The CEO of Isbank, Hakan Aran, is warning that Turkish banks are going to face severe challenges well into the next year. According to him, these challenges stem from the economic turnaround in the country which has put significant pressure on the financial sector. He predicts that banks will experience a deterioration in their net interest margin this year, followed by a decline in asset quality in the following year.
Aran highlights that the high-interest rates and tightening measures imposed by Turkish authorities to combat inflation have adversely affected the financial sector’s balance sheets. He mentions that inflation accounting has not been mandated for banks, which might be masking potential losses that they would report if such accounting practices were in place.
Monetary Policy and Predictions
The CEO foresees the central bank initiating interest rate cuts as early as November, with a 250 basis-point cut expected. He believes that by the end of 2025, the interest rate will have decreased significantly. Aran also predicts that annual inflation rates will drop in the coming years, approaching the Central Bank’s 5% target.
International Expansion
Isbank, celebrating its 100-year anniversary, is looking to expand internationally by focusing on payment system infrastructure, digital platforms, and service banking. This strategy involves establishing new partnerships and making acquisitions abroad. Aran mentions that the bank is evaluating opportunities in the United Kingdom and the European Union to enhance its presence in digital banking.
Despite facing challenges, Isbank aims to become one of the leading banks globally in terms of breadth of operation and the number of clients served. Aran emphasizes the importance of diversifying income sources by investing in payment systems, digital banking, and service banking. Currently, traditional banking accounts for 90% of the bank’s income, with new platforms contributing only 10%.
The future of Turkish banks seems to be fraught with challenges and uncertainties. The impact of economic policies, inflation rates, and international expansion plans will shape the trajectory of these financial institutions in the coming years. It is essential for banks to adapt to the evolving economic landscape and leverage innovative solutions to stay competitive in the global financial market.
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