Moody's changes outlook of Turkish banks to negative from stable
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DHA
Oluşturulma Tarihi: Mart 21, 2017 09:52
Moody's changes outlook of Turkish banks to negative from stable
Haberin Devamı
Istanbul, March 21 (DHA) - Moody's Investors Service has taken rating actions on 17 Turkish banks, the rating company said in statement on Tuesday.
"The long-term debt and deposit ratings of 14 banks were affirmed and their outlook was changed to negative from stable. The ratings of one additional bank were downgraded with a negative outlook, while the ratings of two other banks were affirmed with outlooks unchanged" read the statement.
"The outlook change was prompted by the deterioration of the outlook for Turkey's credit profile as captured by Moody's decision to change the outlook on Turkey's Ba1 government issuer rating to negative from stable on 17 March, 2017" it added.
"Moody's decision to affirm and change the outlook to negative from stable on the long-term deposit and debt ratings of 14 banks reflects Moody's expectation that these banks' ratings will come under pressure from a combination of:
1) the weakening capacity of the government of Turkey to provide support in case of need, as implied by the negative outlook on the sovereign rating;
2) the increasingly adverse macroeconomic environment in Turkey.
Economic prospects have worsened significantly since Moody's last rating action on Turkish banks in September, and the rating agency expects this will negatively affect the banks' asset quality, earnings generation and capital and may lead to heightened foreign currency refinancing risk."
The affected institutions are: Akbank, Alternatifbank, HSBC Bank (Turkey), ING Bank (Turkey), Finansbank, Ziraat Bankasi, Turkiye Halk Bankasi, Turkiye Vakiflar Bankasi Turk Ekonomi Bankasi, Turkiye Garanti Bankasi, Yapi ve Kredi Bankasi, Turkiye IS Bankasi, Turkiye Sinai Kalkinma Bankasi and the GRI Export Credit Bank of Turkey.
"Although Moody's continues to incorporate one notch of government support for government-owned and systemically important banks, corresponding outlooks have been changed to negative from stable, in line with the negative outlook on the Ba1 sovereign rating" Moody's said in the statement, which "reflects the potential weakening of the government's capacity to provide support to banks in case of need."
"Additionally, the negative outlook takes into account the government's limited foreign currency resources, with the Central Bank's net foreign currency reserves amounting to USD34 billion as at January 2017, which may result in the country's authorities becoming more selective in providing support to the banking system" it added.
Another key driver for the negative outlook of the Turkish financial institutions' ratings is the increasingly adverse operating environment, the rating company said, "which has emerged since the last rating action on Turkish banks taken in September 2016."
"Specifically, the operating environment has been characterised by particularly poor economic performance in the third quarter of 2016, the sudden and steep depreciation of the Turkish lira, as well as rapid inflation, which will suppress growth in the near-term. According to Moody's, these factors will exert pressure on the financial performance of Turkish banks' funding, capital, asset quality and profitability" read the statement.
While Turkish banks continue "to fund themselves in international markets" Moody's expects the cost of such funding sources to increase as US interest rates rise and heightened geopolitical risk in the region affects investor sentiment, "which represents a key downside risk as the banks have a high dependence on foreign currency funding."
"The long-term debt and deposit ratings of 14 banks were affirmed and their outlook was changed to negative from stable. The ratings of one additional bank were downgraded with a negative outlook, while the ratings of two other banks were affirmed with outlooks unchanged" read the statement.
"The outlook change was prompted by the deterioration of the outlook for Turkey's credit profile as captured by Moody's decision to change the outlook on Turkey's Ba1 government issuer rating to negative from stable on 17 March, 2017" it added.
"Moody's decision to affirm and change the outlook to negative from stable on the long-term deposit and debt ratings of 14 banks reflects Moody's expectation that these banks' ratings will come under pressure from a combination of:
1) the weakening capacity of the government of Turkey to provide support in case of need, as implied by the negative outlook on the sovereign rating;
2) the increasingly adverse macroeconomic environment in Turkey.
Economic prospects have worsened significantly since Moody's last rating action on Turkish banks in September, and the rating agency expects this will negatively affect the banks' asset quality, earnings generation and capital and may lead to heightened foreign currency refinancing risk."
The affected institutions are: Akbank, Alternatifbank, HSBC Bank (Turkey), ING Bank (Turkey), Finansbank, Ziraat Bankasi, Turkiye Halk Bankasi, Turkiye Vakiflar Bankasi Turk Ekonomi Bankasi, Turkiye Garanti Bankasi, Yapi ve Kredi Bankasi, Turkiye IS Bankasi, Turkiye Sinai Kalkinma Bankasi and the GRI Export Credit Bank of Turkey.
"Although Moody's continues to incorporate one notch of government support for government-owned and systemically important banks, corresponding outlooks have been changed to negative from stable, in line with the negative outlook on the Ba1 sovereign rating" Moody's said in the statement, which "reflects the potential weakening of the government's capacity to provide support to banks in case of need."
"Additionally, the negative outlook takes into account the government's limited foreign currency resources, with the Central Bank's net foreign currency reserves amounting to USD34 billion as at January 2017, which may result in the country's authorities becoming more selective in providing support to the banking system" it added.
Another key driver for the negative outlook of the Turkish financial institutions' ratings is the increasingly adverse operating environment, the rating company said, "which has emerged since the last rating action on Turkish banks taken in September 2016."
"Specifically, the operating environment has been characterised by particularly poor economic performance in the third quarter of 2016, the sudden and steep depreciation of the Turkish lira, as well as rapid inflation, which will suppress growth in the near-term. According to Moody's, these factors will exert pressure on the financial performance of Turkish banks' funding, capital, asset quality and profitability" read the statement.
While Turkish banks continue "to fund themselves in international markets" Moody's expects the cost of such funding sources to increase as US interest rates rise and heightened geopolitical risk in the region affects investor sentiment, "which represents a key downside risk as the banks have a high dependence on foreign currency funding."