Türkiye Banking Sector Outlook. First Quarter 2024

Profitability of the sector is under pressure of high funding costs which continues to be partially offset by fees & commission income. Credit growth will be subdued due to regulationary caps in the very short term.

Key points

• Key points:
• The limited acceleration ahead of the election in March was followed by a moderation in TL credit growth caused by the macro-prudential regulations introduced for consumer credits and TL commercial credits and also by the CBRT’s rate hike in March by 500bps.
• FC lending most recently accelerated, mainly led by the SME lending of public banks. Having in mind the improved short FX positon of the real sector, we do not see any risk yet for the banking sector. Additionally, the CBRT recently (May 23rd) introduced a monthly growth limit of 2% to limit FC credits.
• Increasing de-dollarization of residents support the TL deposit growth rates. Yet, much tighter liquidity policies of the CRBT will make cost of funding even more costly for the sector.
• Asset quality is solid with adequate provisioning. Although being low, NPL ratios of commercial segment is concentrated in certain sectors. On retail side, pick-up in NPL ratios continues, mostly for general purpose loans and consumer credit cards.
• The credit risk indicator, the share of Stage 2 and NPLs in gross loans, declined further to 9.8% in 1Q24 1 for peer deposit banks, according to our calculations.

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