ISTANBUL: An anticipated capital improve will assist Turkey’s Ziraat Financial institution to spearhead President Tayyip Erdogan’s drive to spice up financial progress and deal with power present account deficits this yr, the top of the nation’s largest lender instructed Reuters.
Chief Government Alpaslan Cakar, who can also be chairman of the Turkish Banks Affiliation, stated state banks like Ziraat had been the driving drive within the economic system lately and would keep it up at the same time as they search to pay dividends in 2023.
He downplayed considerations raised by private-sector counterparts over dangers posed by a flurry of bond-holding laws, and he stated credit score would proceed to spice up sectors like manufacturing and agriculture.
Erdogan launched a “new financial mannequin” in 2021 that prioritises progress, funding and exports and is geared toward flipping Turkey’s persistent commerce deficits, a significant part of the present account. The mannequin depends on focused loans and low rates of interest, in step with his unorthodox view that slicing charges decreases inflation.
“We’ll give vital assist to Turkey’s financial mannequin. For that motive we need to be robust in capital phrases,” Cakar stated in an interview carried out late final month.
In December, Reuters reported citing sources that state-owned banks had been in talks with the Treasury and the sovereign wealth fund to safe extra capital, permitting them to spice up lending forward of elections this yr.
“There isn’t any clear determine but for the capital improve of state banks. We’re consulting with the related establishments on this subject,” Cakar instructed Reuters at Ziraat’s Instabul headquarters.
The economic system is anticipated to have expanded 5 per cent in 2022 however progress is slowing and unsure for 2023, when presidential and parliamentary elections due by June pose Erdogan’s largest political take a look at in his 20 years in energy.
To spice up progress and again Erdogan’s financial imaginative and prescient, the central financial institution has slashed its key rate of interest to 9 per cent from 19% since September 2021, stimulus that crashed the forex in December 2021 and drove inflation to a 24-year excessive above 85 per cent in October.
State banks have supported the economic system with low-cost financing for the previous couple of years, growing their dominance within the monetary sector and their capital wants. State banks’ share of loans have reached a file degree close to 50 per cent.
Dividends, loans, dangers
Requested about file sector income in 2022, Cakar confirmed a Reuters report in late December that Turkish banks needed to make dividend payouts to shareholders. Banking watchdog the BDDK – which makes suggestions annually concerning banks’ revenue distribution – was evaluating the request, he stated.
Cakar, nonetheless, stated income had been set to fall in 2023 as inflation cools.
Within the January-October interval, the sector’s web income leapt 417 per cent from a yr earlier to 389 billion lira ($20.72 billion), boosted by inflation-indexed bond yields.
Authorities have sought to discourage overseas change use following the 2021 lira disaster. They imposed almost 100 new laws on banks, together with a mandate to carry extra treasury bonds that drew uncommon criticism from private-sector executives.
However Cakar stated these holdings wouldn’t pose dangers. “The burden of fastened coupon bonds held within the stability sheet attributable to laws is not going to attain a degree that can disrupt the stability sheet,” he stated.
He additionally stated that Ziraat’s selective loans coverage would proceed in 2023, with the priorities being manufacturing, agriculture and small- and medium-sized enterprises (SMEs).
“We now have grow to be one of many banks that gave the most important assist to the Turkish economic system mannequin,” he stated, noting its money mortgage dimension rose 61 per cent to 1.2 trillion lira in 2022.
Ziraat’s non-performing loans ratio was low at 1.1 per cent final yr, in contrast with 2.2 per cent sector-wide, he stated.
He additionally stated the financial institution can be energetic in worldwide funding this yr, aiming for a 100 per cent syndication renewal in February, and searching for to extend worldwide funding, together with through Eurobonds.