Structural Developments in Banking

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3 BANKING REGULATION AND SUPERVISION AGENCY Structural Developments in Banking Issue: 5 / December 21 Department of Strategy Development

4 This Report is for informing the public and BRSA shall not be held responsible for the results of decisions to be made depending on the information hereby. Partially quotation could be made, by indicating bibliography from the Report. Owner on Behalf of the Banking Regulation and Supervision Agency: Tevfik BİLGİN Editor: Faruk DEMİR BANKING REGULATION AND SUPERVISION AGENCY Atatürk Bulvarı No: Kavaklıdere, Ankara-Türkiye DEPARTMENT OF STRATEGY DEVELOPMENT Phone: (9 312) ; Fax: (9 312) ; Web-Site: E-Posta: bygr@bddk.org.tr Full document is published in the BRSA web-site. 1 copies were published in the BRSA documentation center. Date of publication: July 26, 211; 21 BDDK ISSN:

5 EXPLANATION The BRSA having the main objective of ensuring confidence and stability in financial markets has started to publish Structural Developments in Banking including the structural evaluations concerning banking sector and non-banking financial sector (financial leasing, factoring and financing companies) pursuant to the Article 97(3) of the Banking Law Nr The fifth issue of Structural Developments in Banking is composed of seven sections. The publication includes the market structure analysis of banking sector, capacity, attitude and performance indicators concerning banking, structure of non-bank financial sectors as well as the developments concerning financial deepening. Unless otherwise specified, the data related to banks within the Structural Developments in Banking Report include the banks domestic branches as well as abroad branches and are presented as a whole. BRSA takes necessary measures to ensure the quality and accuracy of the data presented in the tables and charts within this Report. However, BRSA does not make any commitments concerning the surety, reliability and accuracy of the data presented in this Report and declines any liability on account of these data. Periodic information included in any issue of the Structural Developments in Banking may be changed in following issues, as a result of updates realized due to various reasons. This publication was prepared based on the data received from the BRSA database by the date of June 3, 211. The updated following the mentioned date are outside the scope of this publication. BRSA i Structural Developments in Banking December 21

6 BRSA ii Structural Developments in Banking December 21

7 GENERAL EVALUATION According to the provisions of the Banking Law Nr. 5411, the Turkish banking sector is classified in three functional groups which are deposit, participation and development and investment banks. As of 21, 92.6% of the sector s asset size is composed of deposit banks, while 4.3% of participation banks and 3.1% of development and investment banks. In parallel with the decrease observed in the shares of development and investment banks and deposit banks within the last five years, the share of participation banks increases consistently. Deposit banks are the dominant group within the sector; the shares of the seven biggest deposit banks within the sector are among 7% and 15%. The shares of banks belonging to other function groups are below 1.5%. When the same period is analyzed by scales, it is seen that the asset size of large scale banks corresponds to 75% of the sector s assets. Medium scale banks group has a share by17%, small scale banks group has a share by 6.6% and the micro scale banks group has only 1.8%. When the last ten years period is analyzed, it is seen that the share of large scale banks is increasing, while the shares of medium and small scale ones are decreasing slightly. On the other hand, in 21, this tendency has changed in favor of medium and small scale banks. The share of micro scale banks is following a fluctuated and moderate increase within the sector. As of 21, in 75% of 49 banks operating in the Turkish banking sector there are shares of global capital. Global capital is mostly present in deposit banks. They are followed by public banks and banks under the control of holding companies. The highest ownership concentration is in global banks, while the concentration in ownership structure has the probability of limiting the possibilities to access financial services. Positive developments seen in national and international environment after 22 have caused the increase of the attention of global capital towards Turkish banking sector. Status changes creating considerable variations in the sector s market structure were realized between 24 and 26; investments via stock market were continued between 27 and 29, and no considerable changes were seen in status structure in 21. Not granting any new banking licenses within this process was an important determinant of the market structure of the sector. A grand number of banks have the license to operate in financial subjects spread on a large area. Extending these licenses by scope and variability and using these licenses in full capacity are important for the deepening of the sector. Moreover, it is possible to increase the sector s growth potential in case of creation of new financial products and new licenses concerning their usage. This situation will provide numerous benefits for the banks, sector and the economy of the country. Participation banks operating in capital market and entering to fields they are not presently operating with their working models conform to their operating principles will make their growth strategies to realize easier. The banks established in Turkey have off-shore activities in 31 different countries in especially EU. When the total loans and deposit market structure of the sector is analyzed as of 21, it is seen that the share of loans granted and deposit collected of banks operating within the sector by their domestic branches within total loans and deposit is weighted. Within the same period, 97.2% of net profit of period is acquired by domestic branches. Considering that almost 6% of the incomes of global institutions are obtained by off-shore activities, the institutions active in Turkey attaching importance to off-shore investments will be beneficiary for both sector and country in this new period of the Turkish economy. Growth strategies taken into account, the expansion of bank variability throughout the globe will contribute to the development of the sector. Total assets of the Turkish banking sector are increased by 2.8% in 21 comparing to previous year-end and realized above TL 1 trillion. When this figure is compared with the average asset size of developed countries and especially EU countries, it is seen that Turkey has a high asset growth speed. On the other hand, when this speed is compared with equivalent developing economies, a big potential is still observed. When total assets are analyzed, the concentration BRSA iii Structural Developments in Banking December 21

8 keeps its decreasing tendency within the last few years and that the sector presents a nonconcentrated appearance for total assets. Market structure of the Turkish banking sector has transformed considerably in the last 11 years, within the frame of fundamental developments occurred. Within this process, the sector has reshaped with numerous banks going out the system, re-structurings, mergers and transfers, share purchases, strategic investments, regulatory framework, risk management, contribution of global capital and market dynamics; and the relative shares of banks are changed. When the markets are analyzed in details, a market structure is observed presenting no concentration in total loans, commercial loans, small and medium enterprise loans and housing loans and with a high level of competition. On the other hand, a moderate concentration is observed in individual credit cards, deposit and syndication and securitization loans. When the structure of global credit market is analyzed, it is seen that the highest share belongs to developed countries and especially the USA. It is observed that the emerging economies show generally a higher performance than the developed countries and that Turkey grows more consistently than USA, England, Germany, Spain, France, China, India, South Africa and Argentine in this market. On the other hand, despite the partial belief formed in international finance environment, the credit growth speed of Turkey is slower than Russia and Brazil which are equivalent economies, showing the potential of development in this area. China is in the first rank in the size of loans granted to real sector, and is followed by Japan and USA. While as of 29 67% of total loans is granted to real sector in China, this ratio is 19% for USA, 3% for EU- 2, and almost 66% for Turkey. In 29, a slowdown is in question for housing loans in all the countries due to the effect of the global crisis. USA is in first rank for housing loans and is followed by England and Germany. The share of housing loans within total countries is 56% for USA, 3% for Germany, 2% for England and around 11% for Turkey. When these ratios and growth rates are analyzed in global scale, it is seen that Turkey has a big potential especially in housing loan market. When the deposit market is analyzed globally, USA is in the first rank, followed by China, England, Japan and Germany. When the growth rate of the deposit is analyzed, it is seen that Turkey grows faster than USA, England, Germany, France, Spain, Portugal and Poland. Nevertheless, the growth rate of the deposit is slower than Russia, South Africa and Brazil, but a convergence to these countries is predicted. Moreover, global deposit collected in countries applying the interest-free banking, becoming more and more important in the global finance sector has reached USD billion in 21, Turkey having a share by 15% in this sector has a big potential. The highest share in syndication loans in global level belongs to the USA by 34.9%. The share of Turkey in the syndication loans market is around 1%. When the credit/deposit ratio presenting the financial intermediation efficiency is analyzed; it is seen that this ratio is.83 in USA, 1.3 in Germany,.7 in China, 1.13 in EU-27. As of 29, the credit/deposit ratio is.76 in Turkey, showing the presence of a potential to develop the financial intermediary. The sector being bank-weighted and having a big deposit base has the possibility to develop this ratio even more. Capacity indicators in the Turkish Banking Sector are generally in a stable development process. Numeric data show that the participation banks are presenting a performance above the sector for all capacity indicators and that they are in a fast development process. When analyzed by scale, small scale banks are the group showing the less development for capacity indicators. The crises of 2-21 have dealt major blows especially to the numbers of branches and personnel in the sector, but after 23, a consistent increasing process has been initiated in these indicators. Even the global financial crisis did not stop this development process and the numbers of branches and personnel kept increasing moderately during the crisis, which proves that the exposure level of Turkish Banking Sector and Turkish Economy in general to the global crisis is relatively low. The numbers of ATM and POS machines, which are BRSA iv Structural Developments in Banking December 21

9 elements of the payments system, are increased respectively by 11% and 18% within the last eight years, which shows that the access to banking services becomes easier each year. In parallel with the increase in the number of ATM, the number of banking cards has also increased considerably; as of 21, there is almost a banking card per person. The number of credit cards has tripled within the last ten years, with the effect of the banks market shares and profit strategies. It is seen that the sector process has more capacity and infrastructure to sustain the sector in respect of number of customers, number of transactions and volume of transactions concerning both credit facility and deposit collection. Turkey is in a good location among emerging countries in the said fields. According to the current condition, in case the number of employees in the sector increases by 1.5 folds, the number of branches doubles and number of ATM increases 2.5 folds, Turkey could achieve EU averages. This situation indicates that improvement field of our country is pretty wide in respect of approaching to global implementations and competitiveness and that competition power shall increase more as improvement is achieved. On the other hand, Turkey is located in top rows in global comparison in respect of especially number of bank card, credit card and POS machines. It is expected that the development experienced in credit cards field in quantity is supported by the development to be achieved in quality so as to provide proper use and keep nonperforming ratio low. In the Turkish banking sector, behavioral processes such as determining price and fee levels, advertising and promotion intensity, intensity of research and development activities and circularity concerning credit issue are influenced significantly by the differences based on market structure. Furthermore, merger and acquisition behavior have significant effect on structural outlook. As a result of the evaluation made by scale in pricing determination behavior of banks, it is seen that average deposit interests differ as to asset size of the bank and large scale banks pay lower deposit interest on average. On the other hand, commissions and fees the banks receive per unit asset were higher in medium scale banks in comparison to large and small scale banks. As a result of the evaluation made by function in pricing determination behavior, average interest rates concerning loans granted and deposit/funds collected approximate increasingly for deposit and participation banks. In Turkish Banking Sector, 16 mergers and acquisitions were realized in periods. The said mergers and acquisitions concentrated mainly in period. Following the periods mentioned, the interest to the Turkish banking system continued as stock purchases and strategic investments. Despite the global crisis, global interest to the sector continues. Having considered the current concentration level in the sector as of 21, mergers and acquisition transactions would be preferred by medium and small scale banks so as to increase activity. Advertising and promotion activities which are one of gaining a foothold in the market and establishing a market presence or branding instruments, as an indicator of the competition of getting a market share, present prominent clues about competition in Turkish banking sector. Share of advertising expenses of large scale banks within total advertising expenses decreased by years, while share of medium scale banks increased. Changes in shares concerning advertising expenses indicates that large scale banks benefited from the branding they acquired and medium scale banks increased their advertising expenses in order to compete with large scale banks. It is expected that medium and small scale banks will increase their advertising activities so as to gain a foothold in the market and to compete. Share of promotion expenses of large scale banks within total promotion expenses of the sector increase in the last three years, while the share of medium scale banks decreased in the last three years. This development indicates that large scale banks attached more importance to promotion activities in recent years to draw more customers. It is expected that medium and small scale banks shall also take interest in this field in order to increase their competitive power in the sector. Research-development (R&D) expenses of the banking BRSA v Structural Developments in Banking December 21

10 sector have been below the expected all along. Share of R&D expenses of the sector within total non-interest expenses is rather low. When it is analyzed by years, it is seen that R&D activities have concentrated on large scale banks. It is expected that large-scale banks shall invest more on R&D and small scale banks shall participate more in R&D activities with mutual organizations. Increasing financial capacity and making financial renovations could be achieved by concentrating on R&D activities. Especially by the Law on Supporting Research and Development Activities which entered into force in 28, it would be beneficial for all banking sector if banks invest more on research and development activities. When credit expansion behavior of banking sector against economic conditions is analyzed, it is seen that banking sector is in a tendency to extend loans in parallel with the fluctuations in economy. As a matter of fact, in economic recession periods, banks decrease the amount of loans they extend and in economic recovery periods, banks increase the amount of loans they extend. This tendency the banks display on extending loans worsen the economy and may cause economy to over-heat in growth conjuncture. It is confirmed after the recent global crisis experience that the said periodic credit facility behavior of banks which are active in world finance system might threaten economic stability. To this respect, it is expected that loan policies to transform the possible recession in economy to recovery, on the other hand, to direct the risk creating and extreme rapid growth to a more controlled and prudent path are taken into consideration. Performance indicators of banking sector have been analyzed in respect of profitability, efficiency and productivity. Accordingly, it is seen that 81% of total profit of the sector was procured by large scale banks, 12.1% by medium scale banks and 6.8% by small scale banks. The share large scale banks gain from the total profit experienced an increasing trend by years. On the contrary, according to the analysis made in respect of returns on assets and equities, it is seen that small scale banks are intensely located among the first 1 banks by asset size, while in return on equities, large scale banks are in the first ranges, especially large scale private banks operate with high return on equities, as of 21. When returns on assets and equities ratios of countries for 21 are compared on global extent, it is observed that especially return rates of EU member countries are relatively low, however the concerning return rates are higher in banking sectors of some emerging countries such as South Africa, Brazil and Argentina. In this outlook, although returns of assets and equities of Turkish banking sector are relatively above the developed markets, these rates being relatively low in comparison to the mentioned emerging markets indicates that there is a progress opportunity in respect of profitability. When the performance of Turkish banking sector as of 2-22 periods is analyzed by means of market-based performance criteria, it is seen that price-earnings ratio which experienced a fluctuated progress began to increase as of 29 and realized as 17.1 as of end-21. Similarly, average price/tangibles ratio began to experience an increasing tendency in the same period and realized as 1.6 in 21. When Intermediation function presenting access capacity to loan opportunities and which is the main function of banking sector is evaluated by loan/asset, loan/deposit ratios, the said ratios have shown a development in period, except 29. As a matter of fact the share of loans in assets has shown an increase in all bank groups also in scale and function basis, as in sector average. When the deposit to loan ratio is analyzed in global scale, it can be seen that the said ratio was progressed over 1% in developed and emerging countries primarily in European countries, except certain countries, and that the ratio of loan/deposit in Turkey was 76% in 29. Accordingly, the ratio of loan/deposit is representing the fact that there is still a high and a stable growth opportunity in Turkey market in spite of the rapid growth in loan volume. It is observed that private banks are operating with a higher loan/deposit ratio when compared to state banks, in first ten banks by asset sizes. It is observed that medium scale banks, which their NPL ratio was in lower level as to sector general in pre-global crisis period, have lost this characteristic with the crisis, when NPL ratio, another efficiency indicator, is analyzed by scale. Large scale banks have a lower NPL ratio as to sector general. NPL ratios of development and investment banks followed a more BRSA vi Structural Developments in Banking December 21

11 stable progress as to the banks in other function groups when analyzed in function basis. NPL ratio which was 17.6% in 22 has shown a decrease trend and was progressed in 3-4% interval in periods expect global crisis period. The growth potential of loan market is quite high due to the fact that NPL ratio of Turkish banking sector is progressing in lower levels in global level and dependent to that market risk is lower as to equivalent economies. The decrease in NPL amount, as a result of the increase in loan quality, shall increase in positive manner the profitability of the sector and accordingly the capital structure. Amelioration of the process of granting loan shall cause more positive results in respect of banks, sector and general economic environment. The number of companies continues to decrease in non bank financial sector. The number of finance companies which was in any case one remained the same while there was a decrease in the number of branch of financial leasing and factoring sectors. Nonetheless, there is an increase observed in the number of employment of financial leasing, factoring and finance companies in spite of global crisis. On the other hand, there is a certain increase in the concentration of asset and own funds and a certain decrease in the loan concentration, in financial leasing sector. There is a certain decrease observed in the concentration of asset, loan and own funds of factoring sector. There is also a certain decrease in asset, loan and own funds concentration of finance companies, as in factoring companies. Factoring sector, having relatively good performance, is the sector with the lowest concentration indicators. In spite of this, concentration indicators of finance companies are in their highest level in non-bank financial sector. The fact that liberalization of local economies was increased within the last 1 years, the markets were integrated in international level and the access to financial services getting easier have accelerated the financialization. It can be seen that international capital movements presented a strong increase trend until 27, in global scale. Turkey has increased constantly its international net capital inflow even if it took a relatively little share from these flows. The financialization presents also risks alongside the opportunities. It is seen that Turkey has still opportunities to use more than risks, when the indicators are observed. It is seen that Turkey s financial deepening indicators were increased during the 2-21 period. The ratio of total loans to GDP increased to 4% in 21 by doubling from 19.1% in 2. When considered that the said ratio was over 8% in countries such as Canada, South Africa and Korea, the relative condition of Turkey in this field is introducing a net growth potential. While the global crisis slowed down relatively the growth of the financial sector in the period of 28-29, acceleration was experienced again in 21. Turkish banking sector settled to a platform in which its total assets and loans shall grow over 2% and 3% respectively. When developed countries and emerging countries such as Brazil, Russia and China are analyzed, it is seen that there is a lot of distance Turkey shall cover in respect of financial deepening by preserving its current tendencies. BRSA vii Structural Developments in Banking December 21

12 BRSA viii Structural Developments in Banking December 21

13 TABLE OF CONTENTS 1. STRUCTURE OF BANKING SECTOR Type/Group/Status Analysis of Banks Banking Licenses Segmentation of Activity and Organization in Banking Asset Growth and Concentration MARKET STRUCTURE OF BANKING SECTOR Loans Commercial Loans SME Loans Consumer Loans Housing Loans Credit Card Receivables Deposit Savings Deposit Non-Deposit Liabilities Non Cash Loans and Liabilities CAPACITY IN BANKING SECTOR Customer Analysis Branch and Personnel Analysis ATM and POS Analysis Credit and Bank Card Analysis BEHAVIOUR IN BANKING SECTOR Price Differentiation in Banking Merger and Acquisitions Advertising and Promotion Activities Research and Development Activities Procyclicality in the Credit System PERFORMANCE IN BANKING SECTOR Performance Indicators Efficiency Analysis Productivity Indicators STRUCTURE OF NON-BANK FINANCIAL SECTORS Financial Leasing Sector Market Structure Factoring Sector Market Structure Developments in the Company, Branch and Personnel Structure Financing Sector Market Structure Developments in Financing Companies, Branch and Personnel Structure FINANCIALIZATION AND FINANCIAL DEEPENING Financialization Financial Deepening Banking Sector Projections BRSA ix Structural Developments in Banking December 21

14 BOXES Box 1: Global Outlook of Bank Types Box 2: Global Outlook of the Number of Banks Box 3: EU-Turkey Comparison for Number of Crossborder Bank Branches Box 4: Global Outlook of Asset Size Box 5: Turkey-EU Comparison by Asset Concentration Box 6: Global Outlook of Loans Box 7: Global Outlook of Loans Granted to Real Sector Box 8: Global Outlook of Consumer Loans Excluding Housing Loans Box 9: Global Outlook of Housing Loans Box 1: Global Outlook of Payment Instruments Transaction Volume Box 11: Global Outlook of Deposit... 4 Box 12: Global Outlook of Participation Funds Box 13: Global Outlook of Syndication Loans Box 14: Global View in Loan Customer Numbers Box 15: Global View in Deposit Customer Numbers Box 16: Global Appearance of Number of Bank Branches Box 17: Global Appearance of Number of Branches by Adult Population and Surface Box 18: Global Appearance in the Number of Personnel... 6 Box 19: Global Outlook in Number of ATM Box 2: Global Outlook of Number of ATM by Adult Population and Surface Box 21: Global Outlook in Number of POS Box 22: Global Outlook in the Number of Credit Cards... 7 Box 23: Global Outlook in the Number of Bank Card Box 24: Development of Net Profits Global Outlook Box 25: Global Appearance of Performance Indicators Box 26: Global Appearance of Efficiency Analysis Box 27: Global Outlook in Branch Based Productivity Indicators Box 28: Global Outlook in Personnel Based Productivity Indicators Box 29: Global Outlook in Operation Based Productivity Indicators Box 3: Regional Indicators in Leasing Sector Box 31: Growth of Leasing Transaction Volume and Penetration Ratio Comparison Box 32: Comparative Structural Indicators Concerning Factoring Sector Box 33: Global Appearance of Derivative Transactions Box 34: Global Outlook of Financial System/GDP Ratio Box 35: Global Outlook of Financial System Structure Box 36: Global Outlook of Banking Sector Assets/GDP Ratio Box 37: Credit Volume/GDP Ratio by Countries TABLES Table 1.1-1: Distribution of Banks by Function... 2 Table 1.1-2: Distribution of Banks by Scale... 3 Table 1.1-3: Financial Holding Companies... 3 Table 1.1-4: Ownership Structure of Banks... 4 Table 1.1-5: Status Changes... 5 Table 1.2-1: Main Activities Subject to Banking License Table 1.3-1: Domestic and Crossborder Weight of Assets Table 1.3-2: Domestic and Crossborder Distribution of Loans and Deposit Table 1.3-3: Domestic and Crossborder Distribution of Net Profit BRSA x Structural Developments in Banking December 21

15 Table 1.3-4: Number of Banks Table 1.3-5:Organizations of Banks Table 1.3-6: Asset Sizes of Banks Crossborder Organizations Table 1.4-1: Total Asset Size and Concentration Indicators... 2 Table 1.4-2: Asset Share Ranking in the Sector Table 2.1-1: Total Loan Volume Concentration Indicators Table 2.1-2: First 1 Banks in Loans Table 2.2-1: Commercial Loans Concentration Indicators Table 2.3-1: Concentration Ind. for Loans Granted to Small and Medium Scale Enterprises Table 2.3-2: First 1 Banks ranking in SME Loans... 3 Table 2.4-1: Consumer Loans Concentration Indicators Table 2.4-2: Ranking of First 1 Banks in Consumer Loans Volume Table 2.5-1: Housing Loans Concentration Indicators Table 2.5-2: Ranking of First 1 Banks in Housing Loans Volume Table 2.6-1: Credit Card Amounts Concentration Indicators Table 2.6-2: Ranking of First 1 Banks in Credit Cards Amount Table 2.7-1: Deposit Concentration Indicators Table 2.7-2: The First 1 Banks in Deposit Table 2.7-3: Size of Participation Fund Market Table 2.7-4: Participation Fund Table 2.8-1: Savings Deposit Concentration Indicators Table 2.9-1: Non-Deposit Liabilities Concentration Indicators Table 2.9-2: Syndication Loans Concentration Indicators Table 2.9-3: First 1 Banks in Syndication Loans Table 2.9-4: Securitization Concentration Indicators Table 2.9-5: First 1 Banks in Securitization Loans Table 2.1-1: Concentration of Non-Cash Loans and Liabilities Table 2.1-2: First 1 Banks in Non Cash Loans and Liabilities Table 2.1-3: Derivative Transactions Concentration Indicators Table 2.1-4: First 1 Banks in Derivative Transactions Table 3.1-1: Development of Loan Customer Numbers and Functional Distribution Table 3.1-2: Loan Customer Number Concentration Indicators and Averages by Groups... 5 Table 3.1-3: First 1 Banks Ranking in Number of Loan Customers... 5 Table 3.1-4: Development of Depositor Number and Functional Distribution Table 3.1-5: Depositor Number Concentration Indicators and Averages by Groups Table 3.1-6: First 1 Banks ranking in Number of Depositors Table 3.2-1: Development of Number of Branches and Functional Distribution Table 3.2-2: Concentration Indicators of Number of Branches and Averages by Groups Table 3.2-3: Ranking of First 1 Banks in the Number of Branches Table 3.2-4: Development and Functional Distribution of the Number of Personnel Table 3.2-5: Concentration Indicators of the Number of Personnel and Averages by Groups.. 59 Table 3.2-6: Ranking of First 1 Banks in the Number of Personnel Table 3.3-1: Development and Functional Distribution of Number of ATM Table 3.3-2: Number of ATM Concentration Indicators and Averages by Groups Table 3.3-3: The First 1 Banks in Number of ATM Table 3.3-4: Development and Functional Distribution of Number of POS Table 3.3-5: Number of POS Concentration Indicators and Averages by Groups Table 3.3-6: The First 1 Banks in Number of POS Table 3.4-1: Development of Credit Card Amount and Functional Distribution Table 3.4-2:Number of Credit Card Concentration Indicators and Averages by Groups Table 3.4-3: First 1 Banks in the Number of Credit Cards Table 3.4-4: Development of Number of Bank Card and Functional Distribution Table 3.4-5: Number of Bank Cards Concentration Indicators and Averages by Groups BRSA xi Structural Developments in Banking December 21

16 Table 3.4-6: First 1 Banks in Number of Bank Cards Tablo 4.2-1: Number and Sizes of Mergers and Acquisitions by Years Tablo 4.2-2: Concentration Analysis of Mergers and Acquisitions Tablo 4.3-1: Advertising Expenses Concentration Indicators... 8 Tablo 4.3-2: First 1 Banks in Advertising Expenses Tablo 4.3-3: Advertising Expenses /Non-interest Expenses Tablo 4.3-4: First 1 Banks in Advertising Expenses/Non-interest Expenses Tablo 4.3-5: Promotion Expenses Concentration Indicators Tablo 4.3-6: First Banks in Promotion Expenses Tablo 4.3-7: Promotion Expenses/Non-Interest Expenses Concentration Indicators Tablo 4.3-8: First 1 Banks in Promotion Expenses/Non-Interest Expenses Tablo 4.4-1: R&D Expenses Concentration Indicators Tablo 4.4-2: First 1 Banks in R&D Expenses Tablo 4.4-3: R&D Expenses/Non-Interest Expenses Tablo 4.4-4: First 1 Banks in R&D Expenses/Non-Interest Expenses Table 5.1-1: ROA and ROE by Scale and Function... 9 Table 5.1-2: First 1 Banks in ROA... 9 Table 5.1-3: First 1 Banks in ROE... 9 Table 5.1-4: Net Interest Margin by Scale and Funciton Table 5.1-5: Average Price/Earnings Ratio Table 5.1-6: Average Price/Book Ratio Table 5.2-1: Loan/Asset Ratios Table 5.2-2: Loan/Asset Ratios of First 1 Banks by Total Assets Table 5.2-3: Loan/Deposit Ratios Table 5.2-4: Loan/Deposit Ratios of First 1 Banks by Total Assets Table 5.2-5: Follow-Up Ratios Table 5.2-6: Follow-Up Ratios of First 1 Banks by Total Assets Table 5.2-7: Reserves/NPL Ratio Table 5.2-8: Reserves/NPL Ratios of First 1 Banks by Total Assets Table 5.2-9: Input-Output Variables Table 5.2-1: Development of Input and Output Variables Table 5.3-1: Asset Amount per Branch Table 5.3-2: Loan Amount per Branch Table 5.3-3: Deposit Amount Per Branch Table 5.3-4: Period Profit per Branch Table 5.3-5: Asset Amount per Personnel Table 5.3-6: Deposit Amount Per Personnel Table 5.3-7: Period Profit Per Personnel Table 5.3-8: Total Operation Expenses/Total Incomes of First 1 Banks by Total Assets Table 5.3-9: Personnel Expenses/ Total Operation Expenses of First 1 Banks by Total Assets Table 5.3-1: Commission Incomes/Total Operation Incomes of First 1 Banks by Total Assets 19 Table : Net Interest Incomes/Total Incomes of First 1 Banks by Total Assets Table 6.1-1: Structural Indicators by Scale Groups Table 6.1-2: Share of First 1 Companies in Assets Chart 6.1-3: Total Credit Volume and Concentration Indicators Table 6.1-4: Distribution of Profitability by Scale Table 6.2-1: Structural Indicators by Scale Groups Table 6.2-2: Company Concentration in Assets Table 6.2-3: Distribution of Profitability by Scales Table 6.3-1: Structural Indicators by Scale Groups Chart 6.3-2: Total Asset and Concentration Indicators Table 6.3-3: Concentration of First 5 Companies in the Assets Table 6.3-4: Distribution of Profitability by Scale BRSA xii Structural Developments in Banking December 21

17 Table 7.1-1: G-2 Countries Direct Foreign Investments Table 7.1-2: G-2 Countries Portfolio Investments Table 7.1-3: Financial Asset Size Table 7.1-4: Financial Asset Size Table 7.1-5: Derivative Transactions by their Types Table 7.1-6: Future and Option Transactions by Areas Table 7.1-7: Off-Shore Receivables of Banks in G-2 Countries Table 7.1-8: Stock Market Transaction Volume/GDP in G-2 Countries Table 7.1-9: Stock Market Capitalization/GDP in G-2 Countries Table 7.1-1: Gross Foreign Debt Stock/GDP in G-2 Countries Table : FX Debt Stock/Total Foreign Debts Stock in Emerging Economies Table : Gross Debt Stock/GDP in G-2 Countries Table : Public Sector Bond Market Capitalization/GDP Ratio in G-2 Countries Table : Private Sector Bond Market Capitalization/GDP Ratio in G-2 Countries Table : International Bond Supply/GDP Ratio in G-2 Countries Table 7.2-1: Asset Size of Financial System Table 7.2-2: Ratio of Financial System to GDP Table 7.2-3: Total Domestic Savings Ratio in G-2 Countries Table 7.2-4: Domestic Loan/GDP provided by Banking System in G-2 Countries Table 7.3-1: Medium-Term Credit Volume Expansion Scenarios Table 7.3-2: Long-Term Loan Volume Growth Scenarios CHARTS Chart 1.4-1:Asset Concentration and Functional Distribution Chart 2.1-1: Loan Concentration and Functional Distribution Chart 2.2-1: Commercial Loans Concentration and Functional Distribution Chart 2.3-1: SME Loans Concentration and Functional Distribution... 3 Chart 2.4-1: Consumer Loans Concentration and Functional Distribution Chart 2.5-1:Housing Loans Concentration and Functional Distribution Chart 2.6-1: Credit Cards Amount Concentration and Functional Distribution Chart 2.7-1: Deposit Concentration and Functional Distribution Chart 2.8-1: Savings Deposit Concentration and Functional Distribution Chart 2.9-1: Non-Deposit Liabilities Concentration and Functional Distribution Chart 2.1-1: Non Cash Loans and Liabilities Concentration and Functional Distribution Chart 2.1-2: Derivative Transactions and Functional Distribution Chart 3.1-1: Number of Loan Customer Development Index by Function and Scale Chart 3.1-2: Number of Depositors Development Index by Function and Scale Chart 3.2-1: Number of Branches Development Index by Function and Scale Chart 3.2-2: Number of Personnel Development Index by Function and Scale Chart 3.3-1: Number of ATM Development Index by Function and Scale Chart 3.3-2: Number of POS Development Index by Function and Scale Chart 3.4-1: Number of Credit Card Development Index by Function and Scale Chart 3.4-2: Number of Bank Card Development Index by Function and Scale Grafik 4.1-1: Average Placement Interest and Interest Cost by Scale* Grafik 4.1-2: Average Placement Interest and Interest Cost by Function Grafik 4.1-3: Average Placement Interest and Interest Cost by Ownership Grafik 4.1-4: Average Placement Interest and Interest Cost by Ownership Grafik 4.1-5: Average Loan and Deposit Interest Rate by Scale* Grafik 4.1-6: Average Loan and Deposit Interest Rate by Function* Grafik 4.1-7: Average Loan and Deposit Interest Rate by Ownership Grafik 4.1-8: Commission and Fees Income and Personnel Expenses Distribution by Scale BRSA xiii Structural Developments in Banking December 21

18 Grafik 4.1-9: Fees Income and Personnel Expenses by Function Grafik 4.1-1: Commission and Fees Income and Personnel Expenses by Ownership Grafik : Commission and Fees Income as well as Personnel Expenses by Ownership Grafik 4.3-1: Advertising Expenses Concentration and Functional Distribution... 8 Grafik 4.3-2: Advertising Expenses /Non-interest Expenses by Scale and Function Grafik 4.3-3: Promotion Expenses Concentration and Functional Distribution Grafik 4.3-4: Promotion Expenses/Non-Interest Expenses by Scale and Function Grafik 4.4-1: R&D Expenses by Scale and Function Grafik 4.4-2: R&D Expenses/Non-Interest Expenses by Scale and Function Grafik 4.5-1: Economic Growth vs. Credit Growth (Total and Deposit Banks) Grafik 4.5-2: Economic Growth vs. Credit Growth (Development and Participation Banks) Grafik 4.5-3: Economic Growth, Total and Deposit Banks NPL Growth Grafik 4.5-4: Economic Growth, Participation and Development Banks NPL Growth Grafik 4.5-5: Economic Growth, Total and Deposit Banks Own Funds Growth Grafik 4.5-6: Economic Growth, DIB and Participation Banks Own Funds Growth Chart 5.1-1: Average Price/Earnings Ratio by Scale and Function Groups Chart 5.1-2: Average Price/Book Ratio by Scale and Function Groups Chart 5.2-1: Loan/Asset Ratio by Scale and Function Groups Chart 5.2-2: Loan/Deposit Ratio by Scale and Function Groups Chart 5.2-3: Follow-Up Ratios by Scale and Function Groups Chart 5.2-4: Reserves/NPL Ratio by Scale and Function Groups Chart 5.2-5: Development of the Efficiency... 1 Chart 5.2-6: Efficiency Levels by Ownership Structure and Function Groups... 1 Chart 5.3-1: Total Operation Expenses /Total Incomes Chart 5.3-2: Personnel Expenses/Total Operation Expenses Chart 5.3-3: Commission Incomes/Total Operation Expenses Chart 5.3-4: Net Interest Incomes/Total Incomes Chart 6.1-1: Development of Number of Branches, Personnel and Companies Chart 6.1-2: Share Distribution of Assets and Concentration Indicators Chart 6.1-3: Distribution of Own Funds and Concentration Chart 6.2-1: Development of the Number of Branches, Personnel and Companies Chart 6.2-2: Asset Share Distribution and Concentration Chart 6.2-3: Distribution of Own Funds and Concentration Indicators Chart 6.3-1: Developments in the Number of Branches, Personnel and Companies Chart 7.1-1: International Capital Movements Chart 7.1-2: Global Over the Counter Derivative Transaction Volume and Types Chart 7.1-3: ISE Transaction Volume Chart 7.1-4: Shares of Financial Institution Activities in GDP Chart 7.1-5: Share of Financial Sector in Total Employment Chart 7.1-6: Banking/ CBRT Sector Balance-Sheet Indicators Chart 7.2-1: Financial System Size Chart 7.2-2: Banking Sector Asset Size Chart 7.2-3: Banking Sector Development Rates Chart 7.2-4: Domestic Savings Chart 7.2-5: Domestic Savings Chart 7.2-6: M1 Money Supply and M1 Indicators Chart 7.2-7: M2 Money Supply and M2 Indicators Sector Development Rates Chart 7.2-8: Loan Volume and Loan Volume Developments Chart 7.2-9: Deposit Volume and Deposit Volume Developments Chart 7.3-1: Loan Growth Trends BRSA xiv Structural Developments in Banking December 21

19 ABBREVIATIONS EU USA BRSA BIS ICC BRS CEBS COSO FXDA ECB GNP GDP HH/HHI Cum. DIB SP M.U. CBRT NPL SDIF CPI TSI TL PPI n.d. FX European Union United States of America Banking Regulation and Supervision Agency Bank for International Settlements Interbank Card Center Banks Reporting System Committee of European Banking Supervisors Committee of Sponsoring Organization of the Treadway Commission Foreign Exchange Deposit Account European Central Bank Gross National Product Gross Domestic Product Herfindahl Hirschman Index Cumulative Development and Investment Bank Securities Portfolio Monetary Union Central Bank of the Republic of Turkey Non-Performing Loans Savings Deposit Insurance Fund Consumer Price Index Turkish Statistical Institute Turkish Lira Producer Price Index No Data Foreign Currency BRSA xv Structural Developments in Banking December 21

20 BRSA 1 Structural Developments in Banking December 21

21 1.1. Type/Group/Status Analysis of Banks 1. STRUCTURE OF BANKING SECTOR Turkish banking sector is classified under three functional groups as deposit banks, participation banks and development and investment banks pursuant to the Banking Law Nr When Turkish banking sector, whose total assets reached to TL 1 trillion as of December 21, is analyzed by functional bank groups, it is seen that 92.6% of sector s asset size is comprised of 32 deposit banks, 4.3% is comprised of 4 participation banks and 3.1% is comprised of 13 development and investment banks. When asset analysis is made by functional classification, it is seen that first 5 deposit banks comprise 55.8% of group total and first 3 development and investment banks comprise 77.1% of group total, therefore there is not a homogenous distribution in the mentioned groups. Participation banks group which has a few banks has a more homogenous structure when compared to other groups. Table 1.1-1: Distribution of Banks by Function December 21 Asset (TL Million) General Share Group Share Bank Asset General (TL Million) Share Group Share Deposit Banks 1 T.C. Ziraat Bankası A.Ş ,2 16,21 17 Alternatifbank A.Ş ,42,46 2 Türkiye İş Bankası A.Ş ,15 14,2 18 Eurobank Tekfen A.Ş ,41,45 3 Türkiye Garanti Bankası A.Ş ,31 13,3 19 Deutsche Bank A.Ş. 3.51,3,33 4 Akbank T.A.Ş ,24 12,14 2 Tekstil Bankası A.Ş ,26,28 5 Yapı ve Kredi Bankası A.Ş ,42 9,9 21 Bank Mellat 1.838,18,2 6 Türkiye Vakıflar Bankası T.A.O ,37 7,95 22 Turkland Bank A.Ş. 1.51,15,16 7 Türkiye Halk Bankası A.Ş ,28 7,86 23 Westlb a.g ,12,13 8 Finansbank A.Ş ,79 4,9 24 The Royal Bank of Scotl. N.V 1.148,11,12 9 Denizbank A.Ş , 2,98 25 Arap Türk Bankası A.Ş ,11,12 1 Türk Ekonomi Bankası A.Ş ,89 2,4 26 Turkish Bank A.Ş. 1.31,1,11 11 Hsbc Bank A.Ş ,77 1,91 27 Fibabanka A.Ş. 92,9,1 12 Ing Bank A.Ş ,72 1,86 28 Birleşik Fon Bankası A.Ş. 797,8,9 13 Fortis Bank A.Ş ,21 1,3 29 Jp Morgan Chase Bank N.A. 72,7,8 14 Şekerbank T.A.Ş ,13 1,22 3 Socıete Generale S.A. 674,7,7 15 Citibank A.Ş. 6.35,63,68 31 Habib Bank Limited 75,1,1 16 Anadolubank A.Ş ,45,48 32 Adabank A.Ş. 51,1,1 Deposit Banks Total Participation Banks 1 Asya Katılım Bankası A.Ş ,44 33,5 3 Kuveyt T. Katılım Bank. A.Ş ,97 22,4 2 T. Finans Katılım Bankası A.Ş ,1 24,7 4 Albaraka T. Katılım Bank. A.Ş. 8.46,84 19,4 Participaiton Banks Total Development and Investment Banks 1 İller Bankası 9.677,96 31,25 8 Merrıll lynch Yatırım Bank A.Ş. 341,34 1,1 2 Türkiye Sınai Kalk. Bankası A.Ş ,79 25,55 9 Nurol Yatırım Bankası A.Ş. 217,22,7 3 Türkiye İhracat Kredi Bankası A.Ş ,62 2,31 1 Gsd Yatırım Bankası A.Ş. 16,11,3 4 Bankpozitif K. ve Kalkınma B. A.Ş ,16 5,32 11 Diler Yatırım Bankası A.Ş. 13,1,3 5 Türkiye Kalkınma Bankası A.Ş ,16 5,16 12 Credıt A. Yatırım Bank.Türk A.Ş. 66,7,2 6 İmkb Takas ve Sak. Bankası A.Ş. 1.59,15 4,87 13 Taib Yatırım Bankası A.Ş. 14,1, 7 Aktif Yatırım Bankası A.Ş: 1.48,18 4,78 Development and Investment Banks Total Total The share of large scale banks1 group which is comprised of seven banks in the sector is realized as 74.8%, the share of medium scale banks group which is comprised of nine banks is 16.8%, the share of small scale banks group which is comprised of 11 banks is 6.6% and the share of micro scale banks group which is comprised of 22 banks is 1.8%. Asset size of 12 banks in micro scale banks group is.1% below the asset size of the sector. There are three state banks in large scale banks group and whole of the mentioned group are comprised of deposit banks. Therefore, large scale banks group has a more homogenous structure by 1 Banks whose asset size shares in sector total are above 5% are classified as large scale, between 1%-5% are medium scale, between,2%-1% are small scale and below,2% are micro scale banks. BRSA 2 Structural Developments in Banking December 21

22 function than other bank groups. Participation banks distributed in equal numbers to medium scale and small scale banks groups. Micro scale banks are generally comprised of development and investment banks as well as foreign bank branches. Table 1.1-2: Distribution of Banks by Scale Dec.1 Asset Sec.Share Gr.Share Asset Sec.Share Gr.Share Bank (TLMillion) (TL Million) Large Scale Banks 1 T.C. Ziraat Bankası A.Ş ,2 2,1 5 Yapı ve Kredi Bankası A.Ş ,42 11,3 2 Türkiye İş Bankası A.Ş ,15 17,6 6 T. Vakıflar B. T.A.O ,37 9,8 3 T. Garanti Bankası A.Ş ,31 16,5 7 Türkiye Halk Bankası A.Ş ,28 9,7 4 Akbank T.A.Ş ,24 15 Group Total Medium Scale Banks 1 Finansbank A.Ş ,79 22,6 6 Asya Katılım Bankası A.Ş ,44 8,6 2 Denizbank A.Ş ,4 7 Fortis Bank A.Ş ,21 7,2 3 Türk Ekonomi Bankası A.Ş ,89 11,3 8 Şekerbank T.A.Ş ,13 6,8 4 Hsbc Bank A.Ş ,77 1,5 9 T. Finans Katılım Bankası A.Ş ,1 6,3 5 Ing Bank A.Ş ,72 1,2 Group Total Small Scale Banks 1 Kuveyt Türkb ,97 14,55 7 Anadolu Bank 4.513,45 6,75 2 İller B ,96 14,47 8 Alternatifbank 4.266,42 6,38 3 Al Baraka Türk 8.46,84 12,57 9 Eurobank Tekf ,41 6,21 4 T. Sınai Kalk.B ,79 11,83 1 Deutsche Bank 3.51,3 4,56 5 Cıtıbank 6.35,63 9,43 11 Tekstil Bank 2.573,26 3,85 6 T. İhracat Kr. B ,62 9,4 Group Total Micro Scale Banks 1 Bank Mellat 1.838,18 1,13 12 Birleşik Fon B. 797,8 4,39 2 Bankpozitif 1.649,164 9,9 13 Jp Morgan Chase 72,7 3,87 3 T. Kalkınma B ,159 8,8 14 Socıete Generale 674,7 3,71 4 Turkland Bank 1.51,15 8,32 15 Merrıll Lynch 341,34 1,88 5 İmkb Takasbank 1.59,15 8,32 16 Nurol Yatırım B. 217,22 1,2 6 Aktif Yatırım B. 1.48,147 8,16 17 Gsd Yatırım B. 16,11,58 7 WESTLB A.G ,12 6,59 18 Diler Yatırım B. 13,1,57 8 Royal Bank Of Sc 1.148,11 6,33 19 Habib Bank Lim. 75,1,41 9 Arap Türk B ,11 6,29 2 Credıt Agr. Yat. B. 66,7,36 1 Turkısh Bank 1.31,1 5,68 21 Adabank A.Ş. 51,1,28 11 Mıllennıum Bank 92,9 4,97 22 Taib Yatırım B. 14,1,8 Group Total Total 1.6,67 Financial holding companies are defined as companies whose all or majority affiliates are credit institutions or financial institutions on condition that at least one of them is a credit institution. Three financial holding companies are operating in Turkey. Total asset size of financial holding company banks comprises 1.5% of the sector s asset size. Table 1.1-3: Financial Holding Companies Finansal Holding Companies Bank 1 Koç Finansal Hizmetler A.Ş. Yapı ve Kredi Bankası A.Ş. 2 Özyol Holding A.Ş. Turkish Bank A.Ş. 3 TEB Holding A.Ş. Türkiye Ekonomi Bankası A.Ş. When analyzed by ownership, it is seen that there is a specific concentration in Turkish banking sector. The highest ownership concentration in global capital banks and they are followed by state banks and banks under the control of holdings. There is global capital in 37 banks operating in the sector. There is global capital in two state banks, as well. When asset structure is analyzed by ownership, it is seen that private banks have the biggest share by TL 314,8 billion. It is followed by state banks with an asset size of TL 28,9 billion. When banking system is analyzed by global ownership share, it is seen that the share of banks operating as joint stock company is TL 15,4 billion and the share of banks operating as branches is TL 3,3 billion. BRSA 3 Structural Developments in Banking December 21

23 Table 1.1-4: Ownership Structure of Banks GLOBAL C.P. PUBLIC PRIVATE INCORPORATED COMPANY BRANCH Million TL; December 21 Asset L.S.. G.S.. N.P.S. L.E.S. P.S. Other Public Private D.I S.E.S Adabank ,1 1,32,55 SDIF (6) Majority Shareholdership* Birleşik Fon Bankası SDIF (6) İller Bankası Municipalities (1) T.C. Ziraat Bankası Undersecretariat of Treasury (1) T. İhracat Kredi B. 279, Undersecretariat of Treasury (1) T. Kalkınma Bankası ,1,9 99,8,92 Undersecretariat of Treasury (1) Türkiye Halk B , ,2 24,9,4 Privatization Administration (1) T. Vakıflar Bankası ,6 4, ,1 25,2 15,7 Foundations Reprstd by Gen Direct.Fou.(2) Group Total 28,884 Aktif Yatırım B ,32 99,65,3 Çalık Holding A.Ş. (1) Alternatifbank ,84 4,16 Anadolu End. Holding A.Ş. (1) Anadolubank ,5 69,97 1,55 Habaş Sın. ve Tıb. Gaz. A.Ş. (1) Diler Yatırım B Yazıcı Dem. Çel. S. ve T. A.Ş. (1) Gsd Yatırım B GSD Holding A.Ş. (1) Nurol Yatırım B Nurol Holding A.Ş. (1) Mıllennıum Bank Credit Europe Bank N.V. (1) Tekstil Bankası ,49 24,5 GSD Holding A.Ş. (1) İmkb Takas Ve Sak. B. 251, ,8 81,9 4,3 1 ISE (2) Yapı Ve Kredi B , ,63 22,4 Koç Finansal Hizmetler A.Ş. (1) Türkiye İş Bankası , ,38 32,6 T.İş Bankası A.Ş. Men. Mun. Vakfı (1) Asya Katılım Bankası ,4 34 9,83 5,6 39,6 Forum İnşaat Dekorasyon Turizm Akbank , ,71 66,5 19,9 4,3 Hacı Ömer Sabancı Holding A.Ş. (1) Türkiye Sınai Klk B ,4 62, ,37 38,3,29 T.İş Bankası A.Ş. (1) Turkısh Bank ,17 93,77 1,6 Özyol Holding (1) Türk Ekonomi B ,5 4 14,12 89,55 1,3,6 Fortis SA/NV ve TEB M.Y. A.Ş. (1) Eurobank Tekfen ,24,76 Eurobank EFG Holding S.A (3) Group Total 314,842 T.Finans Katılım. B , ,1 7,25 8,62 National Commercial Bank (1) Bankpozitif ,2 7 1 Tarshish-Hapo. Hold. and Inv.Ltd. (1) Albaraka T. Kat. B , ,5 61,86 22,4 8,2 Albaraka Banking Group (1) Arap Türk Bankası ,4 2, Libyan Foreign Bank (1) Kuveyt Türk Kat. B ,8 8 98,95 1,5 Kuveyt Finans Kurumu (1) Fortis Bank , ,11 5,89 Fortisbank SA/NV (1) Taib Yatırım B. 13.9,7 99,72 99,28 TAİB Bank BSC (4) Finansbank , ,8,2 National Bank of Greece (1) Denizbank , ,84,16 Dexia Participation (1) Cıtıbank COIC (1) Credıt Agrıc. Yat. B Credit Ag. Corp. and Inv. Bank (1) Deutsche Bank Deutsche Bank AG (1) Hsbc Bank HSBC Bank Plc (1) Ing Bank ING Bank NV (1) Merrıll Lynch Yat. B Merrill Lynch Eur. As Hold. Inc. (1) Türkiye Garanti B , ,66 49,11 48,6 1,6 Banco Bilbao Vizcaya Arg. S.A. (1)** Turkland Bank Bankmed Sal. ve Arab Bank Plc. (1) Bank Mellat Bank Mellat İran (1) Habib Bank Limited Habib Bank HBL (1) Jp Morgan C. B. N.A JPMorgan Chase Bank (1) 3.29 Socıete Generale S.A Societe Generale SA Paris (1) The Royal B. Of S. N.V The Roral Bank of Scotland NV (1) Westlb A.G WestLB AG Düsseldorf (1) Group Total (D.I.) 196,894 J.C. ŞEKERBANK , ,4 18,7 13,2 BTA Sec. ve Şkb. T.A.Ş. P. M. V. (5) Sector s Total Assets 1.6,671 C.P: Control Power, L.S: Local Share, G. S: Global Share, N.P.S: Natural Person Share, L.E.S: Legal Entity Share, P.S: Public Share, D.I: Direct Investment, S.E.S.: Stock Exchange Share * Shows the Legal Entity having the Highest share in the first Phase JC: Jointly Controlled ** By the transfer contract signed on , T. Garanti Bankası shares by 6.292% belonging to Doğuş Holding A.Ş. and T. Garanti Bankası shares by 18.6 belonging to GE Capital Corporation was transferred to Banco Bilbao Vizcaya Argentaria S.A; this transfer was concluded on March 22, 211 following official approvals. (1) Having Majority of the Capital (2) By Having Privileged Shares (3) Contract Made with Other Shareholders (4) Being Able to Assign the Majority Subject to Decision in the Board of Directors in any case (5)Jointly Control (6)Control by the SDIF BRSA 4 Structural Developments in Banking December 21

24 The sector s status structure did not change significantly in 21. There were changes in the share ownership structure of partners of Akbank T.A.Ş. and in the partnership structure of Diler Yatırım Bankası A.Ş. The Credit Europe Bank NV which is one of the financial investments of Fiba Group in banking area has taken over the share amounting to 95% of Millenniumbank A.Ş. Table 1.1-5: Status Changes Date of Commercial Title Establishment Historical Development /Status Changes /Capital Structure Public Deposit Banks T.C. Ziraat Bankası A.Ş. Türkiye Halk Bankası A.Ş. Türkiye Vakıflar Bankası T.A.O. Private Deposit Banks Adabank A.Ş Akbank T.A.Ş Alternatif Bank A.Ş. Anadolubank A.Ş Şekerbank T.A.Ş Tekstil Bankası A.Ş. Turkish Bank A.Ş Established in 1863, transformed into Ziraat Bankası in Pursuant to the Law enforced in 1937, obtained State Economic Enterprise status and with new name of Türkiye Cumhuriyeti Ziraat Bankası. The bank s state bank status was terminated in 2 which was given corporation status subject to private law provisions undergoing a restructuring process. The Bank was taken over by Türkiye Emlak Bankası A.Ş., in 21. The entire capital of the Bank belongs to Treasury. Got entitled to open branches and extend loans directly after 195. The Bank was taken over by Türkiye Öğretmenler Bankası T.A.Ş. in 1992, Sümerbank in 1993, Etibank in 1998, 96 branches of Türkiye Emlak Bankası A.Ş. in 21 and eventually Pamukbank T.A.Ş. in % of the Bank was put in public offering in December 28. Established in 1954 by a special law % of stocks of the bank were put in public offering in 25 in ISE % of the Bank s capital belongs to Vakıflar Genel Müdürlüğü (43% to Group A and 15.44% to Group B) and remaining 16.38% belongs to natural persons and legal entities. The Bank was monitored by the BRSA, according to the Article 14/1 of the Banks Act Nr. 4389; a new Administrative Board was assigned to the bank pursuant to the resolution dated July 25, 23 Nr As a result of the bidding conducted by the Fund in July 3, 26, it was given out by contract to the Kuwait originated The International Investor Company. However Pursuant to the Resolution of the BRSA dated July 26, 27, transfer of shares to The International Investor Company was rejected. Stocks of the bank began to be traded in ISE in 199. Furthermore, some of bank s stocks were issued in international markets and sold as American Depository Receipt and ordinary stocks in In 25, Ak Uluslararası Bankası A.Ş. was transferred to the Bank. In 26, 2% of the Bank s capital was taken over by Citibank Overseas Investment Corporation (COIC). The share of the US Treasury having 33.6% shares of Citigroup Inc. decreased to 27.2% because Citigroup Inc. increased capital but the US Treasury did not participate in the mentioned increase. As a result of current partnership interests of Aksigorta A.Ş. and Exsa Export Sanayi Mamülleri Satış ve Araştırma A.Ş. within Akbank T.A.Ş. was transferred to Hacı Ömer Sabancı Holding, direct share of Hacı Ömer Sabancı Holding in the Bank s capital was increased to 4.75% from 32.28%. The remaining share by 19.31% belongs to other partners and 19.94% is public. The Bank s shares have started to effect transactions within ISE in The Bank had passed over to Anadolu Grubu Subsidiaries in % of the Bank s capital belongs to Anadolu Endüstri Holding A.Ş. and 22.92% belongs to other shareholders. In 1997, the Turkish Privatization Administration divided Etibank A.Ş. into three and made it subject to three separate privatization processes as Etibank A.Ş., Denizcilik Bankası T.A.Ş. and Anadolu Bankası T.A.Ş. As a result, the royalty of Anadolu Bankası T.A.Ş is turned over to Anadolubank A.Ş % of the Bank s capital belongs to Habaş Sınai ve Tıbbi Gazlar İstih. End. A.Ş., 27.32% of it belongs to Mehmet Rüştü Başaran and the remaining share belongs to other shareholders. Established in 1953 in Eskişehir by the name of Pancar Kooperatifleri Bankası. Afterwards, its head office was moved to Ankara and it undertook the name of Şekerbank T.A.Ş. in The shares of the Bank have started to be traded in the ISE in In 26, the shares corresponding to 33.98% of the paid-up capital of the bank were taken over by Turanalem Securities JSC % of the remaining share of the bank is public and 33.98% belongs to Şekerbank T.A.Ş. Munzam Vakfı. 24.5% of the shares of Tekstil Bankası A.Ş. which began to be traded in ISE since 199 are owned by the public. 75.5% of the paid-up capital of the bank which is included in GSD Group belongs to GSD Holding A.Ş. The Bank started to operate in Istanbul in 1982, as the Istanbul main branch of the Türk Bankası Limited previously established in Cyprus. in 1991, Turkish Bank A.Ş. was founded and the Bank took over the Istanbul main branch of Türk Bankası Limited. BRSA 5 Structural Developments in Banking December 21

25 Commercial Title Türk Ekonomi Bankası A.Ş. Türkiye Garanti Bankası A.Ş. Türkiye İş Bankası A.Ş. Yapı ve Kredi Bankası A.Ş. Global Capital Deposit Banks Arap Türk Bankası A.Ş. Date of Establishment Historical Development /Status Changes /Capital Structure Again in 1991, the bank received the permission to perform banking transactions and accept deposits. 4% of the bank capital belongs to the National Bank of Kuwait, 53.77% to Özyol Holding A.Ş. and remaining 6.23% to other shareholders. Established in 1927 by the title of Kocaeli Halk Bankası T.A.Ş., changed status in 1961 and its title became Kocaeli Bankası T.A.Ş. The title of the Bank was changed once more in 1982 as Türk Ekonomi Bankası A.Ş. and its head office was moved to Istanbul 1927 within the same year. The shares of the Bank started to be traded in ISE in % of the Bank s capital belongs to TEB Mali Yatırımlar A.Ş., 34,43% belongs to BNP Paribas and 15,74% belongs to other partners. The bank joined to Doğuş Holding in 1983, its shares have started to trade in the ISE in 199, and have issued shares to abroad in In 21, the bank took over Osmanlı 1946 Bankası A.Ş. within its constitution. In 25, the shares corresponding to 25.5% of the bank were sold to General Electric Group % of the Bank s capital is publicly owned c and 26.7% belongs to Doğuş Holding. The 12.3% share of the bank belonging to Turkish Treasury was offered to domestic and foreign investors by public offerings on May Presently, 32.43% of the Bank is 1924 publicly owned % of the Bank s capital belongs to Türkiye İş Bankası A.Ş. Men. Mun. Social Security and 28.9% to Republican People s Party. Joined the Çukurova Holding in 198 and its shares have started to be traded in ISE in As of 25, bank s 57.43% shares possessed by Çukurova Group Companies and SDIF have passed under ownership of Koçbank A.Ş. with their financial affiliates. Yapı ve Kredi Bankası A.Ş. took over Koçbank A.Ş. with all its rights, receivables, debts and 1944 liabilities ending its legal entity in 26. Also within the same year Koçbank A.Ş. was transferred to Yapı ve Kredi Bankası A.Ş., with all of its assets and liabilities, by ending its legal entity without liquidation. 81.8% of Bank s capital belongs to Koç Finansal Hizmetler A.Ş and remaining 18.2% to other Shareholders Citibank A.Ş. 198 Denizbank A.Ş Deutsche Bank A.Ş. Eurobank Tekfen A.Ş Finans Bank A.Ş Established in 1977, this bank is a joint venture of Arabic (62.37% of it belongs to Libyan Foreign Bank and 1.62% to Kuwait Investment Co.) and Turkish (2,58% of it belongs to T.İş Bankası and 15,43% to T.C. Ziraat Bankası) shareholders. Citibank N.D. started to operate in 198 as a foreign bank opening branch in Turkey. In 23 Citibank A.Ş. was founded as a subsidiary company which belongs to Citibank N.D. Citibank A.Ş. received the permission to accept deposits and to carry out banking transactions in 24. Also in the same year, Citibank N.D. was transferred to Citibank A.Ş. Thus, Bank was transformed into joint stock company from foreign bank branch. All of the Bank s capital is possessed by Citibank Overseas Investment Corporation. With tender in 1997 of Privatization Administration, shares of Denizcilik Bankası T.A.Ş. were bought by Zorlu Holding. Afterwards, in 22 e shares of Milli Aydın Bankası T.A.Ş. were transferred to the Bank. The shares of Denizbank A.Ş. have started to trade in ISE in 24. In 26 Zorlu Holding sold its 74.9% shares in the bank to Dexia Participation Belgique S.A., with Belgium- France capital. Presently, 99.83% of Bank s capital belongs to Dexia Participation Belgique S.A. Starting its operations in 1988 under the title Türk Merchant Bank A.Ş., the bank s title was changed to Bankers Trust A.Ş. in 1997 and to Deutsche Bank A.Ş. in 2. In 24, the Bank received permission to accept deposits. The Bank s capital belongs entirely to DeutscheBank AG. Bank Ekspres A.Ş. started its operations in 1992, was transferred to the Fund in 1998, bought by Tekfen Holding in 21. Afterwards, Tekfen Group transferred Tekfen Yatırım ve Finansman Bankası A.Ş. in 21 to Bank Ekspres A.Ş. and merged the two banks. Within the same year, the title of the bank was changed to Tekfenbank A.Ş. In 27, Eurobank EFG Holding (Luxemburg) S.A. took over 7% of Tekfenbank A.Ş. shares. Commercial title of Tekfenbank A.Ş. was changed as "Eurobank Tekfen A.Ş." in 28. 7% of the capital belongs to Eurobank EFG Holding, the remaining share of 29.24% belongs to Tekfen Holding A.Ş. The first public offer of the Bank s shares was realized in 199 in ISE. The Bank s shares have started to trade also in London Stock Exchange in 1998 as Global Depository Receipts. In 23, the Bank took over Fiba Bank A.Ş. In 26, National Bank of Greece S.A. bought 46% of the shares of Finans Bank A.Ş. directly and by buying remaining shares by public offering in the beginning of 27 and raised its share within the Bank to 77.21%. BRSA 6 Structural Developments in Banking December 21

