Türk Ekonomi Bankasi, or TEB for short, was founded in 1927. It is one of the established names in the Turkish banking sector. TEB's 553 branches provide services for both individual customers and SMEs and large companies. TEB became a strategic partner of the BNP Paribas Group in 2005.
Corporate Banking, Cash Management and Global Trade Solutions are the bank's core business. TEB has very high ambitions: it intends to achieve an even closer collaboration with the country's major companies, and aims to attract more multinational customers via the global network and the relationships of its strategic partner BNP Paribas.
TEB Corporate Banking's 15 Corporate Business Centres provide services to large local companies and multinationals and groups with annual turnover exceeding 50 million lira. The extensive offering includes diverse products and services, such as trade finance, transaction and investment finance, cash management, risk management, standard investment products and derivatives, corporate investment banking and commodity and project finance.
Specialisation: trade finance
Trade finance is one of TEB's specialisations. The Trade Centres in Adana, Ankara, Bursa, Istanbul and Izmir together account for some 70% of Turkey's total foreign trade. Each Trade Centre is staffed with senior managers specialised in plain vanilla and structured trade finance. They have a reputation for developing comprehensive trade finance packages and are greatly appreciated for the added value they provide in trade relations.
Export finance is another of TEB's strong points, accounting for 13% of the bank's total loan portfolio, compared with a figure of barely 5% for the Turkish banking sector as a whole. In relative terms, TEB is the second largest provider of export finance, and the fifth largest in terms of the total volume of export finance.
TEB's Trade Finance team is the market leader in commodity finance. Traditionally strong in hazelnut and tobacco export financing, the Trade Finance team has also developed funding solutions for other soft commodities as well as some petrochemical and mining products. Global Banking & Finance Review Magazine recently named TEB 'Best Bank for Commodity Finance Turkey 2015'.
Award for cash management
TEB Corporate Banking has also built up a strong market position in cash management, offering innovative products and services. In 2015, TEB received the 'Turkey Domestic Cash Management Bank of the Year' award for the second time. Amongst other things, the bank is working with the Turkish government on an electronic billing project.
TEB is also working in partnership with BNP Paribas on developing cash management solutions.
Privileged partner of multinationals
TEB was the first Turkish bank to open a Multinationals Desk, in 2006. The bank therefore has the profile of a privileged partner of multinationals. Thanks to the partnership with BNP Paribas, TEB has a global network that assists multinationals and Turkish companies in their international transactions.
Corporate Banking customers can count on support with financing and lending for all large-scale projects in Turkey. TEB provides its customer with access to international trade resources and advice on corporate investment banking. Corporate Banking customers have access to integrated services in project financing, export finance, procurement finance and corporate bonds.
Young population and strategic location – the main strong points of the Turkish economy
Chief Economist at the Turkish Economy Bank (TEB), Selim Cakir, weighs up his country's chances.
In the last few decades, the Turkish economy has grown by 4% on average. Economic growth now looks set to slow. However, the recent election win for the ruling AKP party and the lifting of sanctions against neighbouring Iran could provide a fresh economic boost. Chief Economist at the Turkish Economy Bank (TEB), Selim Cakir, weighs up his country's chances.
Breathing space for the Turkish central bank
Turkish growth figures have remained surprisingly buoyant over the last few years, despite difficult economic conditions. In the last few decades, the economy has grown by 4% on average. In 2015, GDP is expected to rise by a further 3%, due in particular to an excellent first half of the year. The slowdown may have a greater impact on growth figures for 2016. Turkish inflation remains stubbornly high, an underlying trend that Selim Cakir believes will prove hard to turn around.
"The delayed effect of the depreciation of the lira and negative base effects in November and December will push inflation above 8% by the end of 2016. However, the recent devaluation of the Turkish lira coupled with the election result should give the Turkish central bank a little breathing space. But low international reserves, limited capital inflows and high inflation remain as obstacles in the way of further rate cuts. In this situation, the Turkish central bank will most likely remain cautious and keep interbank rates at the higher end of the range."
Positive fiscal outlook
The trade deficit looks set to narrow further this year, thanks to a slowdown in domestic demand and lower oil prices. But the end-of-year deficit is still very high: 4.8% of GDP to be precise, despite the position of GDP and the cheaper dollar. The fiscal outlook therefore remains encouraging.
"The government has kept the fiscal balance under control, despite two elections in one year. The deficit has remained under control thanks to stringent spending controls, a sharp rise in tax revenue, partly as a result of an amnesty for tax evaders and profit transfers from the Turkish central bank and publicly-owned banks and businesses.
