Analysis of credit risk management in terms of banking types in Turkey

The banks, which perform more than one transaction in the financial sector in various fields, encounter different risk groups all the time due to the abundance of the transactions that they perform and their work obligations. Thus, the banks are always with risks and they have to struggle against those risks. The credit transactions, which are among the significant activities of the banks, introduce the credit risk alongside themselves. The credit risk emerges due to the failure and inability of the firms or indi-vidual customers the loans that they have taken from the bank on time and their failure to follow the terms located in the loan agreement. It is not possible not to have any cred-it risk. Thus, it is important to manage the credit risk properly and efficiently for the banks. Also, the change of the conditions increases the competitive environment. Thus, the banks need to give out loans to maintain their existence by adapting to the competi-tive environment. However, if the given loans are managed well, they provide revenues for the banks. This study attempts to determine the factors that affect the credit risk of the banks through the applied analyses, by discussing the banking sector and addressing the credit risk, types of risk and measurement and measurement method of the credit risk, with the purpose of determining the variables that would reveal the credit risk of the private and publicly funded banks operating in Turkey in the years between 2007 and 2017. In this study, the Logit and Probit Regression Analyses are conducted by access-ing the financial data at the Turkish Association of Banks website of the years between 2007 and 2017 that belong to Türkiye Cumhuriyeti Ziraat Bankası A.Ş., Türkiye Halk Bankası A.Ş, Türkiye Vakıflar Bankası T.A.Ş. which are classified as publicly funded deposit banks, and Akbank T.A.Ş, Anadolubank A.Ş., Fibabanka A.Ş., Şekerbank T.A.Ş., Turkish Bank A.Ş., Türk Ekonomi Bankası A.Ş., Türkiye İş Bankası A.Ş., Yapı ve Kredi Bankası A.Ş. which are classified as privately funded deposit banks. Despite the fact that there are 3 publicly funded deposit banks, and 9 privately funded deposit banks in Turkey, as there is no continuity regarding the data that belongs to Adabank A.Ş., which is located within the group of privately funded banks, it is not included into the study. Two models are developed for the nonperforming loans and the loan and re-ceivables accounts, it has been observed that for Model 1, according to the Logit Mar-ginal Impact results, the variables of Total Deposits / Total Assets (X15), Total Reve-nues / Total Expenditures (X41), Total Assets Per Branch (X52) had a marginal impact in the positive direction, and the variables of Interest Revenues / Interest Expenditures (X40), Interest Expenditures / Total Expenditures (X45), Total Deposits Per Branch (X53) had a marginal impact in the negative direction. And according to the results of Model 2, it has been observed that while the variables of Shareholders Equity / Deposit + Non-Deposit Sources (X4) and Total Deposits (X48) had a marginal impact in the positive direction, the variables of Capital Adequacy Ratio (X1), Deposits in Turkish Lira / Total Deposits (X13), Net Profit – Loss / Paid Capital (X33) had a marginal im-pact in the negative direction. Keywords: Turkish Banking Sector, Nonperforming Loans, Loans and Receiva-bles, Logistic Regression, Credit Risk.