26 Date of Commercial Title Establishment Historical Development /Status Changes /Capital Structure Founded in 1964 under the title Amerikan-Türk Dış Ticaret Bankası A.Ş., changed its title into Türk Dış Ticaret Bankası A.Ş. in The shares of the Bank have started to be traded in ISE in % of the paid capital of Türk Dış Ticaret Bankası A.Ş. was transferred to Fortis Bank NV-SA in 25. As of this date, the bank was excluded from the group of private deposit banks and was classified within the group of foreign banks established in Turkey. As of November 24, 25, its title was changed as Fortis Bank A.Ş. As a result of the rescue operation made for Fortis Group by Belgian Government after the financial crisis in 28, 99.93% of Fortis Bank SA/NV was transferred to Société Fédérale de Participations et d Investissemant (SFPI). Accordingly, SFPI indirectly owned 94.3% of the Bank 94,11% capital of which belongs to Fortis Bank SA/NV. In this process, share of Fortis Brusseles in Fortis Bank SA/NV which directly owns 1% of Fortis Bank SA/NV decreased to.7%, shares of Fortis NV Fortis Bank A.Ş and Fortis SA/NV in Fortis Bank SA/NV which indirectly owns 5% of Fortis Bank SA/NV decreased to.4%, share of Fortis which indirectly has 1% of Fortis Bank SA/NV in Fortis Bank SA/NV decreased to.7%. Furthermore, Fortis Brusseles and Fortis shares in the Bank decreased to.7% and share of Fortis NV and Fortis SA/NV decreased to.3%. In addition to this, BNP took over 74.94% of Fortis Bank SA/NV which caused the indirect share of SFPI in the Bank to decrease to 3.43% from 94.4%, BNP to indirectly acquire 7.52% of the Bank, share of SFPI in Fortis Bank SA/NV which had 99.93% of ownership of FortisBank SA/NV to decrease to 24.99%, share of SPPE in Fortis Bank SA/NV to indirectly increase to 11.39% and SPPE to indirectly acquire 1.72% of the Bank. Following the mentioned transactions, As a result of the capital increase made by BNP in order to purchase BNP shares belonging to SPPE, indirect share of SPPE in Fortis Bank A.Ş. (the Bank) decreased to 9.63% from 1.44% and following this BNP purchased its own shares under the possession of SPPE, therefore SPPE does not have indirect share in the Bank anymore. The remaining stocks are publicly owned. HSBC Bank A.Ş. 199 Started to operate in 199 under the title of Midland Bank A.Ş. In 1999 changed its title into HSBC Bank A.Ş. In 21, took over Demirbank T.A.Ş. The Bank s capital belongs entirely to HSBC Bank PLC. Opened branches in Turkey in 1984 under the title Manufacturers Hanover Trust Company, starting to operate as foreign bank; received the title of Manufacturers Hanover Bank A.Ş. in 1991 and was included within the group of foreign banks established in Turkey. Subsequent to the merger of Manufacturers Hanover Corporation and Chemical Banking Association, the title of the bank was changed as Chemical Bank A.Ş. in The Bank joined to Sürmeli Group in 1997 and its title was Millennium Bank once again changed into Sitebank A.Ş. As of this date, it was classified within private 1984 A.Ş. deposit banks group. Sitebank A.Ş. was taken over by the SDIF in 21. In 22, the shares of the bank were bought by Novabank S.A. As of this date, the Bank was once again classified among the group of foreign banks established in Turkey. In 23, its title was changed into BankEuropa Bankası A.Ş. and in 26 into Millennium Bank A.Ş. In 21, Credit Europe Bank NV which is one of the investments of Fiba Group in banking took over the share which is directly equivalent to 95% of the Bank from BCP Internacional II, Sociedade Unipessoal SGPS LDA. Started its operations under the title of The First National Bank of Boston Central İstanbul Branch. Afterwards, The First National Bank of Boston A.Ş. which was established in 199 pursuant to the Cabinet took over The First National Bank of Boston Central İstanbul Branch. The title of the bank was changed as Türk Boston Bank A.Ş. in Oyak Group became the only owner of the bank by buying all the ING Bank A.Ş shares in 1994; the title of the bank was changed as Oyakbank A.Ş. in 1996, furthermore was transferred into private deposit bank group from foreign bank status. In 22, Sümerbank A.Ş. was transferred to Oyak Bank A.Ş. Oyak Bank A.Ş. shares of which are held by the Armed Forces Pension Fund and which corresponds 1% of its capital was transferred to ING Bank N.V. in 27. Commercial Title of "Oyak Bank A.Ş." was changed into "ING Bank A.Ş." as of July 7, 28. Turkland Bank A.Ş Founded in 1986 under the name of Bank of Bahrain and Kuwait B.S.C. In 1991, took the title of Bank of Bahrain and Kuwait A.Ş. In 1992, passed under the control of Şahenk Family and Doğuş Group, continued its activities under the title of Tasarruf ve Kredi Bankası A.Ş. In the meantime the bank was transferred into from foreign banks group private deposit banks group. On February 1994, its title was changed as Garanti Yatırım ve Ticaret Bankası A.Ş. Finally in 1997, the shares of the Bank have transferred to Doğuş Group to MNG Group and its title was changed as MNG Bank A.Ş. in 27. The commercial title of MNG Bank A.Ş. was changed as Turkland Bank A.Ş. in 27. 5% of bank s capital belongs to Arap Bank, 5% to BankMed Sal. BRSA 7 Structural Developments in Banking December 21

27 Date of Commercial Title Establishment Historical Development /Status Changes /Capital Structure Global Deposit Bank Branches ABN AMRO Bank N.V. Unicredit Banca di Roma S.P.A Bank Mellat 1982 Habib Bank Limited JPMorgan Chase Bank N.A. Sociéte Générale (SA) WestLB AG 1985 Established under the title of Holantse Bank Uni. N.V., changed its title to ABN AMRO Bank N.V. in The capital of the branch belongs entirely to ABN AMRO Bank N.V., headquartered in Netherlands. Starting its operations in 1911 under the title Banco di Roma, in 1992 its title was changed into Banca di Roma S.P.A. The capital of the branch belongs entirely to Banca di Roma S.P.A., headquartered in Italy. Commercial title of "Banca di Roma S.p.A." was changed as "Unicredit Banca di Roma S.P.A." in March 26, 28. Started its operations on April 16, 1982 with status of foreign bank branch in Turkey. The capital of the branch belongs entirely to State of Iran. The Bank received permission to conduct banking activities and open a head office and four branches pursuant to the Cabinet Decision in Continues its activities since 1983, under the status of foreign bank branch in Turkey. The capital of the branch belongs entirely to Habib Bank, headquartered in Pakistan. The Commercial title of the Bank was changed as JPMorgan Chase Bank in 21 and; JPMorgan Chase Bank N.A. in 24, pursuant to the takeover of Morgan Guaranty Trust Company by The Chase Manhattan Bank. The capital of the branch belongs entirely to JPMorgan Chase Bank Co, headquartered in USA. Started to operate as foreign bank branch in Turkey on November 16, The capital of the branch belongs entirely to Sociéte Générale SA, centered in France. In 29, preference shares were issued by Societe Generale S.A. Paris and entire shares were transferred to the company titled as Societe de Prise de Participation de l Etat which is owned by the republic of France. Started to operate in 1985 by opening branch in Turkey under the title Standard Chartered Bank, title of the Bank was changed as Westdeutsche Landesbank (Europe) A.G. in 199. Afterwards, this title was re-changed as Westdeutsche Landesbank Girozentrale in 1997 and as WestLB AG in 22. The capital of the branch belongs entirely to WestLB AG, centered in Germany. State Development and Investment Banks Founded with public capital within the aim of financing the construction development activities of the municipalities in 1933 under the name of Belediyeler Bankası (Municipalities Bank). Including Special Provincial Administrations, municipalities and İller Bankası 1933 villages, İller Bankası is founded officially in 1945, also undertaking the functions of Belediyeler Bankası. The Bank is a public institution subject to establishment law and special provisions in all of its operations, and having legal entity % of the Bank capital belongs to municipalities, 1.39% to Special Provincial Administrations and 7.5% to villages. İMKB Tak. ve Sak. Bankası A.Ş. T. İhracat Kredi Bankası A.Ş. Türkiye Kalkınma Bankası A.Ş The Bank is conducting specialized banking activities related to financial markets within the framework of coherent legislation provisions since the beginning of % of the Bank s capital belongs to ISE and the remaining shareholders are banks and intermediary institutions. Pursuant the Act Nr dated 1987, the Devlet Yatırım Bankası (State Investment Bank) was transformed into Türkiye İhracat Kredi Bankası A.Ş. (Türk Eximbank). The Bank s capital belongs entirely to Turkish Treasury and it is the only officially supported finance institution presenting export credits and export credit insurances/guarantees. Founded in 1975, under the title of Devlet Sanayi ve İşçi Yatırım Bankası (DESİYAB) A.Ş. In 1988 its title was changed as Türkiye Kalkınma Bankası A.Ş. (Turkish Investment Bank). In 1989, pursuant to the Supreme Planning Council Decision, T.C. Turizm Bankası A.Ş. was transferred to Türkiye Kalkınma Bankası with all of its assets and liabilities and consequently the tourism sector was added to the service fields of the Bank. The Bank s shares have started to trade in ISE in The Act on the foundation of the Bank was accepted in The Bank is subject to matters regulated pursuant to this Act but also to special law provisions and is a development and investment bank operating as a joint stock company having legal entity. 99.8% of the Bank s capital belongs to Turkish Treasury. BRSA 8 Structural Developments in Banking December 21

28 Date of Commercial Title Establishment Historical Development /Status Changes /Capital Structure Private Investment Banks Aktif Yatırım Bankası A.Ş. Diler Yatırım Bankası A.Ş. GSD Yatırım Bankası A.Ş. Nurol Yatırım Bankası A.Ş T. Sınai Kalkınma Bankası A.Ş. 195 Started to operate in % of the Bank s capital belongs to Çalık Holding A.Ş. and 8.5% to other shareholders. Commercial title of "Çalık Yatırım Bankası A.Ş." was changed to "Aktif Yatırım Bankası A.Ş." as of August 1, 28. Started to operate in After the death of Recep Sami Yazıcı who owns 45% of the bank s capital, direct share of Fatma Tuba YAZICI, his wife, in the Bank increased to 26,719% from %, shares of Samim YAZICI, Eren Sami YAZICI and Ömer Mustafa YAZICI, their children, increased to %13,43% from %, according to division of estates. Started to operate in The Bank s capital belongs entirely to GSD Holding A.Ş. Started to operate in % of the Bank s capital belongs to Nurol Holding and 15.96% to Nurol İnşaat ve Ticaret A.Ş. Founded in 195 with the support of World Bank and the collaboration of CBRT and commercial banks, Bank is Turkey s first private development and investment bank. The shares of the Bank have started to be traded in ISE in In 22 the Bank took over Sınai Yatırım Bankası A.Ş. 4.51% of the Bank s capital belongs to İş Bankası, and 38.34% is publicly traded. Foreign Investment Banks BankPozitif Kredi ve Kalk B. A.Ş. Credit Agricole Yatırım Bankası Türk A.Ş. Merrill Lynch Yatırım Bank A.Ş. Taib Yatırım Bank A.Ş. Participation Banks Al Baraka Türk Katılım B. A.Ş. Asya Katılım Bankası A.Ş Kuveyt Türk Katılım B. A.Ş Founded in 1999 as Toprak Yatırım Bankası A.Ş., and in 21, Toprakbank A.Ş. which was the old main shareholder of the Bank was transferred to SDIF. In 22, 89.92% of the Bank shares was bought by C Faktoring A.Ş. With its new partnership structure, the title of the Bank was changed into C Kredi ve Kalkınma Bankası A.Ş. in 23, and the Bank undertook capital injection and went under new organizational restructuring. Consequently the share of C Faktoring A.Ş. in the Bank has reached 99.99%. According to the contract signed in 25, the Tarshish-Hapoalim Holdings and Investments Ltd., which belongs entirely to Bank Hapoalim B.M., became a shareholder in the Bank by 57.55%. Thus, the Bank was included within the group of foreign investment banks. On December 29, 25, the title of the Bank was changed into Bankpozitif Kredi ve Kalkınma Bankası A.Ş. In 29 C factoring A.Ş. transferred its capital share by 4.825% to Tarshish-Hapoalim Holdings and Investments Ltd. which is the other partner of the Bank, thus capital share of C Faktoring A.Ş. in the Bank decreased to 3.17% from 35%. Founded in 199 under the title of Avrupa Türk Yatırım Bankası A.Ş. (European- Turkish Investmnent Bank), in 1995 this title was changed into Indosuez Euro Türk Merchant Bank A.Ş. and into Crédit Agricole Indosuez Türk Bank A.Ş. in 2. In 24 Credit Lyonnais (Paris) Headquartered in France took over all the assets and liabilities excluding deposits of İstanbul Türkiye Central Branch. On June 17, 24, the title of the Bank was changed to Calyon Bank Türk A.Ş. As of March 2, 21, Bank s title was changed as "Credit Agricole Yatırım Bankası Türk A.Ş.". Started to operate in 1993 under the title of Tat Yatırım Bankası A.Ş. In 26, the shares corresponding to 99.95% of the capital of Tat Yatırım Bankası A.Ş. were transferred to Merrill Lynch European Asset Holdings Inc. The title of the Bank was changed as Merrill Lynch Yatırım Bank A.Ş. In 29, indirect share of BAC in the Bank reached 1% as a consequence of merger Merrill Lynch&Co. Inc. (M&L), the majority shareholder of Merrill Lynch Yatırım Bank A.Ş. (Bank), and MER Merger Corporation (MER) whose entire shares belong to Bank of America Corporation (BAC). Founded in 1987 under the title Yatırım Bank A.Ş., in 1997 its title was changed into Taib Yatırım Bank A.Ş % of the Bank s capital belongs to Taib Bank. 54.6% of bank s capital owned by middle-east originated Albaraka Bankacılık Grubu belongs to Albaraka Banking Group, 9.38% to other shareholders and 17.11% is public. Started to operate in 1996 under the title of Asya Finans Kurumu A.Ş., its title was changed into Asya Katılım Bankası A.Ş. in % f bank s capital is public and the remaining share belongs to other partners. Founded in 1989 under the status of Private Finance Institution, in 1999 its title was changed as Kuveyt Türk Katılım Bankası A.Ş % of Kuveyt Türk s capital belongs to Kuwait Finance House, 9% belongs to Kuwait Public Institution for Social Security, 9% to Islamic Development Bank, 18.71% to Vakıflar Genel Müdürlüğü and 2% to other shareholders. BRSA 9 Structural Developments in Banking December 21

29 Commercial Title Türkiye Finans Katılım B. A.Ş Date of Establishment Historical Development /Status Changes /Capital Structure Banks under the Structure of the SDIF Birleşik Fon Bankası A.Ş Founded in under the title Faisal Finans. Dar Al-Maal Al-İslami S.A. (DMI) Group, which is the owner of the company s shares, sold its shares to OLFO S.A., domiciled in Switzerland in In 21, 38.82% of the institution s shares were taken over by Sabri Ülker and at the same date title of the institution was changed as Family Finans Kurumu A.Ş. In 21, the share of Sabri Ülker within the capital structure of the institution has reached 98.63%. Anadolu Finans Kurumu which started to operate in 1991 and Family Finans merged in 25 and under the title Türkiye Finans Katılım Bankası A.Ş. within the same year.64.67% of the Bank s capital belongs to Suudi Arabistan Ulusal Ticaret Bankası. Founded as a local bank in 1958 Çaybank A.Ş., changed its status to national bank in In 1988, pursuant the Council of Ministers Decision, its permission to conduct banking activities and to accept deposit was annulled; in 199 this permission was regranted. Its title was changed into Derbank A.Ş. in In 1998, the Bank passed to the corporation of Bayındır Holding and taking the title of Bayındırbank A.Ş. In 21, the Bank was transferred to SDIF. Afterwards in 22, the Ege Giyim Sanayicileri Bankası A.Ş. merged within the corporation of Bayındırbank A.Ş. On April 5, 22, Etibank A.Ş. (with Eskişehir Bankası T.A.Ş. and İnterbank A.Ş. which were transferred to Etibank T.A.Ş. in 21), İktisat Bankası T.A.Ş. and Kentbank A.Ş. merged within Bayındırbank A.Ş. with all their assets and liabilities. Finally on September 3, 22 Toprakbank A.Ş. merged with Bayındırbank A.Ş. In 25 the commercial title of Bayındırbank A.Ş. was changed to Birleşik Fon Bankası A.Ş. BRSA 1 Structural Developments in Banking December 21

30 1.2. Banking Licenses Pursuant to the article 4 of the Banking Law Nr. 5411, main activities that banks may carry out are stipulated by function groups. Accordingly, the most important discrimination criteria are; accepting deposit, accepting participation funds and financial leasing transactions. Deposit banks are authorized to accept deposit and extend loans, participation banks are authorized to collect funds by special and participation accounts and extend loans. Development and investment banks perform the duties granted to them upon special laws and are authorized to extend loans excluding accepting deposit or participation fund. Table 1.2-1: Main Activities Subject to Banking License Banking Transactions Capital Markets Transactions Deposit Bank Participation Bank Development and Investment Bank Accepting deposits Accepting participation fund Extending loan transactions Payment, fund transfer and collection of revenues Purchase of bills of Exchange Storage services Transactions concerning payment instruments FX transactions; Money market instruments, precious metal purchase, sale, safekeeping Guarantee operations Intermediation to Money purchase and sale transactions in interbank market Purchase, sale and intermediation of futures and option contracts, financial instruments (17/32)* (3/13)* Purchase and sale and promise to re-purchase of re-sale of capital markets (29/32) instruments * (11/13)* Intermediation transactions to sale of capital markets instruments by issuing or public offering (5/13)* Intermediation transactions to purchase and sale of issued capital markets (3/32) instruments * (11/13)* Investment consultation transactions (4/13*) Portfolio operation and management (5/13)* Market maker Safekeeping services Insurance Transactions Insurance agent and individual pension intermediary services Other Factoring and forfeiting transactions Financial leasing transactions * Indicates how many banks included in the group have the certificate of authorization granted by the CMB. When certificates of authority granted by the Capital Markets Board (CMB) are analyzed, it is seen that there is no homogenous distribution among banks. The provision stipulated by the CMB regulations that intermediation to sale of capital markets instruments by issuing or going public, portfolio management and investment consultation activities can only be carried out by banks which do not accept deposit is effective in the said structure. Although there is no general restriction that prevents participation banks to carry out capital markets transactions within the scope of Banking Law, it is noteworthy that they are included within 8 banks none of which has a certificate of authority granted from the CMB. It is evaluated that non-interest financial instruments shall enable the said banks to participate actively in the capital markets activities and nourish the market. Within the scope of capital markets transactions, the most active bank group is development and investment banks. While deposit banks only have authority to purchase and sale intermediation, repo and reverse repo and intermediation to purchase and sale of derivative transactions, development and investment banks have authority to purchase and sale intermediation, repo and reverse repo, investment consultancy, intermediation to public offering, portfolio management and intermediation to purchase and sale of derivative transactions. Banks performing in all fields subject to their licenses or granted to them, surely, would contribute positively to the scope and efficiency of the sector. It is well known that demand is a determinant in scope and depth of the market. BRSA 11 Structural Developments in Banking December 21

31 Box 1: Global Outlook of Bank Types Global financial markets offer a rather wide range diversity of bank types. It is expected that the increase in types of financial institutions including bank types would expand, diversify, deepen the market, improve access to financial resources, increase efficiency, expand the scope and contribute to the general economy. Country Financial Institutions Country Financial Institutions USA Depository Institutions Australia Authrzd.Depst. Taking Inst. (ADI) Commercial Banks Banks Money Center Banks Building Associations State Banks CreditUnions Thrifts Non-ADI Financial Instutions Saving Banks Money Market Corporations Credit Unions Finance Companies Non-depository Institutions Securitisers Security Dealers England Banks Investment Banks City Banks and Trust Banks Finance Companies Regional Banks I and II Pension Funds Bank Holding Companies Insurance Fin. Inst. Which engage in Trust Business Mutual Funds Credit Associations Financial Holding Companies Canada Banks Germany Universal Banks Foreign B. Branches and Repr. Offices. Commercial Banks Credit Associations (Big, Regional, Branches of FB, Bankers), Housing Associations Saving Banks Turkey Deposit Banks (Land Banks) Participation Banks Credit ACooperatives Development and Investment Banks Special Bank Switzerland Banks and Securities Dealers Mortgage Banks Raiffeisen Banks Building and Loan Associations Rep.Off.of Foreign B. and Sec. Dealer Banks with Special Functions France Commercial Banks (Postbank AG) Cooperative Banks Luxemburg Universall Banks The Post Office Mortgage Bond Issuing Banks Spain Banks Finland Commercial Banks Saving Banks Cooperative Banks Credit Cooperations Saving Banks Branches of Foreign Credit Inst. Branches of Foreign Credit Institutions Specialized Credit Institutions Japan Governmental Institutions E-money Issuing Entities (Postal Saving Bank) China Policy Banks and Development Bank Cityl Banks Commercial Banks Money Center Banks Cooperative Banks Regional Banks Non-Bank Financial Institutions Online Banks Postal Savings Bank Trust Banks Foreign Banks Foreign Banks Brazil Multiple Banks Egypt Commercial Banks Commercial Banks Business and Investment Banks Savings Banks Specialized Banks Development Banks BAE Major Commercial Banks Exchange Banks Islamic Banks Leasing Companies India Commercial Banks (State, Private, Foreign) Consumer Loan Companies Cooperative Banks RE credit Comp.and Sav. and Loan Assoc Main-cooperative Banks Security Brokarage Companies Central cooperative Banks Exchange Brokerage Companies State cooperative Banks Development Agency Specialized Bank Mortgage Companies Credit Unions Microfinance Institutions Resource : Statistics of country banking authorities BRSA 12 Structural Developments in Banking December 21

32 1.3. Segmentation of Activity and Organization in Banking In 21, 84.7% of assets of Turkish banking sector are comprised of domestic assets. Share of abroad residents within total assets displayed an increasing trend during Abroad share which was 16.7% in 25 reached to 19.52% in 28, decreased in the following years and realized as 15.3% in 21. The biggest share in abroad asset size belongs to abroad branches. Share of abroad branches within asset total which was 9.9% in 25 amounted to 1.6% in 21. Share of onshore banks within total assets decreased generally throughout the period to 3.6% in 21 from 5.2% in 25. Table 1.3-1: Domestic and Crossborder Weight of Assets TL Billion; % 25 Share(% 26 Share 27 Share 28 Share 29 Share 21 Share Domestic Asset ,28 ) , , , , ,67 Abroad Asset , , , , , ,33 Abroad , , , , , ,6 Branches On-shore Bank , , , , , ,58 Off-shore bank 2.259, , , , , ,11 Other Fin. Inst ,1 4.42, , , , ,4 Total* *Total asset differs from the asset amount shown in the other section of the report due to the fact that it includes noneliminated version of mutual transactions of domestic and abroad braches and banks and that total asset amount of subsidiaries are displayed. Share of loans Turkish banking sector extended via abroad branches within total decreased to 9.2% in 21 from 26.5% in 22. In 21, 9.7% of the said loans were granted by domestic residents. Almost whole loans extended via domestic branches (99.3%) belong to domestic residents. Weight of banking sector in loan stock which is calculated having considered the loans extended by non-bank financial sector is above 95%. As of 21, 7.7% of total deposit of Turkish banking sector appears in abroad branches. It is observed that the said ratio displayed a gradual increase after its level in 22 by 3.8%. Domestic residents deposit/total deposit ratio was 97.3% as of 21. In periods, no change was experienced in the limited share of abroad residents within total deposit. Table 1.3-2: Domestic and Crossborder Distribution of Loans and Deposit TL Billion; % Loans Extended by Abroad Branches 13, 2 11,4 3 15,3 4 22,1 5 31,3 6 44,4 7 69,6 8 57,4 48,2 Loans Extended by Domestic Branches 36, 54,8 84, 134, 187, 241, 297, 335, 477, Total Banking Sector Loans 49, 66,2 99, 156, 3 219, 7 285, 2 367, 9 392, 2 525, 7 Loan Stock* 49,1 66, 99, 3 165, 4 231, 32, 6 386, 4 47, 6 541, 9 Loans Granted from Abroad Branches/Total Loans 26,5 17,3 4 15,4 6 14,1 1 14,3 8 15,6 1 18,9 2 14,6 8 9,2 8 Loans Grant. from Abroad Bran. by Domestic Res./Abroad 95,4 97,7 94, 93,6 95,8 91,4 95,6 94,3 9,7 Branch Loans Grant. L. from Domestic Bran. by Abroad Res./Domestic 8,9 5,6 3,4 1,6 1,1,4,3,4,7 Branch Abroad L. Branches Deposit 5,2 6,1 8,4 17, 2,6 21,9 28,9 33,8 47,2 Domestic Branches Deposit 132, 149, 182, 234, 287, 334, 425, 48, 569, Total Deposit 138, 8 155, 2 191, 7 251, 5 37, 356, 9 454, 7 514, 9 617, 8 Abroad Branch Dep./Total Deposit 3,8 3,9 3 4,4 1 6,8 5 6,7 6 6,2 9 6,4 6 6,6 6 7,7 Deposit held by Domestic Residents/ Total Deposit 96, 96, 96, 96,4 96,8 97,2 97, 96,9 97,3 Deposit held by Abroad Residents/ Total Deposit 3,4 6 3,4 6 3,3 7 3,6 3,2 2,8 3, 3,1 2,7 *Banking sector loans consists of banking sector financial leasing receivables, financial leasing sector receivables and consumer finance sector receivables total. In end-21, domestic branches made net profit by TL 21.9, abroad branches made profit by TL 2.1 billion. It is seen that 97.9% of net profit of the period was gained by domestic branches while 2.1% was gained by abroad branches. In 21, dividends received from subsidiaries and affiliates amounts TL 842 million. The said amount comprises.8% of total income of the sector. BRSA 13 Structural Developments in Banking December 21

33 Table 1.3-3: Domestic and Crossborder Distribution of Net Profit Total Share Domestic branches net profit of the period (TL Billion) 2,48 5,34 5,91 5,44 1,79 14,53 11,85 19,7 21,89 97,9 Abroad branches net profit of the period (TL Billion),14,22 1,9,8 1,16,66 3,15,96,46 2,1 Total net profit of the period (TL Billion) 2,62 5,56 6,99 6,24 11,94 15,19 15, 2,66 22,35 1, Dividend from subsidiaries and affiliates (TL Million) ,8* Dividend from subsidiaries (TL Million) ,8* Dividend from affiliates (TL Million) ,4* Note: Data prior to 25 does not include participation banks. (*) Indicates the share within total incomes. Turkish banking sector has been maintaining its current status in terms of number of banks and functional composition in the last three-year period. Total number of banks which increased in the 199s and reached its highest level decreased significantly as a result of the financial crisis experienced especially in 2-22 periods and the restructuring operations in the sector. As of 21, 49 banks carry on their activities. Table 1.3-4: Number of Banks Deposit Banks State Deposit Banks Private Deposit Banks SDIF Global Deposit Banks Participation Banks State Participation Banks n.a. n.a Private Participation Banks n.a. n.a. n.a. n.a Global Participation Banks n.a. n.a. n.a. n.a Development and Investment Banks State Dev. and Inv. Banks n.a. n.a Private Dev. and Inv. Banks n.a. n.a Global Dev. and Inv. Banks n.a. n.a Total Number of Banks Within the period after 22, the re-structuring process in the sector, political and economic stability environment, inclusion of Turkey to the EU membership negotiation process and the improvement of the global financial environment have arose global capital s attention to the Turkish banking sector. Global capital preferred mostly the deposit banks group to operate in Turkey. The number of global deposit banks has increased since 26 and reached its level of 2 which is 17 by the end of 27. The number of global participation banks increased from two to three in 28 after a long time. The number of global development and investment banks decreased from three to two in 24 then re-increased to four in 26. The banks established in Turkey have organizations abroad in 31 different countries. Banks and financial institutions abroad are located in England, Germany, the Netherlands, Ireland, Russia, Austria, Switzerland, France, Luxembourg, Azerbaijan, Bosnia Herzegovina, Kazakhstan, Turkmenistan, Uzbekistan, Romania, TRNC, United Arab Emirates, Senegal, Cayman Islands and Channel Islands. Cross-border activities of banks established in Turkey are concentrated in EU countries. In North America there are only two on-shore branches of state banks. Off-shore banks are concentrated in TRNC with four banks, and an off-shore bank is located in Dubai. On-shore branches are concentrated in TRNC with 39 branches, while the off-shore branches are concentrated in Bahrain with 1 branches. In the distribution of representative offices abroad of these banks, Germany is leading with seven offices. Other financial institutions of banks are concentrated in the Netherlands with six institutions, Cayman Islands with three institutions and Luxembourg with two institutions. BRSA 14 Structural Developments in Banking December 21

34 Box 2: Global Outlook of the Number of Banks The number of banks operating in the Turkish banking sector is under the average number of credit institutions in EU member countries and shows an important potential. Number of Banks Countries USA China Indonesia Germany India Japan Russia Italy Austria France Poland Ireland England Spain Finland Switzerland Netherlands Hungary Sweden Portugal Denmark S. Cyprus Luxembourg Brazil Belgium Lithuania Canada Argentina Greece Australia Czech Rep South Korea Turkey Mexico Romania Latvia South Africa Bulgaria Slovakia Slovenia Malta S. Arabia Estonia EU-27 n.d PB-16 n.d. n.d Resource: EU Banking Structures 21, OECD Statistics BRSA 15 Structural Developments in Banking December 21

35 In 21, seven other financial institutions and two off-shore banks of banks established in Turkey are closed. On the other hand, two other financial institutions are obtained in the Netherlands and Senegal. It is expected that the increasing cross-border activities will contribute to the increase of competitive power of the Turkish financial system, provide the integration in financial markets and a more efficient functioning of the market. Table 1.3-5:Organizations of Banks Dom. Bank Name Branch Branch Abroad (1) Off-Shore Branch Bank Abroad Fin. Ins. Abroad Off-Shore Banka Rep. Off. Adabank A.Ş. 1 Akbank T.A.Ş Aktif YatırımBankası A.Ş. 6 Albaraka Türk Katılım Bankası A.Ş. 19 Alternatifbank A.Ş. 53 Anadolubank A.Ş A rap Türk Bankası A.Ş. 6 Asya Katılım Bankası A.Ş Bank Mellat 3 Bank Pozitif K.K. Bankası A.Ş. 1 1 Birleşik Fon Bankası A.Ş. 1 Citibank A.Ş. 37 Credit Agricole Yatırım B. A.Ş. 1 Denizbank A.Ş Deutsche Bank A.Ş. 1 Diler Yatırım Bankası A.Ş. 1 Eurobank Tekfen A.Ş. 52 Fibabanka A.Ş. 18 Finansbank A.Ş Fortis Bank A.Ş. 269 GSD Yatırım Bankası A.Ş. 1 Habib Bank Limited 1 HSBC Bank A.Ş ING Bank A.Ş İller Bankası 19 İMKB Takas ve Saklama B. 1 JP Morgan Chase Bank NA 1 Kuveyt Türk Katılım Bankası A.Ş Merrill Lynch Yatırım Bankası A.Ş. 1 Nurol Yatırım Bankası A.Ş. 2 Societe Generale SA 16 Şekerbank A.Ş T. C. Ziraat Bankası A.Ş Taib Yatırım Bankası A.Ş. 1 Textilbank A.Ş The Royal Bank of Scotland NV 2 Turkish Bank A.Ş. 21 Turkland Bank A.Ş. 27 Türk Ekonomi Bankası A.Ş Türkiye Finans Katılım B. A.Ş. 182 T. Garanti Bankası A.Ş T. Halk Bankası A.Ş T. İhracat Kredi Bankası A.Ş. 2 T. İş Bankası A.Ş T. Kalkınma Bankası A.Ş. 1 1 T. Sınai Kalkınma Bankası A.Ş T. Vakıflar Bankası A.Ş WestLB AG 1 Yapı ve Kredi Bankası A.Ş Total (1) Off-Shore branches are included. BRSA 16 Structural Developments in Banking December 21

36 Box 3: Global Outlook of the Number of Bank Branches The number of bank branches is considerably high in China, USA and EU zone due to the effect of demographic and physical scale. Furthermore it is seen that the number of branches is also high in developed economies structurally. When the number of bank branches are analyzed by countries as a 1-based index for 22, high increases are observed in emerging economies such as Turkey, Romania, Poland, Indonesia and Mexico, in parallel with the development of their financial markets. In many developed economies the branching has slowed down due to the global crisis. Number of Branches Number of Branches (22=1) EU-27 22,315 26, , , , , ,21 229, China 183, , , , USA 11, ,4 115,15 116,57 116, India 77,349 8,25 83,942 87,891 9, Japan 33,379 32,249 55,714 55,38 55, Spain 39,9 39,75 4,63 41,979 43,691 45,5 46,65 44, Russia 32,916 35,169 39,163 41,554 4, Germany 5,868 47,244 45,331 44,44 4,282 39,777 39,531 39, France 26,162 25,789 26,37 27,75 4,13 39,56 39,634 38, Italy 29,948 3,51 3,95 31,54 32,334 33,23 34,168 34, Brazil 27,612 28,37 29,127 3,83 32, Indonesia 11,346 12,283 13,115 14,437 16, Poland 4,32 8,688 8,31 1,74 1,934 11,67 12,914 13, England 13,867 13,646 13,386 13,13 12,88 12,425 12,36 12, Mexico 8,711 9,92 1,123 1,994 11, Turkey 6,321 6,267 6,474 6,568 7,32 8,144 9,34 9, S. Korea 6,768 7,123 7,49 7,73 7, Canada 6,556 6,667 6,725 6, Portugal 5,348 5,397 5,371 5,422 5,618 6,55 6,417 6, Romania 3,387 3,31 3,533 4,47 6,34 7,375 6, Bulgaria 5,66 5,629 5,569 5,827 6,8 6, Australia 4,96 5,147 5,264 5,398 5, Austria 4,466 4,395 4,36 4,3 4,258 4,266 4,243 4, Greece 3,263 3,3 3,43 3,543 3,699 3,85 4,98 4, Argentina 3,781 3,826 3,882 3,94 3, Hungary 2,992 3,3 2,987 3,125 3,243 3,387 3,515 3, Netherlands 4,269 3,883 3,798 3,748 3,456 3,64 3,421 3, S. Africa 2,947 3,75 3,299 2,968 3, Switzerland 2,718 2,694 2,699 2,664 2, Sweden 2,54 2,69 2,18 2,3 2,4 1,988 2,25 2, Czech Rep. 1,722 1,67 1,785 1,825 1,877 1,862 1,993 1, Denmark 2,128 2,118 2,119 2,122 2,152 2,194 2,192 1, Finland 1,572 1,564 1,585 1,616 1,756 1,693 1,672 1, S. Arabia 1,224 1,289 1,353 1,41 1, Slovakia 1,2 1,57 1,113 1,142 1,175 1,169 1,258 1, Ireland , , Lithuania v.y S. Cyprus Slovenia Latvia Estonia Luxembourg v.y Malta Belgium 5,55 4,989 4,837 4,564 4,574 4,425 4, Note: In the indexes of countries which the numbers of 22 are lacking, the first year having data is taken as a basis year. BRSA 17 Structural Developments in Banking December 21

37 Table 1.3-6: Asset Sizes of Banks Crossborder Organizations Dec. 21 ONSHORE BANKS USD Million Bank Name Corporation Name Country Assets Bank Name Corporation Name Country Assets Akbank Akbank ag Germany Türk Ekonomi B. The Economy Bank n.v. Neth. 979 Akbank Akbank Internatıonal n.v. Neth T. Garanti B Garanti Bank Int.n.v Neth Anadolubank Anadolubank Nederland n.v. Neth. 441 T. Garanti B. Garanti Bank Moscow Russia 329 Bankpozitif JCS Bankpozitiv Kazakhstan 16 T. Halk B. Demir-Halk Bank n.v. Neth Denizbank C.s.j.c dexıa bank Russia 234 T. İş B. İşbank gmbh Germany 1.5 Denizbank Denizbank a.g wıen Austria T. Vakıflar B. Kıbrıs Vakıflar Bankası ltd. TRNC 418 Şekerbank t. Şekerbank kıbrıs ltd. TRNC 68 T. Vakıflar B. Vakıfbank Internatıonal a.g. Austria 76 T.C. Ziraat B. Azer-Türk bank açık tip a.ş. Azerbaijan 77 Yapı ve Kredi B. Banque de commerce Swit T.C. Ziraat B. Kazakhstan Ziraat International Bank Kazakhstan 74 Yapı ve Kredi B. Yapı kredi bank azerbaycan Azerbaijan 259 T.C. Ziraat B. Turkısh Ziraat Bank Bosnıa dd. Bosnia Herz. 119 Yapı ve Kredi B. Yapı kredi bank nederland nv Neth T.C. Ziraat B. Turkmen Turkish Comm. Bank Turkmenistan 46 Yapı ve Kredi B. Yapı kredi moscow Russia 192 T.C. Ziraat B. Uzbekıstan Turkish Bank Uzbekistan 84 Total T.C. Ziraat B. Ziraat Bank Internatıonal a.g. Germany 921 T.C. Ziraat B. Ziraat Bank Moscow cjsc Russia 48 T.C. Ziraat B. Ziraat Banka ad skopje Macedonia 61 OFF-SHORE BANKS Anadolubank Anadolubank ınt.l bankıng unıt ltd. TRNC 7 Şekerbank t. Şekerbank ınt. Bank unıt. Ltd. TRNC 7 Denizbank Euro deniz ınt. bankıng unıt lt. TRNC 713 Tekstil B. The euro textıle ınt. Bank. TRNC Kuveyt türk Kuveyt türk katılım B. dubai ltd. UAE 59 Total 786 OFF-SHORE BRANCHES Akbank Malta Branch Malta T. Garanti B. Malta Branch Malta Denizbank Bahrain Branch Bahrain T. Halk B. Bahrain Branch Bahrain Finansbank Bahrain Branch Bahrain 2.56 T. İş B. Bahrain Branch Bahrain Ing bank Bahrain Branch Bahrain 36 T. Sınaî Kalk. B. Bahrain Branch Bahrain 83 Kuveyt türk Kuveyt türk Bahrain Branch Bahrain 477 T. Vakıflar B Bahrain Branch Bahrain 5.98 Türk ekonomi B. Bahrain Branch Bahrain 975 Yapı ve kredi B. Bahrain Branch Bahrain Total ONSHORE BRANCHES Hsbc bank Nicosia Branch TRNC 494 Türk ekonomi B. Nicosia Branch TRNC 162 Hsbc bank Kyrenia Branch TRNC 16 Türk ekonomi B. Kyrenia Branch TRNC 36 Hsbc bank Famagusta Branch TRNC 49 Türk ekonomi B. Famagusta Branch TRNC 31 Hsbc bank Nicosia-Yenikent Branch TRNC 11 T. Garanti B. Nicosia Branch TRNC 248 Ing bank Nicosia Branch TRNC 27 T. Garanti B. Kyrenia Branch TRNC 118 Ing bank Kyrenia Branch TRNC 7 T. Garanti B. Famagusta Branch TRNC 21 Ing bank Famagusta Branch TRNC 4 T. Garanti B. Luxembourg Branch Luxembourg 11.9 Ing bank Güzelyurt Branch TRNC 5 T. Halk B. Nicosia Branch TRNC 144 Kuveyt türk Stuttgart Branch Germany T. Halk B. Kyrenia Branch TRNC 1 T.c. Ziraat B. Nicosia Branch TRNC 365 T. Halk B. Famagusta Branch TRNC 2 T.c. Ziraat B. Kyrenia Branch TRNC 83 T. İş B. Nicosia Branch TRNC 568 T.c. Ziraat B. Famagusta Branch TRNC 71 T. İş B. Kyrenia Branch TRNC 119 T.c. Ziraat B. Güzelyurt Branch TRNC 33 T. İş B. Famagusta Branch TRNC 11 T.c. Ziraat B. Paşaköy Office TRNC 6 T. İş B. Güzelyurt Branch TRNC 39 T.c. Ziraat B. Nicosia-Yakın Doğu Uni. Branch TRNC 5 T. İş B. Küçük Kaymaklı Branch TRNC 1 T.c. Ziraat B. Gönyeli Branch TRNC 13 T. İş B. Paşaköy Branch TRNC 3 T.c. Ziraat B. Kyrenia-Karaoğlanoğlu Branch TRNC 4 T. İş B. Doğu Akdeniz Uni. Branch TRNC 25 T.c. Ziraat B. Kyrenia-Çatalköy Branch TRNC 4 T. İş B. Güzelyurt-Odtü Branch TRNC 7 T.c. Ziraat B. New York Branch USA T. İş B. Nicosia- Kıbrıs Uni. Branch TRNC 4 T.c. Ziraat B. London Branch England 696 T. İş B Kyrenia-Çarşı Branch TRNC 25 T.c. Ziraat B. Tbilisi Branch Georgia 21 T. İş B. Nicosia-YD Uni. Branch TRNC 9 T.c. Ziraat B. Sofia Branch Bulgaria 42 T. İş B. Lefke-Avrupa Uni. Branch TRNC 2 T.c. Ziraat B. Plovdiv Branch Bulgaria 4 T. İş B. Gönyeli Branch TRNC 24 T.c. Ziraat B. Kardjali Branch Bulgaria 2 T. İş B. London Branch England 2.63 T.c. Ziraat B. Varna Branch Bulgaria 5 T. Vakıflar B. New York Branch USA 1.13 T.c. Ziraat B. Bagdad Branch Iraq 13 Total T.c. Ziraat B. Athens Branch Greece 87 T.c. Ziraat Bç Komotini Branch Greece 4 T.c. Ziraat B. Iskece Branch Greece 14 OTHER FINANCIAL INSTITUTIONS Akbank A.r.t.s. Lımıted Channel Islands T. Garanti B. Gar. div. paym. rights fin. Comp. Cayman Isl Akbank. Ak global fundıng b.v. Neth. T. Garanti B. Garanti holding b.v. Neth. 241 Akbank Ak receıvables corporatıon Cayman Islands 248 T. Garanti B. T2 capital finance company Luxembourg 513 Akbank Akbank (Dubai) lımıted UAE 1 T. Kalkınma B. İstan. venture capital ınitiative Luxembourg 1 Asya katılım B. tamweel Africa holding sa Senegal 63 Yapı ve kredi B. Stiching custody services ykb Neth. Ing bank Ing european fınancıal servıces plc. Ireland 476 Yapı ve kredi B. YKi div.paym. rights fin. comp Cayman Isl. 976 Türk ekonomi B. Kronenburg vastgoed bv Neth. 5 Yapı ve kredi B. Yapı kredi holdıng bv Neth. 6 Türk ekonomi B. Stıchtıng custody servıces teb Neth. Yapı ve kredi B. Yapı kredi ınvest llc Azerbaijan Total Asset Size Abroad Rate within Total %11,67 REPRESENTATIVE OFFICES Assets Bank Name City Country Bank Name City Country Kuveyt Türk Bankası A.Ş. Mannheim Germany T.C. Ziraat Bankası A.Ş. Tehran Iran Almaty Kazakhstan Tekstil Bankası A.Ş. Berlin Germany Şekerbank Köln Germany T. Halk Bankası A.Ş. Köln Germany T. Garanti Bankası A.Ş. Düsseldorf Germany Mannheim Germany London England Dortmund Germany Moscow Russia Tehran Iran Shanghai China T. iş Bankası A.Ş. Shanghai China Cairo Egypt BRSA 18 Structural Developments in Banking December 21

38 Box 3: EU-Turkey Comparison for Number of Crossborder Bank Branches The number of branches of EU-originated foreign banks operating in Turkey* did not change since 25. The growth potential of the banking sector in Turkey causes the increase of number of branches of EU-originated banks after 22, while the number of branches of foreign banks other than EU did not change considerably. Number of Branches of EU-Originated Credit Institutions Number of Branches of Credit Institutions Other than EU EU-27 n.d n.d PB-16 n.d. n.d n.d. n.d Germany Spain England Italy France Belgium Luxembourg Ireland Austria Netherlands Portugal Greece Finland Sweden Czech Rep Poland Denmark Turkey Slovakia Hungary Estonia Romania n.a n.a S. Cyprus Lithuania Latvia Bulgaria n.a. n.a n.a. n.a Slovenia Malta Resource: EU Banking Structures 21 *This is the number of foreign branches in the country Asset Growth and Concentration In 21, in the banking sector s asset concentration, the shares of first 5 banks and first 1 banks within total assets decreased slightly. This decrease in concentration is also captured in the decrease of Herfindahl-Hirschman Index 2 (HHI). In 21, the shares of large scale banks within total assets decreased comparing to previous year. In functional distribution, the share of participation banks increased. In 21, the sector asset share of first 5 banks is realized as 6.1%, while the asset share of first 1 banks was realized as 83.2% and the HHI was realized as 897 points. In this year, all concentration indicators decreased comparing to previous year, which is considered as a positive development. Between 2 and 25, in the sector, the shares of first 5 banks and first 1 banks within total assets have increased considerably and these shares are preserved in following years. 2 HHI is an indicator used frequently in measuring market concentration. It is calculated by totalizing the squares of market shares of each firm (bank) within the market. HHI is a value between and 1.. The concentration increases and the HHI value grow as the market structure monopolizes. Accordingly, if the index value is 1., This means that there is only one firm (monopole) in the market, and if the HHI value becomes close to, this means that there are thousands of firms and evidently a perfect competition in the market. A value less than 1. expresses a relatively competitive market structure, while a value between 1. and 1.8 expresses a market structure with a slightly increased competition. Values higher than 1.8 are considered as monopolized structures. BRSA 19 Structural Developments in Banking December 21

39 Table 1.4-1: Total Asset Size and Concentration Indicators (TL Billion; %) Asset Size by Scale Large Scale Banks 56,4 128,4 154,4 187, 231,2 3,9 376, 43,6 544,3 629,8 752,9 Medium Scale Banks 28,7 29,5 44, 43,8 52,3 64,9 74,6 96, 119,9 135,6 168,8 Small Scale Banks 18,6 12,7 15, 19,7 24,2 34,3 41,3 44,6 56,4 55, 66,9 Micro Scale Banks 2,3 4,6 3,3 4,4 6,1 6,7 7,8 1,4 11,9 13,5 18,2 Functional Asset Size Deposit Banks 99,5 165,4 23,2 239,4 295,1 384,1 47,6 543,3 683,8 773,4 932,4 Dev. and Inv. Banks 4,6 8, 9,4 1,3 11,3 12,9 15,3 18,9 22,9 27, 31, Participation Banks 1,9 1,9 4, 5,3 7,4 9,9 15,3 19,5 25,8 33,6 43,3 Total Assets 16, 175,3 216,6 254,9 313,8 46,9 499,7 581,6 732,5 834, 1.6,7 Concentration Criteria First 5 Banks 47, 53,8 57,4 59, 58,1 61,4 6,9 59,8 6,1 6,5 6,1 First 1 Banks 67,9 78,6 79,3 8,6 82, 82,9 83,5 82,5 82,8 83,4 83,2 HHI 623,4 794,9 851,7 94,6 95,9 934,7 911, 879,1 885,7 913,3 897, Distribution by Scale Large Scale 53,2 73,3 74, 73,4 71,6 71,8 75,2 74, 74,3 75,5 74,8 Medium Scale 27, 16,8 16, 16,2 18, 17,5 14,9 16,5 16,4 16,3 16,8 Small Scale 17,5 7,3 6,9 7,7 7,7 8,4 8,3 7,7 7,7 6,6 6,6 Micro Scale Banks 2,2 2,6 1,5 1,7 2, 1,7 1,6 1,8 1,6 1,6 1,8 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, Distribution by Function Deposit Banks 93,9 94,4 94,4 94,4 94,2 94,2 93,9 93,4 93,4 92,7 92,6 Dev. And Inv. Banks 4,4 4,5 3,2 3,2 3,2 3,1 3,1 3,2 3,1 3,2 3,1 Participation Banks 1,8 1,1 2,4 2,4 2,6 2,7 3,1 3,3 3,5 4, 4,3 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, The progress seen in re-structuring activities, the politic and economic stability environment and the inclusion of Turkey to EU membership negotiation process have remarkably increased the attention of global capital to the Turkish banking sector after 25. Furthermore, factors such as mergers and transfers, entry of global capital which appeared as a reflection of the improvements provided in the regulatory and supervisory structure of the sector have also caused important structural changes. Total assets of the Turkish banking sector have increased by 2.8% comparing to previous year to TL 1.6,7 billion as of December 21. When analyzed functionally, the distribution of the sectors assets among deposit, participation and development and investment banks were realized respectively as 92.6%, 4.3% and 3.1%. In parallel with the decrease seen in the shares of development and investment banks and deposit banks, the share of participation banks has increased. As a matter of fact, in 21, the highest increase was realized in the assets of participation banks with 28.9%. They are followed by deposit banks with a growth by 2.6%. Development and investment banks have grown by 14.6%. BRSA 2 Structural Developments in Banking December 21

40 Box 4: Global Outlook of Asset Size While Turkey has continued on to its high asset growth rate in 29 it has continued to convergencence Turkey process to average asset size of EU. Turkey is in 15th rank when compared to total assets of 27 EU member countries banking sector total assets. Turkey s asset growth rate is higher than countries such as Germany, France, Italy, the Netherlands and Spain. In addition to that the fact that growth rate of Turkey is lower than Bununla countries such as South Africa, India and Brazil can be perceived as a sign to growth potential. Asset Size Asset Size Development 24=1 Billion EUR Japan China USD England Germany France Italy Spain Brazil Netherlands Canada India Switzerland Ireland Belgium Denmark Austria South Korea Sweden Luxembourg Saudi Arabia Portugal South Africa Greece Australia Finland Turkey Russia Mexico Indonesia Poland Czech Rep Argentine GPSC Hungary Romania Slovakia Slovenia Malta Bulgaria Latvia Lithuania Estonia EU PB Resource: EU Banking Structures 21, OECD and country banking authorities statistics BRSA 21 Structural Developments in Banking December 21

41 Chart 1.4-1:Asset Concentration and Functional Distribution % 1. 8 % ,8 1,1 2,4 2,4 2,6 2,7 3,1 3,3 3,5 4,4 4,5 4, 4,3 3,2 3,2 3,2 3,1 3,1 3,2 3,1 3,2 3, ,9 94,4 94,4 94,4 94,2 94,2 93,9 93,4 93,4 92,7 92, Large Scale Small Scale Micro Scale Medium Scale HHI (Right Axis) Deposit Banks Dev. and Inv. B. Participation Banks It is observed that the share of medium, small and micro scale banks shares have increased and large scale banks share has decreased in Turkish banking sector in 21, while the share of large scale banks has increased continually and on the other hand the share of other bank groups has decreased when 1 years of period is observed. As a matter of fact, the assets of large scale banks have comprised 53.2% of sector s assets in 2 while it has shown a sharp increase and reached to 73.3% of total assets and it has protected the said level in 21. The asset share of medium and small size banks has decreased to 16.8% and 7.3% respectively in 21 from 27% and 17.5% respectively in 2 and it was about similar levels tothoughout the following 1-year period. The share of micro scale banks was fluctuated between 2.2% and 1.5%. The assets of large scale banks comprised 74.8% of sector s assets in 21 while the share of medium, small and micro scale banks was realized as 16.8%, 6.6% and 1.8% respectively. When asset shares order in sector is evaluated, it can be seen that 6 of the banks from 86 banks operating in 2 crisis period were large scale banks, 12, 33 and 34 thereof were medium scale, small and micro scale, respectively. 2 of the 6 large scale banks were public capital in the said year. The asset size of the biggest bank in the sector was 15.47% in the sector, and it was included to group with public capital in this period. The share of the biggest bank of the sector was 17.4% in 22 when financial crisis was initiated to overcome. The number of large scales bank has increased to 7 in the same period and there was no change in the number of the said group s banks until today. The number of small scale banks decreased to 15 and number of micro scale banks decreased to 25. A moderate decrease was occurred in the number of small and micro scale banks depending on merger and acquisitions together with banks which are out of system in the following periods. The asset share of the biggest bank decreased to 15% while there were 4 banks having asset size more than 1% in 21. The fact that the asset share of large scale banks got close is evaluated as an indicator that competition structure became stronger in the sector. BRSA 22 Structural Developments in Banking December 21

42 Table 1.4-2: Asset Share Ranking in the Sector 3 2 Share 22 Share 24 Share 26 Share 28 Share 21 Share 1 T.C.Ziraat B 15,47 T.C.Ziraat B. 17,4 T.C.Ziraat B. 18,16 T.İş Bankası 15,8 T.C. Ziraat B. 14,25 T.C. Ziraat B. 15,2 2 T.Halk B. 1,13 Akbank 11,29 T.İş Bankası 12,27 T.C.Ziraat B. 14,54 T. İş Bankası 13,36 T. İş Bankası 13,15 3 T.İş Bankas 7,36 T.İş Bankası 1,95 Akbank 11,13 Akbank 11,46 T. Garanti B. 12,14 T. Garanti B. 12,31 4 Yap. Ve Kr. 7,9 T.Garanti B. 9,3 T.Garanti B. 8,37 T.Garanti B. 1,6 Akbank 11,69 Akbank 11,24 5 Akbank 6,94 Yap. Ve Kr.B. 8,69 T.Halk B. 8,19 Yapı Ve Kredi B. 9,78 Yapı Ve Kredi B. 8,7 Yapı Ve Kredi B. 8,42 6 T.Garanti B. 6,24 T.Halk B. 8,4 Yapı Ve Kredi B. 7,85 T.Vakıflar B. 7,4 T. Vakıflar B. 7,15 T. Vakıflar B. 7,37 7 T.Vakıflar B. 4,62 T.Vakıflar B. 5,88 T.Vakıflar B. 7,71 T.Halk B. 6,92 T. Halk B. 7,1 T. Halk B. 7,28 8 Pamukbank 4,41 Koçbank 3,7 Koçbank 3,3 Finansbank 3,6 Finansbank 3,63 Finansbank 3,79 9 T.Emlak B. 3,48 Pamukbank 2,68 Finansbank 2,75 Oyakbank 2,37 Denizbank 2,63 Denizbank 2,76 1 Demirbank 2,21 Finansbank 2,27 Fortıs Bank 2,27 Denizbank 2,3 Ing Bank 2,25 Türk Ekonomi B. 1,89 11 T.İhr.Kredi B. 2,17 Türk Exım B. 2,12 Denizbank 2,14 Hsbc Bank 2,6 Hsbc Bank 2,1 Hsbc Bank 1,77 12 Osmanlı B. 2,3 Fortıs Bank 1,8 Oyakbank 1,96 Fortıs Bank 1,72 Türk Ekonomi B. 2,1 Ing Bank 1,72 13 Koçbank 2,1 Oyakbank 1,62 Hsbc Bank 1,68 Türk Ekonomi B. 1,66 Fortis Bank 1,63 Asya Katılım B. 1,44 14 Finansbank 1,89 Birleşik Fon B. 1,62 Türk Exımbank 1,42 Cıtıbank 1,22 Asya Katılım B. 1,11 Fortis Bank 1,21 15 Birl.T. Körf.B. 1,8 Denizbank 1,56 Türk Ekonomi B. 1,14 İller B.,89 Şekerbank 1,1 Şekerbank 1,13 16 Türk Dış Tic.B. 1,7 Hsbc Bank 1,47 Şekerbank,99 Asya Kat. B.,84 T. Finans Kat.B.,97 T. Finans Kat.B. 1,6 17 İnterbank 1,5 T.Ekonomi B. 1,1 İller B.,97 Türk Exımbank,83 İller B.,94 Kuveyt Türkb.,97 18 Toprakbank 1,3 Şekerbank 1,1 T.Sınai Kal. B.,73 Türkiye Finans,83 T. Sınai Kalk.B.,85 İller B.,96 19 T. Ekonomi B.,97 İller B.,85 Anadolubank,62 T.Sınai Kal. B.,81 Kuveyt Türkb.,79 Al Baraka Türk,84 2 Eskişehir B.,89 T.Sınai Kal. B.,74 Birleşik Fon B.,62 Şekerbank,8 Cıtıbank,75 T. Sınai Kalk.B.,79 21 İller B.,85 Cıtıbank,67 Asya Katılım B.,62 Kuveyt Türk,59 T. İhracat Kr. B.,68 Cıtıbank,63 22 Kentbank,85 Alternatbank,58 Cıtıbank,61 Tekstil B.,56 Al Baraka Türk,65 T. İhracat Kr. B.,62 23 Şekerbank,8 T.İmar B.,54 Kuveyt Türk,53 Anadolubank,55 Alternatifbank,51 Anadolubank,45 24 Etibank,78 Anadolubank,53 Al Baraka Türk,47 Albaraka Türk,5 Eurobank Tekf.,48 Alternatifbank,42 25 Tüt.B.-Yaşar,78 Albarakatürk,51 Tekstil B.,43 Alternatifbank,4 Anadolubank,46 Eurobank Tekf.,41 26 Egebank,75 Tekstil B.,5 Famıly Finans.,41 Birleşik Fon B.,24 Tekstil B.,4 Deutsche Bank,3 27 T.İmar B.,73 Kuveyt Türk,5 Alternatifbank,37 Tekfenbank,22 Bankpozitif,23 Tekstil B.,26 28 Hsbc B.,69 Asya Katılım,37 Türkiye Finans,33 Mıllennıum B.,21 İmkb Takasbank,19 Bank Mellat,18 29 İhlas Finans,66 Tekfenbank,26 Tekfenbank,19 T.Kalkınma B.,18 Abn Amro Bank,18 Bankpozitif,16 3 Türk Tic.B.,64 Famıly Finans,24 T.Kalkınma B.,17 Deutsche B.,18 Mıllennıum B.,17 T. Kalkınma B.,16 31 İktisat B.,62 Tür. Finans,22 Abn Amro Bank,14 Abn Amro Bank,14 T. Kalkınma B.,14 Turkland Bank,15 32 Alternatifb.,61 T.Kalkınma B.,21 Jp Mor. Chase,14 Westlb Ag,14 Turkland Bank,14 İmkb Takasbank,15 33 Citıbank,6 Ak Uluslar.,21 Turkısh Bank,13 Soc. Generale,13 Birleşik Fon B.,12 Aktif Yatırım B.,15 34 Denizbank,56 Abn Amro B.,14 Socı. Generale,12 Turkısh Bank,13 Westlb A.G.,11 Westlb A.G.,12 35 Tekstil B.,54 Turkısh Bank,14 Turkland B,12 Takasbank Imkb,12 Turkısh Bank,11 Royal Bank Of Sc.,11 36 Egs B.,48 Arap Türk B.,13 Deutsche Bank,12 Turkland Bank,11 Arap Türk B.,11 Arap Türk B.,11 37 Anadolubank,47 Westlb Ag,13 Ak Uluslararası,11 Bankpozitif,1 Deutsche Bank,9 Turkısh Bank,1 38 Sümerbank,42 Adabank,13 Arap Türk B.,11 Arap Türk B.,8 Socıete Gen.,7 Mıllennıum Bank,9 39 Albaraka,41 Calyon Bank.,1 Takasbank Imkb,1 Calyon Bank,6 Bank Mellat,5 Birleşik Fon B.,8 4 Bnp-Ak Dresd.,34 Deutsche B.,1 Mıllennıum B.,9 Bank Mellat,5 Aktif Yatırım B.,3 Jp Morgan Chase,7 41 Yurt Tic. Kred,31 Takas B. Imkb,1 Calyon Bank,9 Jp Mor. Chase,4 Jp Morgan Chase,3 Socıete Generale,7 42 T.Sınai Kalk.,31 Socıete Gen.,7 Westlb Ag,8 Nurol Yat.B.,3 Diler Yatırım B.,2 Merrıll Lynch,3 43 Ulusal Bank,29 Turkland B.,6 Bank Mellat,6 Diler Yatırım,2 Nurol Yatırım B.,2 Nurol Yatırım B.,2 44 Bank Ekspres,29 Cr.Suıs.F.Bos.,6 Bankpozitif,5 Gsd Yat. B.,2 Merrıll Lynch,1 Gsd Yatırım B.,1 45 Westlb Ag,27 Bank Mellat,5 Banca Dı Roma,3 Banca Dı Roma,2 Habib Bank Lim.,1 Diler Yatırım B.,1 46 Kuv. T.Kat. B.,27 Jp Mor. Chase,5 Nurol Yatırım B.,3 Çalık Yatırım,1 Gsd Yatırım B.,1 Habib Bank Lim.,1 47 Bayındırbank,24 Nurol Yat. B.,3 Çalık Yatırım,2 Adabank,1 Calyon Yat.B.,1 Credıt Agr. Yat. B.,1 48 Sınai Yat. B.,23 Bancadı Roma,3 Gsd Yatırım B.,2 Habib Bank,1 Adabank,1 Adabank,1 49 Araptürk B.,23 Gsd Yatırım B.,3 Adabank,2 Merrill Lynch,1 Taib Yatırım B., Taib Yatırım B., 5 T.Kalkınma B.,23 Çalık Yatırım,3 Diler Yatırım,2 Taıb Yat. Bank, 51 Deutsche B.,22 Fiba Bank,3 Habib Bank,1 52 Jpmorgan B.,2 Ing Bank,2 Taıb Yatırım B., 53 Asya Kat. B.,17 Bankpozitif,2 Merrill Lynch, 55 Oyak Bank A.Ş,17 Habib Bank,1 56 Abn Amro B.,15 Mıllennıum B.,1 57 T. Fin. Kat.B.,14 Taıb Yat.Bank,1 58 Socıete Gen.,14 Merrill Lynch,1 59 Milli Aydın B.,14 Cr.Lyonnaıs, Note: 2 year rating and continuation of sector shares are as following from 6 th bank to 86 th bank: MORGAN GUARANTY:,11, FAMILY FINANS :,11, ATLAS YAT. B.:,1, TURKISH BANK:,9, RABOBANK :,9, BANK KAPİTAL TÜRK:,8,SİTEBANK A.Ş.:,8, UNICREDIT B. DI ROMA:,6,MNG BANK AS :,6, ADABANK A.Ş.:,6, İMKB TAKASBANK :,5, FİBA BANK A.Ş. :,5,ING BANK N.V.:,4, TEKFEN YAT. VE FİN. B.:,4, GSD YATIRIM B. :,4, NUROL YATIRIM B.:,3, CALYON BANK türk:,3, BANK MELLAT:,3, CREDIT S. FIRST B.:,2, HABİB BANK LTD :,2, CREDIT LYONNAIS:,2, OKAN YATIRIM B.:,1, TAIB YATIRIM B.:,1, AKTİF YATIRIM B :,1, DİLER YATIRIM B.:,1, BANKPOZİTİF :,1, MERRILL LYNCH :, data is not belonging to BRSA Reporting System; it is presented with an aim of statistics. BRSA 23 Structural Developments in Banking December 21

