Garanti BBVA CEO: The pressure on profitability will increase in 2023
The CEO of Garanti BBVA, Recep Baştuğ, shared the evolution in 2022 and his expectations for 2023 in terms of the banking sector and Garanti BBVA.
Stating that 2022 is not easy from a managerial point of view, Baştuğ said that the topics they focus on as the banking sector change frequently according to legal regulations, however, the sector had a positive year in terms of balance dynamics.
Baştuğ stated that TL loan growth remained slightly below the inflation rate, foreign currency loans continued to decline, and the proportion of Turkish lira deposits increased significantly.
RETURNS ON EQUITY FAILS BELOW INFLATION
Emphasizing that the sector maintains its strong asset quality, Baştuğ said:
“There were no major inflows into problem loans and delinquency rates continued to fall. Although banks’ profitability has risen significantly in nominal terms, their return on capital has remained around 40 percent in the sector and well below inflation.
This means a net loss of capital for the banks. When we rank sectors in terms of return on capital, banking is not in the top 10 most profitable sectors. Due to the effects of tight regulation on loan growth, the industry shifted its focus to higher customer growth. Competition in this field has moved to a dimension we haven’t seen before.
We have seen that the sector prioritizes customer acquisition, even at the cost of compromising profitability. The most obvious example was the price of salary promotions.
‘WE REACHED A RECORD LEVEL IN CUSTOMER ACQUISITION’
Recep Baştuğ said that 2022 was a very successful year for Garanti BBVA and that they consolidated their leadership in all areas.
Stating that they completed the year above their targets in all financial and non-financial performance indicators, Baştuğ said, “We continue our leadership among private banks by increasing our share in the TL lending sector. The pioneer of growth for us has been corporate loans, which are parallel to the sector. We also maintained our traditional leadership among private banks in retail lending. We came out on top with our strong performance, especially in support loans.”
Stating that they strengthened their balance sheet with the provisions they booked, Baştuğ said:
“We closed the year with very good results in our non-financial strategic performance indicators. We reached a record level in new customer acquisition this year. We continue our leadership in digital transformation.
The number of our active mobile customers has increased from 7.7 million at the end of 2019 to 12.6 million. While we are rapidly increasing our customer base, we are also rapidly digitizing it. As of today, 4 out of 5 active customers use their mobile phones actively.
Sustainability was another of the areas in which we were pioneers in the sector. The sustainable financial support we provide in 2022 reached 25 billion lira. We finance one in every 4 wind farms, we are market leaders in this field with 22.5 percent”
‘BALANCED MANAGEMENT OF OUR BALANCE SHEET’
Garanti BBVA General Manager Baştuğ reported that as a bank, 778 percent of its loan portfolio, cash and non-cash, totaling 778 billion TL, consists of the support they provide to the sector. real and 22 percent to individual clients.
Stating that they manage their balance sheets in a balanced manner and have a structure that meets the needs of all customer groups, Baştuğ said, “Our strategy in the coming period will be to grow in each business area on our balanced balance sheet and to consolidate our leadership. In 2023, effective and healthy balance sheet management will continue to be our priority.”
Stating that there is a significant segment that is not yet aware of banking in Turkey and who want to further reach this potential, Baştuğ said that going deep into existing customers is also important and they will benefit from data and artificial intelligence in this regard.
‘DEPOSITS WILL EXCEED GROWTH IN LOANS’
Emphasizing that sustainability will be one of his top priorities, Baştuğ continued as follows:
“We will take very clear actions in sectors with high carbon emissions. We will continue working to raise awareness among all our stakeholders about the climate crisis. 2023 is a year full of uncertainties for the entire world.
For us, the situation is no different. When we look at it, we enter 2023 with a panorama in which the stagnation of economic activity becomes evident, high inflation is our most important agenda and with intense macroprudential measures. These dynamics will also determine the direction and size of loan growth in the banking sector.
