Moody’s takes action on Turkish banks, firms after sovereign rating downgrade

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Moody’s has taken actions on 17 Turkish banks and nine Turkish companies shortly after its recent decision to downgrade Turkey’s government issuer rating to Ba2 stable from Ba1 negative.

In a statement late on March 9, the rating agency said the long-term ratings of 14 banks were downgraded, while the ratings of three other banks were affirmed.

The outlook on 12 banks was changed to stable from negative, while the outlook on five other banks remains negative, according to the statement.

Moody’s said there has been a weakening of the Turkish state’s capacity to provide support to the country’s banks in case of need, as reflected in the downgrading of the government’s debt rating to Ba2 from Ba1.

“Although Moody’s now incorporates one or two notches of government support for seven government-owned and systemically important banks, their long-term deposit ratings have been downgraded by one notch and the outlooks changed to stable from negative, in line with the downgrade of the sovereign rating,” it added.

The agency also noted that the sovereign rating action takes into account the government’s limited foreign currency resources, with the Central Bank’s net foreign currency reserves falling to $27 billion at year-end 2017 (from approximately $38.5 billion at the end of January 2017).

This compares to about $78 billion of banking system short-term wholesale FX refinancing needs, which could result in the country’s authorities becoming more selective in providing support to the banking system in a stress scenario, read the statement.

Corporate ratings

Moody’s also downgraded to Ba1 from Baa3 the ratings for the companies Anadolu Efes, Coca Cola İçecek, Koç Holding, OYAK and Turkcell, while also changing their outlook to stable from negative.

As a result of the downgrades, Moody’s withdrew the issuer ratings and assigned corporate family ratings (CFR) to those companies, in line with its policy for non-financial corporates with non-investment grade ratings.

Moody’s also downgraded the rating of Doğuş Holding to Ba2 from Ba1. The outlook remains negative.

However, Moody’s affirmed the ratings of Şişecam and Tüpraş, keeping the outlook on Şişecam’s ratings stable while changing the outlook on Tüpraş’s ratings to stable from positive.

Moody’s also affirmed the rating of Erdemir, while the ratings of Turkish Airlines (Ba3 stable) are unaffected by the downgrade of Turkish sovereign ratings.

Late on March 7, Moody’s downgraded Turkey’s sovereign ratings to Ba2 from Ba1, citing a continued loss of institutional strength and the increased risk of an external shock given its wide current account deficit.

The rating outlook was also changed to stable from negative.

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