Performance Analysis of the Turkish Islamic Banking Sector

Regularly examining and assessing banks is essential to maintaining the stability of a country's, region's, or special economy's financial systems. This study examines Islamic banks in Turkey. Turkey plays a significant role in the economic stability of its region, and a strong banking system is crucial for financial stability. Based on data from the Bank Association of Turkey's online database (Türkiye Bankalar Birliği, 2021), a CAMEL-type analysis was conducted that considers financial stability, operational efficiency, and credibility. The CAMEL technique not only ranks the participating banks, but also provides recommendations. The results suggest that Turkish banks should review their expenses and develop more efficient operational strategies. They should also monitor and reduce their cost-to-asset ratios to improve business performance. Turkish banks are encouraged to study successful banks to improve their efficiency and profitability. Improving cost efficiency and using assets more efficiently are also key to improving banks’ profits. Furthermore, it was concluded that Islamic Turkish banks could benefit from reducing their loan-to-deposit ratios and increasing their liquid asset ratios. This would reduce liquidity risk and facilitate lending activity. In conclusion, Islamic Turkish banks should work to reduce their loan-to-deposit ratio and increase their liquid asset ratio. This would reduce liquidity risk and facilitate lending.