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Turkey Monthly Banking Monitor May June1st 2016
2
BBVA Research Financial Stress Map
Global Developments
No Data
Very Low Tension (<1 sd)
Low Tension (-1.0 to -0.5 sd)
Neutral Tension (-0.5 to 0.5)
High Tension (0.5 to 1 sd)
Very High Tension (>1 sd)
Source: BBVA Research
Financial tensions surged somewhat in May especially in EM as the probability of a FED rate hike increased.
Financial Stress (FT) in Developed Markets
remained in neutral with some volatility in
equity markets as markets digest the
potential hikes of the Fed Funds.
Financial stress were higher across the
board in Emerging Markets. Turkey was
not an exception but remain in neutral
CDS Sovereign
Equity (volatility)
CDS Banks
Credit (corporates)
Interest Rates
Exchange Rates
Ted Spread
Financial Tension Index
CDS Sovereign
Equity (volatility)
CDS Banks
Credit (corporates
Interest Rates
Exchange Rates
Ted Spread
Financial Tension Index
USA Financial Tension index
Europe Financial Tension Index
EM Europe Financial Tension Index
Czech Rep
Poland
Hungary
Russia
Turkey
EM Latam Financial Tension Index
Mexico
Brazil
Chile
Colombia
Perú
EM Asia Financial Tension Index
China
India
Indonesia
Malaysia
Philippines
20152014 2016
20162010
2013
2011 201520142013
Lata
mEM
Asia
2012
G2
EM
Eu
rop
e
2012
USA
Euro
pe
2010 2011
No Data
Very Low Tension (<1 sd)
Low Tension (-1.0 to -0.5 sd)
Neutral Tension (-0.5 to 0.5)
High Tension (0.5 to 1 sd)
Very High Tension (>1 sd)
3
The EM Bank Lending Conditions tightened further with international funding conditions in negative but bottoming out. International funding still in the tightening area but improving faster in Turkey
Global Developments
IIF Bank Lending Survey for International
Funding Conditions for EM Levels
30
35
40
45
50
55
60
65
13
Q1
13
Q2
13
Q3
13
Q4
14
Q1
14
Q2
14
Q3
14
Q4
15
Q1
15
Q2
15
Q3
15
Q4
16
Q1
Tightening Area
Easing Area
Turkey EM Latın Amerıca
40
42
44
46
48
50
52
54
56
58
12
Q1
12
Q3
13
Q1
13
Q3
14
Q1
14
Q3
15
Q1
15
Q3
16
Q1
Tightening Area
Easing Area
Credit Standards Funding Conditions
IIF Bank Lending Survey for EM Levels
Source: IIF, Garanti Research
4
MSCI Indices Base 100 = Jan 2014
CDS Indices Levels
EM Equities under pressure. Risk premium (CDS) mildly increase on a higher probability of a Fed rate hike in June.
Turkey Financial Markets
50
70
90
110
130
150
170
Feb
-14
Ma
y-1
4
Aug-1
4
No
v-1
4
Feb
-15
Ma
y-1
5
Aug-1
5
No
v-1
5
Feb
-16
Ma
y-1
6
MSCI EM XBANK Index MSCI Turkey
70
120
170
220
270
320
370
420
Feb
-14
Ma
y-1
4
Aug-1
4
No
v-1
4
Feb
-15
Ma
y-1
5
Aug-1
5
No
v-1
5
Feb
-16
Ma
y-1
6
EM TURKEY
Source: Garanti Research, Bloomberg
5
Turkey: Shares of the CBT Total Funding
The CBT cut the upper bound of its interest rate corridor from 10% to 9.50% in May for the third consecutive month. Liquidity injections at 1W repo increased.
Monetary Policy
Turkey: Interest rate Corridor Levels
0%
2%
4%
6%
8%
10%
12%
14%
Jan-1
3
Ma
y-1
3
Sep-1
3
Jan-1
4
Ma
y-1
4
Sep-1
4
Jan-1
5
Ma
y-1
5
Sep-1
5
Jan-1
6
Ma
y-1
6
ON Lending CBT One-Week Repo
ON Borrowing CBT Cost of Funding
BIST Interbank Repo 3-month FX Implied Forward
8%
55%
38%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Aug-1
5
Aug-1
5
Sep-1
5
Oct-
15
No
v-1
5
De
c-1
5
De
c-1
5
Jan-1
6
Feb
-16
Ma
r-1
6
Apr-
16
Apr-
16
Ma
y-1
6
O/N Lending Rate
1 Week Repo Rate
Deposit Market Transactions Rate
Source: Garanti Research, Turkstat, CBT, BRSA and Bloomberg
6
Gross Reserves/ Short term External Debt (%)
CBT Reserves USD bn
FX reserves recovered somehow from low levels, CBT’s net reserves stay at USD 26bn.
