Has Turkish banking lost its charm?

The chief executive officer of Turkey's İş Bank, Ersin Özince, has said that the Turkish banking sector has lost its appeal for investors due to the lack of profit transfers amid escalating political uncertainty and anxiety because of a new economy team that will take office after a general election to be held on June 7. 

Responding to a question after his speech at a panel discussion at a CEO Club meeting on Monday, Özince said: “[The volume of] investors in the Turkish banking sector has been decreasing gradually, especially private investors… The reasons for the slowdown, in my opinion, are Turkey's instabilities and uncertainties. I suppose we should get through the elections and see the seat distribution in Parliament in order to make more accurate evaluations.” Özince also maintained, “The banking sector is no longer an attractive sector for possible investors.” Recalling the government's arbitrary interventions in the decisions of financial institutions, Özince also said, “When a sector is severely targeted in free market economies, then look for political reasons behind it, not economic ones.” 

Özince's remarks came on the heels of existing uncertainty in financial markets that have sparked the exit of foreign lenders from the country or the postponement of their strategic decisions, citing unfavorable market conditions. Global banking giant Citigroup sold its stakes in Turkey's Akbank early in March, provoking claims that global investors were exiting the country amid arbitrary government practices over financial institutions. In mid-March, Finansbank, the Turkish unit of the National Bank of Greece (NBG), announced that it had postponed a planned share offering and that it would complete the offering if market conditions are suitable, implying that current circumstances barred their planned offering. A spokesperson from the Royal Bank of Scotland (RBS) also said in March that the bank was mulling options for the sale or wind-down of its corporate and institutional banking operations in Central and Eastern Europe and the Middle East and Africa (CEEMEA), including Turkey. 

In the meantime, the Financial Times quoted sources close to the bank last week saying that HSBC was in talks with a number of interested buyers for their Turkey operations, citing underperformance. In February, the Turkish financial regulatory body took over management control of Islamic lender Bank Asya, citing the absence of shareholder information. The decision was perceived by many as a deliberate move to sink the bank.