Standalone credit assessments above sovereign level are likely to decline, under global guidance
Frankfurt am Main, March 16, 2012 -- Moody's Investors service has today announced a range of rating actions
with regard to 13 Turkish financial institutions whose standalone credit
assessments are currently positioned above the sovereign debt rating.
Today's announcement reflects Moody's revised assessment of the
linkage between the credit profiles of sovereigns and financial institutions
globally, which is further discussed in the rating implementation
guidance titled "How Sovereign Credit Quality May Affect Other Ratings"
published on February 13, 2012.
Consistent with this guidance, Moody's expects to position
the standalone credit assessments of most banks globally at or below the
domestic sovereign's rating, which in the case of Turkey is
Ba2, with a positive outlook. Moody's will also reassess
its assumptions about government and parental support, as applicable
to each Turkish bank affected by today's announcement. Support
assumptions can lead to a bank's global local currency (GLC) issuer
and deposit ratings being positioned higher than their standalone credit
assessments under Moody's joint-default analysis (JDA).
Today's rating actions can be summarized as follows:
Standalone bank financial strength ratings (BFSRs)
- For 12 banks whose standalone BFSRs are currently positioned
above the sovereign rating, these BFSRs were placed on review for
downgrade
Global local currency (GLC) long-term issuer and deposit ratings
- For 9 banks, their GLC long-term issuer and deposit
ratings are also on review for downgrade
o For seven banks, GLC long-term issuer and deposit ratings
were placed on review for downgrade
o For two banks, previously-announced reviews for downgrade
of their GLC long-term deposit ratings were extended
- For three banks, their Baa3 GLC long term deposit ratings
were affirmed, as Moody's does not currently expect any downgrade
of their standalone credit assessments to affect their long-term
deposit ratings
Foreign currency (FC) long-term and short-term debt and
deposit ratings
- FC debt and deposit ratings of the banks covered by today's
announcement are unaffected, as discussed below
GLC short-term ratings
- Moody's has also taken various actions on 10 banks'
GLC short-term ratings, as detailed at the end of this report
National scale ratings (NSR)
- The NSRs of three banks were placed on review for downgrade,
as they map directly to the banks GLC deposit ratings
For Export Credit Bank of Turkey A.S., a government-related
issuer, the standalone credit profile (BCA) of 10 and the Ba1 foreign
currency issuer and long-term senior unsecured debt ratings have
been placed on review for downgrade.
As announced today in a separate press release, the BFSR,
GLC deposit and FC long-term senior unsecured debt ratings of Finansbank
and the FC issuer rating of its subsidiary Finans Finansal Kiralama A.S.
were also placed on review.
Moody's expects to conclude these reviews within the usual timeframe of
up to 90 days.
A detailed list of the banks and ratings affected by this announcement
is included further below.
RATINGS RATIONALE
REVIEW OF STANDALONE RATINGS ABOVE THE SOVEREIGN DEBT RATING
Moody's believes that the creditworthiness of financial institutions
with low cross-border operational diversification and/or reporting
high balance sheet exposure to the debt of their domestic sovereign is
closely linked to the domestic sovereign's credit strength.
Banks in systems with these characteristics, which apply to Turkey,
are unlikely to have standalone credit assessments above the sovereign,
which is often viewed as the lowest credit risk in the local market or
currency.
Moody's recognizes positively that Turkish banks have strong capital
bases against potential losses from their loan portfolios, and they
have moderate reliance to wholesale market funds. Both factors
limit the banks' vulnerability to sovereign risk. However,
the banks' revenue generation is primarily within Turkey and their
balance sheets have a high direct exposure to the sovereign (primarily
through securities holdings). These two factors elevate the banks'
susceptibility to event risk at the sovereign level.
Overall, Moody's expects that the standalone credit assessments
being placed on review for downgrade will be rated at the Turkish sovereign
(Ba2 with positive outlook) upon the conclusion of the reviews.
