The combined net income of Turkey's banks rose by 13% y/y to TRY42bn (€7.6bn) in January-September, data from banking sector watchdog BDDK showed on October 30.

Notably, however, the annual consumer price inflation rate in the country sprang from 17.9% in August to 24.52% in September, the highest level seen since 2003, the Turkish Statistical Institute (TUIK) announced on October 3.

The lenders' assets rose by 38% y/y to hit TRY4.21tn.

Total deposits grew 31% y/y to TRY2.1tn at end-September.

Total lending increased by 30% y/y to stand at TRY2.59tn at end-September, of which there were TRY1.49tn worth of lira loans and TRY1.1tn worth of FX loans.

Annual growth on lira-denominated domestic loans fell to 10% y/y at end-September, the lowest growth registered since September 2016’s 9.31% y/y when CPI inflation stood at around 7%. Annual growth on FX-denominated loans fell to 72% y/y in September from 93% y/y in August due to lira fluctuations.

Annual growth on lira loans fell below annual CPI inflation in July and has remained there since then.

Retail sales at 18-month low
“Faster inflation and the dramatic tightening of financial conditions since the start of the year have weighed heavily on domestic demand. Retail sales growth slowed to an 18-month low in August and car sales plunged by 67.1% y/y in September. There are clear signs that activity in the industrial sector is losing momentum. The latest survey evidence points to a deep recession over the coming quarters,” Capital Economics said on October 25 in a research note.

Capital Economics still sees Turkish banks as the most vulnerable to the severe lira depreciation and tighter external financing conditions when a comparison is made across the emerging markets universe, according to the latest version of its EM Financial Risk Monitor.

The ratio of non-performing loans to total cash loans rose to 3.22% at end-September from 3.02% as of end-H1 and 2.95% at end-2017.

It should be noted that the NPL figures do not include the recent debt restructuring and bankruptcy protection waves. Local media each day are reporting that companies from across a wide range of different sectors as well as individuals are applying to Turkish courts for bankruptcy protection amid Turkey’s economic difficulties.

On October 17, three unnamed people with direct knowledge of the matter told Bloomberg that some international lenders operating in Turkey were lobbying to relax an agreement that says a loan must be restructured if banks with about 75% exposure to total borrowing agree.

There is no available official data on bankruptcy protection applications or debt restructurings. However, Nedim Turkmen, a columnist for local daily Sozcu, speculated on October 1 that the number of bankruptcy protection applications had already passed 3,000 and was expected to reach 5,000-7,000 by the end of the year, although Turkmen did not cite any sources.

Big companies restructuring estimated $24bn
The total debt being restructured by Turkey’s large companies is estimated to stand at around $24bn, according to Bloomberg.

ING Bank said on October 24 in a bourse filing that it sold TRY533mn worth of its NPL portfolio to Arsan Varlik Yonetim, Armada Varlik Yonetim and Istanbul Varlik Yonetim for a consideration of TRY10.1mn.

Denizbank said on October 19 in a bourse filing that it sold TRY67mn worth of its NPL portfolio but it did not reveal the sale price.

Sekerbank said on October 17 in a bourse filing that it sold TRY92.5mn worth of its NPL portfolio to Birlesim Varlik Yonetim for TRY2.15mn.

Meanwhile, Turkish lenders are managing to renew their syndicated loans albeit at double the cost. The latest announcement came from Yapi Kredi Bankasi with the lender saying in an October 30 bourse filing that it obtained a 367-day syndicated loan, consisting of two tranches of €690.7mn at a cost of Euribor+2.65% and $275mn at a cost of Libor+2.75%.

Isbank said on October 19 in a bourse filing that it obtained a 367-day syndicated loan worth €605mn and $276mn. The all-in cost for the highest participation level of each tranche was Libor+2,75% and Euribor+2,65%.

The combined net income of Turkey's banks increased by 31% y/y to an all-time high of TRY49.1bn in 2017. The banking industry’s combined net income was TRY37.5bn in 2016, up 44% from 2015.

The lenders' assets rose by 19% y/y to TRY3.26tn while their total lending increased by 18% to TRY2.05tn at end-2017.