turkish banking sector and turkish banks november 2008 sadrettin bagci tel : +90 212 336 7277 fax:...
Post on 16-Dec-2015
244 Views
Preview:
TRANSCRIPT
Turkish Banking Sector and Turkish Banks
November 2008 Sadrettin Bagci
Tel : +90 212 336 7277Fax: +90 212 282 2256
sadrettin.bagci@finansinvest.com
2
TURKISH BANKING SECTOR
Past Performance
Recent Trends
Outlook
3
BANKING SECTOR – Continous Growth since 2002
Source: The Banks Association of Turkey
Loans, TRY Billion
56 70103
153
218
280
337
0
50
100
150
200
250
300
350
2002 2003 2004 2005 2006 2007 1H08
Deposits, TRY Billion
142 161197
254
313357
405
0
50
100
150
200
250
300
350
400
450
2002 2003 2004 2005 2006 2007 1H08
Equity, TRY Billion
26
36
4654
58
73 74
0
10
20
30
40
50
60
70
80
2002 2003 2004 2005 2006 2007 1H08
Assets, TRY Billion
213250
306
397
485561
633
0
100
200
300
400
500
600
700
2002 2003 2004 2005 2006 2007 1H08
CAGR: 38.4%
CAGR: 20.9%
CAGR: 21.2%CAGR: 21.9%
1
4
BANKING SECTOR – Penetration Improved as well
Source: The Banks Association of Turkey and the Central Bank of Turkey
Loans to GDP
16% 15%18%
24%
29%33%
37%
0%
5%
10%
15%
20%
25%
30%
35%
40%
2002 2003 2004 2005 2006 2007 1H08
Deposits to GDP
41%35% 35%
39% 41% 42% 44%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2002 2003 2004 2005 2006 2007 1H08
Equity to GDP
7%
8%
8% 8%
8%
9%
8%
7%
7%
8%
8%
9%
9%
2002 2003 2004 2005 2006 2007 1H08
Assets to GDP
61%55% 55%
61% 64% 66% 69%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2002 2003 2004 2005 2006 2007 1H08
• Significant growth performance over the last six years, beating the 19.2% CAGR in Nominal GDP
2
5
BANKING SECTOR – Main Drivers of the Loan Growth post 2002
Source: The Banks Association of Turkey and the State Planning Organization
While
• Pent-up demand during the crisis period in 2001 and
• Gradual decline in interest rates
have helped for increasing loan demand after 2002,
• Easing public sector borrowing requirement due to falling domestic debt stock
has enabled banks to shift their focus from domestic borrowing instruments to loans
20%
25%
30%
35%
40%
45%
50%
55%
12 02 06 03 12 03 06 04 12 04 06 05 12 05 06 06 12 06 06 07 12 07 06 08
Loans to Assets
Security Portfolio to Assets
0%
10%
20%
30%
40%
50%
60%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
-5%
0%
5%
10%
15%
20%Domestic Debt Stock / GDP -left scale
Public Sector Borrowing Requirement -right scale
3
6
BANKING SECTOR – Share of Foreign Banks has Increased
Meanwhile the Turkish Banking Sector has attracted the interest of foreing banks thanks to the
• Strong growth potential backed by the favorable population dynamics, strengthening economic activity and of course with the EU accession progress.
• The share of foreign banks in the Turkish Banking Sector has significantly increased from a mere 3% at end 2002 to around 26% as of June 2008.
