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Mar 21, 2023
Turkey Plans Bigger Capital Boost for State Banks to Accelerate Lending Before Elections
Turkey is stepping up plans for a capital injection into state lenders to $5.5 billion in a bid to encourage lending ahead of elections in May. Bank stocks gained.
It’s the latest attempt by President Recep Tayyip Erdogan to fire up economic growth with less than two months left before the May 14 vote, where he faces the toughest contest of his two-decade tenure.
Turkey’s sovereign wealth fund will boost the capital of TC Ziraat Bankasi AS by 40 billion liras ($2.1 billion), while adding 30 billion liras each to Turkiye Vakiflar Bankasi TAO and Turkiye Halk Bankasi AS, according to an official with direct knowledge of the matter.
The fund, known as TWF, owns all of Ziraat and holds majority stakes in the other two lenders.
Shares of Vakifbank rose by up to 4% after the Bloomberg News report, while Halkbank’s stock surged as much as 6.9%. The banking index on Borsa Istanbul was up 0.4% as of 4:10 p.m.
“Reports of a new round of sizable capital injections to state lenders by the TWF via restricted rights issues are taken positively in the market,” said Can Oksun, a senior trader at Istanbul-based Global Securities. “Investors seem to be betting on likely market share gains and higher lending volumes despite the anticipated dilution of minority shareholders as part of the process.”
Another 4.5 billion liras will be added to the capital of Ziraat’s Islamic banking unit Ziraat Katilim, bringing the total injection to 104.5 billion liras, the official said, asking not to be identified because the plan hasn’t been made public.
The fund had planned a capital boost of 60 billion liras in December, according to state media. TWF declined to comment.
Turkey to Inject $3.3 Billion in State Banks Ahead of Elections
Erdogan, who’s seeking a third term in office, is focused on boosting the economy with cheap loans. But two massive earthquakes last month devastated much of Turkey’s southeastern region, forcing banks to prioritize lending in the affected area.
State lenders tend to offer commercial loans at lower rates than private counterparts thanks to their participation in a slew of government-backed programs.
The lira’s decline has eroded banks’ cash buffers, however, forcing authorities to inject capital for the fourth time since 2019. The wealth fund provided more than $10 billion to shore up state lenders in three separate rounds in 2019, 2020 and 2022.
--With assistance from Asli Kandemir and Beril Akman.
(Updates with bank stocks starting in first paragraph, adds comment in sixth.)
©2023 Bloomberg L.P.
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