Page 6 - TURKRptOct19

cited anxieties about bad debts in the country’s corporate sector, low foreign currency reserves and heavy reliance on foreign financing, as well as a new problem, namely a growing fiscal deficit.
“Growth has rebounded, aided by policy stimulus and favourable market conditions, following the sharp lira depreciation and associated recession in late-2018,” the IMF said. “The lira has recovered and the current account has seen a remarkable adjustment.”
However, the institution said Turkey “remains susceptible to external and domestic risks” while “prospects for strong, sustainable, medium-term growth look challenging without further reforms”.
The IMF also took the view that the central bank’s decision to slash rates by 750 bp since July was “too aggressive”. It further advised that the reduction made in reserve requirements for banks that meet certain lending targets “should be revisited”.
Attempts to expand lending, the IMF said, “should be limited and should also ensure that resulting credit is provided only to viable borrowers”.
The IMF also remarked that additional steps to clean up bank and corporate balance sheets would support financial stability and stronger and more resilient growth over the medium term.
Banking watchdog recently told lenders to write off Turkish lira (TRY) 46bn ($8.1bn) of loans by the end of the year and provision for loss reserves, in a move targeted mostly at the hard-hit energy and construction sectors.
Fitch said its stress test showed that loss-absorption capacity is solid at Akbank and Garanti, moderate at Yapi Kredi Bank, QNB Finansbank and Isbank and generally more modest at Ziraat and Vakifbank.
Halkbank's stressed metrics are the weakest and fall below minimum requirements in all stress scenarios.
According to Fitch, the lenders may seek to raise new capital either from the market or from shareholders to mitigate solvency risks in the event of significant asset quality deterioration.
“Capital injections could come from the Turkish authorities, or state-related entities, for the three state banks, foreign shareholders for the three foreign owned banks, and domestic shareholders for Akbank and Isbank.”
Kicking start of the autumn season for syndicated loan renewals, Akbank renewed syndicated loan at 83% roll-over ratio.
National flag carrier Turkish Airlines has received regulatory approval from the Capital Markets Board (SPK) to issue up to $2bn worth of eurobonds abroad.
No eurobond issues were seen since July.
Banks and corporates are trying their chance with domestic bonds. Turk Telekom bid to issue domestic papers worth up to billion lira. Isbank sold 350mn lira of 10-year domestic subordinated bonds. Energy firm Zorlu Enerji has, meanwhile, won permission to sell up to TRY600mn of domestic bonds to qualified investors.
6 TURKEY Country Report October 2019 www.intellinews.com