Their equally well educated peers in central and eastern Europe might be able to talk the talk just as well, but Istanbul’s young banking Turks can walk the walk with a sense of assurance born of having managed their way out of crises and subsequently having reaped the rewards of the boom times.
Kemal Kaya, chief executive of Yapi Kredi Bank, Turkey’s number four player measured by assets, could arguably be the archetype of the rising stars in the country’s financial services industry. Fresh from addressing a 600-strong audience of the bank’s branch managers, he exudes a confidence that threatens to convert even the most cynical observer into a fervent believer in the future wellbeing of the Turkish banking sector. Although seated on a plush leather sofa on the 24th floor of Yapi Kredi’s headquarters in the Levent quarter of Istanbul, it soon becomes clear that Kaya is not interested in building castles in the air but rather a banking group with strong financial foundations and with a strong profitability profile. Ask him what his primary goal in life is and in a nanosecond he replies: "To make Yapi Kredi the number one bank in Turkey. Why shouldn’t it be?"
Why not indeed given the partners in the 50/50 joint venture that owns Yapi Kredi. On the Turkish side there is the might of Koc Holding, the leading conglomerate in Turkey. Ranking alongside Koc is Italy’s UniCredit, which is the number one banking group in the central and eastern European region. "We have the right shareholders and the right business strategy," says Kaya. And he should know – he played a key role in forging the partnership between Koc and UniCredit, which started in 2002 and also came up with Yapi Kredi’s business model, which is based on the success that Kaya enjoyed when he headed Kocbank, which bought Yapi Kredi in 2005.
At Kocbank Kaya developed a simple but effective strategy based on aggressive organic growth, improved risk management and cost controls and a strong focus on return on equity. It’s a recipe that obviously worked for Kocbank – in the space of three years it was transformed from being a bit-part player in Turkey to one of the country’s most dynamic medium-size banks with a none-too-shabby return on equity of 20%. When in 2005 the chance came up to buy Yapi Kredi – "the best private sector bank available for sale" is Kaya’s description – he and his powerful backers jumped at the chance at taking Yapi Kredi back to the top of the Turkey banking pile. Before the banking sector crisis of 2001, Yapi Kredi had been the number one bank by assets but a series of mistakes by the previous management team and its shareholders had left it with a weakened balance sheet and an unfocused business plan.
Although Kocbank had a better track record in recent years, it still only had a third of the assets that the old Yapi Kredi had and just 170 branches compared with Yapi Kredi’s 410. The past year has unsurprisingly been one of hectic activity, admits Kaya. "We’ve improved Yapi Kredi’s capital base, divested non-core holdings, raised €850 million of subordinated debt and adopted a new business plan based on the one that worked so well for Kocbank," says Kaya confidently.
As a result of the complete integration and reorganization of all the Kocbank and Yapi Kredi units, the new – for which read improved – Yapi Kredi banking group has emerged as a market leader in areas such as asset management, factoring and leasing and one of the strongest players in high-growth sectors such as credit cards.
It’s a measure of Kaya’s pragmatism that he was happy to see the Kocbank name disappear from view and for all the new group’s operations to be branded under the single Yapi Kredi flag. "Market research showed that the Yapi Kredi name enjoyed better brand recognition," concedes Kaya with just the merest hint of regret. He also applauds the fact that UniCredit has been sensitive to Turkish sensibilities and has been happy to see the Yapi Kredi name preserved. "Among the international banks in the region UniCredit has had a unique strategy in the New Europe in that while it has given international support to its acquisitions it has kept the local names and identities of the banks it has bought into," says Kaya.
But as somebody who clearly looks forwards rather than back, Kaya’s mind is firmly focused on the tasks that lie ahead. "In 2007 you will see the full performance of Yapi Kredi," he claims, adding that on the back of his experience at Kocbank, Yapi Kredi now boasts a business plan that is able to absorb unexpected volatilities, based on the avoidance of pitfalls such as interest rate and currency mismatches.
In terms of business development strategy Kaya says that thanks to the financial backing of Koc and UniCredit he is keen to see Yapi Kredi expand its lending activities across all market segments. At the same time he intends to add a further 100 branches over the next two years to further boost the bank’s market share. "A bigger network will give us improved economies of scale," he says, adding that at the same time, under the business plan, new branches must be profitable within 18 months of opening for business. "Recent results show that we’re hitting that target within 12 months," says Kaya with obvious pride.
Given the hectic events of the past year or so Kaya might be forgiven for staying within the comfortable confines of Yapi Kredi’s headquarters in Istanbul. But not a bit of it. One of his more challenging ambitions is to visit every single one of the bank’s outlets. In the past 12 months he’s already notched up 300 visits. "I’m just about past halfway through," he acknowledges, before adding with obvious relish: "I love being in contact with the people who are on the front line." A leader of a major corporation that likes to get his hands dirty and mix with the troops, now there’s ambition.