43 Box 5: Turkey-EU Comparison by Asset Concentration It can be observed that Turkey has a higher market concentration than EU member developed countries in general but has a lower market concentration than EU member but emerging countries when compared to EU-27 countries by taking basis as HHI and first five bank concentration ratios and the said structure has continued on in 29, as well. Herfindahl Index (HHI) First Five Banks Concentration AB ,3 39,7 4,9 42,1 42,1 44,4 44,1 44,3 PB ,8 4,5 41,6 42,6 42,8 44,1 44,7 44,6 Finland ,6 81,2 82,7 82,9 82,3 81,2 83, 82,6 Estonia ,1 99,2 98,6 98,1 97,1 95,7 95, 93,4 Netherlands ,7 84,2 84, 84,5 85,1 86,3 87, 85, Latvia ,9 81, 78,9 8,6 82,5 8,9 81, 8,5 Belgium , 83,5 84,3 85,3 84,4 83,4 81, 77,1 Slovakia ,4 67,5 66,5 67,7 66,9 68,2 72, 72,1 Slovenia ,4 66,4 64,6 63, 62, 59,5 59, 59,7 Malta ,4 77,7 78,5 75,3 71,4 7,1 73, 72,7 Greece ,4 66,9 65, 65,6 66,3 67,7 7, 69,2 Lithuania ,3 63,1 62,4 67,3 69,2 67,2 7, 69,3 Portugal ,5 62,7 66,5 68,8 67,9 67,8 69, 7,1 GPSC ,8 57,2 57,3 59,8 63,9 64,8 64, 65, Denmark , 66,6 67, 66,3 64,7 64,2 66, 64, Czech Republic ,7 65,8 64, 65,5 64,1 65,7 62, 62,4 Turkey ,4 59, 58, 61,4 6,9 59,8 6,1 6,5 Sweden , 53,8 54,4 57,3 57,8 61, 61,9 6,7 Ireland ,1 44,4 43,9 45,7 44,8 46,1 55,7 58,8 Hungary ,5 52,1 52,7 53,2 53,5 54,1 54,5 55,2 Romania n.a v.y. 55,2 59,5 59,4 6,1 56,3 54, 52,4 Bulgaria n.a. v.y v.y. v.y. 52,3 5,8 5,3 56,7 57,3 58,3 France ,6 46,7 49,2 51,9 52,3 51,8 51,2 47,2 Poland ,4 52, 5, 48,5 46,1 46,6 44,2 43,9 Spain ,5 43,1 41,9 42, 4,4 41, 42,4 43,3 England ,6 32,8 34,5 36,3 35,9 4,7 36,5 4,8 Austria ,6 44,2 43,8 45, 43,8 42,8 39, 37,2 Italy ,5 27,5 26,4 26,8 26,2 33,1 33, 34, Luxembourg ,3 31,8 29,7 3,7 29,1 27,9 27,3 27,8 Germany ,5 21,6 22,1 21,6 22, 22, 22,7 25, Resource: EU Banking Structures 21 BRSA 24 Structural Developments in Banking December 21

44 2. MARKET STRUCTURE OF BANKING SECTOR 2.1. Loans Total loans market maintains its non-concentration view for a long time. Concentration criteria HHI which was points in 2-21 in which many small scale banks were operating is realized as as of end-21. HHI which is continuously less than 1. points shows that a strong strong competition for expanding the customer base is going on in loans market. On the other hand, the slight increase in HHI, first 5 and first 1 banks in 21 when compared to the previous year points out to an increase in favor of banks whose market share is relatively bigger in the mentioned competition. Table 2.1-1: Total Loan Volume Concentration Indicators Total Loans First 5 Banks 44,4 54,6 54, 52,2 51,6 53, 55,9 54,7 55,5 52,7 54,3 First 1 Banks 68,9 78,4 73,8 73,4 75,3 76,3 8,4 79,9 81,2 8,1 81,4 HHI 578,7 761,3 732, 71,2 712,6 751, 85,8 784,2 811,7 772,9 797,1 Distribution by Scale Large Scale 47,2 7,8 62, 62,6 63,4 63,9 68,8 68,2 7,4 69,4 71, Medium Scale 32,9 15,9 24,5 24, 23,7 25,9 19,8 21,5 2,1 21,7 2,6 Small Scale 19,9 13,3 13,5 13,4 12,9 1,2 11,4 1,2 9,5 8,9 8,4 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, Functional Distribution Deposit Banks 88,8 88,7 87,6 88,4 9,2 9,4 92,5 91,9 92, 9,5 91,1 Development and Investment Banks 6, 8,6 8,3 7,1 5,1 3,7 3,3 3,1 3,2 3,5 3, Participation Banks 5,1 2,7 4,1 4,5 4,7 5,9 4,3 4,9 4,8 6, 5,9 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, Having an important role in loans market, deposit banks maintained their leadership in 21, as well. The share of deposit banks in loans was realized as 91.1% in 21. Moreover, participation banks continue to grow strongly in total loans market. BRSA 25 Structural Developments in Banking December 21

45 Box 6: Global Outlook of Loans The table showing the loans granted by banking sectors in EU and G2 member countries in is given below. According to the table, the USA has the highest loan volume in the mentioned data set and it is followed by England, Japan and People s Republic of China. The development of loan growths is compared over 24=1 based index. According to the mentioned index, Turkey s loan growth speed as of 29 is higher than Germany, England, France, Italy, China and India. Billion 24=1 Billion USA England PRC Japan Germany France Spain Italy Holland Canada Australia Switzerland S. Korea Denmark Russia Sweden Ireland Brazil Austria S. Africa R Belgium Portugal India Greece Luxemburg Turkey Poland Finland Mexico Indonesia Czech Rep Hungary S. Arabia G.P.S Cyprus Romania Slovenia Slovakia n.a. n.a Argentina Bulgaria n.a. n.a Latvia Malta Lithuania Estonia EU PB Source: IMF, OECD and countries banking authority statistics. BRSA 26 Structural Developments in Banking December 21

46 Chart 2.1-1: Loan Concentration and Functional Distribution Large Scale Small Scale 24 When concentration indicators by scale sizes are analyzed, it is seen that the share of large scale banks is upwards in 21 when compared to the previous year. In parallel, the share of small and medium scale banks decreased in 21. Private banks are weighted in the ranking of first 1 banks in total loans. In 21, while the share of bank which granted the most of the loans was 12.1%, the share of the 1th bank in the ranking was 2.3%. State banks continued to have a significant share in loans market in 21. Table 2.1-2: First 1 Banks in Loans % 2 Share 22 Share 24 Share 26 Share 28 Share 21 Share 1 T.C.ZİRAAT B. 11,7 YAP. KR. B. 13,3 AKBANK 12,2 T.İŞ BANKASI 13, T.GARANTİ B. 13,1 T. GARANTİ B. 12,1 2 YAP. VE KR. B. 8,7 T.İŞ BANKASI 12,5 T.İŞ BANKASI 11,9 AKBANK 12,7 T.İŞ BANKASI 12,5 T. İŞ BANK. 11,9 3 T.İŞ BANKASI 8,4 AKBANK 11,5 T.GARANTİ B. 9,8 T.GARANTİ B. 12,2 AKBANK 11,7 T.C. ZİRAAT B. 1,7 4 PAMUKBANK 8,2 T.GARANTİ B. 9,7 YAPI VE KREDİ B. 9,5 YAPI VE KREDİ B. 1, YAPI VE KREDİ B. 9,9 AKBANK 1, YAPI VE KREDİ 5 T.GARANTİ B. 7,3 T.C.ZİRAAT B. 6,9 T.C.ZİRAAT B. 8,2 T.VAKIFLAR B. 8,1 T.C.ZİRAAT B. 8,1 B 9,7 6 AKBANK 6,8 T.VAKIFLAR B. 5,6 T.VAKIFLAR B. 7,7 T.C.ZİRAAT B. 7,7 T.VAKIFLAR B. 8,1 T. VAKIFLAR B. 8,5 7 T.VAKIFLAR 6,6 KOÇBANK 4,4 FİNANSBANK 4,9 T.HALK B. 5,2 T.HALK B. 6,8 T. HALK B. 8,3 8 T.HALK B. 4,3 TÜRK EXIMBANK 3,8 T.HALK B. 4,1 FİNANSBANK 5, FİNANSBANK 4,6 FİNANSBANK 4,7 9 DEMİRBANK 3,4 FİNANSBANK 3,2 KOÇBANK 3,7 HSBC BANK 3,3 DENİZBANK 3,3 DENİZBANK 3,4 1 T.EMLAK B. 3,4 HSBC BANK 2,7 HSBC BANK 3,3 OYAKBANK 3,3 ING BANK 2,9 ING BANK 2, Commercial Loans Medium Scale HHI (Right Axis) ,7 5,1 4,1 4,5 4,7 4,3 5,9 4,9 4,8 6, 5,9 6, 8,6 8,3 7,1 5,1 3,7 3,3 3,1 3,2 3,5 3, 88,888,7 87,6 88,4 9,29,4 92,5 91,9 92, 9,5 91,1 Commercial loans market which plays a leading role in economic growth as it meets the need of real sector has a non-concentrated view like total loans market. Since HHI is below 1. points and the share of first 5 banks is about 5%, it can be said that there is strong competition in this market. Table 2.2-1: Commercial Loans Concentration Indicators Commercial Loans First 5 Banks 54,2 5,9 48,8 5,3 54,4 53,2 55, 52,1 52,1 First 1 Banks 72,9 73,1 73,9 73,3 77,3 76,3 78,6 76,4 78,1 HHI 742, 697, 676, 695, 758, 734, 787, 742,2 762,2 Distribution by Scale Large Scale 62,3 61,7 61,4 6,4 66,8 66, 69,5 67,8 69,6 Medium Scale 25, 24,9 24,4 22, 18,5 18,9 18,3 2,4 19,3 Small Scale 12,7 13,5 14,2 17,6 14,6 15,1 12,3 11,9 11,2 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, Functional Distribution Deposit Banks 88,2 88,3 89,3 87,4 9,2 88,8 89,4 87,1 88,1 Development and Investment Banks 7, 6, 4,2 5,3 4,8 4,6 4,6 5,1 4,4 Participation Banks 4,9 5,7 6,5 7,3 5, 6,6 6,1 7,8 7,4 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, Deposit Banks Develop.&Inv. Banks Partipation Banks BRSA 27 Structural Developments in Banking December 21

47 Box 7: Global Outlook of Loans Granted to Real Sector Loans granted to real sector decreased in general in 29 by the impact of the global crisis. China is in the first rank in the loans granted to real sector and it is followed by Japan and the USA. While 67% of total loans were granted to real sector in China as of 29, the mentioned ratio was about 34%, 19% and 3% in Japan, the USA and EU-27, respectively. While the share of loans granted to real sector in total loans was about 6% in Bulgaria and Slovenia, it is 12% in England. In the mentioned period, the impacts of global crisis were felt limitedly in Turkey and total increased by 5.8% on Euro basis in 29. EU average of the mentioned ratio is negative 2.9%. Loans Granted to Real Sector Companies Ratio to 29 GDP Billion PRC ,9 Japan ,9 USA ,4 Australia ,7 Spain , Germany , Italy ,7 France , England , S. Korea n.a. n.a. n.a. n.a. n.a. n.a ,1 Holland ,2 Russia n.a. n.a. n.a. n.a. n.a. n.a. n.a ,5 Brazil n.a. n.a. n.a ,3 Sweden ,4 Ireland ,6 Australia ,6 Denmark n.a n.a ,7 India ,7 Canada ,2 S. Africa R. n.a. n.a. n.a. n.a. n.a. n.a. n.a ,5 Portugal ,5 Turkey ,4 Belgium ,2 Greece ,6 Switzerland n.a. n.a. n.a. n.a. n.a. n.a ,8 Luxemburg ,5 Finland ,9 Poland ,1 Mexico ,7 Indonesia n.a. n.a. n.a ,3 Czech Rep ,2 Hungary ,5 Romania n.a. n.a ,6 G.P.S. Cyprus n.a. n.a. n.a ,3 Slovenia ,4 Bulgaria n.a. n.a ,3 Slovakia ,7 Argentina ,2 Latvia , Lithuania ,8 Estonia ,8 Malta ,2 EU ,9 PB , Source: IMF, OECD and countries banking authority statistics. BRSA 28 Structural Developments in Banking December 21

48 When it is analyzed by scale groups, it is seen that there is a slight shift in commercial loans from medium and small scale banks to large scale banks in 21 when compared to the previous year. It can be evaluated as a sign for that the scale advantage was effective in volume making in commercial loans in the mentioned year. While 88.1% of commercial loans which are the most important compound of total loan volume is granted by deposit banks, 4.4% and 7.4% are granted by D&IBs and participation banks, respectively. Chart 2.2-1: Commercial Loans Concentration and Functional Distribution ,9 5,7 5, 6,5 7,3 6,6 6,1 7,8 7,4 4,8 7, 6, 4,2 4,6 4,6 5,3 5,1 4,4 88,2 88,3 89,3 87,4 9,2 88,8 89,4 87,1 88, Large Scale Small Scale Medium Scale HHI (Right Axis) Deposit Banks Develop. & Inv. Banks Participation Banks 2.3. SME Loans SME loans market which had a moderately concentrated view in 26 as the HHI was above 1. points moved away from that view in the recent years and it turned to a nonconcentrated market in which the competition is wilder. As of 21, while HHI is about points, the share of first 5 and first 1 banks are 56.9% and 76.8%, respectively. Table 2.3-1: Concentration Ind. for Loans Granted to Small and Medium Scale Enterprises SME Loans First 5 Banks 65,7 61,4 6,4 57,2 56,9 First 1 Banks 83,2 8,7 79,7 76,6 76,8 HHI 1.43,3 872,8 872,2 821,2 783,5 Distribution by Scale Large Scale 71, 68,2 67,8 64,2 66,4 Medium Scale 15,4 22, 23,1 27,2 24,3 Small Scale 13,6 9,8 9,1 8,6 9,4 Total 1, 1, 1, 1, 1, Functional Distribution Deposit Banks 92,3 92,9 92,3 89,6 88,9 Development and Investment 1,2 1,3 1,8 2, 1,8 Participation Banks 6,5 5,8 6, 8,4 9,2 Total 1, 1, 1, 1, 1, When analyzed by scale distribution, it is seen that SME loans are mostly granted by large scale banks. While large scale banks have a share of 66.4% in SME loans market in 21, the mentioned ratio is 24.3% for medium scale banks and 9.4% for small scale banks. Moreover, the weight of large scale banks is not as significant as it is in total loans or commercial loans. BRSA 29 Structural Developments in Banking December 21

49 When functional distribution is analyzed, it is seen that deposit banks have a significant weight in SME loans. In 21, 88.9% of SME loans are granted by deposit banks. Participation banks grew significantly in this market and their share in this market increased to 9.2%. Chart 2.3-1: SME Loans Concentration and Functional Distribution % ,5 5,8 6, 1,2 1,3 1,8 92,3 92,9 92,3 8,4 9,2 2, 1,8 89,6 88, Large Scale Small Scale Medium Scale HHI (Right Axis) Deposit Banks Develop. & Inv. Banks Participation Banks Together with the increasing growth performance and financial stability in Turkey, SME loans became an important market. Banks which are willing to meet the demand of SMEs wishing to use credit are nourishing this market continuously by serving new products in this loan segment. Although private banks are the ones which mostly grant SME loans, state banks are also effective in this market. Table 2.3-2: First 1 Banks ranking in SME Loans % 26 Share 27 Share 28 Share 29 Share 21 Share 1 AKBANK 17,5 T. GARANTİ B. 14,18 T. GARANTİ B. 15,2 T. HALK BANKASI 14,7 T. GARANTİ B. 12,6 2 T. İŞ BANKASI 16, T. HALK BANKASI 12,92 T. İŞ BANKASI 14,3 T. GARANTİ B. 13,5 T. HALK BANKASI 12,4 3 T. HALK BANKASI 15,3 T. İŞ BANKASI 12,73 T. HALK BANKASI 12,3 T. İŞ BANKASI 13, YAPI VE KRE. B. 11,8 4 T. GARANTİ B. 11,6 YAPI VE KRE. B. 1,99 YAPI VE KRE. B. 9,8 YAPI VE KRE. B. 9, T. İŞ BANKASI 11,4 5 FİNANSBANK 5,4 AKBANK 1,57 AKBANK 8,8 AKBANK 6,9 AKBANK 8,7 6 T. VAKIFLAR B. 4,2 T. EKONOMİ B. 4,96 FİNANSBANK 4,3 FİNANSBANK 4,3 T.C. ZİRAAT B. 4,9 7 YAPI VE KRE. B. 3,7 T. VAKIFLAR B. 3,82 T. VAKIFLAR B. 4,2 ING BANK 4,1 T. VAKIFLAR B. 4,6 8 ING BANK 3,5 DENİZBANK 3,759 DENİZBANK 3,8 T. EKONOMİ B. 3,9 FİNANSBANK 3,9 9 T. FİNANS KATILIM B. 3,4 ING BANK 3,529 T. EKONOMİ B. 3,6 T.C. ZİRAAT B. 3,7 T. EKONOMİ B. 3,3 1 T.C. ZİRAAT B. 2,8 FİNANSBANK 3,338 ING BANK 3,5 T. VAKIFLAR B. 3,4 ING BANK 3, Consumer Loans Consumer loans which did not develop much during years with high inflation and low growing rate and during which Turkey was predominated by a financial instability was in Turkey are gaining more and more importance within the last years. Public borrowing requirement being decreased, income per person being increased and borrowing limits of the household being more elastic, the consumer loans market has become the most rapidly growing area in the banking sector. Consumer loan demand which was delayed during financial crisis periods and which is now accelerated has caused the increase of competition in this market. A concentration tendency was observed in this market during years 2 and 24. However, the tendency observed between years 24 and 21 in the share of first 5 banks and HHI criteria indicates that this market will preserve its competitive structure. As a matter of fact, the HHI value tends to decrease slightly within the last six years and is points as of 21. BRSA 3 Structural Developments in Banking December 21

50 Table 2.4-1: Consumer Loans Concentration Indicators 4 Consumer Loans First 5 Banks 49, 57, 59,6 68,3 66,7 63,1 6,6 59,6 58,9 58,1 59,4 First 1 Banks 72,5 8,5 86,9 91,2 91,7 86,8 87, 87,2 87,3 88, 89, HHI 674,2 852,4 931, 1.88, 1.82, 979, 928, 95, 97, 924,4 952,5 Distribution by Scale Large Scaled 51,5 63,7 65,3 71,6 71,8 69,2 7,5 71,3 72,4 72,7 75, Medium Scaled 3,5 26,8 32,1 27,3 26,7 25,5 24,2 24,4 23,8 24,3 22,2 Small Scaled 18, 9,6 2,6 1,1 1,4 5,2 5,4 4,3 3,8 3, 2,9 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, Functional Distribution Deposit Banks 98,6 1, 1, 1, 99,9 96,6 96,5 97,1 97,5 97, 96,9 Development and Investment 1,4,,,,1,,1,3,3,3,3 Participation Banks,,,,, 3,3 3,3 2,6 2,2 2,7 2,9 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, Like other credit items, the weight of deposit banks is also observed in consumer loans. 96.9% of consumer loans were presented by deposit banks in 21. The share of participation banks by 2.9% is lower than total loans and SME loans. Large scale banks having a share by 75% in consumer loans market are more weighted in this area than in total loans and SME loans markets. Chart 2.4-1: Consumer Loans Concentration and Functional Distribution ,,,,,,1,,1,3,3,3,3 3,3 3,3 2,6 2,2 2,7 2,9 9 1, 1, 1, 1, 99,9 96,6 96,5 97,1 97,5 97, 96, Large Scale Small Scale Medium Scale HHI (Right Axis) Deposit Banks Participation Banks Develop. & Inv. Banks As of 21, the highest share in consumer loans market belongs to a state bank with 17.3%. There are 3 private banks and two state banks among the first 5 banks. Almost 59.4% of total consumer loans are granted by these five banks. 4 Calculated excluding participation banks for 2-24 due to some partial deficiencies in the Bank Reporting Systems Forms. BRSA 31 Structural Developments in Banking December 21

51 Box 8: Global Outlook of Consumer Loans Excluding Housing Loans When the consumer loans other than housing loans granted in different countries banking systems are analyzed, the USA comes up in the first rank in size and is followed by Canada and Germany. As of 29, the average of 27 EU member countries in other retail loans market is Euro 68 billion, and around Euro 32 billion in Turkey. Consumer Loans Excluding Housing Loans Billion Sh. Within GDP USA ,3 Canada ,3 Germany ,6 France ,9 Spain ,7 Italy ,7 England ,4 S. Korea n.a. n.a. n.a. n.a. n.a ,7 Russia n.a. n.a. n.a. n.a. n.a. n.a ,4 Australia n.a. n.a ,3 S. Africa n.a. n.a. n.a. n.a. n.a. n.a ,1 Sweden , Austria ,2 Poland ,1 Netherlands ,4 Denmark ,9 Ireland ,9 Turkey* ,5 Greece ,1 Portugal ,3 Finland ,3 Hungary ,2 Belgium ,6 Romania n.a ,1 Argentina ,1 Luxembourg ,8 Czech Rep ,3 S. Cyprus n.a. n.a ,5 Bulgaria n.a ,7 Slovakia ,6 Slovenia n.a ,9 Latvia , Lithuania n.a ,7 Estonia ,5 Malta 1 n.a , EU ,1 PB ,6 Source: IMF, OECD and statistics of banking authorities of countries. (*) Turkey data is the sum of credit cards, vehicle, consumer and other and retail loans (excluding housing loans). BRSA 32 Structural Developments in Banking December 21

52 Table 2.4-2: Ranking of First 1 Banks in Consumer Loans Volume 2 Pay 24 Pay 26 Pay 27 Pay 28 Pay 21 Pay 1 T.İŞBANKASI B. 12,5 T.C.ZİRAAT B. 15,6 T.C. ZİRAAT B. 14,1 T.C. ZİRAAT B. 14,1 T.C. ZİRAAT B. 15,2 T.C. ZİRAAT B. 17,3 2 T.VAKIFLA B. 11,7 T.İŞ BANKASI 14,1 AKBANK 12,8 AKBANK 12,8 T. İŞ BANKASI 11,8 T. İŞ BANKASI 11, 3 T.GARANTİ B. 1,7 T.VAKIFLAR B. 11,8 T. İŞ BANKASI 12,1 T. İŞ BANKASI 12,1 AKBANK 11,4 T. GARANTİ B. 1,6 4 DEMİRBANK 8,2 YAPI VE KREDİ B. 9,4 T. VAKIFLAR B. 11,8 T. GARANTİ B. 11,8 T. GARANTİ B. 11,1 T. VAKIFLAR B. 1,4 5 T.EMLAK B. 5,9 OYAKBANK 8,6 OYAKBANK 8,9 T. VAKIFLAR B. 8,8 T. VAKIFLAR B. 9,4 AKBANK 1,1 6 AKBANK 5,7 HSBC BANK 7,6 HSBC BANK 6,5 FİNANSBANK 6,5 YAPI VE KREDİ B. 7,3 T. HALK B. 8,2 7 YAPI VE KR. B. 5,4 AKBANK 6,8 YAPI VE KREDİ B. 5,9 YAPI VE KREDİ B. 6, FİNANSBANK 6,8 YAP. VE KR. B. 7,4 8 FİNANSBANK 4,6 T.GARANTİ B. 5,9 T. GARANTİ B. 5,7 T. HALK BANKASI 5,7 T. HALK BANKASI 6,1 FİNANSBANK 7, 9 T.C.ZİRAAT B. 3,9 FİNANSBANK 3,6 FİNANSBANK 4,9 HSBC BANK 4,9 DENİZBANK 4,2 DENİZBANK 3,9 1 PAMUKBANK 3,8 PAMUKBANK 3,4 T. HALK BANKASI 4,5 OYAKBANK 4,5 ING BANK 4, ING BANK 3, Housing Loans The performance of economic growth, the increase of income per person, high need of qualified houses, house supply formed by mass housing projects, related regulations and real interests tending to decrease have made the housing loan market one of the most rapidly growing banking activities in recent years. Housing loans which grew by 15.4% in 29 have grown by 35.4% in 21. The lack of qualified houses is high, so it is expected that this market will keep growing as long as the positive economic climate continues. Table 2.5-1: Housing Loans Concentration Indicators Housing Loans First 5 Banks 59,9 11,3 63,9 59,7 56,6 56,5 55,8 54,1 54,3 First 1 Banks 88,2 27,4 91,9 85,8 86,5 85,2 84,5 84,8 86,3 HHI 991, 1.163,2 1.48, 92, 868, 844, 849, 833,2 853,9 Distribution by Scale Large Scale 44,7 57, 6,6 64,4 66,9 66,1 66,8 66,9 69,3 Medium Scale 5,1 4,3 36,6 28,7 25,9 26,6 27,5 28,8 26,8 Small Scale 5,2 2,7 2,8 6,9 7,2 7,3 5,7 4,3 4, Total 1, 1, 1, 1, 1, 1, 1, 1, 1, Functional Distribution Deposit Banks 1, 1, 1, 95,2 94,4 95, 95,5 94,8 94,5 DIB,,,,,,2,3,2,1 Participation Banks,,, 4,8 5,6 4,8 4,2 5, 5,5 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, When the structure of housing loans market is analyzed for 21, it is observed that the HHI criteria is points indicating no concentration and the share of first 5 banks is 54.3%. When it is analyzed functionally, the deposit banks are leading in this market with 94.5% and the participation banks tend to grow. On the other hand, large and medium scale banks are playing a major role in this market and the leap shown by small banks is slowed down within the last three years. BRSA 33 Structural Developments in Banking December 21

53 Box 9: Global Outlook of Housing Loans The negative effects of global crisis have caused the loosening of the growth of housing loans globally. The USA takes the first rank in housing loans and they are followed by England and Germany. Average housing loans volume of EU-27 was around Euro 188 billion in 29. Despite the strong growth within the last years, the housing loans of Turkey are around Euro 28 billion as of 29. The housing loans had a very low share within the Turkish banking sector, but after the strong growth, they have reached 11% of total loans as of 29. This share is below 27% for EU-27 average. Retail Loans to Purchase House ( Billion) 29 Share Countries within GDP USA ,7 England ,7 Germany ,6 France ,9 Spain ,8 Australia n.a. n.a ,3 Netherlands ,7 Canada ,1 Italy ,1 Denmark ,2 Switzerland n.a. n.a. n.a. n.a. n.a ,1 Sweden ,9 S. Africa n.a. n.a. n.a. n.a. n.a ,1 S. Korea n.a. n.a. n.a. n.a. n.a ,6 Portugal ,7 Ireland ,7 Belgium ,2 Austria ,6 Finland ,6 Greece ,7 Poland ,8 Turkey ,9 Russia n.a. n.a. n.a. n.a. n.a ,1 Czech Rep ,7 Luxembourg ,8 Hungary ,8 S. Cyprus n.a. n.a ,5 Slovakia ,8 Latvia ,5 Estonia ,3 Lithuania ,2 Romania n.a ,4 Bulgaria n.a ,8 Slovenia ,9 Malta ,1 Argentina ,9 S. Arabia ,6 EU ,7 PB ,4 Source: IMF, OECD and statistics of banking authorities of the countries. BRSA 34 Structural Developments in Banking December 21

54 Chart 2.5-1:Housing Loans Concentration and Functional Distribution ,,, 1, 1, 1, 4,8 5,6 4,8 4,2 5, 5,5,,,2,3,2,1 95,2 94,4 95, 95,5 94,8 94, Large Scale Small Scale Medium Scale HHI (Right Axis) Deposit Banks Develop. & Inv. Banks Participation Banks As of 21, the first rank in the ranking of first 1 banks belongs to a private bank. The shares of first four banks are above 1% and these shares are very close to each other. State banks have also an important market share by 26.6% in total. Due to the strong indemnification structure and low follow-up ratios, it is possible that this kind of credits keep being an attractive operation field for banks. Table 2.5-2: Ranking of First 1 Banks in Housing Loans Volume 22 Pay 24 Pay 26 Pay 27 Pay 28 Pay 21 Pay 1 HSBC B. 17,6 HSBC BANK 17,7 AKBANK 12,8 T. GARANTİ B. 12,9 T. GARANTİ B T. GARANTİ B. 12,7 2 T.GARANTİ B. 14,2 AKBANK 13,3 T.C.ZİRAAT B. 12,7 AKBANK 12,4 T.C. ZİRAAT B T.C. ZİRAAT B. 11,9 3 T.VAKIFLAR B. 13,8 T.VAKIFLAR B. 11,7 T.İŞ BANKASI 11,9 T.C. ZİRAAT B. 1,8 AKBANK 11.7 AKBANK 1,2 4 T. İŞ BANKASI 7,4 T.İŞ BANKASI 1,9 T.GARANTİ B. 1,5 T. İŞ BANKASI 1,6 FİNANSBANK 9.8 T. İŞ BANKASI 1,2 5 ING BANK 6,8 T.C.ZİRAAT B. 1,4 FİNANSBANK 8,7 FİNANSBANK 9,9 T. İŞ BANKASI 8.9 FİNANS B. 9,1 6 YAPI VE KR. B. 6,6 OYAKBANK 8,5 T.VAKIFLAR B. 8,4 T. VAKIFLAR B. 7,4 YAPI VE KREDİ B. 8. T.VAKIFLAR B. 8,8 7 PAMUKBANK 6,1 T.GARANTİ B. 8,1 YAPI VE KREDİ B. 6,6 YAPI VE KREDİ B. 6,9 T.VAKIFLAR B. 7.8 YAPI VE KREDİ B 8,4 8 FİNANSBANK 5,9 YAPI VE KREDİ B. 5, HSBC BANK 5,8 T. HALK BANKASI 5,2 T. HALK BANKASI 5. T. HALK B. 5,9 9 BİRLEŞ. FON B. 5,8 FİNANSBANK 4,3 OYAKBANK 5,2 HSBC BANK 4,9 ING BANK 3.9 DENİZ BANK 4,1 1 KOÇBANK 3,9 MILLENNIUM B. 2,1 T.HALK B. 3,9 OYAKBANK 4,3 HSBC BANK 3.9 ING BANK 3, Credit Card Receivables Credit cards market which is an important component of retail loans is a market with moderate concentration (HHI>1. points) on the contrary of other credit items. Table 2.6-1: Credit Card Amounts Concentration Indicators Credit Card First 5 Banks 63, 66,6 71,5 75, 75,6 77,6 8,7 78,5 77,3 72,5 7,8 First 1 Banks 83,6 87,6 9,2 91,8 93,7 93,6 94,8 93,2 92,6 92,5 92,7 HHI 1.182, ,2 1.39, 1.421, 1.388, 1.447, 1.576, 1.447, 1.355, 1.325, ,1 Distribution by Scale Large Scaled 69,8 79,3 75,1 76,8 76,4 77, 78,6 74,1 72,7 72,5 7,8 Medium Scaled 16,6 14, 21,8 21,2 22,2 2, 19,4 24,1 24,2 25,2 27,3 Small Scaled 13,6 6,7 3,1 2, 1,4 3, 2, 1,9 3,1 2,3 1,9 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, Functional Distribution Deposit Banks 1, 1, 1, 1, 1, 98,8 98,6 98,4 98,1 98,1 98,1 Participation Banks,,,,, 1,2 1,4 1,6 1,9 1,9 1,9 Total BRSA 35 Structural Developments in Banking December 21

55 In this market, product cost and credit risk are higher than other credit types, accordingly it is considered that competitive pricing is harder. Consequently consumers may receive service in exchange for higher costs in this market. As of 21, the concentration level is tending to decrease for HHI, first 5 banks and first 1 banks, when compared to 29. Within this frame, appearance of a more competitive structure may be advantageous for consumers. Chart 2.6-1: Credit Cards Amount Concentration and Functional Distribution ,,,,, 1,2 1,4 1,6 1,9 1,9 1, , 1, 1, 1, 1, 98,8 98,6 98,4 98,1 98,1 98, Large Scale Medium Scale Deposit Banks Participation Banks Small Scale HHI (Right Axis) When analyzed by scale groups, it is seen that within recent years, the market share of large scale banks is decreasing in favor of medium scale banks. The market share of small scale banks has also decreased within the last two years. When analyzed functionally, the share of participation banks tends to increase within recent years, but the dominance of deposit banks in this market is observed explicitly. Table 2.6-2: Ranking of First 1 Banks in Credit Cards Amount 2 Pay 22 Pay 24 Pay 27 Pay 28 Pay 21 Pay 1 YAPI VE KR. B. 27,3 YAPI VE KR. B. 26,3 YAPI VE KR. B 22,4 YAPI VE KR. B 23,6 YAPI VE KR. B 21. YAPI VE KR. B 18,7 2 T.İŞ BANKASI 1,8 T.GARANTİ B. 19,5 T.GARANTİ B. 2,4 T. GARANTİ B. 2,1 T. GARANTİ B T. GARANTİ B. 17,5 3 T.GARANTİ B. 8,8 T.İŞ BANKASI 1,9 AKBANK 13,7 AKBANK 13,8 AKBANK 13.9 AKBANK 15,1 4 AKBANK 8,1 AKBANK 7,7 T. İŞ BANKASI 11,8 T. İŞ BANKASI 12, T. İŞ BANKASI 12.8 FİNANSBANK 14,1 5 T.VAKIFLAR B. 8, HSBC BANK 7,1 HSBC BANK 7,2 FİNANSBANK 9, FİNANSBANK 9.9 T. İŞ BANKASI 12,1 6 PAMUKBANK 6,4 T.VAKIFLAR B. 5,4 FİNANSBANK 6,7 HSBC BANK 6,9 HSBC BANK 6.7 HSBC BANK 5,4 7 T.C.ZİRAAT B. 5,5 T.C.ZİRAAT B. 4,3 T. VAKIFLAR B. 4,3 FORTİS BANK 2,2 CITIBANK 2.5 T. VAKIFLAR B. 3,2 8 DEMİRBANK 3,5 PAMUKBANK 3,6 FORTİS BANK 3,1 T. VAKIFLAR B. 2, T. VAKIFLAR B. 2.2 T.C. ZİRAAT B. 2,7 9 CITIBANK 3,2 FİNANSBANK 2,9 DENİZBANK 2,1 CITIBANK 1,9 T.C. ZİRAAT B. 2. DENİZBANK 2,3 1 ŞEKERBANK 1,9 CITIBANK 2,5 T.C. ZİRAAT B. 2, DENİZBANK 1,7 FORTİS BANK 1.9 CITIBANK 1,6 Differently from other credit markets, the dominance of private banks is more obvious in credit cards market. Among the first 1 banks, there are only two state banks and other banks are all private. Expansive branch network and historical experience in retail loans are effective on credit card customer and accordingly on credit volume. BRSA 36 Structural Developments in Banking December 21

56 Box 1: Global Outlook of Payment Instruments Transaction Volume The Red Book prepared annually by BIS s Committee on Payment and Settlements Systems (CPSS) includes information on payment systems of member countries. In this book there are also the transaction volumes of these payment instruments. According to the report, total transaction volume of payment instruments has reached USD trillion as of 29. A real decrease by 9.4% has been realized in transaction volume in the mentioned year. In 29, among payment instruments, the highest share belongs to credit transfers by 75%. In the payment instruments transaction market, the share of check transfers is 1%, the share of electronic banking is 5%, the share of credit card transaction volume is 1.5%. When the transaction volume of payment instruments is analyzed by countries, it is seen that the highest share belongs to England by 21%, followed by Germany by 17% and USA and France by 15% each. Pay. Inst. Tot. Trans. Vol. Tot. Trans. Vol. Annual Real Inc., % Credit Transfers $ Billion England ,9 1,2 11,7-23,9-18, Germany ,8,9 95,1-1,1-8, People s Rep. of China ,1 -,2 9, USA France ,7 23,1 1,5 1,3 3, India ,1 54,5 62,1 9,2 36, S. Arabia , ,4-2,7 6, Mexico ,3-3,5 24,1 73, S. Korea ,5 34,4 14,5 1,8 5, Brazil ,7 17,5 15,7 19,2 2, Italy ,6 5,6 1,1-1,1-6, Russia ,9 24,1-3,4-32, Australia ,3 8,2 12,9,6-5, Canada ,9 6,4-1,5-1, Netherlands ,1 7,9 1,6-3,4-7, Belgium ,2-2,7 16 3,7 1, Switzerland ,7 6, , Sweden ,5 11 5, Singapore ,1 13,7 26,3-7, Turkey ,8 19,9 18 4,4 Japan ,8 1,8 5,2-3, S. Africa 1.6 Total ,1 1,3 26,6-7 -9, The share of Turkey in the credit cards transaction volume made with cards issued in the country is 1.6% as of 29. In the credit card transaction volume, the share of USA is 43.4%. Check payments are frequently used in the USA and People s Republic of China, the shares of these countries as of 29 are respectively 39.% and 37.5%. The shares of Japan and Italy having data in e-banking which has become an important payment instrument recently are considerable. Credit Card Trans. Volume Check Payments E-Banking $ Billion USA People s Rep. of China England France Canada S. Korea Australia Germany India Brazil Italy S. Arabia Netherlands Turkey Sweden Belgium Switzerland Mexico S. Africa Russia Singapore Japan Total Source, BIS CPSS BRSA 37 Structural Developments in Banking December 21

57 2.7. Deposit 5 Total deposit market which owns a market structure that has no concentration excluding 2-22 periods and 28 according to HHI criteria, displayed a moderate concentration as of 21 by 1.42 points. As so many banks got out of the system and the share of small-scale banks receive from the related market decreased relatively, the market continues to have a moderate concentration. The fact that shares of the first 5 and 1 banks continued to increase in annual basis in 21 confirms the moderate concentration in the related market. Table 2.7-1: Deposit Concentration Indicators Deposit First 5 Banks 49,7 56,7 6,8 61,4 62,9 63,9 63,2 62,2 62,3 62,6 63,1 First 1 Banks 7,6 82,8 84,5 85,3 86,8 86,9 87,3 86,3 86,1 86,1 86,9 HHI 72,7 878, 2 969, , 1.9, , , 1 1.3, 3 994, , , Distribution by Scale Large Scale 78,6 78,6 78,6 78,4 76,6 76,9 79,5 78,3 78,6 78,5 78,8 Medium Scale 14,6 14,6 14,6 15, 16,3 15,7 13,8 15,7 15,2 16,6 16,5 Small Scale 6,8 6,8 6,8 6,6 7,1 7,4 6,7 6, 6,3 4,9 4,7 1, Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, Functional Distribution Deposit Banks 96,7 96,7 96,7 96,8 96,6 96,5 96,4 95,8 95,8 94,8 94,6 Development and Investment,,,,,,,,,,, Participation Banks 3,3 3,3 3,3 3,2 3,4 3,5 3,6 4,2 4,2 5,2 5,4 1, Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, By functional distribution, it is observed that participation banks continued to increase their market share in deposit item in which deposit banks are predominant and reached 5.4% in 21. On the other hand, 78.8% of total deposit is in large scale banks, while 16.5% in mediumscale banks and 4.7% in small-scale banks. Chart 2.7-1: Deposit Concentration and Functional Distribution Large Scale Small Scale Medium Scale 21 HHI (Right Axis) ,3 3,3 3,3 3,2 98 3,4 3,5 3,6 4,2 4,2 5,2 5, ,7 96,7 96,7 96,896,6 96,5 96,495,8 95,8 94,894, Deposit Banks Participation Banks 21 It is observed that state banks have an important place in the first 1 banks in deposit. One bank with state capital which was in the first ranking in 21 collected 19.9% of total deposit. 5 Funds collected by participation banks (current and participation funds) are included in the deposit figures. BRSA 38 Structural Developments in Banking December 21

58 One participation bank became the tenth in ranking among banks which collected the most deposit (participation fund) among participation banks in the sector as of 21. Table 2.7-2: The First 1 Banks in Deposit (% 2 Share 22 Shar 24 Shar 26 Shar 28 Shar 21 Shar )) 1 T.C.ZİRAAT B. 18,5 T.C.ZİRAAT e 19,6 T.C.ZİRAAT B. e 22,8 T.C.ZİRAAT B. e 19,1 T.C.ZİRAAT B. e 18, T.C.ZİRAAT B. e 19,9 2 T.HALK B. B. 1,6 T.İŞ 11,6 T.İŞ BANKASI 12, T.İŞ BANKASI 14,2 T.İŞ BANKASI 13,6 T.İŞ BANKASI 13,8 3 T.İŞ BANKASI BANKASI 7,6 AKBANK 11,4 T.HALK B. 9,9 AKBANK 1,5 T.GARANTİ B. 11,2 T.GARANTİ B. 11,3 4 AKBANK 6,6 YAPI VE KR. 9,1 AKBANK 9,6 YAPI VE KREDİ B. 9,9 AKBANK 1,6 AKBANK 9,7 5 YP. VE KR.B. B. 6,5 T.GARANTİ 9,1 T.GARANTİ B. 8,6 T.GARANTİ B. 9,4 YAPI VE KREDİ B. 9, YAP. KREDİ B 8,4 6 T.VAKIFLAR B. B. 5,3 T.HALK B. 8,1 T.VAKIFLAR B. 8,5 T.HALK B. 8,5 T. HALK B. 8,5 T. HALK B. 8,3 7 PAMUKBANK 4,9 T.VAKIFLAR 6,6 YAPI VE KREDİ B. 7,1 T.VAKIFLAR B. 7,8 T. VAKIFLAR B. 7,8 T. VAKIF. B. 7,4 8 T.GARANTİ B. B. 4,2 PAMUKBAN 3,7 KOÇBANK 3,6 FİNANSBANK 3, FİNANSBANK 3,3 FİNANSBANK 3,8 9 T.EMLAK B. K 4,2 KOÇBANK 3,1 FİNANSBANK 2,5 OYAKBANK 2,5 ING BANK 2,2 DENİZBANK 2,5 1 DEMİRBANK 2,2 FİNANSBAN K 2,1 OYAKBANK 2,3 DENİZBANK 2,3 DENİZBANK 2,1 ASYA KAT. B. 1,8 Funds collected by participation banks are a sub-component of deposit market and continue its growth trend. These funds reached a size by about TL 34 billion as of 21. Table 2.7-3: Size of Participation Fund Market Participation Fund (TL Billion) Total Participation Fund 8,4 11,2 14,8 19, 26,7 33,7 Private Current Accounts 2, 2,4 2,8 3,4 5, 6,5 Participation Accounts 6,4 8,7 12, 15,6 21,7 27,2 Relative shares of four institutions operating in the sector are close to each other. As of 21, share of the first institution was 33% while the share of the fourth institution was 2.3%. Table 2.7-4: Participation Fund ) 25 Share 26 Share 27 Share 28 Share 29 Share 21 Share 1 T.FİNANS 31,4 FİNANS 31,2 ASYA 31,4 ASYA 3,3 ASYA 34, ASYA 33, 2 ASYA 25,4 ASYA 28,4 T.FİNANS 28,9 T.FİNANS 27,7 T.FİNANS 25,7 T.FİNANS 24,8 3 KUVEYT TÜRK 22,7 KUVEYT TÜRK 21,1 ALBARAKA 2,1 KUVEYT TÜRK 21,2 ALBARAKA 2,4 KUV. TÜRK 21,8 4 ALBARAKA 2,5 ALBARAKA 19,2 KUVEYT TÜRK 19,6 ALBARAKA 2,8 KUVEYT TÜRK 2, ALBARAKA 2,3 BRSA 39 Structural Developments in Banking December 21

59 Box 11: Global Outlook of Deposit The deposit collected by banking sectors in in countries which are EU and G2 members are displayed below. According to the table, the highest deposit size in the said data set was in the USA, followed by People s Republic of China, England, Japan and Germany. When the development of deposit is compared upon 22=1 based index, it is seen that Latvia realized the highest deposit growth in 29, followed by Russia, Brazil Bulgaria, Estonia and Turkey. Billion Ratio to 29 GDP 24= USA , People s Rep. of China , England , Japan , Germany , Spain , France , Canada , Italy , Netherlands , Switzerland , Australia , South Korea , Belgium , Brazil , Rp.of S. Afr , Austria , Russia , Ireland , India , Greece , Luxemburg , Turkey , Portugal , Sweden , Denmark n.a , Poland , Indonesia , Argentina , Mexico , Finland , Czech Rep , Saudi Arabia , Cyprus (Greek P.) , Hungary , Romania n.a. n.a , Slovenia , Bulgaria n.a. n.a , Slovakia n.a. n.a , Malta , Latvia , Lithuania , Estonia n.a , EU , PB , Source: Data of IMF, OECD and country banking authorities. BRSA 4 Structural Developments in Banking December 21

60 2.8. Savings Deposit 6 Unlike total deposit item, the saving deposit displaying constantly a moderate concentrated market apperance in the period examined in respect of HHI criteria continued this trend also in 21. In periods, an increasing trend was observed in shares of the first 5 and 1 banks. Table 2.8-1: Savings Deposit Concentration Indicators Savings Deposit First 5 Banks 69,2 68,8 69, 66,1 64,2 63,3 62,2 65, 65,4 First 1 Banks 84,1 84,5 84,6 83,7 85,2 84, 83,2 85,1 85,6 HHI ,5 1.65,8 Distribution by Scale Large Scale 76, 76,8 77,1 75,5 76,4 75, 74,2 76,7 77,1 Medium Scale 13,1 13,6 12,6 13, 11,7 13,7 16,8 18,5 18,1 Small Scale 1,9 9,6 1,3 11,5 11,8 11,3 9, 4,8 4,8 Functional Distribution Deposit Banks 91,5 91,6 91,2 91,3 9,9 9,3 9,6 93,9 93,5 Participation Banks 8,5 8,4 8,8 8,7 9,1 9,7 9,4 6,1 6,5 In respect of scale groups, large and medium scale banks continue to have the biggest share from savings deposit. Branch web, service diversity and broad customer base are advantageous in collecting deposit. In addition, it is evaluated that capital structure and bank scale, when all variables are omitted, are taken into consideration by depositors. Chart 2.8-1: Savings Deposit Concentration and Functional Distribution ,5 8,4 6,1 8,8 8,7 6,5 9,1 9,7 9,4 91,5 91,6 93,9 91,2 91,3 93,5 9,9 9,3 9, Large Scale Medium Scale Small Scale HHI (Right Axis) Deposit Banks Participation Banks 6 In this section, data after 22 is mentioned due to the changes in reporting forms. BRSA 41 Structural Developments in Banking December 21

61 Box 12: Global Outlook of Participation Funds According to Islamic Development Bank data, global deposit collected in countries in which participation banking is active reached USD billion as of 21. The said deposit was collected predominantly by institutions operating in Middle East and Asia region. When it is analyzed by country basis, it is observed that United Arab Emirates, Iran and Saudi Arabia have relatively high shares. Turkey has 5% share in the related market. Table: Global Deposit Collected by Participation Banks (USD Billion) Region Country Europe United Kingdom,,,8,17,29,24,31 Albania,1,2,3,4,5,3,3 Bosnia Herzegovina,1,4,3,4,6,8 Region Total,3,7,13,24,39,35,35 Middle East Saudi Arabia 15,15 19,12 26,11 25,16 32,29 4,58 42,73 United Arab Emirates 7,55 1,36 15,73 22,99 33,49 4,7 42,58 Kuwait 8,4 9,38 12,8 14,51 24,31 29,51 32,27 Qatar 2,27 2,81 3,3 4,23 6,68 17,93 13,65 Bahrain 1,98 2,27 4,22 6,31 8,98 11,41 8,22 Jordan 1,7 1,74 1,96 2,23 2,44 2,81 3,65 Yemen,51,66 14,32 1,21 1,57 1,27 1,51 Palestine,8,11,12,14,18,21,23 Syria,1,17,19 Iraq,1,4,5,13, Lebanon,2,3,3,3, Region Total 37,64 46,46 77,87 76,85 11,1 144,11 145,4 Asia Iran 64,84 83,4 89,45 138,66 179,3 17,75 53,66 Malaysia 4,97 9,32 12,73 2,5 28,38 39,38 49,9 Pakistan 3,8 5,12 5,54 8,1 7,88 2,76 26,8 Turkey 2,16 2,98 6,24 7,93 11,57 12,62 17,96 Bangladesh 1,54 1,44 1,87 2,14 2,97 3,36 4,24 Indonesia,61 1,14 1,35 1,71 2,19 2,37 3,67 Azerbaijan,2,2,2,3 Region Total 77,92 13,5 117,17 178,94 232,29 168,25 155,51 Africa Sudan 1,15 1,64,18 4,68 5,1 36,85 55,1 Egypt 2,52 3,5 3,48 4,21 5,14 6,51 South Africa,11,16,16,18,21,17,29 Tunisia,13,27,33,37, Algeria,2 Gambia,1,1,1 5,58 Region Total 3,94 4,85 364,57 9,33 1,78 42,97 61,81 Total 119,54 154,42 559,74 265,37 353,56 355,68 362,7 Regional Distribution Asia 65,2 66,7 2,9 67,4 65,7 47,3 42,9 Middle East 31,5 3,1 13,9 29, 31,1 4,5 4, Africa 3,3 3,1 65,1 3,5 3, 12,1 17, Europe,,,,1,1,1,1 Total 1, 1, 1, 1, 1, 1, 1, Iran 54,2 53,8 16, 52,3 5,7 3,3 14,8 Saudi Arabia 12,7 12,4 4,7 9,5 9,1 11,4 11,8 Country Shares United Arab Emirates 6,3 6,7 2,8 8,7 9,5 11,3 11,7 Kuwait 7, 6,1 2,2 5,5 6,9 8,3 8,9 Turkey 1,8 1,9 1,1 3, 3,3 3,5 5, Egypt 2,1 2,,6 1,6 1,5 Source: Islamic Banks and Financial Institutions Information, Islamic Development Bank (IDB) BRSA 42 Structural Developments in Banking December 21

62 2.9. Non-Deposit Liabilities In 2-21 periods, in non-deposit liabilities 7, the market structure in which no concentration is detected maintains its status. As a matter of fact, HHI in annual basis, shares of the first 5 and 1 banks decreased slightly in 21. Table 2.9-1: Non-Deposit Liabilities Concentration Indicators Non-Deposit Liabilities First 5 Banks 42, 5, 46,9 51,1 47,5 58,9 6,6 59,2 59,1 59,6 55,4 First 1 Banks 6,7 72,2 73, 74,9 69,9 78,8 79,7 79, 8,9 83,3 76,9 HHI 514, 657,2 638,6 691, 627,5 948,6 899,9 873,3 871,4 912, 822,8 Distribution by Scale Large Scale 46, 6,8 57,7 61,7 59,1 67,8 69,6 68, 69,3 73,4 68,9 Medium Scale 31,3 22,5 28,4 24,4 2,7 19,1 18,4 19,1 19,1 15,3 17,9 Small Scale 22,7 16,7 13,9 13,8 2,2 13, 12,1 12,9 11,5 11,2 13,2 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, Functional Distribution Deposit Banks 9,3 82,9 84,3 87,5 83,4 92,8 93,3 91,8 92, 91,9 91,5 Development and Investment 9,2 13,4 12,8 1,1 8,2 6,6 5,9 6,7 6,4 6,9 6,6 Participation Banks,5 3,7 2,9 2,4 8,5,6,8 1,5 1,6 1,2 1,9 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, In the period mentioned, share of large-scale banks decreased, while shares of medium and small-scale banks increased. Besides, weight of deposit banks in non-deposit liabilities continues; the said function group is followed by development and investment banks. Chart 2.9-1: Non-Deposit Liabilities Concentration and Functional Distribution ,5 3,7 2,9,6,8 2,4 1,5 1,6 1,2 1,9 8,5 6,6 5,9 9,2 6,7 6,4 6,9 6,6 1,1 13,4 12,8 8,2 92,893,3 9,3 91,892, 91,9 91,5 82,9 84,387,5 83,4 Large Scale Medium Scale Small Scale HHI (Right Axis) Deposit Banks Develop. & Inv. Banks In recent years, syndication loans market reflects a structure in which a moderate concentration is observed generally. When it is considered in annual basis, 21 data designates a sensible decrease in the concentration in the shares of the first 5 and 1 banks. Similarly, HHI criteria decreased by about 41.4 points when compared to the previous year and realized as 1.214,2. 7 In this volume, non-deposit liabilities are equal to = Total liabilities -deposit-total own-funds. For participation banks, funds collected are taken into consideration instead of deposit in the said equality. BRSA 43 Structural Developments in Banking December 21

63 Table 2.9-2: Syndication Loans Concentration Indicators Syndication Loans First 5 Banks 9,1 81,8 76,7 77,9 74,5 71,3 72,4 85,9 74,2 First 1 Banks 1, 1, 97,7 97,1 93,6 9,3 9,6 1, 93,8 HHI 2.41, 1.866, 1.395, 1.384, 1.288, 1.267, , , ,2 Distribution as to scale Large Scale 66,9 63,5 69,4 73,3 74,5 71,3 72,4 85,9 84, Medium Scale 33,1 36,5 27, 19,9 18,8 16,3 14,5 5, 11,8 Small Scale,, 3,6 6,9 6,7 12,5 13,1 9,2 4,1 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, Functional Distribution Deposit Banks 94,2 94,5 96,5 96,1 95,5 91,1 88,1 92,6 93, Development and Investment Banks 5,8 5,5 3,5 3,9 4,5 6,2 7,9 7,4 3,6 Participation Banks,,,,, 2,6 4,1, 3,5 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, The weight of large scale banks continues in syndication loans. But, there was a clear decrease in the share of small scale banks in 21 while there was equally an increase experienced in the share of medium scale banks. A deposit bank weighted structure in the market is proceeding. The weightof private deposit banks in syndication loans for the first 1 banks has continued also in 21. Table 2.9-3: First 1 Banks in Syndication Loans 22 Share 24 Share 26 Share 28 Share 21 1 T. GARANTİ B. 32, T. GARANTİ B. 21,2 AKBANK 21,1 AKBANK 24,2 AKBANK 17,9 2 AKBANK 2,8 AKBANK 18,4 T.VAKIFLAR B. 18,6 T.İŞ BANKASI 15,3 Y. VE KREDİ B. 15,7 3 KOÇBANK 17,6 T.İŞ BANKASI 14,9 T.İŞ BANKASI 12, T. GARANTİ B. 12,9 T. İŞ BANKASI 14,9 4 T.İŞ BANKASI 14, T. VAKIFLAR B. 14,9 T. GARANTİ B. 12, T.VAKIFLAR B. 11, T. GARANTİ B. 13,9 5 TÜRK EXIMBANK 5,8 FİNANSBANK 7,3 YAPI VE KREDİ B. 1,8 YAPI VE KREDİ B. 9, T. VAKIFLAR B. 11,8 6 FİNANSBANK 5,1 FORTİS BANK 7, FİNANSBANK 5,6 FİNANSBANK 6,5 FİNANSBANK 5,6 7 TÜRK EKONOMİ B. 4,6 DENİZBANK 5,7 TÜRK EXIMBANK 4,2 TÜRK EXIMBANK 4,7 DENİZBANK 4,5 8 T.HALK BANKASI,2 T. EXIMBANK 3,5 DENİZBANK 4, TEKSTİL B. 2,5 T. HALK B. 4,2 9 T. EKONOMİ B. 3,5 ING BANK 2,8 T. EKONOMİ B. 2,3 T. İHR. KRD B. 2,8 1 TEKSTİL B. 1,3 TEKSTİL B. 2,4 ŞEKERBANK 2,2 T. EKONOMİ B. 2,5 On the other hand there is a high concentration since securitization activities are made by a limited number of banks in the sector. The first 5 banks have realized 91.7% of total securitization loans received in % of securitization loans were realized by large scale banks. Table 2.9-4: Securitization Concentration Indicators Securitization First 5 Banks 1, 99,2 94,6 92,9 97,1 89,9 91,2 89,8 91,7 First 1 Banks 1, 1, 1, 1, 1, 1, 1, 1, 1, HHI 4.32, 2.465, 2.388, 1.959, 2.218, 1.883,7 1.93, 1.862,7 2.15, Distribution as to scale Large Scale 91,5 91,6 9,4 83,5 89, 89,9 91,2 89,8 95,5 Medium Scale 8,5 8,4 9,6 16,5 11, 1,1 8,8 1,2 4,5 Small Scale,,,,,,,,, Total 1, 1, 1, 1, 1, 1, 1, 1, 1, Functional Distribution Deposit Banks 1, 1, 1, 1, 1, 1, 1, 1, 1, Development and Investment,,,,,,,,, Participation Banks,,,,,,,,, Total 1, 1, 1, 1, 1, 1, 1, 1, 1, Share BRSA 44 Structural Developments in Banking December 21

64 Box 13: Global Outlook of Syndication Loans Syndication loans are used mostly in the USA with 34.9% in global level as to BIS in 21. Other countries drawing attention in respect of credit volume are Great Britain, France, Spain, Germany, the Netherlands, Canada, Italy and Japan. Table of Syndication Loans as to Country of Origin of Customer is below. Total Developed Countries USD Billion USD Great Britain France Spain Germany Australia Canada Netherlands Italy Japan Switzerland Norway Turkey Denmark Luxembourg New Zeeland Belgium Finland Portugal Austria Greece Ireland Slovenia Iceland Off-shore Centers Hong Kong Singapore Other Emerging Countries Africa and Middle East United Arab Emirates Saudi Arabia South Africa Egypt Other Asia and Pacific India China South Korea Malaysia Indonesia Other Europe Russia Turkey Ukraine Other Lat. Ame. and Caribbean Brazil Mexico Other International Institutions Distribution USD 53, ,9 52,3 47,7 4,6 37,7 38, ,9 Great Britain 8,5 7,3 8,1 8,8 9,2 9,2 9,2 8,7 8,4 6,5 7,2 Spain 1,5 1,9 1,8 1,8 2,9 4,2 3,7 4,1 5,3 8,1 5,2 France 5 3,7 3,2 4,4 5 6,5 4,9 6 5,2 3,5 6,3 Germany 2,9 3,3 6,4 4 6,5 4,9 6,4 4,6 3,3 7,5 5,1 Russia,3,2,4,7,5 1,8 1,7 2,9 3,9 2,1 1,9 Turkey,7,3,3,2,5,5,9,6 1 1,8 Source: BIS BRSA 45 Structural Developments in Banking December 21

