Page 17 - TURKRptOct19

cited by Bloomberg said.
Isbank has sold Turkish lira (TRY) 1.1bn ($195mn) of non-performing loans (NPLs) at 3% of their face value, or TRY 32.4mn, in an auction to firms including Efes Varlik Yonetim and Hayat Varlik Yonetim, the private lender said in a filing with the Istanbul Stock Exchange late on September 26.
Turkish banks are working through an increasingly burdensome pile of bad loans following the currency crisis of summer 2018 that pushed Turkey’s economy into a deep recession. Much of the debt is denominated in foreign currency.
Last month, another private bank, Garanti Bank, sold TRY 260mn of NPLs for TRY 18.5mn, or 7.1% of face value. The buyer was Gelecek Varlik Yonetim.
Turkish banks have some Turkish lira (TRY) 296bn ($52.4bn) in “Stage 2 loans”—loans for which the risk of non-payment has increased significantly— on their books a banker briefed Reuters on September 30. Between 15-20% of that total would become non-performing loans (NPLs) under a “worst case scenario,” he reportedly added.
Banks are exploring strategies to hang on to the loans long enough to extract some profit. One method might be the creation of an asset management company (AMC), sometimes referred to as a “bad bank,” to house higher- quality NPLs.
Two weeks ago, Turkey’s banking watchdog issued a directive for banks to reclassify as NPLs some TRY46bn in debt.
Turkey’s finance minister Berat Albayrak on September 30 had that move in mind when he remarked that steps taken by the government would give banks a “clean slate” to begin lending again and that it was time once more for private banks to take a “proactive role” in extending credit. But there are market anxieties that the government, which has grown impatient with the lack of lending, does not grasp the extent of the debt mess the country’s banks are in. Lenders were left staring at a huge pile of sour and souring loans after last year’s lira crisis put companies with local currency revenues in a position where they were unable to make payments on FX-denominated debt. Turkey slipped into recession in the wake of the currency crunch but ministers are now determined that a new wave of borrowing should help get its economy roaring again. GDP growth of 5% is targeted for next year.
Turkish banks held some TRY124bn in NPLs at the end of August, up from TRY79.5bn a year earlier.
Two senior bankers told Reuters that big lenders may not completely abide Ankara’s most aggressive move so far, namely the demand to reclassify the TRY46bn of loans. The private banks were disappointed by the government decision to not put forward any of its own money in resolving the debt dilemma. Before the BDDK made its reclassification-of-loans announcement, the big lenders had already reclassified as NPLs some TRY10-15bn lira worth of the loans, the quoted sources said. They added that the rest covered by the directive may not be reclassified, in part because banks have restructured part of it.
“This BDDK decision should be interpreted as leaving it up to the banks to decide,” one of them was cited as saying.
Turkey’s private banks better positioned than public banks to weather asset quality troubles says Fitch. Turkey's privately-owned domestic systemically important banks (D-SIBs) are generally better positioned than three state-owned peers against a potential marked deterioration in asset quality, Fitch Ratings said in a latest stress test report.
17 TURKEY Country Report October 2019 www.intellinews.com