Economy
Fitch sees modest margin recovery for Turkish banks as rate cuts loom
Türkiye’s banking sector may see a gradual recovery in net interest margins by the end of the year, aided by anticipated monetary easing from the country’s central bank, according to Fitch Ratings.
Ahmet Emre Kılınç, director of banks at Fitch, said on Tuesday that the credit ratings agency now projects the Central Bank of the Republic of Türkiye (CBRT) to lower its benchmark interest rate to 33% by year-end.
“As a result, we expect an improvement in banks’ net interest margins, although this recovery will be somewhat more modest compared to our initial projections at the beginning of the year,” Kılınç told Anadolu Agency (AA).
The CBRT pivoted to raising its key policy rate by 350 basis points in April to 46% and pushed the overnight lending rate to 49% after Turkish assets and the lira fell sharply after Istanbul Mayor Ekrem Imamoğlu was jailed pending trial over graft charges.
Before that, the bank had begun an easing cycle and gradually cut its one-week repo rate to 42.5% in March as inflation fell from the level of more than 75% that it reached in May 2024.
A sharper-than-anticipated slowdown in annual inflation to 35.41% has reignited speculation that the bank could resume rate cuts as early as this month.
The outlook for Turkish banks is shaped by domestic market developments and the impact of global customs tariffs, Kılınç said.
Before March, he noted, there was an expectation that continued rate cuts would support banks’ interest margins, but this has been somewhat delayed due to volatility in the domestic market.
Eyes on policy path
While the CBRT has signaled a cautious approach, analysts say the decline in inflation has provided some additional room for the bank to resume the rate cuts. Any shift, however, will likely be contingent on whether the overnight lending rate converges with the policy rate in the coming weeks.
The CBRT’s next monetary policy committee (MPC) meeting is scheduled for June 19, followed by another on July 24.
Last month, the bank kept its inflation forecast steady in its quarterly report, saying upward and downward risks balance out. Governor Fatih Karahan said the bank is ready to tighten policy if inflation worsens.
The bank’s year-end mid-point estimate stands at 24%, with an upper band of 29%. Turkish officials continue to emphasize that inflation will remain within this forecast band. Market surveys see a higher rate of around 30%, though estimates have recently been revised down modestly.
Kılınç highlighted that the persistence of high interest rates leads to increased risk costs.
“We have begun to closely monitor banks’ asset quality for the second half of the year. Currently, we believe that the risks to asset quality remain manageable for banks. In this regard, we maintain our neutral outlook for Turkish banks from the beginning of the year,” he said.
Fitch’s operating environment score for the Turkish banking sector remains positive, and the agency is keeping it unchanged, according to Kılınç.
“Profitability could improve this year. However, recent market volatility has somewhat disrupted the positive trajectory. Due to this volatility, Türkiye’s five-year credit default swap (CDS) had risen, but has since declined again to around 300 basis points,” he added.
External financing access remains intact
Despite concerns over short-term external debt levels, Turkish banks have retained strong access to foreign financing, according to Kılınç.
He pointed out that the high level of short-term external debt poses a refinancing risk, though he emphasized that this is not a new concern.
“Last year, market access was strong, with many banks issuing both Eurobonds and subordinated loans. Since March, syndication loans have been renewed at rates exceeding 100%, indicating that banks continue to secure external financing,” Kılınç said.
“However, long-term bond issuances have slowed, with costs being a key factor. In this context, banks are likely to wait for a more favorable environment before proceeding with further issuances.”
Kılınç also mentioned that global developments, including U.S. interest rate policy, geopolitical risks, and tariffs, could indirectly impact the outlook for Turkish banks. However, he emphasized that tariffs were unlikely to have a significant direct effect on Turkish financial institutions.
Drones hit a data center owned by Russia’s Yandex, the country’s leading AI and technology company said on Thursday, in the first major attack on a Russian data hub since the start of the war with Ukraine.
Yandex later Thursday said it could not yet determine whether equipment at the center could be restored.
Mutual drone attacks by Russia and Ukraine this year have gradually spread across the economy, from energy facilities and refineries to ports and vessels carrying oil and grain, e-commerce warehouses and, most recently, data centers.
