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for Reconstruction and Development (IBRD), would come together in a closed- door meeting organised by PwC to discuss the destiny of the already huge and still growing non-performing loans (NPLs) portfolio of Turkey’s lenders.
Foreign-held lenders account for around a quarter of the Turkish banking industry’s total assets. Erdogan needs to soon recognise that “once lost, investor confidence is difficult to restore”, Desmond Lachman wrote on May 8 in an op-ed entitled “Turkey demonstrates how to bungle a currency crisis” for The Hill. He added that making that realisation “might induce him to do something radical like call in the International Monetary Fund for help or fire his minister of finance to show that he has become serious about breaking the downward economic spiral. If he does not do that the rest of the emerging market economies and the Spanish banking system should brace themselves for economic shock waves coming from a Turkish debt default.” Spain’s BBVA bank has the highest exposure to the Turkish banking industry among foreign lenders as it holds 49.85% of Turkey’s largest private lender, Garanti. BBVA Research has remained extremely optimistic over Turkey’s economic and monetary policy outlook, while its chief economist Alvaro Ortiz gets an A for his effort on Twitter to convince popular commentators on Turkey that the country’s inflation will fall and GDP won’t contract at the same time. ING Bank has a relatively lower exposure to Turkey compared to BBVA and its research team simply moves along with any possible market friendly comments or developments in a more non-committal way. Italian lender UniCredit has exposure to Yapi Kredi Bank, one of the largest private lenders in Turkey.
According to a survey released on April 30 by the Loan Market Association (LMA), foreign lenders see the most opportunities for syndicated lending in Turkey when it comes to CEE and CIS countries this year. Some 28.6% of LMA members saw Turkey as offering the most opportunities, followed by Poland with 27.4% and Russia with 23.8%. “There isn’t a lot of [domestic] lending so the banks don’t have huge funding needs. Generally, we’re seeing smaller rollovers, but there’s no indication that the market won’t be happy to lend to them. The banks are still reasonably well capitalised,” Arvid Tuerkner, managing director for Turkey at the EBRD, told Global Capital.
“Progress undone” The Institute of International Finance (IIF) on May 6 observed its EM Growth Tracker that “the recent credit expansion in Turkey has undone a lot of progress made last year in reducing the current account deficit and external vulnerability”.
On May 8, the EBRD said in a press release that it has bought a $100mn stake in Ictas Surdurulebilir Enerji Yatirimlari, the renewables arm of Turkey’s IC Energy Holding. Ictas operates 10 hydropower plants with a total capacity of 400 MW. With EBRD funds, it plans to invest in wind farms and solar projects with a combined capacity of up to 250MW. The EBRD investment will also partly finance the recent privatisation of the Kadincik hydropower plants in Mersin. The development bank is a leading institutional investor in Turkey. It has invested over €11bn in 283 projects in the Middle East’s largest economy since 2009. Of course, the crimes against humanity committed by the Erdogan regime since 2009 would be too numerous to list here. Such is the reality.
“Too big to walk away from” “It’s not ideal—no one wants to see another political back and forth in an already troubled market. But [Turkey’s] banks will still be able to continue their international refinancings. If things continue to be rocky, maybe margins will widen again, but the [lender - borrower] relationships and ancillary business that Turkish banks guarantee are too big to walk away from,” an unnamed loans banker at a European firm told Global Capital. “Turkey has shown some recovery since last summer’s crisis. The Turkish banks repriced their semi-annual borrowings—they’re not back to the previous levels but there is some recovery as deal volumes remain strong,” Penelope Smith of Commerzbank remarked to the publication. International lenders also demonstrated their teflon commitment to Turkish banks during the
43 TURKEY Country Report June 2019 www.intellinews.com