Turkish central bank acts to support financial stability

Updated 25 December 2012

Turkish central bank acts to support financial stability

ISTANBUL: Turkey's central bank will add a required reserve ratio (RRR) based on banks' leverage ratios to its policy tool kit in early 2014 to support financial stability, officials said in an end of year news conference on Tuesday.
Laying out its approach on policy for 2013, Gov. Erdem Basci gave no new hints of the bank's next policy move after a series of interest rate cuts in the past six months.
He said the bank would continue to use a complicated mix of a managed interest rate corridor, forex and lira liquidity management, maturity-based RRRs and reserve option coefficients as policy tools in 2013.
"In the new regime, financial stability will be maintained as the main goal," the governor said, noting the risks that stimulation of the economy through monetary policy carries for the country's financial stability.
Reuters reported in November that the bank was considering setting up an early warning system to avert the risk of cheap foreign borrowing feeding a credit bubble and could consider stricter reserve requirements for banks deemed too highly leveraged from 2014 if it sees such problems developing.
"The monetary policy stance will continue to be characterized by short term interest rates and tight macroprudential measures," said Gokce Celik, an analyst at Finansbank.
"We welcome central bank's actions on the macroprudential side, as we foresee domestic demand accelerating in the upcoming period which would translate into excessive loan growth and external balance deterioration in the absence of a policy response."
The bank will require an additional RRR of two points if a bank's leverage ratio is below 3 percent for a period of three months, but Basci added no Turkish bank currently had a leverage ratio below 3.5 percent.
The bank will require an additional RRR of 1 points if a bank's leverage ratio is between 3.25-3.50 percent and will ask for an additional 1.5 percent RRR if a bank's leverage is between 3-3.25 percent for a period of three months, Basci said, adding that it would be a preventive measure.
Turkey received its first investment grade rating in 18 years from Fitch in early November, putting upward pressure on the lira, which rose a three-month high against the dollar following the upgrade.
The currency has gained just over 5 percent against the dollar this year after falling as much as 20 percent in 2011.
Investors expect a second agency to follow suit next year, paving the way for further foreign capital to flow into the country. The central bank has said in the past it will act swiftly if the real exchange rate rises too quickly.
Basci said he expected the country's inflation rate at the end of 2012 to be below 6.5 percent and "near" the year-end target of 5 percent. This would be the lowest year-end inflation since the bank began inflation targeting in 2005. The lowest year-end inflation over the past years was 6.4 percent in 2010.
The inflation target for each of the next three years will also be 5 percent, he said, announcing the 2015 target for the first time.

He added that the plus or minus two percentage point tolerance band which the bank has on either side of the target may be reduced in coming years.
Turkey was the fastest-growing economy in Europe last year, expanding 8.5 percent, but domestic demand has slumped and the economy slowed more than anticipated in the third quarter, registering growth of just 1.6 percent.
The central bank has been trying to stoke growth by boosting liquidity since the middle of the year, but the current account deficit has meant it has been cautious not to cut too aggressively.
The yield on Turkey's two-year benchmark bond fell to 6.03 percent after Basci's comments from 6.13 percent before, although dealers said that was based on one trade in a very thin market. Yields had closed at 6.06 percent on Monday.

NMC Health’s $450 million bond to boost Saudi expansion

Updated 3 min 10 sec ago

NMC Health’s $450 million bond to boost Saudi expansion

LONDON: The UAE-based private health care operator NMC Health has launched a $450 million senior unsecured guaranteed bond to help pay off an existing $1 billion bridge facility and support its expansion plans into Saudi Arabia.

The earlier bridging loan was part of the $2 billion capital structure refinancing put in place at the start of the year, the company said.

The bond is due in 2025 and is convertible into ordinary shares. JP Morgan is the sole bookrunner on the issuance. Bonds will have a fixed coupon rate of 1.875 percent, paid semi-annually.

The new capital structure — which will feature a mixture of unsecured bank and bond financing — will aid the company’s continued growth into Saudi Arabia, with NMC having been one of the first private health care providers to capitalize on the Saudi government’s health care privatization plans.

The company first secured a foothold in the Kingdom in 2016 after acquiring a 70 percent stake in As Salama Hospital in Al-Khobar.

Since then, NMC won regulatory approval last September for a new long-term care facility, the Chronic Care Specialty Medical Center, in Jeddah. It is though to be the first greenfield medical facility in the Kingdom to be set up by a non-Saudi company.

Earlier this year, NMC said it acquired an 80 percent stake in the Riyadh-based Al-Salam Medical Group.

NMC’s acquisition-led expansion strategy aims to ensure the company retains its recently-won place on London’s FTSE 100 index. It was one of the first Middle Eastern companies to join the index when it qualified last September. It first listed on the London Stock Exchange in 2012.

The company posted strong growth in the last year, reporting $209.3 million in net profit for 2017, an increase of 38.2 percent on the previous year. The company paid out a total of $641 million in acquisitions last year.

“2017 proved to be a year of tremendous achievements for NMC,” said the firm’s chief executive Prasanth Manghat, in a statement in March.

NMC also secured secured its first public ratings of BB+ with a stable outlook from S&P on April 20, while Moody’s gave the firm rating of Ba1 with a stable outlook on April 20, 2018. The bonds are not expected to be rated.

“The company continues to strive to meet self-imposed standards that are higher when compared to what is expected of it by various regulators. This approach supports in turn its resilient business model, loyal customer base, strong brand recognition and market leading position,” according to a statement from Moody’s Investors Service.

Investors are so far reacting favorably to NMC’s strategy, with the company closing at a record high on April 20, according to Bloomberg reports, with a market value of $10.8 billion.

The company is now one of 24 equities in the region to have achieved a market capitalization of more than $10 billion, the report said.

Healthcare is seen as a lucrative sector in the Gulf due to its relatively wealthy population becoming increasingly at risk of problems related to obesity and diseases such as type 2 diabetes.