Turkish Banks with Foreing PartnersTurkish Party Foreing Party
Akbank CitibankDenizbank DexiaFortis Bank Fortis Now BNP ParibasSekerbank Bank Turan AlemTEB BNP ParibasGaranti Bank GECFYapi Kredi Bank UnicreditFinans Bank NBG
Foreign Banks in Turkey
ABN AMRO Bank N.V.Arap Turk BankBank MellatCitibankDeutsche BankEurobank TekfenHSBCING BankJPMorgan Chase BankMillennium BankSociéte GénéraleSource: Banks Association of Turkey
Share of Foreign Banks in Turkish Banking Sector
3.1%
26.0%
0%
5%
10%
15%
20%
25%
30%
2002 1H08
Source: Banking Regulation and Supervision Agency
4
7
BANKING SECTOR – Players w.r.to Ownership
PLAYERS w.r.to OWNERSHIPAs of August 2008 # of Banks # of Branches # of StaffSector 50 8,875 179,746
Deposit Banks 33 8,343 163,662Public 4 2,357 41,751Private 11 4,062 81,299Foreign 18 1,924 40,612
Participation Banks 4 483 10,701Investment & Development Banks 13 49 5,383
Source: Banks Association of Turkey
SIZE of the SECTOR w.r.to OWNERSHIPAs of August 2008, TRY Million Assets Loans Deposits EquitySector 648 347 398 83
Deposit Banks 605 320 381 69Public 184 77 136 17Private 323 181 192 39Foreign 97 62 53 13
Participation Banks 22 17 17 3Investment & Development Banks 21 10 0 10
Source: Banks Association of Turkey
MARKET SHARES w.r.to OWNERSHIPAs of August 2008 Assets Loans Deposits Equity
Deposit Banks 93% 92% 96% 84%Public 28% 22% 34% 21%Private 50% 52% 48% 47%Foreign 15% 18% 13% 16%
Participation Banks 3% 5% 4% 4%Investment & Development Banks 3% 3% 0% 12%
Source: Banks Association of Turkey
5
8
BANKING SECTOR – Recent Growth Trends
6
TRY mn 2005 2006 Oct.07 2007 Oct.08 YoY Growth YtD GrowthDeposits 251,869 308,396 329,283 350,609 425,501 29.2% 21.4%Bank Deposits 8,709 11,581 7,203 10,444 12,625 75.3% 20.9%Customer Deposits 243,160 296,815 322,080 340,165 412,876 28.2% 21.4%
LC 153,995 181,532 208,257 221,384 268,640 29.0% 21.3%FC 89,165 115,283 113,823 118,781 144,236 26.7% 21.4%FC, US$ mn 66,452 82,017 96,005 101,984 92,441 -3.7% -9.4%
Customer Time Deposits 194,304 243,933 270,180 285,364 355,876 31.7% 24.7%Customer Demand Deposits 48,857 52,882 51,900 54,801 57,000 9.8% 4.0%Demand Deposit Ratio 20.1% 17.8% 16.1% 16.1% 13.8%Source: BRSA Weekly Data
TRY mn 2005 2006 Oct.07 2007 Oct.08 YoY Growth YtD Growth
Loans 153,101 214,998 250,161 271,865 360,005 43.9% 32.4%Performing Loans 152,265 214,250 249,109 270,758 357,946 43.7% 32.2%Non-Performing Loans 7,486 8,127 9,420 9,776 11,251 19.4% 15.1%NPL Provisioning 6,650 7,379 8,368 8,669 9,192 9.8% 6.0%
NPL Ratio 4.7% 3.7% 3.6% 3.5% 3.0%NPL Provisioning Ratio 88.8% 90.8% 88.8% 88.7% 81.7%
LC Loans 108,101 156,467 188,144 202,696 252,694 34.3% 24.7%FC Loans 45,001 58,531 62,016 69,169 107,311 73.0% 55.1%FC Loans, US$mn 33,538 41,641 52,308 59,388 68,776 31.5% 15.8%
Corporate & Commercial Loans 107,457 147,888 166,242 180,052 244,302 47.0% 35.7%Retail Loans 45,644 67,110 83,919 91,813 115,703 37.9% 26.0%
Consumer Loans 28,618 45,931 59,595 65,813 83,343 39.8% 26.6%Housing Loans 12,405 22,165 28,392 30,898 38,305 34.9% 24.0%Auto Loans 6,146 6,405 5,766 5,928 5,802 0.6% -2.1%General Purpose Loans 10,066 17,362 25,436 28,987 39,235 54.2% 35.4%
Credit Card Loans 17,026 21,179 24,324 26,000 32,360 33.0% 24.5%Source: BRSA Weekly Data
9
BANKING SECTOR – Recent Growth Trends
