Page 34 - TURKRptMay20

At the nadir of the 2018 crisis, the lira was trading at all-time lows in the 7.20s.
Traders are the most bearish on the lira relative to the South African rand (ZAR) in 10 months, based on the cost of hedging against declines using put options, Bloomberg reported on April 16.
The rand has slumped 25% against the dollar this year compared with the lira’s 14% decline—but South Africa’s authorities don’t intervene in the currency market.
“TRY is the new ZAR”​. Turkey may run out of ammunition to defend the lira, given dollar-debt redemptions in coming months that will weaken the currency, according to Luis Costa of Citigroup said in a note to clients. “TRY is the new ZAR,” he added.
The cost of buying protection in hedging against swings in the lira for the next three months is now more than 11bp above the currency’s historical volatility, near the widest premium in data spanning over two decades, Bloomberg reported on April 21.
“The Turkish central bank has been fighting like crazy to keep the dollar-lira pair below 7, which often seems like a losing battle,” said Brad Bechtel, global head of foreign exchange at Jefferies in New York. “They continue to fight but the market continues to push against them and it feels only a matter of time before they are forced to capitulate.”
8.0​ Financial & capital markets 8.1​ Bank sector overview
8.1.1​ Earnings
The combined net income of Turkey’s banks stood at TRY15.13bn (€2.1bn) for the first two months of this year, marking a 133% increase from a year ago, data from banking watchdog BDDK showed on March 30.
Loans extended by lenders grew 4.4% from end-2019 to TRY2.77trn while the industry’s combined assets increased nearly 5% in the period to TRY5.7trn.
The watchdog reported that the non-performing loans (NPLs)/total loans ratio was 5.2% as of end-February while the capital adequacy ratio in the banking industry averaged 17.7%. There is a question mark as to whether the height of the income gain has been achieved on paper, but won't be achieved in reality further down the line as many loans in the Turkish banking system are seen by analysts as likely to be classified as NPLs at a future date. Officials are presently treading carefully, allowing the banks plenty of leeway in terms of what they need to classify as an NPL, given the fragile state of the Turkish growth picture and, since March, the big impact of the coronavirus (COVID-19) pandemic.
Deposits collected by local banks increased 4.7% from the end of last year to stand at TRY2.7trn as of end-February.
34​ TURKEY Country Report​ May 2020 ​ ​www.intellinews.com