Moody’s revises outlook of 14 Turkish banks to negative

Moody’s Investors Service has taken rating actions on 17 Turkish banks, changing the ratings outlook from stable to negative on 14 of the lenders.
The ratings of one additional bank were also downgraded with a negative outlook, while the ratings of two other banks were affirmed with outlooks unchanged.

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 from stable to negative on March 17, said the rating agency. 

Moody’s on March 17 changed Turkey’s rating outlook from stable to negative. Moody’s also affirmed Turkey’s government debt and issuer ratings at Ba1.

On March 20, Moody’s said its decision to affirm and change the outlook from stable to negative on the long-term deposit and debt ratings of 14 banks reflects Moody’s expectation that these banks’ ratings would come under pressure from a combination of 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; and the increasingly adverse macroeconomic environment in Turkey. 

“Economic prospects have worsened significantly since Moody’s last rating action on Turkish banks in September 2016 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,” read the statement. 

The affected institutions include Akbank, Alternatifbank, HSBC Turkey, ING Turkey, Finansbank, Ziraat Bank, Halk Bank, Vakiflar Bank, Turk Ekonomi Bankası, Garanti Bank, Yapı Kredi Bank, İş Bank, TSKB and the GRI Export Credit Bank of Turkey.

Moody’s also downgraded Şekerbank long-term deposit ratings from B1 to B2 and standalone Baseline Credit Assessment (BCA) from b1 to b2 and assigned a negative outlook to the long-term deposit ratings. The action captures Moody’s expectations that the financial fundamentals of the bank will deteriorate more in the adverse operating environment than other rated Turkish peers.

Moody’s affirmed Burgan Bank’s local and foreign currency deposit ratings at Ba3 and its BCA at b2. The outlook on the long-term deposit ratings remains stable, given the expected resilience of the bank’s financial fundamentals despite the challenging environment.

Moody’s also affirmed Denizbank’s local and foreign currency deposit ratings at Ba2 and its BCA at ba3. The long-term deposit ratings continue to have a negative outlook. The outlook reflects Moody’s expectation that while the bank’s fundamentals remain compatible with the current rating level, Denizbank shows some vulnerability to further deterioration amid the current operating environment.

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