6
TRY MillionLoans 374,690 378,044 366,221
-TRY Loans 268,142 269,903 273,941 -FX Loans 106,548 108,141 92,280 -FX Loans, $ 70,287 72,113 74,927Non-Performing Loans (Net) 2,546 2,444 2,328
Non-Performing Loans (Gross) 12,278 12,069 11,399 Provision for NPL's 9,746 9,625 9,071Total Deposits and Funds (3) 442,674 444,284 432,737
-Time Deposits and Participation Accounts 383,128 381,137 364,824 -Demand Deposits and Special Current Accounts 59,546 63,147 67,913 -Savings Deposits-TRY 173,444 172,938 165,511 -FX Deposits (Natural Persons) 83,820 83,970 82,594 -FX Deposits (Natural Persons), $ 55,294 55,995 67,062 -Other Deposits (Commercial Deposits included) 166,832 168,593 166,911 - TRY 100,127 101,531 108,081 - FX 66,705 67,062 58,830 - FX, $ 44,004 44,720 47,767 -Deposits Under Insurance 124,286 123,925 121,592Source: BRSA Daily Banking Data
NPL Ratio 3.17% 3.09% 3.02%NPL Coverage Ratio 79.38% 79.75% 79.58%Demand Deposit Ratio 13.5% 14.2% 15.7%Guaranteed Deposits / Total Deposits 28.1% 27.9% 28.1%
10.11.08 31.10.08 29.09.08
10
BANKING SECTOR – Composition of Assets & Funding
Tangible Assets3%
Other Assets5%
Liquid Assets12%
Securities27%
Loans, Net53%
External Borrowing
14%
Short Term Funds
5%
Other Liabilities7%
Shareholders' Equity13%
Deposits61%
Source: Banking Regulation and Supervision Agency
• While loans are the main placement item with 53% share in total assets as of August 2008,
• The funding side is mainly composed of deposits with 61% share
7
11
BANKING SECTOR – Composition of Loans
Source: The Central Bank of Turkey
Breakdown of Retail Loans, TRY Million
0
20,000
40,000
60,000
80,000
100,000
120,000
10
02
02
03
06
03
10
03
02
04
06
04
10
04
02
05
06
05
10
05
02
06
06
06
10
06
02
07
06
07
10
07
02
08
06
08
10
08
Credit Card Loans
Other Consumer Loans
Auto Loans
Housing Loans
8
Breakdown of Loans 2005 2006 Oct.07 2007 Oct.08
LC Loans 70.6% 72.8% 75.2% 74.6% 70.2%FC Loans 29.4% 27.2% 24.8% 25.4% 29.8%Corporate & Commercial Loans 70.2% 68.8% 66.5% 66.2% 67.9%Retail Loans 29.8% 31.2% 33.5% 33.8% 32.1%
Consumer Loans 18.7% 21.4% 23.8% 24.2% 23.2%Housing Loans 8.1% 10.3% 11.3% 11.4% 10.6%Auto Loans 4.0% 3.0% 2.3% 2.2% 1.6%General Purpose Loans 6.6% 8.1% 10.2% 10.7% 10.9%
Credit Card Loans 11.1% 9.9% 9.7% 9.6% 9.0%Source: BRSA Weekly Data
12
BANKING SECTOR – Interest Rates
Source: The Central Bank of Turkey and Istanbul Stock Exchange
0
100
200
300
400
500
600
700
04
06
07
06
10
06
01
07
04
07
07
07
10
07
01
08
04
08
07
08
10
08
10.00
12.00
14.00
16.00
18.00
20.00
22.00
24.00
Duration
Interest Rates in theTreasury Auctions
12.00
14.00
16.00
18.00
20.00
22.00
24.00
04
06
07
06
10
06
01
07
04
07
07
07
10
07
01
08
04
08
07
08
10
08
Interest Rates in the Treasury Auctions
Policy Rate Compound
Source: The Turkish Treasury and the Central Bank of Turkey
9
Benchmark Interest Rate vs. CBRT's Policy Rate, %
12.00
14.00
16.00
18.00
20.00
22.00
24.00
26.00
28.00
11 0
5
01 0
6
03 0
6
05 0
6
07 0
6
09 0
6
11 0
6
01 0
7
03 0
7
05 0
7
07 0
7
09 0
7
11 0
7
01 0
8
03 0
8
05 0
8
07 0
8
09 0
8
Benchmark Bond Compound Interest Rate
CBRT Compound Policy Rate
13
BANKING SECTOR – Liquidity Ratios have Diminished but Still at Comfortable Levels
1.00
1.20
1.40
1.60
1.80
2.00
2.20
2.40
2.60
2.80
