ECONOMY

Turkish banks returning to international loan markets

FRANKFURT – After a lengthy forced absence, struggling Turkish banks are returning to international loan markets but they are paying the price of the country’s economic crisis in higher margins. Most Turkish banks have repaid their maturing loans this year, but their ability to borrow has been weakened and their costs have been increased by the crisis that struck in February. Their demand for hard currency in the domestic market has played a key role in a sharp fall in the value of the Turkish lira in the past three months. Turkish banks repaid syndicated loans of more than $2.7 billion during this period. Foreigners’ approach to Turkish banks has changed substantially in the past month, said Naci Sigin, general manager of Yapi Kredi Bank, one of a few Turkish banks which can now borrow at reasonable rates in the market. His bank signed a $350-million syndicated loan on Monday – its first deal this year. The deal followed another $350-million loan signed last week by Garanti Bankasi, one of Turkey’s big four private banks which also include Yapi Kredi, Akbank and Isbank. The banks paid an interest rate of LIBOR [London Interbank Offer Rate] plus 80 basis points, 30-40 points higher than their deals before the crisis. But it is still cheaper than the loans signed last year. Spreads have risen but the costs did not, because LIBOR fell sharply, Sigin said. Loans may boost exports Other banks are expected to follow. Yapi Kredi and Garanti Akbank mandated 17 banks for a $250-million loan. The deal is expected to close at over $350 million. Bankers say Isbank, which recently repaid a $500-million loan, is also expected to launch a syndicated deal. Any fresh loan influx will help the lira recover part of its losses. The currency has lost half its value against the dollar since the crisis broke in February. Such syndications will relieve the domestic foreign exchange market, Sigin said. New loans will also contribute to Turkey’s efforts to boost exports, since almost all of them will be used for pre-export financing purposes. Loan deals by the big banks, which enjoy wide international correspondent relations in arranging new loans, will set a benchmark for others, analysts say. Smaller banks probably will have more opportunities in trade-related financing, Peter Tils, managing director at Deutsche Bank, told Reuters. A few other Turkish banks now are in the market. Kocbank has launched a $100 million loan with an interest rate of LIBOR plus 90 basis points and a top fee of 150 basis points. Finansbank has mandated six banks for a $60 million deal. State-owned Vakifbank signed a $110 million facility in August at a margin of LIBOR plus 140 basis points. Foreign loans popular Foreign loans were very popular in Turkey in the second half of the 1990s. Many banks raised funds abroad to benefit from the margin between high domestic rates and a relatively lower rate of Turkish lira depreciation. This year’s sharp depreciation of the lira forced Turkish banks to square their short foreign currency positions. Now the major motive behind foreign borrowing is the need to roll over maturing debts. Garanti has managed to roll over about 88 percent of its loan and Yapi Kredi, 78 percent. This is very normal as foreign lenders are still trying to keep their exposure in Turkey very limited. They will increase their limits gradually in coming months if they see more positive signs in the economy, said a private bank official. Any recovery in the economy, which shrunk by 8.5 percent in the first half, will also help banks lower their spreads. I think spreads will keep their high level for a while. But I expect them to come down from the fourth quarter, Sigin said.