Garanti chief sees another challenging year for Turkish banks

Turkiye Garanti Bankasi

15/12/2025 11:41

Garanti CEO says limits needed to bring inflation down

Credit limits imposed to support tight monetary policy

Inflation fell to 31% from 2024 peak of 75%

Inflation accounting muting BBVA contributions, Akten says

By Ebru Tuncay

ISTANBUL, Dec 15 (Reuters) - Garanti Bank GARAN.IS expects another tough year for Turkish lenders in 2026, with growth likely to remain constrained as authorities keep most credit restrictions in place to tame inflation, CEO Mahmut Akten told Reuters.

The cautious outlook from Garanti, Turkey's second‑largest private bank by assets, suggests little near‑term relief for a sector hit hard by years of high inflation and a weakening currency.

Turkish lenders' credit growth has trailed inflation in recent years, including at Garanti, which is 86% owned by Spain's BBVA BBVA.MC and has some 4.2 trillion lira ($100 billion) in assets.

That trend reversed in 2025, "somewhat reduc[ing] pressure on us," Akten said, helped by the absence of limits on overdrafts, housing loans and credit cards.

MINOR ADJUSTMENTS EXPECTED

But with annual inflation still high at 31%, the chief executive does not anticipate authorities will dramatically reduce broader inflation-fighting policies and regulations next year.

"If we are serious about bringing inflation down, I don't expect these limits to be ... lifted," Akten said in an interview. "Minor concessions might be made," he said at Garanti's Istanbul headquarters. "That would be the right thing to do."

Since mid‑2023, tight monetary policy has squeezed lenders' net interest margins, while credit restrictions have raised funding costs and weighed on returns and asset quality, despite banks' strong capital and liquidity positions. Measures include a 2% monthly cap on consumer and vehicle loans, along with limits on SME and commercial lending.

BBVA applies inflation accounting to Garanti's results, which reduces capital by the level of inflation. As a result, Garanti contributes about 7 to 8% to BBVA's earnings, compared with roughly 25 to 30% once normal reporting methods resume, Akten said.

CENTRAL BANK 'LISTENING TO' LENDERS

Turkey's inflation problems began in 2018 when easy monetary policy fuelled price surges and repeated currency crashes, prompting a host of regulations that restricted banks' debt, credit and foreign exchange activities.

Policymakers sharply raised interest rates in 2023, then began gradual cuts a year ago, bringing the policy rate to 38%.

Loan and deposit rates have yet to reflect the policy easing due to rules encouraging lira deposits, Akten said. The central bank holds regular meetings with lenders and "they are listening to us," he said, describing rules as "less burdensome" now.

Akten expects inflation to fall to about 25% by end-2026, with the policy rate hitting 32%.

 (Reporting by Ebru Tuncay; Editing by Daren Butler and Jonathan Spicer)

 ((daren.butler@tr.com; +90-212-350 7053; Reuters Messaging: daren.butler.thomsonreuters.com@reuters.net))