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Rating Action:

Moody's concludes review on 17 Turkish financial institutions

26 Sep 2016

Action follows the downgrade of the Turkish sovereign to Ba1

London, 26 September 2016 -- Moody's Investors Service has today concluded its review for downgrade of 17 Turkish financial institutions by downgrading the long-term debt and deposit ratings of 14 entities and confirming the ratings of 3 financial institutions. The action follows the downgrade of Turkish government's debt rating to Ba1, with a stable outlook, from Baa3, under review for downgrade, on 23 September 2016.

RATING DOWNGRADES

Moody's has downgraded the long-term debt and deposit ratings of 10 Turkish financial institutions due to a combination of: 1) the weakened operating environment, which the rating agency expects will gradually exert negative pressure on the individual banks' asset quality, earnings generation and capital; 2) increased downside risks to funding and liquidity as the banks need to refinance large amounts of maturing debt in a relatively difficult global and domestic economic context; and/or 3) the reduced capacity of the government to provide support in case of need, as implied by the downgrade of the sovereign rating and/or the lowering of related rating ceilings. The affected institutions are: Akbank TAS, Alternatifbank A.S., HSBC Bank A.S. (Turkey), ING Bank A.S. (Turkey), T.C. Ziraat Bankasi, Turkiye Halk Bankasi A.S., Turkiye Vakiflar Bankasi TAO, Turk Ekonomi Bankasi A.S., Turkiye Garanti Bankasi A.S., Yapi ve Kredi Bankasi A.S..

Moody's has also downgraded the long-term ratings of four financial institutions (three banks and one government-related institution - GRI) owing solely to the weaker capacity of the government to provide support, as implied by the downgrade of the sovereign rating. At the same time the standalone baseline credit assessments (BCAs) of the three banks were confirmed at existing levels given their expected resilience to the weakened operating environment.

The affected banks are: Turkiye IS Bankasi A.S., Sekerbank T.A.S. and Turkiye Sinai Kalkinma Bankasi A.S.; and the GRI is Export Credit Bank of Turkey A.S..

RATING CONFIRMATIONS

Moody's has confirmed the standalone BCAs and local and foreign currency debt and local currency deposit ratings of three Turkish subsidiaries of foreign banks given their expected resilient standalone profiles despite the challenging environment, and Moody's expectation of a very high likelihood of parental support. Furthermore, the ratings of these banks do not incorporate any uplift associated to government support. The affected banks are: Burgan Bank A.S., Denizbank A.S. and Finansbank A.S..

OUTLOOKS

Moody's has assigned a stable outlook to fifteen of the 17 banks, reflecting a combination of both Moody's expectation that these banks' standalone profiles will remain resilient at their current levels despite the difficult environment, and the stable outlook on the government debt rating or the ratings of the parental groups, which underpins Moody's support assumptions. A negative outlook was assigned to the long-term ratings of two banks: Denizbank A.S. and Sekerbank T.A.S.. For Denizbank, the negative outlook is aligned with the negative outlook on the parent group from which Moody's assumes support in case of need. For Sekerbank, the negative outlook reflects the bank's relatively weaker buffers to withstand downside risks.

ACTION FOLLOWS DOWNGRADE OF GOVERNMENT RATING

Today's action on Turkish banks follows the downgrade of the Turkish government's debt rating to Ba1 from Baa3 and the lowering of the country foreign currency deposit ceiling to Ba2, on 23 September 2016. For additional information on the government's rating downgrade, please refer to the related press release: https://www.moodys.com/research/--PR_354341.

In conjunction with the sovereign downgrade, the map on which national scale ratings (NSR) are assigned was recalibrated, which has resulted in the repositioning of some banks' NSRs. The details of these changes are outlined in the List of Affected Ratings referenced below.

This concludes the review for downgrade initiated on the 17 aforementioned banks on 19 July 2016.

Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_192347 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.

