The chief executive of Turkey’s largest private bank, Isbank, has highlighted the challenges that lie ahead for the country’s banking sector in the midst of economic uncertainties. Hakan Aran, the CEO of Isbank, expressed concerns about the impact of Turkey’s economic turnaround and the ongoing struggle with inflation.
Aran emphasized that Turkish banks are set to face a tough financial environment in the coming years, with repercussions likely to be felt well into 2025. The pressure on financial institutions is expected to stem from measures taken by Turkish authorities to combat inflation through high interest rates and tightening policies.
One of the key issues facing Turkish banks is the erosion of asset quality and the challenges in maintaining net interest margins. Aran pointed out that banks are already experiencing a decline in asset quality, while net interest margins are under significant pressure. The decrease in return on equity for banks is also a cause for concern, with the potential for reporting losses under ‘inflation accounting’.
Anticipated Monetary Policy Changes
Aran predicted that the central bank would initiate a series of interest rate cuts starting from November, with a 250 basis-point cut expected initially. This move is in line with analysts’ projections, with further rate cuts anticipated in the months to come. The gradual easing of monetary policy is aimed at addressing inflation and stimulating economic growth.
Despite the challenges facing the banking sector, Isbank is forging ahead with ambitious growth plans and international expansion strategies. The bank aims to strengthen its presence in payment system infrastructure, digital platforms, and service banking through partnerships and acquisitions abroad. Isbank is evaluating opportunities for acquisitions and partnerships in the United Kingdom and the European Union, with a focus on digital banking and payment systems.
Aran highlighted Isbank’s goal of becoming a prominent player in the global banking industry, with a focus on expanding its geographical reach and client base. The bank is looking to transition into a regional fintech hub, leveraging its recent merger with Moka Payment Institution to drive growth in payments infrastructure, digital banking, and service banking. While traditional banking currently accounts for 90% of Isbank’s income, the bank aims to increase revenue from new platforms in the medium term.
Turkish banks are facing a challenging road ahead, marked by economic uncertainties and regulatory pressures. Despite these obstacles, Isbank remains committed to its growth trajectory and international expansion plans. By navigating the evolving financial landscape and embracing digital transformation, Turkish banks can position themselves for long-term success in the global banking industry.