Banking Sector Deposits Bleed While Credit Volume Hits New Highs

The latest weekly money and banking statistics released by the Central Bank of the Republic of Turkey (TCMB) reveal a significant liquidity shift and aggressive credit growth deep within the financial system. For the week ending July 31, while a notable contraction was observed in the banking sector's liabilities on the deposit side, the asset side saw a rapid expansion in credit volume, with personal credit usage gaining notable momentum. These data send critical signals to smart money regarding changing dynamics in risk appetite and funding costs.

Deposits Erode, FX Assets Decline

The sector's total deposit volume contracted by 13 billion 621 million 611 thousand lira compared to the previous week, falling to 32 trillion 379 billion 318 million 37 thousand lira. This contraction reflects a general trend of decline in both local currency and foreign currency assets.

■Turkish Lira deposits decreased by 0.53% on a weekly basis, settling at 17 trillion 821 billion 6 million 486 thousand lira.

■Foreign currency (FX) deposits saw a 0.82% decline, dropping to 10 trillion 413 billion 374 million 594 thousand lira.

■Total FX deposits in banks stood at $260 billion 81 million, with $220 billion 346 million belonging to domestic residents.

■Adjusted for parity effects, domestic residents' FX deposits recorded a net outflow of $3 billion 548 million last week.

Bold Expansion in Consumer Lending

Contrary to the withdrawal on the deposit side, the banking sector's total credit volume surged by 442 billion 523 million 969 thousand lira in the week ending July 31, reaching 26 trillion 740 billion 928 million 993 thousand lira. Consumer loans and credit card spending are the primary drivers of this growth.

■Consumer loans for domestic residents increased by 2.6% compared to the previous week, rising to 6 trillion 845 billion 268 million 103 thousand lira.

■Credit card balances constitute the largest share of total consumer loans, reaching 3 trillion 422 billion 137 million 913 thousand lira.

■Personal loans stood at 2 trillion 565 billion 831 million 862 thousand lira, housing loans at 815 billion 312 million 722 thousand lira, and vehicle loans at 41 billion 985 million 606 thousand lira.

Smart money interprets the expansion of credit volume by around 442 billion lira against the erosion of deposits by 13.6 billion lira as a clear signal that banks are increasing risk appetite in balance sheet management and changing liquidity composition. In particular, credit card volumes exceeding 3.4 trillion lira indicate a tightness in cash flow on the individual side and consequent upward pressure on financing costs. This spread reflects that banks' efforts to protect net interest margins have sustained uninterrupted credit supply despite deposit outflows.