Turkey Wake up call: Macro, Political and Equity News, 17th April

This analysis by GLOBAL Securities is presented to you by Raiffeisen Centrobank AG. Raiffeisen Centrobank AG acts solely as a distributor of this analysis and has not introduced any material changes to the content of this analysis or any recommendation included herein.

Wake – up call

BIST climbed 0.41% yesterday after a day of mixed activity. Index had a gap higher start and climbed to its daily peak of 97k in early trades. Profit taking trimmed the gains and pushed the benchmark to its intraday low of 95.3k around mid-morning before the market staged another rebound and traded rangebound for most of the afternoon. Banks lagged with the 0.25% increase in their sector index as GARAN and ISCTR outperformed while state lenders fell behind. Pharma/sanitary products companies, fertilizers, Koza group names, SISE, SODA, MGROS, and BIMAS topped the gainers while aviation stocks, TUPRS, KCHOL, and AKSEN were among the top decliners. Today, our local macro agenda is muted apart from the CBT's monthly expectations survey to be revealed at 2:30PM local time. BIST is off to a positive start given the strong mood in global markets on Trump administration unveiled their plans to reopen the U.S. economy after coronavirus lockdowns. U.S. futures are up over 3% in early trades and Asian markets are all trading in the green. Lira is also gaining some ground with USDTRY pair at 6.9215 vs6.9337 at yesterday's closing bell.
Macro and Political News:
(=/-) Number of deaths from coronavirus reached 1643... According to the Health Ministry, the number of deaths from coronavirus increased by 125 people yesterday and reached 1643. The total numbers of tested and infected people are 518,143 and 74,193 in Turkey.

(-) Consumer Confidence Index contracted by 20.5% in April... According to the Bloomberght’s survey, the consumer confidence in April 2020 retreated by 20.5% YoY to 56.19.

(=) Central Bank of Turkey released Private Sector's Outstanding Loans Received From Abroad for February 2020... As regards the private sector’s outstanding loans received from abroad, long-term loans recorded USD 177.9 billion as of February, decreasing by USD 2.9 billion; whereas short-term loans (excluding trade credits) realized USD 7.7 billion, decreasing by USD 1.4 billion in comparison to the end of 2019. From the borrower’s side, regarding long-term loans, banks’ loan liabilities decreased by USD 987 million; whereas bond liabilities amounted to USD 21.4 billion, increasing by USD 181 million in comparison to the end of 2019. In the same period, non-bank financial institutions’ loan liabilities decreased by USD 444 million; whereas bond liabilities amounted to USD 3.6 billion, decreasing by USD 43 million. Non-financial institutions’ loan liabilities recorded a decrease of USD 1.2 billion in comparison to the end of 2019; while bond liabilities amounted to USD 7.5 billion, decreasing by USD 9 million as of February. Regarding short-term loans, banks’ loan liabilities realized as USD 4.7 billion, decreasing by USD 997 million; whereas non-financial institutions’ loan liabilities realized as USD 1.6 billion, decreasing by USD 105 million in comparison to the end of 2019. From the creditor’s side, regarding long-term loans, liabilities to private creditors excluding bonds amounted to USD 122.7 billion, decreasing by USD 2.6 billion compared to the end of the previous year. Regarding short-term loans, liabilities to private creditors excluding bonds amounted to USD 7.3 billion decreasing by USD 1.5 billion compared to the end of the previous year. Regarding the currency composition, of the total long-term loans in the amount of USD 177.9 billion. 61.9 percent consists of USD, 33.2 percent consists of Euro, 3.2 percent consists of Turkish lira and 1.7 percent consists of other currencies and of the total short-term loans in the amount of USD 7.7 billion, 42.2 percent consists of USD, 33.1 percent consists of Euro, 24.1 percent consists of Turkish lira and 0.6 percent consist of other currencies. As for the sectoral breakdown by the end of February, of the total long-term loans in the amount of USD 177.9 billion, 42.7 percent consists of liabilities of the financial institutions; whereas 57.3 percent consists of the liabilities of the non-financial institutions. In the same period, of the total short-term loans in the amount of USD 7.7 billion, 75.9 percent consists of liabilities of the financial institutions. whereas 24.1 percent consists of liabilities of the non-financial institutions. Private sector’s total outstanding loans received from abroad based on a remaining maturity basis; point out to principal repayments in the amount of USD 44.5 billion for the next 12 months by the end of February.

