Expectations for easing in bank loans to remain limited in the first quarter

The Central Bank of the Republic of Türkiye (TCMB) has shared the results of its Bank Loans Tendency Survey, which includes banks' assessments for the last quarter of 2025 and their forecasts for the first quarter of 2026. According to the survey findings, the easing in bank loans in the last quarter of last year was felt more significantly, particularly in short-term and TL-based loans. However, it is projected that the expected rate of easing in the first quarter of 2026 will remain more limited.

Looking at credit standards, while the easing in short-term loans draws attention, the easing in long-term products remained limited. While standards for TL-denominated loans eased further, it was noted that the tightening trend in foreign currency-denominated loans continued. Additionally, it was reported that more flexibility was granted in loans offered to SMEs, while tightening was observed in credit conditions for large-scale enterprises.

On the retail loan side, while there was no significant change in housing and auto loan standards, limited tightening stood out in other retail loans. For the first quarter of the new year, the general expectation of banks is that the easing in credit standards will continue. Accordingly, it is projected that the easing will continue in short- and long-term loans as well as TL loans; in particular, it is expected that SMEs will continue to benefit from this. A certain expectation of easing in credit standards for large enterprises is also noteworthy.

While standards for housing and auto loans are expected to remain at the same level, it is estimated that a slight tightening will be implemented in other retail loans.

RECOVERY PROCESS IN CREDIT DEMAND

An increase in demand for business loans was observed in the last quarter of last year. While there was a recovery in demand for short- and long-term loans in particular, interest in TL loans increased. The rise in demand for foreign currency loans also continued. While SMEs showed intense demand for loans, a renewed activity emerged in the credit demand from large enterprises.

During the same period, demand for housing and retail loans continued to remain relatively weak. On the auto loan side, a new rise was observed. Businesses' needs to increase their stocks and their working capital demands stood out as the most influential factors in credit demand.

Market expectations for housing loans, and changes in savings and facilities provided by different banks for other retail loans, were the main factors affecting demand.

Forecasts for the first quarter of 2026 focus on the continuation of rising demand for business loans. It is estimated that the increase in short-term credit demand will strengthen further, and long-term demand will continue its growth. While the continuation of growth in demand for TL loans is expected, the pace of the increase in foreign currency-denominated credit demand is projected to slow down. While a significant vitality is expected in the credit demand of SMEs, this increase may remain more limited for large-scale companies. A moderate weakening is expected in demand for housing and auto loans as well as other retail loan applications.

FUNDING CONDITIONS HAVE RELAXED TO A LIMITED EXTENT DOMESTICALLY

In loans granted to businesses, while there has been a decrease in average credit profit margins recently, there has been an increase in these margins for high-risk loans. A certain easing was also felt in loan size and collateral requirements. For retail loans, it was reported that current conditions were largely maintained.

Regarding the funding opportunities banks obtained domestically, it was stated that conditions eased in the last quarter of last year. Signals of easing in foreign-sourced funding also strengthened. However, in the assessments for the first quarter of 2026, it was emphasized that the improvement in domestic funding conditions would be more limited, and the easing in foreign funding conditions might lose momentum.

News Source: 12punto