“Turkish Banks' High Dependence On Foreign-Currency Funding Likely To Restrain Credit Growth” (2)

(Adds details)

Öykü Altuntaş / Istanbul, Oct 1 (DHA) - International credit rating company Moody’s urged that Turkish banks might slow their lending growth as foreign currency funding was expected to become more expensive, in a report published on Oct. 1.

Moody's report, entitled "High dependence on foreign funding is a significant risk for credit growth" announced, “Turkish banks may slow their lending growth in 2015-16, as foreign currency funding will likely become more expensive”.

"Turkish banks' rapid rise in lending over the past five years has been largely funded by foreign currency funding inflows, as domestic deposits have not kept in step with credit growth" said Irakli Pipia, a VP-Senior Credit Officer at Moody's. "However, reduced foreign investor sentiment is making banks' access to funding harder and resulting in higher risk premiums at a time when profitability is already facing downward pressure."

Accordingly, Turkish banks could decide to scale back their lending to the rate of, or below, customer deposit growth, said the report. The data also announced the customer deposit growth was at 11 percent, in the first half of 2015.

In the report, it was pointed out that foreign funding might become scarcer as higher rates in the US will likely result in weaker flows of international funds into emerging market of Turkey.

Moody's data also shows that Turkish banks' capital market borrowing more than doubled to USD152 billion at the first half of the year, from 66 billion dollars that was recorded in the end of 2010. Also, Turkish banks’ total lending rose to 540 billion dollars from 356 billion dollars.