RATINGS RATIONALE

Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_192347 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and provides, for each of the credit ratings covered, Moody's disclosures on the following items:

• Methodologies Used

WEAKENED OPERATING CONDITIONS PRESSURE BANKS' STANDALONE CREDIT PROFILES

The primary and overarching driver for today's downgrades is the weakened operating environment in Turkey, characterized by a pronounced economic slowdown and challenging funding conditions, which has led Moody's to lower Turkey's Macro Profile score to 'Moderate-' from 'Moderate'. The lower Macro Profile score implies that the country's banks need stronger loss-absorption and liquidity buffers to withstand the headwinds and remain at the same rating levels.

Accordingly, the lower macro profile, in conjunction with Moody's expectation of weakened financial performances has led to the downgrade of the BCAs of 10 banks, as described in more detail in the Individual Banks Summary section further below.

Moody's updated forecast for Turkey's real GDP growth is 2.7% on average over the 2016-19 period, significantly lower than the average growth of 5.5% recorded for 2010-14. As a result, Moody's now assumes that banks' loan growth and revenues will weaken while problem loans will rise by about 100 basis points by end-2017, from their system-wide average of 3.1% at end-2015.

The other key factor contributing to the challenging operating environment is the system-wide reliance on wholesale markets. Although Moody's has not observed any significant increase in funding costs or strong evidence of a reduction in Turkish banks' investor bases to date, the agency remains cautious regarding the heightened risk of volatility when benchmark interest rates increase internationally. This is in contrast with the accommodative monetary stance expected in Turkey in light of high inflation and a sensitive domestic political environment. Moody's notes that the Turkish banking system's average net loan-to-deposit ratio of 123% indicates that a significant portion of the banks' loans are not covered by deposits, having been financed with relatively short-term wholesale funds as approximately 50% of these liabilities will mature within the next 12 months.

- IMPACT OF GOVERNMENT SUPPORT ON LONG TERM DEBT AND DEPOSIT RATINGS

Another factor that has prompted the rating action on six Turkish banks' long-term ratings is the weaker capacity of the government to provide support, as indicated by its one-notch downgrade on 23 September.

Moody's maintains existing government support assumptions for all Turkish government-owned banks, which result in one notch of ratings uplift (unchanged). Moody's considers that the Turkish authorities are very likely to assist government-owned institutions given their systemic importance and contribution to the economy. As a result, the long-term local currency debt and deposit ratings of three government-owned banks (T.C. Ziraat Bankasi, Turkiye Halk Bankasi A.S., Turkiye Vakiflar Bankasi TAO) are positioned at Ba1/(P)Ba1, the same level as the government debt rating.

The same one notch of uplift is assigned to the two largest systemically important private sector banks (Turkiye IS Bankasi AS and Akbank TAS), leading to the long-term local currency debt and deposit ratings at Ba1, the same level as the government debt rating.

The government support uplift was removed for Sekerbank given the government's lower capacity to provide support combined with the bank's low systemic importance in light of limited market shares.

WHAT COULD MOVE THE RATINGS UP/DOWN

For banks whose ratings incorporate an uplift from government support, the ratings could be downgraded following the downgrade of the sovereign rating or if Moody's changes its views of the government's capacity and/or willingness to provide support in light of the weakening economic environment. Similarly, ratings could also be downgraded if any ceilings are lowered in conjunction with any sovereign downgrade or the parental support incorporated in the rating is lowered.

There is limited upside potential for the standalone BCAs of the banks given the recent downgrades. For banks with potentially weaker BCAs, standalone ratings could be downgraded if Moody's anticipates that the deterioration in the operating environment will lead to a weakening in refinancing capability, profitability and asset quality of the banks to a greater extent than currently assumed.

INDIVIDUAL BANKS SUMMARY

T.C. Ziraat Bankasi (Ziraat)

The long-term foreign and local currency debt and local currency deposit ratings of Ziraat Bank were downgraded to Ba1 from Baa3, with a stable outlook. The bank's foreign currency deposit rating is constrained by the sovereign ceiling at Ba2. The BCA was downgraded to ba2 from ba1.