Russia has conducted a strike campaign on Ukrainian data centers and telecommunications infrastructure over the past month, including targets in central Kyiv.
Yandex said the attack on its Sasovo hub, one of its five large data centers, caused a fire and forced it to suspend operations at the site, which hosts tens of thousands of servers.
The company, often dubbed “Russia’s Google,” said its core consumer services were not affected, but did not describe the extent of the damage.
“The scale of the damage to the infrastructure is still being assessed,” Yandex said in a statement later on Thursday. “For the moment, we cannot confirm whether it is possible to restore the data center equipment in Sasovo.”
On the website of its Yandex Cloud service, the company advised customers there were problems with the electricity supply to one data center “zone” and recommended using others.
Yandex said in 2021 that the Sasovo hub hosted two of its three supercomputers built around Nvidia A100 chips, which it uses to train its YandexGPT large AI model. Yandex declined to say whether the supercomputers were affected by the attack.
Multiple online services in Russia reported technical issues on Thursday, including real estate aggregator Cian, a book portal called Litmarket, and the websites of Russian Railways and professional football club Spartak Moscow.
A state-owned bus company in the Moscow region said online ticket sales were currently unavailable due to the “temporary shutdown of a data center.”
Online monitoring service Detector404 said it had received 58,268 user complaints over the past day. Yandex shares at the Moscow Exchange, where it is a proxy stock for the Russian technology sector, were down 3%.
Previous Ukrainian attacks on Russia have led to fuel shortages and queues at petrol stations, losses for tens of thousands of small businesses involved in e-commerce, and higher inflation as rising fuel costs feed through to consumer prices.
Critically important infrastructure
Russian President Vladimir Putin in August gave the state the power to take control of critically important infrastructure if it is deemed to be poorly protected from drone attacks.
There were previously no confirmed major Ukrainian drone attacks on Russian data centers.
Russia’s RBC news outlet reported on Thursday, quoting sources, that businesses were in talks with the government on developing data centers in countries deemed “friendly” by Moscow.
Some Ukrainian data centers were forced to suspend operations after sustaining damage, while 100,000 households suffered temporary internet outages after one attack.
Ukraine’s digital minister told Reuters last month that the country was moving digital infrastructure underground in response to Russian attacks.
Yandex, which created Russia’s first search engine in 1997 and is one of the few major Russian companies not under Western sanctions, runs YandexGPT, one of Russia’s leading AI models, as well as a cloud computing service and a range of other consumer products, including Yandex Taxi and Yandex Music.
Sberbank, Yandex’s main domestic competitor, which is developing the rival GigaChat model, says Russian AI developers lag their U.S. and Chinese counterparts by six to nine months, with difficulties in importing advanced chips due to sanctions seen as the main bottleneck.
U.S. President Donald Trump, who has said he wants the term “super intelligence” to replace artificial intelligence, said Thursday that anyone who does not heed his wishes will be treated as “THE ENEMY,” without saying what the consequences would be.
“The White House considers anyone that uses the term, ‘Artificial Intelligence,’ as opposed to the highly accepted new and more accurate term, ‘Super Intelligence,’ THE ENEMY!” Trump said in a post on his Truth Social network.
Trump mentioned his proposed name change in a speech before the U.N. General Assembly last month, saying his new term “sounds much better.”
Then in late September, Trump signed an executive order, imposing the use of “super intelligence” across the U.S. government.
That same obligation does not affect the private sector, but some there are already adopting it, including Mark Zuckerberg’s Meta group.
Trump ally Elon Musk is using “super intelligence” in his posts on his social media network X.
Musk has already announced plans to rename his AI company SpaceXAI to SpaceXSI.
The security pledge signed by major AI companies at the White House at the end of September also used the term “super intelligence.”
Industry heavyweights OpenAI and Anthropic, meanwhile, continue to use the well-known term “artificial intelligence” widely.
Even on Truth Social, a link to the platform’s own search function – “Truth Search AI” – remains visible alongside Trump’s post.
