Turks loyal to their bank debts

ANKARA

Turkey is among the countries, which are most loyal to their debts, in terms of non-performing loans (NPL) ratio, according to data from International Monetary Fund and Turkey’s banking watchdog.

Despite Moody’s recent warning that domestic banks’ profitability would be badly affected by rising NPL in 2017, Turkey's NPL ratio currently stands at 3.2 percent, a figure which puts Turkey ahead of its many peers in terms of loyalty to its debt.

On Monday, Moody’s said in its weekly “Credit Outlook” report that they expect gross non-performing loans – in which the debtor has not made payments for at least 90 days – to be above 4 percent by year’s-end, which will require increased provisioning expenses and will reduce banks’ profitability.

"Increased nonperforming loans, leading to higher loan loss charges on these segments, would therefore have a significant effect on the profitability of Turkish banks," it said.

Data from World Bank shows that Greece, still trying to recover from economic crisis, has the highest NPL ratio with 37 percent. Ukraine having geopolitical tension with Russia follows with 30.4 percent NPL as of 2016, which is much higher than the rate of 2015 at 19 percent.

First two countries were followed by Portugal with 12.2 percent, Romania with 11.3 percent, Hungary with 10 percent, Russia with 9.2 percent, India with 7.6 percent, Spain with 6.1 percent, and Czech Republic with 5.2 percent. The countries with NPL ratios worse than Turkey also includes France with 3.9 percent, Brazil 3.8 percent and Poland 4.4 percent.

However, Turkish banking sector shines out with 3.2 percent NPL ratio despite it was challenged by many problems such as economic crisis in its largest trade partner EU, geopolitical tension in neighboring countries, Daesh crisis and terrorist activities alongside changing monetary policies of major global central banks.

Chief economist of Deniz Investment House Ozlem Derici said that they expect a more positive growth performance in 2017 and a recovery in domestic demand which will help slow the increase of NPL.

“Unless there is a major negative change in economic circumstances, our main scenario envisages a 3.8 percent non performing loan ratio. And this is not a rate to throw economy into crisis or cause bankruptcies,” she said.