ANKARA - The Banks Association of Turkey (TBB) released its report on ''Turkish Banking System March 2003'' on Saturday.
The report said, according to the financial tables prepared on the basis of purchasing power parity of the currency as of March 31, 2003; total assets of the Turkish banking system decreased by 8 percent to 129.5 million U.S. dollars from December 2002. The ratio of total assets to gross national Product (GNP) decreased from 78 percent in December 2002 to 75 percent in March 2003.
The financial figures related to the first quarter of 2003 reflects the negative effects of Iraq war on the banking sector to a great extend. Within the commercial banks group; total assets decreased by 5 percent in state-owned banks, by 8 percent in privately owned banks, by 11 percent in foreign banks and by 23 percent in banks under the Fund management. Total assets of non-depository banks decreased by 8 percent in the same period.
Turkish Banking System, March 2003
TL U.S. dollars December 2002
(Trillion) (million) percentage change
--------- -------- -----------------
Commercial banks 210,399 123,759 -8
State-owned banks 72,427 42,602 -5
Privately-owned banks 123,313 72,534 -8
Banks in the Fund 8,025 4,720 -23
Foreign banks 6,635 3,903 -11
Non-depository banks 9,794 5,761 -8
Sector 220,193 129,520 -8

Market Share:
In the period of December 2002 - March 2003, the share of commercial banks and non-depository banks in total assets remained almost the same with 96 percent and 4 percent, respectively.
Within the commercial banks group; while the share of privately owned banks and foreign banks in total assets remained the same with 56 percent and 4 percent, respectively, that of banks in the Fund decreased by 1 percentage point to 4 percent, and that of state-owned banks increased by 1 percentage point to 33 percent.

Market Shares of Groups (percentage):
Total assets Total deposits Total loans
March 2003 Dec.2002 March 2003 Dec.2002 March 2003 Dec.2002
------------------- ------------------- -------------------
Commercial banks 96 96 100 100 90 89
State-owned banks 33 32 36 34 16 17
Privately-owned b. 56 56 59 59 67 65
Banks in the Fund 4 4 4 5 2 3
Foreign banks 3 3 2 2 4 4
Non-depository bank 4 4 - - 10 11
Total 100 100 100 100 100 100

By distribution of total deposits, while the share of state-owned banks increased by 2 percentage points to 36 percent, that of privately owned banks and foreign banks stayed the same with 59 percent and 2 percent, respectively. There was a decrease of 1 percentage point in the share of banks in the Fund to 4 percent.
As for the loans, the share of commercial banks group was 90 percent and that of non-depository banks was 10 percent. Considering the commercial banks group, the share of state-owned banks and foreign banks remained the same with 16 percent and 4 percent, respectively, that of banks in the Fund decreased by 1 percentage point to 2 percent and that of privately owned banks increased by 2 percentage points to 67 percent.

Concentration:
The share of the largest five banks in the sector was 59 percent in assets, 62 percent in deposits, and 55 percent in loans. The same shares for the largest ten banks were 82 percent, 87 percent and 74 percent, respectively.

Foreign Currency Structure:
As compared to December 2002, the share of Fx assets in total assets declined by 2 percentage points to 44 percent at the end of March 2003 while that of Fx liabilities decreased by 1 percentage point to 49 percent. In line with this development the difference between Fx assets and Fx liabilities in balance sheet of the banking sector remained around -6 million U.S. dollars.
According to calculations made by BRSA by including assets and liabilities indexed to foreign exchange, the in-balance sheet foreign exchange position of the banking sector indicated a surplus of 486 million U.S. dollars as of March 2003.

Structure of Assets:
Compared to the end of 2002, the share of liquid assets in total assets decreased by 1 percentage point to 15 percent. The decrease in foreign banks account under the item of banks and other financial institutions was an effective factor in this development. The share of loans and securities increased each by 1 percentage point to 27 percent and 41 percent, respectively.
Due to the reclassification of loans restructured within the scope of ''Financial Restructuring Program'' the share of loans under follow-up in balance sheet decreased to 1.4 percent. Accordingly, the ratio of loans under follow-up to total loans decreased from 6.6 percent to 5.2 percent. Special provision for 67.7 percent of loans under follow-up was set aside.

Structure of Liabilities:
Total deposits, TL deposits and Fx deposits decreased by 11 percent, 8 percent and 14 percent, respectively. During the period of December 2002-March 2003, demand for government securities and investment funds continued due to the tax advantage of these instruments against deposit. Furthermore, some part of Fx deposits went out of the banking system.
According to the figures based on the purchasing power parity of the currency as of March 31, 2003, Fx deposits decreased by 7.6 billion U.S. dollars 46.8 billion U.S. dollars and TL deposits decreased by 3 billion U.S. dollars to 36.6 billion U.S. dollars. Thus, the share of total deposits, TL deposits and Fx deposits in total liabilities were 64 percent, 28 percent and 36 percent, respectively.
Shareholders' equity of the banking sector declined by 3 percent, realized as 16.524 million U.S. dollars. When the commercial banks group was considered, only the shareholders' equity of state-owned banks increased while that of the other bank groups decreased, albeit slowly. The shareholders' equity of non-depository banks remained almost the same. The decrease in the account of marketable securities value increase funds under the item of supplementary capital was an effective factor behind this slow decline in shareholders' equity.
The ratio of shareholders equity to total assets increased from 12.1 percent to 12.8 percent.

Income-Expenditure Structure:
As of the end of March 2003 interest income and interest expenses decreased by 16 percent and 23 percent, respectively compared to the same period of previous year. Depending on this development net interest income indicated an increase of 3 percent. In the same period net trading income decreased by 97 percent to 46 million U.S. dollars. Foreign exchange income/losses (net) account, which decreased by 141 to -407 million U.S. dollars was an effective factor in this development.
Total operating income of the sector increased by 6 percent and amounted to 1.354 million U.S. dollars; net profit/losses after taxes decreased by 32 percent to 383 million U.S. dollars.

Off Balance Sheet Items:
While off-balance sheet items grew by 4 percent to 115,816 trillion TL in the first quarter of 2003, the custody and pledged securities account decreased by 6 percent to 141.224 trillion TL. Thus, total off-balance sheet liabilities decreased by 2 percent to 257.040 trillion TL. The increase in off-balance sheet liabilities was mainly stemmed from increase in derivative financial instrument account.

Number of Banks and Branches:
By the end of March 2003 the number of banks operating in Turkey was 53. The number of branches decreased by 14 to 6,092 in the first quarter of 2003.''

(UK-MS) 19.07.2003