Developments in the banking sector
In 2023, tight monetary policy implemented all over the world due to the ongoing global inflation and soared energy and food prices driven also by aggravated geopolitical risks put pressure on economic growth.
As a result of all these developments, the International Monetary Fund (IMF)’s World Economic Outlook dated January 2024 estimates that global economy expanded 3.1% in 2023 after growing by 3.5% in 2022.
In the second half of the year, domestic demand was balanced with the effect of monetary tightening, and the restraining effect of external demand on growth continued, although at a lesser extent.
On the other hand, while current account deficit showed some recovery owing to increased service revenues and declined energy imports, it still remained high. The Central Bank of the Republic of Turkey (CBRT) kept the policy rate at 8.5% until May 2023. From June onwards, monetary tightening process was initiated to peg the inflation projections and to control the deteriorated pricing behavior. Policy rate was increased to 42.5% with a total rise by 3,400 bps between June 2023 and December 2023.
The measures and arrangements of regulatory authorities continued in 2023 within the scope of the “liraization” strategy based on restructuring the financial system on the basis of Turkish lira instruments, which was initiated in 2022. The CBRT also introduced quantitative tightening and selective credit policies to complement rate hikes. In addition, certain targets in effect were either modified or revised upon the enforcement of the simplification process for the micro- and macro-prudential framework.
Unless otherwise stated, data pertaining to the banking sector and Yapı Kredi are based on the amounts that have been drawn up and publicly disclosed pursuant to the Banking Regulation and Supervision Agency (BRSA).
The steps taken served to increase the share of the Turkish lira in the banks’ balance sheets. With the restraining measures adopted for credits, TL credit growth also remained below the inflation. In 2023, the overall sector’s TL lending grew by 54% annually, and the growth was driven mainly by TL corporate loans and credit cards.
TL loans increased by 53% and 52% at public and private banks, respectively. FC loans, on the other hand, kept diminishing and contracted by 4% on USD basis.
The arrangements concerning the FCprotected TL deposits and the liraization strategy resulted in 87% expansion in TL deposits and 9% contraction in FC deposits. The overall sector’s NPL ratio in 2023 improved by 46 bps as compared to year-end 2022 to go down to 1.6% owing to the continued solid course of economic activity, the support from collections and credit growth.
The banking sector preserved its robust balance sheet position, and high liquidity and capital adequacy ratios. In 2023, the sector’s liquidity coverage ratio was 156% and capital adequacy ratio was 18% including impact of regulatory forbearances. Net profit of the sector was up by 41% to TL 567 billion, and return on equity was registered as 34%. Private banks and public banks achieved respective annual growth rates of 34% and 57% in their net profit.