Europe’s Banks Exposed To Turkey’s Economic Woes

Turkey's economic woes are contagious.

Spain’s BBVA and Italy’s UniCredit are among a handful of European banks with the biggest exposure to Turkey’s economic and currency crisis. BBVA owns 49.9% of Turkey’s Garanti Bank, while UniCredit owns approximately 40% of Yap Kredi through a local joint venture.

France’s BNP Paribas holds a 72.5% stake in small retail bank TEB. Dutch bank ING has a fully-owned subsidiary, ING Turkey. Britain’s HSBC has operated a subsidiary in Turkey since 1980, but it has a smaller exposure than the other banks.

BBVA is the most exposed, with about 13% of its total loan book in the country, according to analysts at Morgan Stanley.

As the Turkish lira plunged against the dollar in August, shares of European banks with operations in the country fell. The Bank for International Settlements estimated that Spanish banks had$80.9 billionof loans outstanding to banks in Turkey in the first quarter; French banks were owed more than $35 billion; and Italian banks had $18.5 billion of loans outstanding from Turkish banks.

Nonfinancial corporations in Turkey had about $120 billion in foreign exchange assets and more than $330 billion in foreign currency liabilities in May, according to Turkey’s central bank.