September 27, 2019 / 1:16 PM / 17 days ago

Turkey's bank index surges; analysts cite new foreign interest

ISTANBUL, Sept 27 (Reuters) - Turkey’s main index of bank stocks surged more than 6% on Friday, pushed higher by what analysts said was new interest from international buyers and optimism over lenders’ prospects a week after a regulation meant to help clean up bad loans.

The state of Turkey’s banking sector has been one of investors’ main concerns after last year’s currency crisis wiped nearly 30% off the value of the lira. Lenders were left with tens of billions of dollars of sour loans after the cost of servicing foreign currency debt to surged.

The boost to bank shares was likely caused by bullish positioning by some foreign buyers, two bank analysts said. One said that two funds bought large stakes in the sector but did not identify them, adding falling interest rates added to optimism.

The analysts requested anonymity due to sensitivity of speaking publicly about Turkish market moves.

The banking index was up 6.2% at 1257 GMT, while the main BIST100 index rose 2.9%. The lira firmed slightly from Thursday’s close to stand at 5.6580.

Last week, Turkey’s BDDK financial watchdog said banks would need to reclassify as non-performing loans (NPLs) 46 billion ($8.13 billion) lira worth of debt, and provision for losses, by year end.

The move shed light on an opaque corner of finance that was at the heart of last year’s crisis.

Turkey’s central bank lowered its policy rate by 325 basis points to 16.5% earlier this month, prompting state banks to cut rates on loans for housing and locally-produced cars. ($1 = 5.6561 liras) (Reporting by Ebru Tuncay; Writing by Ali Kucukgocmen; Editing by Jonathan Spicer)

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