Turkish banking profits slide in real terms

Turkish banking industry profits fell in real terms after inflation accelerated into double digits and the lira slid against the dollar.

Profit in liras rose 12 percent to 23.8 billion liras ($5.2 billion) in the first five months, without discounting the effects of inflation, which was 12.2 percent in May, and the decline in the lira, which amounted to 20 percent this year.

Turkish President Recep Tayyip Erdogan, who won a second term as president in late June, has called on banks to lend to consumers and businesses at lower rates of interest to help spur economic growth. But they have been forced to raise loan costs after the central bank increased interest rates by 500 basis points this year to 17.75 percent stave off a possible currency crisis.

Bad loans at Turkish banks totaled 2.8 percent of total lending at the end of May, according to banking watchdog data reported by BloombergHT on Monday. That figure does not include loans under close watch and restructured lending, which comprises as much as 10 percent of total loans, figures from individual banks show..

The industry’s core capital adequacy ratio was 13 percent, the watchdog said.