Türkiye | Banking Sector Outlook July, 2026

Summary

Financial conditions did not ease further in May-June period; and macroprudential tightening remained the key sector driver with further restricted credit growth caps. Credit growth is losing momentum, however the overall trend remains above the previous 2 years avg.

Key points

• Key points:
• The most obvious impact of macroprudential measures is seen in FC lending. Among segments, FC credit growth continues to slow down after the additional restrictions as of May, while TL credit growth has remained relatively resilient.
• Retail credit has reaccelerated since mid-May. GPLs, and overdraft loans have regained momentum, but the impact of new additional restrictions is still to be seen.
• Inflows into TL deposits have continued at around same levels across the sector with dollarization ratio staying below 40%. Investment fund flows continue to favor TL denominated funds, reinforcing the broader de-dollarization trend.
• Profitability weakened visibly in 2Q26. Deposit-banks ROE declined to 24.5% in May, close to 1H25 levels. We still expect the 2026 ROE level for deposit banks to realize around 25%, with risks tilted to slightly downside.
• CET 1 ratios have continued to decline while the CAR ratio remains at 17% in private banks vs. 15.5% in public banks, indicating a faster erosion of capital buffers.

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