Turkish state-owned lender Halkbank is to issue up to $2bn worth of subordinated and/or unsecured bonds abroad with different maturities ranging up to 12 years, the lender said on December 18 in a bourse filing.

The issue will mark Halkbank’s first eurobond issuance since its deputy general manager Hakan Atilla was arrested in the US in March 2017 for his role in a scheme to evade US sanctions against Iran. Halkbank remains exposed to potential fines from the US in relation to the case though there have been signs that Ankara and Washington are resolving their multi-faceted diplomatic rift.

Halkbank shares were up 1.92% d/d to Turkish lira (TRY) 6.89 as of 16:30 local time on December 19 while benchmark the BIST-100 on the Istanbul stock exchange was up 0.72% to 91,732. The annual loss on Halkbank shares stood at 33% versus the 20% y/y decline on the BIST-100.

Suppressing rates
Turkish authorities have lately cut their lira borrowings with the aim of supressing interest rates on the domestic market amid the country’s substantial liquidity and credit crunch, while the Treasury and local banks have been pushing for FX borrowings.

Previously, the private sector has leaned on FX borrowings with the aim of benefiting from relatively low costs, but its FX debt stock is now Turkey’s main economic woe following the collapse of the lira this year which reached its worst point in August.

At December’s second and last lira auction held on December 18 for 7-year floating coupon bonds (re-open), the average yield fell to 9.74% from the 10.13% recorded at the previous auction held on August 14 for the same paper, daily Hurriyet reported on December 19.

State-owned Ziraat Bankasi has, meanwhile, received approval from the Capital Markets Board (SPK) to issue up to $3bn worth of covered bonds abroad, the SPK’s weekly bulleting showed on December 14.

Another state-owned lender Vakifbank has decided to mandate its headquarters to issue up to $5bn worth of eurobonds, the lender said on December 14 in a bourse filing.

The Treasury is collecting demand from individual investors for USD and EUR-denominated domestic bonds between December 17 and December 21, and also for gold lease certificates that will last for a total of seven phases from December 17 to February 1.

Idle gold
The Treasury has borrowed a total of 6.5 tonnes of idle gold from the domestic market via gold certificates across the last two years, finance minister Berat Albayrak—the son-in-law of Turkey’s nearly all-powerful executive president, Recep Tayyip Erdogan—disclosed on December 18 during budget discussions at parliament.

Turkish residents’ FX deposits at foreign lenders abroad rose to $42.9bn at end-October from $42.4bn at end-September, $25.9bn at end-June and $24.3bn at end-March, the central bank’s data on Turkey’s international investment position showed on December 18.

While pursuing its borrowing moves, the government is struggling with solving liquidity problems on the domestic market.

State trio Halkbank, Ziraat Bankasi and Vakifbank announced this week that they had cut monthly mortgage rates to 0.98% in a move designed to support the collapsing construction industry, a sector that not too long ago was still seen as the growth engine of the Turkish economy.

Government officials continue “encouraging” private lenders to join public lenders in cutting rates.

Prior to the June snap presidential and parliamentary polls, state-owned lenders were also seen employing mortgage rate cuts.