Akbank’s troubled loans almost triple in size

Loans under close scrutiny at Akbank, Turkey’’s second-largest listed bank, have almost tripled to 22.3 billion liras ($5.5 billion) at the end of March when compared to six months earlier, a reflection of stress in the industry and wider economy.

The loans, which the bank defines as at risk of non-repayment, jumped from 8 billion liras at the end of September, according to the financial results of the bank, published on Thursday. Such credits totaled 14.4 billion liras at the end of the year.

The loans make up 9.9 percent of total lending of 225 billion liras, a financial table published on page 61 of the bank’s first quarter results showed. The amount excludes non-performing loans, which the bank reports separately and total 2.1 percent of total loans.

Akbank, along with other Turkish lenders, has become increasingly exposed to problems in the economy after the lira slumped to a record low against the dollar and inflation accelerated into double digits, paring firms’ profits and reducing consumer spending power. Turkish President Recep Tayyip Erdoğan called snap elections last week for June 24, citing economic factors as one of the reasons.

Weighing on the bank’s balance sheet is a loan to OTAŞ, the owner of national telephone company Turk Telekom. OTAŞ has failed to repay about $1.5 billion. Akbank added the debt to its troubled loan protfolio in January.

Turkish banks are being forced to report such potentially problematic lending as regulators bring standards into line with international banking regulations. Turkey's banking watchdog is run by Mehmet Ali Akben, a former Islamic banker.

Akbank’s profit in the first quarter of 2018 belied issues in its loan portfolio. Net income increased an annual 17 percent to 1.7 billion liras, the bank reported on Thursday.

The bank is controlled by Sabancı Holding, one of Turkey's biggest conglomerates. Its chairwoman is Suzan Sabancı Dinçer.

Akbank got a $1.2 billion loan from international lenders in late March, taking borrowing this year to $2.4 billion.

Turkish banks are seeking to bolster profits this year by raising interest rates on loans after inflation accelerated. The higher interest rates have drawn criticism from Erdoğan, who is calling on them to lower borrowing costs. Loan growth is also slowing as it becomes harder for banks to find resources to finance lending.