Denizbank Boosts Borrowing to Fund Farmers, Mayors, Airports

Denizbank AS (DENIZ), the Turkish lender owned by Russia’s OAO Sberbank, expects to increase external borrowing above its 2014 target of 17.2 billion liras ($8.2 billion) as investor confidence in the country returns.

Denizbank plans about $50 million of additional borrowing within 10 days, Chief Executive Officer Hakan Ates said yesterday, after agreeing a $360 million securitized loan with five banks, including HSBC Holdings Plc (HSBA) and Standard Chartered Plc. (STAN) Denizbank will use the five-year loan to lend to agricultural and municipal clients, according to Ates.

While Turkish two-year bond yields jumped 24 basis points yesterday after Turkish diplomats were captured by miltants in northern Iraq, the rate has fallen 241 basis points since Prime Minister Recep Tayyip Erdogan fended off corruption allegations to prevail in March 30 municipal elections. That’s the sharpest drop among 20 emerging-market countries monitored by Bloomberg.

Risk premiums are ‘trending down from the levels they were at between December and March,’’ Ates said in an interview in Istanbul. “Before they were really volatile, but now they’re on a positive trajectory.”

Ates said the Istanbul-based lender would probably exceed its 17.5 percent target increase in external financing this year, after already securing 16.4 billion liras.

Covered Bonds

The bank has met with trade and development banks about issuing more covered bonds backed by the interest on loans to small and medium-sized companies, said Ates. Those bonds are typically higher-rated and lower-yielding than unsecured debt because they are backed by assets that remain on the lenders’ balance sheets.

Denizbank is one of three Turkish banks to have issued this type of security. Turkiye Garanti Bankasi AS (GARAN) and Turkiye Is Bankasi (ISCTR) AS intend to issue mortgage-backed covered bonds.

Denizbank is interested in helping finance Istanbul’s third airport, which, according to Erdogan, will be the largest in the world. The lender has met with the group contracted to build and operate the airport, Ates said. While the groundbreaking ceremony took place last weekend, the project financing hasn’t been announced.

Denizbank pulled out of lending $500 million to the Turkey-based oil refinery planned by the State Oil Company of the Azerbaijan Republic because it found the terms unfavorable, Ates said.

To contact the reporter on this story: Isobel Finkel in Istanbul at ifinkel1@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net Cindy Roberts

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