ISTANBUL
International credit rating agency, Moody’s has taken rating revisions on 11 Turkish banks citing pressures on the standalone credit strength of some of the institutions, a slowdown in real GDP growth and a climate of uncertainty affecting the banks.
In a statement released on its website, the agency estimated that difficult environment for banks and the result of an increasingly challenging operating environment will persist for the next 12-18 months in the country.
The 11 Turkish banks affected by Moody’s rating actions are: Akbank, Asya Participation Bank, Denizbank, Garanti Bank, Isbank, Sekerbank, Turk Ekonomi Bankasi, Vakifbank, Yapi Kredi, Halkbank and Ziraat Bank.
Moody's expects that Turkish banks' asset quality and profitability will weaken and that liquidity will tighten.
“Additionally, the banks will increasingly need to adapt to a capital-optimising lending model, against the background of moderate GDP growth and persistently high funding costs, coupled with the weakening capital adequacy, as credit growth outpaces internal capital generation. The highly unseasoned loan books add further elements of credit risk,” the agency said.
Moody's also says that the future growth of the banking system will increasingly depend on market funding, which increases banks' sensitivity to investor sentiment and wholesale market dynamics.
The agency noted a reduced expectation of the level of systemic support, which it believes should be incorporated in Turkish banks' deposit and senior debt ratings.
“This view takes into account the fact that the banking system and its financial obligations have grown significantly in relation to GDP in recent years, and will continue to do so, increasing the potential cost of any government support, in case of need. The charged domestic political environment and less predictable policy responses add additional elements of uncertainty,” the statement said.
Moody's also said any evidence of improvement in the operating environment and external liquidity conditions available towards emerging markets, especially in Turkey would strengthen the banking system's performance.
The agency added that a downgrade of Turkey's government bond rating would also lead to a downgrade of some banks' debt and deposit ratings.
www.aa.com.tr/en
