Bank Asya vows to see off "smear campaign" amid Turkish power struggle

Reuters

The head of Turkey's Bank Asya has vowed to strengthen its capital base and see off what he described as a systematic campaign to undermine it, warning the attack on his bank could sour foreign investors' views of Turkey.

The Islamic lender, with more than a million deposit-holding customers and 280 branches, is caught at the centre of a power struggle between President Recep Tayyip Erdoğan and Fethullah Gülen, an Islamic cleric whose sympathizers founded the bank.

Erdoğan accuses Gülen, who is based in the United States, of seeking to overthrow him and has pledged to continue purging institutions such as the police and judiciary, where Gülen is believed to wield influence, of his supporters.

In an interview on the Samanyolu Haber TV station broadcast late on Tuesday, Chief Executive Ahmet Beyaz said Bank Asya had one of the strongest capital structures in the industry and had not turned any customers away despite its troubles.

"This bank is based on very solid foundations. Some people may have withdrawn deposits, but others have come to us," Beyaz said, adding most of its customers were ignoring what he described as a "smear campaign."

Bank Asya's profits and deposits tumbled in the six months since December, when the rift between Erdoğan and Gülen burst into the open with a government graft scandal which the then-prime minister blamed on the cleric's network of supporters.

Its shares have fallen more than 40 percent since the start of this week, when they resumed trading after more than a month's suspension over uncertainty about the bank's future, more than halving its market capitalization since mid-December.

"There is a campaign to undermine our bank," Beyaz told Samanyolu Haber, which is close to the Gülen network.

"We are one of the banks with the strongest capital structures and capital adequacy ratios. We had a 17.5 percent capital adequacy ratio at the end of the first half and it will be around 20 percent at the end of the third quarter," he said.

The government canceled tax collection and social security payment contracts with Bank Asya last month.

Local media reports say state-owned firms and institutional depositors loyal to Erdoğan withdrew 4 billion lira, or some 20 percent of the bank's total deposits, earlier in the year, although Bank Asya has not commented on these figures.

Its total deposits fell to 13.6 billion lira ($6.16 billion) by the second quarter from 18.5 billion at the end of 2013, according to its balance sheet.

Pro-government newspapers have carried almost daily reports on Bank Asya's woes, portraying it as a failing bank being propped up by members of Gülen's network.

The bank said on Tuesday that it was raising its paid-in capital by 25 percent to 1.125 billion lira ($509 million) with cash from shareholders.

Investors worried

Beyaz said foreign investors hold half of Bank Asya's listed shares and that the five-week suspension of its stock had worried them. A 300-billion euro fund which owns a stake had written to the government expressing concern, he said.

"This kind of unlawful and criminal activity against Bank Asya could change a large fund's view about Turkey, not just on Bank Asya," he said, adding that the bank had opened more than 300 court cases to defend itself.

"This attack on our bank could be waged against another bank or organization tomorrow. Rule of law should be put in place."

Erdoğan has vowed to pursue his struggle against Gülen, a battle which has already seen him purge thousands of police and hundreds of judges and prosecutors deemed loyal to the cleric in moves which raised concern about judicial independence in the EU candidate nation.

Erdoğan accuses Gülen's followers of seeking to establish a "parallel state" and of orchestrating last December's corruption probe against his inner circle, when the sons of several ministers and businessmen close to him were arrested. They have since been released as investigations have stalled.

Top government officials appeared to be at odds over a possible state purchase of Bank Asya last month, with Deputy Prime Minister Ali Babacan saying state-run Ziraat Bank, which is looking to launch its own Islamic banking unit, could buy it. An advisor to Erdoğan subsequently denied such a plan.

Erdoğan was quoted by Turkish media as saying late on Monday that the BDDK banking watchdog should "take steps" against Bank Asya if necessary, but did not specify what that might involve.

"If clients cannot draw out deposits, it means their capital ratio is shrinking considerably. The BDDK has steps to take. Otherwise the BDDK itself will be responsible," he was quoted by the Hürriyet newspaper as telling reporters on his plane back from an official visit to Qatar.

Beyaz said any customer wishing to withdraw funds had been able to do so, adding that not a single client had been turned away in the 10 months since the campaign against the bank began.

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Published on Today's Zaman, 17 September 2014, Wednesday