The main strong points of the Turkish economy are the sound banking sector and fiscal discipline. The weak points are the current trade deficit and the inflation outlook. The limited international reserves, dependence on capital inflows and external financing will still require attention. On the other hand, Turkey benefits from positive demographic dynamics. Compared with the EU, it has a very young population. Half of its population is under 31."
Ideal base for EEMEA
Selim Cakir is convinced that it is an opportune moment for foreign companies to invest in Turkey:
"Falling commodity prices are good news for a country relying on imports for its commodities. Additionally, the political uncertainty which followed the elections has dissipated. And we mustn't forget that Turkey has a very large domestic market. Thanks to its excellent geographical location, the country is an ideal base for economic activities with countries from the EEMEA region. I recommend Belgian companies get a Turkish bank on board with an extensive local and global network. Don't forget to hedge against fluctuations in the price of the Turkish lira either. That's an absolute must."
Turkish currency and interest rates not shockproof yet
Interview with Jan Van de Velde, Head of FX Sales Belgium, Global Markets
Ten years ago the Turkish lira was still a highly exotic currency, and the short-term interest rate actually rose as high as 50%. Thanks to sound monetary policy, stability gradually returned and the risks diminished. But stability is still a relative term in an emerging country, according to Jan Van de Velde from Global Markets. He advises potential investors to hedge against the currency risk.
Turkey can hardly be called a stable country," said Jan Van de Velde. "The Turkish lira has taken some hard knocks in recent years. The lira has appreciated significantly again following Erdogan's recent election victory. There are doubts about how sustainable this rally will be. It is worth remembering that the region is the scene of many geopolitical tensions. The primary concern is the threat from IS and the resultant refugee crisis. Domestic policy is also proving controversial.
Turkey is actually also a victim of the Federal Reserve's policy. USD rates have risen sharply since the first mention of a scaling back of the expansionary monetary policy in the US in May 2013. Amongst other things, this resulted in the repatriation of 'cheap' USD from emerging markets in general. Turkey was certainly one of the countries that suffered. And the country requires considerable foreign currency to offset its current-account deficit."
Beware of sharp fluctuations
Anyone wanting to do business with Turkey therefore needs to take account of real currency and interest-rate risks. Jan Van de Velde advises businesspeople to hedge against these risks:
"Interest rates in Belgium are low at the moment. Any increase in interest rates here will be gradual. The same cannot be said for Turkey, where sudden changes can occur. Look no further than last year's sharp fluctuations in Russia, which is also a mature market. Turkey's relatively large trade deficit also gives cause for concern. If exports tail off steeply, Turkey could find it difficult to fund its debts. That increases the possibility of sudden fluctuations."
Practically speaking, businesses have different ways to hedge against currency and interest-rate risks. According to Jan Van de Velde, that is very simple:
"You can compare this to hedging against the dollar risk. The only difference is that the Turkish lira is less liquid and that the cost or proceeds of the hedging are higher, depending on whether you wish to sell or buy the lira. In that respect, the lira is most comparable to the Central or Eastern European currencies."
Swap, futures contract or options
Jan Van de Velde describes the three possible techniques:
With a currency swap, the two parties can swap different currencies, based on a spot rate, or a rate that reflects the current exchange rate between the two currencies. Thanks to this technique, Belgian companies that have access to funding in euros or US dollars can generate virtual funding in Turkish lira.
With a futures contract, you agree to buy a predetermined sum in your own currency or foreign currency at a fixed rate on a predetermined date. A Belgian firm that has to make a payment in Turkish lira in a year's time can set the rate now. In other words, you have a sort of price guarantee. The imponderable is, of course, how rates with change. With a futures contract you might miss out on a handsome gain, but you might also avoid a sharp fall, it all depends. However, the major advantage of a futures contract is security. You know today exactly what you can expect in the future.
An option contract allows for more flexibility, so that you can benefit from any rate differences. Put concisely, this means that today you buy the right to purchase a particular currency in the future at a price set today. But if the rate on the predetermined date is disadvantageous, you may waive that right. This means you have more scope to benefit from any rate fluctuations. The only disadvantage of an option is that you pay a premium for it now, which is not the case with a futures contract."
Exporting to Turkey? Make sure you have enough built-in security
Ask businesspeople what is the major requirement when getting involved in international trade and most of them will surely answer proven reliability on the part of their suppliers and customers. Many will also be anxious about the currency risk. These concerns are valid when it comes to Turkey, but they can be mitigated through a partnership based on mutual trust.
