Despite foot-dragging, banks help market rally

Hurriyet Daily News with wires

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Despite the absence of an accord with the IMF, Turkish markets were buoyant last week, lifted largely by global optimism that the crisis had hit rock bottom and aided by better-than-expected first quarter results from banks.

The global optimism manifested itself in the net sales of foreigners at the Istanbul Stock Exchange, or IMKB. According to weekly Central Bank data, foreign investors purchased a net $300 million-worth of Turkish equities in the first week of May, representing an eight-week string of net purchases.

The benchmark IMKB-100 index gained 4.1 percent since May 1, closing Friday at 33,484 points. The index has gained more than 45 percent since March 5, when it dipped at 23,035 points.

Last week’s rise was led by lenders which reported better-than-expected profits for the first quarter.

Garanti said last week that profit jumped 44 percent in the first three months to 651 million Turkish Liras. Net interest income increased to 1.1 billion liras from 770 million a year earlier.

Akbank, partly-owned by Citigroup, said net income stood at 569 million liras representing an 11 percent decline compared to the same period last year, when it posted a profit of 640.2 million liras. Excluding exceptional items in the first quarter of 2008, profit rose 15 percent.

Finansbank, owned by the National Bank of Greece, said first-quarter net income jumped to 297 million liras, from 75.9 million liras a year earlier.

Increase in deposits

Vakıfbank, a state-run Turkish lender, said first-quarter profit jumped 50 percent as interest income increased after the Central Bank cut interest rates. Net income rose to 294.2 million liras from 196 million liras a year earlier, the Ankara-based bank said last week. Deposits increased 6.5 percent from the end of 2008 to 39.5 billion liras, the bank said.

İşbank, the biggest lender by assets, said Thursday first-quarter profit rose 9.2 percent as it earned more from loans and fees. Net income climbed to 606 million liras from 555 million liras a year earlier. Net interest income rose 15 percent.

State-run Halkbank said first-quarter profit climbed 21 percent as revenue from loans and fees increased. Net income rose to 365 million liras from 301 million liras a year earlier, Bloomberg quoted the bank’s Deputy General Manager Osman Arslan as saying.

Fortis Bank Turkey said net profits in the first quarter rose 11 percent to 76.5 million liras. Total turnover rose 5 percent to 281 million liras.

Rate cuts help lenders

Turkish banks have benefited from Central Bank interest rate cuts that shaved 7.5 percentage points off the benchmark rate in seven months, driving yields on lira-denominated bonds to about 14 percent at the end of the quarter from 16.5 percent at the end of 2008.

"Profits of the top eight banks came in at 2 billion liras in the first quarter of 2009, down around 10 percent year-on-year," wrote Timothy Ash, head of emerging-market economics in London at Royal Bank of Scotland Group. "Of note, non-performing loans are being reported in the 3 percent to 5 percent range, which is low given regional standards."

Non-performing loans rose to 4.4 percent of total lending as of April 17 from 3.8 percent at the end of last year, Tevfik Bilgin, chief of Banking Regulation and Supervision Agency, said last month.

Meanwhile, Turkey and the International Monetary Fund, or IMF, will resolve their talks on a new accord "very soon," according to Memduh Aslan Akçay, head of foreign economic relations at the Turkish Treasury.

IMF calls for cuts to Turkey’s budget spending plans are a central issue in the negotiations and Turkey is "fighting not to cut" because lower spending might deepen the economic contraction expected this year, Akçay said over the weekend at the annual meeting of the European Bank for Reconstruction and Development in London.

The U.S. dollar closed Friday at 1.570 liras, having lost 1.3 percent since May 1. The greenback has lost 13.1 percent against the lira since March 9.