Turkey’s banking sector has
shown better resilience during the financial crisis than richer
European markets. As the number of high net worth individuals
continues to grow in parallel with its economy, Duygu Tavan
speaks to analysts at Fitch and Moody’s about the Turkish
market.
Go deeper with GlobalData
Wealth managers
are continually looking to extend their businesses into rapidly
emerging markets and Turkey is increasingly coming up on private
bank radars.
Like other emerging economies,
growth rates are mouth-watering. The Turkish banking system
recorded a 20% growth in total banking assets to TRY1,007bn
($636bn) in the twelve months to 31 December 2010, according to
Arif Bekiroglu, associate vice-president and analyst at Moody’s.
All this means lots of room to grow, although analysts suggest
immediate miracles should not be expected.
Janine Dow, senior director at
Fitch’s Financial Institutions Group, says the private banking
sector in Turkey has evolved “pretty much along the same lines” as
BRIC countries.
“In none of the BRIC countries is
private banking a major division of any bank. We are not looking at
another Switzerland,” Dow suggests. “What we see in Turkey is that
private banking, depending on the bank, never seems to contribute
more than 8% of total operating results in any of the major banks.
So private banking is still a minor division.”
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By GlobalDataAlthough analysts suggest that
Turkey’s booming retail banking market may curb the growth of
private banking, Dow says demand for private banking products and
services is there.
“If we consider the demographics,
the upturn in the economy, urbanisation and the gradual increase in
wealth, we [see] potential for private banking,” Dow adds.
Private banking demand
rising
According to the latest
Capgemini/Merrill Lynch research, the number of high net worth
(HNW) individuals in Turkey with investible assets of $1m or more
grew by 6.4% to 35,900 from 2008 to 2009.
But Dow highlights that the
threshold to accept a client as HNW and the levels of disposable
income or investible assets vary considerably between the
banks.
“We are not talking about the
benchmark that many American private banks insist on, which is
often $1m and more.”
In fact, some banks have a minimum
threshold of $400,000 to consider a client as HNW.
Dow insists that the average assets
of HNW individuals are “really unquantifiable”.
She adds: “The wealthiest people in
Turkey tend to be owners of huge industrial and/or financial
conglomerates with assets and finances all over the world. I doubt
that all their investments would be in Turkey.”
Locals-only
market?
A lack of distinction between
banks’ business segments complicates an overview of the Turkish
private banking sector.
“Unlike what we see in other
countries, where private banking activities are very much in the
domain of the smaller, specialised foreign banks, in Turkey we
don’t see that distinction. In Turkey, all the large banks offer
private banking as part of their banking activities,” Dow
explains.
Both Fitch and Moody’s name Akbank,
Garanti and Isbank as the industry leaders.
With a stable banking
sector already in place, most foreign banks have bought into
established Turkish banks (see box-out, right).
“15% of the total Turkish banking
system is considered to be fully-owned by foreign capital in terms
of asset size,” says Gulcin Orgun, senior director at Fitch’s
Financial Institutions team based in Istanbul.
But those 15% do not include joint
ventures and foreign stakes in Turkish banks, according to Orgun,
although major global banks, such as Citigroup and BBVA, have large
stakes in Turkish banks (see box-out).
“When you include those joint
ventures [and stakes], the%age share of foreign capital rises to
about 25% of the market,” Orgun says.
A significant exemption to the
locals-only rule is HSBC, which operates both as a retail bank as
well as a separate private bank under Turkish banking rules and
regulations. Even for a major bank such as HSBC, private banking
activities are still a minor part of the overall business,
according to Dow.
GDP growth slows, prospects
remain
Looking ahead, analysts agree that
the private banking sector in Turkey is well placed for further
growth and the market is far from saturated.
For 2011, Moody’s expects the
Turkish banking sector to grow slower due to lower GDP growth
compared with the previous year (7.8% in 2010 versus 4.8% forecast
for 2011).
“In the long-term, the prospects for private banking are
favourable because the economic prospects are favourable. The
majority of banks will continue to focus on the moderate expansion
of private banking,” Dow concludes.