The principal driver for the downgrade is the impact of the weakened operating environment on Ziraat's standalone financial fundamentals, particularly on its asset quality and capitalisation. Moody's expects the bank's asset quality to deteriorate gradually, albeit from a low level of problem loans, at 1.6% of total loans as at H1 2016, putting pressure on its currently strong net profitability. The bank's loss absorption capacity is also supported by strong capitalisation, although capital ratio has declined during the last year (Moody's adjusted total capital ratio stood at 13% as of H1 2016) and may come under further pressure due to a fast growth in its loan book and/or foreign currency volatility. Ziraat's funding profile is one of the strongest among Turkish banks. Although the bank has increased its reliance on the wholesale market in recent years, Ziraat still relatively less exposed to changes in funding conditions, and faces proportionally lower refinancing needs, than its Turkish peers.

While Moody's continues to assume a very high probability of support for this fully government-owned bank, the reduced capacity of the government constrains the long-term local currency deposit and local and foreign currency debt ratings to the government's own rating level of Ba1, thus limiting the rating uplift to one notch.

Ziraat remains one of the highest rated institutions in the country given its strong and large franchise and established market shares.

Akbank TAS (Akbank)

The long-term debt and local-currency deposit ratings of Akbank were downgraded to Ba1 from Baa3, with a stable outlook. The bank's foreign currency deposit rating is constrained by the sovereign ceiling at Ba2. The BCA was downgraded to ba2 from ba1.

The principal driver for the downgrade is the impact of the weakened operating environment on Akbank's standalone financial fundamentals, particularly with regards to asset quality, capitalisation and funding cost. Moody's expects the bank's asset quality to deteriorate gradually, albeit from a low level of NPLs, at 2.1% as at H1 2016, putting pressure on its net profitability. The bank's capitalisation (with Moody's adjusted capital ratio as a percentage of RWAs at 13.3% as at H1 2016) has improved during the last year, but may come under pressure due to the impact of the sovereign downgrade on RWAs and on overall profitability. Meanwhile, Akbank's refinancing risk has reduced significantly, as reflected in a loan to deposit ratio of 106% and in a large liquidity cushion, however Moody's notes that the bank's reliance on the wholesale markets remains significant and exposes the bank to any volatility in investor sentiment. At the same time, Akbank's ratings take into account its standalone strengths as one of the most profitable Turkish banks with solid loss-absorption capacity.

Akbank remains one of the highest rated institutions in the country given its strong and large franchise and established market shares. While Moody's continues to incorporate one notch of uplift due to government support assumptions given the systemic importance of this institution, the reduced capacity of the government results in the bank's long-term debt and local currency deposit ratings being at the government's own rating level of Ba1.

Turkiye IS Bankasi A.S. (Isbank)

The long-term foreign and local currency debt and local currency deposit ratings of Isbank were downgraded to Ba1 from Baa3, with a stable outlook. The bank's foreign currency deposit rating is constrained by the sovereign ceiling at Ba2. The BCA was confirmed at ba2.

The principal driver of the downgrade was the corresponding one-notch downgrade of the government debt rating to Ba1, which affected the long-term ratings of Isbank. Moody's incorporates one notch of uplift due to government support assumptions, given the systemic importance of Isbank as Turkey's largest private-sector institution.

The resilience of Isbank's BCA at the ba2 level is driven by its stable trends in asset quality at 2.3% as at H1 2016, a high level of provisioning coverage and, consequently, risk absorption capacity which is in line with other leading Turkish banks. The large holdings of liquid assets also mitigate the bank's refinancing risk and its profitability remains solid.

