The Finance Stability Report by Turkey’s Central Bank, announced Monday, claims the profitability of Turkish banks will not continue to fall in the second half of the year, implying no further hikes in reserve requirements are on the way.
The financial stability report highlights the financial strength of the Turkish banking sector, in which some lenders posted loss in value and profitability during the first half of the year, due to the recent monetary policies of the Central Bank.
The Central Bank implicitly gives support to banks, said Özgür Altuğ, the chief economist at BGC Partners in Istanbul, commenting the report. “The bank’s monetary policy mix started to work by the second quarter of the year, heralding that it is almost done with required reserve ration hikes,” Altuğ told the Hürriyet Daily News in a written statement Monday.
The Central Bank has increased reserve requirements for banks four times since December in a bid to slow the annual growth of consumer lending to 25 percent by year-end from about 35 percent.
“The bank expects a further slow down in loan growth with the existing monetary measures in the coming period, which is another positive signal for banks, Altuğ said.
Even though the profit rates dropped a little bit due to the increasing competition, they continue to remain at high levels, according to the report. “The profitability of the Turkish banking sector will not be as low as the market expects during the second half of the year, thanks to price adjustments,” the report said. On the other hand, the capital adequacy ratio has reduced accordingly to the increase in loans, the report read.
The Central Bank’s report will have positive impacts on banks and the market, said Banu Kılcı Tokalı from Destek Menkul Değerler, speaking to the Daily News. The Central Bank’s positive expectation concerning the profitability of banks has already begun to show its positive impact as of today, Tokalı said.
The Central Banks’ next step may be an increase in interest rate, which is a traditional method, instead of an increase in the required reserve ratio, Tokalı said, adding parallel to that, stock prices may decrease.
Decrease in profit and value
Four leading private lenders of Turkey including Garanti, İşbank, Akbank and Yapı Kedi, posted a total of 20.5 percent loss in profits and 0.7 percent in equity capital during the last five and half months, due to the recent monetary policies of the Central Bank, Turkish daily Radikal reported Monday. These four banks registered a 34.7 percent loss in value during the same period and the loss in value reached $32.3 billion, Radikal reported. The banking sector’s profitability decreased by 13.2 percent, due to the measures taken by the Central Bank to slow down the loan expansion, according to data by the Banking Regulation and Supervision Agency, or BDDK, Radikal reported.
Decrease in daily dollar purchase auctions
Meanwhile, the Central Bank has reduced its daily dollar purchase auctions. The bank said on Monday it would cut the amount of dollars it purchases in daily auctions after debt concerns in European countries reduced currency inflows to Turkey.
The Central Bank will buy $40 million daily instead of $50 million, effective tomorrow, the bank said Monday. The purchases may be “gradually reduced” further if inflows continue to fall, it said in a separate report on financial stability published on its website.
Cutting the size of dollar purchases would lower the amount of lira liquidity the bank provides and “reduce the need for additional increases to reserve-requirement ratios in the second half of 2011,” according to the stability report.
The lira currency gained 0.4 percent to 1.5989 per dollar after the announcement. The currency fell 1.2 percent last week.
Source: www.hurriyetdailynews.com
The financial stability report highlights the financial strength of the Turkish banking sector, in which some lenders posted loss in value and profitability during the first half of the year, due to the recent monetary policies of the Central Bank.
The Central Bank implicitly gives support to banks, said Özgür Altuğ, the chief economist at BGC Partners in Istanbul, commenting the report. “The bank’s monetary policy mix started to work by the second quarter of the year, heralding that it is almost done with required reserve ration hikes,” Altuğ told the Hürriyet Daily News in a written statement Monday.
The Central Bank has increased reserve requirements for banks four times since December in a bid to slow the annual growth of consumer lending to 25 percent by year-end from about 35 percent.
“The bank expects a further slow down in loan growth with the existing monetary measures in the coming period, which is another positive signal for banks, Altuğ said.
Even though the profit rates dropped a little bit due to the increasing competition, they continue to remain at high levels, according to the report. “The profitability of the Turkish banking sector will not be as low as the market expects during the second half of the year, thanks to price adjustments,” the report said. On the other hand, the capital adequacy ratio has reduced accordingly to the increase in loans, the report read.
The Central Bank’s report will have positive impacts on banks and the market, said Banu Kılcı Tokalı from Destek Menkul Değerler, speaking to the Daily News. The Central Bank’s positive expectation concerning the profitability of banks has already begun to show its positive impact as of today, Tokalı said.
The Central Banks’ next step may be an increase in interest rate, which is a traditional method, instead of an increase in the required reserve ratio, Tokalı said, adding parallel to that, stock prices may decrease.
Decrease in profit and value
Four leading private lenders of Turkey including Garanti, İşbank, Akbank and Yapı Kedi, posted a total of 20.5 percent loss in profits and 0.7 percent in equity capital during the last five and half months, due to the recent monetary policies of the Central Bank, Turkish daily Radikal reported Monday. These four banks registered a 34.7 percent loss in value during the same period and the loss in value reached $32.3 billion, Radikal reported. The banking sector’s profitability decreased by 13.2 percent, due to the measures taken by the Central Bank to slow down the loan expansion, according to data by the Banking Regulation and Supervision Agency, or BDDK, Radikal reported.
Decrease in daily dollar purchase auctions
Meanwhile, the Central Bank has reduced its daily dollar purchase auctions. The bank said on Monday it would cut the amount of dollars it purchases in daily auctions after debt concerns in European countries reduced currency inflows to Turkey.
The Central Bank will buy $40 million daily instead of $50 million, effective tomorrow, the bank said Monday. The purchases may be “gradually reduced” further if inflows continue to fall, it said in a separate report on financial stability published on its website.
Cutting the size of dollar purchases would lower the amount of lira liquidity the bank provides and “reduce the need for additional increases to reserve-requirement ratios in the second half of 2011,” according to the stability report.
The lira currency gained 0.4 percent to 1.5989 per dollar after the announcement. The currency fell 1.2 percent last week.
Source: www.hurriyetdailynews.com
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