Turkish banks performing above world average

Published 08.06.2018 02:49

The fact that the rating agencies have entered the race of negative general, sectoral monitoring and downgrading in succession, with only a few days to the elections in Turkey, should be questioned. On the last business day of last week, negative signals came from the rating agencies in succession for the banking sector, which is the most sensitive area of the economy. Let's say that these signals, as a perception operation, will continue and that they will be used to raise both the exchange rate and the interest rates at the end of each week and regularly.

We have repeatedly mentioned in this column that the Turkish banking system is one of the most solid banking systems in the world. The banking system in Turkey, including the public banks, experienced a very radical transformation after the 2001 crisis. Extreme angular legal regulations were made to arbitrate international regulations and the banks followed them meticulously. In the whole process, the banking system also gained a considerably international dimension, with the participation of European banks in particular, rather than being domestic.

When the globalization dynamics of the 2001 regulations and afterward coupled with the rapid recovery and growth of the Turkish economy, both the capital adequacy ratio of the banking system improved and the system, in retail and corporate operations, started to continue well above the world average with profitability. Some of our banks have even worked on the UPRS-9 system, despite being implemented at the beginning of this year, in reserves, and nevertheless achieved high operating profits. Currently the reserve ratio for our banking system is 75.1.

The expected return on equity ratio for the banking sector in 2018 is 14.8 percent, which is the best rate of the past five years. This ratio is currently 16.3 percent. The capital adequacy ratio average was 16.8 percent for 2017, while it is now 16.4 percent. The core capital ratio is 14 percent. The ratio of the nonperforming loan was also 3.0 percent in 2017, but this rate dropped to 2.8 percent. Moreover, the Credit Guarantee Fund (CGF) practice, which started in 2017, strengthened the receivables side of the banking system. The only negativity seen in the Turkish banking system in the last two years is the deterioration of the loan turnover ratio of deposits. This rate, which was 126.5 percent in 2017, started to recover in 2018, falling to 118 percent. However, it is not a problem for the sector, which has high quality of assets and high return on equity, to find outsourcing.

The Turkish banking system can produce highly qualified products for capital markets with high receivable quality and also maximize its resource requirement at this level. In this context, traditional deposit-based banking today is retrogressing all over the world, and it is replaced by a new banking approach with a focus on venture capital and intense resource entry for capital markets. Turkey will also be directed here.

Now, five minutes to the elections, I am asking certain rating institutions that have started to take on the Turkish banks: Since these ratios are compliance with all the international regulations, on what grounds do you carry out such operations?

You and we both know that European banks, which are partners with Turkish banks today, have improved their combined financial statements thanks to these partnerships.

With the manipulative reports of the rating agencies and the accompanying triggers, the appreciation of the Turkish banking system in the stock market has fallen to very low levels. We estimate that bank shares, which are priced at multiplier ratios that do not reflect brand and book values at all, will be valued very quickly in the coming days. Because, after the elections, there will be reforms to secure and improve the system in this area.

So, what exactly is the main aim of this attack on the Turkish banking system in these days? There are two reasons for this: The first, of course, is that the attack on the banking system is part of the attack on the Turkish economy. With only a few days to the elections, they are trying to put Turkey in exchange rate-interest trap and create the perception of crisis in the economy. We know this, and we were expecting these attacks. Our institutions have taken the necessary precautions, and we will see how this perception will reverse after the election. Turkey is neither Italy nor Argentina. Everyone will see this in person.

The second main reason for the attack on the Turkish banking system is that apart from the Western banks and financial institutions, Turkish banks have started receiving other partnership and purchase requests and that especially China and the rapidly growing Asian financial markets and banking systems want to come to Turkey. For example, when these rating agencies attack the Turkish banking system, the Bank of China, one of China and the world's largest banks, officially began operating last month, with the necessary permits from the Banking Regulation and Supervision Agency (BDDK). We are aware of the demands from the Gulf region and the ongoing procurement process here.

The Turkish banking system has become strong and globalized after the 2001 crisis because our relevant institutions have been very careful here. Now, the powerful Asian groups will enter the system, which is very advantageous in terms of both book value and profitability. We see its signs, and I am already giving you the good news. Today, we must say that this is exactly what these rating agencies are trying to prevent.

However, despite all this, the banks in Turkey will be a bridge carrying the power of Asia to the West in banking and finance following energy. We are not expecting the rating agencies that are floating in misery and serving as the representatives of the rotting capital with the 2008 crisis, to explain this fact, but we also know they want to prevent it.

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