DenizBank General Manager Ates stated that the economy could grow in the range of 3-4% in 2021 and said that the priority of the banks will be fighting against increasing provisions and decreasing incomes.
DenizBank General Manager Hakan Ates informed AA reporter within the scope of “Banking Talks” about DenizBank and the sector’s work in the new type of coronavirus (Covid-19) period, and shared his predictions for the future.
Ates stated that growth expectations for 2020 are upward, but in countries with the epidemic there is a great economic crisis due to the cessation of production, decrease in consumption and confidence and increasing uncertainties, and he added saying that the way of life and working has been affected.
He stated that the health crisis caused by the epidemic continues to put heavy pressure on the economy, employment and inflation indicators on a global basis.
On the monetary policy side, Ates pointed out that thanks to the lessons learned from the 2008-2009 financial crisis, the central banks acted very quickly, and important institutions such as the US Federal Reserve (Fed) and the European Central Bank (ECB), and following them, central banks in developed and emerging markets reduced the interest rates and reacted to the economic activity that contracted with monetary expansion.
Ates said that on the fiscal policy side, credit guarantees, credit delays, tax delays, regulations on employer costs, social transfers provided to employees and low-income citizens standed out.
Stating that this also strains the budget resources of the countries, he noted that as a result, 14% of the world national income was spent in financial support reaching $12 trillion and the global negative-yielding bond stock reached $17 trillion.
Ates continued as follows:
“Following the globally synchronized regression and the rapid recovery in the third quarter of 2020, the difficult period begins in 2021. While developed countries have savings, borrowing opportunities, productive power and educated population opportunities, developing countries have different problems. Their financial resources are weak, they have dependencies such as commodity (oil) and tourism income, they are under high debt burden thanks to low interest rates worldwide. Therefore, we will see that the gap between developed and developing countries in 2021.
The segregation between sectors will also be very evident in the recovery process after the global epidemic crisis. In the service sectors, the most affected ones such as food and beverage, accommodation, transportation, and entertainment sector’s recovery may reach 2023. On the other hand, although there are promising developments regarding the future of the vaccine, there is a need for inexpensive vaccines with high production capacity and wide logistical possibilities for vaccination worldwide. This indicates that the effects of the epidemic will continue until the second half of 2021, at least for countries that can access the vaccine, and that central banks will not change their policies in the short term.”
“Putting structural reform programs into effect is crucial”
Hakan Ates said that the global economy in 2020 unfortunately negatively affected growth expectations because of the environment of concern and uncertainty created by the global epidemic.
Reminding that 3% growth is expected in the global economy at the beginning of this year, Ates said, “On the contrary, it seems likely that the year will be completed with a 4% shrinkage. Countries had to apply strong fiscal measures in this process to overcome their economic difficulties. 20% of the average GDP in developed countries and 6% in developing countries were spent. In our country, this rate is in the range of 12-14. We mainly tried to support both companies and households through credit mechanisms. With the effect of the measures taken contrary to expectations, we anticipate that 2020 will be completed with positive growth.”
Looking at the year 2021, referring to the statements made by the Central Bank of the Republic of Turkey (CBRT) fight against inflation will be the primary target. Ates said, “Therefore, we expect the high interest environment to continue and a slow growth in the first half of the year. From the second half of the year, we expect the economic activity to recover in parallel with the relaxation in financing conditions, and the growth to be completed in the range of 3-4% throughout 2021. I believe that we will see the downward impact of the tight monetary policy and anti-inflation program on inflation as of the second quarter of the year with the easing of cost pressures.”
He reported that the current account deficit increased in 2020, especially due to the loss of gold imports and tourism revenues.
Stating that they expect imports to decline, the current level of exchange will have a positive reflection on exports and an increase in tourism revenues in 2021, especially with the tightening of monetary policy, Ates said that thanks to all these, the current deficit will decrease to 2% of GDP.
Ates stated that he believes that the crisis-resistant Turkish economy will overcome this epidemic process which will be felt significantly until the second half of 2021 with the support of the dynamic private sector and strong banking sector, as well as the fiscal policy complementary to the tight monetary policy.
In the medium-long term, for Turkey to get out of the middle-income group, which it has been in since the 1980s, Turkey should focus on reforms. “It is critical to rapidly implement structural reform programs in education, law, tax system, and the employment market in the coming period.” Ates said.
“Banks are the part of the solution, not the source of the problem”
DenizBank General Manager Ates emphasized that contrary to the 2008-2009 crisis, this period was not a crisis in the current financial system, but a public health-based crisis.
