The capital of Turkey’s biggest bank has been increased by TL 21.8 billion ($1.6 billion), according to footnotes of the lender’s annual financial report Wednesday, with the amount to be paid by the country’s sovereign wealth fund.
The move to shore up Ziraat Bank followed a total of about $2 billion in a fresh capital increase for Halkbank and VakıfBank earlier this month.
The Turkey Wealth Fund (TWF) will provide the entire increase to TL 34.9 billion from TL 13.1 billion through a cash payment, Ziraat said in a public filing.
Earlier this month, Halkbank and VakıfBank said they will carry out capital increases by private placement, with combined total sales proceeds of TL 26.8 billion and the shares issued to be sold to the TWF.
The process to complete the capital boost is continuing, Ziraat said, without providing more details.
The moves are meant to stabilize banks and position state lenders, especially to boost lending in line with the central bank's series of interest-rate cuts.
The TWF fully owns Ziraat Bank, 75% of Halkbank and 36% of VakifBank, according to public data.
The fund injected $6.7 billion to strengthen the capital of state lenders in two separate rounds in 2019 and 2020, which was financed through bond sales by the Treasury and Finance Ministry to banks in the local market.
The government has been endorsing a model based on lower borrowing costs to boost credit, exports and investment.
President Recep Tayyip Erdoğan has said the new economic path will also eventually help Turkey solve its chronic current account deficit problem and contribute to stabilizing the lira.
To support the drive, Turkey’s central bank had brought down the key policy rate by 500 points since September to 14% but paused 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 since the start of the year following a 44% decline in 2021. The currency closed last week at 13.49 against the United States dollar. It traded at 13.64 at 1:30 p.m. local time on Wednesday.
The government has relied on public lenders, as they boosted their lending throughout the pandemic, helping the economy avoid a contraction and mount a strong recovery helped by a speedy vaccination campaign.
It on Saturday announced a TL 60 billion new loan package under the Credit Guarantee Fund (KGF) that will provide government-backed borrowing to the companies to finance production and exports.