Turkey’s Garanti BBVA says a rebound in loan growth in 2025 has eased pressure on the bank, but high inflation means authorities are unlikely to roll back broad credit restrictions anytime soon.
Garanti’s chief executive Mahmut Akten said credit expansion has finally outpaced inflation after years of lagging behind rising prices, offering modest relief for lenders operating under strict monetary controls. Garanti, which is 86 percent owned by Spain’s BBVA, manages roughly 4.2 trillion lira, or about 100 billion dollars, in assets.
The shift comes as Turkey continues to battle inflation running at about 31 percent annually, prompting policymakers to maintain tight oversight of lending activity.
In an interview at Garanti’s headquarters in Istanbul, Akten said the improvement in credit growth was helped by the absence of caps on overdrafts, housing loans, and credit card lending.
“That somewhat reduced pressure on us,” he said, while stressing that broader inflation fighting measures are unlikely to be dismantled.
“If we are serious about bringing inflation down, I do not expect these limits to be lifted,” Akten said. “Minor concessions might be made, and that would be the right thing to do.”
Since mid 2023, Turkish banks have faced shrinking net interest margins due to tight monetary policy and credit rules that raised funding costs and weighed on profitability. Regulations include a two percent monthly cap on consumer and vehicle loans, along with restrictions on lending to small and medium sized businesses and commercial borrowers.
BBVA applies inflation accounting to Garanti’s financial results, a method that adjusts capital for price increases. Akten said this reduces Garanti’s contribution to BBVA’s earnings to about seven to eight percent.
Once normal reporting standards resume, that figure is expected to return to roughly 25 to 30 percent of BBVA’s profits.
Turkey’s inflation challenges date back to 2018, when loose monetary policy triggered price spikes and repeated currency crises. In response, regulators imposed wide ranging controls on banks’ lending, foreign exchange activity, and balance sheets.
The central bank raised interest rates sharply in 2023 before beginning gradual cuts last year, bringing the policy rate to 38 percent. However, loan and deposit rates have yet to fully reflect the easing, partly due to rules encouraging lira based savings, Akten said.
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He added that the central bank now holds regular consultations with lenders and has shown greater flexibility.
“They are listening to us,” Akten said, describing current regulations as less burdensome than in previous years.
Looking ahead, Akten expects inflation to slow to about 25 percent by the end of 2026, with the policy rate declining to around 32 percent if economic conditions stabilize.