Good morning, we are hosting a very valuable guest today: the President of the Banks Association and General Manager of Ziraat Bank, Mr. Alpaslan Çakar. Welcome to our program.
Thank you, glad to be here.
Now, 2026 has begun after a challenging 2025. The world is changing greatly—globalization seems to be reversing toward localization and bilateral ties. The World Economic Forum starts next week; the Global Risks Report ranks geoeconomic conflicts and protectionism as the top risk. How do you read this global shift? Let's start there, then discuss banking, Ziraat Bank, and Turkey's macroeconomic framework.
Thank you. The banking sector is part of the Turkish economy, which in turn is tied to the global economy. Between 2000 and 2023, global growth averaged 3.5% and trade volume grew 4.4%. For 2025, these are expected to be 3.2% and 3.6% respectively—slightly below long-term averages but still moderate given major geopolitical tensions: the Ukraine-Russia war, the Israel-Palestine conflict, Iran, Syria, Venezuela. Despite this, inflation is falling globally, leading to rate cuts—75bp in the US and 100bp in the euro area. Rising protectionism is evident: 2,500 trade-restricting measures were taken in the first 10 months of 2025. US-China competition has reshaped supply chains, yet China will still have a $1.2 trillion trade surplus by selling to other markets. All these developments affect capital flows to emerging markets.
So we see near-shoring and friend-shoring concepts.
Exactly, these are becoming key determinants. There are positive aspects too: global inflation is falling, which is reflected in policy rates and capital flows. For example, the Fed cut 75bp and the ECB cut 100bp, which we expect to continue.
Protectionism creates uncertainty for businesses and the financial institutions that fund them. How has the Turkish banking sector prepared for these trade restrictions and protectionism?
We are of course affected by both domestic and international developments. In 2025, our macro policies were shaped by the medium-term program to manage high inflation. Inflation fell from 44.4% to 30.9%, a 13-point drop. Despite global growth of 3.2%, Turkey's growth will likely be around 3.5-3.8%, though our long-term average (2003-2023) is 5.4%. So we managed to grow above the global rate. The current account deficit will be about 1.4% of GDP. Fiscal discipline is strong: despite $95 billion in earthquake spending, the budget deficit will be around 3% of GDP, down from 4.7% in 2024. Central Bank reserves hit $202 billion, net reserves around $70 billion. Turkey's CDS fell from 700 to 204. KKM balances, which peaked at $144 billion, have effectively ended. These indicators show we are on the right track.
The banking sector had accumulated risks from the macroprudential measures introduced after June 2023. Now those measures have been removed, funding composition has changed, and policy rates are more sensitive. Could 2025 be the last year of restructuring, with 2026 being more normal?
We are normalizing every day. In 2025, as inflation fell, policy rates were reduced and macroprudential measures continued. The sector grew to TL 47 trillion, a 45% increase. Return on equity was 27%, NPL ratio 2.5%—manageable, though consumer and SME cards saw some deterioration. Net interest margins narrowed, but overall the sector performed well, funding the real economy within limits.
You mentioned 27% ROE, but that is below inflation, meaning real capital erosion. Do you think by 2026 banks will achieve better net interest margins and ROE in line with inflation?
We have been earning below inflation for years, so there is some capital erosion. This year we got closer to inflation. I believe next year, with rate cuts, both net interest margins and ROE will align with inflation and other sectors.
What net interest margin do you expect for the banking sector in 2025?
That would be a significant improvement. What factors will drive ROE higher—better funding costs or loan spreads?
Policy rate cuts will lower our main funding cost—deposits, which are TL 27 trillion. Deposit rates will fall, and we will pass that on to loan rates. However, loan maturities are longer (18 months vs. 50-day deposits), so this positively affects margins. We also have access to cheaper foreign funding, though deposits remain the core source. The lowering of funding costs will allow us to provide more affordable credit to the real sector.
Turkish banking's maturity mismatch has been a long story. External funding via swaps was a balancing factor. How do you see that leg now?