Turkiye Garanti Bankasi A.S. (Garanti)

The long-term foreign and local currency debt and local currency deposit ratings of Garanti were downgraded to Ba1 from Baa3, with a stable outlook. The bank's foreign currency deposit rating is constrained by the sovereign ceiling at Ba2. The BCA was downgraded to ba2 from ba1.

The principal driver for the downgrade is the impact of the weakened operating environment on Garanti's standalone financial fundamentals. Moody's expects the bank's asset quality to weaken gradually in line with the market average. As a first line of defence, the bank's profitability is strong and comparable with the highest rated peers in Turkey, although pressure due to the economic slow-down and headwinds in the operating environment is likely to increase. The bank's capitalisation is also one of the strongest among peers, with Moody's adjusted Tier 1 ratio at 13% as at H1 2016, although the rating agency notes that this can be vulnerable to FX depreciation. Meanwhile, Garanti's loan-to-deposit ratio is broadly in line with the Turkish system average of about 120%, and the bank is exposed to volatility in investor sentiment. Against this vulnerability, Moody's takes into consideration the bank's ample liquid assets, covering maturing wholesale liabilities up to one year.

Garanti continues to incorporate a moderate probability of affiliate support from Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) (baa2/A3 STA) leading to a one notch uplift on its standalone BCA.

Turkiye Halk Bankasi A.S. (Halkbank)

The foreign currency long-term debt and local currency deposit ratings of Halkbank were downgraded to Ba1 from Baa3, with a stable outlook. The outlook is in line with the government debt rating. The bank's foreign currency deposit rating is constrained by the sovereign ceiling at Ba2. The BCA was dow?ngraded to ba2 from ba1.

The principal driver for the downgrade is the impact of the weakened operating environment on Halkbank's standalone financial fundamentals. Moody's expects the bank's asset quality to weaken gradually in line with the market average. The bank's total capitalisation is somewhat weaker than the similarly-rated banks, with Moody's adjusted total capital ratio at 11.8% as at H1 2016. The bank's profitability is comparable with the highest rated peers in Turkey, although expected to be pressured in the current operating environment. Halkbank's dependence on wholesale market has increased over the past 2 to 3 years, with a loan-to-deposit ratio converging with the Turkish system average of 120%, and exposing it to any volatility in investor sentiment. At the same time, Moody's notes that Halkbank successfully raised long-term funds earlier in 2016, and its refinancing risk remains fully covered by liquid assets.

While Moody's continues to assume a very high probability of support for this majority government-owned bank (unchanged prior to the review), the reduced capacity of the government constrains the long-term local currency deposit and local and foreign currency debt ratings to the government's own rating level of Ba1, thus limiting the rating uplift to one notch.

Yapi ve Kredi Bankasi A.S. (YapiKredi)

The foreign currency long-term debt and local currency deposit ratings of YapiKredi were downgraded to Ba1 from Baa3, with a stable outlook. The bank's foreign currency deposit rating is constrained by the sovereign ceiling at Ba2. The BCA was downgraded to ba2 from ba1.

The principal driver for the downgrade is the impact of the weakened operating environment on YapiKredi's standalone financial fundamentals. Moody's expects the bank's asset quality to weaken further. With non-performing loans as percentage of total loans at 4% as at H1 2016, it remains weaker compared with the leading Turkish banks. The bank's capitalisation is sensitive to foreign currency devaluation, although Moody's notes that it was improved with the issuance of Basel III compliant Tier 2 instrument in March 2016. YapiKredi's dependence on wholesale market, in line with the system average of 120%, exposes it to shifts in investor sentiment. At the same time, Moody's notes that YapiKredi successfully raised long-term debt earlier this year and its refinancing needs in the coming period remain low given the longer average duration of its debt compared with peers. In addition the rating takes into account the bank's improving profitability trends, although this may come under pressure due to the economic slow-down and headwinds in the operating environment.

YapiKredi continues to incorporate a moderate probability of affiliate support from UniCredit SpA (ba1/Baa1 STA) leading to a one notch uplift on its standalone BCA. The current government support assumptions do not result in an additional uplift on the bank's long-term ratings.

