Page 43 - TURKRptFeb20

Still, on an annual basis, net income is set to fall by 3.5% in the fourth quarter from the year-earlier period after lenders increased provisions to cover an increase in NPLs and the after-effects of the lira’s decline, the Bloomberg survey showed.
Julian Rimmer of Investec said on January 20 in an emailed note to investors: “The Turkish govt needs some cash so the Competition Board decided to investigate 20 banks, most of whom will be tapped for 1-2% of 2019 revenues by way of a fine. Most have provisions for this kind of bank robbery but it's symptomatic of the cash crunch experienced by the govt.”
In 2013, the competition authority fined 12 banks a total of TRY1.1bn ($620mn at that time) for collusion on interest rates. In 2017, it investigated 13 banks over corporate loans.
“ The authorities are clearly not content with the pace of the recovery and are pulling out all the stops to stimulate activity ... It’s difficult to say for certain when [lingering vulnerabilities in the banking sector] will crystallise but it’s safe to say that the next time that Turkey faces a crisis, the fallout for the banking sector is likely to be a lot worse ,” Jason Tuvey of Capital Economics said on January 21 in a research note.
Turkey's Islamic banking assets are set to double within 10 years from a low level as government initiatives drive growth in the sector, Moody's Investors Service has concluded in a report. The sector in Turkey represented just over 5.8% of banking assets at the end of September.
8.2 Stock market
Borsa Istanbul broke consecutive records in January.
“The analyst presentations by AKBNK GARAN and ISCTR [Isbank] revealed the banks’ management teams as more positive than the market on loan growth, return on equity (ROE) and non-performing loans (NPL) formation “but then again, they would be, wouldn't they?” observed Rimmer.
Avoiding criticism, direct or oblique . He added: “Forecasting low growth or an increase in problem loans would definitely have attracted the attention of the banking regulators and the govt and the large private banks know they must avoid criticism either direct or oblique. I read the broker GARAN's strategy note for 2020 and was struck by its almost Panglossian view of Turkey's prospects for the year ahead. It was like a world I dream about. And then, in dreaming, The clouds methought would open and show riches Ready to drop upon me, that when I waked I cried to dream again.
“Then you read on the same day that according to the Intl Observatory on Human Rights, Turkey is still the largest gaoler of journalists in the world and you realise that GARAN's strategist, a man I've met, like and respect, probably doesn't have much choice in his opinions. Still, the banks are cheap and if Turkey can avoid stepping on Erdogan's landmines, there could be a significant rerating. The banks trade on ~0.6x p/bv and they could easily trade on 1x p/bv if rates and inflation were to come down to single digits. Those are very large subjunctives, however, and Turkey remains hostage to the capricious monetary policies of the Tyrannical Tache and reliant on the continuance of accommodative interest rates globally. There's $25bn of bad debt in Turkey as a direct result of Erdogan's economic stewardship since 2017. AKBNK has the plumpest cushion while HALKB [Halkbank] is still the most vulnerable and has the added threat of a US-imposed penalty for sanctions-busting. Intl ownership of Turkey's stock and bond mkts hover at multi-year lows so Borsa Istanbul can gap in these periods when the seemingly
43 TURKEY Country Report OUTLOOK 2020 www.intellinews.com