Credit expansion rate expected to normalize in second half of 2017

Dünya Executive - - BUSINESS - ECE CEYHUN

The credit expansion seen in the Turkish banking system in the first half of the year almost doubled in comparison with the same period last year, leading to the momentum created by economic incentives in the first quarter. Huseyin Aydin, president of The Banks Associatio­n of Turkey, exclusivel­y told DUNYA daily that the amount given as credit soared in the first half and significan­tly boosted the economic recovery. “It depends not only on domestic but also on global market developmen­ts to be able to proceed with such a rate,” says Aydin. “The credit expansion rate, which surpassed 20% annually, will stabilize within the 15-17% range.”

Aydin states that such a credit expansion rate indicates that the growth rate in the second quarter will be higher than the first quarter. “The rate of credit expansion in the first six months will support growth in the second half [of the year]. We have to maintain this test. The appetite of banks operating in internatio­nal borrowing markets will be an important indicator to watch closely among global developmen­ts during the upcoming period.”

Turkish banks have

150 billion lira funding gap

When comparing credit and deposit rates in terms of the absolute increase values revealed, data addresses the hot debates currently prevailing in the sector. The banking sector increased credit volume by 186.6 billion lira in the first half of the year. However, the increase in deposits made over the same period was only 109.6 billion lira. Credit volume in terms of lira increased by 172.9 billion in the first half of 2017, yet deposits only increased by 22.5 billion lira over the same period.

So the banks have a funding gap of almost 150 billion lira. When viewing the sector balance sheet, citizens preferring dollars in deposits and lira in credit forces banks to bridge the gap. This finance gap was offset with non-deposit funding tools. Aydin states that the increase in deposits was below the uplift in credit, a situation that led to a general rise in interest rates. “We hope it won’t be permanent,” he added. “We think that a general decline in interest rate levels is essential for sectoral and economic growth.”

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