Analyzing the Impacts of Restructuring on the
Turkish State-Owned Banks[1]
Gazi Sarısakaloğlu[2],
Mustafa Bilgin[3]
2Hitit University, Institute of Social Sciences, Economics Department, Çorum,
Turkey
3Hitit University, Faculty of Economics and Administrative Sciences, Çorum,
Turkey
Abstract. The
subject of this research is to compare the performance based on determined
criteria of the state owned banks in Turkey before 10 years and after 14 years
from 2001 the date they were included in a restructure program. The t-test
method is used in the study. According to the results of the analysis, it
was concluded that the most successful state-owned bank was Halkbank with a
small margin in front of Ziraat Bank after the year that the restructuring
program was implemented. Ziraat Bank, as well as having the second most
positive development of public banks in terms of analysis ratios, it has almost
equal proportions with Halkbank in terms of asset quality and branch ratios.
Halkbank is ranked first as usual in terms of branch ratios. All state owned
banks are subject to the close rates for branch ratios. When evaluating
the performance of public banks in general over a total of 36 criteria, they
showed positive development for 26 criteria. That means after the restructuring
program that we called 2nd period in the study public banks became more
successful based on established criteria.
Key Words: Bank, State Owned Bank, Restructuring of State-Owned Banks, Banking
Sector.
JEL Codes: G21, G28, G34
1. Introduction
After the great economic
crisis spread to the whole world international sizes in 1929, the prevailing
economic thinking in the world was Keynesian Economic Thought System. According
to this opinion the private sector alone cannot provide the capital adequacy to
reach the desired level of industrialization in the national economy, and the
state should take place more effectively to achieve the economic goals and to
implement the economic policy was advocated. In this regard there are
similitudes with other countries [Baicu, 2017].
The economic crisis spread all
over the world in 1929, the deterioration over the international trade balance,
foreign exchange, the supervisory procedures
applied in foreign exchange transactions and the other similar problems
required radical changes in Turkey's economic policy in that period. These economic developments have made necessary to apply
different policies in many sectors including banking sector. Under these
developments, large-sized state-owned banks
have been established between the years 1930-1940 [Akgüç, 2007].
The aim of establishing these
banks to carry out or finance capital investments and industrialization cannot
be met through the private sector [Atasoy, 1993]. The state owned banks founded by special law mainly aimed to transfer the
economic resources to the areas that given priority by state. They were
established to support the industry investments because private banking
structure was insufficient in achieving these goals [Uçarkaya, 2006].
State owned banks have
established with these purposes which were failed in 1980s to adapt to global
economic developments and competition. These banks have been continued their
activities in the public interest for many years but by the time, they became a
kind of institutions that hurt and burden to the public.
In 2000s, Turkey has
experienced economic crisis adversely affecting the entire economy moreover the
banking sector was the mainly affected. After these crises happened, the
troubled banks including state owned banks, were removed from the system or
were taken in a restructure program in order to restore them. As a part of restructuring program to
strengthen the financial structure of the banking system and to increase the
effectiveness of control mechanisms, the international regulations have been
implemented.
In May 2001 a comprehensive
package of reforms announced concerning the Turkish banking sector by BDDK (Banking Regulation and Supervision Agency) to solve
the problems of these troubled banks that were affected adversely from the
November 2000 and February 2001 crisis. It was aimed to ensure the achievement
of a healthy and strong structure in banking sector in Turkey.
As a part of restructuring
works, some of the state-owned banks which have been damaging the financial
sector had been liquidated or exposed to a merger or decided to be privatized.
The state owned banks that agreed on restructuring were Ziraat Bank, Halkbank
and Vakıflar Bank. The objective of this study is to analyze the
performance of these state owned banks were included reconstructing program and
not privatized yet in terms of the determined criteria before and next the
reconstruction decision.
2. Purpose of The
Study
Intermediary institutions in the financial system in Turkey are the
Participation Banks, Commercial Banks, Development and Investment Banks,
Brokerage Houses, Stock Exchanges, Investment Consultancy Companies, Factoring
Companies, Portfolio Management Companies, Forfeiting Companies, Consumer
Finance Companies, Leasing Companies, Insurance Companies, Social Security
Institutions and Individual Pension Companies. Within
the financial system, the importance of banks is bigger than other financial
institutions [Bayraktaroğlu, 2013].
