Turkish Banks: Differentiating Rapidly

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At a time when some argue that Turkey is on a path to being more state-sponsored economy owing to the Treasury guaranteeing large scale projects, the performance comparison of public and private banks gains importance. Thus, we aim to compare both groups in terms of lending growth, funding capacity, capital adequacy, and liquidity position in order provide some insights.

Loan Growth

Public v Private Banks - Loan Growth

Public commercial banks have been outperforming the private peers in lending growth since May 2013 when the so-called taper tantrum hit emerging markets as well as Turkish assets. The gap between lending growth rates has seemed to remain steady. However, there are clear signs of lending recession as the volume growth has slackened systemwide.

Loans-to-Deposits Ratio

Public v Private Banks - LoansToDeposits

Remember that TRY loans-to-deposits ratio for private banks currently stands at a record high of 140%. Despite their strong FX deposit base, private banks apparently feel more constrained to finance their assets when compared to public banks. With a lower l/d spread public banks enjoy their strong local currency deposit base which is primarily compromised of retirement and civil servant salaries.

Capital Position

Public v Private Banks - CET1 Ratios

Having been way stronger than private banks regarding the capital adequacy for a long time, public banks posted a lower figure for the first time in March. This demonstrates public banks are on the ball when the market is in the doldrums.

Liquidity Position

Public v Private Banks - LiquidityRequirements

It is easy to relate this to l/d spreads given above, but, public banks interesting have been weak set of results for liquidity requirements as they have been under the threshold of 100% which all the banks in Turkey must comply. Public banks can’t be given a pat on the back for their maturity management.

To sum up, Turkish government might play hardball to support the economy through state-run banks as it already has the capacity due to its perfect debt metrics. The differentiation explained between private and public banks would be prognosticating.

You can view the charts and the official data here (PDF).

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  • Engin Yilmaz

    Dear Oğuz
    How did you calculate “Liquidity Coverage Ratio” ?
    Can you share this ratio in view of FX and TRY ?

    Sincerely
    Engin

    • It is the official data released by Turkish banking watchdog agency, and so-called “Liquidity Requirements Ratio”. The “Liquidity Coverage Ratio” differs in some ways, due to the newly-introduction of “High Quality Liquid Assets”.

      The figures I shared above contains information about both FX and TRY (total) assets and liabilities that are set to mature in one month of time. The agency forces all the bank to post a ratio above 100%, and 80% for FX assets and liabilities.

  • Engin Yilmaz

    Dear Oğuz;
    My opinion is that TRY liquids of Turkish banking system are government debt securities and TRY cash accounts are only small amounts of the total liquidity.

    Thanks your opinions,