Saruhan Dogan on Turkey’s capital markets | Finansinvest

Transcript

Finansinvest was incorporated in 1996, and remains a wholly-owned subsidiary of Finansbank, with its headquarters in Istanbul. One of its board members, Saruhan Dogan, discusses the recent changes in Turkey’s capital markets, the ways that Finansinvest is responding, and the future for investments in Turkey.

World Finance: So how have the capital markets in Turkey evolved over the last few years?

Saruhan Dogan: Well there has been a very significant change. Turkish capital markets have been very equity throughout the last twenty years. That’s basically because we had very high inflation, very high interest rates and debt market growth donate by the government borrowing. But in the last two years inflation and interest rates fell below to single digits. Investors started to look for better returns than treasuries in the fixed income market, and this led to a demand for corporate bonds and our house and our competitors who have been looking for corporates to raise debts in which they were interested switching from bank borrowing to capital markets. And this is creating a new market, a capital market for corporate borrowing which I believe is going to be one of the biggest and most interesting markets in Turkey, and this is going to be leading to a significant shift in short term corporate working capital borrowing. Shifting from plain vanilla bank short term loans to one to three maybe up to five years Lira corporate bonds, which is going to be a very interesting opportunity for us.

I believe is going to be one of the biggest and most interesting markets in Turkey

World Finance: These changes that have happened in the last two years. How important are they?

Saruhan Dogan: Well, they have been very important because first of all as investment banks this is really shifting our focus and our social P&L. Furthermore, equity markets have been working well in Turkey, but they also have been very volatile and our local investors, especially, have suffered from this volatility a lot. Fixed income offers a much less volatile and certain return, which our investors have so far been very happy with. So I believe that this is going to be very important new door opening for Turkish capital markets.

World Finance: So how did Finansinvest respond and position itself throughout these changes?

Saruhan Dogan: Well, they’ve been lucky enough because in 2012 we had two major deals. We’ve done the live ceremony of the year and we’ve done the largest capital market shares action in the history of our capital markets which was the secondary public offering of Halkbank, one of the very large public banks. But throughout the year our main focus has been in the dept markets and we’ve been pitching lines to raise debts in different forms and it’s been a very successful year so yes we’re still working a lot on additional products, M&A and IPOs but our focus now is definitely on the debt markets because banks are under pressure; capital, liquidity, risk. So, we believe that they will be pulling out of our less lucrative markets which is first to fall, the short term corporate landing market. This is going to be creating further opportunities for us because we will be replacing what the, sort of, the fields they are living free. So our focus has been the debt markets.

[O]ur focus now is definitely on the debt markets because banks are under pressure

World Finance: Now 2012 was a successful year for your. Talk us through some of the developments at the bank.

Saruhan Dogan: We are a very consumer retail oriented institution. Furthermore as we grow up we also focussed on SMEs. For capital markets our perspective is definitely to grow on smaller climbs. As we go smaller, you need to be a more sophisticated house, you need to have more man power to handle larger amount of tickets for smaller size but larger amounts. And that’s where our institution have been focussing as for Finansbank, now, my intention is to be one of the three largest banking institutions in Turkey by 2020. Hopefully we’ll be there. We are trying to catch up to our competition who traditionally have been larger than we are, but with our focus on the SME and commercial clients, we believe we will be there.

World Finance: So you mention your strategic vision there, also how do you see the Turkish market evolving over the next few years?

Saruhan Dogan: Next couple of years are not going to be very easy for Turkish markets, and definitely not the capital markets. Global liquidity is going to definitely be an issue and we are entering a period of elections and politics have been traditionally significant noise in Turkish markets. So the uncertainty about what’s going to happen in the political area is going to be one factor added to the uncertainties of what is going to happen to the global economic environment and sentiment. It’s not going to be easy but this is always an opportunity for us because as times get rougher clients will need more sophisticated support from their investment banks and we believe that we are well positioned to serve them. We are currently nesting because we believe that when times are tougher, it’s going to be a much less easy to go to our bank and borrow whatever you can but you will need to be more sophisticated to be able to protect yourself from the volatility in the market and to access the liquidity you need to run a business.

Next couple of years are not going to be very easy for Turkish markets

World Finance: So in the context of the global macro environment there are still opportunities?

Saruhan Dogan: It is going to be a difficult time, but you can’t just sit down and say it’s going to be difficult what are we going to do? I believe that all difficult times present significant opportunities in Turkey and FInansbank was set up in 1987, as a sort of one floor twenty-four people small bank, and now we are the fifth largest private bank in Turkey. Because we’ve managed to benefit from opportunities and Turkey presented lots of opportunities because we had many crisis. Once again we believe that we are well geared and prepared to be with our clients during these difficult days because I don’t think there is any way out of it. We are going to have a difficult time. Turkey has been one of the countries who benefited most from the abundance of liquidity in the last couple of years which also means that when liquidity goes away, we are going to be suffering. Times will be tough, but tough times call for good partnership between banks and their clients.

World Finance: Saruhan Dogan, Thank you

Saruhan Dogan: Thank you, Nick