Bloomberg News

Turkey Needs More Steps to Cool Banks’ Lending Boom, HSBC Says

June 14, 2011

June 14 (Bloomberg) -- Turkish banking regulators are likely to take additional steps to slow a retail lending boom that is driving the current-account deficit to record levels, HSBC Holdings Plc said.

Year-to-date total loan growth reached 13.9 percent as of June 3, implying a 33 percent growth rate for the year, the bank said in a research note today, citing figures released by the banking regulator yesterday. Retail loan growth, excluding credit cards, was 17.3 percent year to date, implying “eye- catching” 41 percent growth for the year, it said.

Central bank Governor Erdem Basci has raised reserve requirements by 10 percentage points since December to help limit lending. The central bank’s inflation forecast for 2011 of 6.9 percent is based on loan growth of 20 to 25 percent, Basci said.

Increasing reserve requirements limits the amount of money a bank has available to lend and has hurt profits at Turkish lenders including Yapi & Kredi Bankasi AS, whose shares have dropped 17 percent since the beginning of the year, and Akbank TAS, which has fallen 12 percent.

“It is highly likely that the regulators will take additional steps to slow down especially the retail loan growth” as “there is no sign of a slowdown” even after the bank’s intervention, HSBC said.

The deficit widened to $7.7 billion in April, the second- biggest monthly gap since records began in 1984, the state statistics institute in Ankara said yesterday.

Turkey’s credit rating may come under pressure if the government has difficulty financing the current-account gap, Moody’s Investors Service said on June 6. Moody’s ranks Turkey at Ba2, two levels below investment grade, with a positive outlook. Standard & Poor’s rates the country an equivalent BB, also with a positive outlook, and Fitch Ratings has a BB+ ranking, one step below investment grade.

--Editor: Gavin Serkin, Stephen Kirkland

To contact the reporter on this story: Benjamin Harvey in Ankara at bharvey11@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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