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The Rise and rise of the Turkish Banks

Cox Simon

Simon Cox, McGuireWoods

Cox SimonAs the pleasure cruiser gently meandered down the Bosphorus one barmy evening earlier this summer, a Turkish government official was asked “how will Istanbul solve its traffic problem if it wins the 2020 Olympic Games?” [Turkey is one of the three Bid cities along with Madrid and Tokyo.  The winner is expected to be announced in September 2013].  “We will have seven years to sort it out”, replied the official barely pausing to give his answer.  Such is the “can do attitude” which has pervaded Turkey in the last decade and seen it rise to become a thriving G20 player on the fringe of Europe, while providing a stepping stone to Asia and a bridgehead to the Middle East and North Africa.  Against this background, however, an uncertain cloud now hangs over Taksim Square and other parts of the country.  The recent disturbances around Gezi Park on the edge of Taksim Square in Istanbul have taken some of the shine off the achievements of the Prime Minister and the country, and people are starting to question where this will end and what direction Turkey will take.

“2001 – a Banking Odyssey”
The Turkish banking sector has recovered dramatically since several of the local banks were effectively nationalised by the Turkish BRSA (the Banking and Regulatory Supervision Authority) and restructured in 2001.  Turkey avoided the full impact of the 2007/8 banking crisis as its banks have undergone a fundamental restructure post 2001: the residential mortgage lending industry in Turkey was still nascent and exotic banking products even rarer.  The international banks, which had invested in the Turkish financial sector during the post 2001 – 2007 inward investment boom, were retrenching in their home markets leaving the field open for the local banks to operate relatively unchallenged.

“Sultans of Swing”
After years of mainly ignoring Islamic finance techniques and products partly as a consequence of it being a secular Islamic state (as required by its constitution), Turkey has begun to dabble in certain of the Islamic Finance Products.  As various banks from the Middle East are starting to look at Turkey as a place to do business, several new banking licences have been issued recently and banks from Qatar and Lebanon have made local acquisitions in the past year.

Banking delight
Turkish Banks, March 2012

 

banking-delight

 

 

 

 

 

 

 

 

* Majority state-owned or state controlled
Source: Banks Association of Turkey

All aboard the Infrastructure express
Despite the current global economic crisis, Turkey is still in comparative growth mode (although GDP growth rates have plummeted from circa 8% per annum to a more modest

2 – 3% last year).  The Government, at least pre the Taksim Square crisis, is keen to pursue a visionary infrastructure development plan with landmark projects such as the new Istanbul Airport (aiming to become a regional hub with up to six runways), the new motorways and bridges projects together with a much derided mega canal project linking the Black Sea to the Mediterranean and avoiding the congestion in the Bosphorus.  These projects will require substantial bank finance with the local banks well placed to take leading mandate roles.  The recent drop in the local currency (Turkish lira) only serves to strengthen their local position.

As regards international expansion, local/state-owned banks are now looking to consolidate or even open representative offices or branches abroad.  Recent expansion has tended to focus on the “Stans” (eg Kazakhstan) and the republic’s contiguous to Turkey (Azerbaijan is a firm favourite) and the former Yugoslav Republic and Bulgaria especially.  However now ambitions are being raised and global financial centres such as London are being considered for branch openings.

Closer to home the government is promoting a new international financial business district on a 70 hectare site on the Asian side of Istanbul, a sort of “Canary Wharf on the Bosphorus” as one person described it.  The state-owned banks are relocating to the new financial district from Ankara and others with close ties to the political leadership are also moving there. What the international banks make of it remains to be seen although a new airport has been opened nearby and hotels are opening up in the area thus saving the long commute back to the European side of the city.

The New Sultans
As the modern Turkish Republic glides towards its 90th anniversary celebrations later this year the inheritors of the legacy of the founder of modern Turkey can look back on a job well done.
With the potential of the Olympics to host in 2020 and the centenary year of the foundation of modern Turkey in 2023 the next decade should prove to be a Turkish Delight and the local banks are well placed to capitalise on this growth.

Simon Cox is a corporate lawyer with international law firm, McGuireWoods.
He can be contacted at [email protected] and on 020 7632 1721.
 

