June 1, 2015

Credit Suisse Sees Turkey Assets Hurt by Seizure of Bank Asya

The seizure of the remaining shares in Bank Asya will weigh on market sentiment toward Turkey and the risk premia of the country’s assets, Credit Suisse Group AG said.

Turkey’s banking regulator late May 29 seized shareholder rights, control rights, and management rights of the lender, after already taking control of 63 percent of the banks’ privileged stock in February. Shares of the Istanbul-based lender fell 11 percent Friday before the announcement, which came hours after local markets closed.

Prime Minister Ahmet Davutoglu and Deputy Prime Minister Ali Babacan denied the regulator’s move was politically motivated over the weekend. The bank has for months been caught in the crosshairs of a political battle between President Recep Tayyip Erdogan and exiled U.S.-based preacher Fethullah Gulen.

“Bank Asya is known for its proximity to the Gulenist movement and has been a subject of the political tensions in Turkey since December 2013,” said Ates Buldur, analyst at the Zurich-based bank, in an e-mailed report. “We continue to think that such developments are negative for market sentiment and are leading to a higher risk premium for Turkish assets in general.”

The lira has lost about 13 percent this year, while two-year Turkish bond yields are up 180 basis points - three times as much as the next emerging market peer.

In December 2013 a wide-ranging corruption scandal, which implicated ministers close to then-Prime Minister Erdogan, shook the government. Erdogan, who was elected President last year, blamed the allegations on the followers of Gulen and targeted businesses and schools related to the movement.

Published on Bloomberg, 1 June 2015, Monday