Nobody should be jealous about high profitability of Turkish banking sector: Bank chair

Hülya Güler - ISTANBUL

Akbank Chair Suzan Sabancı Dinçer has said that nobody should be jealous of the high profitability of banks, as the higher equity on capital they have, the stronger the economy is, noting that the Turkish economy was robust in three key areas, namely public finances, the budget and the banking sector.

She added the banking sector was the heart of the economy and the sector’s equity base was of great importance in stimulating economic growth.

“In a bid to achieve Turkey’s 2023 economic targets, banks should be able to back the economy. They should have a high equity base with higher yields,” she said in an interview ahead of the Center of Excellence in Finance (CEF) Conference, which will start on June 3, adding that she found the recent emphasis on the decline in Turkey’s banks’ equity base and profitability by several sector representatives quite accurate.

“It is of great importance for banks to have a strong equity base in offering loans with lower costs... High profit levels in the sector should not make anyone jealous, as the higher equity levels our banks have, the stronger our economy will be. In this vein, Turkey’s economy administration is quite aware of this and they embrace all elements in the sector,” she noted.

According to Sabancı Dinçer, nobody should be pessimistic about Turkey and its potential, as its economy was quite strong in three key areas.


Three key areas

Saying that it was highly probable for global markets to see further fluctuations amid the expected rate hikes by the U.S. Federal Reserve (Fed) and Brexit fears, she noted, “There are however three crucial data points which determine economic performance: Public debt levels, budget deficit levels and the banking sector. We have seen that Turkey is strong in terms of these three key elements. The public debt-to-GDP level is quite good at around 33 percent in Turkey, much lower than many countries, such as Japan, where this rate is 228 percent. Even if this rate increases up to 45 percent due to Turkey’s growth policies or other reasons, we will still have space to maneuver.”

She also noted that the rate cuts by the Central Bank have fueled expectations for cuts in loan rates.

“The lower the loan rates are, the more comfortable the banks will be as we take the deposits of the saving holders and offer this money to companies or people as loans. They can repay their loans easier with lower loan rates, which is good for us, as sector representatives,” said Sabancı Dinçer.

She underlined that the sector has recently seen a rise in demands for cuts in loan rates, but some global and local economic developments have slowed down this move.

“Yes, the Central Bank recently started to cut rates, but at the same time we have seen that the Fed is set to make further rate cuts and the possibility of Britain’s exit from the European Union has created an additional pressure over the markets. Besides, we have seen steep fluctuations in the foreign exchange market inside. These have all put the rates under pressure. The forex markets have recently started to calm down, as well as the inflation rate. With the help of these positive developments, the loan rates can be expected to ease in the upcoming period,” she added.

Sabancı Dinçer said the Turkish economy has showed resilience in the face of global economic fluctuations, regional risks and a highly loaded election cycle over the last couple of years. 

“We forecast that the economy will close the year with around 4 percent in an easier manner. We have also seen some relief in the inflation rate thanks to some decline in food prices. The economy will close the year with around 7.7-7.8 percent of inflation rate, we estimate,” she added.

At the first CEF conference, during which former Deputy Prime Minister Ali Babacan will be the keynote speaker, over 450 high ranking finance professionals are expected to attend, said Sabancı University Finance Department President and CEF Founder Özgür Demirtaş.