Turkiye: Deposit rates climb higher after Central Bank’s move

Turkish banks have hiked their deposit rates and loan rates after the Central Bank, in a surprise move, increased the policy rate by 500 basis points to 50 percent last week.

The average return on three-month lira deposits rose to 55.66 percent. The three-month deposit rate was around 28 percent almost a year ago.

Some private banks are offering even higher rates for new customers above 57 percent.

The six-month and one-year deposit rates are 50.33 percent and 44.8 percent,respectively, according to data from the Central Bank.

At current rates, a saver can make returns of up to 4,500 Turkish Liras if they put 100,000 liras into three-month deposit accounts.

“Especially one-month and three-month deposits have become more appealing compared to foreign currencies and now competing with returns on stocks,” said Altan Aydın from Perform Portföy.

The market is expecting the Central Bank to lower its policy rate in the final quarter of 2024 and the deposit rate nor likely to climb higher, according to Aydın.

“Stocks’ performance may beat deposits three months from now,” he said.

Serkan Gönençler, chief economist at Gedik Yatırım, noted that the Central Bank set overnight borrowing and lending rates 300 basis points below and above the one-week repo auction rate.

“This means the Central Bank can push up overnight rates by squeezing liquidity. This, in return, will put upward pressure on deposit rates. Deposit rates may climb to 60 percent or above in the period ahead,” Gönençler said.

Banks may engage in stiff competition to attract savings, which will cause deposit rates to go up higher, said Tuğberk Çitilci from Trive Yatırım.

Meanwhile, loan rates have been on the rise over the past week after the Central Bank’s rate hike.

Some public banks increased the monthly rate on personal loans from 4.24 percent to 4.4 percent, while the rates passed above 5 percent at private lenders.

Data from the Central Bank showed that the annual rate on personal loans increased by 1,264 basis points from a week before to sit at 76 percent, which marked the highest level in 22 years.

Before the May 2023 elections, the loan rate retreated to as low as 25 percent.

The Central Bank’s decision to hike its policy rate should put further upward pressure on deposit rates, helping the accumulation of lira-based deposits, Deutsche Bank said in a report.

Deposit rates relative to inflation expectations are the highest they have been for five years, the report noted.

The bank also said that if markets get more confident about the medium-term disinflation path, local bond yields look increasingly attractive and inflows should emerge in a very under owned market.

Source: hurriyetdailynews

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