Unlu&Co says foreign funds keen to buy up Turkish bad loans

ISTANBUL (Reuters) - Foreign investors would be interested in buying non-performing loans from Turkey’s banks if Ankara makes the necessary adjustment to regulations, the chief executive of Turkish asset management company Unlu&Co said.

Such a move would be an important step, as Turkey’s asset management firms don’t have the resources buy up the country’s non-performing loans (NPLs) on their own, Mahmut Unlu said.

Turkey’s economic growth was driven for years by cheap foreign debt. But this became more difficult for companies to service following a currency crisis last year.

The ratio of NPLs in the banking sector had risen to 4.96% of total loans in September and is expected to reach 6.3% once companies re-classify $8 billion of distressed loans as NPLs by the end of the year, as requested by the BDDK banking regulator.

Reuters reported on Monday that Turkish regulators and bankers were meeting this week to try to hammer out a regulatory change that would make it easier for foreign investors to buy some of the tens of billions of dollars worth of soured loans.

Unlu said Turkish asset managers did not have enough capital to buy all of the NPLs, and would need to work with international companies.

Foreign funds are ready to come to Turkey if banks decide to sell their NPLs, he added.

“If the banks decide to sell right now, the domestic sector would have difficulty in terms of resources and a large part of foreign investors would not invest because regulations are not suitable,” Unlu said.

“We are working with regulating bodies to create certain platforms where they (foreign funds) can invest.”

Unlu said foreign interest in buying Turkish companies was at its highest in three years due to a recovering economy, a decline in geopolitical risks and attractive company valuations due to a weak currency.

“We can now see the light at the end of the tunnel. Valuations are attractive. No investor would make purchases just because it is cheap in a setting where it does not see potential,” he said.

Reuters reported on Friday that SC Lowy and Houlihan Lokey were among international players scouting for business opportunities from Turkey’s attempts to clean up its bad loans.

Writing by Ali Kucukgocmen; Editing by Mark Potter