Turkish banks have posted record profits for fiscal 2009
ahead of analyst forecasts. Akbank, the country’s second-largest
lender by assets, posted a 53 percent rise in full-year net profits
and according to deputy CEO Hakan Binbasgil, is well placed to
target further growth in 2010. Douglas Blakey reports.


Hakan Binbasgil, AkbankDespite the economic volatility in 2009, Turkish
banks weathered the global economic storm better than most of their
international rivals, in the process posting record sector profits
in fiscal 2009 of TRY20.1 billion ($13 billion), up 50.6 percent
from TRY13.4 billion in 2008.

The country’s second-largest bank by assets
and market capitalisation, Akbank, outperformed the sector with a
53 percent increase in full-year net profits to TRY2.72

The Turkish lender, in which Citigroup has a
20 percent stake, grew net interest income by 30 percent to TRY4.73
billion while fees and commission income increased by 16 percent to
TRY1.32 billion. Total assets increased by 11.2 percent to TRY102.8
billion and the bank’s net interest margin grew to 5.1 per cent in
2009 from 4.5 per cent the previous year.

Akbank and its Turkish rivals have benefitted
from the central bank’s record interest rate cuts, helping banks to
obtain cheaper funding while cutting their own deposit rates and
keeping the cost of borrowing high.

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Akbank’s deputy CEO in charge of consumer
banking and corporate communications, Hakan Binbasgil, told
RBI five major reasons accounted for the bank’s success in

Efficient risk
Foreseeing the upcoming risks in credit
quality caused by the global economic downturn, Akbank “enhanced
its state-of-the-art risk management systems and created an asset
quality which ranks the bank at the top of the banking league”.
Though Akbank did not escape the sector-wide growth in
non-performing loans (NPL), its NPL ratio of 3.8 percent compared
favourably to the sector-wide average of 5.4 percent. “Balancing
growth versus risk was still difficult for all of us but Akbank did
a very good job in managing its risk.”

Effective cost
A purge on expenses helped to cut the bank’s
cost-income ratio from 50.7 percent in 2008 to 39.8 percent in

Efficient liquidity
“Our investment in high yield securities,
culminated in a profitable, liquid and flexible securities

Akbank launched new cards products and
benefitted from its alliance with leading retailers. “Carrefour
Axess, a co-branded credit card with Carrefour was an important
initiative in 2009, while 22 Credit Express branches were opened in
hypermarkets to provide financial services to CarrefourSA
customers, becoming one of the first examples of ‘supermarket
banking’ in Turkey.” The bank’s partnership with the retailer
Boyner Group is also proving to be a retail hit.

“Akbank introduced a number of innovative
products and services that cater to the customer demand for
alternative investment products in a low interest rate

Akbank's Loan MachineOther highlights
included Akbank ending the year with a robust capital adequacy
ratio of 21 percent, ahead of the majority of its sector and
international rivals, while Binbasgil was also able to highlight
the bank’s deposits growth.

“Total deposits reached TRY61 billion at the
end of 2009 and we expect to see more than 16 percent growth in
deposits during 2010,” Binbasgil said.

“Our strategy in growing time deposits will be
the same as last year and we will continue to increase our market
share of retail deposits and very strictly control the cost of

A strong brand and successful
multi-distribution strategy has also helped Akbank grow retail
deposits and for 2010, Binbasgil said the bank would look to
increase its market share of low cost demand deposits.

Targeting an increase in sales of salary
accounts, cash management products, payment services and cheque
transactions is also a major objective for the bank in an effort to
grow retail deposits.

A significant part of Akbank’s cross-sell
energies are directed at increasing sales of product bundles and
packaged sales, product innovation the bank has pioneered in

“Currently, there are three different bundles
and we have already achieved sales to over 60,000 customers,”
Binbasgil added. “We believe that this is a future area for growth
and therefore an important area in which to invest.”

In 2009, Akbank also initiated a different
pricing approach in the market, packaging various services and
offering prepaid monthly charges instead of the traditional ‘pay as
you go’ method. The aim was to attract frequent transactors to
Akbank, which proved successful with 65,000 customers signing up in
less than 3 months.

Simge: Akbank's 3G mobile banking servicesPlanned IT investments
in the bank’s IT architecture are also set to provide a boost to
its cross-sell efforts.

