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INTRODUCTION
34
THE WORLD AND
TURKEY IN 2014
BANKING SECTOR
LOAN GROWTH IN THE BANKING SECTOR
SLOWED DOWN IN 2014.
The Turkish banking sector’s total assets increased 15.1%
in December 2014 over the same month of the previous
year and climbed to TL 1,994 billion in 2014. As a result, the
ratio of the sector’s total assets to GDP stands at 117%. The
sector’s asset growth in 2014 was driven mainly by growth
in loans, as the share of loans in total assets reached an all-
time record level of 61.9%. Regulator’s measures taken to
reduce the current account deficit via increasing the savings
rate were very effective on curbing loan growth in 2014. The
regulation put in effect in February 2014 limiting the number
of installments in retail credit card purchases, on top of the
measures implemented in 2013, has prominently slowed
down the growth pace of retail loans. The sector’s retail loan
book growth declined from 24.8% in 2013 to 7.3% in 2014.
The annual growth rate of overall loans, which had stood at
31.8% at the end of 2013, declined to 18.5% in 2014. Total
loans reached TL 1,241 billion as of December 2014. Growth
rate of nominal non-performing loans increased steadily
in the second half of 2014, also raising the NPL ratio. The
banking industry’s NPL ratio increased to 2.85% in 2014, up
from 2.75% in 2013.
The share of loans in total assets increased in 2014 while
the share of the securities portfolio in total assets declined.
The share of securities portfolio in total assets was 15.2% in
2014, down from 16.55% in 2013. With the effect of interest
rate hikes in the first seven months of 2014, the annual
growth rate of the securities portfolio recorded an overall
decline. Dropping to 2.2% in June, the annual growth rate of
the securities portfolio started to rise in August following the
CBT’s decision to cut interest rates and it reached 5.4%. As
a result, the banking sector’s securities portfolio grew 5.4%
compared to the same period in 2013 and totaled TL 302.3
billion.
Similar to 2013, the share of deposits in the funding
sources of the banking sector declined in 2014. The share
of deposits in total liabilities dropped to 52.8% in October
2014, down from 54.6% in 2013.
15.1%
The Turkish banking
sector’s total assets
increased 15.1%, to TL
1,994 billion.
THE SHARE OF DEPOSITS IN LIABILITIES ALSO
DECREASED IN 2014
Similar to 2013, the share of deposits in the funding sources
of the banking sector declined in 2014. The share of deposits
in liabilities declined to 52.8% in 2014, down from 54.6% at
the end of 2013. In 2014, the annual growth rate of deposits
exhibited a major decline. After registering a 22.5% increase
in 2013, the annual growth rate of deposits plummeted to
11.3% in 2014. Following the CBT’s decision to raise interest
rates sharply in January, deposit interest rates also rose in
the first quarter of 2014. The growth rate of deposits began
to slow in lock step with the decline in interest rates in the
second quarter. Deposits continued to be concentrated in
short term maturities in 2014, as the share of 1-3 month
term deposits in total deposits rose to 53.7% at year-end
2014, compared to 53% in 2013.
As a result of reserve requirement rules of the CBT as well as
the rise in the cost of deposits in line with the rising deposit
interest rates in the second half of the year, the banking
sector turned its attention to non-deposit funding sources in
2013. This trend generally continued in 2014, as non-deposit
funding sources registered larger increases than deposits
throughout the year. Consequently, the share of non-deposit
funding sources in liabilities continued to increase and rose
to 35.6%. The growth rate of shareholders’ equity saw an
upward trend throughout 2014 and materialized at 19.8%
YoY in 2014, which is the second best annual growth since
May 2013.
IN 2014, SECTOR NET PROFIT REMAINED UNCHANGED
FROM THE PREVIOUS YEAR
The sector’s annual net profit growth declined gradually
during 2014. Profits in January were 43.9% lower than the
same month of the previous year. During the year, the
decline in profitability leveled off and net profit in 2014
remained at TL 24.66 billion, the same level as the previous
year. The slowdown in profitability was due to the increase
in interest costs. The sector’s net interest income increased
14.4% on an annual basis in December 2014, reaching
TL 65.6 billion. At year-end 2014, the sector’s RoA declined
to 1.24%, from 1.42% in 2013, while RoE declined to
10.63%, from 12.73% in 2013.
The changing risk weightings of banks’ assets after the
enactment of Basel II rules in July 2012 resulted in a
reduction of capital adequacy ratios in 2013. The capital
adequacy ratio of the sector increased to 16.3% in 2014
from 15.28% at year-end 2013.
The contribution of domestic demand to the Turkish
economy is expected to increase in 2015. According to
forecasts, the annual growth rate of loans will also record
an increase following rise in domestic demand; the recovery
the annual growth rate of retail loans will be much faster
than commercial loans. The sector will not encounter any
difficulties in obtaining foreign funding in 2015 thanks to
its sound financial standing. However, the Fed’s decision to
taper off asset purchases and to start raising interest rates
in 2015 may increase the costs of foreign funding for the
sector.