CBT Balance Sheet
%70.5
65%
67%
69%
71%
73%
75%
77%
79%
81%
03
/14
05
/14
07
/14
09
/14
11
/14
01
/15
03
/15
05
/15
07
/15
09
/15
11
/15
01
/16
03
/16
05
/16
0
10
20
30
40
50
60
0
20
40
60
80
100
120
140
Jan-1
1
Sep-1
1
Ma
y-1
2
Jan-1
3
Sep-1
3
Ma
y-1
4
Jan-1
5
Sep-1
5
Ma
y-1
6
FX Reserves Gold Net Reserves-rhs
Source: Garanti Research, CBT
7
Loan Growth
FX adjusted Credit Growth Rate % yoy and 13 week ann. rates
YoY growth rate of FX adjusted credits fell
below 10% (below the Central Bank 15%
comfort range)
YoY Credit growth fall below the 10% mark, the annual rate anticipate better momentum in the second part of the year
Source: Garanti Research and CBT
The annual rate and the ongoing CBT’s
easing process will support the stabilization/
recovery in the second half of the year
9.87% yoy
10.4% ann.
15%
2%
7%
12%
17%
22%
Jul-1
4
Sep-1
4
No
v-1
4
Jan-1
5
Ma
r-1
5
Ma
y-1
5
Jul-1
5
Sep-1
5
No
v-1
5
Jan-1
6
Ma
r-1
6
Ma
y-1
6
8
Loan Growth
Comm. and Consumer Loans Growth Rate % yoy and 13 week ann. rates
Commercial loans slowed down while consumer continue to recover.
Source: Garanti Research, BRSA, CBT
Consumer Loans % 13 week ann. rates
11.7%
8%
-5%
0%
5%
10%
15%
20%
25%
30%
Jul-1
4
Sep-1
4
No
v-1
4
Jan-1
5
Ma
r-1
5
Ma
y-1
5
Jul-1
5
Sep-1
5
No
v-1
5
Jan-1
6
Ma
r-1
6
Ma
y-1
6
Commercial Loans (FX adjusted) Consumer Loans
8.15%
5.35%
2.18%
-0.22%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
08/14 11/14 02/15 05/15 08/15 11/15 02/16 05/16
Housing Automobile Other Personal Credit Cards
9
Interest Rates
Comm. and Consumer Loans Interest Rates 4week mov.avg.
The CBT’s decision to cut the upper bound of the interest rate corridor started to pass-through to retail and deposit rates
Source: Garanti Research, BRSA, CBT
Deposit Interest Rates 4week mov.avg.
15.6%
14.1%
15.9%
17.6%
8%
10%
12%
14%
16%
18%
20%
07/14 10/14 01/15 04/15 07/15 10/15 01/16 04/16
Auto Loans Housing Loans
Commercial Loans Other Consumer
10.52%
6%
7%
8%
9%
10%
11%
12%
08
/13
11
/13
02
/14
05
/14
08
/14
11
/14
02
/15
05
/15
08
/15
11
/15
02
/16
05
/16
10
NPL Ratio of the Banking Sector
Source: Garanti Research, CBT and BAT
NPL Ratio and Volume by Segments
Non Performing Loans ratio continued its increase. NPL ratio of commercial credits reached 3% in April’16 compared to 2.5% in April’15. NPL of consumer credits inc. credit cards is 4.4% compared to 3.6% in the same period.
Asset Quality & Credit Risk
3.4%
2,7%
2,8%
2,9%
3,0%
3,1%
3,2%
3,3%
3,4%
Jun-1
4
Aug-1
4
Oct-
14
De
c-1
4
Feb
-15
Apr-
15
Jun-1
5
Aug-1
5
Oct-
15
De
c-1
5
Feb
-16
Apr-
16
0
10.000
20.000
30.000
40.000
50.000
60.000
0%
2%
4%
6%
8%
10%
12%
Apr-
09
Apr-
10
Apr-
11
Apr-
12
Apr-
13
Apr-
14
Apr-
15
Apr-
16
Total gross NPL in volume-rhsNPL CommercialNPL Consumer CreditsNPL consumer credit cardsNPL Sector
11
NPL Ratio by Industry Sub-Segments
Source: Garanti Research and BRSA
Construction sector continues to take the lead at 6.8% in the NPL
NPL in Sectorial Detail
0%
1%
2%
3%
4%
5%
6%
7%
Non-metallicminerals,v.a.output
Transportequipment, v.a.