08 07 09 07 10 07 11 07 12 07 01 08 02 08 03 08 04 08 05 08 06 08 07 08 08 08
1 Week
1Month
Source: Banking Regulation and Supervision Agency – Monthly Bulletin
• Compared to a year ago the 1 Week and 1 Month Liquidity ratios have been following a declining path, but we believe these levels are still strong for our banking sector
10
14
BANKING SECTOR – Capital Strength is Fair Enough
Source: Banking Regulation and Supervision Agency – Monthly Bulletin
• The sector’s Capital Adequacy Ratio (CAR) stood at 17.7% in August 2008, indicating a 123bps decline with respect to December 2007 and a 96bps decline from August 2007. The inclusion of operational risk since June 2007 and the increasing risk weighting of non-cash loans since January 2008 all played a role in the decline in CAR rates in 2008.
10%
12%
14%
16%
18%
20%
08 07 09 07 10 07 11 07 12 07 01 08 02 08 03 08 04 08 05 08 06 08 07 08 08 08
CAR
Equity / Assets
11
15
BANKING SECTOR – Comparison of Capital Strength
Source: IMF Global Financial Stability Report – October 2008
Bank Capital to Assets
0.02.04.06.08.0
10.012.014.016.018.020.0
Albania
Czech
Rep
ublic
Hunga
ry
Roman
ia
Lithu
ania
Poland
Bulgar
iaLa
tvia
Mon
tene
gro
Israe
l
Estonia
Slovak
Rep
ublic
Croat
ia
Ukrain
e
Turk
ey
Bosnia
and
Her
zego
vina
Russia
Belaru
s
Serbia
Mold
ova
CAR
0
5
10
15
20
25
30
35
Israe
l
Lithu
ania
Hunga
ry
Latv
ia
Czech
Rep
ublic
Poland
Slovak
Rep
ublic
Roman
ia
Bulgar
ia
Ukrain
e
Estonia
Russia
Croat
ia
Albania
Bosnia
and
Her
zego
vina
Mon
tene
gro
Mac
edon
ia
Turk
ey
Belaru
s
Serbia
Mold
ova
12
16
BANKING SECTOR – Comparison of NPLs may become a Major Problem
Source: Banking Regulation and Supervision Agency – Monthly Bulletin
• Though we still feel confident about the NPL ratio of the sector, which is 3.2% as end of August 2008, the possibility of further slow-down in Euro Zone economy may pave for a rise.
• Given that our exports to Euro Zone constitutes almost half of the total exports of Turkey, the importance of the Euro area economic growth becomes more significant.
2.7%
2.8%
2.9%
3.0%
3.1%
3.2%
3.3%
3.4%
3.5%
3.6%
3.7%
08 07 09 07 10 07 11 07 12 07 01 08 02 08 03 08 04 08 05 08 06 08 07 08 08 08
76%
78%
80%
82%
84%
86%
88%
90%
NPL Ratio
NPL Provisioning
13
17
BANKING SECTOR – Comparison of NPLsNPL Provisioning
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
Roman
ia
Ukrain
e
Czech
Rep
ublic
Israe
l
Belaru
s
Croat
ia
Mon
tene
gro
Turk
ey
Slovak
Rep
ublic
Mold
ova
Latv
ia
Russia
NPL Ratio
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Latv
ia
Estonia
Belaru
s
Lithu
ania
Hunga
ry
Bulgar
iaIsr
ael
Russia
Slovak
Rep
ublic
Czech
Rep
ublic
Bosnia
and
Her
zego
vina
Poland
Mon
tene
gro
Albania
Turk
ey
Mold
ova
Serbia
Croat
ia
Mac
edon
ia
Roman
ia
Ukrain
e
Source: IMF Global Financial Stability Report – October 2008
14
18
BANKING SECTOR – Short FX Positions were Cut Recently
Source: Banking Regulation and Supervision Agency – Weekly Bulletin
• We had observed that banks reduced their on balance short FX positions from over US$14bn in mid August 2008 to around US$5.2bn by end of October 2008. Although the on balance short FX positions are mostly hedged (net short FX position of the system is US$1.3bn as of 31 October 2008), we still harbour some doubts regarding the quality of the hedging.
