Awards for Excellence 2016
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In dramatic contrast to its increasingly regressive politics, Turkey’s banking sector remains among the most advanced and sophisticated in the developing markets. Over the past 15 years, a combination of high profitability and outstanding growth opportunities in a relatively open market has fuelled intense competition between the country’s lenders.
As a result, leading private sector players Akbank, Garanti Bank and Isbank – and even second-tier houses such as Yapi Kredi, Vakifbank and Sekerbank – have been at the forefront of innovation in terms of technology, risk management and funding. Banking customers in Turkey have access to a range of digital banking facilities not available in many developed markets, while foreign investors have developed an almost insatiable appetite for Turkish bank debt in an ever-expanding range of formats.
Curbs on consumer lending and currency weakness have put a slight dampener on profitability across the sector over the past three years – however, returns on equity for the top tier remain comfortably above banks’ cost of capital, while double-digit growth rates last year were unrivalled in most of emerging Europe.
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Hakan Binbasgil, Akbank |
Nevertheless, the changing market and regulatory environment has presented challenges for Turkey’s banks – and the lender that has so far responded to them most effectively has been Akbank, the winner of this year’s best bank in CEE award. Over the past three years, under the leadership of chief executive Hakan Binbasgil, the bank has steadily rebalanced away from consumer lending towards more lucrative and fast-growing segments such as small and medium-sized enterprises. An increased focus on cross-selling and capital light products has also helped to boost profitability and protect Akbank’s strong capital base. Akbank’s combination of dynamic growth and prudent risk management has long since earned the lender a loyal following among debt investors, and it is now being recognized by their equity counterparts. In the first five months of the year, the bank’s stock rose by 19% against 6.3% for Garanti, making Akbank the largest Turkish lender by market capitalization for the first time since March 2012.
President Recep Tayyip Erdogan’s increasingly nationalist politics could yet derail the Turkish bank success story, in which case the sector’s dependence on foreign funding might become a liability. It is a testament to the strength of the country’s lenders, however, that despite massive currency depreciation and increasing market nerves over the past three years, investors have so far kept faith with the sector.
Turkey’s banks – and Akbank in particular – have proved that emerging market lenders can compete not only regionally but globally. It is to be hoped they will be allowed to continue to do so.
