Turkish lira banknotes are seen in this illustration taken in Istanbul, Turkey on November 23, 2021. REUTERS / Murad Sezer / Illustration

November 23 (Reuters) – European banks exposed to Turkey came under further scrutiny on Tuesday as the pound collapsed after President Tayyip Erdogan defended recent large interest rate cuts , in what analysts have called reckless and premature monetary easing.

The Turkish lira lost 11% of its value, collapsing to a record 13.45 lira on the dollar as investors panicked after Erdogan vowed to win his “war of economic independence”, defending a aggressive easing cycle. Read more

Shares of Spain’s BBVA (BBVA.MC) fell 1.2%, to a two-month low, with the bank seen as the most exposed to Turkey.

BNP Paribas (BNPP.PA) of France and Dutch bank ING Groep (INGA.AS) also do business in Turkey and could be affected by a decline in its currency. Italian UniCredit (CRDI.MI) is leaving the country.

Spanish banks have by far the largest exposure to loans to Turkey among Western lenders at nearly $ 63 billion, followed by banks in France, Germany, Britain, the United States, Japan and Italy, according to data from the Bank for International Settlements (BIS) shows.

Here is a summary of the Turkish exposure of listed European banks:

BBVA (BBVA.MC)

The Spanish lender is the most exposed to Turkey. It has commercial banking activities and small and medium-sized enterprises, as well as insurance and merchant and investment banking activities in the country, where it operates through Garanti BBVA (GARAN.IS).

Earlier this month, BBVA offered to buy the remainder of Garanti for up to 2.25 billion euros ($ 2.53 billion), profiting from a decline in the pound and raising fears in Turkey that foreigners do not appropriate assets at bargain prices. Read more

For the full year 2020, its net income group share Turkey reached 563 million euros, making it the third largest market for the bank after Mexico and Spain. This represents 14.3% of BBVA’s profits outside the business center.

Loans and advances to customers in Turkey amounted to 37.3 billion euros in 2020, more than 10% of the group’s total and the fourth total after Spain, the United States and Mexico.

Jefferies takes a cautious view of BBVA’s performance in Turkey. He estimates a compound annual growth rate in local currency of 13.5% in 2021-2024, compared to the company’s “high-teen” target. He sees an average cost of risk of around 200 basis points over the same period, above the management target of less than 150 basis points.

ING (INGA.AS)

ING has wholesale and retail banking activities in Turkey, where it operates through a wholly owned subsidiary.

The country generated a total income of 420 million euros in 2020, making it the third largest market for the Dutch bank outside of Europe after the United States and Australia.

Assets in Turkey were around 7.3 billion euros in 2020, or less than 1% of a total of 937 billion euros.

BNP PARIBAS (BNPP.PA)

The French group carries out various activities in Turkey, from retail banking to leasing and insurance through various subsidiaries.

It owns 50% of the TEB Holding joint venture with its local partner Colakoglu Group. BNP said the Turkish company is largely self-funded.

UNICREDIT (CRDI.MI)

UniCredit is expected to withdraw from the Turkish market before March 2022 by selling its remaining 20% ​​stake in local bank Yapi Kredi Bank (YKBNK.IS), under a deal with Turkish company Koc Holding announced earlier this month- this. Read more

($ 1 = 0.8881 euro)

Compiled by Joice Alves and Danilo Masoni; Editing by Saikat Chatterjee and Susan Fenton

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