Turkiye Vakiflar Bankasi TAO (Vakifbank)

The long-term debt and local-currency deposit ratings of Vakifbank were downgraded to Ba1 from Baa3, with a stable outlook. The bank's foreign currency deposit rating is constrained by the sovereign ceiling at Ba2. The BCA was downgraded to ba2 from ba1.

The principal driver for the downgrade is the impact of the weakened operating environment on Vakifbank's standalone financial fundamentals, particularly on its asset quality, capitalisation and funding cost. Moody's expects the bank's asset quality to deteriorate gradually, albeit from a moderate level of NPLs at 4.1% at H1 2016, putting pressure on its net profitability. The bank's capitalisation (with Moody's adjusted capital ratio as a percentage of RWAs at 9.7% at H1 2016) has improved during the last year, but may come under pressure due to the impact of the sovereign downgrade on RWAs and on overall profitability. Meanwhile, Vakifbank's refinancing risk has reduced, as reflected in a loan to deposit ratio of 113% and in a satisfactory liquidity cushion, however Moody's notes that the bank's reliance on the wholesale markets remains significant and exposes the bank to any volatility in investor sentiment. At the same time, Vakifbank's ratings takes into account its standalone strengths as a Turkish bank with a relatively good level of profitability and good loss-absorption capacity.

Vakifbank remains one of the highest rated institutions in the country given its large franchise and established market shares. While Moody's continues to assume a very high probability of support for this government-affiliated bank, the reduced capacity of the government constrains the long-term debt and local currency deposit to the government's own rating level of Ba1, thus limiting the rating uplift to one notch.

Turk Ekonomi Bankasi A.S. (TEB)

The long-term local currency deposit rating of TEB was downgraded to Ba1 from Baa3, with a stable outlook. The bank's foreign currency deposit rating is constrained by the sovereign ceiling at Ba2. The BCA was downgraded to ba3 from ba2.

The principal driver for the downgrade is the impact of the weakened operating environment on TEB's standalone financial fundamentals, particularly on its asset quality, capitalisation and funding cost. Moody's expects the bank's asset quality to deteriorate gradually, albeit from a low level of NPLs at 2.4% at H1 2016, putting pressure on its net profitability. The bank's capitalisation (with Moody's adjusted capital ratio as a percentage of RWAs at 9.6% at H1 2016) has slightly improved during the last year, but may come under pressure due to the impact of the sovereign downgrade on RWAs and on overall profitability. Moody's notes that TEB's refinancing risk is reflected in a loan to deposit ratio of 120%, mitigated by some parental funding and a satisfactory liquidity cushion. However Moody's also notes that the bank's reliance on the wholesale markets exposes the bank to any volatility in investor sentiment. At the same time, TEB's ratings take into account its standalone strengths as a Turkish bank with a relatively good level of profitability and good loss-absorption capacity.

TEB remains one of the highest rated institutions in the country, albeit its mid-sized commercial banking franchise. Moody's continues to incorporate two notches of uplift due to affiliate support assumptions from BNP Paribas (deposits A1 stable, BCA baa1) and based on the latter's 72.5% ownership of TEB and on the significant brand association. This results in the bank's long-term local currency deposit rating being rated at the same level as the government debt rating of Ba1.

Turkiye Sinai Kalkinma Bankasi A.S. (TSKB)

The long-term debt and issuer ratings of TSKB were downgraded to Ba1 from Baa3, with a stable outlook. The BCA was confirmed at ba2.

