Turkish banks’ borrowing costs may rise
ISTANBUL – Turkey’s banking system has so far emerged virtually unscathed from recent global credit problems but bankers and analysts say its banks may face higher foreign borrowing costs in 2008. They said foreign creditors will try to pass on the effects of the narrowing of global liquidity to their customers and this will be reflected in the costs of the syndicated loans and securitizations which Turkish banks will renew next year. Tekfenbank General Manager Mehmet Erten said the global credit problems had not been felt strongly in Turkey as they did not coincide with significant debt rollovers. «But as liquidity creates problems it will be more difficult to make securitization placements and find funding for them – maturities will shorten and rates will rise. This will be reflected in Turkey. But as yet there is no sign of movement on loan prices,» he said. Garanti Bank General Manager Ergun Ozen said last week that the impact of the credit problems may become evident in 2008. «We have virtually finished borrowing for 2007 but our costs may rise in 2008 in the securitization and syndication markets,» he said. The volume of syndicated loans which will be up for renewal in 2008 will be around $10 billion, one banker said. EFG Istanbul analyst Mete Yuksel said Turkish banks in 2006 had preferred loans with more than a one-year maturity because 2007 was an election year and as a result a large number of loans will be up for renewal next year. «When compared with Russia, Ukraine and Kazakhstan, Turkish banks’ borrowing limits are open and their indebtedness levels are rather low. Costs may rise by 20 basis points as liquidity is not plentiful and is expected to narrow further,» he said. Turkey is seen as particularly vulnerable to volatility in global markets because of its large current account deficit. But the theoretical risk deriving from the volume of securities in banks’ portfolios is not expected to materialize amid expectations that domestic interest rates will fall, said one banking sector analyst. The Turkish central bank cut key interest rates by 25 basis points on September 13 in a move which surprised the market and said the timing of further cuts would depend on global markets and government spending. Finans Investment banking analyst Sadrettin Bagci said concerns about mortgages in global markets will also push up the borrowing costs of Turkish banks. «But I think if there is a further cut in Turkish interest rates of 25 to 50 basis points toward the end of the year this will have a positive impact on those with Turkish lira bond portfolios,» he said.
