ISTANBUL BLOG: “Let’s be realistic,” says banking chief conceding Turkey’s banks keep sunk loans afloat

ISTANBUL BLOG: “Let’s be realistic,” says banking chief conceding Turkey’s banks keep sunk loans afloat
By Akin Nazli in Belgrade February 4, 2021

Huseyin Aydin, head of Turkey’s banking association TBB and general manager of the government-run Ziraat Bank—the country’s largest bank by assets—was on February 3 interviewed live on BloombergHT.

Here are some highlights from replies he gave during the interview:

• “Let’s be realistic. There are [sunk] loans that we keep afloat,” Aydin responded to a question on “regulatory forbearance” measures that hide the real situation as regards the Turkish banking industry’s balance sheets.

• “We’re the only banking industry in the world that must simultaneously manage three currencies, namely the lira, the USD and the EUR,” he said on the subject of dollarisation.

• “The lira is an attractive currency to borrow but we should make the lira an attractive currency with which to invest.”

• “If you catch good levels here [on the FX market], you even earn money between sales and purchases. We [the public banks] secured the [FX] supply. This is not too bad a thing,” he said replying to a question on the boom observed last summer in the public banks’ short FX position.

“At what cost does the state borrow [with domestic government bond rates]? At 13-14%. How much does it earn when it invests its money in me [state-owned Ziraat Bank]?”

Ortalama ozkaynak karliligi: Return on average equity, Ortalama DIBS faizi: Average interest on domestic government bonds (risk-free benchmark), ISO-500: Istanbul Chamber of Industry’s (ISO’s) list of the top 500 industrial companies.

• “The domestic government bonds [risk-free benchmark] offers 11%, while banks offer a 11% return [for shareholders]. Why does the man invest in me [Ziraat Bank]? Why would he take on the risk? Why would he deal with tonnes of audit?”

• “A boss who earns a 10% return would not invest in a bank but in a shopping mall.”

• “The Turkish banking industry’s USD-basis total equity has fallen to $80bn from $100bn over the last decade.”