Turkey's Isbank CEO sees balance restored on rates by year-end (updated)

Turkiye Is Bankasi AS

08/05/2024 13:32

(Adds quotes, details, background)
    By Ebru Tuncay and Can Sezer
       ISTANBUL, May 8 (Reuters) - Turkey's banking sector and
the country's economy are leaving behind an "extreme" period,
Isbank chief executive Hakan Aran said on Wednesday, adding that
he expects balance to be restored by the end of the year.
    Speaking to reporters after a press conference, Aran told
reporters that a balance between deposit and loan interest rates
and inflation will be achieved at the end of the year.
    "We will gradually become more able to do banking, but this
problem may continue for another six months," he said, noting
balance between deposit and loan rates and the positioning of
interest rates against inflation was not yet fully established.
    The central bank has raised its policy rate  TRINT=ECI  by
4,150 basis points to 50% when it last hiked rates in March from
8.5% last June, under a U-turn towards more orthodoxy following
a low interest rate policy.
     Turkish annual consumer price inflation climbed to near 70%
in April, with the central bank expecting inflation to peak
around 73-75% before declining to reach 36% at end-2024.
    "We will leave this period behind after seeing the inflation
data on June 3 (end of May)," Aran said. "As of September 30,
deposit, loan (interest) rates in the country will no longer be
high." 
    "We will start to see this balance level after October. It
will stabilise at the end of the year," he said.
    Aran also said that there was a serious decline in banks'
inflation adjusted profits compared to the previous quarter and
that credit growth will probably drop to a historically low
level this year.
    "Therefore, banking is currently experiencing the lowest and
most troubled period historically in terms of its
profitability."
    Aran said he did not see a problem with the capital of banks
and he said there was no systemic risk in the banking system.
    He also said that there were no signs of any worsening in
non-performing commercial loans, but there were signals of such
a development on the consumer side.
    The growth recorded in lira loans from the beginning of the
year to end-April was 9%, with the growth in foreign currency
loans in dollar terms at the same rate. Last year the growth in
lira loans was 54%, while foreign currency loans contracted by
3%.

 (Reporting by Ebru Tuncay and Can Sezer;
Writing by Daren Butler;
Editing by Louise Heavens)
 ((daren.butler@tr.com; +90-212-350 7053; Reuters Messaging:
daren.butler.thomsonreuters.com@reuters.net))