The semantic debate is primarily a political one: the U.S. president, who has stridently defended the use of AI, is trying to put a positive spin on it in the face of mounting worries about AI security and anger over the proliferation of data centers in the U.S.
More generally, Trump is a fan of renaming things or creating nicknames: he now calls the Gulf of Mexico the “Gulf of America” and has converted Lake Ontario into “Lake America.”
Lufthansa Group and three Indian airlines said Thursday they would suspend flights to Riyadh, as Yemen’s Iran-aligned Houthis renewed threats against carriers after claiming an attack on the Saudi capital’s airport.
A Lufthansa spokesperson told Reuters the German group’s airlines would suspend flights to Riyadh through Oct. 16 due to “current developments in the Middle East.”
India’s largest airline IndiGo said it had canceled all flights to and from Riyadh until Oct. 9.
Air India and Akasa Air also told Reuters they had canceled all flights to and from the Saudi capital until Oct. 10.
Air India added that a flight from Delhi to Riyadh returned to the Indian capital on Thursday, while Akasa Air canceled two scheduled services.
Smoke was seen rising from a stationary aircraft at Riyadh airport earlier on Thursday, according to a witness and three people briefed on the matter.
Houthis said they had struck King Khalid International Airport in Riyadh with a ballistic missile, although there was no immediate confirmation from Saudi authorities.
Saudi authorities said on Wednesday that three people had been killed this week in strikes on Riyadh airport and Abha airport in the southwest.
Several dozen international flights bound for Riyadh on Thursday evening have been canceled, data from global flight tracker FlightRadar24 showed.
Data compiled by aviation analytics firm Cirium showed 49.7% of departures from Riyadh airport had been canceled by 1500 GMT, with a further 31 cancelations expected across Saudi airports on Friday.
Türkiye has doubled its share of global manufacturing value added (MVA) over the past two decades, according to Industry and Technology Minister Mehmet Fatih Kacır, who tied it to the country’s bolstering its infrastructure and industrial transformation in the same period.
Speaking at the ACE BPSC 2026 conference in Istanbul on Wednesday, Kacır said engagement with American businesses was an important component of bilateral relations.
Held under the auspices of the Trade Ministry and hosted by the Turkish-American Business Association (TABA-AmCham), the ACE BPSC 2026 summit brought together officials and industry leaders in Istanbul from Oct. 7-9, with the aim of shaping the new direction of global trade.
“We have doubled our share of global manufacturing value added thanks to the strong production infrastructure we have built over the past 20 years,” Kacır said.
Annual goods exports have risen from $36 billion in 2002 to $283 billion, he added, also highlighting Türkiye’s role in European value chains.
The minister also recalled that under Presidents Recep Tayyip Erdoğan and Donald Trump, Türkiye and the U.S. share the political will to deepen economic ties and advance toward their $100 billion bilateral trade target.
Innovation, industrial transformation
Türkiye has more than 1,700 R&D and design centers and over 13,000 companies operating in 115 technology parks, Kacır said.
He also said that its R&D workforce has increased from 29,000 in the early 2000s to 311,000.
Moreover, he highlighted advances in defense manufacturing and electric vehicle brand Togg, saying Türkiye aimed to move higher in global technology value chains.
Cooperation with the World Bank has provided more than $1 billion for industrial companies, smaller businesses and green technology startups, he said, adding that work with the European Bank for Reconstruction and Development (EBRD) has also advanced efforts to secure 5 billion euros ($5.59 billion) for green transformation investments.
Data centers, space ambitions
At the same time, the minister said Türkiye aims to expand data center capacity to 1 gigawatt (GW) by 2030 and mobilize at least $10 billion in private investment in AI, cloud technologies and digital infrastructure.
He said assembly and integration of Türkiye’s lunar spacecraft had been completed, with launch planned for early 2027.
He also recalled that Türkiye has joined the Artemis Accords and is developing a spaceport in Somalia.
Among others, he highlighted the Zangezur Corridor, Development Road and Northern Marmara Railway as projects strengthening trade connections.
Inviting U.S. investors to participate, Kacır called for concrete projects, stronger investment flows, deeper technology cooperation and lasting commercial partnerships.
