General Manager of Garanti Bank Ergun Özen 

 “Turkish banking is in its golden age” 

Ergun Özen thinks judging by its current potential the sector has a still brighter future. Garanti Bank plans to transform itself from being a local bank to a regional one. 

It is said in business and finance circles that Turkish banking sector obtained a successful progress in the recent years… At that point, as the manager of one of the largest banks of Turkey, your views have a special importance. How do you evaluate the current situation of Turkish banks? 

Despite many crises faced within the last 20 years, Turkish banking sector has grown by an average of 13% annually and its total assets reached almost 500 billion dollars. When compared with the past, it is without doubt that our sector is at a much more advanced level with respect to either structural or operational indicators. As a result, we can say that Turkish banking sector lives its golden age. But when we consider its potential I can say a much brighter future awaits the sector. Comparing the past with today, primarily customer profile and ways of doing business have changed in the banking sector. In the context of high inflation and high interest of the 1990s, Turkish banking sector had to operate in a narrow ground limited to transactions with the Treasury. This situation was the greatest obstacle to sustainable growth in the sector. Sector’s customer base has quickly expanded after political and economic stability was achieved, GNP per capita has considerably increased and noteworthy improvements in public finance were secured. While the share of credits in total assets was around 40% in the 1990s, it approached some 50% today.

With genuine banking activities becoming important, banks have increasingly started to take initiatives. Concepts like customer-focused, innovativeness and sales culture have stood out in the strategies of banks. The new operational context we are in is utterly suitable for stable growth of banks. Expansion of customer base, the rise in income level with the resulting growth in volumes of customers, creation of product diversity as a result of customer variety and formation of new markets by new products will all bring market depth and growth to the banking sector.

 Coming to evaluations on the basis of Garanti Bank; what are the recent developments in Garanti?

 With a right foresight, Garanti Bank has restructured all its operations long ago to the requirements of genuine banking. After macro conditions have turned suitable Garanti started to make its difference in the sector felt and its competitive advantages became increasingly visible in financial results. We have been living through the brightest periods of our corporate history in terms of growth and profitability for the last 3 years. And 2007 came to be the most successful one in 61 years since our establishment. As an inevitable result of our customer-focused sustainable growth strategy, we became the leading bank in Turkey in terms of total cash and non-cash loans. We became the second largest private bank in the sector with our 66-billion-dollar consolidated total assets. We increased our market share in all the fields of we operate. We assumed the leadership in mortgage which is one of the fields with the greatest growth potential in the sector. We became one of the most profitable banks in the sector with an average return on equity (ROE) that reaches 40% when sales revenue from affiliates are included and 27% when they are excluded. 

On various occasions you said Garanti Bank aims to become a regional power. What kind of strategy do you think of following towards this purpose?

 With its present competencies, Garanti Bank already has the potential to turn from a local bank to a regional one. We plan to realize that potential gradually by cooperating with our strong partners; Doğuş Group and General Electric (GE) on an equal partnership basis. Within this context we are analyzing the surrounding countries whose return on equity adjusted by long-term risks and whose growth are not smaller than those of Turkey. After carrying out researches we decided to grow primarily in the Romanian market where we operate through our 100% owned subsidiary Garanti Bank International (GBI).

Our branches there operate mostly in corporate banking. Firstly we began to enlarge our field of activity in a way that includes retail banking. For instance, we brought our successful credit card program Bonus into the Romanian market. At the same time we have increased the investments to expand our physical distribution channels there. Now we came to have around 40 branches in Romania. Concurrent with our efforts Doğuş Holding became a partner in GE’s consumer finance works in Romania. In accordance with the decision we made, we plan to bring the consumer finance companies jointly owned by Doğuş and GE under the same organization with our branches. In addition to the Romanian market, we also carry on works to enter other countries like Ukraine which we believe has a high growth potential. Our talks are going on in this field. We aim to conclude an acquisition in this country within 2008. 

Can we learn about the targets Garanti Bank has set for itself both in the long run and short run including the steps it has taken toward this purpose? 

As Garanti Bank, we will continue to expand our operations both in domestic market and abroad in accordance with our profitable growth target. Because of the liquidity and growth problems abroad, we prepared the 2008 budget cautiously. When we talk in general terms, credits will be again the driving force of our total assets which we expect to grow by around 30% and share of securities in total assets will keep decreasing. We aim to grow in cash loans, which we expect to grow by 25% throughout the sector, above sector average and to continue to increase our market share thus consolidating our position as the bank which lends the largest amount of credits in Turkey. Consumer and SME (Small&Medium size Enterprise) credits will be factors in our growth. We will go on funding the growth in assets chiefly with deposits. With the effect also of the expansion in our branch network, we plan to increase the share of deposits in total liabilities… As for branch openings, our long-term goal is to reach 1000 branches. Towards this purpose, we aim to open around 100-150 new branches in 2008. 

You were elected to the Board of Directors of The Institute of International Finance (IIF), the world's only global association of financial institutions… What would you say about the issue? 

The IIF is a global organization that has been operating since 1983 to support the sector in such ways as; risk management, sharing best practices, creation of sector standards, and securing financial stability. IIF’s Board of Directors, which is composed of above 370 financial enterprises from 65 countries, is administered by Dr. Josef Ackermann who is the CEO and Chairman of the Executive Committee of Deutsche Bank. The Board First Vice Chairman of which is William R. Rhodes, Citibank’s CEO, contains 32 persons in total who are from diverse institutions including Bank of America, Barclays, BNP Paribas, Credit Suisse, Commerzbank, HSBC, ING, Intesa, Société Générale and UBS. To be elected to the Board of Directors in such an elite institution makes one feel proud. There have been members from Turkey on the Board before, too. This situation is a good example of the increasing importance of Turkish banking sector in global finance community.