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Halkbank Cuts Deposit Growth Guidance as It Pursues Bank Funds

Turkiye Halk Bankasi AS, Turkey’s largest listed state lender, cut its guidance for growth in deposits to three to four percent, from an earlier 12 to 13 percent, after saying it plans to tap central bank funding.

Deposits fell to 93.5 billion liras ($44.6 billion) in the second quarter, from 99.7 billion liras in the year-earlier period, the company said yesterday in a statement. The 6.3 percent decline compares with deposit growth of 1.8 percent across the Turkish banking industry, Halkbank said.

The Istanbul-based lender is focusing on central bank cash rather than deposits for funding in anticipation of further interest rates declines. The central bank cut its main repo rate three times in as many months since April. Announcing inflation expectations in Ankara yesterday, central bank Governor Erdem Basci said the market is pricing in another 50 basis-point reduction, on top of the 175 points already cut.

“The deposit cost management seems poor at the initial look,” Akin Tuzun, an analyst at VTB Capital ZAO, said in an e-mailed note. Still, the central bank funding “might prove to be supportive in the third quarter,” as rates fall, he said.

Halkbank posted a second-quarter profit of 632.2 million liras, beating the 578 million-lira estimate of 15 analysts in a Bloomberg survey. The bank maintained its full-year guidance for a contraction in net interest margins of 40 basis points.

The bank plans to sell its insurance unit by year-end, declining to give details on pricing.

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