Banks facing challenges

As a recent report on the Turkish banking sector outlines the challenges brought in by the global financial crisis, banks are trying to adapt, restructure and trying to curb foreign borrowing in the face of rising lending rates.

The near-term outlook for Turkish banks is 'challenging,' according to a report released by Fitch Ratings on Tuesday. Though international funding and foreign exchange risks are well contained, there are some significant risks for Turkish banks in this period of global de-leveraging, a deteriorating global economic growth outlook and scarce funding, Fitch said in its report. These risks include "the negative impact of the expected economic slowdown and the impact of rapid loan growth on asset quality, capitalization and profitability."

"Turkish corporations, so far, have increasingly contributed to the financing of Turkey's current account deficit through long-term foreign exchange-denominated borrowings," Fitch said. "Although their short-term open foreign exchange positions remain fairly matched, long-term risks related to open foreign exchange positions exist."

A slowdown in lending could weaken margins and profitability for banks that have geared up for continued loan expansion, Fitch added.



Akbank reshuffle
As Fitch released its warning, Turkey's Akbank said three of its executive vice presidents stepped down in a reorganization of its management.

Cem Muratoğlu resigned as head of consumer banking and Halit Haydar Yıldız stepped down as chief of wholesale banking, Akbank told the Istanbul Stock Exchange yesterday. Esra Bozkurt also quit as human resources chief, it said.

Akbank has a total of 16 business units at its headquarters, whose executive vice presidents report to chief executive Zafer Kurtul, according to the lender's Web site.

Banksis, the trade union organized in Akbank branches, said Monday the bank had laid off around 1,000 employees.

Meanwhile, Garanti Bank and Akbank are curbing borrowing plans as foreign lenders charge higher interest rates on syndicated loans, Bloomberg reported Tuesday. Garanti, partly-owned by General Electric, faces interest margins almost three times those it paid the last time it borrowed in May and plans to refinance just part of a loan due this month. Akbank will also pay higher spreads to refinance loans due in December, Chief Executive Officer Zafer Kurtul said.

"The main problem for us right now is de-leveraging and declining borrowing," Garanti's Deputy Chief Executive Officer Tolga Egemen told Bloomberg.

Banks are paying more because of the credit crunch that triggered losses of more than $272 billion at European banks.

"Right now everybody's talking about the small impact on Turkey from the global crisis, but when banks borrow at high costs like this it means there's an implication on their balance sheets as well," said Funda Afacan, an analyst at Raymond James Securities in Istanbul.

Garanti may pay about 200 basis points over Libor, the London interbank offered rate, to refinance part of a loan that comes due Nov. 29, Egemen said. The bank plans to refinance between half and two-thirds of its $700 million loan, which was agreed Nov. 2006 at a rate of 62.5 basis points over Libor, according to data compiled by Bloomberg.

Akbank also expects to pay a spread of about 200 basis points over Libor to replace loans, CEO Kurtul said in an interview Nov. 14. The debt cost the company a spread of 63 basis points in Dec. 2006. The bank has $1.1 billion of loans coming due next month, "at least" half of which it wants to refinance, Kurtul said. Citigroup owns a fifth of Akbank shares.

İşbank raised $825 million with a one-year loan at a rate of 75 basis points over Libor in September. It was the most recent transaction from a Turkish lender.

Another warning on refinancing loans came from Ersin ?zince, chief executive of İşbank. Turkish banks will have problems refinancing their syndicated loans, ?zince told reporters Tuesday.