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Halkbank powers small business economy

Interview - July 1, 2015

The Worldfolio sits down with Halkbank CEO Ali Fuat Taşkesenlioğlu, who discusses his bank’s leading role in financing small and medium-sized enterprises and its ambitions to expand in participation banking and the wider region


Halkbank recently declared a 10% net profit increase for the first quarter of 2015. What strategies and factors have allowed Halkbank to make such a profitable start to 2015 despite the current weakness of the Turkish lira, and how do you intend to capitalize on this strong start to the year to strengthen your position here in Turkey?

The Turkish economy performed way above the global average in 2014 by growing 2.9% despite the shrinking agricultural sector due to adverse weather conditions.

Economic growth in the first quarter of the year was periodically moderate and we believe that economic activity will pick up after the second quarter and that growth will be near Turkey’s Medium-Term Plan targets.

With the recovery of the European economy and the stability created by lower oil prices, important positive developments that will influence Turkey’s economy positively will take place.

We will continue to lead in the field of SME banking and to develop products and services that will make a difference in all fields of banking. I would say that, as always, the real economy will be one of our priorities.

We believe that there will be important developments in commercial loans, keeping in mind the banking industry’s role in financing Turkey’s production and export investments.

With our expertise in these fields, we will correctly analyze the needs of the real economy and remain the leading bank in the field of SME banking.

We are aiming for 13-15% growth in total assets and 16-18% growth in loans in 2015. As a result of these efforts, we are targeting a return on equity above 20% in 2015.

We will increase the number of branches and staff and offer our products and services to our customers through more channels.

In this context, we are planning to hire 1,500 new employees and open 50 new branches this year.

Additionally, we will continue our efforts in the field of retail banking through Paraf. With more than 3.5 million cardholders, Paraf has attained an important spot in the industry compared to the competition over the past two years thanks to exclusive promotions that made a difference in the credit card industry, such as Katlı ParafPara, ParafGünüm, and Saturday restaurant discounts.

We will continue to maintain our success in this field in 2015 and to add new features and promotions for Paraf.

As Halkbank, we aim to increase our success domestically and internationally through the initiatives we are planning for the next period.

Accordingly, we have re-mapped our road map for 2015-2020. Our efforts will strengthen our balance structure and our reputation in international markets.

We will continue to achieve great success also in the next five years and become Turkey’s most efficient bank.

We hope our efforts will lead us to become one of the world’s top 150 banks.

Halkbank purchased 76.76% of Cacanska Bank in Serbia. What was the aim of this purchase and does it fit into your plans to enter the international market?

As part of our international growth strategy, especially in the Balkans, Halkbank purchased IK Banka AD in Macedonia and re-structured it as Halkbank AD Skopje.

We also bought Ziraat Banka AD, Skopje, which operated in Macedonia, along with all its assets, liabilities, branches, and personnel.

It merged it with Halkbank AD Skopje. Today, we are one of the top three banks in the country.

However, our goal is to expand our power and experience to the entire Balkan region and become one of the most prominent banks in the area.

As part of our goal, we signed a deal to purchase 76.76% of Cacanska Banka. We believe that this purchase will increase Turkish investment in Serbia and contribute to the growth of the industry.

As Halkbank, we aim to serve as a bridge between Turkey and Serbia. Through Cacanska Banka, we will be serving our SME and retail banking customers and offering different product solutions in diverse segments. We trust that Cacanska Banka will contribute to the profitability and the growth targets of our bank.

Halkbank has implemented two of the largest ever public offerings on Borsa Istanbul, and you have enjoyed dollar­denominated bond issues in recent years. What makes Halkbank such an appealing proposition to investors in the capital markets, both domestically and internationally?

As Halkbank, we place great importance on capital markets and believe that Borsa Istanbul will play an important role in positioning Istanbul as a finance center.

Following our successful initial and secondary public offerings, we are now a part of Borsa Istanbul.

Today, 48.9% of our bank’s shares are traded on Borsa Istanbul and 24.98% of our shares were offered to the public in May 2007, as our shares were oversubscribed by eight times.

This constituted the largest and most successful public offering in the history of Turkish capital markets and led Halkbank to receiving the 2007 “Best Public Offering” award by the Swedish investment company East Capital.

At our secondary public offering in November 2012, 23.9% of the bank’s shares were offered to the public, raising our free float rate to 48.9%. Our secondary public offering was also one of the most successful in the country, just like the first one.

In terms of share performance, our shares performed very well with approximately 150% returns from 2007 to the end of November.

Our market value increased to $10 billion following the secondary public offering, while it was $6 billion at the first public offering.

The current rate of foreign investors in Borsa Istanbul is about 64%, while the rate of foreign investors in our bank is about 80%.

This rate, as well as the fact that our bank is the leading bank among publicly traded banks, indicates that Halkbank is one of the most closely watched and trusted banks in international markets.

Taking over the presidency of G20 in 2015, Turkey carried the SMEs to the forefronts of G20 agenda. Meanwhile, SMEs have always been in the center of Halkbank’s business since it was established. What are the latest activities and products Halkbank offers that are designed to help SMEs access to global value chains in line with Turkey’s G20 priorities?

As Halkbank, we correctly analyze the needs of our customers in all fields of contemporary banking and develop new products and services.

We aim to support our retail and corporate customers with all their needs through our loan products.

We have several products targeting, exporters, machine manufacturers, technology, manufacturing, R&D, innovation, pharmaceuticals, tourism, transportation, agriculture and craftsmanship.

We support the real economy with these products as well as young entrepreneurs who wish to realize inventions and new ideas, who have an entrepreneurial spirit and ideas for new businesses, especially with patented projects in the fields of software and hardware development and technological products such as mobile apps.