To avoid currency risks, Belgian importing companies will state a preference for the euro in the terms and conditions of payment. But if a Belgian importer does have to use US dollars (which are used in 70% of Turkish trade operations), they will wonder whether the amount they are paying now will be worth just as much in the future.
"Belgian exporters may well steer clear of the Turkish market purely due to a lack of confidence. Their priority is being certain of payment," according to Vincent Davignon, Global Head GTS Turkey and Regional Manager at BNP Paribas Fortis.
Abolish the uncertainty
Nevertheless, there are solutions that reduce trade risks, and your bank can often provide them.
"Nowadays a quarter of all trade involves documentary credit. This is a written undertaking between a seller and buyer, where the bank plays the role of overseer. In this way, the Belgian company can have full peace of mind. In a nutshell, the Turkish bank that issues the documentary credit includes in it a number of specific clauses. Then the Belgian bank to which the Belgian exporter presents the documents can confirm the documentary credit. Provided that the conditions are satisfied, it undertakes to pay the Belgian company, regardless of the outcome of the commercial transaction."
Vincent Davignon also points out the advantages of a possible collaboration with TEB, the Turkish subsidiary of BNP Paribas Fortis:
"For instance, TEB can process a documentary credit much more quickly. Not only does the Belgian customer save a lot of time, but this is also a cheaper solution, and you can also agree better financing terms. Remember: in principle, the supplier chooses the bank. It is therefore up to you to convince your Turkish trading partner to use TEB. I would advise Belgian businesspeople to capitalise on the partnership between TEB and BNP Paribas. We have an in-depth knowledge of the Turkish market and can provide customised advice. It would be a real shame not to take advantage of this."
Longer payment terms are another risk where banks can make all the difference, even with terms that are already established in a documentary credit. A Belgian company can have a documentary credit with an extended payment term discounted without recourse by its bank. That means it is paid immediately and the company does not have to pay so much attention to the payment terms.
Alternatives to documentary credit
Documentary credit is sometimes seen as too slow and cumbersome in administrative terms in modern trade, when people need things to proceed more quickly. And in some cases it is not the most appropriate arrangement, for instance for trade in perishable goods.
When there is a reasonable relationship of trust and confidence between an exporter and importer, companies may also opt for documentary collection. This means of payment is used in about 10% of trade transactions. The administrative costs are lower, but the bank's role is merely as a postbox, so you are not offered the same level of protection. Vincent Davignon:
"There are also instruments to guarantee payment and tenders, such as bid bonds and performance bonds. They enhance confidence between importers and exporters, by using Turkish and international banks. Incidentally, cheques should be treated with great caution. Turkish companies like using cheques, but payment problems have become more frequent in recent years. My advice is to avoid cheques as an means of international payment. Cheques are primarily a tool for the domestic market."
Guarantee as a solution for SMEs
Large companies systematically opt for documentary credit. That is because they can absorb the costs of this mechanism in their total margin. The same is not as true for medium-sized companies. It is more difficult for them to get their partners to accept this international payment method Consequently, SMEs often use the riskier open account system. Even then SMEs can reduce the risk factor, by using backed trade paper to achieve the same goal as with documentary credit. Vincent Davignon:
"Does your Turkish trading partner agree to use a bill of exchange or promissory note? Make sure of the backing from their bank, so that you can present your trade paper to your Belgian bank for discounting. The guarantee from the Turkish bank plays a significant role in this."
Doing business with Turkey: it's all about respect
You don't need a manual to understand a Turkish business partner. Their ways of doing business are not so different from our own. Nevertheless, some tips from a senior manager with many years' experience of Turkey will surely prove useful.
Here are some wise words from Yvan De Cock, now head of Corporate and Public Bank Belgium at BNP Paribas Fortis, but previously the CEO of Fortis' Turkish branch.
"Turkish managers are very keen to seize opportunities as soon as they arise. Being opportunistic, they switch seamlessly from textiles to tourism. This can sometimes make them a difficult proposition as a trading partner. The entrepreneurial culture is far greater than the management culture. They have often succeeded in turning a family firm into a large company, with the owner as the CEO and the actual boss who keeps a tight hold on the reins; you need to negotiate with this boss, who takes rapid decisions that are sometimes based on a gut feeling."
