Turkey plans almost $3 billion capital injection for state banks, sources say

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ISTANBUL (Reuters) – Turkey plans to inject about 20 billion lira ($2.8 billion) of new capital into three state banks – Ziraat Bank, Halkbank (HALKB.IS) and Vakifbank (VAKBN.IS) – in the coming days, two banking sources told Reuters on Friday.

Turkish banks are under increased pressure to lend in the face of the coronavirus pandemic that is tipping the nation’s economy into what is expected to be its second recession in less than two years. State lenders generally have smaller capital buffers than their private peers.

A Treasury spokesman did not immediately respond to a request for comment.

“We expect necessary regulation to be announced and published next week to increase the capital of state banks,” said one of the sources, both of whom requested anonymity.

“The capital increase will be around the 5 bilion to 7.5 billion lira level for each state bank, totalling about 20 billion lira.”

Halkbank (HALKB.IS) and Vakifbank (VAKBN.IS) stock was up about 2.5% and 1.5% by 1400 GMT, while Istanbul’s main share index .XU100 and banking index .XBANK were both down 0.6%.

Analysts said bank shares had been boosted by expectations of fresh capital. Ziraat is unlisted.

Finance Minister Berat Albayrak told investors on Wednesday that Turkey will soon announce details of a plan to raise state banks’ core capital, according to two people on the conference call.

Albayrak said Turkey was “totally committed to supporting our state banks”, one of the people said.

Turkey, which has imposed a partial lockdown to curb the pandemic, has offered Treasury-backed loans for companies hit by the economic fallout from the coronavirus crisis, while state banks distributed consumer loans with deferred payments.

Reporting by Ebru Tuncay, Orhan Coskun and Birsen Altayli; Editing by Ezgi Erkoyun, Jonathan Spicer and David Goodman

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