Turkey’s Treasury will issue 5-year debt instruments worth a total of €3.7bn to strengthen the capital of state banks, it said yesterday.
Last week, Turkish state-owned lenders Ziraat Bank and Vakifbank said they had completed pricing of perpetual bonds, which will be used to strengthen capital, while Kalkinma Bank and Eximbank authorised headquarters to seek loans to boost their capital.
After last year’s currency crisis — in which the lira shed around 30% of its value against the US dollar — Turkey’s state banks began actively providing loan restructurings to companies and spreading low-interest credit to individuals as part of a broader government effort to stem the damage.
The government debt securities will be issued to the Market Stability and Balance Fund (PIDF) owned by Turkey’s Wealth Fund, the treasury said, adding that the fund would sell the securities to state lenders and in return buy banks’ perpetual bonds or provide loans to strengthen their capital.
Around 38% of the total issuance, €1.4bn, will be used to strengthen the capital of state lender Ziraat Bank, Turkey’s largest bank by asset size, the treasury said.
Earlier this month, Turkey pledged 28bn lira to boost the capital level of state banks and relieve bad debts in the sector, as the country moved to revive an economy plagued by double digit inflation.
Ziraat Bank said it had priced its Additional Tier 1 (AT1) notes worth €1.4bn, while Vakifbank said pricing of its AT1 notes with a nominal value of €700mn had been finalised on April 18.
Economists have raised concern over a spike in the Turkish banking sector’s non-performing loan ratio.
Finance Minister Berat Albayrak said last week the ratio stands at around 4.2% and described it as “quite good.”
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