Turkey banks face profit pressure in 2016, head of top lender Isbank says

Istanbul: Volatility in markets and stricter regulations are likely to put pressure on profits and capital adequacy ratios across Turkey’s banking sector next year, the head of top-listed lender Isbank said on Friday.

Adnan Bali told Reuters in an interview that an expected 10 per cent return on equity and 2 per cent return on assets posed a challenge to the health of the sector.

“Unfortunately there is a perception that banks profit too much. Any given (Turkish) sector has 15-20 per cent profitability, whereas it’s 10 per cent in the banking sector. A return on equity reduced to 10 per cent and a return on assets less than 2 per cent will not carry the banking sector,” Bali said.

Turkey’s implementation of the Basel III set of global banking regulations, due to come in March, is expected to crimp profit and force banks to hold more regulatory capital.

Turkish bankers have been hoping for some easing in the measures, but Deputy Prime Minister Mehmet Simsek, who is charge of the economy, told Reuters in an interview this week that the implementation would go ahead as planned.

Bali said that Turkish banks will average 10-12 per cent growth in loans and deposits in 2016, with capital adequacy ratios likely to be at 14-15 per cent.

“Within the frame of Basel III regulations that will be implemented from March, and taking into account the deposit costs as well as limits on fee and commission revenues, it will be difficult to improve profitability,” Bali said.