Page 13 - TURKRptSept19

10% at end-June 2019. However, we do not expect them to push hard in the short term to qualify for the preferential reserve requirements and remuneration rate,” Fitch said. According to the rating company, most banks have a limited appetite to accelerate loan growth given the volatile operating environment in Turkey and the incentives are unlikely to sway them. “We believe that the lower reserve requirements will have limited appeal as most privately owned banks have good liquidity, helped by slow growth or deleveraging since 2Q18. The potential boost to profitability would be moderate,” the rating agency said. Loan growth will largely be driven by other factors, predominantly the macroeconomic environment and interest rate levels, according to Fitch.
“State-owned commercial banks, representing about a third of the sector, already recorded lira loan growth of 10%-20% at end-1H19. They will therefore benefit immediately, getting a liquidity boost from the lower reserve requirements and a profit boost from the higher reserve remuneration rate at a time when their profitability has weakened relative to privately owned banks,” it added.
Fitch, however, did not expect the extra liquidity to lead to a surge in lending by state banks as lira loan growth above 20% would disqualify them from the preferential reserve requirements and remuneration rate.
Rifat Hisarciklioglu, president of The Union of Chambers and Commodity Exchanges (TOBB) that represents mostly small and medium sized companies, called on private banks in Turkey to lower loan interest rates in response to the country’s three state-owned lenders slashing their lending costs. However, there is no sign that the private lenders are preparing to cut their lending costs or that they are ready to turn the credit taps on given that the country’s economy is not yet out of the woods.
Data from banking regulator BDDK show that loans to small and medium sized companies declined to TRY626bn as of June versus TRY653bn a year earlier with the amount of NPLs for this segment jumping to TRY52bn from TRY31bn.
A poll of 13 economists has concluded that Turkey's annual inflation rate is expected to slip to 15.51% in August thanks to the "base effect" measured against last year's spike. Monthly inflation is, however, expected to grow due to higher cigarette and natural gas prices.
The August inflation data is to be released on September 3 at 07:00.
The polled economists gave year-on-year August inflation estimates ranging between 14.60% and 15.96%. Month-on-month, inflation was expected to rise 1.3% in August, the poll also showed, with estimates ranging between rises of 0.5% and 1.69%.
Tobacco companies raised some cigarette prices as of August leading to a raise of around three lira per pack.
In August, Turkish state energy company Botas raised natural gas prices by an average of 14.97% for residential users.
Natural gas prices was hiked by another 15% effective as of September 1.
The median estimate for inflation at the end of 2019 produced by the poll stood at 14.05%, below the government's estimate of 15.9%.
2.2 INSIGHT: Consumer hump, factory slump
Turkey’s calendar-adjusted industrial production index contracted for a tenth consecutive month in June, shrinking 3.9% y/y, data from national
13 TURKEY Country Report September 2019 www.intellinews.com