Moody’s Lifts Türkiye’s Banking Sector from ‘Negative’ to ‘Stable’

The meeting of the Coordination Council for the Improvement of Investment Environment in Türkiye was chaired by Cevdet Yilmaz in Ankara on Tuesday. (Turkish presidency) 
The meeting of the Coordination Council for the Improvement of Investment Environment in Türkiye was chaired by Cevdet Yilmaz in Ankara on Tuesday. (Turkish presidency) 
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Moody’s Lifts Türkiye’s Banking Sector from ‘Negative’ to ‘Stable’

The meeting of the Coordination Council for the Improvement of Investment Environment in Türkiye was chaired by Cevdet Yilmaz in Ankara on Tuesday. (Turkish presidency) 
The meeting of the Coordination Council for the Improvement of Investment Environment in Türkiye was chaired by Cevdet Yilmaz in Ankara on Tuesday. (Turkish presidency) 

Moody’s Investor Services has improved its outlook for Türkiye’s banking sector, lifting it from negative to stable.

In parallel, it warned of challenges that still face the sector.

Meanwhile, the Turkish government said that it would announce in September short-term, and mid-term plans and programs to enhance the investment environment in the country.

In a report published on Tuesday, Moody’s pointed to a significant increase in asset and capital risks, while profitability, financing, work environment, and government support faced some challenges, but remained generally stable.

The report indicated that the Turkish government is ready to support the sector, but its ability to do so is limited, especially regarding foreign currencies. This capacity has shrunk over the past years, given the deterioration in Türkiye’s net reserves.

Moody’s expects Türkiye’s economic growth to slow down, with real GDP expanding at 4.2 percent in 2023, down from 5.6 percent growth in 2022.

It expects inflation to stay high at 51 percent in 2023, although down from 72 percent recorded in 2022.

It also noted that the export and tourism sectors will continue to support growth, despite a moderate slowdown in the first half of 2023 due to a slowdown in the country's main export markets in Europe.

Moody's warned that asset risks will continue to rise.

Non-performing loans decreased in 2022 to 2.4 percent of total loans, which is lower than 2021 levels when the ratio was 3.7 percent.

But the number of "new non-performing loans" nearly doubled in 2022 compared to the previous year, because high inflation and currency depreciation reduced borrowers' ability to repay.

The agency expected a deterioration in the quality of Turkish banks' assets in 2023, affected by slower growth and continued high inflation rates.

Moody's expected that the depreciation of the exchange rate and credit growth would keep the capital of Turkish banks under pressure.

The agency pointed out that capital levels in state-owned banks are weaker compared to private banks, but the capitalization of state-owned banks was supported by cash injections from the government.

Banks’ profitability measured by return on average assets has cooled to 3 percent in the first half of 2023, down from 3.7 percent for the same period in 2022, as pressure on the sector’s core margin continues to build. However, the overall profitability of banks is still strong.

Last week, Moody’s said Türkiye’s credit rating could be upgraded if the country continues and deepens mainstream policies introduced since the presidential elections in May.

The agency expected the Turkish economy to grow by 2.5 percent next year.

Turkish Vice President Cevdet Yilmaz announced that the government would unveil short-term and medium-term plans in September to enhance the investment environment.

He made his remarks as he chaired on Tuesday the meeting of the Coordination Council for the Improvement of Investment Environment at the Turkish presidency headquarters.

Yilmaz stressed the need for additional regulations within the framework of compliance with the Maastricht standards adopted by the EU.

He went on to say that attaining investment opportunities is a key matter.

Yilmaz further highlighted the urgency of establishing more industrial zones, stating that the industrial zones in Türkiye are much less compared to the EU countries.

The meeting also touched on environment-related regulations, green energy transformation, risk management development, and the significance of preparing for all kinds of disasters, especially in Istanbul.

“Our main framework is sustainable development. The more adequate investment climate is, this would positively reflect on the economy and Turkish people,” Yilmaz added.



Elon Musk Wins Back his $44.9 Billion Tesla Pay Package in Shareholder Vote

Tesla founder Elon Musk attends Offshore Northern Seas 2022 in Stavanger, Norway August 29, 2022. (Reuters)
Tesla founder Elon Musk attends Offshore Northern Seas 2022 in Stavanger, Norway August 29, 2022. (Reuters)
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Elon Musk Wins Back his $44.9 Billion Tesla Pay Package in Shareholder Vote

Tesla founder Elon Musk attends Offshore Northern Seas 2022 in Stavanger, Norway August 29, 2022. (Reuters)
Tesla founder Elon Musk attends Offshore Northern Seas 2022 in Stavanger, Norway August 29, 2022. (Reuters)

Tesla shareholders voted Thursday to restore CEO Elon Musk's record $44.9 billion pay package that was thrown out by a Delaware judge earlier this year, sending a strong vote of confidence in his leadership of the electric vehicle maker.

The favorable vote doesn’t necessarily mean that Musk will get the all-stock compensation anytime soon. The package is likely to remain tied up in the Delaware Chancery Court and Supreme Court for months as Tesla tries to overturn the Delaware judge's rejection.

