(Bloomberg) -- The lira’s unpredictability weighed on Commercial Bank of Qatar last year, but the lender’s chief executive officer said it has no plans to exit Turkey.

The bank took a hit of about 1 billion Qatari riyals ($273 million) on its investments in Turkey, Joseph Abraham said in a Bloomberg TV interview on Thursday. “That sort of impact is very hard to stomach.”

Turkish banks have suffered capital erosion due to the lira’s depreciation, mainly caused by steep rate cuts in the face of rising inflation. The lira lost almost half of its value in 2021, making it the worst-performing major currency. 

Despite the challenges, “divestment is definitely not on the cards,” Abraham said. “Managing your foreign currency risk in this environment will be the challenge” for Turkish companies, he said.

Whether the rate cuts championed by Turkish President Recep Tayyip Erdogan are successful in boosting the economy or not, “volatility will still be there and so we need to manage with that anticipation,” he said.

Shares in the bank were down about 7% in Doha on Thursday. 

CBQ expanded its presence in the Turkish market when it took full ownership of Alternatifbank AS in 2016, and has undertaken several rounds of capital increases since then to support that unit’s growth plans.

No Appetite

Abraham said the bank is ready to put more capital into the business as needed, but has no appetite to pursue any mergers or acquisitions in this environment. 

Alternatifbank, the 18th-largest of Turkey’s 48 lenders, has been a drag on CBQ’s earnings. Abraham said his team is focused on managing risk, including transitioning its Turkish loan book away from foreign-currency debt that had once accounted for around three-quarters of the portfolio. It now comprises 45%.

In the bank’s home market, Abraham said he’s optimistic about performance in 2022 given the Qatari government’s strong fiscal position, positive sentiment in the lead-up to the World Cup, and an ongoing expansion of the country’s capacity to produce liquefied natural gas. 

Still, the bank has continued to increase its provisioning due to the lingering effects of the coronavirus pandemic.

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