Output
Construction Extraction Maufacturing Agr.Forest hotels andcatering
12
Loan/Deposit+(Other Stable Funding Indicators)
OSF* : LT Issuances+Subordinated Debt+Equity
OSF**: LT Issuances+Subordinated Debt+Equity+ LT debt >1yr
YoY %
CBT supports financial stability by inducing banks to borrow with core liabilities since Oct’14. The Loans to deposit CBT ratio L/(D+OSF) indicator stands at near 80%.
Liquidity
Source: Garanti Research, BRSA , CBT, CBT FS Report 1Q’16
149.2%
98.2%
127.5%
75%
95%
115%
135%
155%
07/14 10/14 01/15 04/15 07/15 10/15 01/16 04/16
TRY FX Total
Loan/Deposit Ratio
65%
70%
75%
80%
85%
90%
95%
Apr-
12
Jul-1
2
Oct-
12
Jan-1
3
Apr-
13
Jul-1
3
Oct-
13
Jan-1
4
Apr-
14
Jul-1
4
Oct-
14
Jan-1
5
Apr-
15
Jul-1
5
Oct-
15
Jan-1
6
Apr-
16
L/(D+OSF)* L/(D+OSF)**
13
Bln USD
Source: Garanti Research, BRSA , CBT, Treasury
%
FX debts higher in the Long term than in the short term as banks continue to borrow at longer maturities.
Liquidity
External Debt of Banks-maturity structure
0
20
40
60
80
100
120
140
160
180
200
40
50
60
70
80
90
100
110
20
13Q
1
20
13Q
2
20
13Q
3
20
13Q
4
20
14Q
1
20
14Q
2
20
14Q
3
20
14Q
4
20
15Q
1
20
15Q
2
20
15Q
3
20
15Q
4
ST LT Total-rhs
Maturity Breakdown of Non-Core FX Liabilities s.t. RR
32%
25%
43%
0%
10%
20%
30%
40%
50%
60%
70%
11
/11
05
/12
11
/12
05
/13
11
/13
05
/14
11
/14
05
/15
11
/15
05
/16
in 1 yrs 1-3 yrs longer than 3 yrs
14
Deposit Interest Rates in TL& € & $
Deposit Growth Rate
YoY 4week mov.avg
A sharp swift in favor of TL deposits in May.
Deposits
Source: Garanti Research and CBT
14.5%
1.4%
15.5%
10%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
01
/15
03
/15
05
/15
07
/15
09
/15
11
/15
01
/16
03
/16
05
/16
TRY FX (in $) Total Total FX adj.
0%
2%
4%
6%
8%
10%
12%
02
/14
04
/14
06
/14
08
/14
10
/14
12
/14
02
/15
04
/15
06
/15
08
/15
10
/15
12
/15
02
/16
04
/16
TL Euro USD
15
EM Capital Adequacy Ratios (Q4’15) Capital Adequacy Ratio & CET 1
Source: Garanti Research and IMF FSI
Both CAR and Common Equity Tier 1 capital ratios increased by almost 30bps in May (MoM).
Solid Buffers
Source: Garanti Research, BRSA
0%
5%
10%
15%
20%
25%
Bra
zil
Arg
entina
Ch
ina
Hu
nga
ry
India
Indon
esia
Ma
laysia
Ru
ssia
South
A
fric
a
Me
xic
o
Peru
Turkey 15.8%
4.5% local reg. min.
12% local regulatory minimum
13.6%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Jan-1
4
Ma
r-1
4
Ma
y-1
4
Jul-1
4
Sep-1
4
No
v-1
4
Jan-1
5
Ma
r-1
5
Ma
y-1
5
Jul-1
5
Sep-1
5
No
v-1
5
Jan-1
6
Ma
r-1
6
CAR Tier 1 Ratio
16
Regulatory Developments
• Risk weights on consumer loans: BRSA changed the risk weightings of consumer
loans in line with Basel-III alignment. Effective as of March 31th, risk weightings of the
non-mortgage consumer loans decreased to 75% from the range of 100-250%, risk
weighting of the residential mortgages that are fully collateralized came down to 35% from
50%.
• Capital Adequacy (CAR): Regulation on CAR for systemically important financial
institutions (SIFI), in line with the Basel-III process, has been published. Based on a
score defined by the regulator, banks are classified in three categories and required to
keep additional buffers depending on their categories. SIFI buffers will increase gradually
and the buffers will be fully implemented by 2019. SIFI buffers for each year and each
group is provided below:
2016 2017 2018 2019
Group 1 0.25 0.50 0.75 1.00
Group 2 0.37 0.75 1.12 1.50
Group 3 0.50 1.00 1.50 2.00
Turkey Monthly Banking Monitor May June 1st 2016
Garanti – BBVA Research
Deniz Ergun [email protected]