The net profits of nine publicly traded deposit banks on the Borsa Istanbul Stock Exchange (BIST) exceeded TL 12 billion ($4 billion) in the first half of the year; a 38.4 upsurge compared to the same period last year. The total assets of the same deposit banks increased to TL 1.544 trillion in the first six months of 2016, up from last year's TL 1.392 trillion in the same period, marking a 10.9 percent increase. The total deposits of publicly traded banks jumped from last year's TL 808.7 billion to TL 908.5 billion between January and June, marking a 12.3-percent increase.
The equity capital of deposit banks skyrocketed to TL 172.6 billion in the first half of this year with a 16.3 percent increase compared to the same period last year. The net profit of publicly traded deposit banks on BIST exceeded TL 12 billion in the first half of the year - a 38.4-percent increase from TL 8.7 billion last year.
Garanti Bank earned the highest profit among publicly traded deposit banks at TL 2.580 billion, followed by Akbank at TL 2.339 billion and Türkiye İş Bank with TL 2.287 billion.
Yapı Kredi Bank experienced the highest increase in net profits compared to the first half of 2015. The bank's profits skyrocketed by 71 percent, followed by Akbank with 65.5 percent and VakıfBank with 34.4 percent.
According to data from the Banking Regulation and Supervision Agency (BDDK), the banking sector's profits reached TL 19.33 billion in the first half of the year in a 39.6 percent increase compared to the same period last year. The total assets in the sector increased by 11.4 percent to TL 2.477 trillion in the same period, while the total deposits grew by 12.3 percent to TL 1.312 trillion. The sector's net profit in non-performing loans rose to TL 12.786 billion in the first six-month period, with a 20.5 percent increase compared to the same period of the previous year. In June 2016, the sector's interest earnings stood at TL 93.9 billion and interest expenses were actualized at TL 50.9 billion.
‘Non-recurring income was instrumental in profitability'
Turkey Macro View (TMV) Consulting Managing Director Ferhat Yükseltürk said the first half of the year was a relatively positive period for the banking sector, adding that credit and deposit growth occurred at moderate levels. He underlined that deposit growth was achieved on a level closer to credit growth because of impacts felt from domestic savings and the decreasing account deficit over a long period of time, commenting that this is important in terms of curbing the credit-to-deposit ratio in the upcoming period.
Yükseltürk further noted that they expect this state of balance to continue in the second half of the year with recovery in deposits becoming even clearer. He estimates that the credit risk will continue to rise, putting pressure on the annual credit growth rate, which he believes will hover around 13 percent.
According to Yükseltürk, the banking sector's income from net interest increased as interest rates followed the downward trend of overall interest rates in the first half of the year. A total of TL 2.4 billion was earned in asset sales, including visa sales worth 240 million euros as well as general provision expenses, which declined in parallel with the ongoing slowdown in credit growth, leading to a nearly 40 percent surge in the sector's profitability. The income earned through one-off asset sales played a significant role in profitability performance and the provisions dedicated to non-performing loans rapidly rose alongside the decline in asset quality in the recent period. These two factors raise questions with regard to the sustainability of profitability performance, indicating that the downward trend in the equity capital profitability will continued in the rest of 2016.
Yükseltürk said that the risk of increases in both domestic and foreign funding costs will increase in the coming period due to inflation and global developments, stressing that this will increase the pressure for improvement in net interest gains. He also noted that this indicates a rise in non-performing loans, adding that sectors such as tourism and retail sales will be affected through the second half of the year. Finally, he said "As a result, we expect the net profitability at the end of 2016 to stand near the levels seen in 2015 with average equity capitals and active profitability likely to see a decline."