughest test in loan growth and profit …

15.05.2020 14:33:000

Elçin Cirik

13 banks in asset size reached double digit growth. Serdar Sümer, Abdi Serdar Üstünsalih, Namık Ülke and Hüseyin Aydın were the most successful names of the year in their active performance. Six CEOs achieved a 20 percent increase in loans that grew by 10.6 percent across the industry. On the profit side, which fell for the first time in 6 years, Mert Öncü and Selim Kervancı came forward with the best rates.

trade war between the US and China, passed by geopolitical uncertainty is in the Brexit and Turkey. In the first half of the year, the negative effects of the exchange rate shock experienced in the summer of 2018 on banking continued. There was no credit appetite on the part of companies, neither because of banks nor due to high interest rates. However, in the last quarter, loan demand revived in line with the decrease in inflation in the second half and the decrease in loan rates. Stating that “Steps to support the recovery have continued to be taken under the leadership of the Ministry of Treasury and Finance in 2019”, Alternatif Bank General Manager Kaan Gür says that the banking sector has grown mainly in commercial loans, especially after the CBRT’s required reserve regulation. In this turbulent year, according to BRSA data, the sector increased its asset size by 16.1 percent to 4.5 trillion-TL 2019. Due to the current picture, while the loans side only increased by 10.9 percent, more than doubling, 26.1 percent growth was achieved in deposits. The real hard test of the bankers was on the profit side. Net profit declined for the first time in 6 years with an 8 percent decrease. Increasing provision expenses and narrowing interest margins created problems in profitability. Despite all these obstacles, CEOs of public banks, in particular, ended the year with a “good” report. Executives of small-scale banks also left 2019 behind with good grades.


Last year, managers of 13 banks achieved double-digit growth in asset size. Interestingly, large public banks and small-scale banks are on the list. The general manager of Aktif Bank, Serdar Sümer, which is the leader in growth in asset side with 32.1 percent speed, explains that 90 percent of this increase comes from the growth of the bank’s liquid assets and securities portfolio. “Our strengthening of our liquid structure and making it more resistant to stress conditions was also an important factor here,” says Sümer. Anadolubank General Manager Namık Ülke emphasizes that they achieved a 23.1 percent increase in asset size from loans and focused on liquidity management in this period. Growing above the sector with 19.1 percent, Alternatif Bank’s general manager Kaan Gür said, “In the last two years, we have increased our assets by 50 percent, doubling the private sector. “The main source of the increase comes from loans that make up 60 percent of our assets.” Among the 5 banks with an increase of more than 20 percent, 3 major public banks stand out. Banking consultants agree that this picture is no surprise. Consultant Mehmet Erten comments, “The fact that the government operates the credit transfer mechanism through state banks under favorable conditions in order to revive the domestic demand that has stalled, played an important role here”. “We have left behind another year in which we have effectively used our financial resources to produce the most appropriate solutions for the domestic market needs,” says Osman Arslan, Halkbank General Manager.


In the loan item, which has a poor growth of 10.6 percent, 6 general managers managed to achieve a performance above 20 percent. Namık Ülke, the general manager of Anadolubank, which focuses on commercial loans and asset management, the leader of this list, explains how they achieved this performance as follows: “We saw the important results of our transformation and growth strategy in 2017-2018 in 2019. We increased the number of our customers and increased our volume in corporate, SME and commercial banking. ” In fact, public banks were the ones that stood out for loans, as they did for housing and SMEs throughout the year. Vakıfbank’s general manager, Abdi Serdar Üstünsalih, who increased its loan volume by TL 70 billion in 2019, said, “Compared to the previous year, we increased our market share in cash loans from 9.2 percent to 10.3 percent. “As we left behind a challenging year of fluctuations in the global economy, we increased our support to the real sector through the loans we have provided.” Ziraat Bank General Manager Hüseyin Aydın underlines that 1 TL of every 5 TL loan provided in the sector is provided by Ziraat Bank. Banking consultants attribute the growth of two medium-sized banks, QNB Finansbank and DenizBank, which are strong in loans, to the appetite of the main shareholders. While evaluating the results of 2019, Temel Güzeloğlu, General Manager of QNB Finansbank, said, “We focused on sustainable income sources and achieved loan growth above the sector. “We will continue to contribute to the sector by taking the power of our main shareholder Qatar National Bank.”


