Turkish banks’ net income rises by 9% y/y to €2.8bn in January-April

By bne IntelliNews June 2, 2015

The Turkish banking industry’s net income rose by 9% y/y to TRY8.3bn (€2.8bn) in January-April, data of the banking watchdog BDDK showed on June 2.

Total loans extended by the banks amounted to TRY1.36 trillion as of end-April, representing a 25% y/y increase while gross non-performing loans rose by 26.2% y/y. But, the NPL/total loan ratio was still 2.94% at the end of April. The banking industry’s total assets stood at TRY2.18 trillion, pointing to an 21.5% y/y increase, data also showed.

The Turkish banking sector’s net income was TRY24.66bn last year, unchanged from 2013. The banking sector's profit is expected to rise by 8% this year, chairman of the Banks Association of Turkey (TBB), Huseyin Aydin said on January 22. Aydin predicted that the industry's loans and deposits would grow by 16.8% and 13.5%, respectively while he expected a 14.6% increase in banks’ assets this year.

Continued moderate loan growth in Turkey in Q1 is mildly credit positive for the banking sector, said Fitch Ratings on May 19, adding that this should help contain asset quality problems, prevent banks from overstretching their balance sheets and also reduce the risk of broader macroeconomic imbalances building up.

The Turkish Lira's steep decline in recent months will likely imply worsening asset quality and growth in risk-weighted assets (RWAs) that will become pressure points for Turkish financial institutions, said Moody’s in May.

Although Turkey’ banks are fully hedged, their rising foreign currency borrowing has occurred in tandem with declining profitability and could create a problem for banks if their hedges do not hold due to counterparty risk or the second round effects of the large open foreign exchange position in the corporate sector (at an estimated 22% of GDP) on banks’ asset quality, said S&P in May.

Turkish banking industry as of January-April
  2014 2015 y/y
Net Interest Income (TRY mn)  19,111  23,459 22.7%
Net profit (TRY mn) 7,626 8,306 8.9%
Assets (TRY mn) 1,792,942 2,178,972 21.5%
Loans (TRY mn) 1,086,140 1,355,824 24.8%
Gross NPL (TRY mn) 31,591.29 39,862.06 26.2%
Gross NPL / Total Loans 2.91% 2.94% 5.6bp
Total Equity (TRY mn) 206,883 234,396 13.3%
Paid-in Capital (TRY mn) 60,607 68,149 12.4%
Capital Adequacy Ratio 16.07% 15.10% -0.23bp
source: bddk  

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