Growing U.S. trade
Also addressing the event, Trade Minister Ömer Bolat emphasized that the U.S. is an important partner for Türkiye and said that the total trade volume between the two countries was $38.6 billion last year and that the U.S. had a trade surplus of $6 billion.
Bolat pointed out that Türkiye-U.S. trade has nearly doubled in the past 10 years, with trade volume rising from about $21 billion in 2015 to $38.6 billion.
“In terms of tourism, 1.6 million American tourists come to Türkiye annually, and from Türkiye around 260,000 people travel to America each year,” he said.
He also said that Turkish Airlines flies to 14 cities in the U.S., with 23 daily flights.
Delivering the opening address at the summit, TABA-AmCham President Süleyman Ecevit Sanlı, for his part, highlighted that this was the first time the American Chambers of Commerce in Europe (ACE) had gathered in Istanbul.
“Our role as TABA-AmCham is very simple: to connect people with great opportunities and to keep doors open for the business world,” he said.
He also underscored several priorities and expectations when looking forward, including the need to modernize the Customs Union between Türkiye and the European Union, to lift transit quotas, and “to remove all bans and eliminate visa and transit barriers so that our businesspeople can travel freely within both the European Union and the United States.”
The export climate for Turkish manufacturers continued to improve in September, rising further from an already positive reading a month earlier, a survey showed on Thursday.
The Manufacturing Sector Export Markets Climate Index, which tracks the performance of Türkiye’s top export markets, rose to 53.2 in September, the Istanbul Chamber of Industry (ISO) said in a bulletin.
This marked the improvement from 52.7 recorded in August and was the highest reading in 52 months, or more than four years.
Any reading above the index’s threshold of 50 indicates an improvement in the export climate, while readings below 50 indicate deterioration.
The reading indicated that the improvement in demand conditions across export markets accelerated for the fifth consecutive month. The index has remained above the 50 threshold every month since January 2024.
In September, production increased in nine of Türkiye’s 10 largest export markets, except for Poland, ISO said.
In the U.S., economic activity “increased strongly,” with growth accelerating to its fastest pace in more than five years, according to the chamber.
Meanwhile, signs of improvement continued across European economies as well.
Production continued to increase in Germany, the U.K., Italy, Spain, Romania and the Netherlands. In France, economic activity increased for the first time in more than two years, albeit only modestly. Exports to these European economies account for 34% of Türkiye’s total manufacturing exports.
Strongest increase recorded in UAE
Among all the economies covered by the survey, the United Arab Emirates (UAE) recorded the strongest increase in production. Growth in the UAE reached its fastest pace since February, just before the start of the war in the Middle East.
In addition to the UAE, economic activity in several other Middle Eastern countries also ended the third quarter on a positive note.
Saudi Arabia, Kuwait and Lebanon recorded growth. In contrast, production continued to decline in Qatar, while Egypt experienced a significant contraction. The decline in Egypt was the sharpest among all the economies monitored in the survey in September.
Commenting on the results, Andrew Harker, Economics Director at S&P Global Market Intelligence, said: “The acceleration in global economic activity seen throughout the third quarter continued in September.”
“The strong increase in economic activity in the U.S., with growth reaching its fastest pace in more than five years, was a major factor behind this acceleration. The improvement in operating conditions was not limited to the U.S. The number of European economies recording expansion increased, while the UAE led the way in terms of growth. Manufacturers hope that the recent improvement in export demand will continue throughout the remainder of 2026,” he added.
The Atlantic puffin, barn owl, buff-tailed bumblebee and European hedgehog will feature on the next series of banknotes, the Bank of England has announced.
The first denomination from the new series will be launched over the next few years, the bank said.
It added that the process of designing, testing and printing banknotes to make sure they are high-quality, resilient and accessible takes years.
As the designs are only in very early stages, they will be unveiled closer to their launch.
The decision on which animals to include was made after nearly 500,000 people responded to a public consultation.
They chose from a shortlist of 18 options across three categories – mammals, birds, and amphibians, insects and fish – developed in collaboration with a panel of U.K. wildlife experts.
