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Capital Markets

Turkish bond issuance picks up

As international appetite for Turkish risk has risen, 2011 and 2012 have been record years for bond issuance by Turkish banks. Some of Turkey’s biggest banks have issued Eurobonds for the first time over the past two years and many are following up with additional issuance now.

Last month, Akbank issued $1 billion in five-year and 10-year notes, with the five-year tranche priced at just 3.875%. In September, Garanti’s Eurobonds became the first to benefit from new investment-grade foreign-currency ratings that Moody’s awarded in the summer to five of the biggest Turkish banks. Garanti’s new $750 million 10-year Eurobond was priced to yield 5.375%, with $600 million in five-year notes priced at 4.175%.

Isbank also issued its first bond in 2011. Halkbank issued its debut Eurobond this July, raising $750 million at what was then a record low yield for Turkish banks – 5%. "We’re starting to tap the debt capital markets," says Hakan Atilla, head of international banking at state-owned Halkbank, which the government is selling down via a secondary public offering this autumn.

Now tier 2 deals are happening. This autumn, Isbank issued a $1 billion 10-year lower tier 2 bond priced at 6%. VakifBank issued a $500 million 10-year tier 2 bond the following week, priced at 25 bps over Isbank’s deal. There are no other outstanding public tier 2 issues by Turkish banks.

"Loans-to-deposits ratios in Turkey have reached 100%, so banks are more pushed to raise new capital (as each additional business creates less return on equity)" says Mustafa Bagriacik, head of Turkey investment banking coverage at Deutsche Bank.

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