Turkish banks’ bad consumer and credit-card debts are surging and more scrutiny should be applied before they give out loans, said Ergun Ozen, chief executive officer of Turkiye Garanti Bankasi AS. (GARAN)
“We have a real problem here,” Ozen said late yesterday in an interview at an event in Istanbul. “Banks need to exercise caution in extending credit and consumers should not take out loans they can’t pay.” Garanti Bank is the country’s largest lender by market value.
Souring loans at Turkish banks have been increasing as the country’s economic growth slows, with gross domestic product expanding 2.9 percent in the second quarter, the slowest pace since 2009’s contraction. The country will end the year with 3 percent growth, according to the median estimate of 24 economists surveyed by Bloomberg. While Turkey’s unemployment rate fell to 8.8 percent in August from 9.2 percent a year earlier, the pace of the decline has eased in recent months.
Bad loans increased 30 percent this year through Nov. 23, while so-called non-performing credit-card loans rose 20 percent, according to data from the country’s banking regulator. Total lending gained 12 percent
“It seems borrowers are refinancing credit-card debt with lower-interest consumer loans and then defaulting on those,” said Hakan Aygun, an analyst Ak Investment in Istanbul, the brokerage and investment management unit of Akbank TAS. (AKBNK) This explains the surge in bad consumer loans, he said.
The highest charge Turkish banks can apply to credit cards is 28.1 percent, according to central bank data. The weighted average annual interest rate on cash loans is 15.6 percent and 11.5 percent on commercial loans, data compiled by Bloomberg show.
Garanti rose 0.7 percent to 8.84 liras at 3:48 p.m. in Istanbul today, after rising as much as 1.1 percent, the highest in two years.
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