The share of the banking sector in Turkey is an important level within the
financial system. After the 1950s, the emerging economic system in Turkey had a
structure that is active in the banking sector. So much so that, the sector
affected mostly from the economic policies implemented at 1980s was banking
sector.
The increasing pace of globalization since the 1980s and 1990s brought
together the integration of financial markets in the world economy [Erçel, 2000].
However, the cultural and economic boundaries between the countries have
gradually decreased.
It is defined as periods of liberalization and globalisation in banking
between 1980 and 2001. For adaptation to
globalization and liberalisation, some kinds of policies added to the economic package which was announced at the January 24, 1980 Stability
Program[4]
[Akgüç, 2007]. As a result of
globalization and the market economy target set in this period, legal
regulations have been made to public banks to operate on the same conditions as
other banks.
Banking sector in Turkey is the most important and the biggest part of
financial sector. In Turkey, the size of the banking sector within financial markets
has grown steadily over the years, but it still maintains this magnitude today
[Coşkun, 2012].
After the policies and regulations implemented, changes were made in the
banking system, which had a restrictive structure such as establishing a bank
and increasing the number of branches until 1980. It is aimed to increase
competition and efficiency in the sector by facilitating transactions such as
the establishment of commercial banks and increasing the number of branches of
foreign banks.
In the economic package, known as the April 5th Decisions of 1994,
regulations were made that closely related to the banking system.
The problems that existed in the banking sector in 2000 years; inadequate
loan and deposit ratios, the fact that the number of small banks in the sector
is larger than the number of big banks, the sectoral dominance of state owned
banks and the financial institutions that are in the process of being damaged
and lacking in control and audit mechanisms in the sector. In addition, there were economic
problems such as long-term guarantees for savings deposits are state-based,
making the domestic borrowing heavily in the public and private sectors from
the banks, bad exchange rate policies in foreign exchange transactions and
using the resources of the public banks for the political authorities in their
own interests [Ercan, 2005]. These problems have further increased the adverse effects of emerging
crises on the Turkish banking sector. The fact that the Turkish banking system
is not in a sound legal, operational and financial grounds have increased the
sensitivity of the banking sector to the economic crises experienced.
After the banking crises that emerged in 1999−2001 in Turkey, there
have been developments that can be regarded as positive after the restructuring
studies in the financial sector started and a difficult implementation period.
In this development and growth process, the banking sector has been the most
important building block of the financial system.
Banks, whose main objectives are to transfer the funds they provide from
those with more than their funding to those who need it, contribute to the
growth of financial volume and the increase in national income and employment.
Macro functions of banks are; to transfer resources to the sectors and fields
in need of the economy, to support the implementation of monetary policy, and
to help the country's economies to integrate and develop in foreign trade
transactions [Bayrakdaroğlu, 2013].
The public banks that continue to operate in Turkey are Ziraat Bank, Halkbank,
Vakıflar Bank.
The
main purpose of this study is to measure the performances of 3 state owned
banks engaged in deposit banking operating across Turkey. They were measured in
terms of their performances of 10 years before restructuring process and also
14 years after restructuring process. The other purposes are;
·
The evaluation of public banks' performance
before and after the 2001 crisis on a bank basis over certain ratios,
·
The differences in the restructuring process
implemented in 2001 on public banks, Ziraat Bank, Halkbank and Vakıflar
Bank,
·
The expression of sector shares and sectoral
activities of public banks over the past years with specific criteria and
graphical representations.
3. Limitations of The Study
The performance of state-owned banks between the years 1990-2000 was called
first period. The performance between the years 2002 to 2014 are expressed in
the form of the second period in the research. In order to have a more solid
foundation of this practice, the adverse effects of the 2001 economic crisis
occurred in Turkey in banking sector was deemed appropriate to exclude of the
research. Therefore, the 2001 ratios were not included in study.
4. Methods Used in Research and
Data Analysis
The analysis system of the
research called t-test is a method that helps to evaluate the differences
between the two groups either it is incidental or statistically significant [Akdağ,
2011].
Independent
sample t-test, the type to be used in the study means comparing the average of
two independent groups mutually which were determined according to dependent
variable. While making this comparison a certain level of
confidence is determined and it is tested; either there is a significant
difference over the confidence interval or not [Ural, 2006].
