Does Turkey’s government want to prepare public banks for election?

Banking sources and officials has told some media sources that the government wants to get state-owned banks ready for a new loan expansion that would support growth in the pre-election period.

As the Turkish economy recovers thanks to the rapid vaccination campaign, banking sources and officials say the government also wants to get state-owned banks ready for a new loan expansion that will support growth in the pre-election period.

PROFITS OF PUBLIC BANKS FALL

At the two state-owned banks, net interest income was negative. This shows the decoupling between low-interest loans issued last year and rising funding costs combined with rising interest rates. As a result, the first-quarter net profits of state-owned banks fell sharply.

BANKS NEED CAPITAL INJECTION

Another banking source, who stressed that the capital of state-owned banks should be increased, said: “growth cannot be achieved with these Capitals at the moment. If you want to grow the economy, you have to put in capital. If the economy grows and banking remains small, then who will finance the economy?”

A senior banking source stated that public banks showed loss in net interest income intheir balance sheets last year due to cheap loans adding “issue does not have to do with capital adequacy ratios or liquidity needs but lending ability of concerned banks is very limited. Capital growth is needed to get these banks back into the credit market.”

Economic officials note that there is an expectation of a new loan expansion from the banking sector, which supports economic growth, and for this purpose, capital must be put in banks.

An economy official with knowledge of the matter said that re-injecting resources into state-owned banks had been on the agenda for some time, but there were no concrete steps. He went on to say, “There is currently a serious demand for a new loan expansion. For construction, exports, employment… and for this, especially the capital of state banks needs to be strengthened.”

Source: sozcu.com.tr/2021/ekonomi/reuters-hukumet-kamu-bankalarini-secime-hazirlamak-istiyor-6527419   (EDITED)