Last year, the competitive battles we are used to seeing on the credit side were experienced in deposits. Vakıfbank played an important role in this competition with a high increase of 40.2 percent and Ziraat Bank 35.1 percent. Global Kapital Group CEO Tunç Akyurt attributes the reason for this competition to the use of deposits as the main funding source due to the decrease in resources provided from abroad. “As the credit appetite dropped, banks focused on collecting deposits across all segments,” he says. In addition, both the high interest rates in the first half of the year and the fact that individual and corporate savings did not turn to investment increased the growth rate in deposits. Vakıfbank’s General Manager Abdi Serdar Üstünsalih said, “Our deposit growth of 40.2 percent per year is far above the sector average of 26.1 percent” and explains that they increased their market share here by 1 percent to 9.8. “We expanded our deposit portfolio by offering alternative products,” says Üstünsalih. The same strategy applies to Ziraat Bank. Hüseyin Aydın, the general manager of the bank, states that they added the inflation-indexed deposit product to their deposit products in 2019 and that they reached a high amount of 28 billion TL here in a short time. Namık Ülke, the general manager of Anadolubank, fourth in the list with a 24.6 percent growth, said, “In 2019, we paid special attention to widespread deposit customer acquisition and cost management. We increased the number of deposit customers by 36 percent ”.


In 2019, managers’ hardest lesson was writing profits. The top 7 big banks closed the last year with a loss. The reason for this decline in bank profits after 6 years is attributed to the fact that high interest rates reduce the loan demand for banks. So much so that even the consecutive interest rate cuts in the second half of the year could not prevent their profits from declining. In the current table, the managers of small-scale banks have achieved success in profit. For example, Odeabank General Manager Mert Öncü tripled the bank’s profit annually with TL 71 million in his second year. According to the consultants, this was the result of the bank’s ability to keep most of its profits in 2018 with free provisions and evaluate it in 2019. One of showing very good performance with 40 percent in profit was also HSBC Turkey. Selim Kervancı, the general manager of the bank, summarizes how they achieved this increase as follows: “Despite the year-long activity in the markets, we increased our corporate banking revenues by 48 percent with our focus on customer segments that we will make a difference in, our increasing foreign trade revenues and new customer acquisitions. Correct positions taken by the treasury and balance sheet management also supported our profit. Aktif Bank Serdar Sümer, on the other hand, conveys his profit prescriptions as follows: “While the increase in our interest income was at a reasonable level of 20 percent, our profit increased by 30 percent with the dividend income we obtained from our fintech affiliates and income from investment banking instruments.



2019 was a period when growth was taken to the second plan and asset quality management was emphasized. We saw that some segments of loans contracted, margins were under pressure due to high interest rates and provision expenses increased due to increasing follow-up ratios. It was a difficult year in terms of profitability for the industry. 2020 will be a difficult year for banking. But considering the low base of 2019 and assuming that the effects of the epidemic will be temporary, we think profitability can still increase annually.
FALL IS EXPECTED With the epidemic, it is possible that loan volumes will decrease in parallel with the contraction in economic activity in the second quarter of the year. On the other hand, with the incentives provided to the system and the reduction of the impact of the epidemic, there is a possibility of rapid recovery in the second half of the year, led by consumer and SME loans. We think that the interest rate cuts and liquidity steps taken by central banks in terms of profitability may limit the negative impact on the net interest margin of the sector. In 2020, we will grow our loans by 13 percent, our deposits by 7 percent and our profitability by over 15 percent in the segments we focus on.



In the BIST-100, which experienced a rapid rise in the last two months of 2019, 10 banks, excluding Halkbank, increased their share values ​​strongly on an annual basis. The valuations of more than 50 percent in Yapı Kredi and Akbank drew attention. The highest increase was seen in QNB Finansbank, which tripled its value, and Development Investment Bank with 164.7 percent. A bank analyst, who does not want to be named, states that the free float shares of these two shares are low and that artificial prices are formed at the end of the year with speculative movements independent of financial results. The ongoing court process in the USA seems to be effective in the decrease in Halkbank’s shares.
WHAT HAPPENS THE TABLE IN 2020? Tera Investment Economist Enver Erkan said, “In the last quarter of 2019, banks’ concentration on loan growth with interest rate cuts and profit improvements on a quarterly basis brought these good increases,” said Tera Investment Economist Enver Erkan for 2020: “The corona virus has reached the end of the first quarter. The virus will have a serious impact on bank figures in the second quarter. The inability of the sectors to generate cash will affect the market values ​​of the banks. The real sector and the financial system are in a position to pull each other down. If things return to normal in the next 1-1.5 months, banks will continue the growth story drawn at the beginning of the year. Bank stocks, which have become almost free today, witness an important rally. “

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