In general, we expect deposit growth to remain above loan growth. Under current conditions, we do not expect intense competition, especially on the legal side. Competition will manifest itself in the areas governed by regulation.
Against this backdrop, we will start to see the impact of high costs incurred due to intense competition on customer acquisition in 2022 in the coming period. One of the most important items on the sector’s agenda in 2023 will continue to be capital. Regarding the quality of the assets, we do not see a serious risk in 2023 either. The provisions of the sector are solid, the balance sheet is healthy”
‘DIGITALISATION WILL CONTINUE RAPIDLY’
Recep Baştuğ said that digitization in the banking sector will continue to accelerate in the coming year, but technology alone is not enough to create value.
Stating that the correct use of data with artificial intelligence and analytical models will be the formula to make a difference in the future, Baştuğ said: “Not only traditional banks, but also players such as fintechs, digital banks, payment institutions are becoming becoming a part of this. value creation process. This means an intensification of competition and an increase in the quality of service”.
‘INVESTMENT NEEDED FOR GREEN TRANSFORMATION’
Baştuğ said that there is a very serious investment need for the ecological transformation in Turkey, that the most interested party in this journey are the banks, so they expect that the competition will intensify in this area.
Pointing out that there has been a very serious and permanent digital transformation with the epidemic, Baştuğ made the following assessments:
“Our number of transactions made from digital has increased by more than 100 percent compared to the pre-epidemic period. The share of digital, including ATMs, in the number of basic transactions increased to approximately 98 percent. At the end of 2019, we had 7.7 million active mobile customers and 8.4 million active digital customers. This year, these numbers have reached 12.6 and 13.2 million, respectively.
Today, more than 85 percent of our product sales are made through our digital channels. Open banking regulations will also take this transformation in the industry to the next level. We are entering a period where digital borders will be removed. Data, data usage, and customer experience will be the topics we’ll talk about even more.
We, as Garanti BBVA, determine our customer strategy with this approach, and we maintain our focus and investments in digitization. We have a mobile-centric approach to all of our work. We will continue to increase the share of digital in our sales and customer acquisition.”
THE ORDER TO TL HAS BEEN MANDATORY
The general director of Garanti BBVA, Baştuğ, also shared his vision on the reflection of the monetary policies implemented in Turkey in the sector.
Stating that as a result of the implemented policies, the orientation towards the Turkish lira on balance sheets has become mandatory, Baştuğ said that the maturity structure of deposits in the sector has been widened and the demand for loans in foreign currency. with deposits with exchange guarantee.
‘NEGATIVE PRESSURE WILL CONTINUE TO INCREASE’
Baştuğ stated that loan volumes decreased significantly with the payment of payments due on foreign currency loans;
“On the other hand, the high inflation environment created an increase in the demand for TL loans. However, the stagnation of large corporate loans, excluding SMEs and exporters, began to become evident with the legal regulations that marked the growth dynamics.
We may continue to feel this way for a while, as the spread between lending rates on the corporate side and deposit costs has recently turned negative. When this is the case, it is possible to predict that the negative pressure on the profitability of the sector will continue to increase.
‘INFLATION SHOULD DROP FOR A MOMENT’
Baştuğ, forecasting that inflation will tend to decrease in Turkey in 2023, concluded his speech as follows:
“In any case, an environment of high and above normal inflation still awaits us. I would also like to stress that the current account deficit will remain important with continued growth and high energy prices.
The increase in exports in Turkey after the epidemic slowed down in the last period as a result of the slowdown in export markets, especially in Europe. However, we can say that we avoided the sharp decline by creating market diversity again. We cannot say that there will be a significant investment movement in the country in 2022.
In 2023, we can expect a recovery after more predictability. From the Opportunities window; Turkey has a very serious production and logistics infrastructure. The banking sector has the power to support the needs of the country. However, the industry also needs; It is to reduce inflation as soon as possible and establish a more predictable and stable macroeconomic and investment environment” (AA)
Source: Sozcu
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
