Türkiye: Banking Sector Outlook, 2Q 2024

The slowdown in credit growth started to become more pronounced towards the end of 2Q24 with tight monetary policy and more restrictive macroprudential measures. TL and FC credit growth levels came below the regulatory thresholds.

Key points

• Key points:
• Macroprudential measures for retail loans led to a clearer deceleration in consumer loans since late 2Q24.
• The pick-up in FC lending in the first quarter of the year slowed down with the introduction of the monthly growth limit and the implementation of reserve requirements if the limit is exceeded. However, both supply and demand conditions are still there due to competitive FC rates.
• There is an accelerating NPL trend for retail loans. However, cost of risk (CoR) remains low given the ongoing collections and high amount of provisions.
• The credit risk indicator, the share of Stage 2 and NPLs in gross loans, rose from 9.8% to 10% in 2Q24 for peer deposit banks, according to our calculations. New NPL formations picked up, too, which will probably cause an increase in CoR levels in the coming quarters.
• The sector’s capital and liquidity buffers are solid in spite of the ongoing profitability pressure due to loan growth caps and high TL funding costs. Return on equity has been on a downward trend since 1Q24. Fees and commission income continues to support profitability in both public and private banks.

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