12/7/2016
Fitch Ratings Changes the 2017 Outlook of Turkish Banking Sector to "Negative"
"Political uncertainty may hinder Turkey's long-term economic performance and the asset quality of banks. One third of the total amount of credits is made up of foreign currency. The sharp decline in Turkish Lira increases risk exposure. As the funding markets remain closed longer, this may create pressure on liquidity of banks and foreign funding of Turkey in general."
International credit rating agency Fitch Ratings revised the Turkish baking outlook for 2017 from 'stable' to 'negative'. Fitch stated that political uncertainty may undermine the long-term economic performance and asset quality of banks; foreign-currency credits made up one-third of all credits, which created risks as the Turkish Lira has made its sharpest fall since 2013. "The rate of non-performing loans of the banking sector is expected to increase moderately" Predicting that the rate of non-performing loans in banking sector would moderately increase, Fitch emphasized that it expected the rate of non-performing loans would increase from 3.3% in the first 9 months of 2016 to 4% at the end of 2017. Fitch further pointed out that Turkish banks intensively rely on short-term external borrowing, but this risk persists for a long time and funding costs may increase even further in 2017 depending on investor confidence and perception of the country risks of Turkey. "Turkish banks are on negative outlook" Fitch stated that the Turkish banks that they rate are capable of collecting sufficient foreign currency liquidity to service their external debts for up to one year but prolonged closure of funding markets may put pressure on the liquidity of such markets and on external funding of Turkey in more general terms. Fitch emphasized that revision of the outlook for Turkish banking sector to 'negative' was influenced by the fact that 80% of Turkish banks are on negative outlook.
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