Turkey's Bank Asya, which suffered a massive run on deposits earlier this year after becoming embroiled in a power struggle between Turkish President Tayyip Erdogan and an exiled Islamic cleric,  said it had cut a third of its workforce and more than a quarter of its branches.

The cuts, announced in a stock exchange filing, are designed to boost profitability at the Islamic lender.

Bank Asya has laid off 1,708 staff and closed 80 branches, out of the 5,074 staff and 281 branches it had at the end of 2013.

The bank swung to a 301 million lira ($133 million) net loss in the third quarter partly due to a rise in bad loans, but said last week its underlying operations were healthy.

Its shares, which are on the Istanbul stock exchange watch list, meaning they are restricted to a few hours of trading a day, fell more than 5.5 per cent yesterday.

The lender is caught up in a feud between Erdogan and Fethullah Gulen, the Islamic cleric whose sympathisers founded the bank. Erdogan has long accused Gulen 'now based in the US' of seeking to overthrow him and has pledged to purge institutions such as the police and judiciary of his supporters.

Seeking to show loyalty to Erdogan, depositors including state-owned firms and institutions withdrew four billion lira, or some 20 per cent of Bank Asya's total deposits, earlier this year, according to media reports.

The bank has declined to comment on those figures, but said in its third-quarter results that overall deposits had almost halved to 10 billion lira since the start of the year. Its assets of 16.5 billion lira were down 40 per cent.

Analysts said the staff and branch cuts could put Bank Asya on a surer footing if the political storm also calms.

'It's not abnormal that the branch number is going down. They lost 40 to 45 per cent of their deposits. Otherwise they would struggle to control their operating expenses,' said Deniz Invest analyst Sadrettin Bagci.

'It could even be seen as positive news from an operational perspective ... The worst for Bank Asya is over.'

Loyal clients have been battling to shore up the bank against what they say is a government-orchestrated bid to scuttle it, selling everything from their sofas to their wedding rings.

'It will take time for Bank Asya to get back together. Its balance sheet shrank almost by half,' said another bank analyst who did not want to be identified.

'A normalisation process could start when the dark clouds between the bank and the government fade,' the analyst said.-Reuters