“We have been working on a holistic,
state-of-the-art customer relationship management [CRM] system for
the last two years that will go live in 2010,” Binbasgil said.
“This new system covers both the automation of marketing and the
sales force, and combines marketing and sales strategies via real
time marketing.”

The system integrates all customer
touch-points including online, branch, ATM and call centre, with
the aim of predicting customer channel tendencies and product

“We believe Akbank’s new sophisticated CRM
system will, to a great extent, differentiate the cross-sell skills
of Akbank,” Binbasgil said.

In all, Akbank plans to invest TRY350 million
during 2010 on IT and expanding its 850-strong branch network by 50

“In 2010, we will make the largest ATM
investment in our history, renovating existing ATMs and
[installing] new ATMs. In addition, we will invest in our
point-of-sale [POS] network and upgrade our internet and mobile
banking platforms,” he added.

“We strongly believe in mobility and have been
investing in our infrastructures to have a leading role in

“Turkey is a young country and our customers
adopt to new technologies very rapidly. There are already
approximately 70 million mobile phone subscribers in the country,
which is a huge potential for m-banking.”

The bank can also expect to benefit from 3G
services being introduced to Turkey and widely expected to
accelerate m-banking customer penetration.

As for lending, retail lending accounts for
roughly one third of its total loan book and Binbasgil said Akbank
was aiming for growth of more than 20 percent in 2010,
“significantly higher than the expected growth of the market”.

“We believe we have the infrastructure and
capability to grow much faster than the market,” Binbasgil

aRife taRife serviceIn the cards sector, Akbank
has benefitted from the massive surge in growth over the last six
years – between 2003 and 2004, credit card numbers jumped from 19.8
million to over 26.6 million. By the summer of 2009 there were 43.9
million credit cards in circulation, making Turkey the
fourth-biggest credit card in Europe.

In 2009, Binbasgil said that Akbank was the
only major Turkish bank in Turkey to grow its credit card market
share in 2009, up 1.6 percent from 14.4 percent in 2008 to 16
percent at the end of 2009.

“Our two main credit card programmes, Axess
and Wings were extremely successful in 2009. Credit card loans
reached TRY5.8 billion from TRY4.8 billion, an increase of over 20
percent during the year,” he said.

Recent card technology innovation has included
the repositioning of its ATMs to accept credit card and consumer
loan applications for both customers and non-customers of the bank,
prompting over 500,000 loan and credit card applications. It also
introduced multimedia POS terminals enabling customers to apply for
credit cards and credit limit increases.

In the debit card space, Akbank’s ‘Neo’
loyalty programme offers cardholders cashback at participating
merchants, personalised card options and setting transaction

In the investments sector, Akbank is looking
to achieve 20 percent growth in 2010.

“We try to be innovative to achieve such an
aggressive growth, and have recently introduced a BRIC fund, for
the first time in Turkey, which provides the opportunity to invest
in BRIC countries with small amounts,” Binbasgil said.

“Capital protected funds, only recently
introduced to the Turkish market, are also proving to be very
popular, with Akbank having more than a 30 percent market share in
this area.”

In terms of segmentation, Akbank concentrates
its efforts on three distinct parts of the market: affluent, mass
market and youth.

“Affluent banking is a high priority area for
us – in 2009 we expanded our customer base by 15 percent and will
aim to increase it by a further 18 percent in 2010,” Binbasgil

The bank’s mass market segment, accounting for
over six million customers, will continue to focus on efficiency
savings and migration to alternative channel delivery, with more
than 90 percent of withdrawals and two thirds of all transactions
already using self-service channels.

With around 45 percent of Turkey aged under
24, the youth segment is also a key target for Akbank’s ongoing
investment programmes, such as its ‘exi26’ product line aimed at
customers aged from 16 to 26.

It also continues to invest in its
University-based ‘exi26’ branded branch network “to keep in line
with the needs and expectations of the youth market”.

With a loan-to-GDP ratio in Turkey of only 40
percent, and household debt-to-GDP of a mere 11 percent, there
remains scope for significant consumer lending growth in

But analysts are quick to point out that it
will be hard for Turkish banks to repeat the record high levels
profitability of 2009 as a result of central bank interest rate