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The only way to survive: being innovative

Interview - August 19, 2015

An innovative customer-oriented approach, coupled with the backing of international strategic partner BNP Paribas, has allowed TEB to grow into the leading bank for SMEs and startups in Turkey. CEO Umit Leblebici explains why TEB’s relationships with its clients are built on trust and positive results.


The Turkish banking sector remained resolute throughout the global financial crisis. However, at the moment, Turkey faces political uncertainty, geopolitical instability, a falling currency and weak domestic demand. How is the current situation affecting the Turkish banking and finance sector?

There are many challenges in the Turkish banking sector. First of all, Turkey has a 14%-15% capital adequacy ratio, which is indeed quite high when compared to Europe and the rest of the world.

This means Turkey has the capacity to absorb shocks. This is crucial. Why? Because in the 2001 crisis, the banking sector had low equities and so was not able to absorb shocks. 

Consequently, the regulators took many actions and as a result, everything is now under the control of the regulators and there is strong cooperation between the banks and the Central Bank.

 A couple of years ago, the Central Bank of Turkey stated that they were not pleased with the current account deficit.

Looking at the details of the current account deficit, it was mostly coming from consumption and the banks giving credit cards and consumer loans to everyone. As a result, it was decided to bring in restrictions. 

Though the banks reacted to those restrictions by stating that they were affecting the potential growth of the economy, for the majority, those actions were right in order to prevent the problems which may occur in future. 

Since then, the current account deficit started to decrease in Turkey.

Turkey was hitting a current account deficit of around 7%-8% a few years ago, but now it has come down to 4.5%-5% with the support of current oil prices. 

Turkey has to stay around this figure for another couple of years, as the only solution for this current account deficit is productivity, which means more value-added products need to be produced. 

This issue is already on the agenda of many banks and is being discussed in the country. The actors of the real economy and the regulators are working to create an environment where we can produce more value-added products.

Until that time, Turkey will be having a 4%-5% current account deficit, which I believe is sustainable and not a big issue.

When more structural reforms are made and value-added products are produced, this ratio will be reduced to between 2% -3%, which again would not be a major problem for Turkey.

Regarding the key challenges of the Turkish banking system, I believe Turkey is quite lucky. This is the case because Turkish economy is an open economy and has a flexible structure. 

When the geography of Turkey is considered, you will see that Turkey does not only focus on one region like Europe; instead, we make businesses all around the world, including Russia, Middle East and Asia.

Two or three years ago, the economy in Europe slowed down more than expected, which caused some negative effects on our economy as well. However, Turkey switched to other markets such as Russia, which was growing at the time.

Today, Europe has stabilized and I believe it will start to recover, while the Russian market is down.

Nonetheless, we have industries in every sector and if there is a problem with one, such as tourism, the Turkish economy can switch its focus to other sectors such as car manufacturing, TV manufacturing, agriculture, etc., due to its flexible structure.

One of the main problems of Turkish economy is weakness of domestic demand, though we were expecting this to happen. Obviously, if you look at Syria or Iraq, it is easily noticed that Turkey is surrounded by an environment that does not make it easy for making export.

Therefore, the domestic market and people have concerns for expectations on growth which in return results as a slowdown in demand.

When I say this, I talk about a 2.5%-3% growth rate; which indeed when compared to Europe is quite high, but not enough for Turkey since in the past we’ve got used to having rates as 7%-8%. 

Nonetheless, I believe that this slowdown occurred on purpose, meaning that it was something expected. As I previously explained, the Central Bank of Turkey has put some caps on consumption due to other issues, which affected growth rates. 

However, if they decide to remove the caps, we could grow 6%-7% again. The motivation behind this is the fact that Turkey has a very young population and very good infrastructure, which means we can easily switch from one lane to another.

As a consequence, we are not getting stuck with any particular industries, our economy is quite flexible, so if we decide or aim to grow faster, we can achieve it.

In banking, you have to know your clients very well; the kind of risks that they are taking, which industries are slowing down, which ones are improving… This is not only valid for TEB but for all Turkish banks.

The problem in Turkey is that industries are getting a little bit crowded, meaning that in every industry there are many companies, so competition is quite tough.

