Turkey's banking sector is riding a wave of confidence following resilience during and after the global financial crisis. Today, growth areas are in abundance.

Galİp Tözge
Executive Vice-President in charge of Consumer Banking
Carlo Vivaldi
Executive Director & CEO
Yapı Kredi

How did the bank adjust its strategy in the wake of the global liquidity crisis?

GALİP TÖZGE Of course, looking at the past decade, things have been very dynamic. The circumstances in Turkey were much tougher in 2002 than they are now. What the management board forecasted correctly 10 years ago was the country's potential, declining interest rates, and lower inflation. They changed the whole structure of the bank and the strategy for capturing the potential for growth.

Today, looking at current circumstances and into the next decade, the vision has not changed. Turkey still has vast potential in terms of the banking industry. I think we will continue to exercise the same strategy to capture growth in our sector over the next decade.

CARLO VIVALDI At the end of 2011, the liquidity stress from Europe created a ripple effect in Turkey, which was handled very well by the Central Bank, and the country was protected from external shocks. As soon as the liquidity situation is under control in Europe, the pressure in Turkey will dissipate. We were the first bank in nine months to issue a new syndicated bond on the international market, issuing $500 million in February 2012. Since then, there have been many other international transactions; Akbank rolled over a syndication, and VakıfBank will do the same. We are looking to roll over a $1.2 billion syndication in April 2012.

Which segments within Turkey's banking sector have the most potential for growth?

GT If you compare our penetration rates to those in other countries, Turkey's banking sector still has very high growth potential. The total penetration of pension plans in Turkey is almost 1.3% of GNP; in most other benchmark countries it is at least 20%-30%. On the other hand, the mortgage sector has been growing by almost 25% annually. If you take the 2008 crisis into account, the mortgage book in Turkey is now worth 6% of GNP, and mortgages are still an affluent product. There are still low penetration rates in consumer deposits, personal loans, car loans, and banking services for SMEs—a sector with huge potential. Today, the portion of credit going to SMEs is very low, but 94% of companies in Turkey are SMEs. The country is young and very entrepreneurial. New companies are being formed every day. The savings market will also be an important growth area in coming years. In order to have a sustainable banking sector and reduce our current account deficit, an increase in savings is critical. Investment in Turkey is 22% of GNP, but savings is only 12%. That means almost half of investment must be financed by outside resources.

As the market leader in Turkey for credit cards, how would you characterize the development of the sector?

CV The credit card business is not one that was born recently; people have been using cards for more than two decades. The inflationary environment of the country in the past triggered the development of payment systems. Buying goods today and paying tomorrow is the essence of credit cards, and that was an advantage during the inflationary period. Today, customer exposure to this product is high, but the risks are lower than in the past. The rates are more stable and enjoy a cap, which is 2.2% per month. In the past, rates were hovering at 5%; but now the market is much more regulated than before.

What role does technology play in your growth strategy?

GT Today, two-thirds of Turkish households have internet access at home. There are 31 million Facebook users, 4 million Twitter accounts, and almost 10 million mobile internet users. We are using alternative delivery channels to reach this technology-oriented, high-growth nation. We invest a lot. Akbank spends almost $100 million on the average every year on technology, with new channels, products, and offers.

CV The average age of the population is 29 years, and young people are eager to adopt innovations. For Yapı Kredi, the innovative and limitless products are an integral part of our structure. By end-2011, we had launched our new mobile banking program, which boosted our share in that market by more than 20%. We want to be the frontrunner in innovation, but we are not the only player; the market is extremely saturated with internet and mobile users and developers.