Ziraat Bank secures $1.6 billion in latest capital raise for public lenders

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The capital of Turkey’s largest bank has been increased by TL 21.8 billion ($1.5 billion), according to footnotes to the lender’s annual financial report on Wednesday, with the amount to be paid by the sovereign fund of the country.

The move to consolidate state-owned banks followed a total of around $2 billion in a new capital raise for Halkbank and VakıfBank earlier this month.

The Turkey Wealth Fund (TWF) will provide the entire increase from TL 13.1 billion to TL 34.9 billion through cash payment, Ziraat said in a public document.

Earlier this month, Halkbank and VakıfBank announced that they would conduct capital increases through private placement, with a combined total sale proceeds of TL 26.8 billion and the issued shares to be sold to TWF.

The process of completing the capital increase continues, Ziraat said, without providing further details.

These measures are aimed at stabilizing banks and positioning public lenders, in particular to stimulate lending in line with the central bank’s series of interest rate cuts.

The TWF wholly owns Ziraat Bank, 75% of Halkbank and 36% of VakifBank, according to public data.

The fund injected $6.7 billion to bolster the capital of state lenders in two separate rounds in 2019 and 2020, which were financed through bond sales by the Department of Treasury and Finance to market banks. local.

The government has approved a model based on lower borrowing costs to boost credit, exports and investment.

President Recep Tayyip Erdoğan said the new economic path will also help Turkey solve its chronic current account deficit problem and help stabilize the lira.

To support the momentum, Turkey’s central bank had lowered the key rate by 500 points since September to 14%, but suspended the easing cycle in January. It is expected to keep its one-week repo rate unchanged again on Thursday.

The Turkish lira has been broadly stable year-to-date after falling 44% in 2021. The currency closed last week at 13.49 against the US dollar. It traded Wednesday at 1:64 p.m. to 1:30 p.m. local time.

The government has relied on public lenders as they ramped up lending throughout the pandemic, helping the economy avoid a contraction and recover strongly with a rapid vaccination campaign.

He announced on Saturday a new TL 60 billion loan program under the Credit Guarantee Fund (KGF) which will provide government guaranteed loans to companies to finance production and exports.

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