Public banks’ share in Turkey’s domestic bonds at record high

Public banks’ share in Turkey’s domestic bonds at record high
By Akin Nazli in Belgrade June 10, 2021

The share of Turkey's public banks in the country's domestic sovereign bonds stock reached 36.4% at end-April, extending the run of all-time highs recorded since last year, BloombergHT reported on June 9.

In July 2020, the figure surpassed the 30% level. It has consecutively smashed through record levels ever since.

Public banks' share in Turkey's domestic government bonds.

Meanwhile, the foreign investor share in the market hit a record low level of 3% in September last year before gradually recovering to 4.7% in February. The figure stood at 3.7% at end-April.

Since 2019, it has been hard to describe the local domestic government bond market as a functioning market. The rising share of FX-denominated domestic borrowing is another woe.

Nevertheless, the government has maintained absolute control over the local finance industry. Thus, domestic borrowing has not proved to be a problem.

Despite government pressure exerted on private lenders, the weighting of the public banks has been on the rise. The state banks’ loan volume reached 48% of Turkey's total banking industry loans at end-April, while state banks’ equity stood at 38% of total Turkish banking industry equity.

Following the currency shock of 2018, the capital of the public banks was hiked via the exchanging of government papers among the Treasury, the Turkey Wealth Fund (TWF/TVF) and banks.

As of June 3, the state banks’ registered non-performing loan (NPL) stock stood at $61mn.

Yet the amount of a single controversial loan, extended by Ziraat Bank, stands at more than 10 times this figure. Ziraat is yet to provide a payment document on the instalments of a $750mn loan extended to Demiroren Holding for the acquisition of Dogan Media.