Istanbul: Garanti Bank’s chief executive has sounded a cautious note for Turkey’s banking sector, forecasting continued difficulties in 2026 as lenders grapple with persistent economic pressures and regulatory constraints. Mahmut Akten, CEO of Garanti Bank the country’s second-largest private lender told Reuters that despite some alleviation of pressure this year, conditions are unlikely to improve significantly in the coming year.
Akten highlighted that most credit restrictions put in place to combat high inflation will remain largely intact as authorities prioritise price stability over rapid financial liberalization. He said that while Turkey’s inflation rate has eased from earlier peaks, it remains elevated around 31% and this limits the potential for banks to expand lending and fully boost profitability.
Turkey’s strict credit caps and tight monetary stance over recent years have hindered robust credit growth, Akten explained. Although some limits on overdrafts, housing loans and credit cards were lifted in 2025 helping ease pressure on banks broader restrictions are expected to continue in 2026 to support the ongoing fight against inflation.
Garanti’s performance, and that of its peers, has been shaped by these persistent constraints. Tight monetary policy has squeezed net interest margins and increased funding costs, while inflation-adjusted accounting significantly reduces the bank’s reported contribution to its Spanish parent BBVA’s earnings, compared with what it would be under standard reporting practices.
Despite these challenges, Akten said the central bank has shown willingness to engage with lenders and that some regulatory requirements have been made slightly less burdensome. He also expressed cautious optimism that inflation may decline to around 25% by the end of 2026, with the policy interest rate potentially settling near 32% a sign of gradual improvement, albeit from a difficult starting point.
Garanti Bank, which manages assets worth approximately 4.2 trillion Turkish lira (around $100 billion), faces a banking landscape where credit growth has historically failed to keep pace with inflation. As a result, banks are navigating a period of adaptation as they balance profitability with compliance to stringent regulatory frameworks designed to stabilize the broader economy.
Akten’s comments reflect broader concerns across Turkey’s financial sector as it adjusts to evolving economic conditions, including slow disinflation, regulatory pressures and a strategic focus on long-term resilience rather than rapid expansion. Analysts say that while there may be room for incremental easing of rules, fundamental challenges linked to inflation and monetary policy will continue to shape bank performance through 2026.
Overall, the outlook for Turkish banks remains cautious, underscoring a delicate balancing act for policymakers and financial institutions alike as they seek to foster sustainable growth amid ongoing economic headwinds.