Turkey Ends Two-Year Freeze on Banks’ Dividends

Turkey’s banking regulator ended a two-year freeze and allowed lenders to distribute dividends from their 2020 net income, citing lenders’ successful risk management during the coronavirus pandemic.

The banking regulator, known as BDDK, permitted banks to pay as much as 10% of last year’s net income as dividends, according to an emailed statement on Friday. Banks were prohibited from paying dividends in 2018 and 2019.

Borsa Istanbul Banks Index, which had fallen as much as 2% on Friday, pared its losses on the news and was down 0.3% at 5:13p.m.

Lenders will be required to pay dividends cautiously by taking their capital adequacy ratios into account,” Turkey’s Banking Association, or TBB, said in the statement.

The easing came after mass vaccinations have started in some parts of the world, boosting hopes of a quick economic recovery. The move, which Turkish lenders have been pushing recently, marks another step in authorities’ efforts to undo the policies adopted by Berat Albayrak, President Recep Tayyip Erdogan’s son-in-law who resigned as economy czar in November.

Albayrak’s departure and the ouster of the central bank chief spurred a rally in the lira, boosting hopes among investors that Turkey will return to more orthodox policies promised by the new economic management.

That sets the nation’s lenders on course for improved profitability in 2021, with the average return on equity expected to rise above inflation for the first time since a currency crisis in 2018.

©2021 Bloomberg L.P.

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