Musk has raised doubts about his future with Tesla this year, writing on X, the social media platform he owns, that he wanted a 25% stake in the company in order to stop him from taking artificial intelligence development elsewhere. The higher stake is needed to control the use of AI, he has said, The AP reported.

Tesla also has struggled with falling sales and profit margins as demand for electric vehicles slows worldwide.

But at the company's annual meeting Thursday in Austin, Texas, Musk reassured shareholders that he will stick around, telling them he can't sell any stock in the compensation package for five years.

“It's not actually cash, and I can't cut and run, nor would I want to,” he said.

Vote totals on Musk's pay weren't immediately announced, but the company said shareholders voted for Musk's compensation plan, which initially was approved by the board and stockholders six years ago.

Tesla last valued the package at $44.9 billion in an April regulatory filing. It was once as much as $56 billion but has declined in value in tandem with Tesla's stock, which has dropped about 25% so far this year.

Chancellor Kathaleen St. Jude McCormick ruled in January in a shareholder’s lawsuit that Musk essentially controlled the Tesla board when it ratified the package in 2018, and that it failed to fully inform shareholders who approved it the same year.

Tesla has said it would appeal, but asked shareholders to reapprove the package at Thursday’s annual meeting.

A separate vote approved moving the company’s legal home to Texas to avoid the courts in Delaware, where Tesla is registered as a corporation.

“Its incredible," a jubilant Musk told the crowd gathered at Tesla's headquarters and large factory in Austin, Texas. “I think we’re not just opening a new chapter for Tesla, we’re starting a new book.”

Musk and Tesla didn’t win everything. Shareholders approved measures that trimmed board member terms from three years to one and cut the required vote on shareholder proposals to a simple majority.

Legal experts say the issue of Musk’s pay will still be decided in Delaware, largely because Musk’s lawyers have assured McCormick they won’t try to move the case to Texas.

But they differ on whether the new ratification of the pay package will make it easier for Tesla to get it approved.

Charles Elson, a retired professor and founder of the corporate governance center at the University of Delaware, said he doesn’t think the vote will influence McCormick, who issued a decision based on the law.

McCormick’s ruling essentially made the 2018 compensation package a gift to Musk, Elson said, and that would need unanimous shareholder approval, an impossible threshold. The vote, he said, is interesting from a public perception standpoint, but “in my view it does not affect the ruling.”

John Lawrence, a Dallas-based lawyer with Baker Botts who defends corporations against shareholder lawsuits, agreed the vote doesn’t end the legal dispute and automatically give Musk the stock options. But he says it gives Tesla a strong argument to get the ruling overturned.

He expects Musk and Tesla to argue that shareholders were fully informed before the latest votes, so McCormick should reverse her decision. But the plaintiff in the lawsuit will argue that the vote has no impact and isn’t legally binding, Lawrence said.

The vote, he said, was done under Delaware law and should be considered by the judge.

“This shareholder vote is a strong signal that you now have an absolutely well-informed body of shareholders,” he said. “The judge in Delaware still could decide that this doesn’t change a thing about her prior ruling and doesn’t require her to make any different ruling going forward. But I think it definitely gives Tesla and Musk strong ammunition to try to get her to revisit this.”

If the ruling stands, then Musk likely will appeal to the Delaware Supreme Court, Lawrence said.

Multiple institutional investors have come out against Musk’s sizeable payout, some citing the company’s recent struggles. But analysts said votes by individual shareholders likely put Musk’s pay over the top.

Earlier Thursday, Tesla disclosed that shareholders were voting for Musk's pay package by a wide margin. That drove the company's shares up 3% by the time the markets closed.

After the votes were announced, Musk began telling shareholders about new developments in the company's “Full Self-Driving” system. He has staked the company's future on development of autonomous vehicles, robots and artificial intelligence.

“Full Self-Driving” keeps improving with new versions, and its safety per mile is better than human drivers, Musk said.

"This is actually going to work. This is going to happen. Mark my words, this is just a matter of time,” he said.

Despite its name, “Full Self-Driving” can’t drive itself, and the company says human drivers must be ready to intervene at all times. Tesla’s “Full Self-Driving” hardware went on sale late in 2015, and Musk has used the name ever since as the company gathered data to teach its computers how to drive.

In 2019, Musk promised a fleet of autonomous robotaxis by 2020, and he said in early 2022 that the cars would be autonomous that year. In April of last year, Musk said the system should be ready in 2023.

Since 2021, Tesla has been beta-testing “Full Self-Driving” using volunteer owners. US safety regulators last year made Tesla recall the software after finding that the system misbehaved around intersections and could violate traffic laws.

Musk also said the company is making huge progress on its Optimus humanoid robot. Currently it has two working at its factory in Fremont, California, that take battery cells off a production line and put them in shipping containers, he said.

Despite laying off the team working on Tesla’s Supercharger electric vehicle charging network, Musk said he thinks the company will deploy more chargers this year “that are actually working” than the rest of the industry. In the second half of the year, he expects to spend $500 million on Superchargers, Musk said.