Turkish private lender increases capital, signaling expectation of increasing NPLs

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Turkey’s Akbank plans to increase its capital by 30 percent to 5.2 billion Turkish Liras ($966 million) through a rights issue, it said on Dec. 5.

Akbank will receive 3 billion liras ($558 million) in proceeds from the issue which is to be used to improve its capital base and solvency ratios, the bank said in a stock exchange filing.

The bank’s shares were down more than 5 percent in the early trading.

“The bank has taken this decision to protect itself from the possible impact of expected increase of Non-Permorming Loans in the upcoming period, due to the depreciation of lira and slowdown in economy,” said Bülent Şengönül, equity research manager at İş Investment.

“In my opinion, capital raising by a bank with a strong capital standing like Akbank might trigger similar moves from other banks,” Şengönül said.

The bank reported a capital adequacy ratio of 18.48 percent, above the required legal limit, and an NPL ratio of 3.3 percent in its third-quarter financial results.

The lira slumped in August, at one stage falling as much as 47 percent from its level at the start of the year. It has since recovered some ground but economists are worried about the impact on companies and banks.

On Dec. 3, ratings agency S&P Global said that it expects the level of bad loans on Turkishbanks’ books to rise over the next 12-18 months to 6 percent from 3.5 percent in September.

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