Page 46 - TURKRptAUG19

versus Seker’s 22% call, Onur added. In H1, the lender’s net income declined by 7% y/y to TRY3.63bn. Spanish lender BBVA, which owns 49.85% of Garanti, said it made around 9% of its Q2 profits in Turkey, with the country's political instability and economic recession denting group profitability. BBVA's second-quarter net profit fell 18% y/y to €140mn, the group said on July 31. BBVA also said it lowered its cost of Turkish risk guidance for 2019 to 250bp from the previous 300bp.
● Akbank
8.1.8 Banks news
Turkey's banking system has avoided a hard currency liquidity crunch since last August’s Turkish lira crisis, partly thanks to FX deposit inflows, but refinancing risks remain high, Fitch Ratings said on July 16 in its “Turkish Banks' External Debt and FC Liquidity: End-1Q19” report. “FX deposits increased by 12% in 1Q19, supporting FX liquidity, and banks continue to have access to external funding, albeit at an increased cost. However, maturing foreign debt is sizeable and could be difficult to refinance if investor appetite weakens due to lira volatility, geopolitical tensions or policy uncertainty,” the rating agency warned. Turkish banks' external debt fell to $161bn at end-1Q19 from $180bn at end-1H18, mainly due to debt repayments and lower rollover rates during tough market conditions. External debt maturing within 12 months was $91bn at the end of the first quarter but, net of relatively stable sources of funding, refinancing needs were more moderate, with Fitch giving an estimate of $40bn-$45bn. “This is well within the $89bn of FX liquidity that banks could have accessed, an amount that has increased with deposit dollarisation and, to a lesser extent, FX asset deleveraging. However, a scenario in which banks faced both FX deposit outflows and restricted access to external funding could result in a more rapid tightening of FX liquidity,” Fitch also said.
“Reported” gross external debt at $427bn. Turkey's total “reported” gross external debt was $427bn at end-1Q19. The banking and corporate sector each owe just under 40% of this, with the sovereign owing 23%. Fitch expects Turkey's current account deficit to fall sharply to $4bn, or 0.6% of GDP, in 2019 from $27bn, or 3.5% of GDP, in 2018 and $47bn, or 5.6%, in 2017, as the weak economy and lira suppress imports and boost exports. “However, the external financing requirement will remain large due to private-sector debt repayments,” Fitch underlined. Fitch estimated Turkey's overall short FX position at end-1Q19 was $167bn. This was significantly less than its net external debt of $239 billion due to the lira component of foreign liabilities and banks' FX derivatives. The banking sector's net FX position is close to zero, but banks' FX assets are mostly long-term loans and carry significant risks. Turkish banks' foreign currency liquidity positions were broadly stable in 2Q19
46 TURKEY Country Report August 2019 www.intellinews.com