Turkish lenders still under pressure despite slight recovery

Three prominent Turkish banks’ second-quarter financial outlooks reveal that problems in the sector remain, but the recent rise in rates has helped to ease some of their losses Despite a slight recovery in the second quarter, Turkish lenders have recorded falling profits for the first half of the year due to an increase in interest rates, as well as limitations on credit card and loan spending.

Three of Turkey’s largest banks have announced their balance sheets for the second quarter over the past week, revealing that Turkish lenders are still feeling the pressure from the tough conditions in the sector, in spite of eye-catching progress from the ailing first quarter.

While the Central Bank’s massive hike greatly reduced the high demand for loans, the banking watchdog’s regulations curbed the demand for credit card usage and borrowing loans by restricting installment payments on several goods and lifting loan amounts with the aim of reducing domestic spending that led to a rise in imports.

The results announced by the state-owned Halkbank, as well as Garanti and Akbank, show they have been affected by the higher interest rates, which were hiked by the Bank in January to defend the Turkish Lira from a month-long freefall and macro-prudential measures introduced by the country’s banking watchdog.

State-owned lender Halkbank, which suffered a huge loss in reputation amid claims of mediating Turkey’s gold-for-gas trade with Iran, particularly because of graft accusations against its former CEO Süleyman Aslan, announced on July 25 its net profit dropped by 12 percent on annual basis and became 632.2 million liras in the second quarter.

Garanti also announced...