ECONOMY

Turkish banks cut their losses in the third quarter as State puts more under receivership

ANKARA (Reuters) – The position of Turkey’s crisis-hit banks is improving, reflected in reduced losses for the sector in the third quarter, the country’s banking watchdog said on Tuesday. The total losses of Turkey’s banks fell to $3.3 billion in the third quarter of the year compared to $3.9 billion at the end of the second quarter as the performance of all improved, save for an original 19 banks seized during recent financial turmoil. Banking sector profits have seen a slight recovery in the third quarter of 2001 and losses have been reduced when compared to the second half of the year, the watchdog said in its third-quarter report. The total profits of Turkey’s private banks rose to $503 million in September from $36 million in June, helped by the seizure of five troubled banks, higher net interest income in real terms and reduced losses on the stock market, the watchdog said. Turkey’s seized banks made a total loss of $4.026 million as of September, up from $3.586 million in June, while state-owned banks made a loss of $266 million, down from $763 million. The report showed the sector making an overall profit of $697 million, up from a loss of $381 million in June, if banks seized by the watchdog are excluded. Turkey has promised the IMF it will close or sell the banks it holds under receivership by year-end in return for continuing financial support for its economic program. The open foreign currency positions of Turkey’s crisis-hit banking sector continue to shrink, the report said. The net open foreign exchange position of Turkey’s banking sector was $443 million as of November 23, down from $695 million on September 28. The net open position of banks seized by the watchdog during recent financial turmoil was $913 million while state-owned and private banks ran a foreign currency surplus. The exposure of Turkey’s banks to foreign currency risk led to a run on the dollar during a February crisis that pummeled Turkey’s financial markets, slashing more than 50 percent off the value of the Turkish lira currency. Foreign exchange exposure in Turkey’s banking sector was lessened after a June debt swap of more than $7 billion helped reduce banks’ need for hard currencies and ease pressure on the lira currency.