Before the restructuring in
the study, the data for the first semester was evaluated as the first group,
and the data for the second semester was evaluated as the second group. For
this reason, it is considered appropriate to have a t-test for the method of
the study.
The averages of the ratios
calculated over certain criteria were compared among the groups.
The Independent Sample, which
is the type of t-test to be used in the study; is the reciprocal comparison of
the mean of the two independent groups determined by a dependent variable. In
this comparison, a certain level of confidence is determined and tested to see
if there is a significant difference over this confidence interval [Akdağ,
2011].
The confidence intervals and
significance levels determined in the study are as follows;
sin. < 0,01 => %1 There is a significant
difference in the 99% confidence interval from the Independent Sample t test.
sin.
< 0,05 => %5 There is a significant difference in the 95% confidence
interval according to the Independent Sample t test.
sin.
< 0,1 => %10 There is a significant difference in the 90% confidence
interval according to the Independent Samples t test.
sin.
> 0,1 => There is no significant difference from the Independent Sample t
test.
1% %99 Confidence Interval
5% %95 Confidence Interval
10% %90 Confidence Interval
The established hypothesis
based on the obtained confidence interval and level of significance will be
expressed as follows;
Ho:
Group averages are not different from each other.
H1: Group averages are different
from each other.
5. Data Collection Tool
Some of the data used in this
study are provided from the website of The Banks Association of Turkey directly
or obtained as calculated by author using the ratios about the banks.
When the valuation criteria for the research are
determined, ratios are preferred to ensure monitoring of changes and
development processes of problematic aspects of these banks after
reconstruction. These data and ratios used in
this study are the most widely used in the measurement of bank performance in
literature: Equity/Assets, Total Loans/Assets, Total Loans/Deposits,
Non-Performing Loans/Total Loans and Receivables, Net Profit/Equity, Net
Profit/Assets, Net Profit/Capital, Per Branch Assets Average, Per Branch
Deposits Average, Average Credit Per Branch, Per Branch Employee Average, Per
Branch Net Profit Average.
The Asset Quality, Profitability and Branch Ratios used in the survey to
measure performance indexes of public banks are explained below. Four active
quality ratios, three profitability ratios and five branch ratios were used.
6. Results of Analysis
By using the determined
ratios, it is examined in this study that whether the state owned banks in
Turkey has a positive improvement and significant differences before and after
the restructuring. Results obtained by using the ratios are shown in Table 1.
The results obtained by using
t-test are signed as accepted and refused. Accepted means there is significant
differences between two periods in this study (Table 2).
According to analysis results
when we compare the 1st and the 2nd period due to the performance ratios of
public banks, there are more of the criteria which have significant differences
between terms. That means after restructuring program the state owned banks
have been more successful than the previous period.
Table 1: According to The Independent Sample t-test The Results of Halkbank,
Ziraat Bank and Vakıflar Bank
Table 2: Resulting According to Significance Level
7. Conclusion
The basic tasks
of establishment of public banks in Turkey are to lead the economy in financial
matters, to assist in solving the problems in the banking sector, transporting
the banking services in rural areas and to contribute to the economy in areas
such as financial and fiscal stability.
However, the public banks that have been
established have started to engage in activities other than their duty
purposes, to make decisions in the direction of political pressures or to
allocate resources, to employ unnecessary and inefficient personnel and thus
they had begun to damage the economic system. These drawbacks have led to the
impossibility of collection and repatriation of a significant portion of the
loans granted by public banks; they have caused the falling of banks performances. The operating
objectives of the public banks operating under these conditions have become
diverse and public banks have moved away from the profit motive. The inadequacy
of information technology and the fact that they have very weak infrastructure
in terms of audit has also played an important role in the event that these
banks can easily go bankruptcy and they become harmful for banking sector.
The main purpose of public
banks is to lead financial markets in many countries in the world as well as
economic development in Turkey, to help the sector to solve problems in the
banking system, to contribute to the economy of the banking services in rural
areas and especially financial and financial stability. However, over time,
these banks have failed to keep up with economic development and deepening, and
have begun to exercise influence over the financial system.
The state owned
banks in Turkey had irregular balance structure and became unable to continue their
basic tasks during 2000s, due to the crisis in 2000 and 2001. Therefore, these
banks are included in banking restructuring program implemented in the
financial sector for the purpose of resolving the problems of them. In this
context, primarily duty losses of these banks were paid and capital support was
provided to these banks. The interest rates of the banks have been harmonized
to the market as both deposit and lending thus financial restructuring process
was completed.
