Turkish banks face serious profit problems if demand stays weak: Association
AA PhotoTurkey’s banking system may face “serious problems” with profitability if loan demand continues to weaken, Hüseyin Aydın, the chief executive of state-run Ziraat Bank and the head of the Banks Association of Turkey (TBB), said on Oct. 27, Reuters reported.
“Some have talked about a drop in the loan offering appetite of banks. Here the point is actually a weakening in loan demand. Banks need to raise revenue to strengthen their equity capital. They need to create a volume for when profit margins decline to be able to make returns. Turkey’s banks may face serious problems in profiting if the demand stays low,” Aydın said in a meeting in Istanbul.
“There isn’t a decrease in our appetite in 2016, but there is a drop in loan demand,” he added.
Aydın’s words came after Prime Minister Binali Yıldırım criticized lenders in a speech last week, asking them to give voice to the real sector and stop loansharking.
The Treasury will not take money from banks forever, Yıldırım said, adding that banks’ main mission must be to pour money into the real economy.
“Turkey has been overcoming exceptional conditions. Despite the recent failed coup attempt, its economy has not deteriorated. On the contrary, our economy has been growing while the world economy shrinks,” he said, adding that applying higher interest rates would bring nothing but “speculative gains.”
At the same TBB meeting, Garanti Bank CEO Fuat Erbil said the Turkish economy had remained resilient despite many unexpected domestic and foreign developments in the same meeting, but loan growth has however not been at desired levels.
“Consumer loans have dropped in real terms. Another key factor which marks this year is a slowdown in investment loans,” Erbil added.
However, he emphasized that there has been a strong growth in deposits for the first time in a while. “We have not been in an alarming condition in terms of asset levels, but we have all observed some deterioration,” Erbil said.