Following the 200 basis point rate cut by the Central Bank last week, three state banks announced that they will reduce their corporate and housing loan rates up to 200 basis points depending on the products and maturities. The fact that state banks will offer cheaper commercial loans by lowering corporate loan rates is a reflection of the demand to activate the market and accelerate the economy. We see that this move was made in a market turbulent environment caused by lira deposit returns, which fell well below the annual inflation approaching 20%, while the foreign exchange was also active, and the reduced money cost was reflected on the loans.
TC Ziraat Bankası A.Ş., Türkiye Vakıflar Bankası and Türkiye Halk Bankası A.Ş. stated that they will start to give housing loans at a monthly rate of 1.29% for loans under 1 million liras ($ 102,478), and at a rate of 1.34% for loans over 1 million liras.
According to the CBRT EDDS data, the weighted average interest rate of commercial loans was 20.17% as of the week of October 15; The weighted average in housing loans was 17.90%. Considering that the rates in housing loans will fall below 16% with the last regulation, there may be a significant attraction in terms of housing demand in the market. However, if we consider the possible risky reflections of rapid credit growth, especially through the realizations that will occur in the price-based market; We cannot say that interest alone will be a determining factor here.
Commercial loan volume increased by 9% this year, while consumer loans increased by 12%. In an environment where inflation converges to 20% and the lira depreciates by more than 24% against the dollar, easing the credit mechanism in parallel with the Central Bank’s rate cut, which is not supported by the economic conditions, may also form the basis for some financial system risks. The Credit Guarantee Fund, which was put into effect in 2016, the desire of interest rate to be kept low in order to keep the credit flow fast, factors such as the asset ratio and RR remuneration criteria had caused exchange rate and inflation to heaten.
If we consider that the reason for the 300 bps rate cut by the Central Bank in total in September and October is the contraction in commercial loans due to monetary tightening; state banks have also reduced their loan rates through the same perspective. In normal conditions; The effect of the decrease in short-term interest rates is reflected quickly on the deposit side and this process is slower in loans. In loans, the reflection in the interest rates occurs more slowly depending on the maturity, the credit risk carried and the deposit funding. State banks took this process forward by manually lowering the interest rates. Private banks are likely to follow, but the picture gets more complex. Because; private sectors determine their strategy in loan costs based on balance sheet management, loan composition and risks, and market competition. However, since the public is leading the price leadership, the interest rates of private banks will also decrease to a certain extent. If we go back to the pricing leadership of state banks; As the manual decrease in loan rates against high-cost deposit funding creates market mismatch, it may also cause a duty loss effect depending on maturity matching. Here, we do not expect a similar effect to the period of 2016 – 2018, as deposit rates have fallen sharply before.
An economic growth perspective that is desired to be accelerated through credit growth; carries some risks. After the rate cut, we see an increase in elements such as bond yields, CDS, and exchange rates. In particular, the deterioration in long-term inflation and interest rate perspectives and uncertainties may have some reservations in terms of the risk appetite of the financial system. This, in turn, causes private banks to act more and more reluctantly in terms of the risk they may bear in lending. In addition, the mismatch between market rates and the money cost determined by the Central Bank creates a situation that compels banks in loan pricing. Of course, rapid loan growth in an environment of increased financial market volatility and price stability uncertainty may pose risks in terms of the NPL ratio. At the same time, in terms of ensuring commercial loan growth; Interest is not the only criterion. Market pricing, by private banks; It depends on macro stability, good investment climate, reduction of uncertainties and geopolitical factors.
Kaynak Tera Yatırım-Enver Erkan
Hibya Haber Ajansı
Kaynak: Hibya Haber Ajansı