Therefore, we have to do further reforms to transform the economy and allow it to work more productively and be more innovative, for which I am optimistic because the government is also discussing ways to promote innovation in the country. 

Since it is on the table, I believe, it will create an impact as people will start to think how to be more productive and more innovative.

So, for the upcoming two to three years, maybe on one hand we will see some slowdown in the economy, but on the other, these reforms will give incentives for more productive industries and an unlimited recovery. 

Because of all these reasons, I am optimistic.

2015 marks 10 years since you entered into partnership with BNP Paribas. How has this partnership enabled TEB to have a more global outlook, and what have been the benefits in terms of your trade finance business in particular?

Since we entered into our strategic partnership with BNP Paribas, TEB combines its local market strengths with BNP Paribas’ global expertise in the areas of capital markets, specialized financing, risk management solutions and advisory.

Integrated into TEB’s customer portfolio and BNP Paribas’s product lines, we are benefiting both from TEB’s steadily expanding customer network and from the strengths of BNP Paribas’ own product specialists.

We continue to generate new synergies in the areas of debt capital markets, equities, structured finance, risk management, and corporate finance and advisory.

As TEB, we are experts in our local market and our strategic partner BNP Paribas knows the European and African markets very well, as well as Asia and the USA.

So, the Turkish companies who want to trade globally can benefit from TEB since our partner has the global network and necessary connections.

I believe, as TEB, we have more opportunities than other banks, since our global partner BNP Paribas, for example, is quite an expert in Africa, which is a new market for Turkish companies. 

They are experts on who is who, what kind of business can be done, the business criteria, network, etc. As a result, we can easily match our local companies and clients with their counterparts in Africa so that they can easily work together, which I consider a golden opportunity for TEB.

As I mentioned, BNP Paribas is one of the biggest banks in Europe. They are present in the main industrial economies such as France, Germany and Italy, with which we have very good relationships.

For example, in the last couple of years many mergers and acquisitions by Turkish companies in Europe had been realized through us, as we benefited from BNP Paribas’ network, know-how and information flow. 

Turkish companies who were willing to invest abroad, through us, took the advantage of knowing the possible investment opportunities before everyone else.

Furthermore, this strategy works well as Turkish companies are becoming more and more global. So, for those who want to increase their presence outside the country, our global partnership with BNP Paribas helps them meeting their needs.

Turkey has put SMEs front and center in the G20 agenda this year, with a focus on long-term financing and access to global value chains. How does TEB support Turkey’s G20 objectives through your own activities and services provided to SMEs here in Turkey?

Firstly, let me give you some background information on TEB’s history. Actually, TEB is coming from a corporate banking background, which means TEB was quite an expert on export and import finance and foreign trade activities in general. 

We have a great know-how and experience with large corporations and good relationships with them. Now, here, we should question their distribution channels; who/what are their distribution channels? 

Their distributors are SMEs, so we first decided to go to SMEs and start working with them with simple banking products.

However, it did not work since we noticed that SMEs were looking for something different, which was consultancy, not simple banking products and services. 

If an SME needs, for example, tech advice, he has to hire tech people, but on the other hand they do not have a huge capacity to hire so many people. 

Right at that point, we found our differentiation point as a bank serving SMEs and we have started helping them with any kind of support that they were looking for.

As a starting point, we analyzed the needs of SMEs deeply. Through this market research, we noticed that Turkish SMEs face three key challenges in growing their businesses: limited access to information, lack of technological know-how, and limited capacity for research and development.

Of these three constraints, we found that limited access to information was the most pressing problem; SMEs lacked market information as well as knowledge about long-term business planning.

Based on this research, we decided that a cornerstone of our strategy would be the design and delivery of comprehensive and innovative sources, called non-financial services, to SMEs.

All non-financial services – consultancy, capacity development, information dissemination and networking – were designed to achieve the greater goal of supporting SMEs in strategically planning their future and growing their business thanks to TEB SME Academy, TEB SME Consultants, TEB SME TV, TEB SME Club, and TEB SME Support Line. 

Turkish SMEs who benefit from all of these non-financial services better understand how to make long-term business planning and how to professionally enlarge their businesses.

When we launched SME Banking, we set out with the goal of becoming one of the three names that would first come to mind in SME Banking in Turkey.