"Turks also expect respect, which you can show by paying close attention to detail. I once sent a letter to a high-ranking civil servant in which one letter in the addressee's first name was wrong, and the letter was returned. Turkish businesspeople also have great respect for authority, including ministers or top civil servants. But they are not stuffy in their approach. It helps if you know something about football and which club is favourite of the moment, and eating out with a businessperson can sometimes be even more beneficial. And for Turks, respect also includes avoiding expressing criticism in company. They are easily affronted by criticism and take it personally."
One striking feature is that Turkey still has a number of huge conglomerates that may, for instance, be involved in the car industry, banking and the energy sector. Within such a group of companies that are part of a major holding company, you sometimes have to be careful about precisely who you are communicating with, because family relationships could play a part.
Risk-takers, with a safety net
During his time in Turkey, Yvan De Cock got to know many businesspeople well:
"Turkish managers are extremely demanding, but are also always on the look-out for opportunities. Although time may be of the essence, they will very patiently test out the boundaries during negotiations.
Turkish businesspeople are also risk-takers. Note that it is not because they change tack quickly that more companies go bankrupt in Turkey than in Belgium. They often invest many of their own resources and call upon the assistance of an expert and cautious right-hand man. But the Turks will be quicker to do business with countries that would frighten off Belgians. For instance, they are involved in business not only in the surrounding countries, but also in Africa."
Don't expect Western-style project management in Turkey. Yvan De Cock says:
"They try out an approach and then adjust. Their concept of long term is different from ours. In operating terms, six months can seem like an eternity to them. You just have to trust that they will execute a project in time, and in most cases they do, although you may not hear anything for quite a long time."
According to Yvan De Cock, a local partner such as TEB therefore has advantages for foreign investors that go beyond purely banking services.
"The bank will guide you on regulations and legislation. In the case of a loan application, it will check whether the parties concerned are genuine and financially sound. If it refuses to grant the loan, that is a warning signal for you."
The role of women
Women play an important role in business and society. For instance, Yvan De Cock once attended a business dinner with ten CEOs and he was the only man present:
"These highly capable business leaders were managers of large companies, and the two most recent chairs of the Turkish companies association were women. In western Turkey, a career woman up to the rank of assistant manager still qualifies for full-time paid childcare. Society is very competitive. One million young Turks complete secondary education every year, but only a few thousand of them can go on to the best universities. As a result, many children get extra tuition from the age of 12 in order to prepare for the entrance exam. The fight for a career begins as early as that."
A raft of reforms was implemented following the financial crisis in 2002, including privatisation, abolishing monopolies, attracting foreign investment and encouraging R&D.
"Turkey's economic fabric is very modern. It is more modern that in the rest of Europe, and you will be aware of this in the use of the internet, mobile phones and tablets. What's more, the country's IT infrastructure is more modern than ours, so the Turks can capitalise more quickly on certain market trends. In spite of the cultural differences, you will notice that there are no fundamental barriers for anyone intent on doing business. The fact that Turkey is go-ahead, quick to react, innovative and business-minded makes it very attractive.
One of Turkey's main advantages is its young, consumption-driven population. Remember that Turkey is a large country with over 75 million inhabitants who are avid consumers. The Turks love modern gadgets. The penetration rate for mobile phones is extremely high in Turkey. The Turkish administration also functions well. The courts are efficient, taxes are paid, the registry offices work well, and so forth.
Turkey is and will remain an entrepreneurial country, even though it is facing some economic challenges at present. True, economic growth has slowed, and currently stands at 2-3% a year. That might not seem like much, but remember we are talking about a country with a population of 75 million. That puts what at first seem like modest figures in perspective."
Springboard to the Middle East
Yvan De Cock is positive about the country's future:
"I believe Turkey is a perfect springboard to the Middle East. People do say that Turkey has difficult neighbours. I won't deny that there are sometimes geopolitical tensions, but I take a positive long-term view. Those difficult neighbours are countries with large populations, and hence growth potential. You don't necessarily need to export to do good business.
Turkey is also very attractive for investors. Many companies have built a local production unit in the country. The talk I have heard from investors is uniformly positive. Falling energy prices are making the country even more competitive. As you know, anyone who invests runs a risk. I believe the political and geopolitical risks to be on the low side."
- TEB Corporate Banking: your financial partner in Turkey
- Young population and strategic location – the main strong points of the Turkish economy
- Turkish currency and interest rates not shockproof yet
- Exporting to Turkey? Make sure you have enough built-in security
- Doing business with Turkey: it's all about respect