Bank Asya shares results amid gov't pressure

Turkish Islamic lender Bank Asya posted a net profit of TL 51.4 million in the January-June period of this year, which was 48.8 percent lower year-on-year.

The decline comes on the heels of increased political pressure on the lender following last year's two separate corruption probes implicating a number of top government officials.

Bank Asya is affiliated with Turkey's largest faith-based group the Hizmet movement, which the government has accused of undermining its power, an allegation that lacks sound evidence.

President-elect Recep Tayyip Erdoğan had openly targeted Bank Asya in separate statements, and observers interpreted his verbal attacks as a form of revenge on the Hizmet movement. Earlier in the year, local media speculated that state-owned companies and institutional depositors loyal to Erdoğan withdrew $1.8 billion from Bank Asya accounts.

Opposition groups have accused Erdoğan of “a clear violation of a law regulating and protecting financial institutions” and called on Turkey's Banking Regulation and Supervision Agency (BDDK) to act and protect the lender.

Trading of Bank Asya shares has been suspended since Aug. 7. Turkish authorities canceled the lender's tax collection and social security payment deals last week, which, according to observers, is a sign that the government is stepping up its efforts to put pressure on the lender. Bank Asya said the loss of the tax deal would "not have a significant impact" on its activities, but analysts took it as a sign that the government was planning to put the bank out of business and said it could prompt further deposit outflows from Bank Asya.

Analyst Ahmet Emre Kılınç at Yatırım Finansman said decreasing loan volume had pushed net interest income down 35 percent from the first quarter. "Due to intensive news flow about Bank Asya recently and uncertainties regarding its sale process, we have removed Bank Asya from our recommendation list," Kılınç wrote.

In the first half of 2013, the bank's net unconsolidated profit was TL 100.3 million. Bank Asya's second-quarter net profit fell 81 percent to TL 10.6 million ($4.9 million) as its deposit base shrank and lending wilted under pressure from the government. Loans contracted by 11 percent in the second quarter, while deposits shrank 3 percent, the bank said in a statement to Borsa İstanbul (BİST) late on Monday.

Net fees and commissions declined 33 percent to TL 55.1 million, while loans and receivables dropped 28 percent from the end of 2013 to TL 14.99 billion, it said. In the first quarter, its profit fell 9 percent to around TL 41 million, while deposits fell 24 percent in the same period.

Published on Today's Zaman, 12 August 2014,