65 It can be observed that the banks predominantly use syndication loans are private deposit banks in 21. Table 2.9-5: First 1 Banks in Securitization Loans Share 21 Share 22 Share Share 28 Share 1 AKBANK 58,9 AKBANK 38, T. GARANTİ B. 27,1 T. GARANTİ B. 28, T. GARANTİ B 3,5 2 T. VAKIFLAR B. 27,4 T. İŞ B. 2,4 AKBANK 27, AKBANK 21, AKBANK 23,3 3 FİNANSBANK 8,5 T. GARANTİ B. 18,4 T.İŞ BANKASI 23,5 T.İŞ BANKASI 2,9 T. İŞ BANKASI. 17,6 4 T.İŞ BANKASI 5,2 FİNANSBANK 9,6 YAPI VE KR. B. 11,5 YAPI VE KR. B. 1,7 T. VAKIFLAR B 1,5 5 T.VAKIFLAR B. 8,2 FİNANSBANK 8,1 T. VAKIFLAR B. 1,6 YAPI VE KR. B. 9,8 6 YAPI VE KREDİ B. 5,4 DENİZBANK 2,9 FİNANSBANK 5,2 FİNANSBANK. 3,8 7 DENİZBANK 3,5 8 HSBC BANK 1, Non Cash Loans and Liabilities The concentration of non-cash loans and liabilities has shown a slight decrease in last couple of years. Development of the first 5 banks, first 1 banks and HHI criteria have proceeded to their trend also in 21. Table 2.1-1: Concentration of Non-Cash Loans and Liabilities Non cash Loans and Liabilities First 5 Banks 42,5 55,1 52,8 52,6 49,9 47,8 5,4 48,5 48,1 46,1 45,6 First 1 Banks 6,7 75,1 74,3 74, 71,8 72,3 73,3 71,1 7,3 7,2 7,4 HHI 513,7 78,8 765,3 766,1 712, 664,7 748,6 681,4 648,2 624,7 68,7 Distribution as to Scale Large Scale 36, 65,5 56,6 56,1 55,1 51,8 53,4 52,5 54,1 56, 56,5 Medium Scale 39,7 22,2 32,7 31, 29,2 26,7 23,9 31,6 28,1 27,8 26,8 Small Scale 24,3 12,3 1,7 12,8 15,7 21,4 22,6 15,8 17,8 16,3 16,7 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, Functional Distribution Deposit Banks 96,3 95,5 94,9 94, 91,7 89,4 86,5 83,7 8,5 8,5 81,4 Development and Investment 2,9 3,7 3,4 3, 3, 2,4 2,3 3,1 3,7 4,8 5,5 Participation Banks,8,8 1,7 3, 5,3 8,1 11,2 13,2 15,8 14,7 13,1 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, Large scale and deposit banks are dominant in non cash loans and liabilities. In addition to that, medium scale banks and participation banks have also significant role. Chart 2.1-1: Non Cash Loans and Liabilities Concentration and Functional Distribution ,8 1,7 98 2,9 3, 3,7 3,4 5,3 95 3, 8,1 11,2 93 3, 13,2 15,8 14,7 13,1 9,8 2,4 88 2, ,3 95,5 94,9 94, 3, ,7 89,4 3,7 4,8 5,5 8 86,5 83,7 78 8,5 8,5 81, Large Scale Small Scale Medium Scale HHI (Right Axis) Deposit Banks Develop. & Inv. Banks Participation Banks BRSA 46 Structural Developments in Banking December 21

66 Table 2.1-2: First 1 Banks in Non Cash Loans and Liabilities 2 Pay 22 Pay 24 Pay 26 Pay 28 Pay 21 Pay 1 YP. VE KR.B. 12,6 YP. VE KR. B. 17,2 YP. VE KR. B. 16, YP. VE KR. B. 17,7 YP. VE KR. B. 13, YP. VE KR. B. 11,9 2 T.GARANTİ B 9, T.İŞ BANKASI 11,4 T.GARANTİ B. 11,4 T.GARANTİ B. 11, T. GARANTİ B. 11,3 T.GARANTİ B. 9,6 3 T.İŞ BANKASI 7,7 T.GARANTİ B. 1,4 T.İŞ BANKASI 9,9 T.İŞ BANKASI 8,4 T. İŞ BANKASI 9,3 T.İŞ BANKASI 9,3 4 T.VAKIFLAR B. 6,8 T.VAKIFLAR B. 7,6 T.VAKIFLAR B. 6,4 ASYA KAT. 7,2 ASYA KAT. 8,1 T. HALK B. 7,8 5 PAMUKBANK 6,4 KOÇBANK 6,2 FİNANS B. 6,2 FİNANS B. 6,1 T.VAKIFLAR B. 6,4 T. VAKIFLAR B. 6,9 6 DEMİRBANK 4,5 PAMUKBANK 5,9 AKBANK 5, T.VAKIFLAR B. 5,6 T. HALK B. 5,4 AKBANK 6,3 7 OSMANLI B. 4,5 FORTIS B. 4,2 KOÇBANK 4,9 DENİZBANK 4,7 AKBANK 5,3 ASYA KAT. 5,6 8 FİNANS B. 3,5 FİNANS B. 4, FORTIS B. 4,2 AKBANK 4,5 FİNANS B. 4,4 T.C. ZİRAAT B. 4,6 9 KOÇBANK 3, AKBANK 3,9 DENİZBANK 4,1 FORTIS B. 4,5 DENİZBANK 3,8 DENİZBANK 4,6 1 EMLAK B. 2,8 T.C.ZİRAAT B. 3,6 T.HALK B. 3,6 T.HALK B. 3,6 T.C. ZİRAAT B. 3,4 FİNANS B. 3,7 When concentration of derivative transactions used for risk protection as a principle (the share of firts 5 banks) is analzyed, an increase is observed as to previous year since 27. HHI increased in annual basis in 21. There is an increase observed in the share of large scale banks and a decrease in the share of medium and small scale banks when the distribution as to scale is observed in 21. Derivative transactions are made by deposit banks predominantly also in 21, in parallel with general trend. Table 2.1-3: Derivative Transactions Concentration Indicators Derivative Financial Instruments First 5 banks 47,4 6,7 63,9 63,3 59,3 55,3 52,5 53,2 55,1 57,6 63,7 First 1 Banks 65,8 84,9 81,9 81,5 79,1 79,4 78,1 76,5 8,4 8,4 84,8 HHI 662,7 942,9 152, 144,1 869,4 81,4 835, 84,2 865,5 845,5 949,9 Distribution as to Scale Large Scale 27, 39,8 42,1 47,5 33,8 36,4 32,6 39,4 45,6 5,1 54,4 Medium Scale 45, 43,6 42,7 39,4 47,1 4,1 5,7 37,7 37,7 37,4 36, Small Scale 28, 16,6 15,3 13,1 19,1 23,5 16,7 22,9 16,7 12,5 9,6 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, Functional Distribution Deposit Banks 97,5 97,9 93,4 94,8 94,7 92,3 95,2 91,4 96,4 95,8 96,7 Development and Investment 2,5 2,1 6,6 5,1 4,6 7,6 4, 7,2 1,7 2,2 1,8 Participation Banks,,,,,7,1,8 1,4 1,9 2, 1,5 Total 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, BRSA 47 Structural Developments in Banking December 21

67 Chart 2.1-2: Derivative Transactions and Functional Distribution Large Scale Medium Scale , 2,5, 2,1,,,7,1,8 1,4 98 6,6 5,1 1,9 2, 4,6 4, 1,7 7,6 2,2 1,8 1,5 95 7, ,5 97, ,4 94,8 94,7 92,3 95,2 96,4 95,8 96, , Small Scale HHI (Right Axis) Deposit Banks Develop. & Inv. Banks Participation Banks It is seen that private capital deposit banks and global capital deposit banks have played leading role in this field when the first 1 banks in derivative transactions is observed for 21. Table 2.1-4: First 1 Banks in Derivative Transactions 2 Share 22 Share 24 Share 26 Share 28 Share 21 Share 1 KOÇBANK 17,6 HSBC BANK 21,4 HSBC BANK 17,4 FİNANSBANK 19,6 T.GARANTİ B. 19, YAPI. VE KR. B 15, 2 T.GARANTİ B. 8,2 AKBANK 15,3 T.GARANTİ B. 12,3 T.GARANTİ B. 1,3 FİNANSBANK 12,1 T. GARANTİ B. 14,1 3 FİNANSBANK 7,5 T.GARANTİ B. 12,6 AKBANK 12, AKBANK 7,9 YAPI VE KREDİ B. 8,8 FİNANSBANK 13,4 4 AKBANK 7,4 T.İŞ BANKASI 8,6 DENİZBANK 8,9 T.İŞ BANKASI 7,4 T.İŞ BANKASI 7,9 AKBANK 1,6 5 YAPI VE KR. B. 6,7 DENİZBANK 6, FİNANSBANK 8,7 CITIBANK 7,3 AKBANK 7,3 T. İŞ BANKASI 1,5 6 PAMUKBANK 5,2 CITIBANK 4,4 CITIBANK 4,8 HSBC BANK 7,2 FORTİS BANK 7, DENİZBANK. 6,7 7 T. DIŞ TİC. B. 3,6 YP VE KR. B. 4,1 YAPI VE KREDİ B. 4,6 DENİZBANK 5,4 CITIBANK 5,3 HSBC BANK 6,4 8 BİRLEŞ. T. KÖR. B. 3,5 FİNANSBANK 3,7 T.İŞ BANKASI 4,4 YAPI VE KREDİ B. 4,8 DENİZBANK 4,5 FORTİS BANK 3,2 TÜRK 9 OSMANLI B. 3,1 EXIMBANK 3,3 KOÇBANK 3,1 FORTIS BANK 4,8 ING BANK 4,3 T.EKONOMİ.B. 2,9 1 ALTERNATİFBANK 3, KOÇBANK 2,4 FORTIS BANK 3, OYAKBANK 3,4 HSBC BANK 4,2 ING BANK 2,1 BRSA 48 Structural Developments in Banking December 21

68 3. CAPACITY IN BANKING SECTOR 3.1. Customer Analysis Loan Customers The number of loan customers in Turkish Banking Sector is in an increasing trend by years depending on the economic growth and stability. The continuation of the moderate increase in number of loan customers in the last period which was affected by global finance crisis is an indicator for the loan demand and the reliance to economy. The number of customers who are granted loan by deposit banks is highly more than the number of customers of other functional bank groups. Table 3.1-1: Development of Loan Customer Numbers and Functional Distribution Number of Loan Customers Total Number (thousand) , , , , , ,9 % Deposit Banks , , , , , ,8 Participation Banks 29,6 678,5 77,3 743,5 794,4 95,3 Development and Investment Banks 2,5 14,4 24,4 26,5 28,5 35,8 Deposit Banks 99, 97,5 97,7 98, 97,9 97,7 Participation Banks 1, 2,4 2,3 1,9 2, 2,2 Development and Investment Banks,,1,1,1,1,1 By function groups, when loan customer number development index is analyzed by taking as basis 25=1, it is seen that development and investment banks group is the one which mostly increased its customer number. As of 21, the value of the mentioned index is realized as 1.48 for development and investment banks, 312 for participation banks, 14 for deposit banks and 142 for sector general. When analyzed by function groups, it is seen that small scale banks did not have developments in this area and the index belonging to this group is below the base year value as of 21. According to the index, medium scale banks group increased its loan customer number by 51% in the last 5 years while large scale banks group increased it by 43%. Chart 3.1-1: Number of Loan Customer Development Index by Function and Scale (25=1) Deposit Banks Participation Banks Development and Investment Banks Sector (25=1) Large Scale Medium Scale Small Scale Since the loan customer of a bank may also be a loan customer of another bank at the same time, there is a different concentration in customer area when compared to the situation in other capacity indicators. Furthermore, in total customer base, when the number of loan customers addressed by banks is taken into consideration, it is seen that the share of first 5 banks in total is 58.1% and the share of first 1 banks is 89.3% as of 21. There was not a significant structural change in the mentioned area in the recent years, furthermore the fact BRSA 49 Structural Developments in Banking December 21

69 that the share of first 5 and first 1 banks increased when compared to 29 and the fact that the share of first 1 banks reached to its highest level in recent years are rather negative indicators for concentration. The view of the index relating to loan customer numbers for bank groups are also confirmed by the data of average customer number per bank. In large scale banks group, number of loan customers per bank increased by about 9% in the last five years and realized as 4.1 million people. Although customer number per bank in medium scale banks group decreased in 29, it increased again in the following year and realized as 1,3 million. A small scale bank in the sector serves to about 29 thousand loan customers. On function groups basis, although there is a high increase proportionally in number of customers per bank for development and investment banks, due to the activity type of the mentioned banks, their customer number is low when compared to other groups. Table 3.1-2: Loan Customer Number Concentration Indicators and Averages by Groups Number of Loan Customers First 5 Banks 63,7 61,3 58,5 59,7 57,4 58,1 First 1 Banks 88, 88,7 88,3 88,7 88,3 89,3 Distribution by Scale (thousand) Large Scale 2.89,2 2.74, 3.347, , , ,5 Medium Scale 1.97, , , , , 1.289,5 Small Scale 34,2 24,3 26, 25,5 23,7 29, Functional Distribution (thousand) Deposit Banks 849,5 818,8 1.12, ,1 1.25, ,3 Participation Banks 72,7 169,6 192,6 185,9 198,6 226,3 Development and Investment Banks,2 1,1 1,9 2, 2,2 2,8 When the ranking of loan customer number of banks in the sector is analyzed, it is seen that there are private banks in the first five ranks as of 21. They are followed by three state banks. While the bank having the most loan customer serves to 6,3 million customers, the bank in the 1th rank granted loans to 1.7 million customers. Table 3.1-3: First 1 Banks Ranking in Number of Loan Customers % 25 Share 26 Share 27 Share 28 Share 29 Share 21 Share 1 YAPI KR. B. 24,4 YAPI KR. B. 17,6 YAPI KR. B. 15,5 GARANTİ B. 16, GARANTİ B. 15,4 GARANTİ B. 15,1 2 GARANTİ B. 12, GARANTİ B. 15,8 GARANTİ B. 14,9 YAPI KR. B. 14,6 YAPI KR. B. 13,3 YAPI KR. B. 13,4 3 ZİRAAT B. 11,1 İŞ BANKASI 1,8 AKBANK 1, AKBANK 1,1 AKBANK 1,1 FİNANSBANK 1,2 4 İŞ BANKASI 8,9 FİNANSBANK 8,8 İŞ BANKASI 1, İŞ BANKASI 1, İŞ BANKASI 9,7 AKBANK 1,1 5 FİNANSBANK 7,2 VAKIFBANK 8,2 HSBC BANK 8,2 FİNANSBANK 9,1 FİNANSBANK 9, İŞ BANKASI 9,3 6 HSBC BANK 6,9 HSBC BANK 8, FİNANSBANK 7,9 HSBC BANK 7,6 VAKIFBANK 8,1 VAKIFBANK 8,3 7 VAKIFBANK 5,8 ZİRAAT B. 6,9 VAKIFBANK 7, VAKIFBANK 6,9 ZİRAAT B. 7,3 ZİRAAT B. 7,5 8 ING BANK 4,5 HALKBANK 4,9 ZİRAAT B. 6,3 ZİRAAT B. 6,1 HSBC BANK 6,3 HALKBANK 6, 9 AKBANK 3,7 AKBANK 4,1 HALKBANK 4,9 HALKBANK 4,6 HALKBANK 5, HSBC BANK 5,2 1HALKBANK 3,3 DENİZBANK 3,6 DENİZBANK 3,7 DENİZBANK 3,9 DENİZBANK 4,2 DENİZBANK 4,1 BRSA 5 Structural Developments in Banking December 21

70 Box 14: Global View in Loan Customer Numbers When country comparative data relating to loan customer numbers* are analyzed, it can be said that the loan usage and the loan customer number served by banks in Turkey is higher than the most of the countries in the table. Accordingly, 732 of every 1 thousand adults in Turkey are loan customers and this number is 847 in the Netherlands, 534 in Italy and 34 in Spain. Number of Loan Customers (Million) Loan Customer per 1. Adults Holland 9,7 9,7 9,7 9,7 11,4 728,6 726,8 721, 721,6 847,5 Turkey 29,2 27,7 34,2 38,2 39,4 573,3 534,2 647, 79,4 731,8 Estonia v.y. v.y. v.y.,5,6 v.y. v.y. v.y. 474,6 541, Italy 22,5 22,8 23,1 25,8 27,4 447,1 41,5 454, 51,8 534,2 S. Africa 12,8 16, 18,2 1,5 14,2 398,2 491, 552, 429,1 421,6 Portugal 3, 3,2 3,4 3,7 3,8 333,6 358,3 383,1 411,5 417,6 Argentina 6, 7,7 9,5 11, 11,5 21,2 267,3 325, 369,2 387,9 Latvia v.y. v.y. v.y.,7,7 v.y. v.y. v.y. 363,1 343,1 Spain 9,5 1,4 11,9 11,9 13, ,3 31,5 35,6 339,5 Malaysia 4,7 5,1 5,4 5,4 5,4 269,4 284,8 291, 283,7 286,6 Indonesia v.y. v.y. 26,3 33,1 36,8 v.y. v.y. 162, 2,2 222,8 Saudi Arabia 1,7 2,2 2,5 3, 3,1 113,6 142,6 155,9 184,4 187,3 Japan 2,3 19,8 19,7 19,4 18,9 183,9 179,7 178, 175,3 171, India 77,2 85,4 99,4 17, v.y. 15,3 114,3 13,4 137,5 v.y. USA v.y. v.y. 79,4 v.y. v.y. v.y. v.y. 331,8 v.y. v.y. *Includes commercial bank data. Within this scope, all banks in Turkey are included in the evaluation. Source: BIS, ECB, IMF Deposit Customers Number of depositors in banking sector is not only affected by the reliance in banking and deposit insurance in banking but also by factors such as the yield of deposit and benefiting from some banking service requirements of other natural persons and legal entity customers together with the state. Depositors are the largest customer group of both the banking sector and the finance sector in general. Number of depositors in Turkish Banking Sector8 has a remittent motion. If analyzed in functional banking groups sector, it is seen that the decrease observed in number of depositors in the latest years is arising from deposit banks; on the other hand, participation banks increased their customer numbers. When analyzed proportionally, it is evaluated that customer base served by participation banks group is expanding year by year. Table 3.1-4: Development of Depositor Number and Functional Distribution Number of Depositors (*) Total Number (thousand) , , , , , ,9 Deposit Banks 68.79, , , , , ,8 Participation Banks 833,9 1.3, 1.29,6 1.47, , ,1 % Deposit Banks 98,8 98,6 98,3 97,9 97,1 95,7 Participation Banks 1,2 1,4 1,7 2,1 2,9 4,3 (*) Depositors having deposit/ participation account with zero remainder is not included in the number of depositors as of June 21. Participation banks achievement of having depositors can be seen obviously in the depositor number development index. While the value of the index which is calculated by taking 25 year as basis is below 1 for deposit banks, it increased to 253 for participation banks although accounts with zero remainder in 21 are not taken into consideration. On scale 8 Due to the calculation by dedeuction of accounts with zero deposit remanider from total as of mid 21 in deposit number, 21 data is not comparable with the data belonging to pervious years. BRSA 51 Structural Developments in Banking December 21

71 basis, it is obvious that medium scale banks are more successful to increase the number of deposit customers thereof. Chart 3.1-2: Number of Depositors Development Index by Function and Scale (25=1) Deposit Banks Participation Banks Sector (25=1) Large Scale Medium Scale Small Scale The decrease in the shares of first 5 and first 1 banks by years for number of depositors points out to a decrease in the concentration of customers in certain banks. When average depositor numbers by groups is considered, it is seen that average depositor number of deposit banks as of million and average depositor number of participation banks is about 5 thousand. On scale basis, average depositor number of large scale banks is six folds of average depositor number of medium scale banks and 114 folds of average depositor number of small scale banks. Table 3.1-5: Depositor Number Concentration Indicators and Averages by Groups Number of Depositors First 5 Banks 83,2 8,6 81, 79,5 78,9 71, First 1 Banks 94,8 95,3 94,2 94,3 93,7 9,9 Distribution by Scale (thousand) Large Scale 9.2,5 9.29,5 9.46, , 8.616, ,6 Medium Scale 668,3 666,7 874,7 98,1 857,1 84,2 Small Scale 48,7 53,2 32, 33,5 26, 51,3 Functional Distribution (thousand) Deposit Banks 2.23, , ,3 2.83,2 2.91, ,6 Participation Banks 28,5 25,8 32,4 352, 493,2 528,3 When ranking is made by number of depositors, state banks are in the first ranks in the first 1 banks in the list. The bank which is in the first rank as of 21 serves to approximately one third of all depositors. Later, for the first time, a participation bank was in the first ten banks ranking including private deposit banks in 29. However, the mentioned bank left its place again to a deposit bank in 21. Table 3.1-6: First 1 Banks ranking in Number of Depositors % 25 Share 26 Share 27 Share 28 Share 29 Share 21 Share 1 ZİRAAT B. 38,8 ZİRAAT B. 39,1 ZİRAAT B. 39,8 ZİRAAT B. 39,2 ZİRAAT B. 38,3 ZİRAAT B. 29,2 2 İŞ BANKASI 16,6 İŞ BANKASI 16,8 İŞ BANKASI 17,6 İŞ BANKASI 18,6 İŞ BANKASI 19,1 İŞ BANKASI 13,4 3 VAKIFBANK 13,8 VAKIFBANK 9,5 VAKIFBANK 9,6 VAKIFBANK 9,5 HALKBANK 8,8 VAKIFBANK 11,5 4 HALKBANK 8, YAPI KR. B. 8,2 HALKBANK 7,4 HALKBANK 7,5 VAKIFBANK 8,1 HALKBANK 9,4 5 YAPI KR. B. 6, HALKBANK 7,1 YAPI KR. B. 6,5 GARANTİ B. 4,6 GARANTİ B. 4,6 GARANTİ B. 7,6 6 AKBANK 4,5 AKBANK 6,6 AKBANK 3,9 AKBANK 4,1 AKBANK 4,6 YAPI KR. B. 6,4 7 GARANTİ B. 3, GARANTİ B. 3,6 GARANTİ B. 3,7 YAPI KR. B. 4, YAPI KR. B. 4,1 AKBANK 5,9 8 ING BANK 1,9 ING BANK 2,4 ING BANK 3, ING BANK 3,4 ING BANK 3,3 ING BANK 3,2 9 KOÇBANK 1,2 DENİZBANK 1,2 DENİZBANK 1,6 DENİZBANK 2,1 FİNANSBANK 1,5 FİNANSBANK 2,4 1DENİZBANK 1, ŞEKERBANK,9 ŞEKERBANK 1,1 FİNANSBANK 1,2 BANKASYA 1,4 DENİZBANK 2, BRSA 52 Structural Developments in Banking December 21

72 Box 15: Global View in Deposit Customer Numbers According to the following table including country data relating to depositor numbers*, about seven thousand of every 1 thousand customers is deposit customers in Japan and within this context Japan precedes other countries. Far east countries like South Korea and Malaysia are also in the first ranks. In Turkey, about 1.3 of every 1 thousand adults are deposit customers and this value carries Turkey beyond countries such as Italy and Spain. Deposit Customer Number (Million) Deposit Customer per 1. Adults Japan 833,1 81,2 791,4 785,8 784, , , ,.18,8 7.99,3 Korea 155,7 161,7 163,7 171,1 176, ,6 4.11, ,9 4.26, ,9 Portugal v.y. 23,5 24,4 24,9 25,2 v.y , , ,5 2.8, Estonia v.y. v.y. v.y. 1,9 2,4 v.y. v.y. v.y ,9 2.84, Holland 23,6 23,5 23,7 23,8 24, 1.769, , , , ,7 Malaysia 33,3 34,2 34,7 3,9 28, , 1.894, , , ,9 Austria 9,8 9,8 1, 1,1 9,9 1.42,1 1.46, , , ,8 Turkey 69,3 71, 71,1 67,8 69, ,2 1.37, , , , Italy 37,7 38,3 43,9 55,7 64,2 749,4 756,7 861,5 1.85,1 1.25,8 Latvia 1,8 2, 2,3 2,3 2,4 931,5 1.23, , ,6 1.25,1 Hungary 7,2 7,7 8,2 8, , 897,6 957,8 993,2 1.17,1 S. Africa 16,8 21,8 24,5 26,4 28,3 525,3 61,6 743,7 72,9 839,1 Saudi Arabia 7,3 8,9 1, 11,8 13,4 479,9 571,7 62, 714, 89,3 Spain 26,2 27,3 28,5 3,1 3,3 77,5 723,6 743,2 775,6 78,7 Argentina 14,4 15, 17,8 18,4 18,3 55,6 546,3 66,1 619,3 615,9 Norway 1,6 1,7 1,8 1,9 2, 422,5 42,3 466,2 9,2 529,7 India 466,8 485,1 519,2 581,7 v.y. 637,4 649, 68,7 747,3 v.y. USA v.y. v.y. 83,8 v.y. v.y. v.y. v.y. 35,2 v.y. v.y. *Includes commercial bank data. Within this context, all the banks in Turkey are included in the evaluation. Source: BIS, ECB, IMF 3.2. Branch and Personnel Analysis Branch Bank branches have the most important function for customers access to the services provided by banks. Due to the impacts of 2-21 crisis on Turkish Banking Sector, the number of branches which had continued to decrease until 23, increased by about 7% annually after the mentioned year. The number of branches which especially reached to high growth rates in the pre-global crisis period, increases moderately after the crisis. Productivity factor plays a significant role in the rather slow increase in number of branches when compared to the increase in asset sizes of banks. Number of bank branches which continued its increasing trend together with the organic growth conducting in parallel with the financial stability exceeds 1 thousand as of 21. Table 3.2-1: Development of Number of Branches and Functional Distribution Number of Branches Total Number Deposit Banks Participation Banks Development and Investment Banks % Deposit Banks 97,8 98,2 97,6 96,5 95,6 95, 94,5 94,3 93,8 93,6 93,6 Participation Banks 1,8 1,6 1,9 3, 3,9 4,4 4,9 5,2 5,8 5,9 6, Development and Investment,4,2,6,5,5,5,6,5,5,5,4 Banks BRSA 53 Structural Developments in Banking December 21

73 Box 16: Global Appearance of Number of Bank Branches The table in which the country data concerning population per bank branches indicates that the branching potential is considerably high in Turkey. When compared to 27 EU member countries and Switzerland G-2 countries, it is seen that Turkey presents an appearance similar to developing countries in the comparison of population per branch. On the other hand, according to 29 data, Turkey is behind all EU countries and China which is the most populated country, showing that Turkey has a wide development field for branching. Number of Branches Population per Branch (Person) S. Arabia n.d. n.d. n.d n.d. n.d. n.d S. Africa n.d. n.d. n.d n.d. n.d. n.d Indonesia n.d. n.d. n.d n.d. n.d. n.d India n.d. n.d. n.d n.d. n.d. n.d Argentina n.d. n.d. n.d n.d. n.d. n.d Mexico n.d. n.d. n.d n.d. n.d. n.d Turkey China n.d. n.d. n.d. n.d n.d. n.d. n.d. n.d South Korea n.d. n.d. n.d n.d. n.d. n.d Estonia Brazil n.d. n.d. n.d n.d. n.d. n.d Netherlands Czech Rep Canada n.d. n.d. n.d. n.d n.d. n.d. n.d. n.d England Slovakia Sweden Australia n.d. n.d. n.d n.d. n.d. n.d Latvia Ireland Malta Russia n.d. n.d. n.d n.d. n.d. n.d Finland Lithuania n.d n.d Romania n.d n.d Switzerland n.d. n.d. n.d n.d. n.d. n.d Slovenia Poland Hungary Denmark Greece USA n.d. n.d. n.d n.d. n.d. n.d Belgium n.d n.d. Japan n.d. n.d. n.d n.d. n.d. n.d EU n.d. n.d. n.d. n.d. n.d Luxembourg n.d n.d. Germany Austria Italy France Portugal Bulgaria n.d. n.d n.d. n.d Spain South Cyprus Source: BIS, ECB, IMF BRSA 54 Structural Developments in Banking December 21

74 When the distribution of number of branches by function groups is analyzed, it is observed that the share of total number of branches of participation banks within the sector increased consistently and reached 6% as of 21. On the other hand, the share of deposit banks tended to decrease year by year and stayed the same within the last year. The number of branches of development and investment banks which has decreased from 44 to 4 within the last one year presents.4% of total number of branches. When the development index of number of branches calculated basing on year 2 is analyzed by function groups, it is seen that the branching rate of participation banks is considerably above the sector average. The relatively fast increase of number of branches of participation banks is also based on the growth potential of their share within the sector. The increasing rate of the number of branches within the last ten years is 322% for participation banks, 21% for deposit banks, 43% for development and investment banks and 26% for the whole sector. Deposit banks are the main determinant of the branching rate of the Turkish Banking Sector due to their weight within the sector; the number of branches before 21 crisis could be reached in 27. When the development index of number of branches is analyzed based on scales, it is seen that the medium scale banks are branching faster. The index was increasing slower for medium scale banks than large scale ones until 27, but after that year the medium scale banks have shown a performance above other groups. This index followed a consistent increase for large scale banks as from 25 and reached 153 as of 21. For small scale banks, the index has experienced a sharp descent in 21 but followed a horizontal conduct afterwards. Chart 3.2-1: Number of Branches Development Index by Function and Scale (2=1) Deposit Banks Participation Banks Development and Investment Banks Sector (2=1) Large Scale Medium Scale Small Scale When the number of branches per bank within the sector is analyzed, it is seen that the concentration is less comparing to other indicators (especially monetary indicators). This is due to the effect of the necessity to open a number of branches independently from scale because of the retail banking structure of the sector. While the share of first 5 banks in the number of branches was 5% in 2, due to the developments in the numbers of banks and branches after 21, this share has increased to 6% within the period of This share which has started to decrease afterwards was realized as 51.5% in 21. The share of first 1 banks in number of branches has been around 78% since 21 with little rise and falls. The averages by scale groups confirm also that there is a positive development in 21 like in the past years. As of 21, a bank in the large scale banks groups has 932 branches on average, while this number is 32 for medium scale banks group and 2 for small scale banks group. When looked by functional differences, it is seen that participation banks are ahead in the rate of branching. As a matter of fact, while the average number of branches of deposit banks was 5.3 folds the average number of branches of participation banks in 2, in 21 BRSA 55 Structural Developments in Banking December 21

75 this number decreased to 2.3. Average number of branches per bank did not change for development and investment banks within the last seven years. Table 3.2-2: Concentration Indicators of Number of Branches and Averages by Groups Number of Branches First 5 Banks 5,1 61,5 58,3 58,3 59,5 57,3 54,7 51,3 51,2 51,3 51,5 First 1 Banks 68,2 78,3 77,5 78,1 8,1 78,8 79,8 77,4 76,5 77,1 78,1 Distribution by Scale (number) Large Scaled Medium Scaled Small Scaled Functional Distribution (number) Deposit Banks Participation Banks Development and Investment B When the ranking of the banks within the sector by their number of branches is analyzed, it is seen that the first rank belongs to a state bank with a share by 13.9%. Moreover, banks which are older by their date of foundation are occupying the first two ranks for almost ten years. On the other hand, it is evaluated that among the first 1 banks, private ones are branching faster. Table 3.2-3: Ranking of First 1 Banks in the Number of Branches % 2 Sh. 22 Sh. 24 Sh. 26 Sh. 28 Sh. 21 Sh. 1 ZİRAAT B. 16,2 ZİRAAT B. 19,8 ZİRAAT B. 19,1 ZİRAAT B. 17,2 ZİRAAT B. 13,7 ZİRAAT B. 13,9 2 İŞ BANKASI 1,8 İŞ BANKASI 13,4 İŞ BANKASI 13,2 İŞ BANKASI 12,2 İŞ BANKASI 11,2 İŞ BANKASI 11,3 3 HALKBANK 1,1 AKBANK 9,8 HALKBANK 1,9 AKBANK 9,4 AKBANK 9,3 AKBANK 9,1 4 AKBANK 7,5 HALKBANK 8,6 AKBANK 9,8 YAPI KR. B. 8,3 YAPI KR. B. 9,3 YAPI KR. B. 8,6 5 YAPI KR. B. 5,5 YAPI KR. B. 6,7 YAPI KR. B. 6,5 HALKBANK 7,6 GARANTİ B. 7,8 GARANTİ B. 8,5 6 EMLAKBANK 5,1 GARANTİ B. 4,8 GARANTİ B. 5,4 GARANTİ B. 6,6 HALKBANK 6,5 HALKBANK 7, 7 VAKIFBANK 4, VAKIFBANK 4,6 VAKIFBANK 4,5 VAKIFBANK 5,9 VAKIFBANK 5,6 VAKIFBANK 6,3 8 GARANTİ B. 3,3 ING BANK 3,5 ING BANK 4,5 ING BANK 4,8 FİNANSBANK 4,9 FİNANSBANK 5, 9 TÜRK TİC. B. 3,2 ŞEKERBANK 3,1 DENİZBANK 3,1 FİNANSBANK 4,2 DENİZBANK 4,3 DENİZBANK 5, 1PAMUKBANK 2,5 PAMUKBANK 3,1 ŞEKERBANK 3, DENİZBANK 3,6 ING BANK 3,9 TEB 3,3 BRSA 56 Structural Developments in Banking December 21

76 Box 17: Global Appearance of Number of Branches by Adult Population and Surface When the global data obtained by associating the number of bank branches* with number of adults and surface area criteria are analyzed, it is seen that generally European countries are in better place in this subject. For example, in Luxembourg, there are 94 branches per 1 persons while this number is 18 for Turkey. Turkey is ahead of countries such as Germany, Brazil, and South Africa in this subject. Also in Turkey, there are 12 bank branches per 1. km2 and only four EU countries are below this number. Turkey shall at least double the number of branches to reach the EU average in these indicators. Number of Branches per 1. Adults Number of Branches per 1 km Luxembourg 15,8 11, 98, 95,1 94,1 154,8 15,6 148,6 147,1 148,7 Belgium 53,7 53,4 51,4 49,7 48, 15,2 154,5 149,8 146,1 142,2 Italy 64,2 65,5 66,8 68,1 7,8 19,8 112, ,8 118, S. Cyprus 199,9 186,6 163,4 153,6 151,6 145, 137,8 122,7 117,2 117,4 Netherlands 28,1 27,7 28,6 27,6 25,5 11,8 19,6 113,6 11,3 11,8 Switzerland 62,1 6,8 6,4 59, 52,8 96,9 95,7 96,2 95,4 86,4 Portugal 69,4 71,7 76, 81, 81,8 67,5 7,1 4,5 79,5 8,4 Korea 17,4 17,9 18,4 18,9 18,6 7, 72,8 75,6 78,3 77,1 Bulgaria 84,8 84,1 88,3 92,6 91,9 52,1 51,6 53,9 56,3 55,9 England 28,4 25,7 26,5 26,2 25,5 58, 52,9 5, 54,8 53,8 Poland 37,8 39,4 42,1 45,6 46,3 39,4 1,5 4,5 48,4 49,2 Denmark 53 5,6 51,9 5,5 46, 52,1 52,7 54,4 53,3 48,6 France 22,8 47,5 46,3 46, 43,1 2,7 43,4 42,8 42,7 4,4 Japan 12,5 12,4 12,5 12,5 12,5 37,8 37,6 37,9 38, 37,8 Slovenia 4,2 39,8 4,3 39,4 39,5 34,3 34,1 34,8 34,1 34,5 Germany 2,2 16,7 16,3 16,3 16,6 4,9 33,8 33,1 33,1 33,8 Greece 35,8 37,4 39,3 41,7 41,4 26,4 27,7 29,3 31,2 31, Spain 39,6 4,4 41, 4,5 38,6 29,4 3,5 31,5 31,5 3, India 9,7 9,7 9,8 1,1 1,6 23,9 24,3 25,2 26,5 27,9 Romania n.d. n.d. n.d. 34,9 34,1 n.d. n.d. n.d. 27,7 27, Czech Rep. 21,3 21,8 21,5 22,7 22,7 24,1 24,8 24,6 26,3 26,3 Ireland 34,5 33,9 33,3 34, 35, 16,6 16,7 16,8 17,4 17,8 Hungary 14,8 16,1 17,2 17,8 18,5 14, 15,3 16,4 17, 17,6 Lithuania 24,9 27, 28,7 28,5 28,1 11,3 12,2 13, 12,9 12,8 Turkey 12,8 14, 15,3 17,2 17,7 8,5 9,4 1,5 12, 12,4 Latvia 31, 32,3 36, 35,1 33,3 9,8 1,2 11,3 11, 1,5 Austria 13,3 13, 12,9 12,6 11,8 11,2 11, 11, 1,8 1,1 USA 33,3 33,9 34,7 35,1 36,3 8,5 8,8 9,1 9,3 9,6 Indonesia 5,3 5,8 6, 6,7 7,7 4,6 5,1 5,4 6,1 7,1 Malasia 11,9 1,9 1,8 1,6 1,7 6,4 6, 6,1 6,1 6,2 Mexico 11,2 11,6 12,8 13,8 14,7 4,1 4,3 4,9 5,3 5,7 Estonia 21, 22,7 24, 23,8 2,2 5,7 6,1 6,5 6,4 5,4 Brazil 13,1 13,3 13,4 13,6 14,2 2,1 2,1 2,2 2,3 2,4 South Africa 7,2 7,5 6,1 7,9 8,1 1,9 2, 1,7 2,2 2,2 Finland 13,9 14,2 15,2 15,2 14,2 2, 2, 2,2 2,2 2,1 Argentina 13,5 13,4 13,4 13,3 13,4 1,4 1,4 1,4 1,4 1,5 Norway 6,9 6,9 8,1 7,8 7,5,8,8 1, 1, 1, Saudi Arabia 8,2 8,3 8,5 8,6 9,3,6,7,7,7,8 Canada 34,6 24,6 24,6 24,6 24,4 1,,7,7,8,7 Australia 3,6 31,2 31,3 31,5 32,1,7,7,7,7,7 *Includes the data of commercial banks. All the banks in Turkey are included to the evaluation. Source: BIS, ECB, IMF BRSA 57 Structural Developments in Banking December 21

77 Personnel The decrease of employment experienced generally in the Turkish economy after the crisis of 2-21 is more distinct in the banking sector. The number of employment in the sector which was 174 thousand persons in 2 was only achieved within the period of 27-28, in the eve of global crisis. On the other hand, the strong increasing tendency in banking sector started in 23 has slowed down due to the global crisis. However, the fact that the number of workers has increased moderately within this period confirms that the Turkish Banking Sector and Turkish Economy in general are affected relatively less from the crisis. When the total number of personnel by function groups is analyzed, a conduct in parallel with the number of branches is observed. The share of participation banks within total number of personnel is increasing consistently, while the shares of deposit and development and investment banks are decreasing. As of 21, among total number of personnel in the sector, the share of deposit banks is 9.6%, the share of participation banks is 6.6% and the share of development and investment banks is 2.8%. Table 3.2-4: Development and Functional Distribution of the Number of Personnel Nr. of Personnel Total Number Deposit Banks Participation Banks Development and Investment Banks % Deposit Banks 94,6 94,6 94, 93, 92,4 92,2 91,8 9,9 91,1 9,7 9,6 Participation Banks 1,7 1,4 1,5 2,7 3,6 4,1 4,7 5,4 6, 6,4 6,6 Development and Investment Banks 3,7 4, 4,5 4,3 4, 3,7 3,5 3,6 2,9 2,9 2,8 Within the period of last ten years, participation banks were proportionally the most contributing group to the employment in the banking sector, this development is the most attractive element in the development index of the number of personnel. According to the data of 2 which is the base year, development and investment banks have shown a negative performance throughout the period. For deposit banks which have reached their number of employment in the base year only within the last two years the index is left behind the index concerning the sector in general. When analyzed by scale groups, it is seen that the index concerning small scale banks is negative. Development index of large and medium scale banks are conducting in parallel within recent years. In 21, development index of the number of personnel increased from to for large scale banks and from 127 to 13.1 for medium scale banks. Chart 3.2-2: Number of Personnel Development Index by Function and Scale (2=1) Deposit Banks Participation Banks Development and Investment Banks Sector (2=1) Large Scale Medium Scale Small Scale BRSA 58 Structural Developments in Banking December 21

78 The share of first 5 banks in the sector for their number of personnel within total started to decrease after the sudden increase seen in 21 crisis. This ratio is around 49% for the last four years and the fact that it is below its 2 level is a positive development for concentration. On the other hand, it is not possible to make the same comment for the share of first 1 banks. This ratio which increased from 74.7% to 75.6% in the recent year shows that the concentration formed in first 1 banks in sector employment is more than the one in 2. When evaluated by scales, it is seen that the number of personnel per bank is increasing more rapidly for medium scale banks. As of 21, in the Turkish Banking Sector, there are on average persons working in large scale banks, 6.12 in medium scale banks and 59 persons in small scale banks. When the average numbers of personnel by function groups are analyzed, it is seen that the scissor between participation banks and deposit banks is shrinking every year. Participation banks are getting closer to deposit banks by their number of personnel comparing to their branching indicators. Development and investment banks are considerably behind other groups for their number of personnel. Table 3.2-5: Concentration Indicators of the Number of Personnel and Averages by Groups Number of Personnel First 5 Banks 5,5 57,9 53,1 52,3 52,2 5,2 51,1 48,9 48,4 49,2 48,7 First 1 Banks 68,5 76,8 74,8 73,8 75,1 74,4 75,7 73,7 73,8 74,7 75,6 Distribution by Scale (number) Large Scale Medium Scale Small Scale Functional Distribution (number) Deposit Banks Participation Banks Development and Investment Banks A state bank which was at the first rank for its number of personnel for many years has left its place to a private bank for the last two years. The share of the mentioned bank within the banking sector employment decreased from 21% in 2 to 11.9% in 21, which is mostly due to the decrease of its personnel number within the period of Private banks have shown an important development in this area until 28, but the share of share banks has started to re-increase afterwards. Table 3.2-6: Ranking of First 1 Banks in the Number of Personnel % 2 Sh. 22 Sh. 24 Sh. 26 Sh. 28 Sh. 21 Sh. 1 ZİRAAT B. 21, ZİRAAT B. 18,5 ZİRAAT B. 16, ZİRAAT B. 13,7 ZİRAAT B. 11,7 İŞ BANKASI 12,5 2 İŞ BANKASI 9,2 İŞ BANKASI 11,8 İŞ BANKASI 12,1 İŞ BANKASI 12,4 İŞ BANKASI 11,5 ZİRAAT B. 11,9 3 HALKBANK 8,6 YAPI KR. B. 8,3 HALKBANK 8,4 YAPI KR. B. 8,9 GARANTİ B. 9, GARANTİ B. 8,7 4 YAPI KR. B. 5,9 HALKBANK 7,3 YAPI KR. B. 8, AKBANK 8,2 AKBANK 8,3 AKBANK 8, 5 EMLAKBANK 5,7 AKBANK 7,2 AKBANK 7,8 GARANTİ B. 7,9 YAPI KR. B. 8,1 YAPI KR. B. 7,5 6 VAKIFBANK 4,9 VAKIFBANK 6, GARANTİ B. 6,9 HALKBANK 7,2 HALKBANK 6,8 HALKBANK 7, 7 AKBANK 4,7 GARANTİ B. 5,9 VAKIFBANK 5,4 FİNANSBANK 5,1 FİNANSBANK 5,5 FİNANSBANK 6,1 8 PAMUKBANK 3,3 PAMUKBANK 4, FİNANSBANK 4,1 VAKIFBANK 5,1 VAKIFBANK 5,2 VAKIFBANK 5,8 9 GARANTİ B. 2,7 İLLER B. 3, DENİZBANK 3,3 DENİZBANK 3,7 DENİZBANK 4, DENİZBANK 4,5 1DEMİRBANK 2,4 ING BANK 2,9 ING BANK 3,2 ING BANK 3,6 HSBC BANK 3,8 HSBC BANK 3,4 BRSA 59 Structural Developments in Banking December 21

79 Box 18: Global Appearance in the Number of Personnel Similarly to the figures of population per branch, the figures of population per bank personnel show the high potential of Turkey s banking system and the development of the employment in this sector. When the number of total workers is compared with EU countries, Turkey which is in fifth rank according to 29 data is in the last rank for its figures of population per personnel. In Turkey there are 388 persons per a bank personnel, which is only close to East European countries. Banking sector shall at least increase its employment for one and half times to reach EU averages. On the other hand, population per personnel is relatively higher in Turkey, which shows that Turkey is successful in personnel productivity. Number of Personnel (1. persons) Population per Personnel (Persons) England Luxembourg S. Cyprus Malta Austria Denmark Ireland Netherlands Slovenia Spain Greece Portugal Latvia Italy Sweden Poland Finland Bulgaria n.d n.d n.d n.d Estonia Hungary EU n.d n.d n.d n.d n.d Czech Rep Slovakia Lithuania Romania n.d n.d Turkey Germany n.d n.d France n.d n.d Belgium v.y v.y. Source: BIS, ECB, IMF BRSA 6 Structural Developments in Banking December 21

80 3.3. ATM and POS Analysis ATM Number of ATM the function of which increased in the banking sector in recent years and which is a cost decreasing service provider instrument in terms of banks increased in parallel with the improvement in the sector. In the last 1 years, number of ATM increased annually in average by 9.4%. Although the share of participation banks in total number of ATM increased, it displayed no change in 21 when compared to previous year. On the other hand, the number of ATM, in respect of market share, is seen as the field in which participation banks displayed less improvement in comparison to other capacity indicators. Table 3.3-1: Development and Functional Distribution of Number of ATM Number of ATM Total % Deposit Banks Participation Banks Development and Investment Banks Deposit Banks 1, 1, 99,6 98,8 98,1 97,9 97,7 97,3 96,9 96,7 96,7 Participation Banks,,,4 1,2 1,9 2,1 2,3 2,7 3,1 3,3 3,3 Development and Investment Banks,,,,,,,,,,, According to the index created by taking 2=1 as a basis, development of participation banks in number of ATM is rather fast. By scale, number of ATM development index for largescale banks group is in a better condition as to other groups, medium-scale banks also displayed a development in parallel with large-scale banks group excluding 21. Chart 3.3-1: Number of ATM Development Index by Function and Scale (22=1) Deposit Banks Participation Banks Sector (2=1) Large Scale Medium Scale Small Scale Concentration indicators concerning number of ATM in the sector indicate that concentration level is decreasing. Shares of the first 5 and 1 banks in total number of ATM decreased when compared to 29 and ended up the lowest level in recent years. In 22, while 67 of 1 ATMs belong to the first 5 banks, this figure was about 57 as of 21. While average number of ATM of deposit banks in 22 was almost 2 times of average number of ATM of participation banks, this ratio decreased to 3.6 times in 21. In scale basis, while large-scale banks had ATMs in average as of 21, medium-scale banks had 87 and small-scale banks had 31 ATMs in average. BRSA 61 Structural Developments in Banking December 21

81 Box 19: Global Outlook in Number of ATM When data concerning ATM which is one of the alternative access channels is analyzed globally, it is understood that Turkey which is in a better condition in respect of population per ATM than highly populated countries such as China, India, Brazil and Indonesia is behind the other G-2 and EU countries. Turkey in which there is an ATM per 3 thousand persons can only approximate to East European countries in this field. Portugal is country having the best condition among EU counties in this field by 619 persons per ATM; EU average is persons. Turkey should have to increase its number of ATMs by 2.5 times so as to reach EU average. When it is analyzed globally, it is noted that G-2 countries generally take the first rows in population per ATM. South Korea became the most successful country in this field by 48 persons per ATM. The number of banks being relatively low in Turkey also played a role in the fact that Turkey which comes after Mexico and South Africa in number of ATM per bank is ahead of EU countries. Number of ATM (Number) ATM per Bank (Number) Population per ATM (Number) Germany S. Korea Canada Portugal Belgium USA Spain Australia Japan England Austria Luxemburg Italy Slovenia EU Brazil France S. Cyprus Switzerland Ireland Bulgaria Greece Estonia Russia Latvia Finland Denmark Netherlands Hungary Lithuania Romania Malta S. Africa v.y. v.y v.y. v.y. 657 v.y. v.y Slovakia Poland Saudi Arabia Sweden Czech Rep Turkey Mexico Argentina China Indonesia India Source: BIS, ECB, IMF BRSA 62 Structural Developments in Banking December 21

82 Table 3.3-2: Number of ATM Concentration Indicators and Averages by Groups Number of ATM First 5 Banks 62,2 65,4 67,1 63,8 61,9 6,3 6,1 57,7 58,9 57,7 56,9 First 1 Banks 82,1 89,1 89,2 87,7 88,6 87,5 89, 87,9 87,4 86,7 85,7 Distribution by Scale (number) Large Scale Medium Scale Small Scale Functional Distribution (number) Deposit Banks Participation Banks Among the leading banks of the sector in respect of number of ATM, the same private capital bank has taken the first place for the last 11 years. Share of the first 4 banks are above 1% and the 1th bank has a share by 3.4%. Table 3.3-3: The First 1 Banks in Number of ATM % 2 Share 22 Share 24 Share 26 Share 28 Share 21 Share 1 İŞ BANKASI 19,1 İŞ BANKASI 19,8 İŞ BANKASI 17,5 İŞ BANKASI 17,2 İŞ BANKASI 15,4 İŞ BANKASI 15, 2 YAPI KR. B. 12,5 VAKIFBANK 13,4 VAKIFBANK 13, ZİRAAT B. 11,5 GARANTİ B. 11,8 AKBANK 11,3 3 ZİRAAT B. 11,3 ZİRAAT B. 11,5 ZİRAAT B. 1,6 VAKIFBANK 11,3 YAPI KR. B. 1,8 GARANTİ B. 1,9 4 AKBANK 1,2 YAPI KR. B. 11,4 YAPI KR. B. 1,5 YAPI KR. B. 1,3 AKBANK 1,6 ZİRAAT B. 1,6 5 VAKIFBANK 9,2 AKBANK 11, AKBANK 1,4 AKBANK 9,8 ZİRAAT B. 1,4 YAPI KR. B. 9,2 6 PAMUKBANK 6,3 GARANTİ B. 6, HALKBANK 7,6 GARANTİ B. 8,9 VAKIFBANK 9,9 VAKIFBANK 8,2 7 GARANTİ B. 4,3 PAMUKBANK 5,9 GARANTİ B. 7,3 ING BANK 6,6 FİNANSBANK 5,5 HALKBANK 6,3 8 HALKBANK 3,4 ING BANK 4, ING BANK 6,8 HALKBANK 5,4 HSBC BANK 4,8 FİNANSBANK 5,7 9 EMLAKBANK 3,1 HALKBANK 3,4 HSBC BANK 2,8 FİNANSBANK 4,6 HALKBANK 4,5 HSBC BANK 5,2 1DEMİRBANK 2,7 HSBC BANK 2,9 FİNANSBANK 2,3 HSBC BANK 3,4 ING BANK 3,8 DENİZBANK 3,4 BRSA 63 Structural Developments in Banking December 21

83 Box 2: Global Outlook of Number of ATM by Adult Population and Surface According to the global comparison* made to determine the level of access opportunities to banking services through ATM, there are about 45 ATMs per 1 thousand adult population in Turkey. Turkey overtakes only Czech Republic among EU member countries and is at the same level with countries such as Mexico and Malaysia. While South Korea is in the best condition in this respect throughout the world by 25 ATMs per 1 thousand adult population, Portugal, among EU countries, took the first place by 27 ATMs. Turkey displayed a better outlook than many countries in respect of number of ATMs per 1. km2. Number of ATM per 1. Adults Number of ATM per 1 km Australia 143,4 147,8 151,1 148,1 156,5 3,1 3,2 3,3 3,3 3,5 Argentina 22,8 25,4 28,5 33, 37,4 2,4 2,7 3,1 3,6 4,1 Saudi Arabia 3,3 38,9 46,9 53,8 6,2 2,3 3, 3,8 4,4 5, Russia 22,9 32,5 45,2 65,6 76,4 1,7 2,4 3,3 4,8 5,6 Canada 197,8 25,8 211,2 217, 218,5 5,8 6,1 6,4 6,6 6,7 Norway 58,8 6, 59,8 59,2 58,4 7,2 7,4 7,5 7,5 7,4 Indonesia 9,4 1,6 11,6 13,3 14,5 8,2 9,4 1,4 12,1 13,2 South Africa 25,4 27, 31,1 44,7 52,4 6,7 7,2 8,4 12,4 14,5 Mexico v.y. v.y. v.y. 39,4 44,8 v.y. v.y. v.y. 15,3 17,4 Brazil 18,9 17,6 11, 112,1 115,9 17,4 17,4 18,1 18,7 19,4 Latvia 44,6 48,5 58,5 65,2 67,6 14,1 15,3 18,4 2,5 21,2 Netherlands 55,9 6,7 63,7 64,1 63, 22,6 24,3 253,1 256,3 22, Estonia 73,7 8,3 87,6 89,3 88,2 19,8 21,7 23,6 24, 23,7 Lithuania 37,2 4,3 46,9 51,7 54,2 16,8 18,3 21,3 23,5 24,6 Malaysia 27,8 28,7 34,4 36,7 47,5 14,9 15,8 19,3 21,1 27,3 Turkey 29,2 31,8 35,6 4,8 44,5 19,3 21,5 24,4 28,5 31,1 Austria 44,3 45,6 46,8 47,3 48,2 37,2 38,6 39,8 4,6 41,3 Romania 23,9 33, 4,8 5,7 53,2 18,9 26,2 32,4 4,2 42,2 Czech Republic 34,4 37,4 37,9 38,1 39,8 38,9 42,5 43,5 44,1 46,1 USA 169,2 166,9 173,5 167,9 175,7 43,2 43,1 45,3 44,3 46,4 Slovakia 41,4 44,3 47,8 49,3 5,6 38,5 41,5 45, 46,8 48, Bulgaria 34,1 54,2 66,6 78,6 8,6 21, 33,2 4,7 47,8 49, Ireland 89, 9,1 93,5 96,8 96,6 42,7 44,3 47, 49,4 49,3 Poland 27,5 31, 35,8 42, 49,1 28,6 32,7 37,9 44,6 52,2 Hungary 41,4 44,7 5,2 54,2 55,6 39,4 42,5 47,8 51,6 53, Greece 65,6 69,8 75,2 78,6 78,6 48,4 51,7 56, 58,8 58,8 Denmark 68,2 69,9 7,4 68,8 65,7 7,7 72,9 73,8 72,7 69,4 Spain 149,9 153,4 159, 158,2 154,8 111,4 115,8 122, 123,1 12,5 Switzerland 89, 91,1 93,2 94,2 96,4 138,8 143,4 148,3 152,1 155,7 Luxemburg 16,8 112,7 113,3 114,8 116,8 156,4 168, 171,8 177,6 18,7 Portugal 155, 164,4 177,3 188, 27, 15,8 16,7 173,8 184,7 23,4 Belgium 83,5 83, 86,6 87,5 86,4 239,6 24, 252,4 257,3 v.y. South Cyprus 7,1 79,4 78,7 82,5 87,6 5,9 58,7 59,1 63, v.y. Finland 17,9 14,5 11,5 1,1 91,7 15,4 15, 14,7 14,5 v.y. France 96,3 95,5 13,2 14,9 17,5 87,3 87,3 95,3 97,4 v.y. Germany v.y. v.y. 1,4 112,2 116,8 v.y. v.y. 23,9 228, v.y. Italy 74,6 78,9 86, 97,6 15, 127,6 135,7 149, 17,4 v.y. Japan 123,9 124,3 125,4 125,8 133, v.y. v.y. v.y. v.y. v.y. Korea 212,9 219,5 235,8 244,4 25,3 856,7 891,1 967,1 1.12,9 v.y. Slovenia 86,8 88,2 94,6 99,4 11,5 v.y. v.y. v.y. v.y. v.y. England 64,8 64,5 64,3 64,9 64,6 132,4 132,8 133,4 135,9 v.y. * Including commercial bank data. In this respect, all banks in Turkey are included in the evaluation. Source: BIS, ECB, IMF BRSA 64 Structural Developments in Banking December 21

84 POS In Turkish Banking Sector, number of POS machine as an alternative access channel increased in parallel with the increase of retail banking services. Number of POS, which rapidly increased especially in periods, displayed an increase annually by 1% in average after this period and amounted to 1.8 million in 21. In addition to this, rate of number of POS decreased in recent year. When market shares of functional bank groups are analyzed, it is seen that share of deposit banks was 93% while the share of participation banks was 7%. Table 3.3-4: Development and Functional Distribution of Number of POS Number of POS Total % Deposit Banks Participation Banks Development and Investment Banks Deposit Banks 1, 1, 1, 97,7 96,4 94,2 96,2 92,6 93, Participation Banks,,, 2,3 3,6 5,8 3,8 7,4 7, Development and Investment Banks,,,,,,,,, Deposit banks group, due to their weight in banking sector, is determinative in conduct of development index of number of POS of the sector. Because, the value the index reached base year of which was 25 was 479 for participation banks, 153 for deposit banks and 161 throughout the sector as of 21. When it is analyzed by scale, the least development was experienced in large-scale banks, while small-scale banks could not achieve the increase rate they acquired in 26. Medium-scale banks of which number of POS development index which is calculated by taking 22=1 as a basis reached 547 as of 21 became the group demonstrating the best improvement under the current circumstances. Chart 3.3-2: Number of POS Development Index by Function and Scale (25=1) Deposit Banks Participation Banks Sector (22=1) Large Scale Medium Scale Small Scale The general increase observed in average number of POS in group basis by years affects the concentration indicators in a positive manner. The decrease in share of the first 5 banks in total number of POS of the sector confirms this situation. Nonetheless, share of the first 1 banks in number of total POS, in parallel with concentration indicators concerning number of ATM, increased in 21 when compared to previous year. As of 21, while there were about 184 thousand POS machines per bank for large-scale banks group in the sector, about 57 thousand for medium-scale banks group. When average values are analyzed, it is seen that number of POS per bank in participation banks group fluctuated throughout years and decreased slightly also in 21. On the other hand, number of POS per bank in deposit banks group increased stably every year and reached in 21. BRSA 65 Structural Developments in Banking December 21

85 Table 3.3-5: Number of POS Concentration Indicators and Averages by Groups Number of POS First 5 Banks 79,6 8,6 76,2 73,4 74,2 69,4 7,1 67, 66,8 First 1 Banks 97,5 96,4 94,8 92,3 93,1 89,9 91,4 87,6 88,9 Distribution by Scale (number) Large Scale Medium Scale Small Scale Functional Distribution (number) Deposit Banks Participation Banks Number of POS and credit cards of banks are indicators conducting generally in parallel to each other. It is seen that private banks come first among the first 1 banks in respect of number of POS. while there was only one state capital bank among the first 1 banks until 21, after 21 another state capital bank is included in the list. However, number of POS is a field in which state deposit banks are the weakest in comparison to other capacity indicators. On the other hand, it has been three years since a participation bank is included in the first 1 banks list. Table 3.3-6: The First 1 Banks in Number of POS % 22 Share 24 Share 26 Share 28 Share 21 Share 1 AKBANK 22,3 AKBANK 21,2 AKBANK 18,4 GARANTİ B. 17,1 YAPI KR. B. 17,6 2 YAPI KR. B. 21, İŞ BANKASI 19,7 İŞ BANKASI 17,9 İŞ BANKASI 16,9 GARANTİ B. 17,1 3 İŞ BANKASI 16,5 YAPI KR. B. 15,2 GARANTİ B. 15,7 YAPI KR. B. 16,5 İŞ BANKASI 14,6 4 GARANTİ B. 12,9 GARANTİ B. 12,3 YAPI KR. B. 15,3 AKBANK 13,4 AKBANK 1,8 5 VAKIFBANK 6,9 FORTİS 7,8 VAKIFBANK 6,9 FİNANSBANK 6,2 FİNANSBANK 6,7 6 FORTİS 6,6 VAKIFBANK 6,7 FORTİS 4,7 VAKIFBANK 5,1 DENİZBANK 4,9 7 KOÇBANK 4,1 FİNANSBANK 3,8 FİNANSBANK 4,7 DENİZBANK 4,9 TEB 4,7 8 PAMUKBANK 2,9 KOÇBANK 3,3 DENİZBANK 4,1 HSBC BANK 3,9 BANKASYA 4,6 9 FİNANSBANK 2,7 DENİZBANK 2,5 HSBC BANK 3,1 BANKASYA 3,8 VAKIFBANK 4,1 1 ING BANK 1,7 HSBC BANK 2,3 BANKASYA 2,3 TEB 3,7 ZİRAAT B. 3,7 BRSA 66 Structural Developments in Banking December 21

86 Box 21: Global Outlook in Number of POS Inter countries comparative table concerning the number of POS reflects the improvement Turkey made in card usage. Turkey which is included among the first countries throughout the world in respect of number of POS was behind only Brazil in number of POS per bank. That is to say, Turkey demonstrated a better performance than all EU countries and developed economies in this field. It is evaluated that this situation indicates a success for Turkey in respect of usage and efficiency of payment systems. That being said, high level of number of POS can be evaluated as a factor causing extravagancy in respect of efficient usage of resources. Number of POS (1) Number of POS per Person (number) Number of POS per Bank Brazil ,2,2, Turkey ,2,2, Australia 629 v.y. 698,3 v.y., v.y Mexico ,,, Canada ,2,2, South Africa v.y. v.y. 237 v.y. v.y., v.y. v.y Spain ,3,3, Saudi Arabia ,,, England ,2,2, Romania ,,, Bulgaria ,1,1, France ,2,2, Portugal ,2,2, Italy ,2,2, Estonia ,2,2, Slovenia ,2,2, Czech Rep ,1,1, Slovakia ,1,1, Belgium ,1,1, Greece ,1,1, Switzerland ,2,2, Netherlands ,2,2, Japan ,1,1, EU ,2,2, Ireland ,2,2, Latvia ,1,1, Denmark ,2,2, Finland ,3,3, Malta ,2,, Lithuania ,1,1, Sweden ,2,2, Hungary ,1,1, Russia ,,, Germany ,1,1, Poland ,,1, India ,,, South Cyprus ,,2, Austria ,1,1, Luxemburg ,2,2, China 1 2 2,,, 1 USA v.y.,2,2 v.y v.y. Source: BIS, ECB, IMF BRSA 67 Structural Developments in Banking December 21

