Hakan Eminsoy, CEO of ING Bank Turkey

Despite an adverse response from the bank's military depositors and a sharp recession in Turkey, ING Bank's CEO is planning for growth once the economy turns around. Writer Metin Demirsar

ING Bank Turkey, formerly Oyak Bank, is planning an expansion programme after overcoming a rocky beginning, heightened by the withdrawal of a large numbers of deposits from members of the Turkish armed forces. The global recession that struck the country in the fourth quarter of last year and also affected the parent bank.

Holland's ING Group acquired Oyak Bank in December 2007 from Turkish armed forces pension fund, known as Oyak, Turkey's second largest investment fund, for $2.67bn. The name of the bank was changed to ING Bank in July 2008.

"Last year was one of integration for ING Bank with the ING Group. After having completed our transition and integration process last year, we plan to focus on growth in the Turkish banking sector, beginning from 2009 and then over the following years," says Hakan Eminsoy, CEO of ING Bank Turkey.

"Our main objective is to increase our market share. In order to reach this target, we are developing a much more customer-focused and innovative banking perspective in all of our services and products. ING Bank has gained a considerable competitive power in the sector, especially in retail banking," he adds.

The bank invested $4.2bn in Turkey in one year, according to Mr Eminsoy. Under the ING Group, the bank plans to increase its branch network from 366 at the end of 2008 to 600 by 2012, in moves designed to make it a major retail and consumer banking force. In 2008, the bank had a net income of Tl137m (€64.3bn) on assets of Tl16.861bn. The bank employs 6382 people and plans to hire an additional 2300 people by 2012.

Backlash contained

Some members of the Turkish armed forces opposed the sale of what they perceived as the sale of 'their' bank to a foreign institution, and called on other military personnel to withdraw their deposits and place them with Turkish-owned institutions. The armed forces closed ranks and Mr Eminsoy says that 60% of their transactions shifted to other banks after the change in ownership.

If other depositors had followed suit, this could have had serious consequences, perhaps obliging the parent group to boost the liquidity of its new subsidiary at a time when wholesale funding was becoming harder to obtain worldwide. In practice, however, the deposits of the bank increased after its transfer to the ING Group, possibly because non-military depositors still see a foreign-owned bank as potentially safer from a financial viewpoint, after the banking crisis at the start of this decade.

About 20 large depositors are believed to have left the bank after the ING Group announced its takeover in mid-2007, and Mr Eminsoy says that members of the Turkish armed forces made up only 2.7% to 3.4% of the total deposits of the bank. Paradoxically, Oyak Group - which is involved in steel, auto and cement manufacturing and oil products retailing - remains among ING Bank's best clients.

Local pressures

Foreign ownership provides something of a cushion for ING Bank, but the parent bank has somewhat constrained resources after losing more than $2bn in 2008 due to its exposure to structured credit markets. In any case, Mr Eminsoy is preparing his subsidiary to face the downturn in Turkey, where gross domestic product contracted dramatically by 13.8% year on year in the first quarter of 2009. Company liquidations were up 2.8% in the first half of 2009, and new company incorporations were down 23.9% in the same period.

"ING Bank Turkey has always been strong in traditional banking, but adjustment to the sharp slowdown in economic activity is unavoidable," says Mr Eminsoy. "We have entered 2009 with a lot of uncertainties; after a very bad first quarter macroeconomic indicators started to improve only slightly. But we may expect the step-by-step recovery to continue in the second half with the help of the measures taken by different economic actors."

However, Mr Eminsoy warned that government measures introduced in March, including reduced taxes on motor vehicle, housing and household appliance sales, are temporary and will therefore have only temporary effects on the economy. "Overall, what we need is the improvement in confidence to continue," he says.

ING Bank is playing its part in restoring financing for the vital export sector. The bank was club loan facility co-ordinator of a €200m loan to Turk Eximbank, the Turkish state export credit bank, signed in London in April 2009. It subsequently raised its loan contribution rate this year by €15.5m to €25m. "This is a step that is parallel with the bank's strategy to empower Turkish exporters," says Mr Eminsoy.


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