 

Banking

UBX appoints new Chief Investment Officer

In line with its strategy to explore and invest in companies and platforms of the future, UBX—the Fintech and Corporate Venture Capital arm of Union Bank of the Philippines (UnionBank) — is announcing the appointment of Matthew Kolling as the company’s Chief Investment Officer (CIO).

Matt Kolling

Matt Kolling

As CIO, Kolling will be managing UBX’s Corporate Venture Capital (CVC) fund. He will also play a key role in raising capital for UBX while assisting the company in key corporate transactions, including the structuring of joint ventures and acquisitions.

Prior to his appointment at UBX, Kolling has been Head of Venture Investments at Aboitiz & Company since 2019, wherein he had been working with UBX on investment portfolio decisions. Before that, he held senior positions in Private Equity, Venture Capital, and Investment Banking at firms such as Providence Equity Partners and Morgan Stanley in New York.

Kolling has more than 20 years of experience in managing investments and deals in the Technology and Telecommunications industries and is active in Venture Capital and startup communities in the Philippines and the Southeast Asian region. He currently chairs the Manila Angel Investors Network, among others.

“We at UBX are excited to welcome Matt as our new CIO. We firmly believe that Matt will be instrumental in driving value creation opportunities, both within the CVC fund and our corporate ventures. We look forward to working with him as we fulfill UBX’s vision of a future where banking services are embedded into everyday experiences that matter,” said UBX president and CEO John Januszczak.

Meanwhile, UnionBank president and CEO Edwin Bautista said, “The addition of world-class talents in our pool reinforces our strategy to future-proof the organization and our business as we prepare for many new opportunities that come with the changing times.”

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Banking

It’s all relative: Older generations feel helping out the family financially is more important since the Covid-19 outbreak

It’s all relative: Older generations feel helping out the family financially is more important since the Covid-19 outbreak 1

Before Covid, 23% of people prioritised helping younger generations out financially, that increased to a third as a result of the pandemic

A recent survey* conducted by Hodge has revealed that the Covid pandemic has led to more people wanting to help younger family members financially.

A third (31%)** of those questioned said that since the Covid outbreak giving a financial gift to children or grandchildren is more important to them, compared to 23% who said it was a priority before the pandemic.

The traditional “Bank of Mum and Dad” is still very much open for financial help, with parents being responsible for 72% of the gifts, but the study also revealed that financial gifts can come from all corners of the family – including children (14%) and siblings (14%).

The survey also found that a third of people have received a financial gift from family, with those aged between 25-34 as the most likely to receive

The most popular reason for gifting money to family is for special occasions such as a quarter of gifts were given for weddings and birthdays but 11% of people have received money to help with big purchases such as cars and houses. In addition, 19% of people have received help with day to day finances, with around 14% of those receiving a gift have done so to pay off debt.

Emma Graham, Business Development Director at Hodge, said of the research: “Our study showed that, as a nation, we all want to help our family out when it comes to money. And whilst we all think of the Bank of Mum and Dad or Gran and Grandad as a traditional source, we were surprised to see that 14% of brothers and sisters are also helping out.”

The findings come from a recent intergenerational study conducted by Hodge, who interviewed over 3000 people about their attitudes towards finances and their aspirations for the future. The full research findings can be found at https://hodgebank.co.uk/2020/05/19/money-its-all-relative/.

As part of the study, people were also asked about paying back the gift, with 40% of beneficiaries expecting to pay their parents back, but this dropped to 28% if the gift came from grandparents.

From the gift donor’s perspective, 26% expect the gift to be paid back, however just 15% of grandparents expected the money back.

Hodge has produced a set of guides on how families can navigate the tricky subject of giving financial gifts within a family, as well as the considerations and steps that be families should think about taking before a gift is given, such as is it a loan or a gift and thinking about contingencies if the family member’s circumstances change. The guides can be found here: https://hodgebank.co.uk/news/

Emma continued: “It’s clear that families feel strongly about offering financial support to each other if they are able and this has increased since the Covid pandemic. Before Covid, 23% of people prioritised helping their families out financially in the next five years. Since the Covid-19 outbreak that has increased to a third of people saying helping a family member financially had become more important.

“So, it is clear that the Covid-19 lockdown and subsequent predicted economic downturn, has led to more families looking to share wealth to help younger children or grandchildren during this difficult time. Many people may look to Later Life mortgages, where many products have reduced their rates and have flexible lending criteria, to help out a loved during these difficult times.”