The principal driver for the confirmation of the BCA was the resilience of the TSKB's standalone financial fundamentals at the level of ba2 to the weakened operating environment. Moody's expects the bank's asset quality to deteriorate only marginally, from a very low level of NPLs at 0.4% at H1 2016. The bank's capitalisation (with Moody's adjusted capital ratio as a percentage of RWAs at 13.4% at H1 2016) has improved during the last year and remains good, but may come under pressure due to the impact of the sovereign downgrade on RWAs and overall profitability. Moody's notes that TSKB is a fully market-funded institution, thus exposing it significantly to any volatility in investor sentiment. However, Moody's also notes that the refinancing risk is mitigated by the predominance of long-term funding guaranteed by the government. At the same time, TSKB's ratings takes into account its standalone strengths as one of the most profitable Turkish banks with solid loss-absorption capacity.

TSKB, a subsidiary of Isbank, remains one of the highest rated institutions in the country given its niche franchise on development banking characterised by a public policy role and a large portion of debt guaranteed by the government. While Moody's continues to assume a very high probability of government support, the reduced capacity of the government constrains the long-term debt and issuer ratings to the government's own rating level of Ba1, thus limiting the rating uplift to one notch.

Sekerbank T.A.S. (Sekerbank)

The long-term local- and foreign-currency deposit ratings of Sekerbank were downgraded to B1 from Ba3, with a negative outlook. The BCA was confirmed at b1.

The principal driver of the downgrade was the corresponding one notch downgrade of the government debt rating to Ba1, which affected the deposit ratings of Sekerbank. The reduced capacity of the government resulted in no rating uplift (from one notch previously) given the low systemic importance of this institution.

The confirmation of the BCA is driven by the resilience of the Sekerbank's standalone financial fundamentals at the level of b1 to the weakened operating environment. Moody's expects the bank's asset quality to deteriorate only marginally, from a moderate level of NPLs at 6% as at H1 2016. The bank's capitalisation (with Moody's adjusted capital ratio as a percentage of RWAs at 10.8% as at H1 2016) has improved during the last year, but may come under pressure due to the impact of the sovereign downgrade on RWAs and on overall profitability. Moody's notes that Sekerbank's refinancing risk is reflected in a loan to deposit ratio of 112%, mitigated by a proportionally lower-than-peers liquidity cushion. Moody's views the bank's reliance on the wholesale markets as exposing it to any volatility in investor sentiment. In particular, Moody's expects the overall challenges to be more pronounced for smaller banks, such as Sekerbank, given its more limited scale of operations, weaker competitive position and constrained financial position, thus resulting in a negative outlook on the bank's ratings.

Export Credit Bank of Turkey A.S. (Turk Eximbank)

The long-term debt and issuer ratings of Turk Eximbank were downgraded to Ba1 from Baa3, with a stable outlook.

The principal driver of the downgrade was the corresponding one notch downgrade of the government debt rating to Ba1, which affected the debt and issuer ratings of Turk Eximbank. Moody's incorporates two notches of uplift due to government support assumptions, given the bank's status as a government-related issuer.

Moody's expects the weakened operating environment to exert pressure on Turk Eximbank's standalone financial fundamentals, particularly on its asset quality, capitalisation and funding cost. Moody's expects the bank's asset quality to deteriorate gradually, albeit from a very low level of NPLs at 0.3% as at H1 2016, putting pressure on its net profitability. The bank's capitalisation (with Total Capital Ratio as a percentage of RWAs at 16.7% as at H1 2016) has decreased significantly over the last two years, and may come under further pressure due to the impact of the sovereign downgrade on RWAs and on overall profitability. Moody's notes that Turk Eximbank is a fully market-funded institution, thus being exposed to any volatility in investor sentiment. However, Moody's also notes that the refinancing risk is largely mitigated by the predominance of funding from the Central Bank of Turkey combined with the long-term nature of the remaining part of the bank funding. At the same time, Turk Eximbank's ratings takes into account its standalone strengths as a Turkish bank with an adequate level of profitability and good loss-absorption capacity.

Finansbank A.S.

The foreign currency long-term debt and local currency deposit ratings of Finansbank were confirmed at Ba1, with a stable outlook. The bank's foreign currency deposit rating was downgraded and is constrained by the sovereign ceiling at Ba2. The BCA was confirmed at ba3.

