Page 68 - TURKRptJun19

expansion took place in an environment in which the Turkish economy boomed, demand was strong and external conditions were very favourable for taking out cheap loans. But when the tide turned, as Turkey experienced its currency crisis last summer, energy companies found themselves in a very difficult position with the cost of FX-denominated debt soaring. The currency mismatch resulting from the Turkish lira collapse means that energy companies’ costs are in foreign currency—mostly US dollars—while their revenues are in Turkish lira, which has fallen nearly 13% in value against the USD so far this year, after plunging nearly 30% last year.
According to state-run news service Anadolu, the banks have provided $70bn of financing to energy projects. Investors have repaid $23bn but the repayments of the financing balance of $12-13bn have become problematic. As a solution, banks authorised a refinancing scheme in the last two years to recuperate the $12-$13 bn, leaving a $2bn outstanding debt which necessitated the creation of the fund to manage those non-performing funds. This year will be difficult for the energy companies and the Turkish economy, thus prospects in the near term are not bright for the companies operating in the energy industry.
Arkas Holding said on April 15 it has secured an $800mn refinancing loan from 18 banks headed by Yapi Kredi. The loan has a one-year grace period for a total maturity of five years, it added. The lenders also include Turkey’s Vakif Bank , Ziraat Bank, Akbank Garanti Bank and Is Bank. Arkas provides port operations and logistics services, and also operates in the automotive and tourism sectors. Turkey’s banking industry is a somewhat fraught environment presently, with the country attempting to avoid a reoccurrence of the currency crisis that broke out last summer, causing a collapse in demand that has pulled the economy into a recession.
Isbank sells TRY418mn of NPLs for TRY30mn. Isbank, Turkey’s largest private lender by assets, has sold TRY418.4mn ($69mn) of its non-performing loans (NPL) to asset management companies Efes Varlik Yonetim and Gelecek Varlik Yoneyim for TRY30mn in cash. The bank said in a filing with the stock exchange that it held a tender to offload the NPLs in question. According to an investor presentation on the bank’s website, Isbank’s bank- only and consolidated NPL/total loan ratios stood at 5.1% and 4.9%, respectively, as of end-March. The lender’s total assets stood at TRY426bn, up from TRY416.4bn at the end of 2018. Loans extended by the lender amounted to TRY271bn versus TRY269bn liras at end-2018 while deposits collected by the bank increased to TRY254bn from TRY245bn. As of the first quarter, Isbank had the largest shares in Turkey’s loan and deposit markets with 10.6% and 11.6%, respectively. Many observers expect that local banks’ bad loans can only spike amid Turkey’s economic strife. According to the banking watchdog’s (BDDK) monthly report, NPLs grew by 10% as of end- March compared to the end of 2018 to stand at TRY106bn whereas the banking industry’s overall loan volume expanded 5.2% to TRY2.5bn. This loan growth was due to the credits three state-owned lenders pumped into the system to revive consumer demand and keep troubled companies afloat. However, the government’s efforts, in the form of cheap credits and tax reductions, for instance, appear to have failed to produce the hoped-for results. A recent survey suggested that the next set of GDP figures will show that Turkey's economic output shrunk 2.5% in the first quarter, which would indicate more trouble ahead for local lenders.
68 TURKEY Country Report June 2019 www.intellinews.com