15
-20,000
-15,000
-10,000
-5,000
0
5,000
10,000
15,000
20,000
10
05
12
05
02
06
04
06
06
06
08
06
10
06
12
06
02
07
04
07
06
07
08
07
10
07
12
07
02
08
04
08
06
08
08
08
10
08
Net FX PositionOn BalanceOff Balance
19
BANKING SECTOR – Profitability has slowed down
Source: Banking Regulation and Supervision Agency – Monthly Bulletin
• We haven’t observed that a severe deterioration in the top-line growth yet but especially the increasing provisioning and the higher OPEX growth compared to the overall revenue growth, we face with a decline in the profitability ratios.
• We are almost sure that the economic imbalances will result in a further slow down in the profitability ratios in the following three to nine months time.
17%
18%
19%
20%
21%
22%
23%
08 07 09 07 10 07 11 07 12 07 01 08 02 08 03 08 04 08 05 08 06 08 07 08 08 08
2.2%
2.3%
2.4%
2.5%
2.6%
2.7%
2.8%
2.9%
3.0%
RoAE -left scale
RoAA -right scale
17
20
BANKING SECTOR – Satisfactory Top-Line Growth
Source: Banking Regulation and Supervision Agency – Monthly Bulletin
• As Spread and Net Interest Margin (NIM), we have observed a slow-down in the pace of top-line (Net Interest Income) growth. It is lightly above 20% YoY, but the growth level was higher in early 2008.
• Although we think the growth pace is adequate at the moment, due to the sudden jump in the interest rates started late in September 2008 is expected to further put pressure on spread and margins.
3.00%
3.50%
4.00%
4.50%
5.00%
5.50%
6.00%
08 07 09 07 10 07 11 07 12 07 01 08 02 08 03 08 04 08 05 08 06 08 07 08 08 08
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
NII Growth
SpreadNIM
18
21
BANKING SECTOR – Comparison of Profitability
RoAE
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Mon
tene
gro
Bosnia
and
Her
zego
vina
Serbia
Croat
ia
Roman
ia
Ukrain
e
Belaru
s
Mac
edon
ia
Slovak
Rep
ublic
Israe
l
Turk
ey
Albania
Hunga
ry
Russia
Poland
Latv
ia
Mold
ova
Czech
Rep
ublic
Bulgar
ia
Lithu
ania
Estonia
Source: IMF Global Financial Stability Report – October 2008
19
22
BANKING SECTOR – Consumer Confidence
Source: The Central Bank of Turkey
• The latest survey is as of September 2008, a lot has changed since then.
• But we belive the consumer confidence should be knocked-out for the time being, given the strong relationship between the exchange rate and the consumer confidence.
• On top of that the ongoing interest rates in the market limits the borrowing possibility.