“Bold” entrepreneurs who have a bachelor’s degree and who would like to open their own business in the field they have experience and training in; “inventor” entrepreneurs who operate in techno cities who would like to realize a patented invention or new idea, and entrepreneurs who have been awarded grants from the Small and Medium Enterprises Development Organization (KOSGEB), the Scientific and Technological Research Council of Turkey (TUBITAK) and the Technology Development Foundation of Turkey (TTGV) and are eligible for loans with up to 48 months of financing.

Young entrepreneurs who have bachelor’s degree, with no experience, and have the intention to start their own business in their field of training as well as “master” entrepreneurs who have training certificates from vocational institutions along with experience and the intention to start their own business. Both are eligible for loans with up to 36 months of financing.

With this product, we aim to support an increase in employment rates, the achievement of targeted growth rates in the economy, and the advancement of entrepreneurship activities in our country.

We will continue to be the biggest supporter of the real economy in line with our founding mission.

We develop special products and packages targeting the needs of the industry in the field of SME banking.

The “SME Export Venture Package” we offer takes a different approach than standard export loan packages, providing loan solutions for customers who are vulnerable to interest and/or currency exchange rates.

The energy industry is one of our priority industries here at Halkbank in terms of resource allocation.

We use our bank’s resources, as well as funds from the European Investment Bank, the World Bank, and the French Development Agency to finance energy efficiency and sustainable energy investments.

We offer our Energy Efficiency Loan, Renewable Energy Loan, and Unlicensed Electricity Generation Loan with advantageous financing terms and interest rates.

In addition to providing financial support under the most advantageous terms for SMEs, we also aim to support them through non-financing initiatives by correctly analyzing their needs and offering consulting and training services.

At the “Ask an Expert Corner” on the www.halkbankkobi.com.tr website, which we designed exclusively for SMEs, we provide consulting services from expert consultants on topics such as trade operations, laws, taxes, and so on.

SMEs also can sit down with our experts who advise them about their energy, energy efficiency, hotel investment projects and so on.

They can also get answers to their questions about unbalanced or disadvantageous balance sheets, as well as receive free consulting services on new investments or expansions.

The G20 expects the global infrastructure funding gap to reach $70 billion worldwide by 2030, making discussions on finding innovative ways to plug this gap an urgent priority. In Turkey, do you foresee banks continuing to play a prominent role in providing loans for the realization of major infrastructure projects, such as the third airport in Istanbul; and how significant a role can Halkbank play in such projects going forward?

Halkbank continues to support major projects in Turkey. Since 2004, we have allocated $9 billion in resources for projects in energy, transportation, infrastructure, and so on.

Our financial support for these projects continues today in the amount of $4.8 billion.

Some of the important projects we finance are the Izmit Bay Pass, the Bursa-Balıkesir-Izmir Highway Project, and the Northern Marmara Highway Project, which also includes the third bridge over the Bosphorus.

In addition, we are financing the new airport project for Istanbul, which the public has been following closely.

We also provide technical and financial support for numerous energy investments, which is a propelling force for the economic development of our country.

We approach the projects which will improve the prosperity of people, not only through commercial means, but also from a social perspective.

We will continue to support large investments as the most productive Turkey’s bank.

Turkey’s G20 Presidency is encouraging the use of sukuk to finance many infrastructure projects around the world. Halkbank applied late last year to set up an Islamic finance unit. What are the motivating factors behind this move and what role do you envision for this unit in future infrastructure projects?

We will resume our efforts to launch our operations in participation banking in 2015. We believe that we will contribute to the growth of the participation banking industry thanks to our 76 years of experience in banking.

We aim to increase our participation banking branches to 150. We have filed the necessary permit requests with relevant institutions.

Some of our applications have been finalized while others are still being processed.

Turkey is a predominantly Muslim country, and therefore individuals who would like to receive banking services are at times sensitive about accruing interest.

This is also true for business owners. Thus, we can say that there is a significant potential in the field of participation banking in Turkey.

The interest in participation banking products, most importantly sukuk, as well as the assets of participation banking, is increasing rapidly.

It is possible to say that with Turkey’s regional position and the Istanbul Financial Center project, the investment instruments offered in participation banking will become more prominent in the future.

Currently, Turkey has around 3.5% share in the global sukuk market. Increasing investment in participation banking is important for Turkey to gain a larger share in this field. Growth can be achieved by increasing product diversity and meeting the needs of interest-sensitive investors and customers in need of funds.

We must diversify these instruments and make Turkey a center in this field in order to encourage investors, especially from the Middle East, to bring their investments to Turkey.

You assumed the role of Halkbank CEO last year. How would you sum up your vision for Halkbank going forward?

I worked in the private sector between 1988 and 2012, and since February 7th 2014 I’ve been in this position.

When I was working in private banks, during our first three or four visits to the customers we used to just present our bank and ourselves.

Sometimes it was even difficult to get an appointment with some of our clients. So while I was working in the private sector, only after four or five meetings could we start talking business.

Halkbank is one of the most well-known banks in Turkey. None of our managers in the marketing team have difficulty reaching any clients or getting an appointment and we can talk business during the very first visit.

We need no presentations, everyone knows what we do. This perception about public banks – that the process is so slow, the interactions are slow – is not true.

So my vision is to take advantage of being a public bank and a very well-known bank and to function with speed and high quality like a private bank, so that we can take our bank to a higher level and serve our clients with high quality.

The banking sector is a service sector and you have to serve your clients fast and with high quality.

That’s our aim and it’s like a marathon we have been running together with our 17,500 employees.