Page 47 - TURKRptAug20

project,” one senior banker was quoted as saying.
Turkey’s bad debt problem has been simmering for nearly two years. Any further delay in resolving it could leave Turkey’s economy more vulnerable ahead of an expected wave of loan losses resulting from the coronavirus (COVID-19) crisis.
At $22bn, Turkey’s NPLs have remained high since the 2018 Turkish lira crisis exposed the heavy reliance of the country’s construction and energy companies on foreign debt, noted Reuters.
With Turkey’s normally fast-growing economy expected to shrink by as much as 5% in this coronavirus-afflicted year, S&P Global Ratings has forecast that its NPL ratio could grow to 12% by 2021 from 4.5% at present.
If the AMC was set up, Turkish banks would be expected to shift some of their NPLs into the AMC and jointly manage it.
“If the difference between the book value and the transfer price is significant then some of the banks may opt not to participate,” Filippo Alloatti, a senior analyst at Hermes Investment Management, was cited as saying.
Another top banker reportedly said that there were “different opinions between lenders”, with some seeing no value in transferring their NPLs, while others said ensuring only modest losses on the loans would be crucial to get banks on board.
Turkish banks mark the value of loans on their books to maturity, making provisions for them depending on how badly impaired they are, effectively how likely a borrower is going to repay or the bank is going to be able to recoup the money.
Another factor which could help determined whether banks decide to participate in the bad bank is the involvement of stakeholders such as the European Bank for Reconstruction and Development (EBRD) and the World Bank’s International Finance Corporation (IFC).
The EBRD supported the bad-bank initiative, as well as other solutions, to address Turkey’s “urgent” NPL issue after much delay, Catherine Bridge Zoller, senior counsel in the EBRD’s financial law unit, told Reuters.
However, all industry and government stakeholders must coordinate to adopt regulatory and legal changes that would open the market to foreign investment, Zoller added.
The combined net profit of the Turkish banking industry increased by 24% y/y to Turkish lira (TRY) 27.3bn ($4bn) in January-May​, data from banking watchdog BDDK ​showed​.
Profit in the sector is being driven by state banks fuelled by government budget financing. More prudent private lenders are reporting declining profits, with their market shares in banking declining as the public banks’ proportion of lending booms.
Total assets of the sector amounted to TRY 5.3trn, up 24% from the same period last year and rising nearly 18% compared with the end of 2019. Loans grew 24% on an annual basis to hit TRY3.1trn in the first five months while the non-performing loans (NPL)/total loans ratio rose to 4.54% versus 4.18% a year ago.
Deposits collected by local lenders rose 31% y/y to TRY3trn.
47​ TURKEY Country Report​ August 2020 ​ ​www.intellinews.com