Turkish state banks in talks for capital boost

Reuters

Turkish state-owned banks are in talks with the Treasury and the country's sovereign wealth fund to secure more capital that would allow them to boost lending ahead of elections next year, two banking sources and one government official said.

The Treasury is working on a plan, the two sources said, requesting anonymity. "The total capital increase may be over 50 billion lira ($2.7 billion)," one banking source said.

The last capital increase for state banks happened in March, when the Turkish Wealth Fund, their main shareholder, injected 51.5 billion lira ($2.78 billion) into them. Turkey has boosted state lenders' capital four times since 2018.

The share of loans issued by state banks has risen to an all-time high of nearly 50% as they supported the economy in recent years through cheap financing and the state's Credit Guarantee Fund (KGF) loans. The rise in loans have led to increased need for capital for state banks.

State lenders would also need capital to extend loans before the elections under the KGF scheme, which guarantees loans to small- and medium-sized firms, another source told Reuters.

The Treasury, the wealth fund and the three state banks did not immediately respond to requests for comment.

The government's economic programme includes extending more selective loans via the KGF to support production and exports. It is expected to stick with the policy at least through the presidential and parliamentary elections set for May or June.

"There is a need for a capital increase in state banks. This is also necessary for the use of the KGF (loans). But a step needs to be taken rapidly," the government official said.