Shares in Turkish state-owned development bank Turkiye Kalkinma Bankasi (TKB) shrunk by 47% from TRY60.7 at the end of the first session on October 11 to TRY32.4 at the close on October 12. TKB lost 20% d/d both days, hitting the upper legal limit.
TKB shares clocked up a gain of over 1,000% after Treasury and Finance Minister Berat Albayrak said last month that the lender was to be restructured with an expanded mandate.
The government is yet to elaborate on the details of the restructuring plans, but parliament on October 11 approved a draft law empowering the government to amend the lender’s articles of association with the aim of increasing its efficiency in its development banking activities. The law also allows the lender to establish a Turkish Development Fund (Turkiye Kalkinma Fonu).
TKB has also been given an exemption from almost all of the country’s banking regulations.
Exactly how the bank will be used to bolster growth amid Turkey’s economic turmoil, and why its shares have nosedived after parliament approved the amendment to its draft law is not clear.
The Turkish Treasury owns 99.08% of TKB, which operates with a paid-in capital of TRY500mn, according to public disclosure platform KAP.
The circuit breaker was activated on TKB shares on September 19 for the first time due to extreme price movements and it was activated a total of eight times between September 19 to October 11 (first session), KAP data shows.
On September 24, Borsa Istanbul announced that TKB shares would not be subject to short selling and margin trading from September 25 to October 9 within the scope of the Volatility Based Measures System. On September 28, the stock exchange announced that TKB shares would be subject to gross settlement from October 1 to October 15 and the prohibition of short selling and margin trading would be extended with gross settlement until October 15.
On September 24, the lender said in a bourse filing that it did not have any undisclosed information regarding unusual price and volume movements. On October 8, it said the legal process regarding its restructuring was continuing in parliament and repeated that it has no undisclosed information regarding unusual price movements.
As of October 10, TKB’s market capitalisation of TRY21.1bn passed that of Isbank and the development bank had become the third largest lender on the Borsa Istanbul by market cap, following Garanti Bankasi and Akbank.
During the first session on October 11, TKB caught up with Garanti as the largest listed bank on the Borsa Istanbul by market cap but it was again only the third largest on October 12 with a total market capitalisation of TRY20.2bn, still larger than that of Isbank which had a market cap of TRY18.2bn.
TKB was Turkey’s 27th largest bank with TRY11bn worth of total assets as of end-June while Isbank was the country’s second largest bank, following state-owned Ziraat Bankasi, with assets worth TRY398bn, according to the latest data from Turkish banking association TBB.
TKB’s net profit stood at only TRY123mn in 2017.
Fitch Ratings said on October 2 that its affirmation of the Long-Term Foreign-Currency Issuer Default Ratings (LTFC IDRs) and Support Rating Floors (SRFs) of two state-owned development banks, Turk Eximbank and TKB, at 'BB-' and 'BB', respectively, reflected the banks' ownership, policy roles and, in the case of TKB, almost entirely Treasury-guaranteed funding base. Fitch made the comment while it downgraded the Long-Term Foreign-Currency Issuer Default Ratings (LTFC IDRs) of 20 Turkish banks and their subsidiaries.