May 10, 2019 / 11:04 AM / a year ago

UPDATE 1-Turkish banks in no rush to sell problem loans, focused on restructurings -sources

(Adds quotes, details, background)

By Ebru Tuncay and Can Sezer

ISTANBUL, May 10 (Reuters) - Turkish banks told foreign investors they were in no rush to sell problem loans on their books, and were focused on restructuring them, three people present at a meeting discussing bad debt on Thursday in Istanbul told Reuters.

Deutsche Bank, Cerberus, Goldman Sachs, Bain and the European Bank for Reconstruction and Development (EBRD) attended the meeting on Thursday to discuss the possible sale of problem loans, the attendees said.

Economists have expressed concerns about the transparency of non-performing loans held by Turkish banks which surged after last year's lira crisis led to a sharp rise in the cost to borrowers of servicing foreign debt..

Several large Turkish companies, including Dogus Holding and Yildiz Holding, sought restructurings last year and Turkish Finance Minister Berat Albayrak last month promised a $5 billion injection for state banks and to take energy and construction loans off bank balance sheets via two new funds.

Turkey's banking sector had total loans outstanding of 2.5 trillion lira as of the end of March, 100 billion lira of which is being re-structured. Although the non-performing loan (NPL) ratio is 4.04% this is expected to rise to 6% by year-end and some analysts predict it could hit 8%.

Among Turkish financial groups, Is Bank, Akbank , Garanti Bank, Finansbank, Alternatifbank and Kuveyt Turk took part, along with some asset and portfolio management companies, attendees added.

But the banks see no need to sell Tier 2 loans yet because they are still receiving payments on them and the BDDK banking watchdog is helping restructurings, one attendee said.

"The banks have also applied to the BDDK to have fee and tax exemptions that are granted to asset management companies because they are going to have more restructurings."

Investors such as the EBRD are evaluating different ways to invest in loans which are not being paid and problem assets, another attendee said, adding that the EBRD had said there was very little information about these assets.

A fourth source who spoke to the foreign investors said they were interested in the "least problematic" assets.

"They are interested in companies such as tourism, exporters which have foreign currency income but have administrative problems. They are after assets right now, they are not after operating or managing yet," the source said. (Reporting by Ebru Tuncay and Can Sezer Writing by Ali Kucukgocmen Editing by Daren Butler and Alexander Smith)

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