Turkey

Bad debts could become more of a headache for Turkish banks when credit expansion slows, which threatens to reverse a decline in the ratio of souring loans, according to European Bank for Reconstruction and Development, Bloomberg News reported. “The NPL issue is an elephant-in-the-room,” Roger Kelly, EBRD’s Istanbul-based lead regional economist, said in an interview. A boom in credit extension increases the risk of taking on riskier customers, and means many of the loans are still relatively young, he said.

The owner of the Nusr-Et steakhouse, known by its founder chef’s meme Salt Bae, is negotiating with lenders to delay repayments on 2.3 billion euros ($2.7 billion) of debt that was restructured last year, Bloomberg News reported. Turkish billionaire Ferit Sahenk’s Dogus Holding AS is in preliminary talks with a group of banks after its cash flows took a knock because of the coronavirus pandemic, according to people familiar with the matter. They asked not to be identified as the talks are confidential.

The two companies building the stalled Etlik mega hospital in Ankara agreed to one of Turkey’s largest loan restructurings earlier this month, according to two sources, one of whom said the deal was was worth 1.1 billion euros ($1.3 billion), Reuters reported. The European Bank for Reconstruction and Development, which has invested some 650 million euros in big city hospitals in Turkey in recent years, confirmed it signed off on the deal that should allow construction of Etlik to resume.

Debt-laden Turkish companies are seeking more time to repay bank loans after the coronavirus pandemic upended plans to sell assets, according to four sources with direct knowledge of the matter, Reuters reported. Even before the virus hit Turkey in March, firms were seeking lower rates from banks after an aggressive monetary easing campaign and since then, large and small companies are looking for further revisions to nearly all of the restructurings agreed in the past two years, according to one of the sources.

Turkey had its debt rating cut deeper into junk by Moody’s Investors Service, which warned of a possible balance-of-payments crisis in assigning the lowest grade it’s ever given to the country, Bloomberg News reported. The sovereign credit rating was cut to B2, five levels below investment grade and on par with Egypt, Jamaica and Rwanda. The company kept a negative outlook on the rating, saying fiscal metrics could deteriorate faster than currently expected.

The lira weakened for a fourth day in a sign to traders that the central bank’s efforts to stem its declines by raising the average cost of borrowing are falling short, Bloomberg News reported. The Turkish currency slid almost 0.4% versus the dollar, bringing its depreciation this month to almost 6%, the most in emerging markets. The central bank has sought to anchor the currency by raising the cost of funding ahead of Thursday’s policy meeting. While the benchmark one-week repo rate is at 8.25%, policy makers are offering funding though more expensive channels.

President Recep Tayyip Erdogan says Turkey’s banks are “doing fine.” But as the lira spirals ever lower, debt investors are taking a less sanguine view. The bonds of three Turkish lenders are trading at distressed levels, which shows the deteriorating opinion of investors on the ability of the companies to repay their obligations, even though the banks remain profitable and highly capitalized, Bloomberg News reported.

Turkey stepped back from currency interventions and moved to relax some of the restrictions that tethered the lira for months, allowing it to tumble to a record against the dollar, Bloomberg News reported. State banks withdrew support for the lira at specific levels against the U.S currency even as it dropped to an all-time low, and were largely absent from the market on Thursday, according to people familiar with the matter.

Telia Co. AB is in talks to sell its indirect stake in Turkcell Iletisim Hizmetleri AS, Turkey’s biggest mobile-phone carrier, to the country’s sovereign wealth fund for about $530 million, Bloomberg News reported. Negotiations are still ongoing and are in an advanced stage, but no agreement has yet been reached, Telia said in a statement. Telia is the largest shareholder in Turkcell via the holding company Turkcell Holding AS.

Months of concern over rising Covid-19 infection levels may be secondary for investors in coming days as market-moving events and policy decisions take center stage, Bloomberg News reported. China’s annual National People’s Congress starting Friday will likely keep volatility suppressed for developing-nation currencies, despite the prospect of another flareup in tensions between Beijing and Washington.