Turkish lenders suffer 11.5 percent profit loss in May on gov’t limitations, lower interest revenues

ISTANBUL

Turkish lenders’ profits plunged 11.5 percent in May to 10.1 billion Turkish Liras as measures taken by the country’s economy managers as well as a retreat in interest incomes continued to cast worries on the sector, figures announced by the country’s banking watchdog have revealed.

Squeezed by higher interest rates that curbed consumers’ loan appetite as well as limitations introduced on loan and installment payments, the sector suffered a steep profit decline of 44 percent in January. Moreover despite the drop in the momentum month by month, the downfall in profits continued in June, according to data announced by the Banking Regulation and Auditing Institution (BDDK).

The BDDK figures showed Turkish lenders’ return on equity, which has been on a downward trend since 2009, also plummeted to 12.8 percent during the month from around 18 percent five years ago. The return on equity in the sector during the same month last year was 15.8 percent.

Bankers have warned that the decline in profits adversely affects the capital and return of equity, raising threats against the equity growth’s strength, which is crucial for growth and attraction of more loans.

Meanwhile, Turkish banks’ assets jumped by nearly one-fifth to 1.79 trillion liras by the end of May, according to unconfirmed figures.

While loans reached 1.09 trillion liras with a 22.8 percent rise, deposits hit 953.4 billion liras after a 15.4 percent rise.

At the beginning of June, ratings agency Moody’s took rating revisions on 11 Turkish banks, citing an increasingly challenging operating environment, which “is expected to persist for the next 12-18 months,” due to a slowdown in real GDP growth, higher funding costs and a climate of uncertainty affecting the banks.