Top regulator praises banks, Fitch disagrees

ISTANBUL

Customers inspect cars at a second-hand market in Istanbul. Car loans have contributed to Turkey’s credit growth.

Turkey has already overcome a loan growth risk due to precautions by the banking regulator and the Central Bank, according to Turkey’s Banking Regulation and Supervision Agency’s (BDDK) chairman, Mukim Öztekin. However, one of the three leading credit rating agencies, Fitch – which had given the local economy a boost with a November upgrade – said in yesterday’s report that Turkish lenders may risk their positive outlook with a stable high loan growth.

Öztekin told Anatolia news agency yesterday that despite the credit growth being at a high level between 2009 and 2011, a period when Turkey’s economy grew rapidly, he did not see the same problem today.

The BDDK took the required precautions to prevent loan growth, he said, adding that the essential point is the rate of deposits that are converted to credits. The banks have, as they were encouraged, found new alternative sources that could diversify, extend and change the structure of passives.
He said both the BDDK and Central Bank aim to take measures to restrict loan growth, adding that the BDDK did not want to raise credit growth above 10 or 15 percent.

However, Fitch warned in a report yesterday that Turkish banks might be threatened if the loan growth
“Our favorable outlook for Turkish banks could be threatened if credit growth significantly exceeds our 15 percent-20 percent expectation for a sustained period. We believe aggressive expansion could challenge banks’ underwriting capacity and asset quality,” it said.

The report also said the new precautions of the Turkish Central Bank, which has increased the rate of holding bank reserves, could decrease credit growth. The application of higher Central Bank reserve requirements for Turkish banks that fail to meet set leverage ratios might reduce the risks of a return to very rapid loan growth, it said.

‘Sector grows positively’

Öztekin said the banking sector’s growth would continue positive progress. The profit margins rate would shrink, while banks’ profits rise would reach between 10 and 15 percent this year, he forecasted. The complaints about the sector are generally caused by individual credit and credit cards, said Öztekin, adding that while the individual credit volume was 5 billion Turkish Liras in 2001, it has jumped to more than 250 billion liras, a 52-fold increase.