We have been very positive in accessing foreign funding this year. The sector obtained about $7 billion in subordinated loans, reaching a total of $18 billion. Costs are reasonable and maturities are long—often ten years. Beyond that, syndications, eurobonds, and securitizations are also active. For example, Ziraat Bank alone secured $1.7 billion in syndication in April and another $1 billion in November, with very good pricing and three-year maturities. This is supported by improved macroeconomic indicators and the drop in CDS to 204.
On the credit side, macroprudential measures remain important to balance economic vitality and inflation. Do you expect these measures, especially credit limits, to continue? For how long might they soften?
Macroprudential measures are a key tool of monetary policy. They shape both sides of our balance sheets. For example, banks must hold 60-65% of deposits in TL, otherwise they pay fines. On the asset side, certain credits (agriculture, SMEs, exports, investment) are exempt from growth limits, while consumer and other loans have caps (e.g., monthly growth of 2.5% for SMEs, 1.5% for corporate, 2% for consumer loans, 0.5% for FX loans). The aim is to support disinflation. So far, it has worked. I expect these measures to be gradually and selectively phased out as inflation falls, but not in the short term.
When you say not in the short term, how long might they stay? You don't expect removal in the first half of the year?
I don't expect them to be removed in the first half, but they are being revised periodically. For example, the SME growth limit was raised from 1.5% to 2.5%. The TL/YP ratio and penalty rates have also been adjusted. As inflation declines, these will be relaxed gradually.
There are practical difficulties: gold price movements can push the YP ratio up, forcing banks to adjust. Do you expect the TL/YP ratio requirement to remain throughout the first half of the year?
The TL/YP balance has improved from 68/32 in 2013 to 61/39 now. This is a good development, achieved by offering attractive TL rates and managing the exit from KKM. It has increased our funding costs due to competition, but as rates fall and the ratio stabilizes, the requirement will be loosened.
Does the withholding tax (stopaj) on deposits affect investor choices? It rose to 17.5% for TL. What are your thoughts?
Stopaj has been used as a policy tool. For example, TL stopaj was reduced for longer maturities to extend deposit tenors, while FX stopaj was increased to encourage a shift to TL. It does influence choices: net returns matter, so it has helped tilt preferences toward TL.
Households have recently discovered money market funds. Could that become a risk for the deposit base, and should banks develop new products?
The banking sector still dominates the financial system at 82% of assets. Money market funds are still small—about TL 2.7 trillion vs. 27 trillion in deposits. They are an alternative, but not yet large enough to disintermediate deposits. Their growth also depends on financial literacy. In the near term, TL remains attractive, so there is no immediate risk of a shift to FX.
You mentioned the current account deficit easing and easy access to foreign funding. What are your FX flow expectations for 2026, in terms of exchange rate stability?
Turkey's core problem has always been low savings (around 30% of GDP). But now the Central Bank's reserves are strong at $200 billion. With rate cuts in the US and EU, I expect significant capital inflows to emerging markets, and Turkey is well-positioned. We see strong demand: one bank recently upsized a subordinated loan from $500M to $750M due to demand. The TL/YP ratio is healthy at 61/39. Also, the euro/dollar parity is moving in our favor, averaging 1.13 in 2025 and likely to rise toward 1.20. Combined with rising credit ratings, lower CDS, and improving trade balance, I don't see any FX risk in the near term.
Market surveys suggest a 150bp rate cut at the next meeting, and year-end rates around 29%. What is your view on rates?
I share that view. For inflation, I expect it to settle around 20%, maybe even as low as 19%. The January and February monthly prints will be critical. If we get a good figure in January, we may hit the 19% target. Policy rates will follow. I anticipate rates will end the year below 30%.
Under normal conditions, how do you evaluate the impact of interest rate cuts on credit pricing? We observe commercial loan rates are coming down. How do you assess the cost structure and the real sector's perspective?
