Turkish banking shares saw a three-day losing streak broken into a surge after the central bank cut reserve requirements on lira liabilities, which freed up capital for increased lending.
The banking shared index rose 3.3% at the close, almost completely reversing the previous day's 3.5pc fall. The biggest gain was that of Yapi & Kredi Bankasi AS, which is part-owned by UniCredit SpA saw its share value bump 4.6% to 3.42 liras. Following in second was state-run bank Turkiye Halk Bankasi AS with gains of 3.7% taking their share price to the dizzy heights of 11.25 liras. In third Turkiye Garanti Bankasi AS, which is the largest bank by market value saw its share price back up to 6.36 liras, a gain of 3.6%.
The surge was brought about by the central bank move to cut varying maturities from 12.6% to 10.5% from November 11. This will free up 11 billion liras of liquidity according to the body.
The central bank’s move gives lenders cash as they “adjust themselves to the short-term liquidity shortage in the system,” Ozgur Altug, chief economist for BGC Partners in Istanbul, said in an e-mailed report.
Central bank Governor Erdem Basci said this week he was withholding funding for banks at the 5.75 percent benchmark one- week rate and directing them to an overnight borrowing facility that costs as much as 12.5 percent. The policy allows the bank to switch between the rates and gives it flexibility enjoyed by “no other bank in the world,” Basci said, as he moves to strengthen the lira and control inflation.
“There is considerable uncertainty over how exactly the central bank will manage domestic lira liquidity conditions,” Ahmet Akarli, an economist with Goldman Sachs Group Inc., said in an e-mailed report today. “Failure to fully sterilize the reserve requirement cuts may result in renewed lira weakness and create further confusion over the central bank’s policy framework.”
More liquidity is good news for overseas property buyers in Turkey, of course, because more money to lend for mortgages. View this video from the Spot Blue channel on You Tube to learn more about mortgages in Turkey.