LONG TERM RATINGS CONSIDERATIONS - PRIVATE BANKS
Moody's ratings incorporate assumptions about external support through
its JDA methodology. As a result, issuers whose standalone
credit strength is positioned below or at the sovereign rating level will
continue to benefit from the availability of external sources of support,
either from a higher-rated foreign parent and/or government (or
systemic) support, where applicable. Moody's believes
that Turkey is a high-support country that is likely to use its
considerable resources, including non-fiscal options such
as forbearance, to support banks in case of need. Accordingly,
systemic support imputed through the application of the JDA methodology
for Turkey allows banks final GLC issuer and deposit ratings (including
support) to be positioned up to two notches above the sovereign rating,
at Baa3.
Moody's expects that most privately owned banks, depending
on their systemic importance or shareholder composition that includes
a higher-rated parent will benefit from multi-notch rating
uplift due to support assumptions and hence may see their long-term
ratings downgraded to Baa3, with few seeing their GLC ratings fall
lower.
LONG TERM RATINGS CONSIDERATIONS -- STATE-OWNED BANKS
The D+ standalone BFSRs (which translate to Baa3 on Moody's
long-term scale) for the three state-owned banks T.C.
Ziraat Bankasi A.S., Turkiye Halk Bankasi A.S.
and Turkiye Vakiflar Bankasi T.A.O. have been placed
on review for downgrade, because they exceed the current Ba2 sovereign
level.
Moody's has nonetheless affirmed the banks' Baa3 GLC deposit
ratings. This reflects Moody's view that the three banks
benefit from government support that will offset the adverse impact of
lower standalone credit assessments on their GLC ratings. Moody's
believes the three banks are of very high systemic importance due to their
market shares between 8% to 17% as well as their affiliation
to the state.
FOREIGN CURRENCY DEBT AND DEPOSIT RATINGS
The FC deposit and debt ratings of Turkish banks are on average lower
than the GLC ratings, because they are constrained by Turkey's
FC deposit ceiling of Ba3 and the FC debt ceiling of Ba1, both with
a positive outlook. Given their lower level, the banks'
FC deposit and debt ratings are unaffected by this review. Moody's
expects that the FC ratings will be positioned at these ceilings upon
completion of the review.
FOCUS OF THE REVIEW
During the reviews, Moody's will assess the degree to which
the issuer's standalone credit profiles are correlated with those
of the sovereign. The reviews will take into account (i) the extent
to which the entities' business is dependent on the domestic macroeconomic
and financial environment, (ii) the degree of reliance on market-based
and therefore more confidence-sensitive funding, and (iii)
direct or indirect exposures to domestic sovereign debt.
WHAT COULD MOVE RATINGS
For all banks whose ratings are included in the reviews announced today,
the most important rating drivers are: (i) the level of cross-border
diversification of their operations; (ii) the level of balance-sheet
exposure to domestic sovereign debt, compared with their capital
bases; (iii) franchise resilience and intrinsic strength within the
operating environment; (iv) shareholder composition and the rating
of the parent incorporated in our JDA analysis to reflect imputed external
support; and/or (v) the assumptions for systemic support available
to a bank in case of need.
LIST OF RATING ACTIONS
The following rating actions were taken:
(i) Akbank T.A.S.'s Baa1/Prime-2 GLC deposit
rating, and C- BFSR were placed on review for downgrade.
Its other ratings were unaffected;
(ii) Anadolubank A.S.'s Ba1 long-term GLC deposit
rating, and D+ BFSR were placed on review for downgrade.
Its other ratings were unaffected;
(iii) Denizbank A.S.'s Baa2/Prime-2 GLC deposit rating,
and C- BFSR were placed on review for downgrade. Its other
ratings were unaffected;
(iv) HSBC Bank A.S.'s D+ BFSR was placed on review
for downgrade. The current review of its Baa1 long-term
GLC deposit rating, and Aa2.tr long-term NSR have
been extended. Its other ratings were unaffected;
(v) Turk Ekonomi Bankasi A.S.'s Baa2/Prime-2 GLC
deposit rating, and D+ BFSR were placed on review for downgrade.