87 3.4. Credit and Bank Card Analysis Credit Card The fact that the increase in the number of credit card was 265% while the number of person employed in Turkey was increased approximately by 5% in last 1 years is reflecting the banks market share and profit increasing strategies effect besides the change in consumers spending behaviors. It is seen that the number of credit card was decreased only in 21 as to the previous years and it has increased constantly in flowing years when it is observed by years. The lowest increase ratio in this period is belonging to 29 with 2.3% in which global financial crisis was very effective in economy. Participation banks are showing a more rapid development in this field also as in other capacity indicators and their share in credit cards is approximately half of its share in POS number. The share of deposit banks in credit card market was decreased moderately by years and was realized as 96.4% in 21. Table 3.4-1: Development of Credit Card Amount and Functional Distribution Number of Credit Card Total Amount (Thousand) , , , ,6 26.9, , , , , , ,4 % Deposit Banks Participation Banks Development and Investment Banks Deposit Banks Participation Banks Development and Investment Banks , , , , , , , , , , ,7 25,9 64, 363,8 57,7 92, , , ,7 1, 1, 99,6 98,8 98,1 97,9 97,7 97,3 96,9 96,7 96,4,,,4 1,2 1,9 2,1 2,3 2,7 3,1 3,3 3,6,,,,,,,,,, Due to the fact that the participation banks number of credit card was relatively lower in 23, the base year, development index relating to this bank group was reached to very high values. In response to this rapid development in participation banks, the fact that the index in deposit banks group was reached to the value of 234 in 21 is indicating a moderate growth. The fact that large scaled banks grew in more rapid manner than medium scaled banks in credit card market and that small scaled banks could not catch the state in base year is introducing a similar state that of development in ATM number. Chart 3.4-1: Number of Credit Card Development Index by Function and Scale 1 (23=1) Deposit Banks Participation Banks Sector (2=1) Large Scale Medium Scale Small Scale The number of credit card, in parallel with number of POS is one of the capacity indicators showing that there is a concentration. In addition to that there was a decrease on concentration indicators in 21 as to 26 in which the concentration was the highest. Number of credit card per bank in large scaled banks group, which grew the most in credit card market, was approximately 5 million in 21. Average credit card number of a medium BRSA 68 Structural Developments in Banking December 21

88 scaled bank has reached approximately to 1.5 million following the decrease in 29. Participation banks are erasing the differences between deposit banks also in credit card field each year, thanks to their rapid growth performances. Table 3.4-2:Number of Credit Card Concentration Indicators and Averages by Groups Number of Credit Card First 5 Banks 56,8 64,8 64, 61,3 64, 64,3 67,2 64,9 65, 64,3 63,7 First 1 Banks 78, 87,3 87,2 86,3 89,1 88,8 9,1 89,2 88,4 88,1 88,2 As to Scale (Thousand) Large Scale 1.166,8 1.33, 1.615, , 2.593, , , , , , ,1 Medium Scale 443,2 223,6 423,2 668,8 969, 1.96, , , , , ,8 Small Scale 13,6 65,4 65,1 14,4 128,4 114,9 91,5 1,9 112,7 98,2 13,1 As to Function (Thousand) Deposit Banks 351,9 445, 628,1 862, , 1.341, , , 1.993,7 2.26, ,6 Participation Banks 25,9 64, 121,3 142,7 23,1 381,4 46,5 582,9 Development and Investment B., A private capital bank which was leading for long years in the sector in credit cards field has lost its seat to another private capital bank for last two years. The same private capital banks are included in the first five for the last seven years. The share of state capital bank which decreased to its minimum level in 26 has been showing an increase for the last four years. As in POS and Bank Card field, a participation bank has been in first 1 in credit card field. Table 3.4-3: First 1 Banks in the Number of Credit Cards % 2 Share 22 Share 24 Share 26 Share 28 Share 21 Share 1 YAPI KR. B. 19,3 YAPI KR. B. 18,6 YAPI KR. B. 17,5 YAPI KR. B. 19,5 YAPI KR. B. 17,9 GARANTİ B. 16,7 2 İŞ BANKASI 11,3 GARANTİ B. 14,7 GARANTİ B. 15,9 GARANTİ B. 17,3 GARANTİ B. 17,3 YAPI KR. B. 16,4 3 VAKIFBANK 9,1 İŞ BANKASI 12,3 İŞ BANKASI 12, İŞ BANKASI 11,5 İŞ BANKASI 11,5 İŞ BANKASI 11, 4 GARANTİ B. 9, AKBANK 11,1 AKBANK 1,8 AKBANK 1,8 AKBANK 1,4 AKBANK 1,5 5 PAMUKBANK 8,1 VAKIFBANK 7,3 FİNANSBANK 7,7 FİNANSBANK 8, FİNANSBANK 7,8 FİNANSBANK 9,1 6 ZİRAAT B. 5,6 PAMUKBANK 6,9 VAKIFBANK 7, HSBC BANK 6,3 HSBC BANK 7, ZİRAAT B. 6,7 7 AKBANK 5,4 ZİRAAT B. 6,3 HSBC BANK 6,9 VAKIFBANK 5,8 ZİRAAT B. 5,3 VAKIFBANK 5, 8 DEMİRBANK 4,3 FİNANSBANK 4,1 FORTİS 4, DENİZBANK 4,7 VAKIFBANK 4,7 HSBC BANK 4,6 9 EGEBANK 3, HSBC BANK 2,9 ZİRAAT B. 3,8 ZİRAAT B. 3,1 HALKBANK 3,5 HALKBANK 4,4 1 CITIBANK 3, CITIBANK 2,9 DENİZBANK 3,3 HALKBANK 3,1 DENİZBANK 3, BANKASYA 3,7 BRSA 69 Structural Developments in Banking December 21

89 Box 22: Global Outlook in the Number of Credit Cards Turkey has been in the first ranks in the world in respect of credit card number. While USA was in the first rank in respect of number of credit cards as to 29 data with 1.1 billion credit cards, china, Brazil and South Korea is following USA. Turkey has left behind all EU countries except England with 44 billion credit cards in the said year. While USD was in the first rank with 3.6, the number of credit card per population, the said number was in the level of.6 in Turkey. Turkey is in front of EU countries except Luxembourg, Spain, England and Portuguese with this ratio. It is evaluated that our country has displayed a model of development in credit card step of payment systems, with its technologic substructure and usage facility. Number of Credit Card (Million) Credit Card per Person (Unit) USD 1.274, , ,8 1.28,5 1.17,6 4,3 4,4 4,4 4,2 3,6 South Korea 86,5 92,5 88,8 96,2 17, 1,8 1,9 1,8 2, 2,2 Canada 6,2 61,8 68,4 72,7 73,8 1,9 1,9 2,1 2,2 2,2 Luxembourg,4,6,4,4,5,8 1,2,9,9 1, Spain 33,2 38,5 43,5 44,8 43,8,8,9 1, 1, 1, England 69,9 69,5 67,3 66,2 58,6 1,2 1,2 1,1 1,1 1, Australia 16,7 17,7 18,9 19,5 2,3,8,9,9,9,9 Finland 3,1 3,6 3,9 4,5 4,8,6,7,7,8,9 Brazil 67,5 85,2 117,7 137,8 152,3,4,5,6,7,8 Portugal 5,1 5,6 6,3 7,4 7,6,5,5,6,7,7 Turkey 3, 32,4 37,3 43,4 44,4,4,4,5,6,6 Switzerland 3,5 3,9 4,3 4,5 4,7,5,5,6,6,6 Italy 28,9 31,3 34,5 33,7 33,6,5,5,6,6,6 Sweden 3,6 4, 4,3 5, 5,2,4,4,5,5,6 South Cyprus,4,4,5,5,4,5,5,6,6,5 France 31,2 28,9 32,7 34, 34,5,5,5,5,5,5 Greece 6, 6,3 6,7 7, 6,,5,6,6,6,5 Belgium 3,3 3,4 3,8 4, 4,3,3,3,4,4,4 Malta,1,1,1,2,2,3,3,4,4,4 Netherlands 6, 6,2 6, 5,7 5,8,4,4,4,3,4 Estonia,3,3,4,4,4,2,3,3,3,3 Austria v.y. 2,3 2,4 2,5 2,5 v.y.,3,3,3,3 Germany 18,3 18,3 21,7 22,2 24,1,2,2,3,3,3 Poland 4,4 6,4 7,8 9,4 1,9,1,2,2,2,3 EU ,1 13,7 143,5 149,2 141,9 v.y. v.y.,3,3,3 Denmark 1, 1,,9 1,1 1,4,2,2,2,2,3 Mexico 14,7 21,2 24,8 25,2 22,1,1,2,2,2,2 Slovakia,7 1, 1,2 1,3 1,1,1,2,2,2,2 Latvia v.y. v.y.,5,5,4 v.y. v.y.,2,2,2 Lithuania,1,2,3,5,6,,1,1,2,2 Hungary 1, 1,6 1,7 1,7 1,5,1,2,2,2,2 Czech Republic,9 1,4 1,9 2,1 1,5,1,1,2,2,1 Çin v.y. 5,6 9,3 142,3 185,6 v.y.,,1,1,1 Bulgaria,3,8 1,1 1,2 1,1,,1,1,2,1,7 1,3 1,8 2,7 2,2,,1,1,1,1 Saudi Arabia 1,1 1,4 1,8 1,9 2,,,1,1,1,1 Russia 2,5 5,7 8,9 9,3 8,6,,,1,1,1 Slovenia,1,1,1,1,1,,1,1,1,1 Ireland,2,2,2,2,2,,1,1,1,1 India 17,3 23,1 27,6 24,7 18,3,,,,, Japan 289,1 292,7 38,6 317,8 v.y. 2,3 2,3 2,4 2,5 v.y. Resource: BIS, ECB, IMF BRSA 7 Structural Developments in Banking December 21

90 Bank Card The number of bank card in the sector has been increased in a stable manner each year in parallel with the increase in the number of ATM. 67 million of banks cards in the system out of a total of 7 million was belonging to deposit banks, 3 million thereof was belonging to participation banks in 21. The share of deposit banks in bank card market was 99.9% in 24 and this ratio was recessed to 95.8% in 21. Table 3.4-4: Development of Number of Bank Card and Functional Distribution Number of Bank Card Total Number (thousand) % Deposit Banks , , , , , , , , , , , , , , 55.51, , , , , , , , 3 Participation Banks,,,, 41,7 397,8 688,1 1.11, , , ,5 Development and Investment Banks,,,,,,,,,,, Deposit Banks 1, 1, 1, 1, 99,9 99,2 98,7 98, 97,1 96,4 95,8 Participation Banks,,,,,1,8 1,3 2, 2,9 3,6 4,2 Development and Investment B.,,,,,,,,,,, It is seen that participation banks has shown a very rapid growth again when bank card development index by function groups is observed but due to its relatively low share in the sector, this state has not affected performance of the sector. In Scale basis, index values calculated by taken basis as 2 is showing that large scaled banks has grown more in bank card market when compared to other groups. As a matter of fact, while the index hardly came up to base value in last two years for medium scaled banks and there was any positive development observed for small scaled banks. Chart 3.4-2: Number of Bank Card Development Index by Function and Scale (24=1) Deposit Banks Participation Banks Sector (2=1) Large Scale Medium Scale Small Scale The shares of first 5 and 1 banks in bank cards were decreased to 63.2% and 89.5% respectively in 21 from 82% and 96.2% in 21. Nevertheless the concentration in bank cards field is maintaining by decreasing more each year. It can be seen also from average card number per bank that large scaled banks have shown a better development in bank card amount as to other groups. Nevertheless while average bank card amount of a large scaled bank was approximately 2.2 folds of bank card amount of medium scaled banks in 2, the said ratio has decreased to 5 folds in 21. Bank card amount per bank in small scaled banks is still in low levels. In the context of function groups, while there were 3 million bank cards per deposit bank, this amount is approximately 73 million in participation bank group. BRSA 71 Structural Developments in Banking December 21

91 Table 3.4-5: Number of Bank Cards Concentration Indicators and Averages by Groups Number of Bank Cards First 5 Banks 75,4 82, 78,4 77,4 76,8 73, 73,4 68,7 65,3 63,8 63,2 First 1 Banks 93,2 96,2 96, 95,2 95,7 94, 95, 93,4 91, 9,4 89,5 As to Scale (Thousand) Large Scale 2.811, 3.536,1 4.5, , , , , , , , , Medium Scale 1.257,6 24,3 377,6 542, 683,7 847,8 898,6 1.73, , 1.472, ,9 Small Scale 56,5 21,4 19,7 28,3 37,9 64,8 94,4 4,9 63,1 57,9 74,1 As to Function ( thousand ) Deposit Banks 775,9 1.35,1 1.46, , ,3 2.78, 2.398, , , ,4 3.45, Participation Banks,,,, 41,7 99,5 172, 275,5 443, 587,2 731,4 Development and Investment B.,,,,,,,,,,, In parallel with order in depositor number, it is observed that there are public capital banks in the first ranks in bank cards number. While the share of the bank included in the first rank in total bank card number was 2%, its share is significantly more than the share of the rest of the banks. The fact that the said bank has made mediation in government-citizen relation that has to be executed on bank is playing role in this state to come true. On the other hand, there were 9 deposit banks and 1 participation bank in the first 1 banks ranking in first 1 banks. Table 3.4-6: First 1 Banks in Number of Bank Cards % 2 Share 22 Share 24 share 26 Share 28 Share 21 Share 1 VAKIFBANK 24,8 VAKIFBANK 26,5 VAKIFBANK 25,7 VAKIFBANK 23,1 ZİRAAT B. 19,6 ZİRAAT B. 2, 2 ZİRAAT B. 19,3 ZİRAAT B. 21,4 ZİRAAT B. 2,6 ZİRAAT B. 19,8 İŞ BANKASI 13,1 VAKIFBANK 12,2 3 İŞ BANKASI 14,8 İŞ BANKASI 13,9 İŞ BANKASI 12,9 İŞ BANKASI 13,7 VAKIFBANK 12,3 İŞ BANKASI 12, 4 YAPI KR. B. 9,7 YAPI KR. B. 9,7 AKBANK 9,7 AKBANK 9,2 AKBANK 12,3 HALKBANK 1,2 5 AKBANK 6,9 AKBANK 7, YAPI KR. B. 7,9 HALKBANK 7,6 HALKBANK 8, GARANTİ B. 8,8 6 PAMUKBANK 6,3 GARANTİ B. 6,6 GARANTİ B. 6,1 YAPI KR. B. 6,5 GARANTİ B. 7,9 YAPI KR. B. 8,1 7 GARANTİ B. 3,9 HALKBANK 4,8 HALKBANK 4,9 GARANTİ B. 6,2 YAPI KR. B. 7,7 AKBANK 7,4 8 EMLAKBANK 3,3 PAMUKBANK 3,3 FORTİS 3,6 ING BANK 4,5 ING BANK 5, FİNANSBANK 5, 9 HALKBANK 2,7 FORTİS 1,5 ING BANK 2,6 FORTİS 2,6 FİNANSBANK 2,6 BANKASYA 2,9 1 DEMİRBANK 1,7 ING BANK 1,3 KOÇBANK 1,8 DENİZBANK 1,8 FORTİS 2,5 ING BANK 2,8 BRSA 72 Structural Developments in Banking December 21

92 Box 23: Global Outlook in the Number of Bank Card There is.9 bank card per person in Turkey according to global comparison made concerning bank card usage in banking services. EU average in bank card per person is one and Turkey has come closer to EU average in bank card amount per person. While Japan is in the best state in the world by 3.2 bank cards per person, Portugal is in the first rank by 1.6 cards per person in EU countries. Number of Bank Card (Million) Bank Card per Person (Unit) Japan 394, 47, 421, 49, 412, 3,1 3,2 3,3 3,2 3,2 South Korea 81,6 9,2 12, 118,8 124,3 1,7 1,9 2,1 2,4 2,6 Australia 28,9 3,6 32,3 35,3 37,9 1,4 1,5 1,5 1,6 1,7 Portugal 14,1 15, 15,8 16,7 16,7 1,3 1,4 1,5 1,6 1,6 Netherlands 25,4 25,5 25,3 25,2 24,4 1,6 1,6 1,5 1,5 1,5 Belgium 12,7 13,2 13,7 14,7 15, 1,2 1,3 1,3 1,4 1,4 England 67, 68,3 71,6 76,3 79,3 1,1 1,1 1,2 1,2 1,3 Slovenia 2,3 2,4 2,5 2,6 2,6 1,2 1,2 1,2 1,3 1,3 Germany 88,5 89,7 1,3 1,7 11,7 1,1 1,1 1,2 1,2 1,2 Brazil 163,9 174,5 182,4 27,9 221,5,9,9 1, 1,1 1,2 Malta,3,4,4,4,5,9,9 1, 1,1 1,1 Lithuania 2,8 3,2 3,5 3,7 3,7,8,9 1, 1,1 1,1 France 38,9 56,4 64,4 66, 7,8,6,9 1, 1, 1,1 Estonia 1,1 1,3 1,3 1,4 1,4,8,9 1, 1, 1, Luxembourg,4,4,5,5,5,9,9 1, 1, 1, Switzerland 6,3 6,6,7 7,6 7,9,8,9,1 1, 1, Denmark 3,9 4,2 4,5 5,1 5,5,7,8,8,9 1, EU ,6 47,6 452,9 471,4 482,1 v.y. v.y.,9,9 1, Austria 6,7 7, 7,2 7,5 7,8,8,8,9,9,9 South Cyprus,4,5,6,6,7,5,6,7,8,9 USD 269, 271,4 273,9 276,3 278,8,9,9,9,9,9 Turkey 48,2 53,5 55,5 6,6 64,7,7,7,8,9,9 Sweden 6,7 7,2 7,5 7,9 8,2,7,8,8,9,9 Lithuania 1,6 1,8 1,8 1,9 2,,7,8,8,8,9 Bulgaria 4,4 5,2 6,3 6,9 6,6,6,7,8,9,9 Finland 4,7 4,9 5,2 5,3 4,5,9,9 1, 1,,8 Russia 52,1 68,9 94,1 19,3 115,4,4,5,7,8,8 Greece 5,9 6,7 7,6 8,2 9,2,5,6,7,7,8 Slovakia 3,1 3,3 3,6 3,9 4,,6,6,7,7,7 Czech Republic 6,6 6,8 7,2 7,5 7,8,6,7,7,7,7 Hungary 6,3 6,6 6,9 7,2 7,3,6,7,7,7,7 Ireland 1,3 1,6 2,5 2,9 3,1,3,4,6,7,7 Spain 31,8 31,6 31,5 31,6 3,7,7,7,7,7,7 Canada 2,5 2,3 21,3 21,5 22,3,6,6,6,6,7 Italy 3,7 32,6 33,1 35,5 35,5,5,6,6,6,6 Poland 15,4 16,9 18,3 2,5 22,,4,4,5,5,6 Mexico 36,1 51,7 51,9 56,9 6,8,3,5,5,5,6 Saudi Arabia 8, 1, 11,1 12,4 13,7,3,4,5,5,5 Romania 6,6 7,9 9,8 1,8 1,6,3,4,5,5,5 India 49,8 75, 12,4 137,4 182,,,1,1,1,2 Source: BIS, ECB, IMF BRSA 73 Structural Developments in Banking December 21

93 4.1. Price Differentiation in Banking 4. BEHAVIOUR IN BANKING SECTOR In this section, the impacts of the distribution of scale, function and ownership on the prices of banking products, commissions and banking services prices of banks are analyzed. Participation banks are not included in the evaluation made on scale and ownership structure. The differentiations observed in price, commissions and fees in banking sector are depending on more than one factor. Scale economies, scope economies, differences between risk perception and risk calculation of banks, the diversity in asset and liability structure of banks, the differences in risk perception of markets and customers against banks etc. can be listed among the mentioned factors. Especially, the customer and maturity differentiations in the loan and deposit portfolio owned by banks as well as the deviations in risk premium applied by financers of banks (depositors or other banks) to banks because of scale or other issues are thought to be important. First of all, in order to make a general evaluation on the prices of banking products on assets and liabilities sides, average placement interest and average interest cost are examined. In the evaluation made by scale, it is seen that there are differentiations in favor of medium scale banks concerning average placement interest and in favor of small scale banks concerning average interest cost. Grafik 4.1-1: Average Placement Interest and Interest Cost by Scale* 3,5 3, Average Placement Interest 2,5 2, Average Interest Cost 2,5 1,5 2, 1,5 Large Scale Medium Scale Small Scale 1,,5 Large Scale Medium Scale Small Scale * The ratio of year-end value of total interest income to average value of interest-sensitive assets within the year is defined as average placement interest; the ratio of year-end value of total interest expenses to average value of interestsensitive liabilities within the year is defined as average interest cost. In the evaluation made by functional distribution, it is seen that the situation in average placement interest/ profit share is in favor of deposit banks; there is convergence for deposit and participation banks concerning average interest cost, average interest cost of development and investment banks is lower than the mentioned two groups. Grafik 4.1-2: Average Placement Interest and Interest Cost by Function 5 4 Average Placement Interest/Profit 2,5 2, Avererage Interest Cost 3 1,5 2 1, 1 Development and Investment Banks Participation Banks Deposit Banks,5, Development and Investment Banks Participation Banks Deposit Banks BRSA 74 Structural Developments in Banking December 21

94 In the evaluation made according to ownership, it is seen that, for deposit banks, there is a convergence between foreign and domestic private banks regarding average placement interest and average interest cost. State banks have higher average placement interest and average interest cost than these two groups. Grafik 4.1-3: Average Placement Interest and Interest Cost by Ownership 4, 3,5 Average Placement Interest 3, 2,5 Average Interest Cost 3, 2, 2,5 1,5 2, 1,5 Public Banks Foreign Banks Private Banks 1,,5 Public Banks Foreign Banks Private Banks The evaluation made according to ownership concerning development and investment banks shows that state banks have lower average placement interest and average interest cost. Grafik 4.1-4: Average Placement Interest and Interest Cost by Ownership 2,5 Average Placement Interest (Development and Investment Banks) 1,25 Average Interest Cost (Development and Investment Banks) 2,,75 1,5 1, Public Banks Foreign Banks Private Banks,25 -,25 Public Banks Foreign Banks Private Banks The differentiation by scale, function and ownership structure in interest rates relating to loans which are important for intermediation function of banks as well as deposit/funds collected are also evaluated. In the evaluation made by scale in average loan and deposit interests, it is seen that loans extended by medium scale banks are priced higher in average. In deposit interests, it s remarkable that there is a ranking as per scale and banks pay lower deposit interest in average as the scale gets bigger. Grafik 4.1-5: Average Loan and Deposit Interest Rate by Scale* 6 5 Average Loan Interest Rate 5 4 Average Deposit Interest Rate Large Scale Medium Scale Small Scale 2 1 Large Scale Medium Scale Small Scale BRSA 75 Structural Developments in Banking December 21

95 * The ratio of year-end value of total interest income obtained from loans to the average value of interest-sensitive loans item within the year is defined as average loan interest; the ratio of year-end value of total interest expenses paid to deposit to the average value of interest-sensitive deposit item within the year is defined as average deposit interest. In the evaluation made according to function in average loan and deposit interest, it is seen that the difference between average interest rates relating to loans extended and deposit/funds collected by deposit and participation banks is closed in the last two years and there is not a differentiation currently. Furthermore, it is seen that there is an important difference in average loan interests of development and investment banks when compared to other two groups. Grafik 4.1-6: Average Loan and Deposit Interest Rate by Function* 4,5 4, 3,5 Average Loan Interet Rate/Profit 3, 2,5 Average Deposit Interest Rate 3, 2,5 2, 2, 1,5 1, Development and Investment Banks Participation Banks Deposit Banks 1,5 1, Participation Banks Deposit Banks * For participation banks deposit defines the funds collected and interest defines the dividend. In the evaluation made by ownership concerning average loan and deposit interest, it is seen that average loan interest in foreign banks is higher than other two groups. In deposit banks, although average deposit interest is higher than other two groups for state banks, it is seen that there is a convergence in average deposit interest of state, foreign and domestic private banks in the last period. Grafik 4.1-7: Average Loan and Deposit Interest Rate by Ownership Average Loan Interest Rate (Deposit Banks) Public Banks Foreign Banks Private Banks 3,5 3, 2,5 2, 1,5 1, Average Deposit Interest Rate (Deposit Banks) Public Banks Foreign Banks Private Banks Average Loan Interest Rate (Development and Investment Banks) Public Banks Foreign Banks Private Banks To evaluate if there is a differentiation in the commissions and banking services fees taken by banks as well as the wages paid by them, total incomes and total expenses collected and paid by banks are proportioned to their average assets and compared by scale, function and ownership. Within this frame, it is observed that the commissions and fees taken by banks per unit asset are higher in medium scaled banks than in large and small scale banks. Personnel expenses per unit assets realized as the highest in medium scale banks and lowest in large scale banks. BRSA 76 Structural Developments in Banking December 21

96 Grafik 4.1-8: Commission and Fees Income and Personnel Expenses Distribution by Scale,8,7 Commission and Fees Income /Average Assets,7,6 Personnel Expenses/Average Assets,6,5,4 Large Scale Medium Scale Small Scale,5,4,3 Large Scale Medium Scale Small Scale,3, In the evaluation made according to function, it is seen that commission and fees taken by banks per unit asset is higher in deposit banks than participation banks. Personnel expenditures per unit asset is realized as the highest in participation banks and the lowest in development and investment banks. Grafik 4.1-9: Fees Income and Personnel Expenses by Function,5,4 Commission and Fees Income /Average Assets,6,5 Personnel Expenses/Average Assets,3,2 Development and Investment Banks Participation Banks Deposit Banks,4,3 Development and Investment Banks Participation Banks Deposit Banks,1,2, According to the evaluation made by ownership, it is seen that commissions and fees taken by banks in deposit banks per unit asset are higher in foreign banks. Personnel expenditures per unit asset realized as the highest in foreign banks again. Grafik 4.1-1: Commission and Fees Income and Personnel Expenses by Ownership,7,6 Commission and Fees Income /Average Assets (Deposit Banks),7,6 Personnel Expenses/Average Assets (Deposit Banks),5,4,3 Public Banks Foreign Banks Private Banks,5,4,3 Public Banks Foreign Banks Private Banks,2, The evaluation made according to ownership concerning development and investment banks shows that commissions and fees taken by banks per unit asset as well as personnel expenses thereof per unit asset is realized the highest in foreign banks and the lowest in state banks. BRSA 77 Structural Developments in Banking December 21

97 Grafik : Commission and Fees Income as well as Personnel Expenses by Ownership,8,6 Commission and Fees Income /Average Assets (Development and Investment Banks),7 Personnel Expenses/Average Assets (Development and Investment Banks),4,5,2,3 Public Banks Foreign Banks Private Banks, -,2 Public Banks Foreign Banks Private Banks, Merger and Acquisitions Within the period of , 16 mergers and acquisitions have been realized in the Turkish Banking Sector. Especially the share of the number of mergers and acquisitions during 21 and 22 within the sector assets is considerably high. Mergers and acquisitions transactions have continued until the end of 26, then interrupted for the four following years and in 211, one mergers and acquisitions transaction is realized. When the general characteristics of the mergers and acquisitions behavior in financial markets throughout the globe are analyzed, it is seen that it is done to increase the efficiency and profitability and to open up to product varieties and customers in some geographic regions. Mand acquisitions transactions are grouped especially in determined periods. For the Turkish Banking System, this aggregation is realized in after the crisis of November 2 and February 21. It is considered that the search for cost efficiency and economy of scales in a sector transformed and in which the competitiveness was increased after these crises were affective in this situation. As a matter of fact, the examples of merger of banks operating within the same group are clearly reflecting this purpose. When the asset concentration level in the sector as of 21 is analyzed, it is estimated that there may be more mergers and acquisitions between medium and small scale banks to acquire more market shares. The transfer realized in the beginning of 211 and which was equivalent to the 1.16% of sector size may be evaluated within this frame. Tablo 4.2-1: Number and Sizes of Mergers and Acquisitions by Years Nr. Of Transactions Total Value (TL thousands)* Share ** ,13, ,142, , ,249, ,738, ,28, ,877, *It is assumed that total asset value of the bank taken over defines the total value of the merger. ** Defines the share in total assets of banking sector. The effects of the 16 mergers and acquisitions in the Turkish Banking Sector on the asset concentration and number of personnel in the sector are analyzed. The biggest effect on the sector concentration was realized after the transfers of T. Emlak Bankası to T.C. Ziraat Bankası and of Osmanlı Bankası to T. Garanti Bankası in 21 and of Pamukbank to T. Halk Bankası in 24 and of Koçbank to Yapı ve Kredi Bankası in 26. BRSA 78 Structural Developments in Banking December 21

98 In most of these mergers and acquisitions transactions (in 11 out of 16), it is seen that the number of personnel was reduced to increase the cost efficiency of the transferee or the company established after the merger. In the other 5 transactions, the number of personnel of the company established after the merger was not changed. Tablo 4.2-2: Concentration Analysis of Mergers and Acquisitions Date Institutions Merged Title After Merger T. Emlak Bankası A.Ş. ve T.C. Ziraat Bankası A.Ş. Birleşik Türk Körfez Bankası A.Ş. ve Osmanlı Bankası A.Ş. Tekfen Yatırım ve Finansman Bankası A.Ş. ve Bank Ekspres A.Ş. Osmanlı Bankası A.Ş. ve T. Garanti Bankası A.Ş. Demirbank T.A.Ş. ve HSBC Bank A.Ş. Morgan Guaranty Trust Company ve The Chase Manhattan Bank Market Share Before Merger Market Share After Merger Number of Personnel Before Merger * Number of Personnel After Merger** T.C. Ziraat Bankası A.Ş. 12,49 15, Osmanlı Bankası A.Ş. 2,2 3, Tekfen Bank A.Ş.,15, T. Garanti Bankası A.Ş. 6,21 9, HSBC Bank A.Ş.,9 1, JP Morgan Chase Bank,18, Sümerbank A.Ş. ve Oyak Bank A.Ş. Oyak Bank A.Ş.,28 1, Sınai Yatırım Bankası A.Ş. ve T. Sınai Kalkınma Bankası A.Ş. Milli Aydın Bankası A.Ş. ve Denizbank A.Ş. T. Sınai Kalkınma Bankası A.Ş.,37, Denizbank A.Ş. 1,4 1, Fibabank A.Ş. ve Finansbank A.Ş. Finansbank A.Ş. 2,47 2, Credit Lyonnais Türkiye İstanbul Merkez Şubesi ve Credit Agricole Indosuez Türk Bank A.Ş. Pamukbank T.A.Ş. ve T. Halk Bankası A.Ş. Ak Uluslararası Bankası A.Ş. ve Akbank T.A.Ş. Family Finans Kurumu A.Ş. ve Anadolu Finans Kurumu A.Ş. Koçbank A.Ş. ve Yapı ve Kredi Bankası A.Ş. Fortis Bank A.Ş. ve Türk Ekonomi Bankası A.Ş. Credit Agricole Indosuez Türk Bank A.Ş.,125, T. Halk Bankası A.Ş. 7,15 9, Akbank T.A.Ş. 12,42 12, Türkiye Finans Katılım Bankası A.Ş. Yapı ve Kredi Bankası A.Ş. Türk Ekonomi Bankası A.Ş.,37, ,94 1, ,88 3, * Shows total number of domestic personnel of the parties of merger or acquisition transactions as of the date of merger. **Shows the number of domestic personnel of the institution occurred after the mergers and acquisitions on the date of 6 months after than the date of transaction. The share transfers which are the third re-structuring method in the sector alongside with the mergers and acquisitions are the kind of transactions resulted mostly by the entrance of foreign capital. Especially the year 26 was the year with intensive share transfers resulted by the entrance of foreign capital. It is thought that macroeconomic and political stability as well as positive expectation concerning the future are effective in the entrance of foreign capital. Furthermore, the barriers in front of these entrances, emanating from the present regulations and the strategic purposes concerning the usage of the present deposit of the company of whose shares are transferred are important elements for share transfers Advertising and Promotion Activities Advertising and promotion are among the instruments used by banks to increase their competitive power inside the sector. The decrease of the shares of first 5 and 1 banks in advertising expenses which was started in 27, has started to increase in 29 and kept increasing in 21 and reached respectively to 6.8% and 85.2%. The share of small scale banks within the total advertising expenses of the sector has started to decrease since 28 and reduced to 3.6% in 21. The shares of medium and large scale banks within advertising BRSA 79 Structural Developments in Banking December 21

99 expenses have both increased recently. When analyzed by years, the decrease of the shares of large scale banks was reflected as an increase in the shares of medium scale banks. As of 21, the share of large scale banks advertising expenses within total advertising expenses realized as 64.3%, while the share of medium scale banks is 32.1%. Tablo 4.3-1: Advertising Expenses Concentration Indicators Advertising Expenses First 5 Banks First 1 Banks Distribution by Scale Large Scale Medium Scale Small Scale Total Functional Distribution Deposit Banks Development and Investment Participation Banks v.y. v.y. v.y Total As of functional distribution, while market share of participation banks considering advertising expenses decreased when compared to the previous year in 21, the market share of deposit banks as well as development and investment banks increased. In 21, the share of advertising expenses of deposit banks in total advertising expenses realized as 93.7% while the share of development and investment banks realized as.7% and the share of participation banks realized as 5.6%. Grafik 4.3-1: Advertising Expenses Concentration and Functional Distribution First 5 Banks Medium Scale Large Scale Small Scale ,,3,,2,, ,7 99,8 99,7 96, 93,8 93,1 92,9 92,9 93,7 It is seen that private banks have an important place in advertising expenses in first 1 banks ranking. In 21, total share of first three banks in advertising expenses realized as 43.5%. As of 21, one participation bank and two state banks are among the first 1 banks which makes the highest expenditures to advertising in the sector ,7,3 25 5,9 6,6 6,7 6,8 5,6,2 26,3,4, Deposit Banks Development and Investment Banks Participation Banks 29,7 21 BRSA 8 Structural Developments in Banking December 21

100 Tablo 4.3-2: First 1 Banks in Advertising Expenses 22 Share 24 Share 26 Share 28 Share 21 Share 1 YAPI VE KREDİ B. 3. T. İŞ BANKASI 21.9 T. İŞ BANKASI 23.8 AKBANK 13.5 T. İŞ BANKASI AKBANK 19.1 AKBANK 21.5 YAPI VE KREDİ B T. İŞ BANKASI 12.9 T. GARANTİ B T. İŞ BANKASI 12.4 YAPI VE KRE. B AKBANK 15.1 T. GARANTİ B AKBANK T. GARANTİ B T. GARANTİ B. 7.7 T. GARANTİ B. 8.9 YAPI VE KREDİ B. 1.2 YAPI VE KRE. B FORTİS BANK 6. HSBC BANK 4.9 HSBC BANK 5.9 FİNANSBANK 7.5 FİNANSBANK HSBC BANK 3.8 T. VAKIFLAR B. 4.3 FORTİS BANK 4.3 HSBC BANK 7.2 DENİZBANK KOÇBANK 3.1 FORTİS BANK 3.9 FİNANSBANK 4.2 T. VAKIFLAR B. 5.4 T. VAKIFLAR B CITIBANK 2.3 KOÇBANK 3. T. VAKIFLAR B. 4.1 T. HALK B. 4. HSBC BANK FİNANSBANK 2.2 DENİZBANK 3. DENİZBANK 3.1 ASYA K. B. 3.9 T. HALK B PAMUKBANK 2. FİNANSBANK 2.8 ASYA K. B. 2.6 CITIBANK 3.4 ASYA K. B. 3.9 The decrease which started in 27 in the advertising expenses/non-interest expenses ratio of first 5 and first 1 banks continued in 21 and realized as 4.4% and 3.9%, respectively. The decrease which started in 27 in the advertising expenses/non-interest expenses ratio of large scale banks started to increase in 21 and realized as 2.9%. The decrease which started in the mentioned ratio of medium scale banks in 26 started to increase in 21 and realized as 3.5%. The mentioned ratio of small scale banks decreased in the last five years and it decreased to 1.1% as of 21. Tablo 4.3-3: Advertising Expenses /Non-interest Expenses Advertising Expenses /Non-interest Expenses First 5 Banks 8,2 7,8 8,7 6,8 7,6 7,1 5,1 4,5 4,4 First 1 Banks 6,2 5,8 7,4 6,6 6,5 5,6 4, 3,5 3,9 Distribution by Scale Large Scale 3,9 4,1 5,2 3,5 4,3 3,1 2,9 2,5 2,9 Medium Scale 2,6 3,6 4,5 5,3 4,6 4,6 4, 3, 3,5 Small Scale 1,9 1,8 2,1 3,2 2,9 3,3 2,1 2, 1,1 Sector 3,4 3,8 4,8 3,8 4,2 3,5 3,1 2,6 2,9 Functional Distribution Deposit Banks 3,5 3,9 4,9 3,8 4,2 3,5 3,1 2,6 2,9 Development and Investment,3,2,5,5,4,5,6,4 1, Participation Banks v.y. v.y. v.y. 4,3 6,1 5,3 4,2 3,4 2,9 Sector 3,4 3,8 4,8 3,8 4,2 3,5 3,1 2,6 2,9 As of functional distribution, it is seen that advertising expenses /non-interest expenses ratio of deposit and participation banks are higher than development and investment banks. In 21, while advertising expenses /non-interest expenses ratio increased by 2.9% and 1% respectively in deposit and development and investment banks when compared to the previous year, it decreased from 3.4% to 2.9% for participation banks when compared to the previous year. Grafik 4.3-2: Advertising Expenses /Non-interest Expenses by Scale and Function ,1 4,3 5,3,5 4,2,3,2,5,4 3,4 2,9,5,6 3,5 3,9 4,9 3,8 4,2,4 1, 3,5 3,1 2,6 2, First 5 Banks Medium Scale Large Scale Small Scale Deposit Banks Development and Investment Banks Participation Banks A development and investment bank was in the first rank in the first 1 banks ranking concerning advertising expenses/non-interest expenses ratio as of 21. There weren t any BRSA 81 Structural Developments in Banking December 21

101 state banks in the first ten of advertising expenses/non-interest expenses ratio in 21. One participation bank and two development and investment banks were among the first 1 banks which made the highest advertising expenditure as of 21. Tablo 4.3-4: First 1 Banks in Advertising Expenses/Non-interest Expenses % 22 Ratio 24 Ratio 26 Ratio 28 Ratio 21 Ratio 1 YAPI VE KREDİ B. 9. AKBANK 1.7 T. FİNANS K. B. 9.5 CITIBANK 7.4 AKTİF Y. B NUROL Y. B. 8.9 CITIBANK 7.8 ASYA K. B. 7.9 ASYA K. B. 6.7 ASYA K. B AKBANK 7.6 FİBABANK 7.7 T. İŞ BANKASI 7.5 HSBC BANK 5.8 FİNANSBANK FORTİS BANK 7.6 YAPI VE KREDİ B. 7.6 HSBC BANK 7. FİNANSBANK 4.8 AKBANK HSBC BANK 6.4 HSBC BANK 6.9 FİBABANKA 6.8 AKBANK 4.3 DENİZBANK T. İMAR B. 6.3 T. İŞ BANKASI 6.5 AKBANK 6.4 T. FİNANS K. B. 4. HSBC BANK 4. 7 CITIBANK 6.1 AKTİF Y. B. 6.4 T. EKONOMİ B. 6.1 FORTİS BANK 3.5 T. İŞ BANKASI T. GARANTİ B. 4.3 DENİZBANK 6. FORTİS BANK 5.8 ŞEKERBANK 3.3 T. GARANTİ B FİNANSBANK 3.8 FORTİS BANK 5.4 TURKLAND B. 5.6 T. GARANTİ B. 3.3 ŞEKERBANK T. İŞ BANKASI 3.7 ŞEKERBANK 4.7 YAPI VE KREDİ B. 5.1 T. İŞ BANKASI 3. TAİB YAT. B. 3. The decrease in the share in the sector of first 1 banks in promotion expenses which continued until 29 started to increase as of 21 and reached to 95.7%. The share of promotion expenses of first 5 banks in sector total in 21 decreased when compared to 29 and realized as 76.4%. In promotion expenses, while the share of promotion expenses of large scale banks which already have the highest share in sector total increased by 1.5 points to 88.2% in 21 when compared to the previous year, the share of medium scale banks decreased by 1.5 points when compared to the previous year and realized as 11.7%. The share of promotion expenses of small scale banks in sector total did not change in 21 when compared to the previous year. Tablo 4.3-5: Promotion Expenses Concentration Indicators Promotion Expenses First 5 Banks 95,5 85,6 81,6 82, 79,3 76,4 First 1 Banks 99,7 98,7 97,5 95,5 94,7 95,7 Distribution by Scale Large Scale 9,8 81,4 81,7 85,4 86,7 88,2 Medium Scale 8,7 18,2 17,8 14,2 13,2 11,7 Small Scale,4,4,5,4,1,1 Sector 1, 1, 1, 1, 1, 1, Functional Distribution Deposit Banks 1, 99,8 99,3 99,2 99,4 99,6 Development and Investment,,2,7,8,6,4 Participation Banks 1, 1, 1, 1, 1, 1, As of functional distribution, it is seen that deposit banks nearly comprises the whole of the sector in promotion expenses. In 21, while the market share of participation banks decreased, market share of deposit banks increased. As of 21, while the share of promotion expenses of deposit banks in sector total realized as 99.6%, the share of participation banks realized as.4%. BRSA 82 Structural Developments in Banking December 21

102 Grafik 4.3-3: Promotion Expenses Concentration and Functional Distribution ,,2,7,8,6,4 1, 99,8 99,3 99,2 99,4 99, First 5 Banks Medium Scale Large Scale Small Scale Deposit Banks Participation Banks In 21, there is a state bank in the third rank of first 1 banks in promotion expenses. As of 21, there aren t any participation banks in promotion expenses in first 1 banks ranking which includes 3 state banks. Tablo 4.3-6: First Banks in Promotion Expenses % 25 Share 26 Share 27 Share 28 Share 29 Share 21 Share T. GARANTİ 22.3 AKBANK AKBANK AKBANK AKBANK AKBANK 1 B. YAPI VE YAPI VE YAPI VE KREDİ B. T. GARANTİ B. T. GARANTİ B. AKBANK 2 KREDİ B. KREDİ B T. İŞ T. VAKIFLAR 15. T. İŞ BANKASI T. GARANTİ B. T. İŞ BANKASI T. VAKIFLAR B. 3 BANKASI B. T. GARANTİ T. GARANTİ T. İŞ 9.2 T. İŞ BANKASI YAPI VE KREDİ B. YAPI VE KREDİ B. 4 B. B. BANKASI YAPI VE 8.8 FİNANSBANK FİNANSBANK FİNANSBANK T. VAKIFLAR B. T. İŞ BANKASI 5 KREDİ B T. VAKIFLAR FORTİS BANK HSBC BANK FİNANSBANK T. HALK B. T. HALK B. 6 B. 7 T. HALK B..8 DENİZBANK 3.2 HSBC BANK 4. HSBC BANK 3.5 ZİRAAT B. 3.3 ZİRAAT B KOÇBANK.8 T. HALK B. 2.5 DENİZBANK 3.5 DENİZBANK 2.3 FİNANSBANK 3.2 FİNANSBANK ING BANK.6 FORTİS BANK 1.2 FORTİS BANK 1.8 T. HALK B. 2.2 DENİZBANK 2.7 HSBC BANK ŞEKERBANK.3 T. VAKIFLAR B..6 T. HALK B. 1.2 T. EKONOMİ B. 1.3 FORTİS BANK 2.2 DENİZBANK 1.7 Promotion expenses/non-interest expenses ratio of the first 5 and the first 1 banks increased in 21 to 11% and 8.2%, respectively when compared to previous year. In 21, promotion expenses/non-interest expenses ratio of large-scale banks increased to 8.9% when compared to previous year, while the said ratio of medium-scale banks decreased to 2.8% when compared to previous year. Promotion expenses/non-interest expenses ratio of small-scale banks has not changed in the last two years. Tablo 4.3-7: Promotion Expenses/Non-Interest Expenses Concentration Indicators Promotion Expenses/Non-Interest Expenses First 5 Banks First 1 Banks Distribution by Scale Large Scale Medium Scale Small Scale Sector Functional Distribution Deposit Banks Development and Investment Participation Banks By functional distribution, it is seen that promotion expenses/non-interest expenses ratio is higher in deposit banks than participation banks. In 21, promotion expenses/non-interest BRSA 83 Structural Developments in Banking December 21

103 expenses ratio in deposit banks increased to 6.9% when compared to previous year, while in participation banks it decreased to,5%. Grafik 4.3-4: Promotion Expenses/Non-Interest Expenses by Scale and Function First 5 Banks Medium Scale Large Scale Small Scale 8 7,9,7 6,8 5, ,3 6,2, 5,5 2 4,7 1 2, Deposit Banks Participation Banks,5 6,9 21 In 21, there were 3 state banks among the first 1 banks in promotion expenses/non-interest expenses ratio. Tablo 4.3-8: First 1 Banks in Promotion Expenses/Non-Interest Expenses % 25 Ratio 26 Ratio 27 Ratio 28 Ratio 29 Ratio 21 Ratio 1 AKBANK 1.9 AKBANK 14.2 AKBANK 13.4 AKBANK 13.2 AKBANK 13.8 AKBANK FİNANSBANK 4.6 YAPI VE KREDİ B. 8.4 FİNANSBANK 7.4 T. VAKIFLAR B. 1.6 T. VAKIFLAR B T. VAKIFLAR B T. GARANTİ B. 4. HSBC BANK 6.8 T. GARANTİ B. 7.3 T. GARANTİ B. 9. T. GARANTİ B. 8.7 T. GARANTİ B T. İŞ BANKASI 3. FİNANSBANK 6.1 YAPI VE KREDİ B. 6.9 T. İŞ BANKASI 8.1 YAPI VE KREDİ B. 6.4 T. HALK B YAPI VE KREDİ B. 2.5 T. GARANTİ B. 5.6 T. İŞ BANKASI 5.9 YAPI VE KREDİ B. 6.5 T. İŞ BANKAS 5. YAPI VE KREDİ B FORTİS BANK 1.4 DENİZBANK 4.6 HSBC BANK 5.8 HSBC BANK 5.3 T. HALK B. 4.4 T. İŞ BANKASI KOÇBANK.7 T. İŞ BANKASI 2.7 DENİZBANK 5.7 FİNANSBANK 5.1 FORTİS BANK 4.4 HSBC BANK ING BANK.7 T. HALK B. 2.5 T. VAKIFLAR B. 4.8 DENİZBANK 3.9 DENİZBANK 4. FİNANSBANK T. HALK B..6 FORTİS BANK 1.7 FORTİS BANK 3.2 T. HALK B. 2.7 FİNANSBANK 3.7 FORTİS BANK ŞEKERBANK.4 ING BANK.8 ASYA K. B. 2. FORTİS BANK 2.5 HSBC BANK 3.6 ZİRAAT B Research and Development Activities Banking sector R&D expenses have always conducted below the expected. Share of R&D expenses of the first 1 banks according to asset size within total R&D expenses of the sector reached to 99.7% as of 21, constituting a very large proportion of total. In 21, share of R&D expenses of the first 5 banks within sector total decreased to 94.5% when compared to 29. Large-scale banks have always had the highest share in R&D expenses by scale. In 21, share of R&D expenses of large-scale banks within total sector increased by.9 point to 73.4% when compared to previous year, while share of R&D expenses of medium-scale banks decreased by 1.2 points to 23.2% when compared to previous year. Share of R&D expenses of small-scale banks within total sector increased by.3 point to 3.4% when compared to previous year. Tablo 4.4-1: R&D Expenses Concentration Indicators R&D Expenses First 5 Banks 9,4 93,8 93, 91,4 91,6 93,4 97,1 95,3 94,5 First 1 Banks 98,1 98,4 98,5 98,9 99, 99,4 99,7 99,7 99,7 Distribution by Scale Large Scale 84,1 85,2 87,5 7,6 63,4 86,3 89,4 72,5 73,4 Medium Scale 11,3 13,7 11,3 26, 33,2 12,2 9,4 24,4 23,2 Small Scale 4,6 1,1 1,2 3,5 3,3 1,5 1,2 3,1 3,4 Sector Functional Distribution Deposit Banks 99,5 99, 99,9 99,9 99,8 98,7 98,9 97,1 96,9 Development and Investment,5 1,,1,1, 1,3 1, 2,1 2,7 Participation Banks v.y. v.y. v.y.,,2,,1,7,4 First 5 Banks BRSA 84 Structural Developments in Banking December 21

104 By functional distribution, it is seen that deposit banks constitute a very large proportion of R&D expenses. On the contrary, while market share of deposit and participation banks in R&D expenses decreased in 21, market share of development and investment banks increased. In 21, share of deposit banks R&D expenses within total sector realized as 96.9%, while shares of development and investment banks and participation banks realized as 2.7% and.4%, respectively. Grafik 4.4-1: R&D Expenses by Scale and Function 1 8 1,,5,, 1,,1,,1,,1,,1,7,4 1,3 1, 2,1 2, ,5 99, 99,9 99,9 99,8 98,7 98,9 97,1 96, İlk 5 Banka Orta Ölçekli Büyük Ölçekli Küçük Ölçekli Mevduat Bankaları Kalkınma ve Yatırım Katılım Bankaları Share of the first 3 banks in R&D expenses have always constituted almost whole of the sector. In 21, shares of the first 3 banks in R&D expenses realized as 85.2%. One participation bank and one development and investment bank are included in the first 1 banks making the biggest expense on R&D in the sector as of 21. Tablo 4.4-2: First 1 Banks in R&D Expenses % 22 Share 24 Share 26 Share 28 Share 21 Share 1 YAPI VE KREDİ B T. GARANTİ B T. İŞ BANKASI 35.6 T. İŞ BANKASI 76.6 T. GARANTİ B T. İŞ BANKASI 31.5 AKBANK 27.8 FİNANSBANK 29.1 T. GARANTİ B. 1.3 T. İŞ BANKASI T. VAKIFLAR B. 4. T. İŞ BANKASI 1.1 T. GARANTİ B FİNANSBANK 6.5 ING BANK YAPI VE KREDİ FORTİS BANK AKBANK ING BANK FİNANSBANK 4 B. 5 KOÇBANK 3.2 ING BANK 5.7 YAPI VE KREDİ B. 4.1 YAPI VE KREDİ B. 1.8 YAPI VE KREDİ B DENİZBANK 2.6 FİNANSBANK 2.2 ING BANK 3.7 T. İHR. KREDİ B. 1. T. İHR. KREDİ B DEUTSCHE B. 1.8 KOÇBANK 1.3 ŞEKERBANK 2.1 HSBC BANK.9 HSBC BANK FİBABANKA 1.5 ŞEKERBANK 1. THE ROYAL B..6 AKBANK.6 AKBANK KUVEYT TÜRK K..3 T.C. ZİRAAT B. DENİZBANK T. VAKIFLAR B. T. HALK B. 9 B. 1 ŞEKERBANK.8 T. EKONOMİ B..5 DENİZBANK.5 THE ROYAL B..1 ARAP TÜRK B..1 When it is analyzed by years, it is seen that R&D expenses have a rather small share within total non-interest expenses. The decrease began in R&D expenses/non-interest expenses ratio of the first 5 and the first 1 banks in 28 continued also in 21 and the related ratio realized as.8% and 6%, respectively. R&D expenses/non-interest expenses ratio decreased in 29 and 21 for large-scale banks and in 28 and 21 for medium-scale banks. R&D expenses/noninterest expenses ratio of small-scale banks experienced no significant change in recent years. BRSA 85 Structural Developments in Banking December 21

105 Tablo 4.4-3: R&D Expenses/Non-Interest Expenses R&D Expenses/Non-Interest Expenses First 5 Banks First 1 Banks Distribution by Scale Large Scale Medium Scale Small Scale Sector Functional Distribution Deposit Banks Development and Investment Participation Banks v.y. v.y. v.y First 5 Banks By functional distribution, it is seen that R&D expenses/non-interest expenses ratio is higher in deposit and development and investment banks than in participation banks. In 21, R&D expenses/non-interest expenses ratio decreased for deposit and development and investment banks when compared to previous year and they both recessed to.3%. Grafik 4.4-2: R&D Expenses/Non-Interest Expenses by Scale and Function 2,5 1,4 1,2 2, 1, 1,5,8,,4,,4,1 1,,5, First 5 Banks Medium Scale Large Scale Small Scale 29 21,6,4,2,,,1 22,1,,,2,2, ,,4 26,7 27,8 28 Deposit Banks Development and Investment Banks Participation Banks,4,4 29,,3,3 21 As of 21, one development and investment bank was included in the first row among the first 1 banks in R&D expenses/non-interest expenses ratio. There was no participation bank within the first 1 banks in R&D expenses/non-interest expenses ratio as of 21. Two development and investment banks were included in the first 1 banks making the biggest expense in the sector on R&D as of 21. Tablo 4.4-4: First 1 Banks in R&D Expenses/Non-Interest Expenses % 22 Ratio 24 Ratio 26 Ratio 28 Ratio 21 Ratio 1 FİBABANKA 2.1 T. GARANTİ B..6 FİNANSBANK 2.3 T. İŞ BANKASI 4.6 T. İHR. KREDİ B DEUTSCHE BANK 1. AKBANK.4 T. İŞ BANKASI 1.1 T. İHR. KREDİ B. 2.4 ING BANK GSD YAT. B..6 ING BANK.4 THE ROYAL B..9 FİNANSBANK 1.1 T. GARANTİ B..9 4 ARAP TÜRK B..4 ADABANK.2 T. GARANTİ B..6 T. GARANTİ B..7 T. İŞ BANKASI.5 5 YAPI VE KREDİ B..3 FİBABANKA.2 ING BANK.6 ING BANK.6 GSD Y. B..3 6 T. İŞ BANKASI.2 GSD YAT. B..2 TURKLAND B..5 HSBC BANK.2 FİNANSBANK.3 7 DENİZBANK.2 ARAP TÜRK B..2 ŞEKERBANK.5 GSD YAT. B..2 ARAP TÜRK B..1 8 FORTİS BANK.1 YAPI V KREDİ B..1 AKBANK.3 TURKISH BANK.2 HSBC BANK.1 9 KOÇBANK.1 FİNANSBANK.1 DEUTSCHE BANK.1 THE ROYAL B..1 TURKISH BANK.1 1 FİBA BANK.1 T. İŞ BANKASI.1 ARAP TÜRK B..1 YAPI VE KREDİ B..1 YAPI V KREDİ B..1 BRSA 86 Structural Developments in Banking December 21

106 4.5. Procyclicality in the Credit System The credit amount granted by banks fluctuates by periods. In economic growth periods, the credit amount granted by banks increase, on the other hand banks reduces credit supply in economic recession periods. Fluctuations experienced in credit supply of banks conducts in the same direction as the fluctuations in economy and causes effects increasing the severity of the fluctuations in economy. When GDP growth rate of banking sector and deposit banks credit volume which are annualized by real growth rate is analyzed, it is seen that both have been conducting together by years. However, more severe trends were experienced in real growth rate of total credit volume in some periods than the growth rate of economy. For instance, small decreases were experienced in growth rate of economy in 24 and in the third quarter of 26, while real growth rate of total credit volume experienced severe decreases. Grafik 4.5-1: Economic Growth vs. Credit Growth (Total and Deposit Banks) Total Real Credit Growth Annualized GPD Growth (Right Axis) Real Credit Growth of Deposit Banks Annualized GPD Growth (Right Axis) GDP growth rate of participation banks credit volume which is annualized by real growth rate conducts together except certain years. While there was a slowdown in annualized GDP growth rate as of the second quarter of 27, a noteworthy increase was experienced in loans extended by participation banks. A similar development was experienced in the second quarter of 21 as well. Credit volume real growth rate of development and participation banks does not generally conducts in parallel with the growth of economy. For instance, while the economy recessed in the first quarter of 29, real growth rate of credit volume of development and participation banks increased and an opposite development was experienced in the first quarter of 21. Grafik 4.5-2: Economic Growth vs. Credit Growth (Development and Participation Banks) Real Credit Growth of Development and Real Credit Growth of Participation Banks -3 Annualized GPD Growth (Right Axis) Investment Banks -4-1 Annualized GPD Growth (Right Axis) One of the most important factors affecting the credit amount extended by banks is the counterparty risk. During growth periods in economy, economic conditions of companies and household sector prospers and credibility of these sectors against banks increases. During BRSA 87 Structural Developments in Banking December 21

107 recession periods in economy, economic condition of companies and household sectors gets worse and credibility of these sectors against banks decreases. The most significant indicator of counterparty risk in respect of banks is NPL (non-performing loans) item. When NPL real growth rate belonging to banking sector and deposit banks and annualized GDP growth rate are analyzed, it is seen that these two series conduct against each other. In other words, in economic recession periods NPL increases, while in economic growth periods NPL decreases. The increase experienced in NPL increases the risk perception of banks and causes them to gradually decrease the loans they extend. In periods in which NPL decreases, risk perception of banks decreases and credit supply is increased gradually. Grafik 4.5-3: Economic Growth, Total and Deposit Banks NPL Growth Total Real NPL Growth Annualized GPD Growth (Right Axis) Real NPL Growth of Deposit Banks Annualized GPD Growth (Right Axis) There is a reverse relation between real growth rate in NPL and annualized GDP growth rate for participation banks; it is not equally notable for development and investment banks. Credit supply of development and investment banks having tendencies different from the sector is reflected to the real growth rate of NPL as well. Grafik 4.5-4: Economic Growth, Participation and Development Banks NPL Growth Real NPL Growth of Participation Banks -3 Annualized GPD Growth (Right Axis) Real NPL Growth of Development and -4-2 Annualized GPD Growth (Right Axis) Developments in economy affect own-funds of the banks too. In economic recession periods, banks tend to increase their own-funds against the risks they are exposed to and the increase in NPL. In economic growth periods, risk perception of banks and NPL decrease, leading banks to avoid investing their own-funds. When own-fund real growth rate and annualized GDP growth rate in banking sector and deposit banks are analyzed, it is seen that they conduct opposite to each other. In other words, banks are inclined to strengthen their ownfunds against these risks, if there are high risks in economy. If there are low risks in economy, banks stop investing their own-funds and increase credit supply. BRSA 88 Structural Developments in Banking December 21

108 Grafik 4.5-5: Economic Growth, Total and Deposit Banks Own Funds Growth Total Real Own Funds Growth Annualized GPD Growth (Right Axis) Real Own Funds Growth of Deposit Banks Annualized GPD Growth (Right Axis) It can be said that the tendency of banking sector on own-funds against economic recessions is observed for participation banks as well excluding certain periods. On the other hand, development and investment banks do not generally pursue the tendency of banking sector on own-funds. Grafik 4.5-6: Economic Growth, DIB and Participation Banks Own Funds Growth Real Own Funds Growth of Participation -3-2 Real Own Funds Growth of Development and Banks Investment Banks Annualized GPD Growth (Right Axis) -4-4 Annualized GPD Growth (Right Axis) BRSA 89 Structural Developments in Banking December 21

