Private lender Akbank's syndicate loan boosts BIST, Turkish lira

The capital markets have been waiting for the Turkish private lender Akbank's syndicated loan for weeks, which was seen as a litmus test for some to see the confidence of the global markets in Turkish assets. Turkey's fifth-largest bank by assets managed to borrow $980 million from 23 banks operating in 11 different countries with one-year maturity. While the banks most senior executives evaluated the loan as a trust in the Turkish economy, the markets also responded positively with a more than 4 percent increase in the Borsa Istanbul's banking index and Turkish lira gaining almost 2 percent.

Out of the $980 million loan, $285 million of the total was in dollars at an annual cost of 2.75 percent points above Libor. The remainder was made up of 591 million euros at a cost of 2.65 percentage points above Euribor.

According to a statement by Akbank, the loan was provided by Bank of America Merrill Lynch, Bank of Montreal, BNP Paribas, Cargill Financial Services, Citi, Commerzbank, Deutsche Bank, Emirates NBD, Goldman Sachs, HSBC, ICBC, ING, Intesa Sanpaolo, JPMorgan, KBC Bank, Mashreqbank, Mediobanca, Mizuho Bank, MUFG, Societe Generale, Standard Chartered, SMBC and UniCredit.

Akbank Chair Suzan Dinçer said the high interest of foreign banks in Akbank's syndicated loan, which followed the announcement of the New Economic Program (NEP), demonstrates the trust in Turkey and the lender's financial structure. She expressed her belief that Akbank's syndicated loan, which was followed by the global markets closely, will pave the way for other Turkish banks.

The Akbank loan fueled optimism that the deal will open the way for other banks to refinance liabilities due by the end of the year. The atmosphere of optimism also reverberated in the Turkish markets. The lira recovered some of its previous losses and spiked by 2 percent against the U.S. dollar.

The U.S. dollar-Turkish lira exchange rate fell below 6.00, its lowest level over the past four weeks. By market close, $1 traded for 5.9950 liras, versus 6.1070 at Wednesday's close.

The 10-year government notes extended this month's biggest rally in emerging markets. The yield on 10-year government bonds fell as much as 64 basis points to 17.85 percent, the lowest level since July.

Turkey's benchmark stock index ended Thursday up 1.16 percent to close at 100,298.73 points, the highest close over the past four months. Borsa Istanbul's BIST 100 index recorded a 1,149.88-point hike from Wednesday's close of 99,148.85 points, while it started the day at 99,083.90 points.

Among all sector indices, the BIST banking index was the best performer – up 3.72 percent. Closing at 115,405 points on Thursday, the index also hit 118,217 points during the trading session on Friday.

The rally in Turkish assets comes after the Central Bank of Republic of Turkey (CBRT) raised interest rates by 625 basis points on Sept. 13, preventing a currency slide that fueled a running inflation and increased pressure on companies that borrowed heavily in foreign currency.

Speaking at the signing ceremony for the loan, Akbank's Hakan Binbaşgil said the bank sees the loan agreement with leading foreign banks as an indicator of the confidence of the international financial circles in the potential of the Turkish economy at a time when the emerging markets go under high volatility and the access to liquidity is getting tighter.

Meanwhile, Asian Infrastructure Investment Bank (AIIB) also provided $200 million in loans for the Industrial Development Bank of Turkey (TSKB). The Turkish bank will provide long-term financing for the renewable energy and energy efficiency projects. TSKB shares were trading 0.86 percent up Friday in the afternoon trading session.