Feb 25 2019

Turkish bad debt sales to climb 33 percent, Bloomberg says citing buyer

Turkish banks will increase their sales of bad loans by about a third this year as they seek to meet the cost of a jump in business debt restructurings, Bloomberg reported, citing the country’s top buyer of the loans.

The banks, seeking to maintain profitability during a deep economic downturn, are expected to sell about 10 billion liras ($1.9 billion) of the non-performing loans, receiving about 500 million liras in return, said Hilmi Güvenal, who runs Hayat Varlık Yönetim, Bloomberg reported.

Güvenal said banks may accelerate categorising of loans under close watch into non-performing loans.

“As total loan volume declines, the likelihood of NPL-recovery diminishes, and the possibility of inflows from loans under close watch to bad loans increases," he said in an interview with the news wire. The NPL ratio will not exceed the regulator’s 6 percent forecast this year as long as the lira does not plunge again, Güvenal said.

NPLs as a percentage of total loans were 3.9 percent at the end of last year.

Last week, ratings agency Standard & Poor’s warned that the Turkish regulator’s forecast for NPLs this year may be too optimistic as loans under close watch, some of which comprise debt that has already been restructured, turn sourer. Turkish authorities should announce a plan to deal with banks’ asset quality, it said.

There are 19 distressed-loan buyers in Turkey, Bloomberg said.

Turkish companies are finding it more expensive to repay their debts after the lira fell by 28 percent against the dollar last year and interest rates and inflation surged. Consumer spending power and confidence has also dropped off markedly, meaning Turks are buying fewer goods and services.