Its other ratings were unaffected;
(vi) Turkiye Garanti Bankasi A.S.'s Baa1/Prime-2
GLC deposit rating, Aa1.tr long-term NSR, and
C- BFSR were placed on review for downgrade. Its other ratings
were unaffected;
(vii) Turkiye Halk Bankasi A.S.'s Baa3/Prime-3
GLC deposit ratings were affirmed with stable outlook. Its D+
BFSR was placed on review for downgrade. Its other ratings were
unaffected;
(viii) Turkiye Is Bankasi A.S.'s Baa2/Prime-2 GLC
deposit ratings, and C- BFSR were placed on review for downgrade.
Its other ratings were unaffected;
(ix) Turkiye Sinai Kalkinma Bankasi A.S.'s Baa2/Prime-2
local currency issuer ratings, and D+ BFSR were placed on review
for downgrade. Its other ratings were unaffected;
(x) Turkiye Vakiflar Bankasi T.A.O.'s Baa3/Prime-3
GLC deposit ratings were affirmed with stable outlook. Its D+
BFSR was placed on review for downgrade. Its other ratings were
unaffected;
(xi) T.C. Ziraat Bankasi A.S.'s Baa3/Prime-3
GLC deposit ratings were affirmed with stable outlook. Its D+
BFSR was placed on review for downgrade. Its other ratings were
unaffected;
(xii) Yapi ve Kredi Bankasi A.S.'s D+ BFSR was placed
on review for downgrade. The current review of its Baa2/Prime-2
GLC deposit rating, and Aa2.tr long-term NSR have
been extended. Its other ratings were unaffected;
(xiii) Export Credit Bank of Turkey's BCA of 10, and its Ba1 foreign
currency issuer and long-term senior unsecured debt ratings were
placed on review for downgrade.
Moody's will separately address the subsidiaries of the Turkish banks
included in today's announcement that might be affected by the review
of the parent's credit ratings.
PRINCIPAL METHODOLOGIES
The methodologies used in these ratings were Bank Financial Strength Ratings:
Global Methodology published in February 2007, Incorporation of
Joint-Default Analysis into Moody's Bank Ratings: A Refined
Methodology published in March 2007, Moody's Guidelines for Rating
Bank Hybrid Securities and Subordinated Debt published in November 2009
and Government-Related Issuers: Methodology published in
July, 2010. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
Moody's National Scale Ratings (NSRs) are intended as relative measures
of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale ratings in that they are not globally
comparable with the full universe of Moody's rated entities, but
only with NSRs for other rated debt issues and issuers within the same
country. NSRs are designated by a ".nn" country
modifier signifying the relevant country, as in ".mx"
for Mexico. For further information on Moody's approach to national
scale ratings, please refer to Moody's Rating Implementation Guidance
published in March 2011 entitled "Mapping Moody's National Scale
Ratings to Global Scale Ratings".
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The deposit ratings of Turk Ekonomi Bankasi was initiated by Moody's and
was not requested by the rated entity.
Turk Ekonomi Bankasi rated entity or its agent(s) participated in the
rating process. The rated entity or its agent(s) provided Moody's
access to the books, records and other relevant internal documents
of the rated entity.
The ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure.
Information sources used to prepare each of the ratings are the following:
parties involved in the ratings, and public information.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these reviews.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entities or their related third parties within
the two years preceding the credit rating action. Please see the
special report "Ancillary or other permissible services provided
to entities rated by MIS's EU credit rating agencies" on the
ratings disclosure page on our website www.moodys.com for
further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%)
and for (B) further information regarding certain affiliations that may
exist between directors of MCO and rated entities as well as (C) the names
of entities that hold ratings from MIS that have also publicly reported
to the SEC an ownership interest in MCO of more than 5%.
A member of the board of directors of this rated entity may also be a
member of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's provides a date that it believes is
the most reliable and accurate based on the information that is available
to it. Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has
issued the rating.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Arif Bekiroglu
Asst Vice President - Analyst
Financial Institutions Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's reviews Turkish banks' local currency issuer and deposit ratings for downgrade