109 5.1. Performance Indicators 5. PERFORMANCE IN BANKING SECTOR Return on assets (ROA), return on equities (ROE) and net interest margin are used in profitability analysis in banking sector 9. As of end-21, it is seen that return on assets and return on equities of all groups in scale and function basis decreased partially when compared to previous year. In the period mentioned, return on assets was 2.2% for deposit banks, 2.7% for development and investment banks and 1.8% for participation banks. Table 5.1-1: ROA and ROE by Scale and Function Shar e RO Shar RO RO Shar RO RO Shar RO RO Shar RO RO Shar RO A ROE e A E e A E e A E e A E e A By Scale Large Scale 112,1 2,1 17,6 72,2 2, 14,9 7,6 2,1 2, 4 73,9 1,8 18,3 78,3 2,5 21,7 81, 2,4 19,7 - Medium Scale -27, -1,8 2,3 15,2 1,9 13,3 14,5 2,2 21, 12,9 1,4 12, 12,7 1,9 13,9 12,1 1,6 12,4 Small Scale 14,9 2,4 12,3 12,7 2,7 1,8 15, 3,5 13,7 13,3 2,6 1, 9, 2,6 9,2 6,8 1,8 6,8 Sector 1, 1,3 11,2 1, 2,1 14,4 1, 2,3 19,1 1, 1,8 15,5 1, 2,4 18,2 1, 2,2 16,4 By Function 2, Deposit Banks 83,5 1,2 1,7 93,6 2,1 15, 9,1 2,2 3 88,3 1,7 16,4 91,6 2,4 19,7 92,8 2,2 17,8 Development and Investment B. 15,9 4,9 15,5 4,8 2,8 6,1 6,4 4,8 9,7 6,9 4, 8,7 4,9 3,7 7,8 3,8 2,7 6, Participation Banks,6,4 4,4 1,6 1,4 1,7 3,4 2,8 25,1 4,8 2,5 17,4 3,5 2,1 16, 3,4 1,8 13,9 Sector 1, 1,3 11,2 1, 2,1 14, 1, 2,3 19,1 1, 1,8 15,5 1, 2,4 18,2 1, 2,2 16,4 It is noted that 81% of total profit of the sector was obtained by large-scale banks, 12.1% by medium-scale banks and 6.8% by small-scale banks. The share large-scale banks obtained from the total profit increased in comparison to previous year. Table 5.1-2: First 1 Banks in ROA 22 ROA 24 ROA 26 ROA 28 ROA 29 ROA 21 ROA 1 İLLER BANKASI 19,4 B.FON B. 19,9 BİRLEŞİK FON B. 32,2 GSD YAT.B. 12, CR. AGR. Y. B. 14,8 CR. AGR. Y. B. 8,6 2 İMKB T. VE SAK. B. 11,1 AK ULUS. B. 13,4 T.KALKINMA B. 16,8 B. FON B. 9,5 JPMCH. B. 11,3 GSD YATIRIM B. 4,4 3 BİRLEŞİK FON B. 1,9 DEUTSCHE B. 12,1 ÇALIK YATIRIM 7,8 JPM CH. B. 8,7 DİLER Y.B. 7,4 MER. LYNCH YB 4,3 4 AKTİF YATIRIM B. 8,5 İMKB T. S.. B. 9,5 EXIMBANK 7,3 T.İHR.KR. B. 7,5 B. FON B. 6,6 T.İHR.KR. B. 4,1 5 YAPI VE KREDİ B. 5,9 GSD YAT.B. 7,8 TAKASBANK 5,5 ADABANK 5,6 T. RO.L B. 5,8 DİLER Y.B. 3,2 6 TEKSTİL B. 5,4 BANKPOZİTİF 7,4 DEUTSCHE B. 5,1 HABİB BANK 5,5 DEUTS. B. 5,5 JPMCH. B. 3, 7 AK ULUS. B. 4,6 T. İH. KR.İ B. 4,7 GSD YATIRIM B. 4,7 DİLER YAT.B. 5,2 WTLB A.G. 5,4 T.HALK B. 2,7 8 DEUTSCHE BANK 4,4 AKTİF YAT. B. 4,6 FİNANSBANK 4,1 DEUTSCHE B. 5, T.İHR.K. B. 5,3 ANADOLUBANK 2,7 9 FİNANSBANK 3,8 T. KAL. B. 3,5 İLLER B. 3,6 İLLER BANKASI 4,4 HABİB BANK 4,6 T.SINAİ KALK.B. 2,7 1 T. HALK B. 3,4 THE ROYAL B. 3, ASYA KATILIM B. 3,5 BANKMELLAT 4,3 BANKMELLAT 4,6 T.GARANTİ B. 2,5 In ROA, it is seen that all banks excluding one large-scale state bank within the first 1 banks and one private bank are small-scale as of 21. Table 5.1-3: First 1 Banks in ROE 22 ROE 24 ROE ROE 29 ROE 21 ROE 1 BİRLEŞİK FON B. 64,8 DEUTSCHE BANK 35,4 BİRLEŞİK FON B. 45,4 T.C. ZİRAAT B. 29, T.C. ZİRAAT B. 33,9 T.C. ZİRA.B. 27,6 2 TEKSTİL B. 61,8 T. VAKIFLAR B. 31, FİNANSBANK 34,4 BANK MELLAT 25,4 T. HALK B. 28,3 T. HALK B. 27, 3 T. VAKIFLAR B. 4,3 BİRLEŞİK FON B. 3,4 T.FİNANS. KAT.B.. 32,2 T. HALK B. 23,7 DEUTSCHE B. 25,6 B.MELLAT 26,3 4 YAPI VE KREDİ B. 4,2 T.C. ZİRAAT B. 3,3 T.C.ZİRAAT B. 31,9 AL BARAKA T. B. 21,4 BANK MELLAT 24,8 MER. LY.YB 23,5 5 FİNANSBANK 35,2 AK ULUS. B. 29,4 ALBARAKATÜRK 28,2 T. GARANTİ B. 18,5 T.GARAN.B. 22,2 YAPI KR. B. 2, 6 İLLER BANKASI 34,6 ŞEKERBANK 27,8 T.KALKINMA B. 27,6 ASYA KATILIM B. 17,6 DENİZBANK 2,2 T.GARAN.B. 19,1 7 T. HALK B. 32,5 ANADOLUBANK 27, DEUTSCHE BANK 23,5 ANADOLU B. 17,1 THE ROYAL B. 19,5 FİNANSBANK 17,6 8 EUROBANK 27,6 ALBARAKA T. B. 23,2 ASYA KATILIM B. 23,1 ABN AMRO BANK 16,9 WESTLB A.G. 19,2 T.İŞ BANKASI 17,5 9 ANADOLUBANK 25,7 FİNANSBANK 18,3 T.HALK B. 22,8 WESTLB A.G. 16,6 AKBANK 19,2 T.SIN.KALK.B 16,7 1 ALTERNATİFB. 24,9 T. HALK B. 17,5 T.GARANTİ B. 22,8 İMKB TAKAS. 16,6 ANADOLU B. 19,1 T.EKON.B. 16,6 In ROE, large-scale banks come first; while two state banks have the highest ROE, large-scale private banks operate with high ROE. RO E 9 Return on Assets (ROA)=Net Profit of Period/ Total Assets, Return On Equities (ROE)= Net Profit of Period/ Total Equities, Net interest margin: Net interest incomes/ Total Assets BRSA 9 Structural Developments in Banking December 21

110 Box 24: Development of Net Profits Global Outlook Net profits of period of EU and G-2 countries banking sectors concerning periods are displayed below. While USA banking sector made loss by Euro 4.7 billion in 28, it made a net profit by Euro 13.4 billion in 29. Banking sectors of Denmark and Ireland made loss by Euro 15.5 and 23.2 billion, respectively in 29. Net profit amount of Turkish banking sector in end-29 was Euro 9.3 billion. Euro Billion Sweden 12,2 17,4 52,9 32 7,1 44,2 38,1 34,3 France 17,3 17,3 19,7 23,3 34,2 21,6-6,9 17,7 USA 14,6 98,8 92,1 115,8 112,5 72,6-4,7 13,4 Spain 9,3 9,4 1,7 13,6 19,2 25,2 18,5 13 Canada 6,4 9,1 1,9 11,2 14,8 16,3 9,7 11,8 Turkey 1,7 3,2 3,5 3,7 6,1 8,6 6,2 9,3 Poland 2,3 2,3 7,1 9,1 1,7 13,7 13,7 8,5 Italy 9,9 11, ,5 22,4 23,6 1,5 7,4 South Korea 3,8 1 5,5 9,4 9, ,8 Mexico,3 2,3 2,1 4,6 5,7 5,3 3,1 3,7 Russia 3,9 6 8,1 1,8 v.y. 3,2 S. Arabia v.y. v.y. v.y. v.y. 3,5 2,3 2,8 3 Czech Rep. v.y. v.y. v.y. v.y. v.y. 1,7 2,2 2,1 Finland 1,2 2,8 1, ,7 1,9 1,5 Switzerland 6,2 8 9,8 15,6 12,2 5,4-2,7 1,4 Argentina -4,6 -,8 -,3,2,7,5,7 1,1 Hungary v.y. v.y. v.y. 1,2 1,4 1,3,9,8 Slovakia,4,4,4,5,8,7,5,3 Slovenia,1,1,2,3,3,4,2,1 Netherlands 5,8 8,5 1,7 13,5 14,1 19,7-1,9 -,3 Estonia,1,1,2,2,2,5,3 -,6 Belgium 2,6 4,3 3,5 4, ,5-3 Germany 4,9-5,4 2,5 21,1 19,3 19,9-19,9-6,8 Denmark 14,5 16,3 21,9 26,9 33,5 32,6-6,1-15,5 Ireland 4 3,9 5 6, 7, 7,2,2-23,2 Australia v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Austria 1,6 2,1 3,3 3,5 6,3 4,8-1,4 v.y. Brazil v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Bulgaria v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. People s Rep of China v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Indonesia v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Rep. of S. Africa v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Southern Cyprus v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. India v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. England * 1,7 14,8 16,7 19,4 22,7 24,5-37,5 v.y. Japan -41,6 6,1 17,4 4, ,5-12,9 v.y. Latvia v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Lithuania v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Luxemburg 2,7 2,9 2,9 3,6 5,7 3,7,2 v.y. Malta v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Portugal v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Romania v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Greece v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Source: Statistics of OECD and country banking authorities. *Data relating to large commercial banks. BRSA 91 Structural Developments in Banking December 21

111 Table 5.1-4: Net Interest Margin by Scale and Funciton By Scale Large Scale 5,9 4,3 5,5 4,3 4, 4,2 3,7 4,6 3,6 Medium Scale 6, 4, 6, 5,4 4,9 5,4 5,7 6,6 4,9 Small Scale 7,5 7,9 6,9 5,5 5,1 5,4 5,6 5,1 3,8 Sector 6,1 4,6 5,8 4,6 4,2 4,5 4,2 5, 3,8 By Function Deposit Bank 5,7 4,2 5,6 4,5 4,2 4,4 4,1 5, 3,8 Development and Investment Banks 12,4 11,6 8,9 6,5 6,3 6,1 6,6 5,5 4,1 Participation Banks 8,1 7,3 5,8 4,5 4,8 4,7 4,8 4,6 3,5 Sector 6,1 4,6 5,8 4,6 4,2 4,5 4,2 5, 3,8 Due to the fact that net interest incomes decreased when compared to end-29, net interest margin experienced a partial decrease in all groups in function and scale basis. By function groups, the highest interest margin was observed in development and investment banks by 4.1%, while net interest margin of deposit banks and participation banks were 3.8% and 3.5%, respectively. How the performance of banking sector is evaluated by the markets is analyzed via market based performance criteria. As of 21, there are 16 open to public banks (12 deposit banks, 2 participation banks and 2 development and investment banks) and market based performance analysis of the said banks was carried out in scale and function basis and upon average price/earnings 1 and price/tangibles 11 ratios. Price/earnings ratio, basically, is used in the capital structure analysis of a public company. High level of the said ratio indicates that investors overestimate the unity gain of the company and the potential of the demand on that stock. This kind of situation reflects the positive opinions of the investors concerning subjects such as financial performance, risk structure and etc. of the said company in following periods. In addition, stock of the company having low price/earnings ratio among two companies parameters of which excluding price/earnings ratios are identical is considered by the investors more investable than the other company due to the fact that the stock of the other company is extremely valued. Price/tangibles ratio is used so as to compare the market value and book value of a company which is public. If the said ratio is low this indicates that this company is priced cheap in the market and if it is high this means that it is priced expensive. The increase in price/tangibles ratio means for a company that it gained value for investors and its reliability has increased. As there are differences between the comparisons to be made for both price/earnings and price/tangibles ratios, they should be interpreted prudently. It is seen that the price/earnings ratio which experienced a fluctuated 12 conduct as of 2-21 periods began to increase beginning from 23 and decreased as of end-28, due to the value losses in stock markets as the impacts of the global crisis increased. In parallel with the decrease of impacts of the crisis following this period, the said ratio began to increase by 29 and realized as 17.1% as of end-21. Chart 5.1-1: Average Price/Earnings Ratio by Scale and Function Groups 8 7 Ratio Ratio 7 Large-scale 6 6 Medium-scale Small-scale 5 5 Sector 4 4 Source: Bloomberg Price/Earnings ratio is gained by dividing the stock price into the annual profit of the bank Price/Book ratio is gained by dividing the stock price into net tangible assets. 12 Some of the said fluctuations were generated from going public of certain banks and they cannot be explained generally by economic and financial events and considered to be derived from the data Deposit Banks Dev. And Inv. Banks Participation Banks Sector BRSA 92 Structural Developments in Banking December 21

112 When analyzed by scales, it is seen that the average price/profit ratio of small scale banks is a little above the sector average, while the average price/profit ratio of large scale banks is a little below the sector average. Table 5.1-5: Average Price/Earnings Ratio Price/ Profit By Scale Large Scale 4,5 34,3 7,6 12,8 13, 17,2 11, 11,7 6,1 8,9 9,6 Medium Scale 7,8 6,3 3,6 6,1 46,2 11,9 1,3 12,7 6,7 11, 11,6 Small Scale 9,5 5,6 2,7 2,1 9,6 37,8 11,5 12,7 14, 19,4 27,5 Sector 7,6 5,6 4,1 9,7 25,1 23,9 11,3 12,4 9,3 11,9 17,1 Functional Deposit Banks 6,3 14,1 5,8 9,3 21, 19,4 13, 11,7 9,2 11,4 12,3 DIB 9,1 6,4 2,5, 11,2 51,7 6,7 12,8 7,5, 44,2 Participation Banks,,,,,,, 14,5 5,2 1,7 1,3 Sector 7,6 5,6 4,1 9,7 25,1 23,9 11,3 12,4 9,3 11,9 17,1 The average price/book ratio increased reflecting the confidence of the markets on the banking sector after the 2-21 crisis and the positive expectations in risk perception has entered to a decreasing tendency after 26. This situation is caused by the fluctuation started in that period in global markets and the consideration of the investors assuming that the average price/book ratio is over-increased. In parallel with the global crisis increasing its effects, the decreases in stock markets have continued until the first quarter of 29. In parallel with the effects of the crisis going down, after the mentioned period, the average price/book ratio has started to re-increase and realized as 1.6 in 21. Chart 5.1-2: Average Price/Book Ratio by Scale and Function Groups Source: Bloomberg When analyzed by scale groups, it is seen that the average price/book ratio is generally above the sector average for medium and large scale banks. In 21, this ratio is also above the sector average for small scale banks. Table 5.1-6: Average Price/Book Ratio Price / Own Funds By Scale Large Scale 2,1 2,,9 1,3 1,5 2,8 2,2 2,7 1,1 1,8 1,8 Medium Scale 2,2 1,5,7 1,1 1,7 2,8 2,9 2,5 1,1 1,8 1,6 Small Scale 1,1 2,2,6 1,2,7 2,7 2, 2,2,7 1,2 1,7 Sector 1,7 2,,6 1,1 1,3 2,7 2,2 2,3,9 1,5 1,6 By Function Ratio Large-scale Medium-scale Small-scale Sector Deposit Banks 1,6 1,9,8 1,3 1,5 2,9 2,4 2,5 1, 1,6 1,6 DIB 1,6 1,4,6,,7 2,4 1,6 1,4,7, 2,3 Participation Banks 3,9,8 1,8 1,5 Sector 1,7 2,,6 1,1 1,3 2,7 2,2 2,3,9 1,5 1, Ratio Deposit Banks Dev. And Inv. Banks Participation Banks Sector BRSA 93 Structural Developments in Banking December 21

113 5.2. Efficiency Analysis Efficiency analysis is made to see how effective the intermediation function which is the main function of banking is realized. One of common methods used to measure the efficiency is the ratio analysis. Ratio analysis is made by the ratios calculated on intermediation activities which are the main function of banking and is realized based on three ratios which are loans/assets, loans/deposit and follow-up ratio. Box 25: Global Appearance of Performance Indicators In the comparison of return on assets and return on equities of countries for 21, it is seen that the return ratios remain relatively low for EU countries, while there are higher return on assets and equities ratios in the banking sectors of emerging countries. The return on assets and equities of the Turkish banking sector are above the EU general and in top ranks of emerging countries. ROA ROE Price/Profit * Price/Tan. Assets * % Argentina 3,6 4 29,5 34,8 8 8,8 1,2 n.d. Indonesia 2,6 2,7 26,8 25,9 n.d. n.d. n.d. n.d. Canada,7 1,1 18,2 22,9 n.d. n.d. n.d. n.d. Brazil 1,9 2,1 2,4 21, ,8 2,3 n.d. Czech Rep. 14 1,3 26,4 19,7 n.d. n.d. n.d. n.d. China,8 1,1 16,7 19,7 21,1 14,6 2,7 n.d. South Africa 1 1, ,7 16,6 18,9 2,4 n.d. Turkey 2,4 2,2 18,2 16,4 11,9 17,1 1,5 n.d. Slovakia,6 1,6 6,7 16,3 n.d. n.d. n.d. n.d. Mexico 1,5 1,7 15,2 15,2 22,7 23,9 2,6 n.d. Malta 1,2 1,5 11,7 13,5 n.d. n.d. n.d. n.d. Russia,7 2 4,1 12,5 15,6 8,3 1,3 n.d. India n.d. 1 n.d. 1,8 21,8 22,4 3,8 n.d. Belgium,1,5-2,5 1,6 n.d. n.d. n.d. n.d. S. Korea,6,7 8,9 9,7 n.d. n.d. n.d. n.d. Finland,6,5 1 9,2 n.d. n.d. n.d. n.d. Japan,2,4 5,5 9,2 n.d. n.d. n.d. n.d. GPSC,8,5 14 9,1 n.d. n.d. n.d. n.d. Austria,1,5 1,5 7,9 n.d. n.d. n.d. n.d. Spain,6,5 9,1 7,9 n.d. n.d. n.d. n.d. Portugal,4,5 7,3 7,5 n.d. n.d. n.d. n.d. England,1,3 2,6 6,1 n.d. n.d. n.d. n.d. Germany,2,2 5 5 n.d. n.d. n.d. n.d. Italy,3,3 4 4 n.d. n.d. n.d. n.d. Netherlands,o,1 3 n.d. n.d. n.d. n.d. Estonia 2,8,3-24,6 2,1 n.d. n.d. n.d. n.d. USA,2,2 1,8 1,8 n.d. n.d. n.d. n.d. Hungary,6,1 8,3 1,3 14,2 12,2 1,4 n.d. Greece,4 5,2 n.d. n.d. n.d. n.d. Romania,2 -,2 2,9-2,1 n.d. n.d. n.d. n.d. Latvia 3,9-1,8-5,6-19,7 n.d. n.d. n.d. n.d. EU-27 n.d. n.d. n.d. n.d. n.d. n.d. n.d. n.d. Australia 1 n.d. 17,4 n.d. n.d. n.d. n.d. n.d. Bulgaria 1,1 n.d. 9,8 n.d. n.d. n.d. n.d. n.d. Denmark -,1 n.d. -3,2 n.d. n.d. n.d. n.d. n.d. France,3 n.d. 7,2 n.d. n.d. n.d. n.d. n.d. Ireland -1,6 n.d. -35,8 n.d. n.d. n.d. n.d. n.d. Sweden,4 n.d. 8 n.d. n.d. n.d. n.d. n.d. Switzerland,5 n.d. 7,3 n.d. n.d. n.d. n.d. n.d. Lithuania n.d. n.d. n.d. n.d. n.d. n.d. n.d. n.d. Luxembourg,6,9 11,5 n.d. n.d. n.d. n.d. n.d. PB-16 n.d. n.d. n.d. n.d. n.d. n.d. n.d. n.d. Poland,8 n.d. 1,7 n.d. 19,3 14,1 1,6 n.d. Slovenia,2 n.d. 2 n.d. n.d. n.d. n.d. n.d. Saudi Arabia 2 n.d. n.d. n.d. n.d. n.d. n.d. n.d. Source: IMF Global Financial Stability Report October 21, IMF FSI Table The most actual data is presented for 21. Given as ratios, shall not be interpreted as percentages. Stock markets of countries are evaluated generally. Additional calculations are not made for banks. BRSA 94 Structural Developments in Banking December 21

114 Efficiency Analysis in Ratios Loans/assets ratio which is a fundamental indicator of the banking sector for intermediation activities is 49.6% for large scale banks, 53.6% for medium scale banks and 34.3% for small scale banks as of end-21. This ratio is 51.4% for deposit banks, 71.1% for participation banks and 51.7% for development and investment banks. Chart 5.2-1: Loan/Asset Ratio by Scale and Function Groups 8 6 % 8 6 % Large scale Medium scale Small scale Deposit B. Participation B. Dev.&Inv. B The share of loans is 52.2% within total assets of the sector. It is observed that the intermediation function which is the main function of the banking sector has developed during the period of 22-21, except 29 during which the effects of the global economic crisis were intense. Table 5.2-1: Loan/Asset Ratios Loan / Asset By Scale Large Scale 2,5 Medium Scale 28,4 Small Scale 27,9 By Function Deposit Banks Participation Banks DIB Sector 22, 25,6 52,4 58,5 44,9 48,1 23, 26,5 23,2 28,6 33,8 4,1 45,3 47,5 43,2 49,6 37,9 47,3 55, 58,2 59,7 56,9 52,2 53,6 26,3 29, 29,9 3,8 33,3 31,6 35,3 34,4 31,9 66,4 46,9 32,4 37,5 65,1 46,3 38,4 43, 67,8 46,9 43,8 48,3 72,4 47,5 49,1 49,4 45,9 51,4 68,5 7,3 71,1 51, 5,7 51,7 5,2 47,1 52,2 It is seen that by the end of 21, the share of large scale banks loans within the balance sheet have considerably increased, while the increase in medium scale banks remained relatively low. The share of small scale banks loans within the balance sheet has decreased. Especially large scale banks are effective on the increase of loans within the sector. Table 5.2-2: Loan/Asset Ratios of First 1 Banks by Total Assets % 22 L/A 24 L/A 26 L/A 28 L/A 21 L/A 1 T.C. ZİRAAT B. 9,4 T.C. ZİRAAT B. 15, T. İŞ BANKASI 37,7 T.C. ZİRAAT B. 28,7 T.C. ZİRAAT B. 37,1 2 AKBANK 24,1 T. İŞ BANKASI 32,2 T.C. ZİRAAT B. 23,3 T. İŞ BANKASI 47,1 T. İŞ BANKASI 47,3 3 T. İŞ BANKASI 26,9 AKBANK 36,6 AKBANK 48,6 T. GARANTİ B. 54,3 T. GARANTİ B. 51,3 4 T. GARANTİ B. 25,3 T. GARANTİ B. 38,7 T. GARANTİ B. 52,9 AKBANK 5,3 AKBANK 46,2 5 YAPI VE KR B. 36,2 T. HALK B 16,7 YAPI VE KR B. 44,8 YAPI VE KR B. 57,4 YAPI VE KR B. 59,9 6 T. HALK B 6,9 YAPI VE KR B. 4,1 T. VAKIFLAR B 47,7 T. VAKIFLAR B. 57, T. VAKIFLAR B. 6, 7 T. VAKIFLAR B. 22,6 T. VAKIFLAR B. 33,3 T. HALK B 32,9 T. HALK B 48,7 T. HALK B 59,4 8 KOÇBANK 33,9 KOÇBANK 37, FİNANSBANK 61,3 FİNANSBANK 64,3 FİNANSBANK 65, 9 PAMUKBANK 13,9 FİNANSBANK 58,9 ING BANK 6,4 DENİZBANK 62,5 DENİZBANK 64,2 1 FİNANSBANK 33,5 FORTİSBANK 41,9 DENİZBANK 37,7 ING B ANK 63,7 TÜRK EKON.B. 6, *L/A: Loan/Asset Ratio BRSA 95 Structural Developments in Banking December 21

115 The loan to deposit ratio which is one of the main processes of the intermediation function is calculated by loan/deposit 13 ratio. The mentioned ratio has tended to increase by scale and function until 29, then it has decreased afterwards due to the slowdown in credit volume. In 21, in parallel with the growth in the sector, the loan/deposit ratio has increased for all scales and function groups. Chart 5.2-2: Loan/Deposit Ratio by Scale and Function Groups % Large scale Small scale Medium scale Sector % Deposit B. Participation B. Sector When analyzed by scale and function groups, it is seen that the loan/deposit ratio is 76.8% for large scale banks, which is the closest level to sector general, while it is 16.8% for medium scale banks. For small scale banks, this ratio is 95.8%. Table 5.2-3: Loan/Deposit Ratios Loan/ Deposit 2 21 By Scale Large Scale 48,3 31,9 Medium Scale 67,6 27,2 Small Scale 42,1 39,4 Sector 51,2 31,8 By Function Deposit Banks 5,6 31,4 Participation Banks 92,6 55,9 Sector 51,2 31, ,7 35,1 42,7 51,5 61,6 69,7 72,4 67,4 76,8 48,5 65,9 84,9 97,1 12,5 19,3 17, 1,1 16,8 78,9 88, 11,2 111,7 119,9 96,7 81,7 83,4 95,8 36,2 43,5 52,9 62,2 71,2 77,5 78,3 73,6 82,6 32,4 39,5 49,2 59,2 68,3 76,6 77,6 72,8 82, 65,5 76,3 81,8 77,4 83,6 94,9 92,6 88,5 93,2 36,2 43,5 52,9 62,2 71,2 77,5 78,3 73,6 82,6 The loan to deposit ratio is 82% for deposit banks and 93.2% for participation banks. The loan to deposit ratio for sector general is 82.6%. Table 5.2-4: Loan/Deposit Ratios of First 1 Banks by Total Assets % 22 L/D 24 L/D 26 L/D 28 L/D 29 L/D 21 L/D 1 T.C.ZİRAAT B. 12,8 T.C. ZİRA. B. 19,1 T. İŞ BANKASI 64,8 T.C. ZİRAAT B. 36,5 T.C. ZİRAAT B. 36,5 T.C. ZİRAAT B. 45,7 2 AKBANK 36,5 T. İŞ BANKASI 52,4 T.C. ZİRAAT B. 28,7 T. İŞ BANKASI 74,7 T. İŞ BANKASI 67,6 T. İŞ BANKASI 73,3 3 T.İŞ BANKASI 39, AKBANK 67,4 AKBANK 86,3 T. GARANTİ B. 95,1 T. GARANTİ B. 8,3 T. GARANTİ B. 9,8 4 T.GARANTİ B. 38,8 YAPI VE KR B. 7,4 T. GARANTİ B. 91,9 AKBANK 89,8 AKBANK 75,2 AKBANK 87,8 5 YAPI VE KR. B. 53,1 T. HALK B. 22,1 YAPI VE KR. B. 71,8 YAPI VE KR B. 89,3 T. VAKIFLAR B. 8,4 YAPI VE KR B. 98,5 6 T.HALK B. 1,5 T. GARANTİB. 59,9 T. VAKIFLAR B. 73,5 T. VAKIFL. B. 84,3 YAPI VE KR B. 9,7 T. VAKIFLAR B. 97,5 7 T.VAKIFLAR B. 3,7 T. VAKIFL. B. 48,3 T. HALK B. 43,7 T. HALK B 64,7 T. HALK B 75,6 T. HALK B 84,9 8 KOÇBANK 51, FİNANSBANK 15,2 FİNANSBANK 118,6 FİNANSBANK 114,8 FİNANSBANK 97,8 FİNANSBANK 15,8 9 PAMUKBANK 15,3 FORTİS BANK 87, ING BANK 91,5 DENİZBANK 128,1 DENİZBANK 12,2 DENİZBANK 116,9 1 FİNANSBANK 55,2 KOÇBANK 54,5 DENİZBANK 94,5 ING BANK 16,3 ING BANK 113,1 TÜRK EKON.B. 16,3 *L/D: Loan/Deposit Ratio Among the banks taking place within the first ten banks by their total asset sizes, private banks are operating with higher loan/deposit ratios comparing to public banks. The mentioned ratio has increased comparing to 29 for all the ten first banks, in parallel with the loan growth. 13 Funds collected by Participation banks (current and participation funds) are included to deposit figures. BRSA 96 Structural Developments in Banking December 21

116 The asset quality is one of the most important indicators to analyze the banking sector s financial soundness. Consequently, it is important to analyze the follow-up ratios concerning loans composing almost 5% of the Turkish banking sector s assets. The follow-up ratio of the banking sector has entered to a decreasing tendency after the 2-21 crisis. Follow-up ratio which tended to increase after 27 with the effect of the global crisis has slowed down in 21 in parallel with the effects of the crisis easing down. When analyzed by scales, it is seen that the medium scale banks which had lower follow-up ratios during the post-crisis period have lost their quality after the crisis. For large scale banks, it was the opposite situation. The follow-up ratios of small scale banks are conducting more stably comparing to large and medium scale banks. Chart 5.2-3: Follow-Up Ratios by Scale and Function Groups % Large-scale Medium-scale Small-scale Total % Deposit Banks Dev. And Inv. Banks Participation Banks Total When the banking sector follow-up ratios are analyzed by function groups, it is seen that the follow-up ratios of development and investment banks are conducting more stably comparing to the banks in other function groups. The follow-up ratio of the sector in general are conducting in parallel with the follow-up ratios of the deposit banks due to their weighted share in the banking sector. As of 21, the follow-up ratios of development and investment banks and participation banks are lower than the sector general. Table 5.2-5: Follow-Up Ratios FR First 5 Banks 15,2 11,4 6,5 3,9 3,5 3,4 3,3 4,6 2,8 First 1 Banks 2,6 12,4 6,6 5, 3,8 3,6 3,5 5,1 3,5 By Scale Large Scale 18,1 13,2 6,9 5,3 4,1 3,8 3,6 4,9 3,2 Medium Scale 19,8 8,4 3,8 3, 2,2 2,9 3,9 6,5 5,2 Small Scale 6,4 7,8 6, 5,1 4,1 2,9 4, 5,2 3,8 Sector 17,6 11,5 6, 4,8 3,8 3,5 3,7 5,3 3,7 By Function Deposit Banks 18,6 12,1 6,2 4,9 3,8 3,6 3,7 5,4 3,7 DIB 4, 3,5 3,3 2,6 2,5 1,8 1,7 2,3 2,1 Participation Banks ,6 3,8 3,6 4,5 4,8 3,5 Sector 17,6 11,5 6, 4,8 3,8 3,5 3,7 5,3 3,7 When the follow-up ratios of first 5 and 1 banks by their asset size are analyzed, the follow-up ratios of first 5 banks are considerably low comparing to the sector in general. In 21 the follow-up ratio is realized as 3.7% for banking sector, 3.5% for first ten banks and 2.8% for first five banks. BRSA 97 Structural Developments in Banking December 21

117 Table 5.2-6: Follow-Up Ratios of First 1 Banks by Total Assets % 22 FR 24 FR 26 FR 28 FR 21 FR 1 T.C.ZİRAAT B. 41,1 T.C. ZİRAAT B. 4,3 T. İŞ BANKASI 3,9 T.C. ZİRAAT B. 2, T.C.ZİRAAT B. 1,5 2 AKBANK 1,9 T. İŞ BANKASI 8,4 T.C. ZİRAAT B. 1,9 T. İŞ BANKASI 4,5 T.İŞ BANKASI 3,7 3 T.İŞ BANKASI 15,6 AKBANK 1,6 AKBANK 2,1 T. GARANTİ B. 2,5 T.GARANTİ B. 3, 4 T.GARANTİ B. 6,8 YAPI VE KR B. 4,1 T. GARANTİ B. 2,3 AKBANK 2,6 AKBANK 2,4 5 YAPI VE KR. B. 1,7 T. HALK B. 22,1 YAPI VE KREDİ B. 7,3 YAPI VE KR B. 4,5 YAPI VE KR. B. 3,5 6 T.HALK B. 48,8 T. GARANTİ B. 6,6 T. VAKIFLAR B. 5,4 T. VAKIFLAR B. 4,6 T.VAKIFLAR B. 4,8 7 T.VAKIFLAR B. 24,5 T. VAKIFLAR B. 9, T. HALK B. 8,7 T. HALK B 4,8 T.HALK B. 3,9 8 KOÇBANK 13,1 FİNANSBANK 9,6 FİNANSBANK 2,3 FİNANSBANK 3,7 FİNANSBANK 6,6 9 PAMUKBANK 7,5 FORTİS BANK 2,1 ING BANK,8 DENİZBANK 3,3 DENİZBANK 4,9 1 FİNANSBANK 9,3 KOÇBANK 4,9 DENİZBANK 2,4 ING BANK 2,5 T.EKONOMİ B. 3,1 The ratio of special reserves set aside to reduce the effect of losses to be exposed due to loans granted on the capital to the non-performing loans (NPL) is important to analyze the sector s credit risk and effectiveness. The special reserves set aside by the banking sector to the NPL ratio has increased rapidly after the crisis of due to the decreasing NPL and increasing reserve amounts and has followed a stable conduct until 26. This ratio which was 89.7% by the end of 26 has decreased to 79.8% by the end of 28. The NPL amount being decreased and the special reserves amount being increased due to the reducing effects of the global crisis have caused the mentioned ratio to increase and realize as 83.6% as of 21. When the share of reserves within NPL is analyzed by scales, it is seen that it is higher for large scale banks than the sector while lower for medium and small scale banks. As of end-21, for large, medium, small scale banks and for the sector this ratio realized respectively as 88.9%, 75.8%, 74.9% and 83.9%. Chart 5.2-4: Reserves/NPL Ratio by Scale and Function Groups 1 9 % 1 9 % Large-scale Medium-scale Small-scale Total Deposit Banks Dev. And Inv. Banks Participation Banks Total When the reserves to NPL ratio is analyzed by function groups, it is seen that this ratio is below sector general for development and investment banks and above sector general for deposit banks. It is seen that for participation banks this fact has a historical process. For development and investment banks, this ratio has shown a fast decrease after 28, but this tendency has ended as of 21. Table 5.2-7: Reserves/NPL Ratio Reserves/NPL First 5 Banks 61,8 91,2 91,3 91,5 87,4 86,6 82,5 92,5 87,3 First 1 Banks 63,6 91,5 88,9 9,6 91,2 89,4 83,5 87,8 87,1 By Scale Large Scale 66,1 93,2 9,3 9,9 91,2 9,2 84,3 89,7 88,9 Medium Scale 6,1 71,5 8,9 86,2 85,7 78,4 71,8 72,8 75,8 Small Scale 6,1 8, 8, 79,1 83,8 73,9 66,4 72,4 74,9 Sector 64,2 88,5 88,1 88,7 89,7 86,8 79,8 83,6 83,8 By Function Deposit Banks 64,2 88,5 88,1 89,7 9,7 88,3 81,2 84,6 84,6 DIB 64, 9,3 87,2 93,4 95, 93,4 91,7 75,1 8,6 Participation Banks 61,7 64,9 55,5 54,9 67,9 7,7 Sector 64,2 88,5 88,1 88,7 89,7 86,8 79,8 83,6 83,8 BRSA 98 Structural Developments in Banking December 21

118 It is seen that the shares of first 5 and first 1 banks within NPL is higher than the sector general. This ratio for first 5 and first 1 banks is respectively 87.3% and 87.1% as of end-21. Table 5.2-8: Reserves/NPL Ratios of First 1 Banks by Total Assets % 22 R./NPL 24 R./NPL 26 R./NPL 28 R./NPL 21 R./NPL 1 T.C.ZİRAAT B. 71,6 T.C. ZİRAAT B. 83,8 T. İŞ BANKASI 1, T.C. ZİRAAT B. 81,1 T.C.ZİRAAT B. 67, 2 AKBANK 1, T. İŞ BANKASI 1, T.C. ZİRAAT B. 8,9 T. İŞ BANKASI 1, T.İŞ BANKASI 1, 3 T.İŞ BANKASI 41,3 AKBANK 1, AKBANK 1, T. GARANTİ B. 63,7 T.GARANTİ B. 81,9 4 T.GARANTİ B. 31,7 YAPI VE KR B. 56,4 T. GARANTİ B. 7,9 AKBANK 1, AKBANK 1, 5 YAPI VE KR. B. 69,3 T. HALK B. 96,5 YAPI VE KREDİ B. 81,8 YAPI VE KR B. 62,4 YAPI VE KR. B. 77,1 6 T.HALK B. 99,3 T. GARANTİ B. 74,6 T. VAKIFLAR B. 1, T. VAKIFLAR B. 94,2 T.VAKIFLAR B. 98,9 7 T.VAKIFLAR B. 48,7 T. VAKIFLAR B. 1, T. HALK B. 98,6 T. HALK B 82,9 T.HALK B. 83,3 8 KOÇBANK 45,9 FİNANSBANK 76,3 FİNANSBANK 1, FİNANSBANK 1, FİNANSBANK 86,8 9 PAMUKBANK 58,1 FORTİS BANK 1, ING BANK 36,3 DENİZBANK 69,2 DENİZBANK 72,3 1 FİNANSBANK 59,8 KOÇBANK 7,4 DENİZBANK 96,3 ING BANK 34,5 T.EKONOMİ B. 65, Efficiency Analysis by Data Envelopment Method Due to the recession seen in interest margins within recent years, it has become more and important for banks to maintain their activities effectively for protecting their profitability. In this new environment, it is considered that the banks decreasing their operational costs will operate more effectively. The efficiency development of banks operating in the Turkish banking sector 14 is analyzed using the data envelopment method 15. Intermediation approach is used to measure the efficiency. The intermediation approach is based on the traditional intermediation function and banks are evaluated as firms using capital and work power to transform their liabilities to loans. In this approach, while the inputs are composed of various liabilities of banks (deposit and other liabilities, interest payments made for these, work power payments, physical capital etc.); the outputs are composed of loans and other income bringing assets and their interest incomes. Inputs and outputs used in the analysis are defined in the table below. Table 5.2-9: Input-Output Variables Inputs Outputs 1. Foreign Resources / Total Assets 1. Total Loans / Total Assets 2. Interest Expenses / Total Assets 2. Interest Incomes/ Total Assets 3. Non-Interest Expenses/ Total Assets 3. Non-Interest Incomes/Tot. Assets The data envelopment analysis includes the period of Accordingly, development of the entries and outputs used in the analysis throughout data set is presented in the table below. Table 5.2-1: Development of Input and Output Variables Inputs Foreign Resources/Total Assets,93,89,88,86,85,87,88,87,88,87,87 Interest Expenses/Total Assets,17,23,15,11,7,6,7,8,7,5,4 Non-Interest Expenses/Total Assets,6,7,6,5,5,5,4,4,4,3,3 Outputs Loans/Total Assets,32,22,23,27,32,38,44,49,5,47,52 Interest Incomes/Total Assets,21,35,21,16,13,11,11,12,12,1,7 Non-Interest Incomes/Total Assets,3,3,4,3,3,3,3,3,2,2,2 14 Deposit, development and investment and Participation banks taking place in the system other than SDIF banks are used in this study. Participation banks are included to the study as of 25 during which they are included to BRSA supervision. 15 For detailed information about data envelopment analysis see Berger, A. ve Humprey, D.Humprey (1997), Efficiency of Financial Institutions: International Survey and Directions for Future Research, Wharton School, Financial Institutions Center, Working Paper No: See Development of Efficiency in the Turkish Banking Sector in the Period of Disinflation BRSA ARD Presentations 25/1 made conceerning the Turkish banking sector fort he period of BRSA 99 Structural Developments in Banking December 21

119 When the historical development of the inputs is analyzed, it is seen that liabilities to assets ratio followed a stable conduct during the period concerned. With the effect of the reduce occurred in nominal interest rates, the interest expenses/total assets ratio follows a decreasing conduct since 27. Loans/total assets item among the outputs showed an important increase in 21, even if it was decreased in 29 with the effect of the recession occurred due to global crisis. However, despite the increase in loan portfolio, the interest incomes/total assets ratio decreased due to the decrease of nominal interest rates. Non-interest incomes/total assets ratio tended to decrease, despite the stable increase in banking services incomes and incomes from fees and commissions. Chart 5.2-5: Development of the Efficiency,95,85 % Average efficiency Non-efficient banks 1,,9 % Large scale Medium scale Small scale Aver. Efficiency,75,8,65,7,55, According to the results of the analysis, the efficiency of the banking sector increased within the period of The average efficiency decreased in 25 and then re-increased within the period of After 29, the efficiency rate has started to increase in 21, and within this period, the efficiency of banks having an efficiency rate below one (non-active banks) have followed a conduct in parallel with the average efficiency. In the efficiency analysis by scales, it is seen that the efficiencies of banks except medium scale ones decreased in 29, while in 21 the efficiency increased for all bank groups. Chart 5.2-6: Efficiency Levels by Ownership Structure and Function Groups 1,1 1, % Kamu Özel Küresel Ser. Ort.Etkinlik 1,,9 % Katılım B. Kal.ve Yat. B. Mevduat B. Ort.Etkinlik,9,8,8,7,7,6, State banks have shown a better efficiency performance during the period. The fact the state banks are mostly large scale banks was determinative in this situation. While private banks have conducted in parallel with the average efficiency level, the efficiency level of global banks has remained relatively low. It is considered that scale was determinant in this situation. When classified by function groups, the performance of participation banks is better, and they are followed by development and investment banks and deposit banks. BRSA 1 Structural Developments in Banking December 21

120 Box 26: Global Appearance of Efficiency Analysis In the comparison between countries concerning the efficiency of their banking sector, it is observed that the share of loans within assets is relatively higher for EU countries comparing to East European countries, in the interval of 4%-77%. The deposit to loan ratio is above 1% in European countries except for a few country. In Turkey, the deposit to loan ratio is below these countries by 76.5% in 29. This ratio conducts lower when compared to equivalent developed and emerging economies, which indicates a high and stable growth potential in credit market. In parallel with the ease down of the effects of the global crisis on the economy, the follow-up ratio of the Turkish banking sector has also started to conduct downwards and decreased to 3.7% by the end of 21. The follow-up ratios of the Turkish banking sector conducts in lower levels in global scale and consequently the market risk is lower than equivalent economies, so the growth potential of the credit market is considerably high. The improvement which may occur in the loan quality due to the decrease of the amount of non-performing loans will have positive effects on the sector s profitability and thus the sector s capital structure will become sounder. Loans/Asset Loans/Deposit NPL/Loans Reserves/NPL Lithuania 77,8 73,1 19,9 158,3 Lithuania 77,8 73,1 19,9 Latvia 71, ,9 161,5 Latvia 71, ,9 Ireland 34,1 33,3 156,7 151,5 Ireland 34,1 33,3 156,7 Romania 6 58,1 127,5 122 Romania 6 58,1 127,5 Italy 49,8 5,1 152,1 145,9 Italy 49,8 5,1 152,1 Hungary 6,8 57,9 138,2 13,4 Hungary 6,8 57,9 138,2 Greece 47,8 43,9 78,6 77,1 Greece 47,8 43,9 78,6 Russia 135,3 14,9 183,5 153,5 Russia 135,3 14,9 183,5 Bulgaria 67,6 68,4 113,6 113 Bulgaria 67,6 68,4 113,6 Malta 59,5 51,2 166,7 123,5 Malta 59,5 51,2 166,7 South Africa n.d. n.d. 95,4 93,2 South Africa n.d. n.d. 95,4 Slovakia 86,4 129,6 247,8 318,2 Slovakia 86,4 129,6 247,8 Slovenia 63,3 58,5 147,6 129,2 Slovenia 63,3 58,5 147,6 USA 56,3 54,2 92,7 83,3 USA 56,3 54,2 92,7 Czech Rep. 49, ,5 Czech Rep. 49, Estonia 77,3 76,2 188,9 16 Estonia 77,3 76,2 188,9 South Cyprus 45,8 41,7 96,4 1 South Cyprus 45,8 41,7 96,4 Spain 58,7 57,4 113,6 11,4 Spain 58,7 57,4 113,6 England 57,9 52,9 99,1 98,2 England 57,9 52,9 99,1 Turkey 5,1 47 8,8 76,5 Turkey 5,1 47 8,8 Germany 41 42,6 15,3 12,7 Germany 41 42,6 15,3 Denmark 5,7 49,8 29,1 288 Denmark 5,7 49,8 29,1 Portugal 58, ,6 129,9 Portugal 58, ,6 Brazil n.d. n.d. 77,7 86,1 Brazil n.d. n.d. 77,7 Austria 39, ,3 13,5 Austria 39, ,3 Belgium 31,6 32,2 74,4 69,1 Belgium 31,6 32,2 74,4 Netherlands 49,1 52,1 19,7 119,8 Netherlands 49,1 52,1 19,7 Japan n.d. n.d. 76,2 76,3 Japan n.d. n.d. 76,2 India n.d. n.d. 87,1 84,5 India n.d. n.d. 87,1 Australia ,2 114,9 122,2 Australia ,2 114,9 Argentina n.d. n.d. 17,9 19,4 Argentina n.d. n.d. 17,9 Mexico 4,6 41,5 89,8 9,7 Mexico 4,6 41,5 89,8 Canada 54,2 55,7 87,7 86,8 Canada 54,2 55,7 87,7 China n.d. n.d. 66,9 69,5 China n.d. n.d. 66,9 South Korea 47 42,4 117,8 11,9 South Korea 47 42,4 117,8 Luxembourg 21,8 23,3 77,2 73,8 Luxembourg 21,8 23,3 77,2 EU-27 45,7 45,4 114,8 113,3 EU-27 45,7 45,4 114,8 Indonesia n.d. n.d. 74,8 73,1 Indonesia n.d. n.d. 74,8 Finland 43 42, ,3 Finland 43 42,8 146 France 31,7 32,4 137,1 131,2 France 31,7 32,4 137,1 Sweden 47,2 49, ,4 Sweden 47,2 49,1 231 Switzerland 42,1 48,7 92,6 92,6 Switzerland 42,1 48,7 92,6 PB-16 41,5 42,4 117,6 115,3 PB-16 41,5 42,4 117,6 Saudi Arabia n.d. n.d. 54,7 39,3 Saudi Arabia n.d. n.d. 54,7 Poland 6,1 63,9 12,6 12,3 Poland 6,1 63,9 12,6 Source: IMF Global Financial Stability Report October 21, IMF FSI Table *The most actual data is presented for 21. BRSA 11 Structural Developments in Banking December 21

121 5.3. Productivity Indicators Productivity Indicators by Branches and Personnel The asset amount per branch keeps increasing generally in the Turkish banking sector. This amount has reached TL 1 million by the end of 21 which was TL 61.9 million throughout sector in 25. Asset amount per branch has increased by 12% for large banks, 22.3% for medium banks and by 19.5% for small banks by the end of 21 comparing to previous year. The increase of assets is higher than the increase in the number of branches for large banks, which caused the increase of asset amount per branch. When the development of asset amount per branch are analyzed by function groups, it is seen that, in 21 comparing to previous year, this amount has increased by 14.8% for deposit banks, 26.% for development and investment banks and 2.8% for participation banks. For development and investment banks, this situation is emanated from the increase of the assets by 15% within the period of 29-21, while the number of branches has decreased from 44 to 4. For other function groups, number of branches and asset amounts have both increased. Table 5.3-1: Asset Amount per Branch Asset Amount per Branch (TL Million) By Scale Large Scale 13,2 23,4 36, 43,9 51,4 68, 76,7 82,7 92,3 13, 115,4 Medium Scale 16,8 26,6 25,3 27,9 35,5 47, 48, 43,1 46,2 47,9 58,6 Small Scale 1,6 21,7 43,9 49,6 52,8 54,1 58,7 79,7 83,7 17,6 128,6 Functional Distribution Deposit Banks 12,7 22,7 33, 39,6 47,7 61,5 68,2 7,9 78,4 86,2 99, DIB 165,7 569,1 269,7 311, 343,2 367,6 365,3 449,7 521,4 614,3 774, Participation Banks 15,7 2,6 33, 29,4 28,1 34,1 38,6 46,1 48,1 59,1 71,4 Sector 13,3 25,2 33,6 39,8 47,3 62, 68,4 71,4 78,7 87, 1, In the banking sector, the credit amount per branch kept increasing also in 21 like the asset amount per branch. Credit amount per branch which was TL 23.8 million in 25 increased to TL 52.2 million in 21. When analyzed by scales, it is seen that the fastest increase within the period of 2-21 realized in small scale banks. In 21, the credit amount per branch increased by 28.5% for large scale banks, 25.2% for medium scale banks and 21.7% for small scale banks, when compared to previous year. The expansion in credit volume has triggered this increase. When analyzed by functions, in 21 comparing to previous year, the credit amount per branch is 28.5% for deposit and development and investment banks and 22.4% for participation banks. The main reason of this situation is the growth of credit volume. On the other hand the decrease in the number of branches of development and investment banks is another factor causing the increase of this amount for this group. Table 5.3-2: Loan Amount per Branch Loan Amount per Branch (TL million) Distribution as to Scale Large Scale 3,7 5, 7,4 1,2 14,7 23, 3,7 37,4 43,9 44,6 57,2 Medium Scale 6,5 5,6 7,3 1,2 21,9 25,8 28, 27,6 28,4 3,1 37,7 Small Scale 3,3 6,4 16,5 19,6 11,9 25,1 29,9 42,4 42,8 54,8 66,7 Functional Distribution Deposit Banks 3,8 4,7 7,3 1,1 15,2 23,1 29,4 34,3 38,8 39,6 5,9 Development and Investment 72,4 239,9 121,1 149,7 16,8 17,3 171,4 213,6 266,2 311,2 4,2 Participation Banks 12, 9,3 14,7 17,7 18,6 22,2 26,2 33,1 32,9 41,5 5,8 Sector 4,2 5,6 7,7 1,6 15,3 23,8 3, 35,1 39,5 41, 52,2 Deposit amounts per branch in banking sector has continued to increase in 21. The said amount which was TL 35.3 million in 25 has reached to TL 61.3 million in 21. The deposit amount per branch has reached to TL 74.5 million from TL 7.7 million in large scale banks, to TL 35.3 million from TL 8.8 in medium scale banks and it has reached to TL 44.3 million from TL 6.5 million in small scale banks in 2-21 period. Deposit amount per branch of large scale BRSA 12 Structural Developments in Banking December 21

122 banks increased by 12.7% in 21 as to the previous year, the said ratio was realized as 17.3% and 11.% for medium scale banks and small scale banks respectively. When development of deposit per branch in function basis is observed, it can be seen that the said ratio for deposit and participation banks in 21 increased by 13.9% and 16.2% respectively as to 29. Table 5.3-3: Deposit Amount Per Branch Deposit Amount Per Branch (TL million) Distribution as to Scale Large Scale 7,7 15,8 24,9 29, 34,4 44,7 49,9 53,7 6,6 66,1 74,5 Medium Scale 8,8 15, 17,8 18,2 21,9 26,6 27,3 25,1 26,6 3,1 35,3 Small Scale 6,5 11, 15,6 18,7 21, 22,4 24,8 31, 34,9 39,9 44,3 Functional Distribution Deposit Banks 7,5 15,1 22,4 25,7 3,9 39, 43, 44,6 49,9 54,4 62, Participation Banks,, 28,5 23, 22,8 28,7 31,3 35,1 35,5 46,9 54,5 Sector 7,6 16,1 21,8 24,8 29,5 38,3 42,1 43,8 48,9 53,7 61,3 Period net profit per branch, another productivity indicator, has continued to increase in sector general also in 21. The said amount which was TL.9 million in 25 for sector general, has reached to TL 2.2 million in end-21. Period profit per branch increased by 3.8% for large scale banks in end-21 as to previous year, it did not change for medium scale banks and decreased by 17.8% for small scale banks. The fact that the branch number and period profit of medium scale banks has expanded in same ratio in 21 as to previous year-end and that period profit of small scale banks decreased, preventing the period profit amount per branch to increase for both groups. When the development of banking sector s period profit per branch in functional distribution basis is analzyed, it can be seen that asset amounts per branch increased by 4.8% and 2.8% for deposit banks and participation banks respectively and decreased by 5.8% for development and investment banks in 21 as to previous year. The decrease observed for development and investment banks was emanated from the fact that period profit decreased by 14.8% for development and investment banks group. Table 5.3-4: Period Profit per Branch Period Profit per Branch (TL million) Distribution as to Scale Large Scale,3 -,6,8,9 1,1,3 1,7 2,2 1,7 2,6 2,7 Medium Scale -,6-2,1 -,6,7,5,9 95,8,8,7,9,9 Small Scale -1,6-5,8,7 1, 18, 2,5 25,7 2,5 2,2 2,8 2,3 Functional Distribution Deposit Banks -,4-1,4,4,9 14,7 1,2 41,3 1,8 1,4 2,1 2,2 Development and Investment 7,7-15,3 13,3 13,4 11,3 29,1 29,8 2,6 21, 22,4 21,1 Participation Banks,1 -,2,1,4,4,9 1,1 1,2 1,2 1,2 1,3 Sector -1.7,5,9 1,,9 1,6 1,8 1,4 2,1 2,2 Banking sector asset amount per personnel has continued its increasing trend also in 21. The said amount which was TL 2.9 million in 25 increased to TL 5.3 million in 21. When it is analzyed on scale basis, it can be seen that total asset per personnel increased by 15.1%, 21.1% and 16.7% for large scale, medium scale and small scale banks respectively in 21 as to previous year. When it is analzyed on function basis, it can be seen that total asset per personnel grew by 16.3%, 13.9% and 2.% for deposit banks, development and investment banks and participation banks respectively in 21 when compared to previous year. Table 5.3-5: Asset Amount per Personnel Asset Amount Per Personnel (TL Thousand) Distribution as to Scale Large Scale ,3 Medium Scale ,2 Small Scale ,5 Functional Distribution Deposit Banks ,3 Development and Investment ,7 Participation Banks ,7 Sector BRSA 13 Structural Developments in Banking December 21

123 Box 27: Global Outlook in Branch Based Productivity Indicators When branch based productivity indicators is observed on country basis, it can be seen that EU countries such as England, Ireland and the Netherlands and Switzerland,,playing an important role in international banking activities, are in first ranks in indicators such as asset, loan, deposit and period profit per branch. Besides, the said rates are lower for Turkey when compared to developed countries. (EUR Million) Asset Per Branch Loan per Branch Deposit Per Branch Period Profit per Branch Ireland 1577,7 178,2 537,4 359, ,2-18,9 England 715,2 762,2 414,1 42, ,1-3, v.y. Netherlands 653,3 76, ,5 292,6 37,6-3,2 -,1 Switzerland 759, 665,8 319, ,3 349,8-7,8,5 Denmark 498,2 553,6 252,7 275,6 87,1 95,7-2,8-7,8 Sweden 444,4 435,5 29,9 213,8 9,9 9,8 18,8 16, Malta 378,4 353,4 225, ,1 146,6 v.y. v.y. Canada 279,4 37,2 151, , ,4 1,8 Finland 229,7 252,3 98,7 17,9 67,6 74,8 1,1 1, Austria 251,7 248, ,6 74,2 76,3 -,3 v.y. Germany 199,2 188,4 81,7 8,3 77,6 78,1 -,5 -,2 France 182,3 185,9 57,8 6,3 42,1 45,9 -,2,5 South Korea 12,1 127,4 82,4 9,2 7 81,4,5,5 Greece 112,7 12,2 53,9 52,7 68,6 68,4 v.y. v.y. Italy 16,2 18,5 52,9 54,3 34,8 37,2,3,2 Estonia 85,6 98,6 66,1 75, ,9 1,2-2,8 USA 9,6 84, , ,1,,1 Portugal 75,1 8,9 43,9 45,3 32,9 34,8 v.y. v.y. Czech Rep. 77,8 8,1 38,6 4 5,2 53,1 1,1 1,1 Spain 73,4 77,3 43,1 44,3 38 4,1,4,3 Slovenia 7,2 75,1 5,1 49,6 3,1 34,3,1 Latvia 48,6 48, ,7 19,8 2,8 v.y. v.y. Slovakia 52,5 43,9 24,6 25,2 18,3 17,9,4,2 Turkey 36,9 4,4 18, ,9 24,8,7 1, Hungary 35,6 35,5 21,6 2,6 15,6 15,8,3,2 Lithuania 27,7 26,7 21,6 19,5 11,3 12,3 v.y. v.y. Mexico 25,7 26,9 1,5 11,2 11,6 12,3,3,3 Poland 2,4 2,6 12,2 13,2 11,9 12,9 1,1,6 Romania 11,5 13,4 6,9 7,8 5,4 6,4 v.y. v.y. Russia 8,3 8,1 11,3 11,4 6,1 7,4 v.y.,1 Bulgaria 6,1 6,3 4,1 4,3 3,6 3,8 v.y. v.y. EU ,3 183, ,4 7,5 73,6,, Argentina v.y. v.y. 7,4 7,1 41,5 36,6,2,3 Australia 71,1 86, ,2 115,8 141 v.y. v.y. Belgium 294,7 v.y. 93,1 v.y. 125,1 v.y. -4,5 v.y. Brazil v.y. v.y. v.y. v.y. 2,1 v.y. v.y. China v.y. v.y. 17,4 22,5 26,. 32,4 v.y. v.y. Indonesia v.y. v.y. 5,7 6,5 7,7 8,9 v.y. v.y. GPSC v.y. v.y. v.y. v.y. 6,7. 62,4 v.y. v.y. South Africa v.y. v.y. 146,6 132,5 153,6 142,2 v.y. v.y. India v.y. v.y. 2 2,6 2,3 3,1 v.y. v.y. Japan v.y. v.y. 66,5 87,3 -,2 v.y. Luxembourg 469,9 v.y. 886,5 v.y. 1148,5 v.y.,9 v.y. PB-16 v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. South Arabia v.y. v.y. 4,4 46,1 45,4 58,6 2, 2, Resources: BIS, ECB, IMF BRSA 14 Structural Developments in Banking December 21

124 When total deposit amount per personnl which reached to TL 3.2 million by increasing 15.5% in 21 as to previous year is analyzed by main trends, it is seen that average of large scale banks are clearly different from sector average. Deposit per personnel in deposit banks, which was TL 94 thousand in 24 in which deposit guarantee was limited, reached to TL 3.4 million in 21, and it reached to TL 2.6 million from TL 1.3 million in the same period for participation banks. Table 5.3-6: Deposit Amount Per Personnel Deposit Amount Per Personnel (TL Thousand) Distribution as to Scale Large Scale ,2 Medium Scale ,3 Small Scale ,2 Functional Distribution Deposit Banks ,8 Participation Banks ,2 Sector Total period profit per personnel reached to TL 115 thousand in end-21 from TL 42 thousand in 25 in sector general. Period profit per branch increased by 8.6% and 2% for large scale and medium scale banks respectively and it decreased by 21.2% for small scale banks in end- 21 as to previous year. The fact that the number of branches and period profit of medium scale banks grew at the same time and that period profit of small scale banks decreased in 21 as to previous year has been an obstacle for period profit per personnel to increase for both groups. When the development of total period profit per personnel of banking sector in functional distribution basis is analyzed, stand-out respect is the fact that the period profit per personnel decreased by 15.1% for development and investment banks in 21 when compared to previous year. The decrease observed for development and investment banks emanated from the fact that the period profit for this bank group decreased by 14.8%. Table 5.3-7: Period Profit Per Personnel Period Profit Per Personnel (TL Thousand) Distribution as to Scale Large Scale Medium Scale Small Scale Functional Distribution Deposit Banks Development and Investment Participation Banks Operation Based Productivity Indicators The negative effects of increasing competition and global crisis in banking sector is causing banks to give more importance to productivity concept for sustainable growth. When Turkish banking sector which can protect its healthy structure in this environment is analzyed in respect of various productivity performance indicators, it can be seen that the sector has protected its main trends. A moderate increase was experienced in the ratio of operation expenses to total expenses 17 in 21 when compared to previous year. The said ratio increased to 46.3% in 21 from 44.6% in 29. It is observed that an increase was experienced in the ratio of total operation expenses to total incomes of medium and small scale banks while there was no changes for large scale banks in this period, when it is observed on scale basis. When it is analzyedoin function groups basis, it is seen that moderate increases were experienced in this indicator in all banking groups in Total Operation Expenses = Non-interest Expenses General Provision; Total Incomes = Net Interest Incomes +Non-interest Expenses BRSA 15 Structural Developments in Banking December 21