Stating that banks are not the source of the problem, but rather the part of the solution by mediating the implementation of the countries’ fiscal policies, especially with credit expansion, Ates said, “Since the beginning of the year, the TL loan increase has exceeded 40%. Therefore, we anticipate that the increase in non-performing loans will be higher in 2021 compared to the current situation. On the other hand, our banks are in a position to manage the process with 19% capital adequacy ratios and front-loaded provisions to be prudent.”
On the income side, Ates said that the net interest margin improved in line with the decline in interest rates in the past period, but the upward trend in interest rates pulled the margins down.
On the non-interest income side, Ates stated that the regulation on service revenues has an income-reducing effect and said, “As a result, fighting against increasing provisions and decreasing incomes will be the priority of our banks in 2021. We expect the credit expansion to slow down in 2021 in parallel with the increasing interest rates. We expect TL loan growth in the sector to be around 13-15%, on the other hand, foreign currency loans to remain at the current level of $165 billion, and TL deposits to increase in parallel with interest.”
Ates said that as DenizBank, they will continue their journey without compromising their main strategies in 2021.
He stated that the main advantages they offer to their customers are branch networks throughout Turkey’s 81 provinces, strong synergy between all subsidiaries and support units, including banks abroad, and that they maintain a financial supermarket understanding thanks to their communication and wide product range. He also noted that using big data and data analytics to create an accessible branch and ATM network for DenizBank’s targeted customer segments, to design the branch experience of customers, and to create offers suitable for them will be part of their strategy in 2021.
Ates stated that they will continue to support the niche sectors tourism, education, health, energy, infrastructure, agriculture and maritime sectors they have supported since its establishment, and to maintain their market share in the retail sector, SME banking, retail banking and agricultural banking, where they are the leader with 45% among private banks.
“For 2021 and beyond, our focus will be digital and our priority will be mobile-focused services.”
Hakan Ates stated that 2020 is a difficult year for banks as in general terms, however, as in every crisis period, different opportunities emerge here, and said, “We have experienced the digital transformation that we expect to take place over the years with the effect of the global epidemic in a few months. With the idea that it will go down in history as the year of necessity in digital, we have determined our priority as being able to continue to serve our customers in the fastest and most agile way, and we made our investments accordingly in this direction.
Pointing out that technologies such as artificial intelligence, data science and blockchain are now used by banks and even all industries, Ates said that DenizBank is one of the leading banks in investing in these areas.
Ates emphasized that their focus will be digital and their priority will be mobile-focused services for 2021 and beyond.
Stating that there are two critical decisions for banks among the developments that will shape the year 2021, Ates said:
“Thanks to the change made by the Banking Regulation and Supervision Agency (BRSA) on digital customer identification, everyone can now become a bank customer without the need to go to the branch. This was a facilitating step for our potential customers to join our organization without worrying about health, as well as equalizing the conditions of competition between banks and fintechs. Thanks to the CBRT’s Instant and Continuous Transfer of Funds (FAST) system, banks, like e-money institutions, will now be able to make 24/7 EFT. I believe at this point CBRT’S and BRSA’s decision about Turkey’s open banking ecosystem can change the whole sector. The Central Bank’s incorporation of the Interbank Card Center (BKM), bringing a standard to the use of API technology and clearly drawing the boundaries of open banking with the BRSA’s regulation, paves the way for banks to cooperate with fintechs and all other technology companies in this field. As DenizBank, we are ready for the future with more than 380 API points.”
“The resource we have transferred so far in SME and agricultural banking has reached ₺50 billion”
Hakan Ates stated that, as DenizBank, they are trying to restructure the loans of all sectors that are doing seasonal business and affected by the epidemic, and that they finalized the restructuring / modification of 42% of the total tourism loans in the 5-month period between April and August 2020.
Stating that the funds they have transferred in SME and agricultural banking so far have reached ₺50 billion, Ates, within the scope of the Nefes Project and the Check Payment-OPEX Program, in which they participated as the only bank, they provided ₺6 billion credit opportunity to 55 thousand SMEs with the support of the Credit Guarantee Fund (CGF).
Ates said that they stand by SMEs and farmers who cannot open their shops, and who have difficulties in generating income during the epidemic process by not only giving new loans but also delaying existing loans.
Stating that they postponed the loan of approximately ₺4 billion in this way, Ates said, “We continue our support with 25%turnover increase on the part of the Producer Card, which we financed with an interest-free period of up to 6 months for the producers to continue their agricultural activities.”
As an institution has a service network that reaches all segments of Turkey, Ates stated that they continue to provide uninterrupted service by prioritizing the health of both employees and customers during the epidemic. He added that, “As the DenizBank family, we are fully integrated into the digital banking channel and we are ready for the new normal banking dynamics and the changing future in accordance with home / remote working and health measures.”
Source: AA / Translated by Bazaar Times Team