Page 49 - bne_Magazine_February_2019

bne February 2019 Outlooks 2019 I 49
6.4% y/y in Q2 and 9.1% in Q1 while private consumption’s share in Tur- key’s overall GDP based on current prices also declined. It hit a histori- cally low level of 56% in Q3, moving down from 59% in Q2 and 60% in Q1, according to the latest GDP data.
Property market hurting
Amid the hard landing, Turkey’s property market is also hurting. Home sales in Turkey declined by 27% y/y
to 89,626 units in November while mortgage sales for the month sank
in tandem, by 86% y/y to only 5,324 units, following the 79% y/y fall seen in the previous month.For January-
backed securities to be issued by Ziraat Bankasi, Halkbank and Vakifbank
and private lender Garanti Bankasi.
Rescue plan for construction,
real estate firms
Last month, the Ministry of Treasury and Finance devised one rescue plan that would allow construction and real estate companies to offload unsold stock to a state-backed fund. Subsequent proceeds would then be channelled
into repaying banks beset by mount-
ing bad debts amid the lira crisis.
In late August, the government backed the latest campaign in Turkey to
towards the domestic-focused construc- tion, retail and other industries, as the weaker lira and higher interest rates led to a slowdown in domestic demand.
Bad loans expected to double
The volume of bad loans on Turk-
ish banks’ books can be expected to approximately double over the next 12-18 months to around 6%, rating agency S&P Global said on December 3. The lenders’ total credit losses will at the same time grow to as much as 2.5% from the recent average of 1.4%, it predicted.
Using a wider definition of problem loans that includes restructured loans, the rating agency added that NPLs already exceeded 10% of total loans and could move up to 20% over the next year under the rating agency’s base-case sce- nario amid the country’s credit crunch. “This is because we expect the economic slowdown, deleveraging, continued lira depreciation, and increased interest rates will start weighing on asset quality over the next 12-18 months,” S&P said.
It added: “Turkish banks' high reliance on short-term external debt compared with peers is key to our assessment of Turkey's industry risk. This reliance exposes the industry to conditions
in external debt and capital markets. Despite adequate banking regula-
tion and supervision, along with the banks' ability to adequately price risks, Turkish banks' strained performance in the next 12-18 months will weaken industry stability. We will continue to monitor the president's interference
in the central bank and the regulator, which has affected our assessment of Turkey's institutional framework.”
Debt weight switched to banks ‘under government pressure’
Two weeks before the curtain came down on 2018, it was apparent that anxiety was mounting in Turkey that the debt weight difficulties of large companies amid the country’s economic turmoil were being trans- ferred to the balance sheets of banks under government pressure.
“The volume of bad loans on Turkish banks’ books can be expected to approximately double over the next 12-18 months”
November, home sales declined by 3% y/y to 1.24mn units, with mortgage sales down 39% y/y to 269,672 contracts.
Annual home price growth in Tur-
key edged up to 11.30% in October
from 10.45% in September, placing it 13.94pp behind annual inflation, central bank data showed on December 18.
Isbank announced on December 20 that it had joined state trio Halkbank, Ziraat Bankasi and Vakifbank in cutting month- ly mortgage rates to 0.98% for consum- ers in a move designed to support the collapsing construction industry, a sector that not too long ago was still seen as the growth engine of the Turkish economy.
Turkish private lender Akbank has received regulatory approval from
the Capital Markets Board of Tur-
key (SPK) to issue up to TRY1.5bn (€247mn) worth of mortgage-backed securities abroad, according to an SPK bulletin released on December 6.
The finance ministry announced on December 7 that Turkiye Kalkinma Bankasi (Turkish Development Bank, or TKB) completed the issuance of TRY3.15bn (€521mn) worth of asset- backed paper based on mortgage-
stimulate home sales. Turkish property developers were targeting the sale of at least 25% of 100,000 discounted homes to be included in a campaign
to run from August 29 to October 31, urbanisation minister Kurum said.
Kurum said on September 20 that more than 3,000 homes were sold under the scope of the campaign, according to BloombergHT.
There are a total of 1.5mn-2mn unsold homes in Turkey, accord- ing to sector representatives.
The country’s construction industry saw a pronounced collapse in activ- ity in the third quarter of this year.
The industry contracted by 5.3% y/y in the quarter versus a 6.7% y/y expansion in the first three months of the year.
Finance
Global credit insurers have cut expo- sure to some Turkish builders, retailers and other industries in what could be an early warning sign of a spike in bad debts, it emerged on December 13.
France’s Coface told Reuters it had observed a “need to be more cautious”
www.bne.eu