125 Chart 5.3-1: Total Operation Expenses /Total Incomes % Large-scale Medium-scale Small-scale Total % Deposit Banks Dev. And Inv. Banks The ratio of total operation expenses to total incomes of first ten banks in respect of asset size decreased in 21 as to 28. The banks which their ratio of total operation expenses to total incomes decreased the fastest in this period are T.İş Bankası, T.Garanti Bankası ve Yapı ve Kredi Bankası. Table 5.3-8: Total Operation Expenses/Total Incomes of First 1 Banks by Total Assets % 2 Share 22 Share 24 Share 26 Share 28 Share 21 Share 1 T.C.ZİRAAT B. 58, T.C.ZİRAAT B. 44,3 ZİRAAT B. 34, T.İŞ BANKASI 35,7 T.C.ZİRAAT B. 39,2 T.C.ZİRAAT B. 33,7 2 T.HALK B. 69,1 AKBANK 48,1 T.İŞ BANKASI 67,2 T.C.ZİRAAT B. 58,1 T.İŞ BANKASI 56,7 T.İŞ BANKASI 44,1 3 T.İŞ BANKASI 56, T.İŞ BANKASI 65,1 AKBANK 4,7 AKBANK 41,3 T.GARANTİ B. 55,2 T.GARANTİ B. 44,9 4 YAPI VE KR.İ B. 44,5 T.GARANTİ B. 82,5 T.GARAN. B. 7,3 T.GARANTİ B. 42,6 AKBANK 45,7 AKBANK 4,4 5 AKBANK 28,4 YAPI VE KR. B. 56,2 T.HALK B. 37, YAPI VE KRİ B. 74,7 YAPI VE KR. B. 59,2 YAPI VE KR. B. 43,5 6 T.GARANTİ B. 56,1 T.HALK B. 28, YAPI VE KR. B. 11,4 T.VAKIFLAR B. 48,5 T.VAKIFLAR B. 55,6 T.VAKIFLAR B. 51,2 7 T.VAKIFLAR B. 93,1 T.VAKIFLAR B. 87,7 T.VAKIFLAR B. 49,9 T.HALK B. 36 T.HALK B. 39,7 T.HALK B. 36,5 8 PAMUKBANK 35,7 KOÇBANK 69,6 KOÇBANK 56,8 FİNANSBANK 46 FİNANSBANK 49,1 FİNANSBANK 44,6 9 T.EMLAK B. 498, PAMUKBANK -22,3 FİNANSBANK 53, OYAKBANK 63,6 DENİZBANK 56,6 DENİZBANK 51,9 1 DEMİRBANK 49,3 FİNANSBANK 35,7 FORTİS BANK 73,9 DENİZBANK 66,2 ING BANK 63,2 T.EKONOMİ B. 6,8 BRSA 16 Structural Developments in Banking December 21

126 Box 28: Global Outlook in Personnel Based Productivity Indicators When personnel based productivity indicators are analzyed on country basis, it can be observed that EU countries such as England, Ireland, the Netherlands and Luxembourg are in the first ranks in indicators such as asset, loan, deposit and period profit per personnel. The said ratios for Turkey are quite above EU average. Total loan and deposit per personnel was realized as EUR 9.5 billion and EUR.8 billion respectively for EU-27, while it was EUR.9 billion and EUR.1 billion for Turkey respectively in 29. Asset per Personnel Loan Per Personnel Deposit Per Personnel Period Profit Per Personnel (EUR Million) Ireland , , , ,3 748,8 765,8 4,9-61,5 Luxembourg , , , ,8 974,1 969,2 7,4 v.y. Denmark 2.63,8 22.1, 1.452,8 11., 36, ,1-31, EU , , , , ,5,, Netherlands , , ,5 1.59,1 862,9 877,3-94, -2,7 England ,6 2.2, , ,2 1.43,8 1.76,2-75,8 v.y. Switzerland 18., 19.81,6 8.5, 9.367, , 7, Finland , , 6.346,2 6.64, 434, ,1 6, Austria , , , ,6 398, ,7 v.y. Spain 12.25, , , ,5 633,7 667,8 67, 48,7 İtaly 1.733, , , ,4 51,8 392,3 3,1 22,9 GPSC 9.76, , , ,5 43,8 446,2 v.y. v.y. Malta 1.5, 1.25, 6.25, 5.25, v.y. v.y. Portugal 7.774, , , ,5 34,3 361,3 v.y. v.y. Geece 7., 7.424, , ,6 425,8 422,7 v.y. v.y. Slovenia 4.83, , , , ,7 8,3 Czech Rep , 4.21, , 2.15, ,9 55, 55,3 Estonia 3.666,7 3.5, 2.833, , ,7 5, -1, Hungary 2.84,9 2.93, , , ,2 2,5 18,6 Slovakia 3.142, , , ,6 19,5 115,8 23,8 15,8 Latvia 2.285,7 2.5, 1.642,9 1.75, 92,9 18,3 v.y. v.y. Lithuania 2.454, ,6 1.99, ,3 1 19,1 v.y. v.y. Turkey 1.874,3 2.13,3 939,9 989,1 116,4 129,3 33,9 5,5 Poland 1.391, , ,3 81,5 93,4 72,5 46,4 Romania 1.18, ,7 78,3 735,3 55,6 6,3 v.y. v.y. Bulgaria 1.121, ,6 757,6 764,7 66,7 67,6 v.y. v.y. USA v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Germany ,6 v.y. 4.77, v.y. 447,1 v.y. -29, v.y. Argentine v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Australia v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Belgium ,7 v.y. 6.9,9 v.y. 818,2 v.y. -295,5 v.y. Brazil v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. China v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Indonesia v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. France , v.y ,5 v.y. 339,4 v.y. -14, v.y. South Korea v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. South Africa v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. India v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Switzerland v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Japan v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Canada v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Mexico v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. PB-16 v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Russia v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Saudi Arabia v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Resource: BIS, ECB, IMF BRSA 17 Structural Developments in Banking December 21

127 The share of personnel expenses in total operation expenses, in parallel with the growth of the sector, has maintained to its moderate increase trend, in which it has entered in 25, also in 21. The said ratio increased to 41.2% in 21 from 28.9% in end-25. When banking sector is analyzed by scales, it is observed that the said ratio decreased for small and medium scale banks and that a sharp increase amounting to 4.7 points experienced for large scale banks in 21. By function groups basis, the sector is progressing over the averages while the share of personnel expenses in operation expenses was relatively higher for development and investment banks. It is seen that there is a decrease experienced in the share of personnel expenses in total operation expenses of participation banks in 21 as to previous year. Chart 5.3-2: Personnel Expenses/Total Operation Expenses % Large-scale Medium-scale Small-scale Total % Deposit Banks When the share of personnel expenses in total operation expenses of first ten banks is analyzed in respect of asset size, it is seen that T.C. Ziraat Bankası, T. Halk Bankası and İş Bankası have values above sector average in 21. Table 5.3-9: Personnel Expenses/ Total Operation Expenses of First 1 Banks by Total Assets % 2 Share 22 Share 24 Share 26 Share 28 Share 21 Share 1 T.C.ZİRAAT B. 46,6 T.C.ZİRAAT B. 44,7 T.C.ZİRA.B. 47,3 T.İŞ BANKASI 38,7 T.C.ZİRAAT B. 47,6 T.C.ZİRA.B. 52,5 2 T.HALK B. 42, AKBANK 19,7 T.İŞ BANKASI 31,6 T.C.ZİRAAT B. 44,4 T.İŞ BANKASI 37,5 T.İŞ BANKASI 46,6 3 T.İŞ BANKASI 45,1 T.İŞ BANKASI 38, AKBANK 27,2 AKBANK 3,4 T.GARANTİ B. 31,6 T.GARA. B. 34,3 4 YAPI VE KR.B. 36,7 T.GARANTİ B. 19,9 T.GARAN. B. 23,1 T.GARANTİ B. 27,5 AKBANK 33,9 AKBANK 32,3 5 AKBANK 27,5 YAPI VE KREDİ B. 19,7 T.HALK B. 48,1 YAPI VE KR. B. 28,6 YAPI VE KREDİ B. 32,5 YAPI KR. B. 35,5 6 T.GARANTİ B. 29,5 T.HALK B. 54,1 YAPI VE K. B. 23,6 T.VAKIFLAR B. 3,8 T.VAKIFLAR B. 34 T.VAKIFL. B. 34, 7 T.VAKIFLAR B. 38, T.VAKIFLAR B. 31, T.VAKIF. B. 32,4 T.HALK B. 49,7 T.HALK B. 45,3 T.HALK B. 42,8 8 PAMUKBANK 42,6 KOÇBANK 24,4 KOÇBANK 35,7 FİNANSBANK 28,3 FİNANSBANK 37,7 FİNANSBANK 4,1 9 T.EMLAK B. 33,1 PAMUKBANK 13,6 FİNANSBANK 34,8 OYAKBANK 44,8 DENİZBANK 41,2 DENİZBANK 36,5 1 DEMİRBANK 6,4 FİNANSBANK 27, FORTİS B. 29,6 DENİZBANK 52,6 ING BANK 47,6 T.EKON. B. 38,5 The ratio of commission incomes 18 which increased as a result of policies the banking sector adopted for increasing its non-interest incomes and in paralel with expansion in loan portfolio to total operation expenses could not maintain its increase trend in 21. The said ratio decreased in 21 for deposit and participation banks on function basis and small and medium scale banks on scale basis. The said ratio for development and investment banks, which the provision ratio of commission incomes to total operation expenses was quite below the sector average, reached to 31.% in 21 by increasing 6.2 points. The fact that commission incomes covering mainly the total operation expenses, has contributed sector to maintain its profitability in 21 in which interest margin of banking sector shrank 1.2 points as to previous year. Chart 5.3-3: Commission Incomes/Total Operation Expenses 6 5 % Large-scale Commission Incomes = Commissions Taken from Loans + Banking Services Incomes Medium-scale 2 1 Small-scale 1 Total Deposit Banks Dev. And Inv. Banks Participation Banks Total BRSA 18 Structural Developments in Banking December 21 %

128 When the ratio of commission incomes of first 1 banks to total operation expenses as to their asset size in 21 is analyzed, it is seen that five of the said banks had a ratio above the sector average. It is observed that the said ratios for T.C. Ziraat Bankası, Akbank, Yapı ve Kredi Bankası, Halk Bankası ve T. Ekonomi Bankası increased in 21 as to 28. In addition, it is thought that level of total operation expenses and preferences in goods pricing (such as replacing interest ratio and commission incomes) while making evaluations has to be taken into account. Table 5.3-1: Commission Incomes/Total Operation Incomes of First 1 Banks by Total Assets % 2 Share 22 Share 24 Share 26 Share 28 Share 21 Share 1 T.C.ZİRAAT B. 19,1 T.C.ZİRAAT B. 18,4 T.C.ZİRA.B. 29,6 T.İŞ BANKASI 47,7 T.C.ZİRAAT B. 43,8 T.C.ZİRA. B. 46,8 2 T.HALK B. 13,1 AKBANK 31,2 T.İŞ BANKASI 36,1 T.C.ZİRAAT B. 46,4 T.İŞ BANKASI 43,5 T.İŞ BANKASI 42,2 3 T.İŞ BANKASI 28,8 T.İŞ BANKASI 27,9 AKBANK 47,6 AKBANK 57,4 T.GARANTİ B. 67,3 T.GARANTİ B. 66,9 4 YAPI VE KREDİ B. 46,3 T.GARANTİ B. 45,2 T.GARAN.B. 48,8 T.GARANTİ B. 69,8 AKBANK 57,2 AKBANK 57,5 5 AKBANK 29,9 YAPI VE KREDİ B. 41,3 T.HALK B. 22,9 YAPI KREDİ B. 49,7 YAPI KREDİ B. 6,8 YAPI KR. B. 69,6 6 T.GARANTİ B. 33,3 T.HALK B. 12, YAPI KR. B. 39,8 T.VAKIFLAR B. 35, T.VAKIFLAR B. 38,7 T.VAKIFL.B. 27,9 7 T.VAKIFLAR B. 24,6 T.VAKIFLAR B. 4,2 T.VAKIFL. B. 38,2 T.HALK B. 34,8 T.HALK B. 41,8 T.HALK B. 44,6 8 PAMUKBANK 35, KOÇBANK 37,1 KOÇBANK 47,7 FİNANSBANK 46,6 FİNANSBANK 66,7 FİNANSB. 66,3 9 T.EMLAK B. 15,5 PAMUKBANK 14, FİNANSBANK 53,3 OYAKBANK 33,9 DENİZBANK 34,8 DENİZB. 32,6 1 DEMİRBANK 3,1 FİNANSBANK 62,7 FORTİS B. 42,2 DENİZBANK 38,2 ING BANK 36,4 T.EKON.İ B. 65,4 The share of banking sector net interest incomes in total incomes regressed to 63.4% by decreasing 5.1 points in 21 as to previous year. The said share for all groups on scale and function basis decreased in this period. In addition to that the share of interest incomes of development and investment banks in total incomes continued to progress quite above the sector average. It is thought that especially the decrease in nominal interest ratios was effective in the said development. Chart 5.3-4: Net Interest Incomes/Total Incomes 1 1 % 8 8 % Large-scale Medium-scale Small-scale Total 4 2 Deposit Banks Dev. And Inv. Banks Participation Banks Total When first 1 banks are analyzed on asset size, it is seen that the share of net interest income in total incomes of five banks was over the sector average. The share of interest incomes of T. Garanti Bankası and T. Vakıflar Bankası has shown an increase in 21 as to 28. Table : Net Interest Incomes/Total Incomes of First 1 Banks by Total Assets % 2 Share 22 Share 24 Share 26 Share 28 share 21 Share 1 T.C.ZİRAAT B. 79,9 T.C.ZİRAAT B. 86,5 T.C.ZİRA.B. 84,5 T.İŞ BANKASI 56,7 T.C.ZİRAAT B. 75,7 T.C.ZİRA. B. 69,8 2 T.HALK B. 78,8 AKBANK 76,9 İŞ BANKASI 6,6 T.C.ZİRAAT B. 76,2 T.İŞ BANKASI 59,4 İŞ BANKASI 56,9 3 T.İŞ BANKASI 62, T.İŞ BANKASI 53,7 AKBANK 75, AKBANK 61,7 T.GARANTİ B. 55,6 T.GARAN. B. 61,5 4 YAPI KREDİ B. 55,6 T.GARANTİ B. 53,1 GARANTİ B. 56,8 T.GARANTİ B. 49,9 AKBANK 64, AKBANK 63,5 5 AKBANK 88,4 YAPI KREDİ B. 32,7 T.HALK B. 82, YAPI KREDİ B. 54,1 YAPI KREDİ B. 51,4 YAPI KR. B. 48,5 6 T.GARANTİ B. 7,9 T.HALK B. 63,2 YAPI VE K.İ B. 48,5 T.VAKIFLAR B. 67,2 T.VAKIFLAR B. 67, T.VAKIFL. B. 69,5 7 T.VAKIFLAR B. 44,7 T.VAKIFLAR B. 38,1 T.VAKIF. B. 64,7 T.HALK B. 59,4 T.HALK B. 69,9 T.HALK B. 69,5 8 PAMUKBANK 54,8 KOÇBANK 65,8 KOÇBANK 7,3 FİNANSBANK 45,4 FİNANSBANK 6,3 FİNANSBANK 58,8 9 T.EMLAK B. -292,5 PAMUKBANK 143,5 FİNANSBANK 62,4 OYAKBANK 63,7 DENİZBANK 68, DENİZBANK 63,9 1 DEMİRBANK -45,2 FİNANSBANK 71,9 FORTİS B. 55,6 DENİZBANK 54,4 ING BANK 71,9 EKONOMİ B. 47,8 BRSA 19 Structural Developments in Banking December 21

129 Box 29: Global Outlook in Operation Based Productivity Indicators When operation based productivity indicators are analyzed in country basis, it seen that countries such as Lithuania, Greece and Denmark are in first ranks in indicators such as net interest income/total income and personnel expenses/non-interest expenses. It is seen that the said ratios are high for Turkey as to the averages of EU and G2 countries. The ratios of net interest income/total income and personnel expenses/non-interest expenses for the given countries were realized respectively as 57.4%and 37.6%, and it was realized as 63.4% and 41.2% respectively for Turkey. % Net Interest Income/Total Income Personnel Expenses/Non-Interest Expenses Lithuania v.y. 88,1 v.y. 41,4 Greece 73, ,3 55,7 Denmark 82,4 82,4 v.y. 69,6 Slovakia 76, ,5 39,3 South Cyprus Greek Cypriot 66,7 75,9 59,4 59,4 Bulgaria 74,8 74,8 37,1 37,1 South Korea 8,9 73,1 37,4 36,7 Germany 72,5 72,5 54,7 54,7 Hungary 66,8 71,9 v.y. Mexico 68,1 71,6 1 1 Netherlands 68,8 7,4 47,4 57 India v.y. 67,8 v.y. Malta 62,2 67,6 56,1 53,4 Austria 69,7 67,4 51,4 5,2 Japan 73,9 67,2 v.y. Spain 65,3 63,8 57,1 56,4 USA 62,6 63,6 41,9 41,9 Turkey 68,5 63,4 38,4 41,2 Czech Republic 55,8 63,1 4,5 39,7 Slovenia 163,1 61,3 v.y. Indonesia 62,5 6,5 4,9 37,3 Sweden 59,7 59,7 v.y. Belgium 7,8 58,7 38,9 43 Romania 44,1 58,7 31,8 36,1 Italy 6,8 56,8 57,5 56,5 Brazil 48,5 54,7 v.y. Estonia 42,3 54,1 3,9 36,5 Poland v.y. 54,1 v.y. 42,3 Portugal 53,8 52,2 49,3 49,2 Latvia 57 49,4 54,9 52,6 Canada 46,4 48,6 52,9 54,1 Russia 45, ,9 3,2 France 44,7 44,7 42,9 42,9 South Africa 39,5 44,5 43,7 5,8 China 47,7 44 v.y. England 44,1 41,9 44,3 49,2 Finland 52,4 4 38,4 36,5 Switzerland 3,4 3,4 55,3 55,3 Luxembourg 36,5 27,2 38,7 34,4 Australia 52,7 36 Ireland 6 39,8 EU-27 v.y. v.y. v.y. v.y. Argentina v.y. v.y. v.y. v.y. PB-16 v.y. v.y. v.y. v.y. Saudi Arabia v.y. v.y. v.y. v.y. Resource: IMF FSI Table (fsi.imf.org) *the most current data available for 21 is presented. BRSA 11 Structural Developments in Banking December 21

130 6. STRUCTURE OF NON-BANK FINANCIAL SECTORS 6.1. Financial Leasing Sector Market Structure Developments in Company, Branch and Personnel Structure The number of companies operating in financial leasing sector decreased continuously by years and decreased to 35 as of end-21. Branching weakened in crisis period and decreased from 17 in 29 to 16 in 21. On contrary to the decrease in the number of financial leasing company and number of branches in the mentioned period, the number of personnel increased by 1.2% when compared to the previous year and realized as Chart 6.1-1: Development of Number of Branches, Personnel and Companies Fin. Leasing 1. Number of Personnel (left 4 Nr. Of Companies axis) Nr. Of Branches Number of leasing comp. 2 Nr. Of Personnel (left axis) When analyzed by scales 19, as of December 21, the number of large scale companies is 6, the number of medium scale companies is 12 and the number of small scale companies is 17. It is seen that the decrease in the number of companies is mostly occurred in small scale group. In the sector there are 16 branches in total and only three companies are branched. While the large scale companies own 56% and medium scaled companies own 44% of branches, small scale ones have no branches. Large scale companies own 5% of the employment within the sector, medium scale companies own 35% and small scale companies own 15%; it is seen that the personnel concentration is mostly in large scale companies. On the other hand, in financial leasing sector, a decrease occurred comparing to 21 in the basis of scale and in the number of customers. Accordingly, the customers tended to medium scale companies from large scaled companies, so the large scale companies have now 7% of customers, while medium scale companies have 25% and small scaled companies have 5%. Table 6.1-1: Structural Indicators by Scale Groups (person, number) Large Med. Small Tot. Large Med. Small Tot. Nr. Of Fin. Leasing Branch Personnel , ,286 Nr. Of Loan Customer (Nr.) 44,614 12,677 2,719 6,1 35,317 12,511 2,6 5,428 Nr. Of Personnel by Company Concentration Indicators In financial leasing sector, asset concentration increased a bit in parallel with the asset growth in 21 when compared to the previous year, and while the share of medium and small scale companies in total assets increased by 1.7% and 17.7%, the share of large scale companies decreased by 4.8%. In the mentioned period, while the share of first 5 companies increased by 19 Companies of which share of asset size is higher than 5% of total assets are considered as large scale companies, companies of which share of asset size are between 1%-5% are considered as medium scale companies and companies of which share of asset size is below 1% are considered as small scale companies. BRSA 111 Structural Developments in Banking December 21

131 5.4% and the share of first 1 companies increased by 2.3%, and the HHI relating to asset concentration increased to 872. Chart 6.1-2: Share Distribution of Assets and Concentration Indicators % Large Scale Medium Scale Small Scale Assets First 5 Comp First 1 Comp HHI By Scale Large-Scale Medium-Scale Small-Scale ,7 Total While TEB Finansal Kiralama A.Ş. is included in the first 1 companies having the highest share in total assets in financial leasing sector in 21, FFK Fon Finansal Kiralama A.Ş is not included in the ranking in this period. In 21, main actors of the sector are the affiliates of banks as in previous periods. When the share distribution of first 1 companies in total assets is analyzed, it is seen that there are closer ratios in 21 when compared to the previous years. Table 6.1-2: Share of First 1 Companies in Assets 29 Share Cumulative Share 21 Share Cumulative Share 1 Yapı Kredi F.K Yapı Kredi F.K Garanti F.K Garanti F.K Deniz F.K Deniz F.K Finans F.K İş F.K İş F.K Finans F.K Ak F.K Ak F.K Fortis F.K BNP Paribas F.K TEB F.K Vakıf F.K FFK Fon F.K Halk F.K Halk F.K TEB F.K While HHI indicator relating to loan concentration in financial leasing sector was about 97 in 29, it decreased to 899 in 21. Despite the decrease in HHI and the decrease in the share of first 5 and first 1 companies, it s seen that concentration continues and the share of first 1 companies is over 8%. The share of medium scale companies in loans increased in the same period while the share of large scale banks decreased. Chart 6.1-3: Total Credit Volume and Concentration Indicators % Large scale Small scale Medium scale HHI(Right axis) Total Loans First 5 Comp First 1 Comp HHI Distr. By Scale Large-Scale Medium-Scale Small-Scale The concentration indicators of own funds of financial leasing sector increased moderately in 21 when compared to the previous year. Accordingly, HHI criteria increased to 916 points. When compared to the previous year, while the share of large scale companies in total own BRSA 112 Structural Developments in Banking December 21

132 funds decreased in 21, the share of small scale companies remained the same and the share of medium scale companies increased. Chart 6.1-3: Distribution of Own Funds and Concentration % Large scale Medium scale Small scale HHI(Right axis) Total Own Funds First 5 Comp First 1 Comp HHI Distr. By Scale Large-Scale Medium-Scale Small-Scale Total When the profit distribution of companies in financial leasing sector in end-21 is analyzed, it is seen that 75.1% of the sector profit belongs to large scale companies, 21.9% belongs to medium scale companies and 8.5% belongs to small scale companies. Moreover, ROA and ROE of the companies in each three scales decreased significantly in 21 when compared to the previous year. When ROE is compared on scale basis, it is seen that small scale companies have considerably low ratios when compared to large and medium scale companies. Table 6.1-4: Distribution of Profitability by Scale Net Period Profit Distr. ROA ROE Distr. ROA ROE Distr. ROA ROE Distr. ROA ROE Large-Scale Medium-Scale ,1 Small-Scale Sector BRSA 113 Structural Developments in Banking December 21

133 Box 3: Regional Indicators in Leasing Sector The crisis experienced in world finance markets had negative impacts on the financial leasing sector which had been into a stable growth process after the recession in and the sector narrowed in 29. Activity volume which was USD billion in 28 decreased by 23.9% and realized as USD billion in 29. Leasing Sector Asset Sizes (USD Billion) Europe N.America Asia S.America Avustralia/NZ Africa Source: World Leasing Yearbook (211) Years Europe North America Asia South America , Austr./ NZ. Africa Total In 29, in the leasing sector, all regional leasing sectors have become smaller, except for the positive development in China in the Asia zone. The reduce seen in 29 in the European and North American leasing sectors, composing almost 7% of the global leasing sector is behind the reduce seen in South America and Australia/NZ leasing sectors. However, despite this recession, the share of North American leasing sector within the global leasing sector s volume has increased from 3.8% to 34.2% within the same period. The least recession in proportional basis is occurred in Africa. North America which was leading the sector previously has left its place to the EU as of 26. Leasing Volume and Development Growth 28-9 Source: World Leasing Yearbook (211) Leasing Volume and Development Annual Volume ($ Bil.) Growth 28-9 Europe N. America Asia S. America Africa Australia/NZ Total % within World Market Volume 28 % within World Market Volume 29 Market Share Variation The development in Chinese leasing sector by 86.7% in 29 reflected positively on the sector both regionally and globally. Therefore, the performance of Chinese leasing sector is effective on the increase in market share of Asia. Financial leasing volume narrowed nearly in all the countries in Europe. On the other hand, Africa and Australia s shares in leasing sector are so small. BRSA 114 Structural Developments in Banking December 21

134 Box 31: Growth of Leasing Transaction Volume and Penetration Ratio Comparison The recession by nearly 2% seen in the global leasing volume is the most serious recession occurred in this sector so far. While the leasing transaction volume in the USA which was in the first rank globally has decreased by 14.8% in 29, the leasing sector in Mexico has grown by 1%. Leasing volumes of all member countries of Europe have decreased, but Serbia is the most affected country with a recession by 75%. In Latin America, Brazil is the country with the highest decrease by 48.5%, its rank declined from four to seven within first 5 countries. In China, this sector has grown considerably within recent years, due to the increase of liberality in the market and accordingly the entrance of numerous international and national companies to the leasing sector. In Japan, the sector decreased by 18.7%, keeps its third rank within the global market. In Turkey which was in the 31 st rank throughout the world, the leasing sector decreased by 59%. Leasing Trans. Volume ($ Bil.) % variation Market Penetration % Leasing Trans. Volume ($ Bil.) % Variation Market Penetration % Countries Countries America Australia Germany Denmark Japan Belgium China Norway France Switzerland Italy Portugal Brazil n.a. Mexico n.a. England South Africa n.a. Canada Czech R Russia Greece Sweden Hungary Spain Turkey Netherlands Romania Poland Colombia n.a. Korea Other 2.8 Austria Total 557,3 Source: World Leasing Yearbook (211) Another structural criteria of the countries leasing sector is the penetration ratio (leasing transaction volume/fixed equipment and hardware investments*1) in which the leasing transaction volume compared to all fixed equipment and hardware investment sizes are observed. This ratio removes the comparison difficulties arising from the countries present market sizes and related fundamentally the investments which may be subject to leasing and leasing volume. Penetration ratios are relatively high in America and EU countries. This ratio is 17.1% in America, 13.9% in Germany, 17.6 in England, 1% in France, 4.1% in Russia, 3.1% in China and 7% in Japan. Penetration ratio of Turkey which is 3.7% is closer to the Asia average. BRSA 115 Structural Developments in Banking December 21

135 6.2. Factoring Sector Market Structure 6.3. Developments in the Company, Branch and Personnel Structure The number of companies operating in the factoring sector is decreased by 2 units to 76 during 21, when compared to previous year. In the factoring sector in which the consolidation continues, increases were seen in the numbers of personnel and branches in 21. Chart 6.3-1: Development of the Number of Branches, Personnel and Companies % 8 Number of companies Nbr. Of Factoring Comp Number of branches 5 3. Nbr. Of Branches Number of personnel Nbr. Of Personnel (right axis) 2,912 3,9 2,959 3,557 2 (right axis) In 21, in the factoring sector, the number of large and medium scale companies remained the same, while the number of small scale companies decreased. There are 28 branches in the sector and only 8 companies are branched. The number of customers increased by 39% comparing to previous year. Medium and small scale companies have a share by 85% in the number of customers within the factoring sector. Half of the employment of the sector is provided by medium and small scale companies. The number of personnel per branch is higher in large scale companies. Table 6.3-1: Structural Indicators by Scale Groups (Person, Number) Large Medium Small Tot. Large Medium Small Tot. Nr. Of Factoring Companies Branch Personnel 446 1,117 1,396 2, ,252 1,767 3,557 Nr. Of Loan Customer (Nr.) 4,643 21,71 15,283 4,997 8,478 24,327 24,266 57,71 Nr. Of Personnel per Company BRSA 116 Structural Developments in Banking December 21

136 Box 32: Comparative Structural Indicators Concerning Factoring Sector There are 592 factoring companies in EU countries and 3 in the USA. Turkey has 7 factoring companies and it is the country having the highest number of factoring companies after the USA and Germany. There are no direct correlation between the number of companies and factoring transactions and the level of development. Because in countries such as the Netherlands, France, Spain, Belgium and Finland in which there are fewer factoring companies, the transaction volume per person is considerably high. Number of Companies and the Development of Factoring Transaction Volume by Countries Billion Country Nr. Of Comp. 21 Trans. per Comp. Million Germany , 89. Belgium , Czech Rep , Denmark , Estonia , Finland , France , Netherlands , England , Sweden , Spain , Italy , GPSC , Latvia.2., Lithuania , Luxembourg , Hungary , Poland , Portugal , Slovakia , Slovenia , Greece , Turkey , USA , Source: World Factoring Yearbook 211, Factors Chain International When the factoring transaction volume per company data is evaluated, it is seen that France is in the first rank by Euro 11.6 billion. France is followed by the Netherlands by Euro 6 billion and Spain by Euro 4.5 billion. Turkey takes place in back rows by Euro 29 million. BRSA 117 Structural Developments in Banking December 21

137 Concentration Indicators Factoring sector is the sector with the lowest concentration within the non-bank financial sector and the concentration has decreased in 21 comparing to previous year. Accordingly the HHI indicator which was 591 in 29 decreased to 538. In parallel with this development, the shares of first 5 and 1 companies also decreased. When the asset concentration is analyzed by scales, a decrease by 6.7% is observed in large scale companies and increases by.6% and 2.2% in medium and small scale companies respectively are observed in 21 comparing to previous year. Chart 6.3-2: Asset Share Distribution and Concentration % 27 Large scale Small scale Medium scale HHI T. Assets First 5 Comp First 1 Comp HHI Distr. By Scale 2 Large Medium Small Total It is observed that in the factoring sector, bank affiliated companies are weighted among the first 5 and 1 banks having the highest ratios as asset sizes. All of the companies taking place among the first 1 companies within the sector in 29 take also place among the first 1 companies in 21, even if their places are not the same. Table 6.3-2: Company Concentration in Assets Cum. Share 29 Share Cum. Share 21 Share 1 Yapı Kredi F Yapı Kredi F Garanti F Garanti F Fiba F Deniz F Girişim F Fiba F Deniz F Vakıf Finans F Vakıf Finans F TEB F TEB F Girişim F Kapital F Kapital F Lider F İş F İş F Lider F The concentration of factoring receivables is decreased in 21. Consequently, the HHI concentration index which was 634 in 29 decreased to 565 in 21. Moreover, the shares of first 5 and first 1 banks within factoring receivables also decreased. When analyzed by scales, it is seen that the share of small scale companies increased, while the share of large and medium scale companies decreased. Factoring receivables of large scale companies is twice the size of the receivables of small ones. In other words, large scale factoring companies keep their weight in the sector even if it decreased. BRSA 118 Structural Developments in Banking December 21

138 Chart 6.3-3: Distribution of Receivables and Concentration Indicators by Scale % 27 Large scale Small scale Medium scale HHI T.Loans First 5 Comp First 1 Comp HHI Distribution by Scale Large Medium Small Total Own funds concentration decreased in the factoring sector in 21. Accordingly, the HHI index concerning own funds concentration which was 397 in 29 decreased to 375 in 21. Moreover, the shares of first 5 and 1 companies within own funds also decreased. In 21, while the share of small and medium scale companies within own funds increased, the share of large scale companies decreased. The own funds concentration is lower than the asset, loan and profit concentration in the sector. This situation is emanating from the fact that generally when the scale of a company gets larger, its foreign resource usage tends to increase, but also from minimum capital requirements. Chart 6.3-3: Distribution of Own Funds and Concentration Indicators % 27 Large scale Small scale T.Own Funds First 5 Comp First 1 Comp HHI Distribution by Scale Large Medium Small Total As a result of low nominal interest policy applied recently, the profitability performance of factoring sector is regressed comparing to previous years. By scales, it is seen that while the share of large scaled companies within total profit is decreasing, the shares of medium and small scaled ones are increasing. Small scaled companies have a relatively better performance in return on assets and return on equities. Table 6.3-3: Distribution of Profitability by Scales Net Period Profit Distr. ROA ROE Distr. ROA ROE Distr. ROA ROE Large Scaled Medium Scaled Small Scaled Sector Financing Sector Market Structure Medium scale HHI Developments in Financing Companies, Branch and Personnel Structure The number of companies operating in the financing sector increased by one in 21. While the number of branches stayed the same within the same period, the number of personnel increased by 39 to 551. BRSA 119 Structural Developments in Banking December 21

139 Chart 6.5-1: Developments in the Number of Branches, Personnel and Companies % Number of companies Number of branches Number of personnel Cons. Fin. Nbr. Of Comp Nbr. Of Branches Personnel (right axis) When analyzed by scales, it is seen that in 21, only the small scale companies increased by one, while the numbers of medium and large scale companies stayed the same. Financing companies conduct their activities of gaining new customers and expanding their loans from their centers, so by the end of 21, there is only one branch in the sector. In 21, the number of customers increased by comparing to previous year. This increase is emanating from the increase occurred in the customer portfolios of large and small scale companies. Within this period, the employment is still concentrated on large scale companies. Table 6.5-1: Structural Indicators by Scale Groups Large Medium Small Total Large Medium Small Total Cons. Fin. Nbr. Of Comp Branches Personnel Customers (Nbr) 228,252 1, ,676 26,472 1, ,95 Nbr. of Personnel by Company Concentration Indicators The concentration in financing companies sector decreased in 21. Accordingly, the HHI concentration index which was in 29 decreased to in 21. However, the highest concentration within banking sector is observed in financing companies. Chart 6.5-2: Total Asset and Concentration Indicators % Large scale Medium scale Small scale HHI Asset First 3 Comp First 5 Comp HHI By Scale Large Medium Small Total In 21, in the financing companies sector, the share of first 3 companies decreased while the share of first 5 companies increased. While the share of small companies did not change within the sector, the share of large scaled ones increased and the share of medium scaled ones decreased. BRSA 12 Structural Developments in Banking December 21

140 Table 6.5-3: Concentration of First 5 Companies in the Assets 29 Sh. Cumulative Sh. 21 Sh. Cumulative Sh. 1 VW Doğuş T.F Merc.-Benz F.Türk Merc.-Benz F.Türk Koç T.F Koç T.F VW Doğuş T.F Koç Fiat Kredi T.F TEB T.F TEB T.F Koç Fiat Kredi T.F When loan concentration in financing sector is analyzed, it is seen that the HHI index decreased from 1,954 in 29 to 1,691 in 21. When analyzed by scales, more than 9% of loans within the sector are granted by large scale companies. Within this period, the share of loans of medium scale financing companies decreased comparing to previous year, while the share of large scale ones increased. Chart 6.5-2: Loan Distribution and Concentration % Large scale Medium scale Small scale HHI(Right axis) T. Loans First 3 Comp First 5 Comp HHI Distribution by Scale Large Medium Small 1 1 Total In 21, the concentration of own funds decreased in consumer financing sector. The HHI index concerning own funds concentration decreased from 1,727 in 29 to 1,636 in 21. Large scale companies have an own funds rate considerably high comparing to other companies which is 88.6%. Furthermore, while the concentration ratio of large and small scale companies increased in 21 comparing to previous year, the share of medium scale companies decreased. Chart 6.5-2: Distribution of Own Funds and Concentration % 2. Large scale Medium scale Small scale HHI T. Own Funds First 3 Comp. 73, First 5 Comp HHI Distribution by Scales Large Medium Small Total In 21, in consumer financing sector, the share of large and small companies within total profit increased, while the share of medium companies decreased. When the return on assets and return on equities of consumer financing sector is evaluated by scales, it is seen that in 21, the profitability of large and medium companies increased while the profitability of medium and small companies decreased. BRSA 121 Structural Developments in Banking December 21

141 Table 6.5-4: Distribution of Profitability by Scale Net Period Profit Distr. ROA ROE Distr. ROA ROE Distr. ROA ROE Distr. ROA ROE Large Scale Medium Scale Small Scale Sector BRSA 122 Structural Developments in Banking December 21

142 7. FINANCIALIZATION AND FINANCIAL DEEPENING 7.1. Financialization Financialization means the increase of the weight of financial services and financial movements in the economy of national and global economies. Financialization is the growth in importance of financial markets, the increase of number and weight of financial actors in an economy on one hand. On the other hand, it means that even non-financial institutions are making their decisions based on financial impulses. As a result, fundamentally the financialization appears to be a concept of economies in which financial markets and capital movements are liberalized. While the financialization is considered as a sign of development in some ways, it is also one of the leading concepts newly discussed especially due to its negative effects on distribution and increase of financial risks. In the measurement of the weight of financial services and trends there are different approaches in time. The starting point of these approaches and their consequence suggestions differentiate from each other, but it is seen that some economic and financial indicators are analyzed in common. These indicators may be classified as those concerning global capital movements, data concerning national capital market, debt market indicators and employment indicators. Moreover, deepening indicators concerning national income are also used as variables helping to analyze the financialization phenomenon Capital Movements The liberalization of the presentation of financial services underlies under financialization indicators. Without a certain level of liberalization in capital finance accounts, it is not possible for the financial services to increase their weight within the economy. In this respect, it is observed that in many studies, first of all the volume of the global private capital is monitored as a basic variable. Paincheira (29) 2 expresses that the increase of capital movements is realized by the financialization of domestic economic activity. It is expressed that the increasing capital movements being mostly portfolio investments is a fact supporting this process. Chart 7.1-1: International Capital Movements 3. 3, Billion USD direct investment 2.5 Advanced Econ. 2,5 2. Dev. Econ 2, Global Volume (Net) 1.5 1,5 Turkey (right axis) Billion USD portfolio inv. Advanced Econ. Dev. Econ Global Volume (Net) Turkey (right axis) 4,5 4, 3,5 3, 2,5 2, ,,5 5 1,5 1,,5, -5, Source: IMF 2 P. Paincheira (29), Developing Countries in the Era of Financialisation: From Deficit Accumulation to Reserve Accumulation Research on Money and Finance Discussion Papers No 4. BRSA 123 Structural Developments in Banking December 21

143 When the last decade is analyzed, it is seen that the global crisis occurred in 27 affected negatively the capital movements throughout the globe. The Global direct foreign investment volume has reached UDS 2.5 trillion within the period of and in parallel with the big stability occurred in 29, it has decreased under USD 1.3 trillion. The share of Turkey within this kind of capital movements remained relatively low. However, a relative increase of flow was provided within the period of 25-28, thanks to the privatizations realized in Turkey. When the portfolio flows are analyzed, it is seen that the global volume increased to USD 2.8 trillion in 25. In the beginning, the global crisis was affecting all flows, and the highest recession realized in these flows. As of 28, the net portfolio flows were nulled globally. However, as of 29, with the global recovery, the net flows have started to increase again. Table 7.1-1: G-2 Countries Direct Foreign Investments USA Billion Global Sh. (29) 24-29(**) USA 159,2 142,4 154,5 149,6 316,2 36,2 244,9 414, 351,1 268,7 21,5-3,2 European Union (*) 4,7 3,6 5, 13,6 17,5 22,5 55,7 13,5 13,2 48,9 3,8 22,8 Germany 59,7 39,3 19,6 5,2 2, 77, 119,2 163,7 137,2 6,1 4,8 24,6 Argentina,9,2 -,6,8,7 1,3 2,4 1,5 1,4,7,1,9 Australia 3,3 12, 7,8 17,2 11,1-33,9 23,9 2, 38,1 n.d. 3, 36,2 United Kingdom 246,3 61,8 5,3 65,6 94, 8,8 85,6 328,1 163,2 46,7 3,7-13,1 Brazil 2,3-2,3 2,5,3 9,5 2,5 28,2 7,1 2,5-1,1 -,8-21,3 China,9 6,9 2,5 -,2 1,8 11,3 21,2 17, 53,5 43,9 3,5 89,2 Indonesia n.d. n.d. n.d. n.d. 3,4 3,1 2,7 4,7 5,9 3,,2-2,9 France 174,3 87, 5,6 53,4 56,9 113,8 111,4 167,1 165,2 147,1 11,8 2,9 S. Africa,3-3,5 -,4,6 1,3,9 5,9 3, -2,1 1,8,1 6,7 India,5 1,4 1,7 1,9 2,2 3, 14,3 17,3 18,4 14,9 1,2 46,8 Italy 12,1 21,8 17,3 9, 19,3 4,8 42,5 92,1 42,9 43,7 3,5 17,8 Japan 31,5 38,5 32, 28,8 31, 45,4 5,2 73,5 13,8 74,6 6, 19,2 Canada 44,5 36,2 26,8 23,6 42,6 27,6 46,4 57,7 82,2 4,4 3,2-1,1 Korea 5, 2,4 2,6 3,4 4,7 4,3 8,1 15,6 18,9 1,6,8 17,8 Mexico n.d. 4,4,9 1,3 4,4 6,5 5,8 8,3 1,2 7,6,6 11,4 Russia 3,2 2,5 3,5 9,7 13,8 12,8 23,2 45,9 55,6 44,5 3,6 26,4 S. Arabia n.d. n.d. n.d. n.d. n.d. -,4, -,1 3,5 2,2,2 - Turkey,9,5,1,5,8 1,1,9 2,1 2,6 1,6,1 14,7 Switzerland 44, 18,4 8,6 15,7 26,1 5,8 76,6 49,9 5,2 26,9 2,1,6 Global Volume 1, ,8.1 1,67.5 1,52.9 2, ,91. 1, , 4,4 Source: IMF. (*) Data clarified by regional flow.(**) Annual average increasing rate. When the direct investment entries to G-2 countries are analyzed, it is seen that in 29 the highest share belongs to USA by 21.5% and Turkey has a share by.1%. While China and India have shares by 3.5%, Mexico has a share by.6% and Russia by 3.6%. A similar development is also observed for portfolio investments; the highest share belongs once again to USA by 22.9%. On the other hand, the share of Turkey increased to.2% as of 29. The volatile nature of net portfolio investments shall not be neglected. Especially in 28 when the effects of the global crisis were deeper, the negative flows in developed economies are noteworthy. Consequently, it is seen that the financialization was rapidly increasing by capital movements since the beginning of 2 s until the global crisis. In this situation, developed countries were the leading actors but the emerging countries were also financialized strongly. BRSA 124 Structural Developments in Banking December 21

144 Table 7.1-2: G-2 Countries Portfolio Investments USD Billion Global Sh. (29) (*) USA 127,9 9,6 48,6 123,1 177,4 257,5 498,9 39,8-285,9 393,5 22,9 17,3 European Union , 1,4 Germany 191,6 111,7 57,9 52,5 128,6 257,3 23,4 199,9-23,1 11,6 5,9-4,6 Argentina 1,3 -,2 -,5,1,1-1,4,,,,, - Australia 1,9 1,1 16,8 8,2 24,6 21,3 43,9 77,3-3, n.d. n - United Kingdom 97,2 124,7-1,2 58,4 259,5 273,4 257, 179,7-199,7 239,2 13,9-1,6 Brazil 1,7,8,3 -,2,8 1,8 -,5 -,3-1,9-4,1 -,2-24,6 China 11,3 2,7 12,1-3, -6,5 26,2 11,4 2,3-32,8-9,9 -,6 8,8 Indonesia n.d. n.d. n.d. n.d. -,4 1,1 1,8 4,4 1,3,1, -183,3 France 97,4 85,5 84,6 192,7 232,5 243,6 325,4 281,8 142,7 84,1 4,9-18,4 S. Africa 3,7 5,3,9,1 1,,9 2,2 3,4 6,7 1,9,1 15, India,1,1, n.d.,,, -,2,,2, 53,4 Italy 8,3 36,2 15,3 57,4 26,4 18,1 61,7-1,6-17,4 53,3 3,1 15,1 Japan 83,4 16,8 85,9 176,3 173,8 196,4 71, 123,5 189,6 16,3 9,3-1,6 Canada 43, 24,4 18,6 13,8 18,9 44,2 69,4 42,8-1, 6,2,4-19,9 Korea,5 5,5 5, 4,4 9,9 14,1 28, 56,4-23,5-1,3 -,1-166,6 Mexico -3,1-2,1-1,8-1,2 1,8 3,3 6, 4,7 5,3 6,2,4 28,7 Russia,4 -,1,8 2,2 3,8 1,7-6,3 1, 7,8 1,4,6 22,1 S. Arabia 9,4 2,8-7,6 18,7 26,7 -,4 12, 5,5 3,9 2,1 1,2-5,5 Turkey,6,8 2,1 1,4 1,4 1,2 4, 2,1 1,3 2,7,2 14,5 Switzerland 23,2 43,1 29,2 32,9 42,4 53,3 41,7 2,3 65,6 35,4 2,1-3,5 Global Volume 1,36.4 1, , ,96.7 2,56.4 2, , , , -2,1 Source: IMF (*) Annual average increasing rate Global Financial Assets, Derivative Transactions, International Banking Activities In parallel with the development and growth of the economies, a development is also seen in the volume of financial assets belonging to the household. This asset size which is analyzed by the International Global Financial Assets Report is considered as an important indicator for financialization. The definition of global financial asset is principally the wealth stock of the household collected from deposit, equity shares, insurance and other financial assets. Table 7.1-3: Financial Asset Size World (USA Trillion) Share within Global Volume Asia L. America Emerging Europe GDP 31, 57,8 1,4 13,6 6,1 6,9 2,7 5,6 Bank 79, 92,9 8,5 1,7 2, 2,8,6 1,8 Share 29, 47,1 4,5 11,5 1,4 4,7,3 2,1 Bond 42, 92, 3, 4,3 1,7 2,5,7 1, Total 15, 232,2 6,2 8,3 1,8 3,1,6 1,5 Source: FTKMC-Credit Suisse The global volume estimated by Allianz presents details by countries. According to the data of 29, the share of USA within total global financial assets is 38.9%. The share of Turkey is.7%. But the annual increasing rate by 14.9% is noteworthy. According to the Allianz report, the average of the increase of global financial asset has been 3.7% since 21. This financial asset size by USD trillion as of 29 and which is close to USD 2 trillion according to the temporary data of 21 has reached more than three folds of global products by USD 62.9 trillion. This means that the assets which were USD 15 trillion in 21 have increased by 3% despite the global crisis. BRSA 125 Structural Developments in Banking December 21

145 Table 7.1-4: Financial Asset Size 29 Financial Assets GDP per Person Fin. As. Per Person Distr. Of Fin. Assets Annual Var. % (USD Bil.) (USD) (USD) EU ,6 USA , ,9 Japan , ,7 Germany , ,7 United Kingdom , ,7 France , ,7 Italy , ,3 China , ,1 Canada , ,5 Australia , ,9 Switzerland , ,5 South Korea , ,5 Brazil , ,9 India , ,8 Turkey 81 14, ,7 Mexico 88 13, ,7 Russia , ,2 Turkey , ,2 South Africa 222 2, ,2 Indonesia , ,2 Argentina 49 25, , Spain , ,13 Netherlands , ,85 Belgium , ,9 Denmark 758 9, ,64 Austria 634-2, ,49 Portugal 562 3, ,47 Ireland 442 7, ,37 Greece 413 4, ,35 Poland 333 4, ,28 Czech Rep , ,15 Hungary 146 8, ,12 Romania , ,11 Slovenia 58 8, ,5 Slovakia 56 1, ,5 Bulgaria 48 7, ,4 Estonia 33 5, ,3 Lithuania 3-5, ,3 Latvia 16-4, ,1 World , Source: Allianz Note: Expresses the household wealth stock collected from deposit, equity shares, insurance and other financial assets. According to the findings of the Allianz report, the global financialization has followed a horizontal conduct after 21. The average nominal increasing rate of global financial assets within this period (3.7%) stayed behind the increase of global income. Epstein (25) 21 and Paincheira (29) indicate that; in addition to global capital flows, the increasing derivative transactions and off-shore banking services are also among fundamental indicators of global and national financialization. According to this approach, 21 Epstein, Gerald A. (25). Introduction: Financialization and the World Economy in Gerald A. Epstein (ed.) Financialization and the World Economy, Cheltenham: Edward Elgar. BRSA 126 Structural Developments in Banking December 21

146 Thousands these activities are increasing the relative share of financial sector within general economic activity and playing a significant role in the decisions of economic units. Thus, the financial development contributes positively to the growth, but also is a risk element due to the complexion of economic relations and market information. As a matter of fact, toxic assets were considered one of the main reasons of the global financial crisis within the period of Chart 7.1-2: Global Over the Counter Derivative Transaction Volume and Types Billion USD Source: BIS, ISDA DeriivateTran. Notional Value When the BIS which is the main data source of the international banking activities and derivative transactions market is analyzed, it is seen that the global over the counter derivative transaction volume collected from the data in which the reporting is made has been increasing rapidly during the 2 s, with also the support of the development in information technologies. However, stagnation has been observed since the second half of 27. Table 7.1-5: Derivative Transactions by their Types USD Trillion Distribution % Total 299,3 418,1 585,9 598,1 63,9 61, 1, 1, 1, 1, 1, 1, FX Rate Contracts 31,4 4,3 56,2 5, 49,2 57,8 1,5 9,6 9,6 8,4 8,1 9,6 Forward 15,9 19,9 29,1 24,5 23,1 28,4 5,3 4,8 5, 4,1 3,8 4,7 Swap 8,5 1,8 14,3 14,9 16,5 19,3 2,8 2,6 2,4 2,5 2,7 3,2 Option 7, 9,6 12,7 1,6 9,5 1,1 2,3 2,3 2,2 1,8 1,6 1,7 Interest Rate Contracts 212, 291,6 393,1 432,7 449,9 465,3 7,8 69,7 67,1 72,3 74,5 77,4 Forward 14,3 18,7 26,6 41,6 51,8 51,6 4,8 4,5 4,5 6,9 8,6 8,6 Swap 169,1 229,7 39,6 341,1 349,3 364,4 56,5 54,9 52,8 57, 57,8 6,6 Option 28,6 43,2 57, 5, 48,8 49,3 9,6 1,3 9,7 8,4 8,1 8,2 Equity Share Contracts 5,8 7,5 8,5 6,5 5,9 5,6 1,9 1,8 1,4 1,1 1,,9 Forward +Swap 1,2 1,8 2,2 1,6 1,7 1,8,4,4,4,3,3,3 Option 4,6 5,7 6,2 4,8 4,3 3,8 1,5 1,4 1,1,8,7,6 Commodity Contracts 5,4 7,1 8,5 4,4 2,9 2,9 1,8 1,7 1,4,7,5,5 Gold,3,6,6,4,4,4,1,2,1,1,1,1 Other Commodity 5,1 6,5 7,9 4, 2,5 2,5 1,7 1,5 1,3,7,4,4 Forward +Swap 1,9 2,8 5,1 2,5 1,7 1,8,6,7,9,4,3,3 Option 3,2 3,7 2,8 1,6,8,7 1,1,9,5,3,1,1 CDS 13,9 28,7 58,2 41,9 32,7 29,9 4,6 6,9 9,9 7, 5,4 5, Singular Name 1,4 17,9 32,5 25,7 21,9 18,1 3,5 4,3 5,5 4,3 3,6 3, Plural Name 3,5 1,8 25,8 16,1 1,8 11,8 1,2 2,6 4,4 2,7 1,8 2, Index Products 7,5 1,2 Other 3,8 43, 61,4 62,7 63,3 39,5 1,3 1,3 1,5 1,5 1,5 6,6 Source: BIS 15 1 When the derivative transactions are analyzed by their contract types according to BIS data, it is seen that the biggest share belongs to interest rate contracts (77.4% in 21). The most weighted item of this contract type is interest swaps (78.3% of interest contracts in 21). A decrease from 9.9% to 5% is observed in the share of CDS after the global crisis. 5 Trillion USD Currency and IR CDS (right axis) Stock (right axis) BRSA 127 Structural Developments in Banking December 21

147 When the derivative transaction volumes are analyzed by countries, a USA- weighted structure is observed in the market. In the USA, as can be seen in OCC reports, there is a derivative transactions market 99% of which is composed of the biggest 25 commercial banks. By the intermediation of these global banks, more than the half of market value of derivative transactions all around the world is realized. The strong increase in derivative transactions contributes considerably to the financialization. Box 33: Global Appearance of Derivative Transactions Derivative transactions appeared to be protected from the various risks carried out by financial transactions have reached a considerable volume and currency throughout the globe. The most comprehensive historical data set about derivative transactions is collected by the BIS. This data set includes the data concerning derivatives, swaps and options on interest, money and equity shares for G1 countries and Central Banks of Switzerland. Within this scope, the development of derivative transactions markets for the period of obtained from the reports made to BIS is presented in the table below. No significant variations occurred in the distribution of derivative transactions during this period and the interest swaps maintained their relative weight. A recession is observed in the increase of derivative transactions within recent years. Table: Global Derivative Transactions USD Billion % Share Annual Inc. % Forward FX Transactions ,8 4,7-5,6 22,9 Money Swaps ,7 3,2 1,5 16,7 Interest Swaps ,8 6,6 2,4 4,3 CDS ,4 5, -21,9-8,5 Other ,2 26,5 3,7-12,7 Total , 1, 1, -,5 Source: BIS In the Turkish banking sector, the derivative transactions maintain their growing process after the decrease occurred in 28. Moreover, their share within total balance sheet increased from 13% in 24 to 39% in 21. Money swaps maintain their weight among derivative transactions. When compared to the size of derivative transactions reported to the BIS, it is seen that the derivative transactions made by the Turkish banking sector are still limited by volume despite their stable increase. Table: Derivative Transactions in the Turkish Banking Sector $ Billion % Share Annual % Inc Forward FX Transactions Money Swaps Interest Swaps CDS n.d. n.d Other Total It is seen that North America and Europe owns 9% of all futures market and 85% of option market. When the volume of international positions of the banking sectors of countries reporting to the BIS is analyzed, within the period of 2-21, despite the stagnation in global crisis, USD 3 trillion is reached and this level is maintained. When the weights of reporting countries within this position are analyzed, the high shares of United Kingdom and the USA are remarkable. Turkey has grown more than twice within the last decade by volume, but its share within global volume is only.1%. The average annual increase by 7.8% in the off-shore banking activities within the last five years indicates a strong increase. This increase which is also considered as the increase of the integration of global financial markets supports the increase of financialization. BRSA 128 Structural Developments in Banking December 21

148 Table 7.1-6: Future and Option Transactions by Areas Amount Transaction Volume USD Billion Sh Sh. Future All Markets 19, , , ,126, ,38, Interest Rate 18, , , ,16, ,235, FX Rate , , Equity Shares , , , North America 1, , , , , Interest Rate 9, , , , , FX Rate , , Equity Shares , , Europe 6,56.3 8,53.4 6, , , Interest Rate 6, ,68.7 5, , , FX Rate Equity Shares , , Asia-Pacific 2, ,48.3 3, , , Interest Rate 2, ,25.6 2, ,88.5 6, FX Rate , Equity Shares , , Other Markets , , Interest Rate , , FX Rate ,36.8 5, Equity Shares ,46.7 2, Option All Markets 38, , , , , Interest Rate 33, , , , , FX Rate ,98.3 3, Equity Shares 4, ,83.5 4, , , North America 19, , , , , Interest Rate 17, , , , , FX Rate ,6.9.3 Equity Shares 1, , , , , Europe 18, , , , , Interest Rate 15, ,95. 17, , , FX Rate Equity Shares 2, , , , , Asia-Pacific , , Interest Rate ,825. 2, FX Rate Equity Shares , , Other Markets , , , Interest Rate , , , FX Rate , , Equity Shares , , Source: BIS Table 7.1-7: Off-Shore Receivables of Banks in G-2 Countries Sh USA ,9 12,5 Germany ,9 3,8 Australia ,8 15,5 United Kingdom ,3 6,5 Brazil ,2 22,3 France ,3 8, S. Africa ,2 1,5 S. Korea ,3 12,7 India ,1 1,1 Switzerland ,7-2,2 Italy ,9 7,1 Japan ,4 11,1 Canada ,5 19,5 Mexico ,1 21,5 Turkey ,1 7,6 All Countries , 7,8 Source: BIS, (*) Annual average increasing rate BRSA 129 Structural Developments in Banking December 21

149 Capital Markets Indicators The development of capital markets on local basis is also considered as one of fundamental indicators of financialization. The development of capital markets in an economy is critically important for the level of usage of the market by current companies to create sources and the financialization of companies, thus the economy. Stock market transaction volumes and market capitalization indicators are basic indicators in this area. When the transaction volume is evaluated within the scope of the efficient usage of the market, the market capitalization is considered also as an expansion indicator for a deepening criteria. Table 7.1-8: Stock Market Transaction Volume/GDP in G-2 Countries 24/ Aver. USA 321,9 283,8 239,6 14,2 163,9 171, 249,5 33, 253,8 331, 245,4 EU 86,8 87,2 71,2 63,6 78, 89,3 15,4 158,9 13,8 59,4 99,1 Germany 56,3 75,1 61,1 47, 51,2 63,2 85,2 11, 85,4 38,7 7,8 Argentina 2,1 1,6 1,3 3,8 5, 9, 2,1 3,2 4,1,9 4,1 Australia 54,3 63,3 74,2 78,9 83,6 88,5 11,3 154,4 97,9 82,4 12,9 United Kingdom 124,2 126,5 118,5 118,8 168,3 182,8 173,9 368,9 243,6 156,5 215,7 Brazil 15,7 11,8 9,6 1,9 14,1 17,5 23,4 42,8 44, 4,7 3,4 China 6,2 33,9 22,9 29,1 38,7 26, 6,3 223, 121, 179,6 18,1 Indonesia 8,7 6, 6,7 6,3 1,7 14,7 13,4 26,1 21,7 21,3 18, France 81,6 8,4 64,1 61,3 68,7 71,1 11,5 131,8 114,4 51,6 91,4 S. Africa 58,3 58,8 71, 61,1 74,3 81,2 119,7 148,7 145,2 12, 114,9 India 11,8 52,2 38,9 47,5 52,5 52, 67,1 89,1 86,3 79,1 71, Italy 7,9 49,4 44,3 44, 46,6 62,7 73,3 19,3 29,1 21,8 57,1 Japan 57,7 44,6 4,2 53,7 74,5 19,8 143,3 148,4 12,3 82,7 113,2 Canada 87,6 64,5 55,3 54, 65,9 74,5 1,9 115,5 118,1 92,8 94,6 Korea 2,2 139,5 137,5 16, 88,5 142,4 14,8 188,1 157,4 19, 151,2 Mexico 7,8 6,4 4,3 3,4 5,6 6,2 8,4 11,3 9,9 8,8 8,4 Russia 7,8 7,5 1,5 18,8 22,1 2,9 52, 58,1 33,7 55,4 4,4 S. Arabia 9,2 12,1 18,9 74,1 188,9 349,7 393,4 176,6 11,2 89,7 218,1 Turkey 67,2 39,8 3,4 32,9 37,6 41,7 42,9 46,7 32,8 39,6 4,2 Switzerland 243,7 118, 235,7 177,1 2,3 237,1 328,9 49,5 299,6 161,7 272,9 World 151,4 133,7 115,5 81, 95,1 15,8 139,2 181,9 135,5 142,5 133,3 Source: World Bank When stock market transaction volume to GDP ratio is analyzed by G-2 countries, it is seen that among developed countries especially the USA, Canada and United Kingdom have the highest values. When emerging G-2 economies are analyzed, it is seen that Turkey has improved its status. Performance of South Africa in recent period is outstanding. Volatility factor should be taken into consideration during interpretation of this indicator which is extremely sensitive to international capital flows and price movements. When the capital markets transactions in Turkey are examined in more detail, a stable increasing trend is detected, in addition to transaction volume, in total transactions. Chart 7.1-3: ISE Transaction Volume Billion TL Total Volume No. Of Total Transaction Billion Volume/GDP 2Ç2 21Ç1 21Ç4 22Ç3 23Ç2 24Ç1 24Ç4 25Ç3 26Ç2 27Ç1 27Ç4 28Ç3 29Ç2 21Ç1 21Ç4 Source: ISE, TSI, BRSA 2Ç2 21Ç1 21Ç4 22Ç3 23Ç2 24Ç1 24Ç4 25Ç3 26Ç2 27Ç1 27Ç4 28Ç3 29Ç2 21Ç1 21Ç4 BRSA 13 Structural Developments in Banking December 21

