MOODY'S ASSIGNS RATINGS TO INTERBANK A.S. - LONG- AND SHORT-TERM RATINGS FOR DEPOSITS OF B2/NOT PRIME AND BANK FINANCIAL STRENGTH RATING OF E+
Limassol, 11-28-97 -- Moody's Investors Service assigned B2/Not Prime ratings for deposits and an E+ bank financial strength rating (BFSR) to Interbank AS. The ratings for deposits, which reflect overall credit risk, are set at the current ceiling for bank deposit ratings in Turkey.
BFSRs are intended to provide a measure of the intrinsic safety and soundness of an institution excluding external credit considerations such as ownership, availability of support in case of need and transfer risk. Moody's commented that while BFSRs are not constrained by a country ceiling, the impact of the operating environment on a bank's performance means that it is unlikely that a bank in a country with a B2 deposit ceiling would obtain the highest BFSR.
Moody's said that Interbank was once a flagship of Turkish banking and can claim many "firsts" in the market, most notably being the first to obtain medium term funding and the first to receive support from the IFC. It was also one of the first to introduce American-style management as a result of the experience of its largely US educated or experienced senior management team. However, in recent years it has faced some difficulties. It was owned by the Cukurova Group and, during the economic crisis of 1994, a number of companies in the group experienced problems and Interbank was obliged to provide support and, in so doing, it built up a large exposure in excess of prudential regulations. At the end of March 1996, the bank was sold to the Nergis Group. As a result, exposure to Cukurova was reduced, but replaced by exposure to the new owner. These two amounts totalled over 37% of the balance sheet at the end of 1996 and sit on the bank's books as medium to long term facilities that are funded by short term deposits.
The bank has developed new strategies and aims to work with smaller companies and to increase its retail banking business in a focused, targeted way that will limit the required investment. Nevertheless, in Moody's view, Interbank will be constrained by its lack of resources. Some new branches are required as well as potentially high investment in new technology if retail customers are to be served adequately. The financial strength rating reflects these concerns. The rating could improve if the shareholders are able to provide greater financial flexibility for the bank.
At the end of 1996 Interbank, which is headquartered in Istanbul, Turkey, had total assets of TL148 trillion (US$1.4 billion).
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