Best bank – Akbank
Best debt house – Citigroup
Best M&A – Goldman Sachs
Best equity house – Garanti Securities
It’s been another tough year for Turkish banks, though 2002 showed good signs of recovery from 2001. The positive news, for the best privately owned banks, is that unfair competition from state banks looks to be on the wane, and the better banks will gain customers from expected consolidation among smaller or weaker banks.
At the top of the market, Akbank, Garanti, Yapi Kredi and Isbank still dominate. Akbank is in the best shape after the crisis of 2001, thanks to its more conservative banking strategy. Analysts say, however, that Garanti, which is perhaps the most innovative wholesale bank, is set to do well if the economy recovers. But in difficult times, Akbank can be proud of its results. In 2002 it made a profit of TL680.3 trillion ($411 million), compared with a loss of TL308.8 trillion in 2001.
These results were supported by Akbank’s strong reserves position. It has a capital ratio of 37.4%, which is much stronger than, say Garanti’s, at 13.2%. It is also helped by its efficiency – Fitch Ratings says that it has the lowest cost-income ratio of any of the Turkish banks rated by Fitch. Its efficiency ratio is fairly low, at 32%. And its losses are not as bad as at some banks. Its forex losses, which hit it hard in 2001, have declined to almost zero. Its non-performing loan ratio, at just 1.8%, is very low for the banking sector. Garanti, for example, has done very well to reduce its NPL ratio last year, but it is still at 5.1%.
Akbank’s strategy hasn’t been entirely defensive. It is making inroads into mutual funds, in which it has an 11.7% market share, up from 5.4% in 2001. It is the only Turkish bank with a franchise from American Express, and this has helped it to good profits in credit cards, in which its market share is 12%, up from 8% in 2001.
Its subsidiary, Ak Securities, remains the market leader in treasury-bill trading. One slightly worrying sign, though, is the bank’s own heavy investment in government securities.
Nonetheless, Akbank’s return on equity is impressive at 24.9%, one of the best in the region, and a vast improvement from minus 11.51% in 2001.
Akbank’s main rival, Garanti, deserves praise as well. For its leadership in trading in the equity primary market, Garanti Securities wins our award for best equity house in Turkey. Garanti is also the leader in forex and in custody, and is also strong in the mutual fund business.
Citigroup wins the best debt house award. JPMorgan has the slight edge for sovereign bonds but Citigroup makes up the ground because of its strong showing in syndicated loans, in which key transactions include a $450 million loan for Akbank, a $150 million syndicated loan for Koc Holding, and a $75 million loan for Petrol Ofisi.
Goldman Sachs wins the award for best M&A for advising UniCredito Italiano on the $240 million merger with the Koc group to form Koc Financial Services, a deal completed in mid-2002. The deal has created a bank with very strong domestic brand recognition and UniCredito’s powerful financial expertise, and should prove a top-five bank before too long.
