Commercial loan growth, excluding corporate credit cards, reached 21.3 percent across the entire sector

With the implemented monetary policy and normalization steps, the improvement in the credit market has become visible. The growth rate in private banks, which had been shrinking in commercial loans, has surpassed public banks in recent weeks and climbed to 25 percent.

The tight monetary policy and the steps toward normalization and simplification that began to be implemented in the Turkish economy following the presidential elections have created a change in the banking sector. Private banks, in particular, which had avoided providing commercial loans due to the low-interest-rate policy before the elections, are returning to the scene in recent weeks. According to Central Bank data, as of the week of December 1, the 13-week annualized, exchange-rate-adjusted commercial loan growth, excluding corporate credit cards, reached 21.3 percent in the banking sector, while growth in private banks rose to 25 percent. Public banks, meanwhile, remained behind the growth rate of private banks with 18.31 percent growth in the same week.

TOTAL LOAN GROWTH HAD REACHED 60 PERCENT

According to Central Bank data, as of May 26, the last week before the elections, the 13-week annualized, exchange-rate-adjusted loan growth in the banking sector was at 57.9 percent. On an unadjusted basis, consumer loan growth was at 72.8 percent, and commercial loan growth, 13-week annualized and exchange-rate-adjusted, was 44.8 percent. In the same week, total loan growth in private banks was 44.8 percent. In private banks, unadjusted consumer loan growth was 82 percent, and 13-week annualized, exchange-rate-adjusted commercial loan growth was at 13.13 percent. In public banks, total loan growth in the same week was 72.8 percent, consumer loan growth was 71.7 percent, and commercial loan growth was 62.8 percent.

TURNED NEGATIVE IN PRIVATE SECTOR AFTER FIRST INTEREST RATE HIKE

In the weeks following the first policy rate hike in June, total loan growth fell to 25.8 percent, consumer loan growth declined to 34.1 percent, and commercial loan growth dropped to 22.5 percent. While total loan growth in private banks fell to 18.2 percent, consumer loan growth remained at 47.7 percent, and the clearest change was a contraction in commercial loans by 5.11 percent. While public banks recorded a total loan growth of 34.1 percent in the first week of July, consumer loan growth was 28.4 percent and commercial loan growth was 24.4 percent.

In the following months, with both the increase in the degree of tightening in monetary policy and the steps toward simplification in macroprudential measures, credit growth rates fell below 20 percent, and the contraction in commercial loans in private banks continued until the final weeks of September. So much so that in mid-August, 13-week annualized, exchange-rate-adjusted commercial loan growth in private banks showed a contraction of 14.22 percent.

PRIVATE BANKS SURPASSED PUBLIC BANKS IN GROWTH

With commercial loan interest rates rising above 40 percent at the beginning of September due to the effect of tight monetary policy, the commercial loan taps in the banking sector began to open slowly at the end of September. In the following weeks, while public banks showed growth of over 25 percent, private banks reached double-digit growth figures again. However, after the November Central Bank Monetary Policy Committee meeting, private banks accelerated further in commercial lending and surpassed public banks in growth. According to Central Bank data, in the week of December 1, when average commercial loan interest rates, excluding corporate credit cards and overdraft accounts, rose to 52.04 percent, the commercial loan growth rate of private banks rose to 25 percent, while it fell to 18.32 percent in public banks. Commercial loan growth in the total banking sector also rose to 21.3 percent.

On the other hand, according to the weekly data of the Banking Regulation and Supervision Agency (BDDK), as of the week ending December 1, the total loan volume in the sector increased by 85 billion 876 million liras, rising from 11 trillion 228 billion 402 million liras to 11 trillion 314 billion 278 million liras. During this period, the amount of installment commercial loans increased by 8 billion 797 million liras to 1 trillion 333 billion 371 million liras. In the same week, the commercial loan volume of public banks rose to 4 trillion 749 billion 597 million liras, while it reached 2 trillion 81 billion 622 million liras in domestic private banks and 1 trillion 926 billion 358 million liras in foreign banks.

GOVERNOR ERKAN HAD ALSO DRAWN ATTENTION TO PRIVATE BANKS

Central Bank Governor Hafize Gaye Erkan also draws attention to the improvement in the credit market in her speeches. In her speech at the Istanbul Chamber of Industry Professional Committees Joint Meeting, Governor Erkan recalled that after the acceleration seen in the first half of 2023, commercial loan growth came to a standstill at the end of May, stating, "Both the excess before and the sudden stop afterward are not healthy for both our firms and the banking system. In light of this assessment, we took rapid action and ensured the re-establishment of the market mechanism." Stating that with the recovery of the credit flow in Turkish liras to the real sector, commercial loan growth has attained a balanced and sustainable structure, Erkan said, "The improvement in the functionality of the credit market mechanism has also manifested itself in the distinction between private and public banks. Private banks have also started to play an effective role in commercial loan growth."

CONTRACTION IN CONSUMER LOANS CONTINUES IN PUBLIC BANKS

According to Central Bank data, public banks, whose commercial loan growth has slowed, have accelerated their contraction in consumer loans. As of the week of December 1, the 13-week annualized, unadjusted consumer loan contraction in public banks was 15.5 percent. In contrast, private banks have also accelerated in consumer loan growth. As of the week of December 1, 13-week annualized, unadjusted consumer loan growth in private banks rose to 31.1 percent. In the banking sector, consumer loan growth rose to 11.3 percent. Again, according to Central Bank data, personal loan interest rates rose to 61.3 percent in the week of December 1. Vehicle loan interest rates fell to 38.1 percent, and housing loan interest rates fell to 42.6 percent.