Hakan Binbaşgil, CEO of one of Turkey's largest banks, recently spoke with Burak Tansan, a partner and managing director in the Istanbul office of The Boston Consulting Group and head of the firm's Turkish operations, on how to transform a major bank for the challenges of the future.
I’m with Mr. Hakan Binbaşgil, CEO of Akbank. It’s a great pleasure to have you with us to talk a bit about your experience, your story at Akbank, and the great success story that you have demonstrated throughout the years. Just a bit of background about yourself and how you joined Akbank.
In 2002, I joined Akbank. The reason for that was the transformation of the bank. At that time, Turkish banking had a different business model, high inflation rates, and so on. But that was not sustainable, so the reason I joined was to prepare the bank for low inflation rates, a more competitive framework, and more customer-focused requirements. That’s what I did for the first initial years.
I remember those days. It was a pretty chaotic time in Turkey. We had just come out of a crisis. So your role was to transform Akbank into a different type of a bank. What were the key pillars of that transformation, which you executed successfully?
Actually, I guess the customer focus side was the most critical element. Because in the past, what banks used to do in Turkey was to collect deposits and actually use that funding in T-bills and T-bonds. That was actually the basic business, and it was a very profitable business. Now, the economy is different. At that time, the government was probably the only, or [at least] the major customer for every bank in the country. That was not sustainable, so we had to focus more on real customers, meaning corporate, commercial, SME, consumer, as well as private banking. We did that segmentation and almost changed [our] whole way of doing banking.
We changed all distribution—physical and digital—and aligned our operations, risk management, applications inside the bank, our HR technology, and even the corporate identity itself. So it was a huge, typical “consultancy” job that we did.
The main goal was to significantly increase the share of customer-driven business within the overall portfolio?
Can you give us some numbers—what it was at that time and what it is right now?
I guess for a typical bank, roughly, I would say 70 to 80 percent of the revenue base was actually coming from those treasury operations, 20 to 30 percent coming from customer operations. I think it’s just the opposite now. So it’s 20 to 30 percent coming from the treasury versus 70 to 80 percent coming from the customer base.
Akbank was not an unsuccessful bank. Even after the crisis, it was one of the few banks making money. And when you went in, you were changing a model that many people internally still thought was successful. So it was probably a challenge. What were the key challenges that you faced when you started this transformation program?
You are right, actually. I think what should be appreciated is the shareholder position, the board position at that time. Akbank was standing out with its profitability, sound asset quality, and still-high capital-adequacy ratio, which were lacking in many banks in Turkey. I think this courageous decision is something that should be appreciated. It was something visionary and affordable for the shareholder—to start transforming the bank.
Of course, change is difficult. Change is difficult everywhere. At the very beginning, there are only a few people supporting change. But we were very keen on it, actually. Change is also a very long process. If you start seeing the benefits of that change at the early stages, it gives you some confidence, not only for those people who are executing but even for those people who are skeptical about the change. Maybe if you start with a few people at the top level, then two people, four people, eight people, sixteen people, and so on, all of a sudden you’ll see this [support] changing your organization.
I think this is a great success story in terms of the transformation, because when you look at the evolution of the market share of the company, the sophistication level of the IT, and the HR capabilities, they have all gone in a very positive direction. The valuation of the bank proves that. So going forward, what are the key challenges for you from now on? I think the first part of this major transformation is complete, but what are the next challenges? What keeps you awake at night?
You are right. Sustainability is very important. What we have done is “so far so good.” We have to continue with that. We have to keep on shaping the company, because globally and domestically, things are changing. Technology will be one of our key focus areas. But maybe I should put people first—people, talent, digitization are extremely important. Mobility is one of our key focus areas. I think this is the way forward. On the other side, of course, we have certain challenges, both global challenges and domestic challenges. We all know the global challenges.
Still, the Turkish banking system will continue to grow. The growth may not be as big as in the past, and this is something that we'll have to cope with in the future. On top of that, regulation risk has been increasing over the last several years and it keeps on coming. Therefore, somehow we have to adjust to that. We cannot stop, especially as this is the life of emerging markets. Imagine a country growing by 15 to 20 percent every year. You can be a leader today, but if you fall behind—in a couple of years’ time, you can easily end up a midsize player. We have to make sure we keep up things, good motivation, reading the markets properly. That is also very important. There is tremendous volatility.
At the end of the day, sustainable ROEs, profitability—that’s bottom line. It’s a very difficult equation, but I think we have a good team, so I’m quite positive for the future despite all these challenges.
I’m sure you won’t be bored. Congratulations on a great story. Thank you very much for being with us.