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Turkish Banks Plan to Create a Bad-Loans Manager by March

Turkish Banks Plan to Create a Bad-Loans Manager by March

(Bloomberg) -- Turkish banks plan to create an asset-management firm by the end of the first quarter that will take over their non-performing loans so they have more room to give out new credit and fuel the economy.

The banks want to attract multinational lenders as shareholders, according to people with the direct knowledge of the matter. The lenders still need to decide what types on NPLs will be transferred to the new entity, said the people, who asked not to be identified because the discussions have yet to be made public.

Pressure to ramp up lending is building after President Recep Tayyip Erdogan’s administration set a 2020-2022 economic growth target of 5%. Policymakers are intensifying their efforts to reduce the ratio of bad loans by easing measures on how these are classified.

“The new company will be able to buy big problematic loans as opposed to the existing asset management companies,” said Ovunc Gursoy, a banking analyst at Istanbul-based TEB Investment. “Therefore, we view that development as positive for banking shares.”

The fresh push by some of the nation’s biggest banks to accelerate the formation of the asset-management company comes after efforts in May failed. Those talks stalled almost as soon as they began amid differences over the price and structure of potential transactions, people familiar with the matter said at the time.

More recently, the banking regulator asked lenders to develop their own roadmaps to halving their non-performing loan ratios, which averaged 5.2% in October, and may reach 6.3% at the end of the year.

Turkish Banks Plan to Create a Bad-Loans Manager by March

Turkey’s banking regulator in September told lenders to reclassify 46 billion liras ($8 billion) of loans as non-performing by the end of the year. It later decided to let lenders determine which company loans need to be reclassified, and revised how banks classify credit to once-troubled companies, potentially helping them avoid adding more problem loans to their books.

The 12-member Borsa Istanbul Banks Sector Index pared an earlier decline of as much as 0.6% to trade 0.2% down as of 4:58 p.m. in Turkey’s biggest city. The gauge has gained 28% this year, compared with 18% for the bourse’s benchmark index.

To contact the reporters on this story: Cagan Koc in Istanbul at ckoc2@bloomberg.net;Kerim Karakaya in Istanbul at kkarakaya2@bloomberg.net;Asli Kandemir in Istanbul at akandemir@bloomberg.net

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, ;Onur Ant at oant@bloomberg.net, ;Benjamin Harvey at bharvey11@bloomberg.net, Vernon Wessels, Ross Larsen

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