MENA & Turkey Financials

Ercan Uysal

Thematic (Sector/Industry)

Brazil Banks / Thematic (Sector/Industry)

<p>The answer largely depends on what the metaphor implies. While the recent sharp devaluation in TL has surely exacerbated the structural problems in the Turkish economy, if the political tensions with the US do not further escalate leading to economic sanctions, a painful but manageable hard landing is still within the realm of possibility, in our view. As we have discussed in detail in our previous note ("Turkish Banks: A Painful Deleveraging Ahead"), having registered the second largest private sector debt-to-GDP build-up in 2009-2017 in the EM universe after China, a multi-year deleveraging in the Turkish economy seemed inevitable to us. In this respect, the recent political developments have merely triggered this inevitable process, which could have devastating consequences (social and economic) if not handled carefully and swiftly. In this note, we further delve into the potential impact of recent macro developments on the Turkish banking sector and attempt to quantify our somewhat “orderly deleveraging” scenario.</p>

The answer largely depends on what the metaphor implies. While the recent sharp devaluation in TL has surely exacerbated the structural problems in the Turkish economy, if the political tensions with the US do not further escalate leading to economic sanctions, a painful but manageable hard landing is still within the realm of possibility, in our view. As we have discussed in detail in our previous note ("Turkish Banks: A Painful Deleveraging Ahead"), having registered the second largest private sector debt-to-GDP build-up in 2009-2017 in the EM universe after China, a multi-year deleveraging in the Turkish economy seemed inevitable to us. In this respect, the recent political developments have merely triggered this inevitable process, which could have devastating consequences (social and economic) if not handled carefully and swiftly. In this note, we further delve into the potential impact of recent macro developments on the Turkish banking sector and attempt to quantify our somewhat “orderly deleveraging” scenario.

Turkish Banks: Has the Rubicon Been Crossed?