150 ISE transaction volume/gdp ratio conducts a relatively horizontal process. However, a slight increasing trend is spotted after 24. High share (by 7%s) of foreign investors in ISE increases the sensitivity of this indicator to global risk appetite. As a matter of fact, this structural quality in domestic-foreign shares should be taken into consideration in interpretation of it as a financialization indicator on national scale. When markets in similar sizes are analyzed, high level in foreign ownership shall result in low capital market depth on national basis. Table 7.1-9: Stock Market Capitalization/GDP in G-2 Countries /9 Aver. USA 154,7 137,5 16,5 13,8 14,3 137,3 148,1 145,2 83,3 152,3 134,4 EU 1,2 79,9 6,8 69,3 71,6 74, 92,2 92,2 41,4 6, 71,9 Germany 66,8 66,8 56,7 34,3 44,2 43,5 43,8 56,2 63,5 74,7 54,3 Argentina 58,4 71,6 11,4 3 3,3 33,6 37,2 33, 15,9 29, 29,8 Australia 92, 11,4 98,4 128,6 129,7 119,2 151,3 158,2 66,5 179, 134, United Kingdom 174,4 147,2 115,6 132,2 128,1 134,1 155,8 137,6 69,3 132,2 126,2 Brazil 35,1 33,6 24,6 42,5 49,8 53,8 65,3 12,8 37,4 169,7 79,8 China 48,5 39,5 31,9 41,5 33,1 34,9 91,3 184,1 64,6 v,y, 81,6 Indonesia 16,3 14,3 15,3 23,3 28,5 28,5 38,1 49, 19,3 74,1 39,6 France 18,9 87,7 66,4 75,3 75,6 81,9 17,2 16,9 52,2 124,4 91,4 South Africa 154, ,5 16,7 21,9 232,9 277,4 293,8 177,7 338,2 255,2 South Korea 32,2 43,6 43,3 51,2 59, ,8 17,1 53,2 278,1 111,8 India 32,2 23,1 25,8 46,6 55,3 68,3 89,5 154,6 55,7 51, 79,1 Italy 7, 47,2 39,4 4,8 45,7 44,9 55,1 5,7 22,6 98,4 52,9 Japan 67,6 55, 54,3 71,9 79,9 14,1 18,3 11,7 65,6 27,4 111,2 Canada 116,1 97,9 78,3 13,2 118,7 13, ,9 66,8 138,9 123,5 Mexico 21,5 2,3 15,9 17,5 22,6 28,2 36,7 38,9 21,4 64,7 35,4 Russia 15 24, ,5 45,3 71,8 16,6 116,1 78,7 158, 96,1 S. Arabia 35,6 4 39,7 73,3 122,3 24,7 91,7 134,1 52,5 65,3 111,8 Turkey 36,7 19,4 16,1 21,1 23,7 33,6 3,3 39,9 19,1 41,9 31,4 Switzerland 3, 2,9 2,1 2, 2,2 2,4 2,9 3, 3,2 3,4 2,9 World 11,7 88,8 72, 87, 92, 96,7 11,1 118,7 58,6 85,2 93,6 Source: World Bank When the ratio of stock market capitalization in G-2 economies to national income is analyzed, it is seen that Turkey is relatively ahead of emerging economies in G-2 countries, though not has gained depth as much as recently developed economies. Similarly in 29, performances of S. Africa and Brazil are noteworthy Indebtedness Indicators Dore (28) 22 expresses financialization, in other words, the increase in debt stocks of countries. The increasing borrowing is considered as an indicator of the recovery of the relation between financial products and markets. However, while borrowing indicators are indication of integration with global financial markets, on the other hand they are considered as a fragility indicator within macroeconomic scope. Furthermore, it is seen that the development in external borrowing of countries and the currency unit by which this borrowing is made are used as other indicators supporting the said approach Dore, Ronald (28). Financialization of the Global Economy, Industrial and Corporate Change, 17 (6): , Palley, Thomas I., Financialization: What it is and Why it Matters. Levy Economics Institute Working Paper No Eichengreen, B; Hausmann, R. Ve U. Panizza (22) The Pain of Original Sin. Inter-American Development Bank, November 22. BRSA 131 Structural Developments in Banking December 21

151 Table 7.1-1: Gross Foreign Debt Stock/GDP in G-2 Countries EU USA Germany Argentina 5,9 56,9 153,2 131,8 112,6 7,8 55,5 45,6 37, 4,1 Australia United Kingdom Brazil 38,5 42,7 47,2 43,1 33,5 21,6 18, 17,6 16,3 17,9 China 12,3 14,2 12,9 12,8 12,8 12,5 11,9 1,6 8,3 8,7 Indonesia 95,4 92,1 74,1 59,1 56, 49,4 35,9 32,3 29,7 3,2 France S. Africa 19,2 21, 23,2 16,8 12,6 12,8 13,9 15,8 15,7 15,1 India 22, 2,8 2,8 19,8 17,1 14,5 16,8 16,5 18,6 18,2 Italy Japan Canada Korea Mexico 26,6 26,9 25,8 24,8 22,8 2,1 17,4 19,1 19, 22,3 Russia 63,2 5,4 43,5 42, 34, 3,8 26,1 29,1 24,9 31,9 Saudi Arabia Turkey 44,4 59,1 56,7 48,4 41,3 34,6 37,3 36,9 36,5 41,2 Switzerland Source: World Banks When data concerning the ratio of gross foreign debt stock allocated from the World Bank data to national income is analyzed, it is seen that foreign debts of emerging countries were high especially in the beginning of 2 s. It is seen that these ratios decreased in due course in countries such as Brazil, Russia and Indonesia, while it conducted a relatively horizontal process in countries such as Turkey, Mexico and India. High level of borrowing indicates domestic investment-savings deficit, on the other hand it designates integration of countries with global financial institutions and markets. Table : FX Debt Stock/Total Foreign Debts Stock in Emerging Economies Argentina 99,9 99,9 99,9 99,9 99,9 99,8 99,8 99,8 99,8 99,8 Brazil 99,7 99,9 99,9 99,9 99,9 99,9 1, 1, 1, 1, China 99,6 99,6 99,6 99,6 99,7 99,7 99,7 99,8 99,9 99,9 India 99,1 99,2 99,2 99,6 99,6 99,5 99,6 99,7 99,8 99,7 Indonesia 99,2 99,2 99,2 99,2 99,1 99, 99, 99, 99,2 99,1 Lithuania 97,6 98, 98,3 98,4 98,6 98,8 99,7 99,8 99,9 1, Mexico 99,5 99,7 99,7 1, 1, 1, 1, 1, 1, 1, Romania 99,2 99,3 99,5 98,4 98,1 97,5 97,4 97,2 98, 98,3 Russia 1, 1, 1, 1, 1, 1, 99,1 99,4 99,3 99,3 S. Africa 98,4 98,6 99,1 98,6 98,3 98,4 97,9 98,1 98,2 98,6 Turkey 99,8 99,8 99,8 99,8 99,8 99,8 99,8 99,7 99,7 99,7 Source: World Bank Within the scope of data gathered from the World Bank development and progress indicators, almost all foreign debt stock of emerging economies are in terms of foreign currency. Besides, it is noted that US dollar is dominant among the said currency types. BRSA 132 Structural Developments in Banking December 21

152 Table : Gross Debt Stock/GDP in G-2 Countries USD Billion /9 Aver. USA 62,6 7,7 75,3 84, 95,5 95,7 97,5 86,5 Germany 115,3 136,3 136,2 137,5 128,3 144,6 153,7 141, 153,9 143,2 Argentina 127,3 111,7 62,1 5,8 47,5 38,1 38, 58, Australia 89,4 82,3 76,5 85,4 95,7 76,9 112, 88,1 United Kingdom 29,5 35,5 323,9 378,7 42,3 342, 429,4 363,6 Brazil 42,6 33,2 21,3 18,3 17,6 15,9 17,4 2,6 Indonesia 47, 36,4 32,7 3,4 32, 35,7 Euro Zone 16,3 118,9 111,9 12,3 114,4 France 118,5 127,8 138,3 142,2 168,5 186,7 17,4 196,4 167,1 S. Africa 29,4 22,1 19,8 18,7 22,8 26,3 26, 27,5 23,5 India 16,8 16,6 18,9 18,3 17,7 Italy 91,6 96,3 95,4 94,3 113,1 12,5 14,3 12,8 18,1 Japan, 32, 33,8 33,4 34,7 4,4 45,6 41,2 38,2 Canada 71, 66,9 61, 55,9 54,5 58,4 54,9 72,6 59,6 Korea 26,5 24, 23,1 22, 2,9 19,1 23,7 31,8 34,1 41,5 28,5 Mexico 25, 23,2 21,9 2,4 17,7 18,8 18,5 22,5 2, Russia 43,2 36,3 33,7 31,6 35,7 28,8 37,9 34, Turkey 6,5 48,9 47,6 41,1 35,2 39,1 38,5 38,4 43,7 39,3 Source: World Bank When gross debt stock by size is analyzed as of G-2 countries, it is seen that high debt stocks of the USA and Euro Zone are prominent. Having considered this situation is at the same time an economic fragility indicator, it is noted that Turkey is located in a relatively good place among G-2. It is expected that this shall have effect on behaviors of financial sector institutions, due to the increasing share of government bills in their balance-sheets, in addition to the macro-economic effects of increasing debt stock in the following period. Table : Public Sector Bond Market Capitalization/GDP Ratio in G-2 Countries /9 Aver. USA,4,4,4,4,5,5,5,5,5,5,5 Germany 32, 31,9 34,4 37,3 4,8 41,1 4, 39,9 39,8 39,7 4,2 Argentina 1,9 1,8 21,2 2,4 23,1 25,3 27,6 23,7 2,5 17,8 23, Australia 2, 18,1 17,6 17,7 15,3 13,6 13, 13,1 13,2 13,3 13,6 United Kingdom,3,3,3,3,3,3,3,3,3,3,3 Brazil 39,1 48,7 44,6 39,2 42,5 41,4 44, 46,1 48,6 51,2 45,6 China 8,1 9,3 12, 15,6 19, 23,5 26,6 29,4 32,3 35,8 27,8 Indonesia 29,9 31, 26,4 24,8 22,5 17,8 16,1 17, 18, 19,2 18,4 France 45,6 44,9 47, 5,3 53,9 53,3 51,5 51,4 51,2 51,1 52,1 S. Africa,4,3,3,3,3,3,3,3,2,2,3 India 23,1 25,3 27,9 29,7 32, 32, 31,6 31, 3,3 29,6 31,1 Italy 92,5 86,2 84,5 82,4 83,2 8,5 78,2 79,1 8,1 81,2 8,4 Japan 78,5 89,4 14,8 123,4 138,5 149,1 154,6 159,9 165,7 172,3 156,7 Canada 61,3 6, 58, 56,1 56,7 53, 48,8 51,3 54,1 57,3 53,5 Korea 21,2 25,5 26,8 3,8 39,2 44,8 48, 48,1 48,2 48,3 46,1 Mexico 11,7 14,3 15,8 16,9 16,8 16,9 18,6 2,3 22,4 24,6 19,9 Russia,,,,,,,,,,, Saudi Arabia Turkey,2,4,4,4,4,4,3,3,3,2,3 Switzerland,2,2,2,3,3,3,3,3,3,2,3 Source: World Bank Ratio of international bond capitalizations which are one of the integrated indicators through which borrowing can be monitored by sectors to national income differs extensively in G-2 BRSA 133 Structural Developments in Banking December 21

153 countries. Clear decompositions are observed in this development which is a reflection of investment-savings balance by sector in economy. In respect of ratio of public sector bond issues to national income, Canada and Korea follow Japan. The said ratios of the USA, S. Africa, Russia, United Kingdom and Turkey are close to zero. Table : Private Sector Bond Market Capitalization/GDP Ratio in G-2 Countries /9 Aver. USA 1,2 1,6 1,8 1,11 1,12 1,15 1,2 1,25 1,3 1,35 1,23 Germany 61,47 54,8 46,95 42,69 39,57 34,95 33, 34,54 36,12 37,89 36,1 Argentina 4,95 5,4 12,95 1,4 8,92 8,43 7,6 5,58 3,92 2,8 6,21 Australia 27,18 28,69 31,96 38,95 4,4 4,86 44,89 57,37 72,4 9,64 57,7 United Kingdom,2,18,18,17,16,16,15,16,16,17,16 Brazil 8,5 9,4 9,26 8,8 1,8 11,88 14,85 16,92 19,23 21,91 15,81 China 7,4 7,52 8,5 8,61 8,96 1,61 12,94 14,53 16,46 18,69 13,7 Indonesia 1,4 1,38 1,15 1,72 2,42 2,36 2, 1,98 1,96 1,94 2,11 France 39,21 39,81 4,8 4,35 42,47 41,9 41,48 48,49 57,2 66,64 49,53 S. Africa,11,9,1,1,12,13,14,16,18,2,16 India,45,42,4,41,5,95 1,76 2,67 3,96 5,83 2,61 Italy 32,5 34,31 39,1 42,32 46,36 48,36 5,54 54,77 59,39 64,9 53,92 Japan 47,73 48,5 47,22 45,44 43,89 42,6 39,67 38,79 37,86 36,97 39,87 Canada 25,88 27,34 26,83 26,35 28, 28,31 28,16 29,62 31,14 32,69 29,65 Korea 51,83 59,97 62,63 61,3 57,22 53,55 54,29 58,82 63,96 69,22 59,51 Mexico 9,7 9,7 11,32 12,85 13,88 15,32 16,29 17,11 17,99 18,95 16,59 Russia Saudi Arabia Turkey v.y. v.y. v.y. v.y. v.y. v.y.,, v.y. v.y., Switzerland,43,41,4,39,36,32,28,29,29,3,31 Source: World Banks When the ratio of private sector bond market capitalizations to national income is analyzed, it is noted that Australia, France and Italy have high ratios. Table : International Bond Supply/GDP Ratio in G-2 Countries Aver. USA,44,42,42,44,46,47,47,47,47,47,47 Germany 32,2 31,92 34,38 37,25 4,8 41,7 4,4 39,94 39,83 39,72 4,23 Argentina 1,89 1,84 21,22 2,4 23,6 25,32 27,57 23,72 2,54 17,78 23, Australia 2,3 18,12 17,58 17,73 15,31 13,59 13,1 13,1 13,21 13,33 13,59 United Kingdom,31,29,28,27,28,31,32,32,32,32,31 Brazil 39,9 48,68 44,57 39,25 42,53 41,35 44,4 46,13 48,61 51,24 45,65 China 8,11 9,26 12, 15,64 18,96 23,53 26,63 29,44 32,29 35,82 27,78 Indonesia 29,92 3,98 26,43 24,84 22,49 17,83 16,11 16,96 17,96 19,2 18,43 France 45,55 44,9 47,1 5,26 53,91 53,31 51,47 51,35 51,23 51,8 52,6 S. Africa,39,33,33,31,33,32,29,26,23,21,27 India 23,11 25,32 27,93 29,72 32,2 32,1 31,6 3,97 3,3 29,58 31,8 Italy 92,51 86,21 84,51 82,36 83,16 8,47 78,16 79,9 8,12 81,24 8,37 Japan 78,52 89,37 14,82 123,44 138,54 149,15 154,59 159,91 165,68 172,26 156,69 Canada 61,35 59,96 57,97 56,8 56,71 53,1 48,77 51,31 54,11 57,27 53,53 Korea 21,21 25,53 26,76 3,8 39,15 44,81 48,3 48,11 48,21 48,32 46,11 Mexico 11,66 14,3 15,78 16,9 16,82 16,94 18,58 2,32 22,38 24,65 19,95 Russia,3,2,2,2,3,3,3,3,3,3,3 Saudi Arabia Turkey,18,36,38,38,4,37,35,31,27,23,32 Switzerland,38,42,42,45,59,75,83,89,97 1,7,85 Source: World Banks BRSA 134 Structural Developments in Banking December 21

154 In respect of total international bond supply, Japan and Italy have rather high ratios. Turkey, Russia and India are economies in which international bond supply is limited. On the other hand, USA and United Kingdom have low international bond supply levels within the scope of exteriority of the fact that they are global financial centers Economic Weight Indicators Employment, another approach used in measuring the financialization of an economy, measures the share or weight of financialization within domestic economic activities via variables such as value added. Orhangazi (28) 24, approaches financialization through the relative relation of non-financial sector and financial sector via these indicators and studies the connection between financialization and investment expenses. Furthermore, it is noted in some studies that the ratio of size and profitability of financial companies (balance-sheet) to size of non-financial companies is used as well. When activities (as value added) of financial intermediary institutions included primarily in national income accounts to national income is analyzed, a value fluctuating around 4% after 22 is noted for Turkish economy. While only employment information is used in 1987 based method in national income estimation for the said item, in the new calculation, financial intermediary services are calculated under two different sub-items, direct and indirect production. Direct production includes incomes from banking services, while indirect production includes the service worth received from creditors and depositors implicitly in interest transactions. When total amount of these items are analyzed, a trend 4% to 6% is seen. On the other hand, years before 22 includes data which may cause inconsistency for the evaluation. Chart 7.1-4: Shares of Financial Institution Activities in GDP Activires of Fin. Inst. /GDP 1 14 Act. Fin. Ins. /GDP Indirect Activites of fin. Inst. / GDP 2Q2 21Q1 21Q4 22Q3 23Q2 24Q1 24Q4 25Q3 26Q2 27Q1 27Q4 28Q3 29Q2 21Q1 21Q4 2Q2 21Q1 21Q4 22Q3 23Q2 24Q1 24Q4 25Q3 26Q2 27Q1 27Q4 28Q3 29Q2 21Q1 21Q4 Source: TurkStat As a matter of fact, it is analyzed in respect of employment of financial sector in a longer perspective, the decrease in employment of banking system in 2-22 periods is clearly seen. When the share of total financial sector within general employment is examined, a rapid increase is seen after 22. The increasing performance of other financial sector is important as banking in the share of total employment which amounted to 6.3% as of 29. Banking sector consists about 3% of total financial sector employment. 24 Orhangazi, O., (28) "Financialisation and capital accumulation in the non-financial corporate sector:," Cambridge Journal of Economics, Oxford University Press, vol. 32(6), s BRSA 135 Structural Developments in Banking December 21

155 Chart 7.1-5: Share of Financial Sector in Total Employment share in total empoylment Financial Inst. /Total Emp. 1,,95,9,85,8,75,7,65,6,55 shate in total employment Banking/Total Emp. Banking/Total Finan. Ins. Enm (right axis) , Source: BRSA, SPO, TSI, BAT Comparison of profit and asset size of banking sector with regard to other sectors in economy are indicators used in financialization. Accordingly, it is possible to compare asset and profit of period information of banking sector in Turkey with company balances of the CBRT. When banking sector information and balance-sheet and income-expense statement data the CBRT gathered from 13 main sectors and 28 sub-sectors, around 8 companies (excluded banking) are analyzed, it is seen that total assets of banking and total assets of other sectors fluctuated between 12% and 9%. This ratio, according to current data, was 11% in 29. Chart 7.1-6: Banking/ CBRT Sector Balance-Sheet Indicators Period Profit (Loss) Total Asssets Source: BRSA, CBRT The said ratio, in respect of profit of period, fluctuated around 4%-8%. Not only the domestic economic developments but also global trends have influence on this fluctuation. Although profits of sectors export-based production decreased due to global crisis, especially during periods, banking sector maintain its profitability due to its portfolio structure, causing this ratio to increase. It is seen that these ratios are evaluated with domestic economic dynamics rather than their global comparisons which differ among countries. BRSA 136 Structural Developments in Banking December 21

156 7.2. Financial Deepening Financial deepening is defined as access of society to broader and different financial service options and the usage of services financial sector offers in economic activities in a higher volume. Financial deepening became internationally widespread as a concept concerning economic development. Financial deepening is approached as a concept interpreted by means of indicators including size, structure and product range. Quantity indicators are classified under three titles; monetary sizes, credit sizes and capital markets sizes 25. By means of these indicators, to what extent do domestic economic activities monetarized and on what level financial markets services are being utilized are tried to be understood. Hence, it is seen that asset size of institution types offer financial services in the system is one of the most accepted indicators on global scale. This indication gives important information on the structure of financial system at the same time Financial System Size Absolute size of financial system and its ratio to national income is used as the fundamental indicator of financial development, hence deepening 26. When Turkish financial system is analyzed by size or quantity indicators, it is seen that the system amounted to TL 1.7 trillion as of end-21. The said size is equivalent to TL 1.6 trillion, excluding the CBRT balance-sheet size, and to TL 1.1 billion, excluding the ISE total market capitalization. This amount which was TL 116 billion in 2 realized as about TL 236 billion in 22. Table 7.2-1: Asset Size of Financial System TL Billion CBRT 3,9 82,8 74,1 76,5 74,7 9,1 14,4 16,6 113,5 11, Banks 16,4 173,4 212,7 249,7 36,4 46,9 499,7 581,6 732,5 834, 1,7. Financial Leasing Companies 2,2 2,8 3,8 5, 6,7 6,1 1, 13,7 17,1 14,6 15,8 Factoring Companies 1,3 1,5 2,1 2,9 4,1 5,3 6,3 7,4 7,8 1,4 14,5 Consumer Fin. Companies,,,5,8 1,5 2,5 3,4 3,9 4,7 4,5 6,1 Asset Management Companies,, v.y. v.y. v.y. v.y. v.y.,2,4,4,7 Insurance Companies 2,5 4, 5,4 7,5 9,8 14,4 17,4 22,1 26,5 33,3 31, Individual Pension Companies,,, 3,3 4,2 5,7 7,2 9,5 12,2 15,7 17,8 Sec. Intermediary Inst.,5,7 1, 1,3 1, 2,6 2,7 3,8 4,2 5,2 8, Sec. Inv. Part.,,,1,2,3,5,5,7,6,7,7 Sec. Inv. Fund 1,9 4,8 9,3 19,9 24,4 29,4 22, 26,4 24, 29,6 29,7 ISE Tot. Market Cap. 46,7 68,6 56,4 96,1 132,6 218,3 23, 336,1 182, 35,8 472,6 Real Estate Inv. Part.,9 1,1 1,1 1,2 1,4 2,2 2,5 4,1 4,3 4,7 5,1 Venture Capital Investment Trusts,,,,,1,1,1,2,1,2,2 Total 193,3 339,6 366,5 464,4 567,2 784,1 96,2 1116,3 1129,9 1414, ,6 Total-Excluding CBRT 162,4 256,9 292,4 387,9 492,5 694, 81,8 19,7 116,4 134,1 1.69,2 Total-Excluding CBRT and ISE 115,7 188,3 236, 291,8 359,9 475,7 571,8 673,6 834,4 953, ,6 Source: BRSA, CBRT, CMB, TT, BAT, ISE In addition to nominal size of financial system, it is considered to be beneficial to analyze quantity indicators by proportioning them to national income. Ratio of total financial system in Turkey to GDP increased to 157.2% in 21 from 116% in 2. Excluding capital market and central bank sizes, financial sector increased to 12.9% of GDP in 21 from 69.4% in Lynch, D., (1996), Measuring Financial Sector Development, Journal of Monetory Economics, V.22., N.28, 26 Shaw, Edward S., 1973, Financial Deepening in Economic Development, New York, Oxford University Press. BRSA 137 Structural Developments in Banking December 21

157 Chart 7.2-1: Financial System Size Billon TL Total Total-excl. CBRT & ISE Banks Source: BRSA, CBRT, CMB, TT, BAT, ISE 26 financial system Finansal Total Sistem/GSYH Total-excl. CBRT & ISE Banks Weighted structure of Turkish banking system continues. Share of banking within total which was 55% in 2 realized as 58% in 21. Besides, the said ratio in respect of total excluding CBRT and ISE market capitalization increased to 91.9% and 88.6%, in 2 and 21, respectively. After 24, weight of insurance companies in the financial system increased relatively due to individual pension insurance. Furthermore, growth of consumer financing companies in recent years is noteworthy. Table 7.2-2: Ratio of Financial System to GDP CBRT 18,5 34,5 21,1 16,8 13,4 13,9 13,8 12,6 11,9 11,5 11,6 Banks 63,8 72,2 6,7 54,9 54,8 62,7 65,9 69, 77,1 87,4 91,1 Financial Leasing Companies 1,3 1,2 1,1 1,1 1,2,9 1,3 1,6 1,8 1,5 1,4 Factoring Companies,8,6,6,6,7,8,8,9,8 1,1 1,3 Consumer Fin. Companies,,,1,2,3,4,4,5,5,5,6 Asset Management Companies,,,,1 Insurance Companies 1,5 1,7 1,5 1,6 1,8 2,2 2,3 2,6 2,8 3,5 2,8 Individual Pension Companies,,,,7,8,9,9 1,1 1,3 1,6 1,6 Sec. Intermediary Inst.,3,3,3,3,2,4,4,5,4,5,7 Sec. Inv. Part.,,,,,1,1,1,1,1,1,1 Sec. Inv. Fund 1,2 2, 2,7 4,4 4,4 4,5 2,9 3,1 2,5 3,1 2,7 ISE Tot. Market Cap. 28, 28,6 16,1 21,1 23,7 33,6 3,3 39,9 19,1 36,8 42,8 Real Estate Inv. Part.,5,5,3,3,3,3,3,5,5,5,5 Venture Capital Investment Trusts,,,,,,,,,,, Total 116, 141,4 14,6 12,1 11,5 12,8 119,5 132,4 118,9 148,2 157,2 Total - Excluding CBRT 97,4 16,9 83,4 85,3 88,1 16,9 15,7 119,7 16,9 136,7 145,6 Total - Excluding CBRT and ISE 69,4 78,4 67,3 64,2 64,4 73,3 75,4 79,9 87,8 99,9 12,9 Source: BRSA, CBRT, CMB, TT, BAT, ISE When nominal and real (deflated by CPI) developments of financial system in 2-21 periods are analyzed, it is seen that the system displayed a stable growth performance. In 2-21 periods, the financial sector grew annually by average 24.6% in nominal terms. In the same period, annual average real growth rate realized in a high level by 7,6%. When asset size of the sector is analyzed by using net of inflation data and by ratio to national income, a recession is observed until the first quarter of 23 due to November 2 and February 21 crises. In the following period, it is observed that the sector responded to the developments and establishment of economic stability in line with surveillance and supervision by growing very strongly and stably. BRSA 138 Structural Developments in Banking December 21

158 Chart 7.2-2: Banking Sector Asset Size 6 5 Billion TL Billion TL T. Assets total assets at 23 prices T.Assets /GDP (right axis) Q2 21Q1 21Q4 22Q3 23Q2 24Q1 24Q4 25Q3 26Q2 27Q1 27Q4 28Q3 29Q2 21Q1 21Q4 2Q2 21Q1 21Q4 22Q3 23Q2 24Q1 24Q4 25Q3 26Q2 27Q1 27Q4 28Q3 29Q2 21Q1 21Q4 Source: BRSA, TSI In 2-21 periods, annual average growth rate of banking sector realized as 27.7%, in nominal terms and as 8.6%, in real terms. The annual average real increase rate in periods increased to 9.6% and the growth performance displayed a stable structure. Chart 7.2-3: Banking Sector Development Rates 7 6 Banking Nominal 25 2 Banking Real Banking Average Banking Average Source: BRSA, TSI BRSA 139 Structural Developments in Banking December 21

159 Box 34: Global Outlook of Financial System/GDP Ratio When central bank/gdp ratio, deposit banks/gdp, other financial institutions/gdp ratio and stock market capitalization/gdp data of the World Bank are analyzed, it is seen that Turkey made a significant progress in financial deepening after 24. However, in comparison to EU member developed economies, a capacity open to development is spotted. Ratio to GDP, % Luxemburg 273,8 263,6 224,8 211,9 237,2 256,8 298,5 428,6 64,4 1.5,3 South Africa 325,9 313,6 314,7 299,9 335,8 39, 442,4 476,5 512,2 551,6 Switzerland 478,1 456,5 383,3 369,8 388,1 416,9 462,6 483, 56,2 53,1 Spain 194,1 197,9 189,1 193,6 214, 231,5 258,7 29,8 327,6 369,2 Netherlands 315,3 283, 247,9 239,7 249,3 263,8 282,6 34,8 33,9 36,9 Canada 225,2 267,5 286,1 276,8 293,5 312,8 335,2 291,9 318,3 35,6 India 85,2 78,2 78,2 89,2 13,8 116,7 134,8 175,9 24,3 349,2 Denmark 16, 212,4 25, 29,2 221,1 236,9 26,2 283,8 311,5 344,4 Great Britain 315,8 297,6 264,3 259,2 269, 287,4 38,4 316,9 327,9 341,4 Australia 189,2 193,4 19,6 21,9 214,1 222,4 243,4 265,2 29, 316,9 Sweden 239,3 223,1 21,5 23,7 223,2 242,6 266,4 277,9 29,2 33,3 Ireland 181,2 183,3 164,3 159,1 179,2 22,5 23,7 246,7 266,5 288,9 Cyprus 262,8 262,7 274, 26,2 249,1 251,6 287,6 347,9 259,8 28,3 Brazil 111,1 114,3 16,3 111,5 12,9 126,6 143,6 177, 29,9 274,4 Portugal 182,1 185,3 178,2 177,4 179,6 183,8 199, 219,8 244, 273,3 Korea, Rep. 193,5 175,2 179,6 188,3 19,8 29,4 19,9 21,4 234,4 262,2 Finland 323,3 255,2 185,2 16,4 162,9 175,8 192,6 211, 232,5 259, Japan 331,4 278,9 227,1 233,3 246, 267,6 283,3 273,9 265,4 256,5 France 212,5 22,2 177,6 169,2 177,3 186,3 25,1 218,6 234,4 252,9 Slovenia 63,8 69,2 75,3 81,8 92,8 11,6 19,8 13,4 163,5 216,6 Russia 47,6 44,6 54,7 68,3 69,9 81,9 112,2 135,5 166,8 27,5 Belgium 28,5 197,8 173,4 159,1 166,6 178,6 192, 195,9 2, 25, Bulgaria 3,2 29,5 32,6 39,8 49,6 61,6 74,4 1, 138,6 24,6 Greece 194,1 157,8 142,4 133, 136, 145,1 158,9 17,8 183,8 198,6 Austria 139,4 139,8 137,8 14,2 146,2 159,4 175,9 181,4 187,9 196,5 Italy 164, 155,9 139,5 136,9 143,7 151,5 16,4 171,1 182,2 195,3 Germany 217,6 28,2 188,4 179,3 181,5 181,2 182,7 184,2 186,4 19, Malta 21,9 215,6 25, 23,8 215, 227,2 229,7 157,5 155,1 153,9 USA 364,5 348,6 323,3 322, 345,5 353,8 364,3 376,4 389,1 152,3 Turkey 116, 141,4 14,6 12,1 11,5 12,8 119,5 132,4 118,9 148,2 Estonia 66, 64,7 69, 79,5 97,7 98,8 12,3 114, 128,7 146,2 Hungary 83,2 74,4 69,5 71,9 79,9 88,5 97,8 14,1 112,1 122, Saudi Arabia 12,7 112,4 114,7 126,8 163,2 213,9 198,5 159,2 137,1 12,5 Czech Rep. 76,5 69, 67,3 69, 72, 77,4 82,9 92,5 15,1 12,4 Latvia 27,4 34,5 4,7 48,7 58,7 72,6 87,4 95,1 15,5 119,5 Poland 53,9 52,6 52,6 54,6 6,6 66,6 77,2 88,3 11,7 117, Mexico 61,2 57,6 54,4 51,6 54,3 6,2 7,4 81,7 96,4 116,1 Indonesia 89,2 76,3 72,6 72,6 75,5 73,2 72,7 79,9 91,9 18,2 Lithuania 3,3 3,1 29,8 37,8 52, 66,3 78,1 81,1 85,5 92,3 Romania 16,8 16,1 2, 22,4 27, 34,9 44,7 53,2 63,7 78,6 Slovak Rep. 67,3 7,4 7,9 65,6 6,3 6,3 6,5 61, 61,3 61,8 Argentina 81, 16,7 197,1 19,1 74,6 71, 67,7 62,2 57,3 53, China 38,1 42,1 34,2 35,1 34,5 31,9 6,6 131,8,, Source: WB and BRSA calculations BRSA 14 Structural Developments in Banking December 21

160 Box 35: Global Outlook of Financial System Structure According to World Bank data, when structure of financial system by countries in 29 is analyzed, it is seen that especially developed economies have deep capital structures along with developed banking. In the USA, especially due to the weight of insurance companies, weight of other financial institutions in national income and financial system is noteworthy. In respect of developed economies, examples are observed displaying capital market capitalization being close to banking level and even exceeding it. 29 ; % Deposit Banks/ GDP Stock Market Capitalization/ GDP Total Financial System /GDP Central Bank/GDP Other Financial Institutions/GDP Luxemburg - 266,5-738,8 1.5,3 South Africa,4 94,8 118,2 338,2 551,6 Switzerland 1 188,9-34,3 53,1 USA (*) 5,3 69,1 166,9 152,3 393,6 Spain 1,1 216,7-151,5 369,2 Netherlands,3 215,2-145,3 36,9 Canada 3, 14,1-27,4 35,6 India 2,2 69, - 278,1 349,2 Denmark,2 242,4-11,8 344,4 Great Britain 1,6 27,6-132,2 341,4 Australia 9,2 128,6-179, 316,9 Sweden - 14, 15,7 147,6 33,3 Ireland - 233,2-55,8 288,9 Cyprus 8,8 271, ,3 Brazil 13,8 9,8-169,7 274,4 Portugal,1 193,3-8, 273,3 Korea, Rep. 2,1 121,1-138,9 262,2 Finland - 86,5-172,5 259, Japan 9,8 148,3-98,4 256,5 France 1,3 127,2-124,4 252,9 Slovenia,3 87,3-129,1 216,6 Russian Federation,8 48,8-158, 27,5 Belgium 1,3 115,3-88,4 25, Bulgaria - 85,3-119,3 24,6 Greece 4,2 18,4-86, 198,6 Austria 1,8 121,8-73, 196,5 Italy 4,3 14,1-51, 195,3 Germany,2 115,1-74,7 19, Malta - 153, ,9 Estonia - 118,4-27,8 146,2 Turkey(**) 11,5 87,4 12,5 36,8 148,2 Hungary,4 9,5-31,1 122, Saudi Arabia - 55,1-65,3 12,5 Czech Rep. - 67,1-53,3 12,4 Latvia - 112,9-6,6 119,5 Poland - 55,5-61,5 117, Mexico - 38,3 13,1 64,7 116,1 Indonesia 5,1 29, - 74,1 18,2 Lithuania - 73,5-18,8 92,3 Romania - 51,8-26,7 78,6 Slovak Rep. - 54,7-7,1 61,8 Argentina 4,7 18,5,9 29, 53, China Source: WB and BRSA calculations, (*) USA Data belonging to 28, (**) Turkey Data BRSA data BRSA 141 Structural Developments in Banking December 21

161 Domestic Savings One of the main structural indicators relating to financial system is domestic savings. While total domestic savings level is determinative for economic growth, it is presenting information concerning development and depth of financial system. Besides, development of domestic savings by sectors (public and private sector) is displaying importance in respect of types and development of domestic financial products 27. Chart 7.2-4: Domestic Savings 3 Private Savings / GDP 25 Public Savings / GDP 2 Tot. Domestic Savings /GDP Investment-Savign diff. / GDP Private Public -5-1 Domestic Savings / GDP E E. Source: SPO (E: Estimate) It is seen that the level regressed to 12.6% in 21 from 18.4% in 2 when the rate of total domestic savings to GDP in Turkey in 2-21 is observed. Private sector saving trend, decreased significantly following 23, was effective in this development. Rate of personal savings/private disposable income was regressed to 14.5% in 26 from 23.1% in 2 and it was realized as 13.5% in 21. The said decrease was realized with the fact that the effect of global crisis on private consumption decreased following the relative increase in 28 and 29. Chart 7.2-5: Domestic Savings Prive/ Dom. Savings Private Savings/ Disp. Income E E. Source:SPO (e: estimate) It is seen that the public sector, having savings deficit constantly during 2-24 period has turned into a structure giving savings surplus in periods as a result of financial discipline provided, when the ratio of investment savings differences to national income by sectors is analyzed. Public sector has given savings deposit again with the relative relaxation realized within the scope of policies implemented for decreasing the effects of global crisis in But the ratio of deficit regressed in 21. A savings deficit formed in periods in which there was suitable international borrowing opportunities and strong domestic demand when 27 King, Robert G., and Ross Levine, 1993a, Finance and Growth: Schumpeter Might Be Right, Quarterly Journal of Economics, Vol. 18, s BRSA 142 Structural Developments in Banking December 21

162 private sector is analyzed. It is seen that especially the private sector could go into debt more easily with the increase of financial deepening and that savings trend decreased relatively in period following 2. Table 7.2-3: Total Domestic Savings Ratio in G-2 Countries USA 17,9 16,3 14,4 13,6 14,2 14,7 15,9 13,4 11,4 9,8 Germany 19,8 19,2 19,3 19,4 22, 22,1 24,3 25,9 25,1 21,5 Argentina 13, 12,8 2, 2,1 2,8 24, 26,7 26,6 25, 23,2 Australia 19,6 19,1 19,8 19,5 2,1 19,5 2,8 2,9 21,5 v.y. UK 14,6 15,1 15,1 14,9 14,9 14,4 14,2 15,6 15, 12,2 Brazil 13,9 13,5 14,7 16, 18,5 17,3 17,6 18,1 18,8 14,7 China 36,8 37,6 4,3 44, 46,8 49,2 52,3 52,4 53,5 53,6 Indonesia 25, 21,1 16,7 29,9 24,6 19,1 19,9 18,2 19,9 23,2 France 21,7 21,3 2, 19,4 19,4 18,8 19,6 2,2 19,6 16,4 South Africa 15,8 15,6 16,7 15,7 15, 14,5 14,4 14,1 14,9 15,4 India 25,1 25,5 26,7 28,5 33,1 34, 34,9 36,7 32,5 35, Italy 2,5 2,8 2,9 19,9 2,3 19,6 19,7 2,1 18, 16, Japan 28, 26,9 25,9 26, 26,7 27,1 27,6 28,4 26,8 23,6 Canada 23,5 22,2 21,2 21,4 22,9 23,8 24,4 23,8 23,5 17,7 Korea 33, 31,1 3,5 31,8 34, 32, 3,7 3,8 3,7 3,3 Mexico 2,5 17,9 18,5 21,9 24, 23,2 25,7 25, 25,6 21,7 Saudi Arabia 29,5 26,1 28,5 34,3 41, 48,5 47,8 45,7 49,9 32,2 Turkey(*) 18,4 18,4 18,6 15,5 16, 15,9 16,5 15,5 16,8 13,1 Switzerland 34,6 3,5 28,9 33,1 33,3 34,8 35,6 31, 23, 32,3 World 22,1 21,1 2,4 2,5 21,5 21,8 22,8 22,3 21, 18,5 Source: World Bank, (*)SPO. It is seen that developed economies except the USA have relatively high savings ratios when domestic savings are observed in G-2 countries. Besides, China, India, South Korea and Russia, from emerging economies in G-2 have significantly high savings ratios. It is observed that Turkey and Brazil, from emerging country class, have relatively low savings ratios. This respect continues to be one of the most important problems on growth and also financial deepening for Turkish economy Monetary Aggregates Monetary aggreagtes are one of the most common indicators used for financial deepening. The development of all sizes from money supply with the most narrowed definition to money supply with the most comprehensive definition, usage of national currency and other currencies and payments systems have become the criteria of financial deepening 28. The ratio of M1/GDP is expected to decrease with the continuation of financial deepening in economy. The money amount in circulation being higher, in other words the ratio of M1/GDP being higher, is accepted as an indicator of being underdeveloped in financial means, and being lower is accepted as an indicator of being developed of financial markets. 28 Levine, R., (1997), Financial Development and Economic Growth: Views and Agenda, Journal of Economics Literature, Vol.35 McKinnon, R. I., (1973), Money and Capital in Economic Development, Washington D.C., Brookings Institution. BRSA 143 Structural Developments in Banking December 21

163 Chart 7.2-6: M1 Money Supply and M1 Indicators Billion TL M1 1987Q1 1988Q2 1989Q3 199Q4 1992Q1 1993Q2 1994Q3 1995Q4 1997Q1 1998Q2 1999Q3 2Q4 22Q1 23Q2 24Q3 25Q4 27Q1 28Q2 29Q3 21Q Billion TL M1 at fixed prices M1/GDP (right axis 1987Q1 1988Q2 1989Q3 199Q4 1992Q1 1993Q2 1994Q3 1995Q4 1997Q1 1998Q2 1999Q3 2Q4 22Q1 23Q2 24Q3 25Q4 27Q1 28Q2 29Q3 21Q Source: CBRT, TSI, BRSA It is seen that M1/GDP had a decrease trend significantly in period when quarterly money supply definitions are observed as to CBRT data. There are changes which came to definition of M1 in following periods. In spite of this modification, the increase in the said ratio remained limited. One of the financial deepening indicators used frequently in monetary sizes is the ratio of comprehensive definition money supply to GDP. When M2/GDP and term deposit is taken into account together, an indicator of which banking system usage is taken into account is obtained. This is a criteria of level of monetization in another means. Chart 7.2-7: M2 Money Supply and M2 Indicators Sector Development Rates Billon TL 1987Q1 1988Q2 1989Q3 199Q4 1992Q1 1993Q2 1994Q3 1995Q4 1997Q1 1998Q2 1999Q3 2Q4 22Q1 23Q2 24Q3 25Q4 27Q1 28Q2 29Q3 21Q4 Resource: CBRT, TSI, BRSA M Billon TL M2 at fixed prices M2/GDP (right axis 1987Q1 1988Q2 1989Q3 199Q4 1992Q1 1993Q2 1994Q3 1995Q4 1997Q1 1998Q2 1999Q3 2Q4 22Q1 23Q2 24Q3 25Q4 27Q1 28Q2 29Q3 21Q The ratio of M2/GDP being higher is an indicator of development of financial markets. The ratio of M2/GDP, which Foreign Exchange Deposit Accounts are included especially with the new definition in Turkey increased rapidly following 22 and reached to 36% in Aggregates of Loan and Deposit Volume indicators relating to loan and deposit are frequently used variables in respect of financial deepening, similar to monetary sizes. Especially the ratio of loan volume to GDP is accepted as one of the main indicators of financial deepening. The role and the efficiency of banking system in financial deepening can be monitored by this indicator Levine, R., (24), Finance And Growth: Theory and Evidence, National Bureau of Economic Research NBER Working Paper Series, Working Paper Shaw, E.S., (1973), Financial Deepening in Economic Development, New York, Oxford University Press. BRSA 144 Structural Developments in Banking December 21

164 When credit volume of Turkish financial system is analyzed, it is seen that a strong increase was experienced together with consumer and investor confidence supported by economic and political stability following recession after 2 period in Within this scope, the ratio of loan/gdp exceeded 4% in 21. Chart 7.2-8: Loan Volume and Loan Volume Developments Milyar TL Resource: BRSA, TSI Loan 1987Q1 1988Q2 1989Q3 199Q4 1992Q1 1993Q2 1994Q3 1995Q4 1997Q1 1998Q2 1999Q3 2Q4 22Q1 23Q2 24Q3 25Q4 27Q1 28Q2 29Q3 21Q Billion TL Loan (fixed prices) Loans / GDP (right axis) 1987Q1 1988Q2 1989Q3 199Q4 1992Q1 1993Q2 1994Q3 1995Q4 1997Q1 1998Q2 1999Q3 2Q4 22Q1 23Q2 24Q3 25Q4 27Q1 28Q2 29Q3 21Q When credit volume is analyzed in real terms, it is seen that increase trend seen following 22 began to conduct horizontally in the second half of 28 as a reflection of global crisis, but loans have entered into an increasing period again in 29. Table 7.2-4: Domestic Loan/GDP provided by Banking System in G-2 Countries USA 198,4 26,1 198,8 214,4 221,3 225,2 235,1 242,7 219,7 23,5 EU 116,2 119,3 119,4 121,6 124, 129,1 134,1 142,2 148,1 157,9 Germany 145,4 144, 142,4 14,6 137,8 136,1 131, 124,5 126,3 131,8 Argentina 34,5 37,2 62,4 5,6 45,4 38,3 3,8 28,5 24,4 28, Australia 93, 94,5 1,8 14,7 19,1 113,7 119, 135,9 143,7 143,6 UK 13,1 135,7 14,8 144,9 153,2 161,9 171,9 188,4 211,3 228,9 Brazil 71,9 72,5 74,5 74, 72,6 74,5 86,6 92,2 96,9 97,5 China 119,7 123, 143,5 151,9 14,4 134,3 133,5 127,8 12,8 145,2 Indonesia 6,7 54,5 52,4 49,2 49,6 46,2 41,7 4,6 36,8 36,9 France 13,4 15,6 13,1 14,9 15,8 18,5 115, 122, 124,3 128,4 South Africa 152,5 184,3 159,8 163,1 169,6 178,5 192,9 195,2 172,2 183,5 South Korea 79,5 83,8 89,6 92, 87,4 91,4 99,9 11,8 112,3 112,4 India 53, 54,7 58,9 57,4 57,6 58,4 6,9 6,8 68,2 69,4 Italy 96,4 97,3 96,8 12,5 13,4 18, 112,2 128,8 132,6 141,6 Japan 38,9 299,4 299,2 37,3 33,5 312,8 35, 294,3 295,4 32,5 Canada 113,7 23,7 198,4 192, 194,4 22,7 219,6 154,2 178,1 v.y. Mexico 34,1 33,1 36,5 33,2 31,8 32,1 34,9 37,6 37,4 v.y. Russia 24,7 25,6 26,8 27,8 25,7 22,1 22,4 25,5 25,1 33,8 Saudi Arabia v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. v.y. Turkey(*) 37,9 52,9 47,5 42,8 41,4 45,6 45,8 49,3 52,5 63, Switzerland 171,9 168,1 167,4 172, 173,5 177,3 182,2 185,5 179,8 191, World 159,6 162,1 159,1 162,9 162, 162,2 162,6 16,3 154, 169, Source: World Bank(*)While it is a World Bank definition, the definition loan differentiate It is seen that Turkey is behind developed economies when the ratio of domestic credit volume, provided by banking system by G-2 countries, to national income is observed. But it is observed that Turkey is ahead of countries such as Argentina, Indonesia, Russia and Mexico in respect of financial deepening, by showing a stable development after 2. It is seen that Turkey has still potential to develop domestic loan volume when global weighted average is observed. BRSA 145 Structural Developments in Banking December 21

165 Box 36: Global Outlook of Banking Sector Assets/GDP Ratio Quite a higher ratio is seen in developed countries as to Turkey when the ratio of total assets of loan institutions by countries to GDP is analyzed. The said ratio is 2% in EU member countries. The said ratio in Turkey increased to 87.4% in 29 and increased to 91.1% in 21. While Turkey takes place over some countries newly member to EU with this ratio, it gets closer to countries having developed financial systems. But, it is seen that Turkey is still behind the countries rooted banking and financial service history and that Turkey has a high growth potential in this field Luxembourg 3.923, , 2.837,2 3.97,6 2.58,9 2.16,1 2.21, ,9 Ireland 517,8 525,1 543,5 687,9 699,7 67,5 722,2 735,8 Cyprus 518,9 454,1 413,4 541,8 547,7 51,9 634,3 73, Malta 55,1 519,2 521,2 671,7 612,1 59,9 684,6 652,1 Great Britain 485,4 477,7 438, 38,8 381,2 425,4 452,2 547,2 Switzerland 733,6 626,1 69,8 714, 659,4 556,7 548,2 451, Denmark 41,4 385,5 357,7 426,5 394, 371,4 436,4 45,6 Netherlands 413,9 394,5 382,9 391,5 358,2 328,6 348,2 353,5 Austria 36,1 335, 35,7 35,5 322,7 282,3 35,9 343,6 France 351,4 32,1 298,3 347,9 332,9 33,9 344,8 341,1 Japan 222,9 298,4 293,4 248,7 261,8 269,1 345,8 31,2 Belgium 49,7 383,8 352,3 412,5 37,2 333,8 342,5 39,7 Spain 261,3 245, 228,8 28,4 269,5 246,1 288,8 297, Sweden 259,3 237,6 23,6 261,9 258,1 218,1 253,5 29,7 Portugal 314,1 311,5 259,8 277,4 26,1 224,5 26,8 282,1 China 198, 272,8 27,1 261,7 26,4 249,6 272,9 281,8 Germany 422, 377,2 333,8 36,4 321,3 268, 295,1 281,6 Italy 221,9 23,1 183,3 27,8 197,4 185,7 215,6 22,7 South Africa 148,6 112,6 119,8 18,7 195,1 222,2 229,2 219,6 Finland 164,2 163,3 156,2 176,5 161,7 138, 193,3 25,7 Brazil 8,5 125,9 129, 116,9 122,6 146,8 139,5 2,3 Canada 21,6 192,7 171,2 28,3 164,7 155,4 17,7 194,6 Greece 183,1 157,7 138,7 17,3 157,2 145,9 179,6 187,6 Saudi Arabia 1,9 122,6 131,7 111,9 112, 128,2 138,6 176, India 96,3 128,9 13,6 123,9 143,3 152,2 167,3 173,5 Korea 152,9 134,3 135,3 156,5 137,4 111,3 135,3 146,6 Latvia 1,4 13, 111,2 144,3 149,9 126,4 129,8 144,3 Estonia 91,2 87,8 14,1 125,7 122, 113,7 127,8 141,2 Slovenia 115,8 19,1 99, 124,1 117,8 18,4 122,7 139,1 Hungary 88,4 94, 92,7 14,6 19,2 92,2 19,8 123,6 Czech Republic 14,2 123, 11,5 119,3 16,1 94,9 97,7 16,4 Bulgaria 66,9 62,7 71,6 88,9 88,4 87,5 96,8 98,4 Lithuania 47,2 46,4 55,5 74,6 75,9 71,9 76,7 88,9 USA 18,7 99,5 92,7 113,6 94,4 79,6 1,1 88,1 Turkey (*) 6,7 54,9 54,8 62,7 65,9 69, 77,1 87,4 Poland 84,3 74,4 78,2 79,2 73,1 64,9 67,7 8,5 Slovakia Republic 92,6 75,5 77, 9,9 93,7 81,3 9,6 78,5 Indonesia 67,6 82,9 78,1 69,9 69,3 67,1 59,6 67,8 Romania 37,9 36,3 42,4 52,7 55,7 5,2 57,6 67,7 Australia 136,1 139,8 99,3 99,6 79,8 62,9 5,3 65, Argentina 76,7 93,3 9, 7,1 69,9 63, 6,2 61,5 Mexico 58,6 45,9 41,4 52,7 4,1 34, 35,4 44,1 Russian Federation,, 66,9 65,1 48,3 35, 28,3 33,6 Source: EU Banking Structures, SB, Countries Central Banks and Supervision Authority web-sites (*) BRSA data BRSA 146 Structural Developments in Banking December 21

166 Chart 7.2-9: Deposit Volume and Deposit Volume Developments BillionTL 1987Q1 1988Q2 1989Q3 199Q4 1992Q1 1993Q2 1994Q3 1995Q4 1997Q1 1998Q2 1999Q3 2Q4 22Q1 23Q2 24Q3 25Q4 27Q1 28Q2 29Q3 21Q4 Resource: BRSA, TSI Deposits BillionTL Deposits (fixed price) Deposits / GDP (right axis) 1987Q1 1988Q2 1989Q3 199Q4 1992Q1 1993Q2 1994Q3 1995Q4 1997Q1 1998Q2 1999Q3 2Q4 22Q1 23Q2 24Q3 25Q4 27Q1 28Q2 29Q3 21Q The most important indicator of usage of banking system and accordingly financial system by economic sectors, mainly household, is the ratio of deposit volume to national income. When deposit indicators including FX developments, due to Foreign Exchange Deposit Accounts are analyzed, it is seen that the ratio to national income exceeded 5% following especially 22 as a general trend and that deposit volume expanded in a stable manner. This is one of the indicators showing the fact that savings owners tended to financial system and it is one of the specific structura indicators of financial deepening. BRSA 147 Structural Developments in Banking December 21

167 Box 37: Credit Volume/GDP Ratio by Countries It is seen that credit/gdp ratio is about 6% when countries such as Luxembourg and Malta, which are strong in banking in EU countries having developed financial system and centers in off-shore banking, are excluded. It can be seen that this ratio decreased and regressed to 3-5% when emerging economies are analyzed. This ratio is in the level of 4% with the developments in recent periods. While this state is displaying an inadequate outlook considering financial deepening, it is important in respect of the fact that it is indicating at the same time the growth potential of system Luxembourg 584,6 48,1 352, 385, 371,1 374,4 352,2 355,7 Malta 165,4 16,2 16,5 184,6 216,7 265, 297,2 262,9 GPSC 28,4 165,1 158, 164,7 168,3 187,8 212,8 231,6 England 136,2 184,9 174,6 199,6 28,7 27,7 192,2 229, Ireland 162,3 131,9 141,5 165,2 182,2 185,2 18,6 194,1 Denmark 158,2 137,3 138,1 151,4 162,9 162,2 162,6 177,7 Switzerland 232,2 181,8 175,8 19,1 24,7 193,5 169,6 173,8 Netherlands 16,8 141,6 139,5 148,3 152,7 139,1 125,8 145,9 South Africa Rep. 183,6 11, 9,8 112,1 121,8 12,9 157,4 143,7 Spain 11,7 97,7 96,7 113,1 129,7 129,1 124,6 134,8 Portugal 138,8 115,2 15,5 19,3 114,9 111,7 112, 125, EU ,1 11,8 13,7 112,1 116,7 113,8 15,3 116,8 Sweden 18,4 9,2 83,7 93,1 11,2 96, 87,2 113, Austria 132,6 19,9 12,4 18,3 18,3 11,5 11,3 18,9 Australia 85,6 92,2 76,2 81,3 82,2 86,6 69,1 12,5 PB ,1 99,5 92,1 97,3 1,8 97,6 93,5 11,8 Germany 149,8 123,9 19,6 18,4 14,6 94,4 88,8 95, France 94, 79,6 74,3 79,2 83,3 83,2 8,2 87,5 Italy 87,5 74,9 68,8 72, 76,4 81,5 78,7 87,5 People s Republic of China 13,9 93,2 81,8 9,3 85,3 74,7 74,4 87,2 Canada 86,8 75,2 69,6 8,1 7,5 73,6 67,9 85,8 Estonia 41, 4,6 49,9 57,5 66,2 7,1 72,3 83,8 South Korea 74,5 62,6 67, 73,4 73,8 68, 68,2 82,2 Latvia 32,2 35,8 36,3 56,1 75,2 73, 67,9 8,2 Belgium 11,5 92,2 84,2 96,4 97,5 9,9 79,5 79, Slovenia 39, 34,4 41,5 47,6 53,9 61,3 64,3 72,2 Finland 63,7 57,3 55,1 59,8 63, 6,2 61, 69,8 Japan 9, 74, 64,7 67,4 63,6 62,5 75,3 66,4 Greece 64,5 56,5 55,5 6,9 63,3 64,2 63,1 65,2 Hungary 39,1 37,9 39,2 42,7 49,6 47,6 49,1 56,6 Bulgaria v.y. v.y. 27,7 31,1 36,1 45,1 48,2 53,4 Lithuania 21,2 21,5 22,2 34,7 39,9 46, 44,6 51,1 Czech Rep. 38,5 33,9 3,1 32,9 36,5 38,5 35,6 42, Turkey 14, 14,6 17,8 24,1 28,9 33,9 38,7 41,2 Poland 3,8 26,3 26,5 25,7 28,1 31,5 29,9 4,7 USA 47,9 4,7 4, 47,5 43,6 4,7 41,4 37,8 Russia 21,4 18,8 2,1 24,6 27,6 3,6 28,1 37,5 Slovakia v.y. v.y. 19,6 24,5 27,5 29,7 31,5 35,4 Romania 1,9 11,8 14,6 17,2 22,8 24,8 25,5 31, Brazil 16, 16,2 15,9 19, 18,7 2,8 17,3 27,1 Indonesia 19,9 17,9 17,1 21, 18,4 16,9 16,3 19,6 Saudi Arabia 12,2 13,5 17,2 19, 15,1 15,3 12, 18,6 India 15,4 13,3 12,1 15,5 17,1 13,8 14,5 17,4 Mexico 21,3 14,7 13,3 15,1 12,6 12,1 1,6 14,5 Argentina 13,7 8,5 7,8 9,3 9,8 1, 8,9 9,1 Source: EU Banking Structures 21, SB, BRSA 148 Structural Developments in Banking December 21

168 7.3. Banking Sector Projections It was benefited from the study realized on growth, domestic demand development and loan expansion in obtaining projections relating to banking sector. The negative effects of financial crisis experienced in global level as of 27 were felt in banking sector especially in 29 and caused asset growth to remain relatively lower. Banking sector has accelerated its growth again in parallel with the developments in domestic demand together with the fact that the negative effects of crisis decreased as of 21. It is estimated that the sector shall catch a growth performance close to the period of 24-21, as of 211. Besides the respect of the fact that the growth rate shall maintain in levels not to be risky in respect of financial stability is became important concerning sustainability. As a matter of fact, certain policy measures were actualized within this scope in the first half of 211. It is expected that these measures shall create a relative slow down in the growth of banking sector. But it is foreseen that Turkish Banking Sector shall maintain its strong performance in medium and long terms with its high growth potential. Loan Rate Coefficient scope, which is mainly a linear analysis, is used for emerging countries. This rate coefficient which can be represented as relative growth ratios is around 2 for emerging countries. While this ratio was calculated as 1.3 in Turkey in period, which is quite low, it increased to 5.21 in the period following 24. These coefficients were calculated as approximately 4.5 as nominal for Turkey in the section concerned of the report of Structural Developments in Banking Sector-29 and in Loan Expansion in Turkish Economy analysis included in Financial Markets Report December 27 (issue 8)also. Table 7.3-1: Medium-Term Credit Volume Expansion Scenarios GDP Growth Assumption 7, 6, 8, Rate of Loan Increase Rate/GDP Growth Rate (5.21) 36,5 31,3 41,7 Rate of Loan Increase Rate/Total Investment Growth Rate (4.22). 29,5 25,3 33,8 Rate of Loan Increase/Total Demand Growth Rate (5.22). 36,6 31,3 41,8 Assumptions Averages (24-21)(1+2+3/3) 34,2 29,3 39,1 Source: BRSA The rate coefficients of were taken as basis also in this assumption analysis. The coefficient increased to the level of 4-5 in long term and in medium term with the latest data. Within the scope of the study realized with this method, loan expansion assumptions shall be between 29.5%-36.6 for 211, % for 212 and 33.8%-41.8% for 213. While GDP growth for 211 is taken as 7% for 211, these ratios are used as 6% and %8 respectively for 212 and 213. It is foreseen that emerging economies shall show a growth performance amounting to 6-8% in annual average in medium term, within the scope of predictions of international institutions. Accordingly, in the main scenario Nr.(II), it is approached as Turkey shall also catch the said average growth numbers in 223 perspective. In the scenario Nr.(I) which is relatively strong, it is analyzed states in which Turkey shall be around 9% in annual average over the other emerging economies with the respects such as growth performance, rapid pozitivization in business environment, positive reflections of changes in global regulatory structure, positive reflections of increases in the collaboration of university-industry. In the scenario (III) including relatively lower growth (average scenario), it is assumed that Turkey shall maintain its average growth in and that there shall not be any additional improvement in its current performance. But in this scenario, it is handled that Turkey will continue to grow in an environment in which macro-economic and financial stability is protected. Within the scope of these scenarios, it is foreseen that the credit volume shall increase annually in average by 31.8% in basic scenario, 22.8% in average scenario and 35.3% in strong scenario, in BRSA 149 Structural Developments in Banking December 21

169 Table 7.3-2: Long-Term Loan Volume Growth Scenarios Average Loan Increase Rate Scenario (I) [Strong Scenario] 31,5 4,5 36, 4,5 35,3 Loan Increase Rate Scenario (II) [Basic scenario] 31,5 36, 31,5 36, 31,8 Loan Increase Rate Scenario (III) [Average Scenario] 31,5 21,6 21,6 21,6 22,8 It is found probable that loan size of Turkish Banking Sector shall exceed TL 17.5 trillion in 223 with this long term overlook. This size is explaining a very rapid development in financial deepening. Turkish banking sector is required to operate not only on national scale but also on international scale for this development. Chart 7.3-1: Loan Growth Trends 6, 5, 4, 3, 2, 1,, Strong Scenario GDP growth 8 % Loan growth 35,6% Base Sceanrio GDP growth 7% Loan growth26,8% Average Scenario GDP growth. 4,8% Loan growth 17,9% -1, -2, -3, BRSA 15 Structural Developments in Banking December 21

170 BRSA 151 Structural Developments in Banking December 21

171 BANKACILIK DÜZENLEME VE DENETLEME KURUMU Atatürk Bulvarı BRSA No: Kavaklıdere/Ankara 152 Structural Developments in Banking December 21 Tel:(312) Faks: (312)