With the monetary policy and normalization steps, the improvement in the credit market has become visible. The growth rate of private banks in commercial loans overtook public banks in recent weeks and reached 25 percent.
The tight monetary policy, normalization and simplification steps that started to be implemented in the Turkish economy after the presidential elections have created a change in the banking sector.
Private banks, which had refrained from lending commercial loans due to the low interest rate policy before the elections, have returned to the scene in recent weeks. According to Central Bank data, the 13-week annualized exchange rate-adjusted commercial loan growth in the banking sector excluding corporate credit cards was 21.3 percent as of the week of December 1, while growth in private banks reached 25 percent. Public banks, on the other hand, lagged behind the growth rate of private banks with 18.31 percent growth in the same week.
Total loan growth had reached 60 percent
According to Central Bank data, the 13-week annualized, exchange rate-adjusted loan growth in the banking sector was 57.9 percent on May 26, the last week before the elections. In unadjusted terms, consumer loan growth was 72.8 percent and commercial loan growth was 44.8 percent in 13-week annualized and exchange rate-adjusted terms. In the same week, total loan growth in private banks was 44.8 percent. Unadjusted consumer loan growth in private banks was 82 percent, while 13-week annualized exchange rate-adjusted commercial loan growth was 13.13 percent. In the same week, total loan growth in public banks was 72.8 percent, consumer loan growth was 71.7 percent and commercial loan growth was 62.8 percent.
Commercial loans had contracted after the first rate hike
In the weeks following the first policy rate hike in June, total loan growth fell to 25.8 percent, consumer loan growth to 34.1 percent and commercial loan growth to 22.5 percent. In private banks, total loan growth dropped to 18.2 percent, while consumer loan growth remained at 47.7 percent, with the clearest change being the contraction in commercial loans by 5.11 percent. In the first week of July, public banks recorded a total loan growth of 34.1 percent, while consumer loan growth was 28.4 percent and commercial loan growth was 24.4 percent.
In the following months, loan growth rates fell below 20 percent due to both the increase in the degree of tightening in monetary policy and the simplification steps in macroprudential measures, and commercial loan contraction continued in private banks until the last weeks of September. In fact, in mid-August, the 13-week annualized exchange rate-adjusted commercial loan growth in private banks contracted by 14.22 percent.
Private banks surpass public banks in commercial loan growth
After commercial loan rates rose above 40 percent in early September due to the tight monetary policy, the banking sector slowly started to open commercial loan taps at the end of September. In the following weeks, public banks grew by more than 25 percent, while private banks reached double-digit growth figures again. However, after the Central Bank’s Monetary Policy Committee meeting in November, private banks accelerated their commercial loan growth and overtook public banks. According to Central Bank data, in the week of December 1, when the average commercial loan interest rates excluding corporate credit cards and overdraft accounts rose to 52.04 percent, the commercial loan growth rate of private banks increased to 25 percent, while it declined to 18.32 percent in public banks. Commercial loan growth in the total banking sector rose to 21.3 percent.
On the other hand, according to the weekly data of the Banking Regulation and Supervision Agency (BDDK) as of the week ending December 1, the total loan volume in the sector increased by TRY 85 billion 876 million from TRY 11 trillion 228 billion 402 million to TRY 11 trillion 314 billion 278 million. In this period, the amount of installment commercial loans increased by TRY 8 billion 797 million to TRY 1 trillion 333 billion 371 million. In the same week, the commercial loan volume of public banks reached TRY 4 trillion 749 billion 597 million, while it reached TRY 2 trillion 81 billion 622 million in domestic private banks and TRY 1 trillion 926 billion 358 million in foreign banks.
Central Bank Governor Hafize Gaye Erkan also draws attention to the improvement in the credit market in her speeches. In her speech at the Joint Meeting of the Professional Committees of the Istanbul Chamber of Industry, Ms. Erkan reminded that after the acceleration seen in the first half of 2023, commercial loan growth came to a halt at the end of May and said, “Both the excessive growth before and the sudden stop afterwards are not healthy for both our companies and the banking system. In light of this assessment, we took swift action and ensured the restoration of the market mechanism.” Stating that commercial loan growth has regained a balanced and continuous structure with the recovery of Turkish lira-denominated credit flow to the real sector, Erkan said, “The improvement in the functionality of the credit market mechanism has also manifested itself in the distinction between private and public banks. Private banks have also assumed an active role in commercial loan growth.”
Consumer loans contract in public banks
According to Central Bank data, public banks, whose commercial loan growth slowed down, accelerated their contraction in consumer loans. As of December 1, the 13-week annualized consumer loan contraction was 15.5 percent in public banks. On the other hand, private banks accelerated their consumer loan growth. As of December 1, 13-week annualized unadjusted consumer loan growth in private banks rose to 31.1 percent. In the banking sector, consumer loan growth rose to 11.3 percent. Again according to Central Bank data, consumer loan interest rates rose to 61.3 percent in the week of December 1. Vehicle loan rates fell to 38.1 percent and housing loan rates to 42.6 percent.