Further drop in the Turkish lira against the US dollar will severely undermine the capital buffers of banks in Turkey, warns investment bank Goldman Sachs.
The financial institution analysts are of the opinion that every 10% drop of the TRY reflects bank capital levels by an average of 50 basis points.
The Turkish lira (TRY) lost 43.91% of its value against the US dollar (USD) in just 159 days since March 1, 2018.
They have calculated that the 12-percent drop in the Turkish national currency since late June has led to Yapi Kredi’s lowest level of capital among all major Turkish banks and has erased the remaining profits from recent issued rights.
At the same time, other banks like Garanti and Akbank appear to be in a better position than others.
“The rising depreciation of the TRY will increase concerns about the capital increase of banks, particularly those with low capital levels”, said Goldman Sachs analysts.
Investors have signalled increasing concern over the stewardship of the economy under President Recep Tayyip Erdogan, particularly after the Trump administration last week imposed sanctions on Ankara, its long-time Nato partner.