The bank used the feedback from the consultation to decide on the four animals. There will be one for each denomination of banknote.
The barn owl, buff-tailed bumblebee and European hedgehog were the most popular animals in their respective categories.
The bank said that the Atlantic puffin was selected because it was the most popular marine animal.
It said the inclusion of a marine animal will add variety to the series, making the denominations easier to distinguish and giving an opportunity to celebrate the British coastline.
The red fox, which was in the mammals category, received more nominations than the Atlantic puffin, with 244,651.
In the birds category, the common kingfisher also received more nominations than the Atlantic puffin, at 211,277 compared with 183,137 for the Atlantic puffin.
The bank has said previously it would not necessarily choose the four animals that receive the highest number of responses.
It said that is important the animals represent different environments from across the U.K.
The bank said the decision on which selected animal will feature on which denomination will be made in due course and announced closer to launch.
The animals selected will feature as the central imagery but the bank said other elements from nature will also be included.
Other shortlisted animals may also potentially be included to complete the designs, it added.
Historical figures who have helped shape thought, innovation, leadership and values have been showcased on Bank of England banknotes since 1970.
The first of the current series has been in circulation since 2016, when 5 pound banknotes featuring Winston Churchill were issued.
The current series of banknotes in circulation also features Jane Austen on the 10 pound banknote, JMW Turner on the 20 pound and Alan Turing on the 50 pound.
The rise in payment technologies such as contactless and mobile wallets has given people an increasing array of alternatives to banknotes and coins.
On June 3, the bank launched a consultation asking the public which animals they would prefer to see used as the central images on the next series of banknotes.
The consultation ran for a month and received 478,531 responses.
The bank said it is the most responses that it has ever received to a banknote imagery consultation.
Those responding placed 2,549,003 selections across the shortlist of 18 animals.
The next series of banknotes will also continue to include a portrait of the monarch.
Victoria Cleland, Bank of England chief cashier, said: “I am delighted that nearly half a million people responded to our wildlife imagery consultation, showing that cash still matters.
“I would like to thank everyone who engaged, including those who I met at our events.
“With their support, we have chosen four distinct and inspiring animals that not only showcase the great variety of wildlife we have in the U.K. but will also enhance the security of our banknotes.”
Rhys Phillips, the bank’s incoming chief cashier who will be responsible for delivering the new series of notes, said: “It’s fantastic to see how engaged the public have been in this choice.
“With these animals as the focus for the design, we can deliver a new series of banknotes that are secure and represent the U.K. at its best.
“We’ll now work to design, test and produce the banknotes, combining the imagery we’ve announced today with cutting-edge security features and materials science.”
The shortlisted animals for the 2026 wildlife imagery consultation are below, with the number of nominations they received in brackets:
Mammals
European hedgehog (259,665) Red fox (244,651) Brown hare (130,614) Grey seal (92,043) Pine marten (82,773) Bottlenose dolphin (48,847)
Birds
Barn owl (270,596) Common kingfisher (211,277) Atlantic puffin (183,137) Great-spotted woodpecker (86,839) White-tailed eagle (46,109) Eurasian curlew (44,521)
Amphibians, insects and fish
Buff-tailed bumblebee (360,399) Emperor dragonfly (143,894) Common frog (120,382) Marsh fritillary butterfly (108,467) Basking shark (69,699) Atlantic salmon (45,090)
-
Politics3 days agoTürkiye condemns Israel’s deepening incursion into Syria
-
Politics2 days agoTurkish police detain 14 suspects linked to Daesh, al-Qaida
-
Economy2 days agoOver $16B shifted into deposits amid fund exits: Turkish central bank
-
Economy2 days agoTürkiye sets new record for solar, wind power generation
-
Economy1 day agoInside Türkiye’s plan to repay investors caught up in fund turmoil
-
Politics2 days agoMecca Alliance activates collective deterrence over Saudi attacks
-
Economy2 days agoCBRT chief vows cautious stance to preserve disinflation gains
-
Economy3 days agoAnthropic chief’s pay puts him mid-pack among top tech CEOs