BBVA and European Banks: Will They Walk Away from Turkey?

The question of whether European banks, such as BBVA, will walk away from the Turkish market is a significant one given the current economic climate in Turkey. However, it is highly improbable that they will do so, largely due to several factors including the presence of foreign shareholders and the strategic options available to them.

No High Probability of Withdrawal

First and foremost, many banks in Turkey have foreign shareholders, including European institutions such as BBVA. This stake often comes in the form of partnerships or acquisitions, and as a result, these banks are deeply embedded in the Turkish economy and market. For BBVA specifically, their involvement in the Turkish banking sector through their ownership of Garanti Bank, with a 49.9% stake, illustrates their long-term commitment.

According to a BBVA spokesperson statement to Reuters, Garanti Bank is well-prepared for potential challenges. This suggests that BBVA is taking proactive steps to manage risks and ensure the stability and resilience of its operations in Turkey.

Strategic Options for European Banks

While walking away from Turkey is highly unlikely, European banks do have strategic options to adjust their involvement without entirely withdrawing. These options include:

Building Fewer Branches

One approach is to reduce branch expansion in Turkey. By doing so, they can minimize costs and focus resources on more stable markets. This strategy allows them to maintain a presence without the high overhead associated with new branches.

Reducing New Loans

Another option is to limit new loans until market conditions improve. By holding off on extending new credit, banks can avoid future potential losses associated with higher inflation risks. This decision can be influenced by expectations of more drastic interest rate adjustments.

Redirecting Profits

Banks can also redirect profits from Turkey to other countries where the market environment is more stable. By channeling these profits into growth opportunities abroad, they can bolster their overall financial health while maintaining a strategic presence in Turkey.

Increasing Interest Rates on New Loans

Raising interest rates on new loans can help balance the risk of inflation and stabilizing the financial portfolio. While this may deter some borrowers, it can protect the bank's financial interests and maintain a responsible lending policy.

Economic Dynamics and Political Factors

The decision of European banks to alter their strategy in Turkey is influenced by a range of economic and political factors. The influence of the Turkish leader, Recep Tayyip Erdo?an, can play a significant role. If Erdo?an can successfully blame foreigners for Turkey’s economic challenges, it might lead to increased support from the Turkish public for measures such as raising interest rates. This could, in turn, lead to economic stability and recovery.

Conversely, if Turkey manages to address its economic issues and implement effective reforms, European banks may see a positive outlook for the future and be more inclined to invest further in the country.

Conclusion

In conclusion, while BBVA and other European banks in Turkey face challenges, there is little likelihood of a complete withdrawal from the market. Instead, these institutions are likely to adapt their strategies to better manage the risks and capitalize on opportunities. The key lies in economic and political stability, and the ability to navigate the complex dynamics of the Turkish market.

For further reading and insights, please refer to the sources provided and explore the latest reports on the financial landscape of Turkey.