The resilience of Finansbank's BCA at the ba3 level is driven by its solid capital ratios and risk-absorption capacity despite a relatively weak asset quality ratios. Moody's expect the bank's profitability to continue on an upward trend, despite the headwinds in the operating environment, given that the recent change in the ownership is likely to benefit its funding costs.

Finansbank's ratings continue to incorporate a high probability of affiliate support from its 99% shareholder Qatar National Bank (QNB) (baa1; Aa3/NEG) leading to two notches of uplift on its standalone BCA (unchanged prior to the review).

Denizbank A.S. (Denizbank)

The deposit ratings of Denizbank were confirmed at Ba2, with a negative outlook. The negative outlook is in line with the ratings of its parent Sberbank (ba2/Ba1 NEG). The BCA was confirmed at ba3.

The resilience of Denizbank's BCA at the ba3 level is driven by its improved capitalisation, which benefited from the injection of Tier 1 capital in June 2016 and enhanced the bank's risk-absorption capacity. The bank's refinancing risk is relatively low with the net loan-to-deposit ratio below 110% as at H1 2016. Moody's expect the bank's profitability to remain under pressure, however, given the headwinds in the operating environment and the relatively high concentration in the bank's loan portfolio.

Denizbank continues to incorporate a high probability of affiliate support from its 99% shareholder Sberbank, leading to one notch of uplift on its standalone BCA (unchanged).

ING Bank A.S. Turkey (ING-TR)

The long-term local currency deposit rating of ING-TR's were downgraded to Ba1 from Baa3, with a stable outlook. The bank's foreign currency deposit rating is constrained by the sovereign ceiling at Ba2. The BCA was downgraded to b1 from ba3.

The principal driver for the downgrade is the impact of the weakened operating environment on ING-TR's standalone financial fundamentals. Moody's expects the bank's asset quality to weaken further, albeit from low levels. With non-performing loans as percentage of total loans at 3.1% as at H1 2016, it is comparable with the peer group. The bank's total capitalisation as reported at 16.4% as at H1 2016 is supported by a sizeable portion of Tier 2 instruments compared to its peers, and is dependent on the parent given the bank's low, albeit improving, profitability. The bank's internal capital creation may come under further pressure due to the economic slow-down and headwinds in the operating environment. Moody's notes that ING-TR's loan-to-deposit ratio is one of the weaker ones among the peers, indicating its dependence on wholesale markets, which is mitigated by parental support.

ING-TR continues to incorporate a very high probability of affiliate support from its 100% shareholder ING Bank N.V. (deposits A1/Prime-1 stable; BCA baa1) leading to three notches of uplift in its ratings (unchanged prior to the review).

HSBC Bank A.S. Turkey (HSBC-TR)

The foreign and local currency long-term deposit ratings of HSBC-TR's were downgraded to Ba3 from Ba2, with a stable outlook. The BCA was downgraded to b2 from b1.

The principal driver for the downgrade is the impact of the weakened operating environment on HSBC-TR's standalone financial fundamentals. Moody's expects the bank's asset quality to weaken further. With non-performing loans as percentage of total loans at 6.9% as at Q1 2016, it is one of the weakest with the peer group. The bank's total capitalisation at 16.3% as at Q1 2016 is relatively strong, although it benefited from the deleveraging trends that the bank has been undergoing since early 2015. The bank is expected to remain loss-making in light of its restructuring costs and in the context of the economic slow-down. The bank's refinancing risk remains manageable with the loan-to-deposit ratio below the market average. In Moody's view its affiliation with the HSBC group would also reduce its refinancing risk in case of need.

HSBC-TR continues to incorporate a high probability of affiliate support from its 100% shareholder HSBC Holdings plc (A1 Negative) leading to two notches of uplift in its ratings (unchanged).