20
Consumer Confidence and Borrowing Possibility
75
80
85
90
95
100
105
09
05
12
05
03
06
06
06
09
06
12
06
03
07
06
07
09
07
12
07
03
08
06
08
09
08
25
27
29
31
33
35
37
Consumer Confidence Index -left scaleBorrowing Possibility (next 3 months) -right scale
Consumer Confidence vs. Inverse TRY/USD
75
80
85
90
95
100
105
110
09
04
12
04
03
05
06
05
09
05
12
05
03
06
06
06
09
06
12
06
03
07
06
07
09
07
12
07
03
08
06
08
09
08
0.60
0.65
0.70
0.75
0.80
0.85
0.90Consumer Confidence Index -left scaleInverse TRY/USD -right scale
23
BANKING SECTOR – Portfolio Preferences
• Foreign investors have more faith in the Turkish Capital Markets
Portfolio Preferences of Citizens, % Share
2004 2005 2006 2007 Sep.08FX Deposits 25.7 22.1 25.4 22.9 23.1TL Deposits 34.9 42.0 42.8 46.1 47.8Repo 0.6 0.4 0.6 0.6 0.5TL Domestic Borrowing Instruments 19.2 15.5 13.5 12.2 12.2FX Borrowing Instruments 0.9 0.5 0.4 0.3 0.2Eurobond 1.9 1.5 1.4 0.9 0.8Mutual Funds 8.3 8.5 5.8 5.8 5.1Participation Accounts 2.0 2.5 2.8 3.3 3.5Equity 5.7 6.6 6.6 6.9 5.7Pension Funds 0.1 0.4 0.7 1.0 1.2Source: State Planning Organization
Portfolio Preferences of Foreigners, % Share
2004 2005 2006 2007 Sep.08Equity 47.0 58.0 52.4 65.5 58.5T-Bills and Bonds 38.3 35.0 39.2 29.6 34.0Eurobond 3.5 1.1 0.8 0.3 0.8Deposits 11.3 5.9 7.6 4.6 6.8Source: State Planning Organization
21
24
BANKING SECTOR – Outlook
Short-Term Outlook
• Going forward we expect the high interest rate environment to prevail during the rest of 2008.
• Banks are likely to end up the year with around 35% YoY loan growth.
• We expect deposit growth to be around 25% YoY in 2008.
Long-Term Outlook
• Security portfolio build up will gain some pace and the structure of the securities is expected to turn out to be floating rate rather than fixed rate securities.
• We forecast the loan growth at 16% in 2009 and deposit growth at around 20%.
• Thanks to the postponement of Basel-II, which would be in effect starting from 2009 according to the previous plans, banks will be able to meet the necessary capital requirements.
• Syndication roll-overs will not be a major problem for Turkish banks in our view.
• We expect the banks providing the four main criteria to outperform the market going forward. These are:
Sufficient liquidity
Wide funding base
Strong capitalization
Low OPEX
22
25
BANKING SECTOR – ISE Total vs ISE Listed Banks
25.4%21.5%
26.0%29.1%
38.5% 36.5%40.2%
35.3%
26.9% 26.7%
30.7%
23.6%25.4%
33.2%
37.8%
51.6%
0%
10%
20%
30%
40%
50%
60%
2001 2002 2003 2004 2005 2006 2007 2008
Banks Market Capitalization / ISE Total
Trading Volume of Banks / ISE Total
Source: Istanbul Stock Exchange
• There are 17 banks listed on the ISE as of today with total market capitalization of TRY62bn (US$41bn)
• While banks constitute 35% of the total market capitalization of the ISE total, the trading volume of banks is more significant at slightly over 50% in 2008.
23
26
BANKING SECTOR – ISE Banks’ Performance in the last one year
Source: FinansInvest Research
• Banking sector index has fallen by almost 60% compared to a year ago.
• Banks have also underperformed the ISE-100 by 15% in the last one year.
24
0
20
40
60
80
100
120
11
07
12
07
01
08
02
08
03
08
04
08
05
08
06
08
07
08
08
08
09
08
10
08
11
08
0.75
0.80
0.85
0.90
0.95
1.00
Banking SectorIndex NominalPerformanceBanking SectorIndex RelativePerformance
27
BANKING SECTOR – Trading at their historical lows
Source: FinansInvest Research Forecasts
• The banks in our coverage are trading very close to their historical low P/E and P/BV multiples.
12-M FW Looking P/E and P/BV Ratios
0.00
5.00
10.00
15.00
20.00
25.00
2003 2004 2005 2006 2007 2008 2009
0.00
0.50
1.00
1.50
2.00
2.50P/E -left scale
P/BV -right scale
25
top related