Turkey to Add $3 Billion to Capital at Three State Banks
Turkey to Add $3 Billion to Capital at Three State Banks
(Bloomberg) -- Turkey’s sovereign wealth fund will inject 21 billion liras ($3 billion) into three state lenders to strengthen their capital positions and minimize the impact of the coronavirus pandemic that may provide a $24 billion boost to the market.
Turkiye Varlik Fonu, the fund also known as TWF, will boost the core capitals of TC Ziraat Bankasi AS, Turkiye Halk Bankasi AS and Turkiye Vakiflar Bankasi TAO, the fund said in an emailed statement. Halkbank and Vakifbank said in separate public filings that the fund will purchase newly issued shares. The fund will finance the cash injection via bond sales by the Treasury and Finance Ministry to banks in the local market, it said.
Ziraat, Vakifbank and Halkbank will each get 7 billion liras from the wealth fund through rights issues, the lenders said. Currently, Ziraat has 6.1 billion liras in capital, while Vakifbank holds 2.5 billion liras and Halkbank 1.25 billion liras.
Fresh capital will be used to help companies hard hit by the loss of business after lockdowns hampered manufacturing and retail industries, Halkbank said. Proceeds from the rights issue, to be held through private placement, will be used “for the bank’s loan-support packages extended to support the economy during the coronavirus outbreak,” it said.
Lending Room
The move will create at least 56 billion liras of extra lending room for each bank, and may provide a 170 billion liras stimulus for the economy, without causing immediate capital concerns, Ates Buldur, an analyst at Credit Suisse Group AG in Istanbul, said in an emailed note. “The relief may be temporary depending on the extent of the need for state banks to stimulate the economy.”
The capital injection is the second boost for state-owned lenders in just over a year as they make up for a drop in lending from their private peers to keep the economy afloat. State-owned institutions have been extending credit at three times the pace of their private peers since 2017, according to data compiled by the regulator. The 15% depreciation of the lira this year against the dollar has also weighed on the capital of state banks.
Halkbank fell as much as 0.5% after rising as much as 1.5% in Istanbul, while Vakifbank rose as much as 1.5%.
The sovereign wealth fund fully owns Ziraat, which is not listed. It also owns non-trading shares of Halkbank. The fund will own a stake at Vakifbank, currently controlled by the Treasury and Finance Ministry.
The capital adequacy ratios of Ziraat, Halkbank and Vakifbank were above the regulatory benchmark of 12% at the end of last year at 17%, 14.3% and 16.6%, respectively.
“The market impact may be positive given that newly issued shares will be sold at around market prices to the wealth fund and not at nominal prices, said Can Oksun, a senior trader at Global Securities in Istanbul.
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