Akbank TAS, the Turkish lender part-owned by Citigroup Inc., mandated banks to market a sale of lira-denominated bonds abroad, taking advantage of demand for lira assets as central bank policies stabilize the currency.
Akbank hired Bank of America Merrill Lynch, Deutsche Bank AG, JPMorgan Chase & Co., Citigroup and HSBC Holdings Plc for the sale, it said in a statement to the Istanbul Stock Exchange today. Meetings will take place between January 25-29, according to a person familiar with the plans, who declined to be named because the information isn’t public. Akbank applied to Turkey’s market regulators in December for a sale of as much as $1 billion of notes in dollars, foreign currency or liras.
The sale announcement comes as Central Bank Governor Erdem Basci’s variable rates policy has succeeded in making the Turkish lira the least volatile among 8 major currencies in emerging Europe, the Middle East and Africa, according to data compiled by Bloomberg. That’s boosted appetite for lira debt and helped Turkey win its first investment-grade rating in 18 years when Fitch Ratings upgraded the country in November.
“The timing is right for these lira issues after the recent sovereign upgrade and in expectations of yet another upgrade,” Ugursel Onder, a fixed-income analyst at Is Invest, Turkey’s biggest brokerage by trading volume, said by phone today. “This shows there’s risk appetite for Turkish corporate debt abroad.”
Akbank may issue about 500 million liras ($282 million) worth of the lira-denominated bonds in its first sale, with maturities ranging between five and seven years, Onder said. Akbank could borrow at costs of between 40-50 basis points over similar sovereign bonds, she said. Turkey’s lira notes due March 2017 traded at 6.3 percent today, while the sovereign bond due January 2020 yielded 6.4 percent, according to data compiled by Bloomberg.
Moody’s Investors Service may follow Fitch in giving Turkey an investment-grade rating this year, according to a report by Morgan Stanley economist Tevfik Aksoy yesterday. Moody’s said yesterday it will hold a conference call on Turkey on January 28 to discuss topics including the sovereign’s move toward an investment-grade rating.
“Turkish banks will definitely get lower funding costs compared with the deposit rates with these bonds,” Mete Yuksel, assistant general manager at TEB Invest, a unit of Turkiye Ekonomi Bankasi AS, which is part-owned by BNP Paribas SA, said today by phone. “I would expect other major Turkish banks to go for lira bond issues this year as well.”
The weighted average interest rate for three-month deposits stood at 8.4 percent, according to central bank data. The average cost of Turkish corporate debt in dollars was 4.17 percent, compared with the average for emerging market corporate debt of 4.59 percent, according to JPMorgan CEMBI indexes.
Turkiye Garanti Bankasi AS, Turkey’s largest bank by market value, said on January 11 it plans to sell as much as $3 billion of bonds in liras and foreign currency. Turkiye Is Bankasi AS, Turkey’s largest by assets, will sell 500 million liras to 1 billion liras of notes abroad, Milliyet newspaper reported on January 18, citing the bank’s deputy chief executive officer Erdal Aral.