Today we are very proud of the fact that TEB is indeed one of three banks in the world that is pointed to as a model for SME Banking in non-financial services by the International Finance Corporation (IFC), a member of the World Bank Group.

I would like to share with you an experience that I had a couple of years ago. A rating agency came to visit us and said we may have a problem because the economy was slowing down and there was a huge portion of SMEs in the sector.

I asked them ‘which economy?’ and they looked at me strangely, saying they meant the Turkish economy of course. 

I explained that if they looked at our SMEs, they would see that we had converted them to export-oriented companies because we knew that one day our economy would start slowing down.

We taught them how to export, and if you look at our share of export loans in total loan volume, it is two times higher than the rest of the market.

Therefore, I am confident about our SMEs, because even if there is a slowdown in the Turkish economy, they export to Europe and they are fine. 

I believe with our consultancy approach we have achieved a positive thing in SMEs’ lives. They were able to see and predict the future and now every day they are coming to us telling us how much we helped, and how we supported them to understand and foresee this particular issue.

Because of all of these things, I told the rating agency that I did not see any problem.

Employment is another priority of Turkey’s G20 Presidency. Within this, there are discussions on how to close the gender gap in the workplace and bring more women into the job marketWhat is TEB doing to actively encourage entrepreneurship and business success amongst women here in Turkey, which has one of the lowest female employment rates in the OECD? 

We decided to adapt our innovative approach and know-how to the entrepreneurship ecosystem and launched the most comprehensive startup banking segment in Turkey two years ago.

In Turkey, we have bright people with great ideas, however, when it comes to business they do not know the market dynamics, they do not do enough market research, they have problems with regulatory issues and do not know how to handle them, etc.

Therefore, we decided to consult startups, like we did with SMEs, and we brought our ‘Consultant Bank’ approach that we’ve embraced in our SME Banking business line to TEB Startup Banking.

Since the nature of entrepreneurs and SMEs are different, we needed to build a new structure for TEB Startup Banking, from the loan allocation department to relationship managers, in order to be completely focused on startups.

We redesigned all financial and non-financial products and services offered by TEB SME Banking by taking the specific needs of startups into consideration.

We went far beyond what might be expected from a bank and opened TEB Startup House in Istanbul as part of our Startup Banking program.

Startups have access to training, consultancy and mentor support free of charge at the TEB Startup House, which is a business management consulting center.

The consultants of TEB Startup House not only provide the support for the startups during the idea process, but will also offer advice on selling, marketing, business planning and commercializing their projects.

Every week, participants at TEB Startup House are provided with free-of-charge training on a host of crucial issues ranging from how to set up a business venture to how to make it a viable company.

We also made agreements with some governmental bodies to give some credit guarantee forms and other facilities to startups in order to sustain themselves.

While dealing with startups, we realized that the people who are more innovative and even more open to creating new businesses are women. We saw the opportunity to launch female banking with our ‘Women Banking’ line.

With the Women’s Banking program, we also seek to strengthen the presence of women in the world of business.

Standing by women in business not just through the financing that we provide but also through our ’Consultant Bank’ approach, TEB supports women-owned SMEs and women entrepreneurs with a range of specially designed products and services in such areas as finance, markets, training, and networking in order to help them overcome the obstacles they may encounter in business.

Besides unsecured loans, we’re also offering Women’s Banking finance packages to make it easier for women entrepreneurs to gain access to the financing they need.

Along with vendor financing, we also provide training and mentoring to help women deal with marketing issues and overcome obstacles to accessing domestic and international markets.

For the same reason, we’re also collaborating with leading international organizations seeking to empower women in economic activity.

In addition, when you look at the statistics, the government did very well in this field during the last 10 years, as female participation in the workforce is increasing.

We think this is an opportunity and we want to empower women to create their businesses and make more income.

I think we are the only bank with a startup business line that is different from the other business lines, and we also have women banking. These things are differentiating us from the rest of the banking sector.

As TEB, we consider innovation and the economy that is based on added value as the future our country, and so have made many investments contributing to startup businesses. 

Under our ‘Consultant Bank’ approach, we will continue to help SMEs and startups – the SMEs of the future – excel in their businesses and thus have a positive impact on the Turkish economy.

