July 20, 2017 / 10:52 AM / 7 months ago

Turkey banks see weak demand for project finance deals

ISTANBUL (Reuters) - Project finance by Turkish banks is likely to decline to $12 billion this year, a drop of two-thirds from two years ago, as demand has been hit by lower energy prices and high financing costs, a senior executive at Garanti Bank said on Thursday.

Project finance deals by Turkish banks totaled $34.5 billion in 2015 and tumbled to $16 billion last year.

They amounted to $4 billion in the first five months of this year, the lowest level in a decade, Ebru Edin, Garanti’s (GARAN.IS) deputy general manager responsible for project finance, told Reuters in an interview.

The drop-off this year also comes amid investor concern in the run-up to the April 16 referendum on a constitutional change that narrowly handed President Tayyip Erdogan sweeping executive powers.

“The sector is moving very slowly,” Edin said. “There was no new work. Nobody wanted to do anything before the referendum.”

A decline in energy prices has blunted demand for energy projects, she said, adding that high financing costs were also dissuading investment.

    Garanti’s new project financing commitments for 2017 were expected to be around $1.5-1.8 billion, with it taking a market share of around 12-14 percent, she said.

    Separately, she said some $4-5 billion of energy sector loans had been restructured in the last two years and this figure may rise as high as $7-8 billion.

    Garanti is Turkey second-largest listed lender by assets, according to Thomson Reuters data. Its top shareholder is Spain’s BBVA, which owns just under 50 percent.

    Writing by Daren Butler; Editing by David Dolan

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