Türkiye’s Isbank CEO foresees economic challenges, anticipates November rate cut

Turkish banks are expected to face significant challenges throughout the next year as the country continues its economic turnaround, according to the CEO of Isbank Hakan Aran.

IsBank is Türkiye’s largest private bank by assets.

In a recent interview with Reuters, Aran predicted that the Turkish Central Bank might start cutting interest rates this November.

Economic challenges ahead for Turkish banks

Hakan Aran emphasized that Turkish banks would “pay the price” for the country’s efforts to stabilize prices and reduce inflation.

Despite the anticipated economic difficulties, Aran expressed confidence that banks would navigate the process, albeit with a deterioration in net interest margins this year and asset quality in the next.

“Banks’ return on equity is decreasing. If inflation accounting were mandatory, many banks might be reporting losses,” Aran noted.

The government excluded banks from applying inflation-adjusted accounting methods last year, citing concerns over potential tax revenue losses.

Turkish central bank rate cuts expected in November

Aran anticipated that the central bank of Türkiye will begin easing its monetary policy in November, with an expected 250 basis-point cut.

This projection aligns closely with analysts’ forecasts. He predicted the policy rate would decrease to 45% by the end of this year and further drop to 25% by the end of 2025.

September inflation data, expected in early October, will likely show annual inflation below 50%. Aran predicted inflation to decrease to about 42% by year-end and further to 20% by the end of 2025.

He also mentioned that household price expectations should align more closely with the central bank’s forecasts by 2025.