Contradictory comments from Turkish officials whiplashed shares in Islamic lender Asya Katilim Bankasi AS and exposed rifts in the country’s economic management before elections on Aug. 10.
Yigit Bulut, chief adviser to Prime Minister Recep Tayyip Erdogan, yesterday denied comments by Deputy Prime Minister Ali Babacan that the government wants state-owned TC Ziraat Bankasi AS to buy Bank Asya, as the lender is known. Turkey’s tax and social security authorities both canceled agreements with the bank today, without citing reasons. Nationalization of the bank could derail plans to sell a stake to Qatar Islamic Bank SAQ, announced in April.
Trading in Istanbul was suspended during the market’s midday close after the shares plunged as much as 9.2 percent today on Bulut’s comments. The stock had surged 8.3 percent the previous day on Babacan’s. Bank Asya said in a public filing that the tax authority provided “no reason whatsoever” for the cancellation of its right to serve as an intermediary for tax collection on behalf of the state.
“Some of the disagreements in the Ak Party administration have become conspicuous,” Istanbul-based brokerage Ceros Securities said in an e-mail today. Bulut’s remarks “could increase investor worry over who’s going to be in charge of Turkey’s economy after Erdogan.” The prime minister is seeking to move to the presidency after the elections.
Bank Asya has run afoul of the government for its alleged links to Fethullah Gulen, the U.S.-based Islamic cleric accused of inciting followers in Turkey to undermine Erdogan’s Ak Party. The latest discord over the bank has raised questions about who will direct economic policy when Babacan, the country’s minister responsible for banking and the Treasury, reaches the end of his three-term limit in Parliament next year.
“It is a concern that Babacan seems to be called into question by Bulut,” Timothy Ash, chief economist for emerging markets at Standard Bank Group Ltd. in London, said by e-mail today. “Babacan is tried, tested and proven to the market -- a successful and pragmatic policy maker, who unfortunately looks set to exit the Turkish policy scene at the next election. Bulut has yet to prove himself in any meaningful way on the policy front.”
Bulut said in an interview with the Sky360 TV channel yesterday that he would ask the Capital Markets Board to investigate movements in Bank Asya shares to see who profited, after Babacan said on Wednesday that the purchase of Asya by Ziraat is something the government desires. The state wouldn’t consider buying a bank with 2.8 billion liras ($1.3 billion) of non-performing debt, Bulut said.
“I think this clash of Titans spells the end of Mr. Babacan’s career as the economy czar,” said Atilla Yesilada, Turkey adviser at New York-based advisory firm GlobalSource Partners Inc. “It would be inconceivable for Mr. Bulut to attack Babacan so openly unless he had received the blessing of Mr. Erdogan himself,” he said in e-mailed comments.
Erdogan said last month that Bank Asya had “deceived investors” and was suffering from liquidity constraints, according to a July 25 interview in the Daily Sabah newspaper. Bank Asya said July 31 it had lodged a complaint to the banking regulator about statements in the press attributed to Erdogan.
Erdogan, who is running for president, said in a speech to Turkish business people in Ankara today that he was determined to eliminate Gulen’s supporters from state positions. On July 22, he said operations against civil servants allegedly linked to the Gulenist movement could spread to “other areas,” according to CNN Turk.
As the markets closed for lunch, GIB, the revenue administration, published a statement on its website revoking Bank Asya’s right to act as an intermediary for tax collection, effective Sept. 8. Cengiz Onder, the head of investor relations at the bank, said by telephone today that the facility was worth “at most” 150 million liras to the bank at any one time.
Onder declined to comment on Babacan and Bulut’s statements. The lender said on June 11 it had hired Goldman Sachs Group Inc. as a financial adviser after announcing in March that it was in exclusive talks to sell a stake to Qatar Islamic Bank. The mandate with Goldman Sachs and the exclusive arrangement with QIB continues, Onder said.
The shares were down 5.3 percent when trading was suspended, bringing their loss this year to 14 percent. That compares with an 16 percent gain on the Borsa Istanbul 100 Index.