Page 66 - TURKRptJun19

8.1.4 NPLs
Deadlocked: Turkish bankers ‘strongly disagree’ with Goldman Sachs and other global investors in talks on offloading NPLs. Serious disagreements broke out between Turkish bankers and international investors during talks on offloading non-performing loans (NPLs) from lenders’ balance sheets, Bloomberg reported on May 16, citing people who attended the discussions last week. Goldman Sachs investors attended the talks as did representatives from private investment firms including US-based Bain Capital. But the investors and the bankers apparently could not break the deadlock when it came to the price and structure of each potential transaction on distressed loans. There was even disagreement on the definition of an NPL, one meeting attendee reportedly said. Some participants questioned whether more talks would take place at all, the newswire report said. It added that investors sought a 30% discount on the face value of the loans as a condition for taking part in the offloading plan, while also demanding stakes in troubled assets. Turkish bankers attending the meetings reportedly refused to write off loans and said they should be restructured instead.
Turkish Treasury and Finance Minister Berat Albayrak announced plans in April to deal with the troubled loans of the country’s severely embattled energy and real estate industries. The currency crisis Turkey went through last summer, and which threatens to re-emerge, and the subsequent recession have left huge numbers of companies in Turkey struggling to meet payments on loans, particularly when it comes to FX- denominated credits.
Reports suggest Turkish companies have requested that banks restructure at least $30bn of loans. Goldman Sachs has previously warned Turkish banks face capital depletion should the Turkish lira continue to slide against the dollar. Last summer, it said major Turkish banks could see their capital largely eroded should the currency weaken to 6.3 against the USD. By the end of May 16, it was trading at around 6.04 having lost around 13% of its value in the year to date.
Turkish corporates’ FX borrowing exceeded $310bn as of February. That is equivalent to nearly 40% of the country’s GDP. When subtracted against the companies’ foreign exchange assets, the debt totals towards $200bn.
The NPL ratio at Turkish banks rose to 4.2% in the wake of last year’s currency crisis and is expected to reach 6% by year-end, according to finance ministry data.
In April, the European Bank for Reconstruction and Development (EBRD) said it was ready to help with Turkish banks’ NPLs.
66 TURKEY Country Report June 2019 www.intellinews.com