Turkish banks to benefit from lower rate environment: BBVA

ISTANBUL

The Turkish banking sector’s profitability is expected to improve in 2025, driven by a recovery in the net interest margin (NIM) as the Central Bank cuts interest rates, BBVA has said in a report.

Net profits of Türkiye's banking sector totaled 658.97 billion Turkish liras ($18.77 billion) in 2024.

For the banking sector, 2025 is a year in which the effects of economic policy normalization continue, the risk premium improves, regulatory simplification continues and the sector focuses on its core business, it added.

“As we believe that the most difficult part of the rebalancing of the Turkish economy is behind us, the Turkish banking sector will benefit from the expected improvements in the general economy,” the report said.

In 2025, banks with higher Turkish Liras liabilities (deposits) and lower CPI linker portfolios will be better off as rates fall, according to BBVA.

The Turkish banking sector has successfully managed global and local shocks in each period, demonstrating its resilience to financial turmoil and standing out for its robust structure, it stressed.

“In this sense, the recent commitment of the Turkish central bank to tighten monetary policy has improved the operating environment by boosting investor confidence and exchange rate stability, while easing external financing conditions.”

The rate-cut cycle is a very important catalyst that should help banks recover their NIMs significantly in 2025 and 2026, it added.

“In addition to the positive impact of low funding costs on NIMs, banks' increased ability to generate non-interest income should also support their profitability,” the report said.