Turkish Banks Face Challenges Amid Economic Contraction

Turkish banks have traditionally been resilient to economic turmoil, maintaining sound loan-to-deposit ratios and capital adequacy ratios. However, the country's economic contraction is starting to take its toll, with non-performing loans (NPLs) anticipated to rise from 3.6% in 2008. Garanti and Akbank, two of Turkey's largest lenders, have already reported significant increases in bad loans, with Akbank's bad loans jumping 35% and Garanti's NPLs rising 46% in the last quarter.

Key Takeaways:

• Akbank reported a 39% drop in fourth-quarter net income, falling to TL212m, compared to the third quarter, and a 15% decline in annual net income to TL1.78bn.
• Garanti Bank's unconsolidated net profit fell 14% quarter on quarter to TL350m, and year-end net profit was down 24% from 2007 at TL1.75bn.
• Analysts polled by Reuters expect Is Bank to report a 7% drop in full-year earnings.
• Turkish banks are facing higher provisioning expenses due to increasing NPLs, which are expected to rise from 3.6% in 2008.
• Family shareholders of Akbank plan to sell stakes in both the bank and its parent, Sabanci Holding, totaling over $1bn, which may negatively impact Akbank's share price.
• Garanti's shares rallied on Friday, but Akbank's shares fell sharply after the news of the potential sale was announced.

Statistics:

• Akbank's bad loans jumped 35% in the last quarter.
• Garanti's NPLs rose 46% in the last quarter.
• Turkish banks' loan-to-deposit ratios and capital adequacy ratios are still above 13%.
• Akbank's domestic loan portfolio was worth $15.3bn by the end of October 2008.
• Garanti's loan portfolio increased by 13% in the first 11 months of 2008.
• 7% drop in full-year earnings expected by Is Bank (Source: Reuters).

Sources:

• Reuter's poll of analysts
• Istanbul Stock Exchange
• Reuters
• Ata Invest