Share the article
twitter-iconcopy-link-iconprint-icon
share-icon
Western EuropeSeptember 28 2010

Survival built on trust

Over the past eight years, Yapi Kredi has been taken over by Turkey's banking regulators, sold and then merged with a smaller bank, yet it still emerged from the recent global financial crisis in robust shape. The secret, according to its CFO, is looking after the customers. Writer David O'Byrne
Share the article
twitter-iconcopy-link-iconprint-icon
share-icon

Only eight years ago, the future of Turkey's Yapi Kredi Bank looked as uncertain as any of the other 20-odd banks that had been taken over by the country's banking regulators following a domestic bank crisis.

However, almost alone among its peers that had been taken over, Yapi Kredi was actually solvent, having been seized not due to problems on its own balance sheet but because of those of another bank owned by the same parent group.

Thanks in part to its healthy financials and to its strong reputation on the Turkish high street, where it had been a sizeable presence for 60 years, Yapi Kredi was able to prosper while operated by the country's regulators.

At the same time, it faced little difficulty in finding a buyer, in the shape of Turkey's Koc conglomerate, which wasted little time in merging its new purchase with its existing Koc Bank, in which UniCredit Group held a 50% stake.

A mixed blessing

According to Marco Cravario, chief financial officer of Yapi Kredi, who arrived from UniCredit as a result of the merger, the period of regulator operation was one of mixed blessings. "The regulator's priority was not maximising shareholder value, so the bank was administered very conservatively," says Mr Cravario.

With significant constraints on liquidity, the management had to concentrate on two business lines: loans to the construction sector (the sector the bank was founded to serve and from which it takes its name, which means 'construction credit') and a fast-growing credit card franchise.

Ahead of its peers, Yapi Kredi had signed up about 6 million credit card customers, giving it 20% of Turkey's credit card market - a excellent base from which the new owner was able to launch an ambitious growth plan, following the merger and restructuring of its new purchase.

"We focused on regaining leadership of what is one of the most interesting markets in Europe," says Mr Cravario. "Between mid-2007 and the end of 2008, we opened nearly 240 new branches and, beginning in 2008, we began to expand customer-related business, increasing our exposure to [small and medium-sized enterprises] by 45%."

Survival technique

When the global economic crisis hit Turkey, it was the country's export-driven manufacturing base that took the brunt of the downturn, with a disproportionate effect on the SMEs that supply the major exporters and which are less well placed to cope than larger companies.

Faced with this threat, Yapi Kredi opted to stay true to its basic values as a customer-driven bank and to stay as close as possible to its customer base.

"Banks need a customer base that is trustworthy and faithful - the only way you can build that relationship is by staying close to the customers through difficult times. We identified those companies that had a serious banking relationship with us and not only did we not withdraw our loans [to them], in some cases we actually increased our exposure in order to support our clients better," says Mr Cravario.

Moving forward

Supporting its customers has paid dividends, with Yapi Kredi managing to increase its loan book marginally through the difficult 12 months of 2009, before boosting it by 21% over the first half of this year.

"Loan growth has been focusing mainly on Turkish lira loans - individual retail loans, mortgages, general-purpose loans to SMEs and some corporate loans," he says.

Over the same period, the bank also managed to boost its securities portfolio by 11%, an increase that has not prevented some analysts from criticising the bank as being over-cautious.

"We could have made a lot of money betting on securities. That's easy to say with hindsight - but it could easily have gone the other way," says Mr Cravario, unrepentant.

Yapi Kredi has 2.6 million credit card-only customers - a hangover from the period when the bank was run by the regulators. Yapi Kredi is now targeting them as potential customers for other banking services, with 220,000 having already been persuaded to open accounts.

As with many Turkish banks, Yapi Kredi also holds a portfolio of subsidiaries, not all of which are the best fit for a retail bank. Notable in Yapi Kredi's case is a sizeable non-life insurance company, Yapi Kredi Sigorta.

"We do sell business and property insurance and accident insurance through the bank, but it's a different business and we do not necessarily need to own an insurance company in order to sell insurance," says Mr Cravario.

That said, he explains that currently market conditions mean that no decision has been taken on whether to sell the insurance subsidiary. Yapi Kredi's current strategy is to boost co-operation between the insurance and banking operations pending better market conditions when a reassessment can be made.

Was this article helpful?

Thank you for your feedback!

Read more about:  Western Europe , Turkey