Recently we interviewed Huseyin Gelis, the CEO of Siemens Turkey, who spoke at length about the need for innovation in all aspects of the economy. Can you expand on how TEB is leading the way in terms of innovation in the financial industry?

For us, as a mid-sized bank – the 10th biggest bank in Turkey – the only way to survive is: being innovative. Only the innovative can survive; if you stay classical, with our size, there is no way to survive.

Thus, we are naturally forced to be innovative. We are innovative in every aspect: digital banking, a breakthrough approach to SMEs and startups, promoting women banking, and so on.

We started our innovation journey within our company 10 years ago, having a special platform where every employee can enter his or her innovative idea. 

We listen to every idea and evaluate it. We have been building our innovation culture for years and I can say that now innovation is a part of TEB’s DNA.

This innovation culture within our bank is reflected by what we do externally, for our clients. For instance, most of our SME and startup banking approach come from this innovative thinking. 

Also, looking at our global strategic partner BNP Paribas, we are the most innovative bank within the group, and are recognized with awards every year. 

Furthermore, we are regularly selected as the ”most innovative bank of Turkey”. We are always trying to improve ourselves, to find new and creative approaches for our clients and for the sector.

Technology is changing life very fast. In the past, people were not in such a rush or maybe they had the patience to queue for an hour.

Today, waiting in a queue for an hour is very problematic, as people want to go to do sports or for lunch, and they do not want to waste their time.

So we have to adapt ourselves to those changes by perhaps doing more digital banking, digitalizing the services, or changing the modus operandi in the branches.

It is all about how you can be more agile to answer your client’s needs. If you think like that, then you can survive, otherwise you will get stuck.

That is our strategy: always to look for better and quicker services for our clients.

Before we started the interview, you joked that nobody likes or trusts bankers anymore, but you come across as a very approachable person. Why should people trust you as a banker?

I believe trust is the key. To build this trust, first of all, we never make promises that we cannot keep; and if we make a promise then we know that we have to keep it. 

We are all coming from different backgrounds, everyone is unique. We have a humanistic approach in the bank in relations with our employees as well as in relations with our stakeholders.

Today, we are serving different client segments – large corporations, SMEs, startups, and so on – with the same humanistic approach and we never reject anyone because of their background. 

We are giving the same level of service to all our clients. Therefore, they heavily rely on us and trust us.

Regarding my statement that ”nobody likes bankers”, I believe, it is a global approach, not a local one. Today people are blaming bankers in Europe and in the US, but that is just the industry.

We need to ask ourselves how to be different from the rest. We have a motto; we aim to be a ”good bank”. Being a “good bank” means you have to be ”good” to your clients, ”good” to your employees, “good” to your investors and “good” to your shareholders. 

To explain it more, we can be ”good” to our clients if we give them high-quality services and help them with their needs. Hence, if they have a problem or a question to ask, we are ready to give them the correct answers and guide them with appropriate solutions.

On the other hand, we should also have a look internally. There we have to ask ourselves, “How are we going to satisfy our employees and motivate them?”

Even if they are paid with high salaries, if they do not feel that they are learning new things, or they are being helpful and productive for society, they are not motivated and do not feel happy.

What we are trying to do is to introduce them to new horizons, and encourage them to be more productive and innovative.

Since they would like to learn more, for example, we are sending them to Silicon Valley. I believe people get more happy and satisfied once they learn and discover new things.

In the world where everyone has nearly the same level of information and is equal to each other, the only thing that creates difference is “experience”.

By the way, if you are experienced, you also have to be humble as well. People do not care about what you did, they care about how you approach them; they want to be respected.

In addition, we believe in open discussions, two-way communication. For instance, when I am about to make a decision, I ask everybody about their opinion.

Besides, you have to have a clear strategy and by doing so you can bring everyone to the same page, preventing confusions in the process.

There are of course some times when we make mistakes as well. When that happens, we have to acknowledge it, admit it and adapt ourselves. 

If you have this adaptation capacity and you do not point fingers at anyone, then you are becoming a team. If you keep promises, the team works, otherwise, the team will not play very well.

Therefore, I believe that the way you communicate is crucial. The way you speak to your client, to your employees, to your shareholders or the media members…

With this approach and understanding, we encourage our people to learn new things, share their experiences and we believe in co-creation, good teamwork and respect for each other.