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We Are Different: The Drivers of Asset Quality in Loan Type and Sectoral Breakdowns

Author

Listed:
  • Mehmet Selman Colak
  • Yavuz Kilic
  • Huseyin Ozturk
  • Mehmet Emre Samci

Abstract

This study employs model averaging methods to analyze the determinants of non-performing loans (NPLs) in the Turkish banking sector. The characteristic drivers of NPL are examined separately for different loan types categorized by customer segments (consumer loans, corporate loans, SME loans, mortgage loans, credit cards, general purpose loans, vehicle loans) and sectors (manufacturing, agriculture, construction etc.). Our results confirm that asset quality, proxied by NPL ratio of different loan segments, and economic sectors present unique relations with macroeconomic and banking variables. We conclude that customized risk management practices may bring significant benefits given that credit risk in different subcomponents of the economy responds to macroeconomic and banking variables differently.

Suggested Citation

  • Mehmet Selman Colak & Yavuz Kilic & Huseyin Ozturk & Mehmet Emre Samci, 2025. "We Are Different: The Drivers of Asset Quality in Loan Type and Sectoral Breakdowns," Working Papers 2504, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:2504
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2025/25-04
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    More about this item

    Keywords

    NPL ratio; Loan segments; Emerging economies;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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