(=/+) Mercedes-Benz to resume production in Turkey... According to Anadolu Agency, Mercedes-Benz will restart production in Turkey next week after suspension due to coronavirus pandemic in its Hosdere Bus Factory on April 20 and Aksaray Truck Factory on April 24. Recall that the company halted production in its two Turkish plants in March as part of measures for the health of employees and society, and logistic disruptions in the international supply chain.


Sector and Company News:

(=) ISCTR bought 1.30mn lots of SISE shares with TRY4.69 – 4.76 price range per share. Its share in SISE reached to 68.61% by this transaction.

(=) KARSN decided to start production partially after April 20. Recall that the Company had stopped production since April 1.

(=) GARAN BoD authorised the management to buy back its previously issued USD denominated bonds from international markets. The tranches of the bond buybacks are as follows: i) USD100mn portion of USD500mn outstanding with 6.25% coupon rate issued in 2011 with 2021 maturity listed in London Stock Exchange, ii) USD150mn portion USD750mn outstanding with 5.25% coupon rate issued in 2012 with 2022 maturity listed in London Stock Exchange, iii) USD100mn portion of USD500mn outstanding with 5.875% coupon rate issued in 2017 with 2023 maturity listed in Irish Stock Exchange.

By this transaction GARAN may generate profit if it acquires the bonds at attractive levels.

(=/+) BRSA update on capital adequacy calculation… BRSA announced an easing update on calculation for capital adequacy of the banks. Accordingly, banks will be able to weight 0% risk on its foreign currency receivables from central government while calculating its capital adequacy.

(-) Foreign investors’ net outflow trend continues… According to the CBRT data released on Thursday, during the week of 03-10 April, non-residents executed net outflow of USD183mn from equities and USD328mn from GDDOs. As of last week, non-residents’ y-t-d net total flow of securities has been USD-2.44bn from equities and USD-5.02bn from GDDOs.


Exhibit: Non-residents’ y-t-d net flow of securities (Weekly)



Source: CBRT weekly securities statistics

(=) CBRT international reserves… According to the latest CBRT data released on Thursday, the Central Bank’s gross international reserves declined by 70 bps WoW from USD89.7bn to USD89.0bn. The decline in gross reserves has been 15% by monthly comparison. Net international reserves declined by 3% from USD27.1bn to USD26.3bn WoW. However, comparing to last month, the decline in net reserves has been 23% from around USD34.3bn to USD26.3bn.

As of April 10, CBRT gross international reserves declined by 16% and the net reserves declined by 36% y-t-d.



Exhibit 1: The change in gross and net international reserves of CBRT

CBRT International Reserves (USD,mn) 10/04/2020 03/04/2020 13/03/2020 12/04/2019 03/01/2020 w/w m/m y/y y-t-d
Net Reserves 26,300 27,140 34,323 28,440 40,985 -3.10% -23.38% -7.53% -35.83%
Gross Reserves 89,071 89,699 104,314 97,943 105,561 -0.70% -14.61% -9.06% -15.62%

Source: CBRT analytical balance sheet


Exhibit 2: The graph for gross and net international reserves of CBRT beginning from Jan-19



Source: CBRT analytical balance sheet


(=) BRSA weekly banking data… According to the BRSA weekly banking data, total loans increased by 93 bps, mainly sourced from the expansion in the commercial and SME loans while consumer loans remained flattish. Commercial loans increased by 130 bps WoW and the SME loans 2.08% WoW indicating the effect of loan support program of the government. In-line with its declining y-t-d trend, FX indexed loans inched down by 95 bps woW.

NPLs indicating a slower pace in its declining trend y-t-d in line with the expectations coming from Covid-19 effects. NPL ratio inched down 5 bps WoW.

On the other hand, total deposits slightly increased by 90 bps WoW, mainly contributed by the commercial institutions which increased by 2.10% weekly.

Total FX deposits of the residents indicated a slight decline by 18 bps WoW while corporates increased their USD deposits by 2.38%