One of the other
important restructure issues of these banks is the implemented arrangements to
ensure compliance with public sector numbers and international standards about
loans, deposit and non-performing loans. A number of arrangements have been
done to improve the asset quality of these banks. Such as the qualifications of
the personnel employed in state-owned banks, the number of branches and
employees has been the subject of debate topics and became one of the issues
given the importance part of the restructuring.
According to the
results of our study evaluating the performance of public banks included the
restructuring program; over the 12 ratios in the study, 10 criteria of the
Halkbank, 9 criteria of Ziraat Bank and 7 criteria of Vakıflar Bank were
found to be positive differences to be statistically compared to the previous
period. It has been concluded that there is a small margin difference between the
Halkbank and Ziraat Bank in terms of performance in state-owned banks and Halkbank
is the most successful state owned bank according to the analysis. Ziraat Bank,
as well as having the second most positive development of public banks in terms
of analyze ratios has almost equal proportions with Halkbank in terms of asset
quality and branch ratios proportions. Halkbank is ranked first as
usual in profitability ratios. In terms of the branch ratios, all public banks
are subject to the close level of success rate.
Halkbanks branch/employee ratios lagged behind the other two state banks and
through the branch/ deposit ratio, it has a better average growth than the
others.
The banking
sector is one of the most important dynamics in a country's economy. Therefore,
as in most countries of the world, public banks have an important share and
role in the economy in Turkey as well. Especially, the fact that Ziraat Bank
continues to fulfil its intermediary role in agricultural credits and Halkbank
continues to its intermediary role in subsidized and other commercial loans
granted to Tradesmen and Craftsmen, while successfully fulfilling other banking
activities, makes these banks more important in the sector. Other benefits of
public banks to the economic system is their services apart from ordinary
banking services such as investment and portfolio consultancy, insurance and
private pensions, financing in leasing transactions. After the restructuring
efforts of the public banks, even if they have damaged the economy for a while,
today they are continuing their activities in a profitable and stable manner.
As a result of
our study, while the state banks have been assessed as a whole, after the
restructuring process in 26 of the total 36 criteria, 3 state-owned banks have
been found to show a positive evolution. In this case, it is understood
that after the restructuring works in public banks they became more successful
in the next process.
Similar
to our study, Bağlı
and Rençber analyzed the performance index of Turkeys public and private banks
between the years 2006-2012. As a result of the study, they came to the
conclusion that Public banks are more profitable than the private banks.
Another conclusion of the study is that Halkbank is the most profitable bank in
the state-owned banks [Bağcı,
2014].
In the similar
nature of the study performed by Altıkulaç, state-owned
banks have been subject to performance evaluation between the years 2001-2005
on the basis of 2001. In this study, in parallel with our research it was determined
that there have been improvements in public banks after the restructuring
program [Altıkulaç, 2006].
The financial status of deposit banks in Turkey was
evaluated in 3 groups as private banks, public banks and foreign capital banks
by using The Camels Analysis Method based on 2002-2010 years in Ege and others
study conducted at 2015. According to the results of the study, it has been
determined that the public banks are better than others in capital sufficiency,
managerial proficiency, and sensitivity to market risks, foreign capital banks
are better than others in active quality and liquidity and private banks are
better than others in profitability.
Kandemir and Arıcı have divided
deposit banks into three groups according to their ownership structures in
their study conducted in 2013. Banks classified as private capital, public
capital and foreign capital have compared their financial performances through
19 criteria through The CAMELS analysis method. Banks classified as private capital,
public capital and foreign capital have compared their financial performances
through 19 criteria through CAMELS analysis method. It is stated that the
restructuring initiatives initiated after the crisis of 2001 gave positive
results and the works contributed positively to the sector in evaluating the
data taken between 2001 and 2010. At the same time, as a result of these
studies, the industry has become more cautious [Kandemir and Arıcı,
2013].
Acar and the others used the data envelopment
analysis method to compare banks in terms of number of branches, number of
personnel, total assets, profitability and total deposits between 2009 and
2013. In comparison, bank groups are divided into 4 groups as domestic,
private, public and participation banks. According to the result of the study,
the most effective banks are respectively; public banks, domestic private
banks, participation banks and foreign-private banks [Acar etc, 2015].
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