The EU Council’s decision in December to open membership negotiations with Turkey on October 3 this year brings the country an important step closer to EU accession. It also helps clear the way to significant changes in the country’s fragile financial sector. The economic structural reforms achieved in recent years have brought inflation down into single figures for the first time in decades. This has created a platform of stabilisation, allowing foreign banks to take a new look at the huge opportunities in the Turkish market.
Just as Austrian, Italian and other European banks have piled into central Europe in recent years the spotlight now seems to be shifting to Turkey, with its population in excess of 70 million and 8.5% estimated GDP growth in 2004. Unlike central Europe a decade ago, Turkey already has an advanced banking sector with some very sophisticated products. Garanti Bank’s mobile money transfer system using SMS messaging is said to be the first of its kind in the world. While GDP per capita may be low, Istanbul bankers put the number of ‘bankable people’ at a sizeable 25 million and growing fast.
So far foreign banks have made little impression on the sector, accounting today for just 7% of banking assets, according to banking sources. But that seems about to change. Last month France’s BNP Paribas announced the purchase of 50% of Türk Ekonomi Bankasi and the Dutch Rabobank is expected to conclude a 50% acquisition of Sekerbank in May. Koc Financial Services (50%-owned by Italy’s Unicredit) is negotiating the 57% acquisition of Yapi ve Kredi Bankasi.
And that is just the start. With privatisation plans afoot and almost all banks needing more capital to expand consumer and corporate lending, more foreign banks are looking hard at Turkey. Bankers suggest that up to 25% of the sector will be foreign-owned by the end of 2007 and that figure could go much higher.
The EU negotiations look set to work as a long-term anchor in supporting the right economic policies for the Turkish economy and opening up the banking sector to much neeed foreign capital.
