Turkish Banks: A Deceleration in Earnings
We have been closely monitoring the banking sector in Turkey as the industry is usually at the focal point for investors looking at the country. Previously we analyzed the declining earnings in the industry and our finding suggested that the monetary policy framework causing higher uncertainties around FX and interest rates was the main culprit.
Turkish banks’ ROAE dipped in mid-2015 when the profitability metric was slightly higher than 10% across the board. That also marked the end of the downtrend...
Banks to Stay Under Pressure
One of the main functions that banks provide is liquidity transformation. To simplify this financial term, one can interpret it as funding shorter term assets with longer term liabilities. In case of failure of this process, the banks face a liquidity mismatch which would put them at serious risk.
Like any of its peers in other countries, Turkish watchdog, or shortly BRSA applies tough risk rules in order to stem the financial system facing the risks that...