Garanti BBVA CEO: Interest Rate Cuts May Begin in July, Inflation Could Fall Below 30%

Garanti BBVA CEO Mahmut Akten anticipates that the Central Bank of Türkiye will initiate an interest rate cut in July, projecting a 300 basis point reduction in the policy rate. Akten believes the current disinflation trend, alongside elevated real interest rates, supports the case for monetary easing.

Expecting June inflation to come in between 1.3% and 1.7%, Akten stated, “Under these conditions, I expect the policy rate to be lowered from 46% to around 43% or lower.” He also projected that year-end inflation could fall below 30%, provided external shocks and food price volatility remain contained.

Year-End Interest Rate Could Settle at 36%

Noting that official projections put year-end inflation at 31%, Akten said the bank’s expectations are slightly more optimistic. “If we revise this forecast, it would likely be downward,” he added. Assuming the disinflation path continues, Akten foresees policy rates dropping to around 36% by year-end, offering a real return of 500–1000 basis points, depending on forward or backward-looking metrics.

Loan Margins Compressed, Recovery Expected in Q4

Akten emphasized that the current high-rate environment has squeezed bank profit margins significantly. The combination of short-term deposits funding long-term loans and rapidly shifting funding costs has created a tight margin scenario, particularly in Q2. “We’ve reached the lowest margin levels seen so far,” he noted, blaming global financial volatility, local regulations, and rising CDS premiums for added pressure.

While loan demand remains limited, Akten expects margins to improve by the fourth quarter as interest rates begin to decline.

TL Loan Growth Forecasted at 30% in 2026

Akten projects Turkish lira-denominated loan growth to be modest in 2025—close to inflation—but sees 30% real growth potential in 2026. Despite this, sector profitability remains under strain. “Capital returns have declined dramatically,” he said, adding that some rival banks have achieved returns nearly half of Garanti’s 30%. He stressed that high interest rates are eroding capital returns across the sector.

Calls for Unified Credit Pool for SMEs and Corporates

Akten also addressed ongoing issues in credit accessibility, especially for SMEs. While programs like the Credit Guarantee Fund (KGF) help bypass limits, he criticized the practice of setting separate credit growth caps for SMEs and corporates. “Instead of setting a 2.5% growth limit for SMEs, we believe both SME and corporate loans should be evaluated as a single credit pool to better align with actual demand,” he argued.

Home Loan Market Set for a Rebound

In the housing market, Akten expects a strong rebound, particularly in demand for mortgages. He emphasized that longer maturities, ideally up to 36 months, are essential to meet the rising interest in homeownership. He also noted that limited credit access for second homes is constraining the market, despite growing demand fueled by expectations of price increases in a lower-rate environment.

“Mortgages are not the most profitable product for banks,” Akten admitted, “but they foster long-term customer relationships—which we value deeply.”