Foreign investors get familiar with emerging Turkish banks

Turkey, with its population of about 70 million and strong growth potential, is becoming a pole of increasing foreign investment interest, including Greek. The National Bank of Greece (NBG), the country’s biggest lender, has said one of its strategic targets is its expansion into Turkey through an acquisition, while EFG Eurobank Ergasias a few months ago bought a moderately sized, Istanbul-based stockbrokerage, a move which bank officials described as «exploratory.» This last week, members of EFG Istanbul Securities held a presentation in Athens on the prospects of the Turkish economy and investment opportunities. Particular attention was given to Turkey’s banking sector. The country’s total borrowing represents just 21 percent of gross domestic product (GDP) and banking evidently has a large growth potential. The EFG Istanbul Securities officials listed private banks Akbank, Denizbank, Garanti and Finansbank, and state-controlled Halkbank as those in which about 15 foreign groups have expressed interest in acquiring stakes. This interest is expected to up bank stock valuations. A recent analysis report by Greece’s Emporiki Bank notes that the Turkish banking system underwent a period of restructuring in the 1999-2003 period, starting with the formation of the Savings & Deposits Insurance Fund (SDIF) which was designed to deal with the effects of the huge crisis that hit the sector in 1999. SDIF was assigned the fate of 20 banks that emerged as problematic. Eight of them went into receivership, while 11 others either merged or were sold. The total cost of restructuring reached $47.2 billion, and the number of banks was reduced from 81 in 1999 to 48 in 2004. At the end of last year, the Turkish bank sector had total assets of $229 billion, representing 78 percent of GDP. This is considered a low rate, reflecting the low degree of penetration in the economy and the sector’s large growth potential. Deposits represent 62 percent of the funding sources of the banking system and 47 percent of GDP. In terms of assets, of the 10 top Turkish banks, three are state-controlled and seven privately run. Four banks (two state and two private) had assets of $10-20 billion, two private banks $20-30 billion and one state bank more than $30 billion. BNP Paribas recently decided to acquire 50 percent of TEB, a medium-size Turkish bank, while Koc Financial Services (jointly owned by Italy’s Unicredito and Turkey’s Koc Holdings) announced that it is negotiating a majority acquisition of Yapi Kredi Bankasi, one of Turkey’s biggest banks. Belgium’s Fortis has also expressed interest in 100 percent of Disbank, another medium-sized concern. The balance of retail loans more than doubled in 2004 (up 106.9 percent), while corporate loans rose 42 percent. According to Emporiki’s report, mortgages are projected to be the fastest growing segment of lending in the neighboring country. In the last two years, demand for private cars skyrocketed and loans for their purchase rose 225 and 135 percent respectively, coming to represent 16 percent of total retail lending. The trend is expected to weaken in 2005. The number of credit cards went up by 26 percent in 2003 and 34 percent in 2004, with respective increases in the volume of transactions of 57 and 63 percent. Nevertheless, the volume of credit card transactions still amounts to only a fifth of those in cash.

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