Türkiye: Banking Sector Outlook, 4Q 2024

Profitability and NIMs of the banking sector stay under pressure due to high funding and RR costs and regulatory lending caps We expect the easing cycle of the CBRT to be a cautious combination of both rate cuts and easing over deposit and credit rules, helping the sector recover gradually 1Q25 onwards.

Key points

• Key points:
• Demand for TL commercial lending remains subdued, being substituted by FC borrowing. Consumer loan growth is driven by credit cards and general purpose loans However, trend rate of credit cards implies some moderation compared to previous months Housing loans somewhat accelerate on top of the rate cut expectations of the CBRT.
• The de-dollarization tendency of residents continues albeit more slowly The share of TL deposits increased to 57.3% and the share of FX protected deposits fell below 7% (compared to 26% in Aug 23).
• The accelerating NPL trend continues for retail loans despite the most recent restructuring options. Although being low, the NPL for SME credits has a steady upward trend as well .Cost of risk CoR increased slightly to 0.85%.
• Total NPL amount rose significantly btw 2Q24 and 3Q24 for peer public and private banks. However the increase in restructured loans was higher in public banks.
• The sector’s capital buffers are solid. Regulatory forebearance on FC risk weighted assets and security portfolios also support reported CAR ratios. The reversal of risk weights on consumer loans in Sep’ 24 additionally provided a positive impact of around 90 bps.

Authors

Geographies

Topics

Tags