Burgan Bank A.S. (Burgan)

The long-term deposit ratings of Burgan were confirmed at Ba3, with a stable outlook. The BCA was confirmed at b2.

The resilience of Burgan's BCA at the b2 level is driven by its improved profitability metrics, relatively stable asset quality with problem loans as a percentage of total loans just below 2% and low refinancing risk given its affiliation with the parent. At the same time the rating is constrained by the bank's high loan book concentrations, dependence on the wholesale market and pressure on its Tier 1 capitalisation, which stood at 8.15% as at H1 2016. Moody's notes that the bank's total capitalisation, however, was supported by the long-term subordinated debt provided by the parent, which improves the bank's loss-absorption capacity.

Burgan continues to incorporate a very high probability of affiliate support from its 99% shareholder Burgan Bank K.P.S.C. (ba2/A3 Stable) leading to two notches of uplift on its standalone BCA (unchanged prior to the review).

Alternatifbank A.S. (ABank)

The long-term local currency deposit ratings of ABank were confirmed at Ba1, and the long-term foreign currency deposit rating was downgraded to Ba2 from Ba1, constrained by the foreign currency deposit ceiling. The BCA was downgraded to b1 from ba3, while the adjusted BCA was confirmed at ba1. The outlook on long-term deposit ratings are stable.

The long-term deposit rating of ABank is in line with ABank's adjusted BCA, which benefits from three notches of uplift given a very high probability of parental support from its majority shareholder (75%) Qatar based The Commercial Bank Q.S.C. (deposits A2, stable/P-1; BCA baa3).

The principal driver for the downgrade of the BCA is the weakened operating environment and the weak financial performance of ABank. ABank's BCA reflects its 1) weak asset quality, with NPLs at 6.3% of gross loans as of June-2016 and (2) moderate capitalisation, at about 8.8% of tangible common equity currently, which could come under further pressure due to loan growth, rising asset quality risks or foreign exchange volatility. Against these weaknesses, ABank benefits from a reliable access to funding from its parent bank, as well as from an adequate buffer of liquid assets, which mitigate the bank's significant reliance on confidence-sensitive market funding.

The principal methodology used in rating T.C. Ziraat Bankasi, Akbank TAS, Turkiye Garanti Bankasi AS, Turkiye Is Bankasi AS, Turkiye Halk Bankasi A.S., Yapi ve Kredi Bankasi AS, Turkiye Vakiflar Bankasi TAO, Turk Ekonomi Bankasi AS, ING Bank A.S. (Turkey), Sekerbank T.A.S., Turkiye Sinai Kalkinma Bankasi A.S., Alternatifbank A.S., Finansbank AS, HSBC Bank A.S. (Turkey), Denizbank A.S. and Burgan Bank A.S. was Banks published in January 2016.

The principal methodology used in rating Export Credit Bank of Turkey A.S. was Government-Related Issuers published in October 2014. Please see the Ratings Methodologies page on www.moodys.com for a copy of these methodologies.

Moody's National Scale Credit 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 credit 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 ".za" for South Africa. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in May 2016 entitled "Mapping National Scale Ratings from Global Scale Ratings". While NSRs have no inherent absolute meaning in terms of default risk or expected loss, a historical probability of default consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. For information on the historical default rates associated with different global scale rating categories over different investment horizons, please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_189530.

REGULATORY DISCLOSURES

Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_192347 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and provides, for each of the credit ratings covered, Moody's disclosures on the following items:

• Lead Analyst

• Releasing Office

• Person Approving the Credit Rating

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Moody's considers a rated entity or its agent(s) to be participating when it maintains an overall relationship with Moody's. On this basis Turk Ekonomi Bankasi AS or their agents are considered to be participating entities. These rated entities or their agents generally provide Moody's with information for their ratings process.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead analyst and the Moody's legal entity that has issued the ratings.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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 tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Irakli Pipia
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Sean Marion
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

No Related Data.
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