‘Turkish banks’ local currency ratings outperform foreign currency ratings’

Fitch Ratings reports that large Turkish banks are facing rating constraints due to operational challenges

Fitch Ratings released a report Thursday highlighting the constraints on the ratings of large Turkish banks due to challenges in the operating environment and risks of government intervention.

According to Fitch, the “B-” Long-Term Foreign-Currency Issuer Default Ratings (LTFC IDRs) for these banks are largely based on their Viability Ratings (VRs) or individual credit profiles. An exception is Turkiye Garanti Bank, whose rating is influenced by shareholder support but is still anchored by its “B” VR.

The VRs of major private banks, including Turkiye Is Bank, Garanti Bank, Yapi Kredi Bank and AKBANK, are set at “B.”

This is one level above the “B-” score for the operating environment, highlighting their robust capitalization, funding and liquidity profiles, which stand out amid the operating environment risks.

However, concerns about government interventions in the banking sector, compounded by Turkiye’s limited foreign exchange reserves and financial flexibility, restrict their LTFC IDRs to “B-“, a notch below the country’s sovereign rating.

State-owned banks, such as Ziraat Bank, Turkiye Vakiflar Bank, and Turkiye Halk Bank, have VRs rated at “B-“. This lower rating reflects their capitalization, funding and liquidity profiles, which are just adequate for the risks within the Turkish operating context.

Fitch has placed a Rating Watch Negative on Halk Bank’s ratings due to the significant risk of the bank facing a fine or other punitive actions from ongoing U.S. legal proceedings.

There is also uncertainty regarding the sufficiency and promptness of support from Turkish authorities, if needed.

All seven significant Turkish banks have Long-Term Local-Currency IDRs rated “B”, one notch above their LTFC IDRs, the report concluded.

The higher rating indicate a perceived lower risk of government intervention in local currency operations.

Source: Newsroom

#haber#