Turkey’s main index of bank stocks jumped more than than 6% on September 27, prompting market speculation that international buyers were showing renewed interest in picking up shares in Turkish lenders amid hopes that their outlook was improving following a move by the banking regulator to force a clean-up of sour loans.
The boost to bank shares was probably caused by bullish positioning by some foreign buyers, two bank analysts told Reuters. One said that two funds bought large stakes in the banking sector but did not identify them. Falling interest rates were adding to optimism, they reportedly added.
Turkey’s banks were left lumbered with a growing pile of bad loans in the wake of the summer 2018 Turkish lira (TRY) crisis that left companies with revenues in local currency unable to meet payments on FX loans. The currency crash wiped nearly 30% off the value of the lira.
Last week, Turkey’s BDDK financial watchdog said banks would need to reclassify as non-performing loans (NPLs) some TRY 46bn ($8.1bn) worth of debt and provision for losses by year end.
In less than two months to early September, Turkey’s central bank slashed its key interest rate by 750 bp to 16.5%. That prompted state banks to cut rates on loans for housing and locally-produced cars.
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