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Turkey’s banks in equity market rally

The country’s banks are proving among the most resilient in emerging Europe and have helped to boost sentiment towards the country and its stock market. But are there still dangers ahead? Guy Norton reports.

EBRD helps to plug funding gapETFs blossom amid equity rally

IN CONTRAST TO the doom and gloom that surrounds many banking sectors in the post-credit crunch era, there’s a positively upbeat tone around Turkish banks at the moment. Whereas in 2001 the country’s banking sector was widely viewed as the weakest link in Turkey’s crisis-hit economy, during the course of the present global economic crisis it has arguably proved to be its strongest.

Ironically, the Turkish banking sector is now reaping the rewards of its own failure in 2001, with improved risk management and regulation meaning that banks were cautious during the recent boom years. The result has been high capital adequacy ratios of 18%, prudent borrowing abroad and a focus on stability rather than triple-digit growth rates. For example, the Turkish banking sector’s total loan syndication repayments in the next 12 months are only $9.7 billion and banks have enough cash on hand to repay half this amount, with the rest likely to be rolled over.

In mid-May, Turkish banks reported their first-quarter financials, and most of them beat expectations. Profits at the top eight banks came in at TL2 billion ($1.3

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