Turkish bank shares slipped 2 percent yesterday after sector regulator BDDK said it would slap higher charges on banks whose consumer loans exceed 20 percent of total loans, in a bid to cool a credit growth surge. Loan expansion in excess of an annual 35 percent has driven Turkey's current account deficit to worrying highs, and fuelled a domestic demand boom which has kept pumping imports into the economy.
Since late last year the central bank has increased banks' required reserve ratios in order to limit the amount of money they lend to consumers, however repeated rises have had little effect and loan growth is still far in excess of a recommended 25 percent this year. Consumer loans, excluding loans for mortgages and cars, have grown particularly fast and all six of Turkey's major listed banks are above the new 20 percent threshold.
According to Deutsche Bank data Akbank's retail loans account for 35 percent of total loans, Yapi Kredi's and Vakifbank's for 33 percent, Garanti for 32 percent, Isbank for 28 percent, and Halkbank for 25 percent of total loans. Deutsche Bank said the new provisioning regulations could add 25 basis points to the cost of general purpose loans, while analysts at TEB said the cost could rise by 75 to 100 basis points.
Turkey's official gazette on Saturday announced the BDDK had ruled banks which exceed the 20 percent limit, must pay provisions of 4 percent instead of 1 percent. The BDDK said it would also amend how it calculates consumer credit risk in relation to capital adequacy ratios, a move which will likely reduce banks' capital adequacy ratios.
Regulatory pressures are likely to prevail until overheating in the economy and current account deterioration has been contained," Deutsche said in a note. TEB said it believed the changes to risk weighting would be more effective in cooling loan growth. "The increase in the risk-weightings is likely to act as a better tool to curb loan growth as it will increase the capital cost of giving general purpose loans which should lead to higher interest rates to maintain the profitability of the product," TEB s
aid. - Reuters