David O'Byrne in Istanbul -
Speak to any senior Turkish banking executive about the past decade, and you should expect the odd wry smile. Little wonder. It's only 11 years since the signal failure of the state to effectively regulate the banking sector brought Turkey to the brink of collapse, necessitating an international bailout. Yet today, the situation could hardly be more different, with no Turkish banks requiring help in the 2008 financial crisis or subsequently.
"2001 was a difficult year, we lost roughly 50% of our banks," smiles Hakan Binbasgil, CEO of Akbank - one of Turkey's hardiest and best managed financial institutions, which has sailed through successive crises with little difficulty.
The secret of the sector's recovery, says Binbasgil, was a stiff dose of corrective measures, regulation and close supervision. "The Turkish banking sector has gone through a very successful restructuring period after 2001," he explains. "We started to manage our banks very prudently, getting the fundamentals right - no toxic products, no liquidity problems, low leverage and high capital adequacy ratios."
That prudency has left Turkey's banks with high capital adequacy ratios and low leverage ratios, while the sound economic management of the three successive administrations of current Prime Minister Tayip Erdogan and his Justice and Development Party has left the wider Turkish economy similarly blessed.
With a sovereign debt ratio of just 40% and private sector borrowing of only 19% of GDP, Turkey has one of the fastest growing economies in the world - with GDP expected to grow 4% this year despite continuing worries over the Eurozone.
Most importantly, with per-capita GDP now in excess of $10,000 a year, living standards have soared, leading to a steady expansion of a new well-educated, tech-savvy middle class. Coupled with Turkey's young population, it's little surprise that Akbank is at the forefront of Turkish banks aiming to continue its rapid expansion targeting 70 new branches this year. "Turkey is a very large and very young country - 75m population, and half of them under 29," Binbasgil says. "And it's still comparatively under-banked with only a quarter of the branches per million people of the EU."
Addressing that young population requires the use of the latest technology and marketing strategies, explains Binbasgil, pointing out that Turkey's high usage of mobile phones and social media. "In order to sustain our growth, we have to cater to the needs of the hundreds of thousands of young people who enter the job market each year and make sure that we tailor our services to meet their expectations," says Binbasgil
"Our aim is to continue to be the state-of-the-art bank in terms of mobility, internet, i-pad, i-phone banking - you name it, we will continue to serve our customers with our state-of-the-art infrastructure," he says, adding that this year will see Akbank invest a hefty $120m in yet more new technology.
It's precisely this focus on new customer service models and Akbank's success in transforming its business in the wake of Turkey's 2001 crisis that attracted the Harvard University Kennedy School of Government to use the bank's story over the past decade as a case study.
Given Akbank's success ,it comes as a surprise to learn that one of the bank's main shareholders, the US' Citigroup, has just announced that it plans to sell the 20% equity stake that it bought in 2007 from the bank's main shareholder, Turkey's giant Sabanci Group. According to Citi's emerging markets president, Hamid Bigarli, in a recent interview, it wasn't its preferred choice to sell the stake in Akbank, it was one of the technical decisions it had to make as part of the Basel III criteria. "If there had not been such a requirement, we would have had no intention of selling our shares," he told Turkish daily Hurriyet.
What happens now is unclear. Citi is obliged to offer its shares first to Sabanci Group, which is not obliged to buy them back. However, given the high level of interest in the Turkish banking sector from cash-rich Gulf-based investors, Citi is unlikely to have to look far for a buyer. Already this year, Kuwait-based Burgan Bank has agreed to buy up a 29% stake in Eurobank Tekfen, the Turkish unit of Eurobank, while the Gulf's biggest lender Qatar National Bank has confirmed that it is talks with Dexia over the possible purchase of it's Turkish subsidary Deniz Bank.
But for Binbasgil, whatever buyer materialises, business will continue as normal. "Akbank remains the flagship of Sabanci Group so there will be no change of strategy, which remains one of 'sustainable leadership' within the sector," he smiles.
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