Türkiye Halk Bankası A.Ş. and Türkiye Vakıflar Bankası TAO announced their decision to increase their capital of 13.4 billion liras (990 million dollars) in the statements they made to the Public Disclosure Platform. Ziraat Bank is also expected to announce its capital increase with the decision of the board of directors. Thus, in the last three years, capital increase has been made for public banks for the third time. It has been stated that all of the shares to be issued due to the capital increase are planned to be sold to the Turkey Wealth Fund, which is the controlling shareholder of both banks, through a dedicated sales method. Thus, approximately 2 billion dollars will be injected to strengthen the balance sheets of public banks. The wealth fund injected $6.7 billion to support public banks in two separate rounds in 2019 and 2020, financed by the Treasury and Finance Ministry through bond sales to local banks.
In order to balance the economic effects of the pandemic, we watched the government intensively revitalize credit channels in 2020, especially through public banks. During this process, the continuous decline in the lira revealed risks in the repayment of foreign currency loans and the cash flow of the market. Accordingly, we have constantly talked about the risk of the banks’ cash buffers being eroded. The process of depreciating the lira by 44% in 2021 accelerated, especially after the Central Bank began to lower interest rates after September. There are some risks posed by the increasing exchange rate on capital adequacy. Before the 2023 elections, the third capital injection in the last three years will be made within the framework of reinforcing the capital needs of the banks in order to continue the credit flow to the enterprises.
According to the December 2021 banking sector data announced by the BRSA; In general, the CAR of deposit banks decreased from 19% to 18% between 2020 and 2021, and the core CAR decreased from 14% to 13%. In public banks, CAR fell from 17% to 16% and core CAR fell from 13% to 11%. 12% is accepted as a reference value in the Turkish banking sector. We can see a trend within the framework of closing the current capital deficit and converting it back to credit. It is understood that public banks will again lead the way in the credit channel in order to continue to provide cash inflows to the market and the real sector.
Firms will face some constraints in terms of extending the loans to be taken, in terms of completing the working capital or providing financing through foreign exchange needs. Here; The issue of project-based loans, which the Minister of Treasury and Finance, Mr. Nureddin Nebati also points out, comes to the fore. President Mr. Recep Tayyip Erdogan announced a 60 billion lira loan package last month, in which companies will have access to government-backed borrowing, as part of the Credit Guarantee Fund. The CGF mechanism will be at the forefront, and it was said at the London meeting that the loans given to businesses under this program could be increased if necessary. On Saturday, a selective financing support package will be announced to support businesses and exporters through the Credit Guarantee Fund (CGF).
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