TURKISH BANKS - Asset resolution and banks’ recap plans
Ever-greening loans through continuous restructuring with years of grace periods may postpone capitalisation needs, and also prevent new loan originations, but it may ultimately delay economic growth. A well-structured bank recapitalisation program is necessary to improve the health of the financial system and front-load revival in economic activity, in our view.
All in all, we believe clogged up questionable receivables reduce banks’ ability to provide liquidity to the economy. The BRSA can keep CARs at comfortable levels through substandard practices, but we believe this cannot relieve the banks on the liquidity front. Recapitalisation provides the solution, in our view. In the event a bank recapitalization scheme and/or a liquidity support scheme is announced, we believe banks that have relatively lower capital adequacy and liquidity coverage ratios will be the biggest beneficiaries. Halkbank and Yapi Kredi should benefit the most from potential recapitalization schemes, while Akbank and Garanti should be favoured less.
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