A market stability fund within the government-controlled investor bought debt issued by the lenders under a recapitalisation programme announced last week, which will see a further EUR 400 million flow to Islamic banks.
Sunday 28, April 2019
(Bloomberg) --Turkey’s sovereign wealth fund bolstered the capital ratios of five state-owned banks by TRL 3.3 billion ($3.7 billion) in a bid to keep credit flowing in the recession-hit economy.
President Recep Tayyip Erdogan’s administration is seeking to rekindle growth with cheap loans, while tasking the firms with salvaging industries and helping consumers in the hopes that private firms will follow.
Ates Buldur, a Banking Analyst at Credit Suisse Group’s Istanbul unit, said, “The plan isn’t creating fresh cash for the state banks, it’s turning one liability in the state banks’ balance sheets to another liability so that their capital adequacy ratios will increase, enabling them to have more lending power without an erosion in their capital buffers.”
Capital ratios have fallen as the country’s lenders have undertaken nearly $28 billion in debt-restructuring requests.
Turkish lenders are also facing a growing pile of bad loans in the wake of the currency’s plunge last year, which has spurred inflation and increased funding costs. The government last year recapitalized three of its banks by selling bonds to its unemployment fund.
State-owned lenders rushed to extend loans before municipal elections at the end of March as their commercial and international peers pulled back. That helped increase their market share by three percentage points to 43 per cent between August and the end of February.
Ziraat Bankasi received the most, selling EUR 1.4 billion of bonds and Turkiye Halk Bankasi signed an agreement with the fund for a five-year loan of EUR 900 million, the first interest payment of which will be made at maturity.
Additionally, the fund invested in Turkiye Vakiflar Bankasi TAO’s issuance of EUR 700 million of five-year subordinated bonds. Vakifbank bonds have 5.08 per cent coupon rate, although the Treasury earlier said they would have a zero-coupon.
Similarly, Development bank Turkiye Kalkinma ve Yatirim Bankasi , which is being restructured, and Eximbank, signed agreements for five-year subordinated loans of EUR 150 million.