Finansbank AS, the Turkish bank owned by National Bank of Greece, expects credit card revenue to gain 20 percent by the end of the year as narrowing margins and tighter regulation force competitors to exit the business.
The Istanbul-based bank expects revenue to rise to 3.6 billion liras ($2 billion) a month from 3 billion liras, chief executive officer Temel Guzeloglu said late yesterday in an interview. The bank, aiming for a top three position in credit cards in Turkey from fifth now, expects consolidation in the industry because of more regulation and lower profit, he said.
Turkey’s growth rate of 8.5 percent last year, the fastest after China and Argentina, was driven by an increase in lending that reached 40 percent on an annual basis in October. Loan growth in July slowed to 17 percent after Central Bank Governor Erdem Basci raised interest rates to cool the economy.
“There will be credit card consolidation before bank consolidation in Turkey in the near future,” Guzeloglu said. “There won’t be so many cards or so many similar campaigns.”
Draft legislation would limit the fees banks are allowed to charge customers on credit cards, a step that could cut banks’ income by 4.6 billion liras, Hurriyet newspaper reported on Aug. 15, citing Customs and Trade Minister Hayati Yazici. The legislation is designed to bring consumer rights in line with European Union legislation, the newspaper cited him as saying.
If the government limits the fees and commissions banks charge, lenders will have to pass on costs in other ways, Guzeloglu said. “Banking is a costly industry,” he said.
Limiting or cutting fees would have a negative impact on customer service, said Feyzi Ozcan, Deputy Chief Executive Officer of Turkiye Vakiflar Bankasi TAO, a state-run bank.
“Banks will have to give up practices that create added value for the customer,” he said in an e-mailed response to questions today.
Bad loans rose by 13.9 percent at the end of June from the end of last year, according to the Central bank in Ankara. The number of Turkish consumers who didn’t repay credit-card loans rose to 343,428 in the first half, an increase of 10 percent over the figure for all of 2011, according to the central bank.
Consolidation in the credit card business should allow Finansbank to enter the top three Turkish banks in terms of credit card turnover and total customers, Guzeloglu said, without disclosing whether the bank plans to buy competitors.
Guzeloglu said he expected some of the bank’s rivals to merge with each other or go out of business in the next four or five years because they can’t meet profit expectations.
“A bank might sell its card portfolio totally to another bank.” he said. “Aggressive and price-competitive strategies currently prevalent in the sector can’t be long-lasting.”
Finansbank will have 4.5 million customers by year-end, from the current 4 million and a total of 5.5 million cards, from 5 million at the moment, according to Guzeloglu. Vakifbank aims for 2.9 million cards by end-2012, from the current 2.8 million, Deputy CEO Ozcan said.
Finansbank fell 0.9 percent to 3.45 liras in Istanbul at 4:31 p.m. local time today. Vakifbank rose 0.3 percent at 4.06 liras.