Banks cash in as interest rates fall
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Anatolia News Agency
Oluşturulma Tarihi: Mayıs 27, 2009 00:00
ISTANBUL - Turkish banks and global banks are following quite a different trend. While many global banks have filed for bankruptcy or posted losses due to impacts of the crisis, the picture has been quite different in Turkey. Some 17 of the banks trading at the Istanbul Stock Exchange have revealed significant increases in their profits for the first quarter of the year
While the crisis has rocked the global finance industry to its foundations, Turkey’s banks survived the year virtually unscathed, many reporting significant profits.
Many U.S. and EuropeanĞbased banks announced significantly low end of year profits, even losses in 2008. Many global banks were seized, sold or went bust. On the other hand, Turkish banks posted "considerable" profits during the same period. And during the first quarter of the year many global banks’ Turkish units have also managed to announce profits.
None of the 17 banks trading at the Istanbul Stock Exchange posted losses during the first quarter of the year. During the period, banks’ net profits rose to 3.61 billion Turkish Liras, according to the Banks Association of Turkey, or TBB. That was an increase of 23 percent compared to the same period last year.
The profits of 13 banks were higher than their profits during the first quarter of the year in 2008. But the profits of Akbank, Şekerbank, Turkish Development Bank and Yapı Kredi deteriorated from a year earlier.
Denizbank and Finansbank posted the biggest profit increases during the first three months of the year. Denizbank’s profit rose 292 percent during the first quarter of the year compared to the same period last year. Denizbank posted a profit of 71.58 million liras. Meanwhile, the profit of Finansbank rose 291 percent and reached 297.90 million liras.
Highest profit of Q1
Still, Garanti Bank posted the highest profit for the first three months of the year at 650.73 million. That was an increase of 43 percent compared to same period a year earlier. Akbank fallowed Garanti’s lead by announcing 618.17 million liras net profit. İşbank posted 605.830 million liras of net profit for the first quarter of the year, while Yapı Kredi announced net profits of 493.15 million liras.
The new banking system is based on the capital and risk relationship, said Ekrem Keskin, TBB secretary-general. "A bank that has a growing equity can take more risks. Profit is the main channel that feeds the equity. Making profit is necessary, however not enough. A banking system should be profitable. These two are different from one another."
"Currently what is triggering the profit increase in the banking system is the decline in interest rates. If the interest rates were increasing, then we would have seen declining profits in the banking system," Keskin said.
The biggest risk for the banking sector is the rapid contraction in the economy, he said. "Half of the banking system’s balance sheets consist of credits. The return of these credits is crucial for the sustainability of profits. Currently the ratio of bad loans are increasing," said Keskin. "Banks have taken on interest rate risk."
"Declining interest rates help increase banks’ profit margin. However, if things begin to shift the other way, then that would create a risky environment for the system. Putting all this data together it is important to see whether this increasing trend will be sustained for the rest for the year. The banking system wants the economic contraction to stop. It also desperately wants this bad-loan period to come to an end. Profits are important, but not enough. Return on equity is what’s crucial."
"We have collected the fruits of implementing the right strategies for years," said Denizbank Chief Executive Hakan Ateş. "We have generalized risks while increasing support to the real sector. We have never taken direct exchange risk. While our balance sheets grew we have always kept our costs in check," he said.
"We have always had a high capital strength, which allowed us to manage the negative impacts of the global crisis. Although loose monetary policy has been providing support for the banking system, we shall never forget that the reason for that is the contracting economy and declining credit quality. The way to sustain profitability is to keep credit quality from falling to unsustainable levels," said Ateş.
Denizbank’s consolidated assets rose 5 percent in the first quarter of the year compared to the end of 2008. The bank’s equities grew above the market average in 2008 due to the bank’s capital increase. Denizbank’s equities continued the company’s growth with 6 percent in the first three months of the year. The bank’s equity growth during the first quarter of the year compared to the same period last year was also higher than the market average with 40 percent. "We foresee a healthy growth through the end of 2009. We also expect to sustain profitability with the 450 new branches we intend to open this year."
Many U.S. and EuropeanĞbased banks announced significantly low end of year profits, even losses in 2008. Many global banks were seized, sold or went bust. On the other hand, Turkish banks posted "considerable" profits during the same period. And during the first quarter of the year many global banks’ Turkish units have also managed to announce profits.
None of the 17 banks trading at the Istanbul Stock Exchange posted losses during the first quarter of the year. During the period, banks’ net profits rose to 3.61 billion Turkish Liras, according to the Banks Association of Turkey, or TBB. That was an increase of 23 percent compared to the same period last year.
The profits of 13 banks were higher than their profits during the first quarter of the year in 2008. But the profits of Akbank, Şekerbank, Turkish Development Bank and Yapı Kredi deteriorated from a year earlier.
Denizbank and Finansbank posted the biggest profit increases during the first three months of the year. Denizbank’s profit rose 292 percent during the first quarter of the year compared to the same period last year. Denizbank posted a profit of 71.58 million liras. Meanwhile, the profit of Finansbank rose 291 percent and reached 297.90 million liras.
Highest profit of Q1
Still, Garanti Bank posted the highest profit for the first three months of the year at 650.73 million. That was an increase of 43 percent compared to same period a year earlier. Akbank fallowed Garanti’s lead by announcing 618.17 million liras net profit. İşbank posted 605.830 million liras of net profit for the first quarter of the year, while Yapı Kredi announced net profits of 493.15 million liras.
The new banking system is based on the capital and risk relationship, said Ekrem Keskin, TBB secretary-general. "A bank that has a growing equity can take more risks. Profit is the main channel that feeds the equity. Making profit is necessary, however not enough. A banking system should be profitable. These two are different from one another."
"Currently what is triggering the profit increase in the banking system is the decline in interest rates. If the interest rates were increasing, then we would have seen declining profits in the banking system," Keskin said.
The biggest risk for the banking sector is the rapid contraction in the economy, he said. "Half of the banking system’s balance sheets consist of credits. The return of these credits is crucial for the sustainability of profits. Currently the ratio of bad loans are increasing," said Keskin. "Banks have taken on interest rate risk."
"Declining interest rates help increase banks’ profit margin. However, if things begin to shift the other way, then that would create a risky environment for the system. Putting all this data together it is important to see whether this increasing trend will be sustained for the rest for the year. The banking system wants the economic contraction to stop. It also desperately wants this bad-loan period to come to an end. Profits are important, but not enough. Return on equity is what’s crucial."
"We have collected the fruits of implementing the right strategies for years," said Denizbank Chief Executive Hakan Ateş. "We have generalized risks while increasing support to the real sector. We have never taken direct exchange risk. While our balance sheets grew we have always kept our costs in check," he said.
"We have always had a high capital strength, which allowed us to manage the negative impacts of the global crisis. Although loose monetary policy has been providing support for the banking system, we shall never forget that the reason for that is the contracting economy and declining credit quality. The way to sustain profitability is to keep credit quality from falling to unsustainable levels," said Ateş.
Denizbank’s consolidated assets rose 5 percent in the first quarter of the year compared to the end of 2008. The bank’s equities grew above the market average in 2008 due to the bank’s capital increase. Denizbank’s equities continued the company’s growth with 6 percent in the first three months of the year. The bank’s equity growth during the first quarter of the year compared to the same period last year was also higher than the market average with 40 percent. "We foresee a healthy growth through the end of 2009. We also expect to sustain profitability with the 450 new branches we intend to open this year."