turkish banks — Turkish banks are set to endure another challenging year in 2026 as credit curbs continue to constrain growth, according to Garanti Bank CEO Mahmut Akten. The cautious outlook from Garanti, the second-largest private bank in Turkey, highlights the ongoing struggles faced by the sector amid persistent inflation and a depreciating currency.
With annual inflation currently hovering around 31 per cent, Akten conveyed that he does not foresee significant changes to the existing credit restrictions that the authorities have imposed to combat rising prices. “If we are serious about bringing inflation down, I don’t expect these limits to be … lifted,” he stated during an interview at Garanti’s headquarters in Istanbul. He noted that while minor concessions might be possible, the overarching policy framework is likely to remain in place.
In recent years, credit growth for Turkish lenders has lagged behind inflation rates, a trend that has also affected Garanti, which is 86 per cent owned by Spain’s BBVA. The bank currently manages approximately 4.2 trillion lira (around $100 billion) in assets. Despite some easing of pressures in 2025 due to the lifting of limits on overdrafts, housing loans, and credit cards, the outlook remains bleak.
The tight monetary policies enacted since mid-2023 have further strained banks’ net interest margins. Credit restrictions have increased funding costs, impacting returns and asset quality. Current regulations impose a 2 per cent monthly cap on consumer and vehicle loans and also restrict lending to SMEs and commercial enterprises.
Garanti’s performance is closely monitored by BBVA, which applies inflation accounting to the bank’s results. This method reduces capital based on inflation levels, resulting in Garanti contributing only about 7 to 8 per cent to BBVA’s earnings. In contrast, when normal reporting methods are reinstated, this contribution could rise to between 25 and 30 per cent.
Turkey’s inflation woes trace back to 2018, when a loose monetary policy led to significant price increases and currency devaluations. In response, authorities introduced a variety of regulations to limit banks’ credit and foreign exchange activities. The central bank raised interest rates sharply in 2023 before beginning a gradual reduction, currently maintaining a policy rate of 38 per cent.
Despite the easing of the policy rate, loan and deposit rates have not yet adjusted accordingly, primarily due to regulations encouraging lira deposits. Akten noted that the central bank is receptive to feedback from lenders, describing recent rules as “less burdensome”. He expressed optimism that inflation could decrease to approximately 25 per cent by the end of 2026, with expectations for the policy rate to settle at 32 per cent.
