(The following statement was released by the rating agency)
Link to Fitch Ratings' Report: Peer Review: Large Private
LONDON, August 20 (Fitch) Turkish banks' rapid credit growth and
debt increase downside risks in case of extremely stressed
Fitch Ratings says. The four largest private banks - Akbank,
Garanti, Isbank and
Yapi ve Kredi - have solid capital buffers, although these have
Foreign liabilities have increased, particularly at the
short-end, as loan
demand has outpaced deposit growth. Increased short-term
uncertainty over the ability to monetise foreign-currency assets
in a stress
scenario leave banks more vulnerable to downside risks. The
banks have limited
foreign currency cash and unencumbered foreign securities, so
they would have to
draw down on central bank reserves to service external debt.
The combined loans of the four banks expanded around 2.5x since
reported loan quality metrics are healthy, rapid growth partly
helps to mask
performance deterioration. There was a slowdown in 1H14 with
sector loan growth
up a moderate 7.3% and we believe total loan growth will be
around 15%-20% for
the year, below its recent historical pace.
Sharp interest rate changes and a fluctuating lira against major
likely to persist in Turkey. The credit profiles of the four
large private banks
are sensitive to the volatile operating environment. The banks'
diversified franchises are a source of credit strength.
Capital is still comfortable by international standards with all
reporting Fitch Core Capital ratios in excess of 10%. But the
buffers have been
eroded since 2010. Growth, tougher regulatory demands and the
impact of lira
depreciation on foreign currency assets have pushed down
ratios. Weaker and volatile capital markets also depressed
capital in 2013 where
securities are marked-to-market through equity.
For more details on the sector, see "Peer Review: Large Private
published today on www.fitchratings.com.
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The above article originally appeared as a post on the Fitch
Wire credit market
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