Catastrophic banking: Turkish state bank sustains $1 billion loss in bad loans

Published January 27th, 2015 - 02:14 GMT

A Court of Accounts report for 2013 has revealed that the amount of bad loans that state-run Ziraat Bankası had at the time was almost TL 2.5 billion (approximately $1 billion), nearly four times the amount needed to establish a private bank, a daily maintained on Monday.

According to data in the report, which was submitted to Parliament, the management of Turkey's leading state bank just managed to lower bad loans down to nearly TL 2.5 billion, the daily's report said. “However, it is striking that even this figure is nearly four times the amount needed to open up a bank, which is $300 million,” the daily said.

In fact, based on the exchange rate in December 2013, the nearly TL 2.5 billion was equal to around $1.25 billion, given that $1 was around TL 2 at the time. As of the end of 2012, the amount of bad loans the bank had, based on the Court of Accounts report, was TL 2.58 billion ($871 million). But the amount increased by TL 1.71 billion ($722.5 million) in 2013, reaching TL 3.7 billion ($1.56 billion).

Because of a restructuring of bad loans the amount was decreased to $2.5 billion, the daily added, noting that the increase in bad loans was one of the highest in the history of the bank. A total of TL 646,963 ($273 million) was put outside of the bad loans in the bank's accounts through restructuring loans. Another TL 699 million ($295 million) of the total TL 3.7 billion in bad loans was eliminated through various loans and confiscations.

The auditing agency's report revealed that the total of bad loans decreased to TL 2.417 million ($1 billion) following such banking operations. It was in this way that Ziraat Bankası managed to come out with an average bad loan figure acceptable for the banking sector by the end of 2013, the daily said. According to the Court of Accounts report, an increase in the amount of bad loans that needed to be eliminated continued into 2014, with the figure having increased to TL 2.506 billion ($1.06 billion).

The daily's report also included the account numbers of those clients of the state bank due to whom the bad loans of the bank increased. Some of those clients were described in the daily's report as follows: Firm with account number 1071 at Ankara corporate branch of bank; firm with account number 4176 at Ankara Anadolu Bulvarı branch; firm with account number 60451271 at bank's Şişli branch in İstanbul; firm with account number 46578924 at bank's Sivas branch.

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