VKF_FRAE_2018_uyg11

34 Section I: Introduction Turkey’s banking sector maintained its strong financial structure despite all the adversities experienced in 2018. Turkey’s banking sector assets recorded growth came at 18.7% driven by loans in 2018, climbing to TL 3.9 trillion. Loan growth initially slowed compared to a year earlier, but then picked up as the rapid rise in the foreign exchange rate in August led to an increase in foreign currency commercial loans. However, the slowing economy in the second half of the year caused loan growth to lose momentum as well. As loan growth down shifted, non-performing loans started to rise. As a result of the increased domestic borrowing requirement of the Treasury, the securities portfolio of banks expanded in 2018. After posting 14.3% growth in 2017, the banking sector’s securities portfolio expanded 19% as of the end of 2018. In 2019, loan growth is projected to decelerate and NPLs are forecast to increase in the first half, in parallel with the slowdown in the Turkish economy. However, absent a new spike in foreign exchange rates and or a rise in interest rates, Turkey’s economy is widely expected to return to the growth in the second half of 2019, with NPLs decelerating. In 2018, deposits retained their importance within total liabilities. Deposits remained the main funding source of the banking sector in 2018. However, non-deposit funding sources accounted for a larger share of total liabilities during the year. The rise in the foreign exchange rate led to an increase in both deposits and non-deposit funding sources. In 2018, the loan to deposit ratio hovered above 100%, while the TL loan/deposit ratio stood at 138.1%. Deposits were concentrated in short term accounts, as in previous years. Positive outlook in capital adequacy The banking sector reported lower profit growth in 2018 due to the rise in the foreign exchange rate and the base effect from the last year. The sector posted TL 53.5 billion in profit for the year. The capital adequacy ratio (CAR), which down trended the first half of 2018, reversed course in third quarter. The CAR rose from 16.8% at the end of 2017 to 18.3% at the end of 2018. Banking sector In 2018, Turkey’s banking sector assets recorded 18.7% growth driven by loans, climbing to TL 3.9 trillion. The banking sector achieved 19% growth in 2018... Source: BRSA Loans 30 50 10 -10 Loans (Adjusted exchange rate, y-y, %) Loans (y-y, %) Assets (y-y, %) 12/09 12/10 12/11 12/12 12/13 12/14 12/15 12/16 12/17 12/18 THE WORLD AND TURKEY IN 2018