TBY talks to V. Derya Gürerk, General Manager of Türkiye Finans, on participation banking, innovative products, and sukuks.

V. Derya Gürerk
V. Derya Gürerk was born in Ankara in 1963 and holds a BSc degree from Gazi University and an MBA from Manchester Business School and the University of Wales. He started his career at Etibank and also spent 10 years at Citibank in Turkey before spending two years with the multinational banking group in New York. He became Assistant General Manager of Kentbank from 1998 to 2000, and then transferred to Türkiye İş Bankası. Before assuming his current position, he was CFO and Vice-President of the Executive Committee at Dedeman Holding.

In 2013, Türkiye Finans and other participation banks outperformed and outgrew conventional banks. What were the main factors behind this success?

Awareness of the participation banking system has been increasing, as has our branch network and penetration. We increased our branch numbers by 30% over a 17-month period. In 2013, we had 250 branches, and today we have 259. In 2013 alone, we opened up 30 new branches, and in the year before that we opened 38. Moreover, the product range has been increasing. These three factors—awareness, presence, and product range—had formerly been the basic areas of complaint regarding the performance of participation banking. Türkiye Finans is the leading new product generator amongst participation banks. One product we have introduced, a card, is a credit scheme called “Finansör." Finansör is, basically, a credited debit card; a pre-paid, pre-credited card. We also have a product geared at individuals and another at SMEs, that is, small companies with a turnover of up to TL2 million. And as a result, individuals and small corporate clients alike benefit from a common platform. Therefore, product range, presence, and awareness, once again, have helped us increase our market share. Moreover, Türkiye Finans has been increasing its market share both in participation banking and the banking sector in general. In terms of credit market share, we rose from 1.5% to 1.7% over a two-year period. We also gained over a 2 percentage point market share among participation banks. Along with branch numbers, employee numbers have reached 4,000.

Which innovative products is Türkiye Finans launching in the short term?

In 2013, we were the second largest contributor to the Turkish treasury in terms of sukuk issuance at $500 million in May. Also, for the first time, we borrowed a Turkish lira sukuk that was real estate based. Ever since the regulation emerged, we have been pushing to offer funding as well as borrowing via sukuk instruments. This year, we are the first participation bank to issue sukuk funding to a corporate with just a three-year maturity. It is significant that in a climate like the current one, we have loaned about TL30 million worth of long-term debt, in what was a first of its kind. Our Turkish lira sukuk issuance, which is publically listed, is offered to the general public and not to business entities. The one that we funded, though, was institutional in nature.

Can you elaborate on Türkiye Finans's plans regarding sukuk?

We plan to issue a US dollar-denominated sukuk and another denominated in Malaysian ringgit, which would be a first of its kind, as well as a larger Turkish lira sukuk. We are also keen to introduce another product to the market, namely long-term local currency funding. For example, our Turkish lira sukuk had a six-month maturity given the economic environment and the US Federal Bank's sudden tightening policy. Otherwise, we would have opted for a one-year issuance, which is a very long-term instrument by our standards. And be it denominated in Malaysian ringgit or US dollars, all funds raised are specifically channeled to SMEs, followed by commercial entities, and finally the individual loan portfolio. Meanwhile we have a 1.7% share of the loans market, and a 3% market share in SME business in Turkey, making the segment our strong point.

What are your targets for 2014?

I have two targets. One is to exceed TL30 billion in asset terms, over TL25 billion in loans, and over TL20 billion in deposits. This is my number one target. The second target is to outperform market growth by 20%. Today, we are at 1.7%. Our budget plan is designed around this extra 20%; however, if market growth outperforms our expectations, we have to exceed that figure, too.