Non-performing loans to rise further

Hurriyet Daily News with wires

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The ratio may rise from about 4.5 percent as of May 15, Bilgin said in Istanbul at a meeting of the Banks Association of Turkey. Non-performing credit card loans rose to 8.8 percent of the total on May 15 from 6.5 percent at the end of 2008, reported Bloomberg, citing Bilgin.

Bank profitability this year will match levels achieved in 2008, Bilgin said. It would be "proper" for banks to use their profits to shore up their positions against worsening loan performance, he added. Interest income was the main driver for banking profits in the first quarter, the Central Bank said in a separate report Thursday.

Turkish banks converted 83 percent of deposits into lending as of May 15, down from 92 percent in October 2008, Bilgin said. The government is preparing a fund that will guarantee bank lending to companies, a step designed to free up credit for businesses.

The increase in the non-performing loans since the final quarter of 2008, points to some credit risk management and profitability problems that will be experienced by banks in the future, said Economy Minister Ali Babacan.

"Turkey’s strong financial structure has enabled monetary policies to have an ample scope. The Central Bank has implemented interest rate cuts, paving the road to measures needed to prevent liquidity crunch and help credit markets work effectively," Anatolia news agency quoted Babacan as saying. "However, credit supply has been disturbed by feelings of uneasiness due to an increasing number of non-performing loans. One of the major reasons for the increasing number of non-performing loans is the limited access our banks began to have to obtain externally funded loans. Another is the increasing cost of resources," he said.

İşbank gets syndicated loan

Meanwhile, İşbank, Turkey’s biggest bank by assets, received a one-year syndicated loan of $568 million from 28 banks. The loan deal, signed Thursday, comprised of two parts, $255 million, and 225.25 million euros ($313 million), İşbank said. The lendan has the option to extend the borrowing for one year and it will pay 2.5 percentage points above the London interbank offered rate, or Libor, for the dollar part of the loan and 2.5 percentage points above Euribor for part in euros, it said.