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Banking

New report identifies the factors which will determine SMEs’ chances of a successful COVID recovery

New report identifies the factors which will determine SMEs’ chances of a successful COVID recovery 2

·         Analysis of the performance of over 1,000 UK small and medium-sized businesses by Allica Bank provides roadmap for SMEs 

·         Regular training, an openness to innovation, and a clear vision all contribute heavily to an SMEs’ chances of success  

·         Allica Bank has launched a programme of free workshops to expand on the findings and support business owners 

Business bank, Allica Bank has combined data and insight from over 1,000 UK SMEs with a multiple regression analysis to determine what factors most closely aligned with an SMEs’ chances of success and separated the highest-performing businesses from their peers. These ‘rules for success’ have been compiled from the research data to support British businesses as they look to chart a course to post-Covid recovery.  

The full report identifies six behaviours for small and medium businesses to follow, to maximise their chances of a successful COVID recovery. The six top-line rules emphasised by the data were: 

Rule 1: SMEs should regularly train staff 

Of the top-performing businesses analysed, 47% provided training for employees at least on a quarterly basis, compared to just 32% of other businesses. Regular employee training was linked closely to success by the model.  

Despite this, many small businesses have neglected training and nearly half (46%) of the small businesses analysed only provide training for employees about once a year or less often. This included 15% that never provide employer-funded training. This discrepancy could represent a significant opportunity for small businesses to unlock the potential of their employees and thrive in the post-Covid economy. 

Rule 2: SMEs need to focus on innovation and technology 

Looking again to the best performing businesses, 76% were found to either continually (39%) or often (37%) be considering new opportunities for technology in their business. This is compared to only 51% for businesses considered to be outside of the top ranks, out of which only 27% admitted to continually looking for new technology opportunities. 

Rule 3: Small business must have a formal, long-term vision  

Nearly two thirds (66%) of the most successful businesses in the survey had a formal, long-term vision, compared to just 50% of businesses outside the top 100. Looking to the businesses that scored the lowest on the SME Performance index, only 37% claimed to have a formal, long-term vision. 

Rule 4: SMEs should broaden their customer reach and find new markets 

Of the top-performing businesses, 65% of these have overseas customers compared to just 40% of the worst performing businesses. Among the best performing SMEs, over a third (34%) identified international expansion as one of the top three drivers for their success. 

Rule 5: SMEs need to develop reinvestment plans 

22% of the best performing SMEs reinvested some of their profits into the business in the past three years with an average 9% of profits being redeployed. Tellingly, this is nearly double what other businesses admit to reinvesting in their business (5%). 

Rule 6: SMEs should engage with local business organisations and networks  

Of the top 100 SMEs, 30% had obtained external credit to expand over the past three years (compared to 24% of other businesses). Meanwhile, only 16% of all other SMEs had engaged with local enterprise partnerships or growth hubs in the past three years (compared to 23% of the top 100 SMEs). 

Chris Weller, Chief Commercial Officer, Allica Bank, said: 

“All small businesses are different, as are all small business owners, but one trait they share is an innovative resilience. Whilst the coming months and years will undoubtedly continue to present extreme challenges, there is no doubt that small and medium sized businesses across the UK will rise to meet them head on.  

“To give them the best chance to succeed, though, they need to be equipped with the right tools. There is certainly no silver bullet or panacea for every small business, but as this study has found, there are a number of common factors found in the most successful businesses that allow small enterprises to thrive and that they can consider individually for their business.  

“This research has identified common ‘rules for success’ that speak to every aspect of running a business, not just the financials. Once we saw these results, we wanted to use them to help small businesses begin to re-build and prosper, by outlining common factors and then examining how best they can be practically applied to businesses in all sectors of the economy.  

“Small business owners and their employees have been hit hard by the crisis, but they have the drive and resourcefulness to breathe new life into the economy and bring energy to post-Covid Britain. Our commitment at Allica Bank is to give them the support they need to do so, every step of the way.”

The full report contains a wealth of additional data and insight into each of these topics. As part of its mission to empower small businesses, Allica Bank is making the findings freely available and running a series of free online workshops with relevant partner organisations for businesses to attend.

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