Fitch: Turkey bank loan growth ’mildly positive’

Ratings agency Fitch has said continued moderate loan growth in Turkey in the first quarter of this year is mildly credit positive and will help contain the emergence of systemic risks and the build-up of impaired loans.
Fitch said on Tuesday that quarter-on-quarter loan growth was 6.6 percent in the first quarter, but this would have been 3 percent when adjusted for exchange rate effects. It added that foreign currency loans represent around 30 percent of total bank lending, and the lira depreciated by 12.6 percent against the dollar in the first three months of 2015. Although this still represents significant nominal loan growth, Fitch said it is moderate in real terms and a andquotnotable slowdownandquot relative to the rapid expansion of preceding years. It noted that this has been driven by slower economic growth, regulatory curbs and greater caution by banks. Fitch recorded a moderate rise in consumer lending — 2.6 percent until March, which it said is due to regulatory restrictions on credit card and auto lending introduced in the past two years.
Consumer lending was once the main growth driver at Turkish banks and the primary source of a ballooning current account deficit. Turkeyand’s central bank raised interest rates in late January by more than four percentage points after the lira plunged to record lows. The tightening measure was also designed to curb domestic demand and keep loan growth in check. Fitch described loan growth targets of Turkish banks at the outset of 2015 of around 15-20 percent for the full year as andquotrealistic,andquot based on first quarter figures. It highlighted that confidence levels may improve after Juneand’s parliamentary election and that loan growth in Turkey has traditionally picked up during the second half of the year.
The ratings agency stated that Turkish banks remain andquotrelatively cautiousandquot about loan growth expectations in 2015 because of geopolitical tensions in neighboring countries, continued weak growth reported by EU trading partners, interest rate uncertainty and continuing high unemployment, which stood at 11.2 percent at the end of February.

SOURCE: Today’s Zaman