(TL, mn) 10/04/2020 03/04/2020 13/03/2020 12/04/2019 03/01/2020 w/w m/m y/y y-t-d
Total Loans 2,938,404 2,911,212 2,808,501 2,531,530 2,646,894 0.93% 4.63% 16.07% 11.01%
Consumer Loans 510,349 510,366 507,299 405,037 467,381 0.00% 0.60% 26.00% 9.19%
Housing 211,493 211,415 209,855 184,837 199,268 0.04% 0.78% 14.42% 6.13%
Vehicle 7,050 7,071 7,061 6,285 7,051 -0.30% -0.16% 12.16% -0.02%
GPL 291,806 291,879 290,383 213,915 261,062 -0.03% 0.49% 36.41% 11.78%
Consumer Credit Cards 109,541 112,056 116,418 103,037 116,791 -2.24% -5.91% 6.31% -6.21%
Commercial and Other Loans 2,318,514 2,288,791 2,184,784 2,023,456 2,062,722 1.30% 6.12% 14.58% 12.40%
Installment Commercial Loans and Corporate Credit Cards 481,591 472,624 462,414 425,429 434,411 1.90% 4.15% 13.20% 10.86%
SME Loans 679,382 665,511 648,162 636,682 611,735 2.08% 4.82% 6.71% 11.06%
Fx Indexed Loans 9,846 9,940 10,438 25,802 11,808 -0.95% -5.68% -61.84% -16.62%

(TL, mn) 10/04/2020 03/04/2020 13/03/2020 12/04/2019 03/01/2020 w/w m/m y/y y-t-d
Non Performing Loans 151,549 151,617 152,756 107,364 150,758 -0.04% -0.79% 41.15% 0.52%
Consumer Loans 13,318 13,361 13,747 12,655 13,355 -0.32% -3.12% 5.24% -0.27%
Housing 1,173 1,179 1,216 1,100 1,269 -0.49% -3.51% 6.64% -7.52%
Vehicle 174 174 197 231 201 -0.26% -11.78% -25.02% -13.61%
GPL 11,971 12,008 12,334 11,323 11,885 -0.31% -2.94% 5.73% 0.73%
Consumer Credit Cards 6,305 6,317 6,563 6,639 6,323 -0.19% -3.93% -5.03% -0.28%
Commercial and Other Loans 131,926 131,939 132,446 88,070 131,081 -0.01% -0.39% 49.80% 0.64%
NPL Ratio 5.16% 5.21% 5.44% 4.24% 5.70% -0.97% -5.18% 21.61% -9.45%

(TL, mn) 10/04/2020 03/04/2020 13/03/2020 12/04/2019 03/01/2020 w/w m/m y/y y-t-d
Total Deposits 2,859,315 2,833,837 2,728,415 2,236,239 2,567,331 0.90% 4.80% 27.86% 11.37%
Natural Person 1,738,591 1,731,745 1,677,349 1,359,474 1,595,204 0.40% 3.65% 27.89% 8.99%
Demand 453,437 446,308 418,424 270,502 360,147 1.60% 8.37% 67.63% 25.90%
Time 1,285,154 1,285,436 1,258,925 1,088,972 1,235,056 -0.02% 2.08% 18.02% 4.06%
Commercial Institutions 928,941 909,868 858,227 728,159 817,594 2.10% 8.24% 27.57% 13.62%
Demand 280,706 271,583 260,275 184,433 220,838 3.36% 7.85% 52.20% 27.11%
Time 648,235 638,286 597,953 543,726 596,757 1.56% 8.41% 19.22% 8.63%
Official and Other Institutions 191,783 192,224 192,839 148,606 154,533 -0.23% -0.55% 29.05% 24.10%
Demand 42,463 37,261 51,067 42,577 33,914 13.96% -16.85% -0.27% 25.21%
Time 149,320 154,963 141,771 106,029 120,619 -3.64% 5.32% 40.83% 23.79%
Deposits Subject to Insurance 750,116 745,070 730,713 520,013 698,978 0.68% 2.66% 44.25% 7.32%

Total Fx Deposits with Banks (USD, mn) 213,725 218,788 222,882 202,734 214,029 -2.31% -4.11% 5.42% -0.14%


(USD, mn) 10/04/2020 03/04/2020 13/03/2020 12/04/2019 03/01/2020 w/w m/m y/y y-t-d
Total FX Deposits of Residents 179,501 179,822 184,026 177,241 184,087 -0.18% -2.46% 1.28% -2.49%
Real Persons 101,052 101,644 105,555 100,326 107,919 -0.58% -4.27% 0.72% -6.36%
Dolar ($) 68,568 68,839 70,778 68,967 73,788 -0.39% -3.12% -0.58% -7.07%
USD Eqv. of Euro 29,866 30,174 32,253 29,352 31,705 -1.02% -7.40% 1.75% -5.80%
Corporates 74,929 74,497 75,035 72,145 72,360 0.58% -0.14% 3.86% 3.55%
Dolar ($) 39,034 38,126 36,840 40,326 37,364 2.38% 5.96% -3.20% 4.47%
USD Eqv. of Euro 34,897 35,428 37,135 31,029 34,181 -1.50% -6.03% 12.47% 2.09%