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Turkish banks to pay dividends after record 2022 profits

REUTERS/Umit Bektas
Net profit of banks leapt 408% year-on-year to $18 billion in the January-October period

Several big Turkish banks want to issue dividends to shareholders after posting record profits in 2022 and the country’s BDDK banking watchdog is considering the request, three banking sources familiar with the issue said.

Each year the BDDK makes recommendations regarding banks’ profit distribution. In 2021, dividends were up to 10 percent of lenders’ net profits, and in previous years the BDDK made recommendations for profits to be added to capital.

The BDDK declined to comment on the issue.

Against a background of Turkish inflation hitting a 24-year high above 85 percent this year, lenders’ net profits leapt 408 percent year-on-year to 335.9 billion lira ($18 billion) in the January-October period, boosted by inflation-indexed bond yields.

One source said some banks, especially private ones, had sent requests to the BDDK for clearance to distribute profits and that the watchdog was evaluating them. The sources could not be named because they were not authorised to speak to the press and they did not name any of the banks concerned.

Another banking source said the BDDK’s general approach to sector profits was: “Don’t distribute it, add it to capital.”

“However last year (2021), the BDDK evaluated this issue on a bank-by-bank basis, suggesting profit distribution up to a certain rate, according to the banks’ capital adequacy ratios and other indicators,” the source said.

The BDDK will announce banks’ January-November profit data on Thursday.

For 2023, bankers have forecast a slide in profits as inflation declines, and after the introduction of regulations aimed in part at discouraging hard currency deposits and redirecting credit to government-preferred sectors.

Adding to uncertainty in lending markets next year, Turks vote in tight presidential and parliamentary elections in which the opposition has vowed to roll back President Tayyip Erdogan’s unorthodox policies including low interest rates.