London, 15 September 2020 -- Moody's Investors Service has today downgraded (1) the foreign currency
long-term deposit ratings of 12 banks in Turkey; (2) the long-term
counterparty risk ratings (CRR) and the long-term counterparty
risk assessments (CRA) of six banks; and (3) the long-term
senior unsecured rating of one bank by one notch and the long-term
foreign currency CRR of three banks by two notches. The standalone
baseline credit assessments (BCAs) and other ratings of these banks and
of the other four Turkish banks rated by Moody's are unaffected
by this rating action.
Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL432558
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
The downgrades on the 13 impacted banks are driven by Moody's downgrade,
on 11 September 2020, of the Government of Turkey's bond rating
to B2 with negative outlook from B1 with negative outlook. The
downgrade of Turkey's sovereign rating resulted in the lowering
of the ceilings for foreign currency deposits to Caa1 from B3 and for
foreign currency bonds to B2 from B1. For further information on
the sovereign rating action, please refer to Moody's press release
published on 11 September 2020: Moody's downgrades Turkey's ratings
to B2 and maintains negative outlook (https://www.moodys.com/research/--PR_431146).
Moody's has maintained the Macro Profile it assigns to Turkey at Very
Weak+.
The outlooks on the long-term deposit and debt ratings of all the
Turkish banks rated by Moody's remain negative, in line with
the negative outlook on the sovereign rating. The negative outlooks
reflect the downside risks associated with a balance of payments crisis,
which could lead to capital controls and restrictions on foreign currency
outflows.
RATINGS RATIONALE
The rating action follows Moody's downgrade of the Government of Turkey's
bond rating, which also resulted in the lowering of the ceilings
for foreign currency deposits to Caa1 from B3, for foreign currency
bonds to B2 from B1 and, for eight banks, a lower rating uplift
from government support.
FOREIGN CURRENCY DEPOSIT RATINGS ARE CONSTRAINED BY THE FOREIGN CURRENCY
DEPOSIT CEILING
In a related decision to the sovereign downgrade, Moody's lowered
the long-term foreign currency deposit ceiling for Turkish banks
to Caa1 from B3 on 11 September 2020. As a consequence, the
long-term foreign currency deposit ratings of 12 Turkish banks
are constrained at Caa1. These banks are: Akbank T.A.S.
(Akbank), Alternatifbank A.S. (Alternatifbank),
Denizbank A.S., HSBC Bank A.S. (Turkey),
QNB Finansbank A.S. (QNB Finansbank),T.C.
Ziraat Bankasi A.S. (Ziraat), Turk Ekonomi Bankasi
A.S. (TEB), Turkiye Garanti Bankasi A.S.
(Garanti BBVA), Turkiye Halk Bankasi A.S. (Halk Bank),
Turkiye Is Bankasi A.S. (Isbank), Turkiye Vakiflar
Bankasi T.A.O. (Vakifbank) and Yapi ve Kredi Bankasi
A.S. (Yapi Kredi).
PROBABILITY OF GOVERNMENT SUPPORT IS UNCHANGED
Moody's has maintained its assumptions of government support unchanged
for Turkish banks.
The long-term deposit and issuer ratings -- where
applicable -- of eight banks benefit from uplift from government
support, reflecting Moody's assumptions of very high or high probability
of government support. These banks are Akbank, Export Credit
Bank of Turkey A.S. (Turk Eximbank), Garanti BBVA,
Halk Bank, Isbank, Vakifbank, Yapi Kredi, Ziraat.
The long-term CRR and CRA of Akbank, Garanti BBVA,
Turk Eximbank, Vakifbank, Yapi Kredi and Ziraat now benefit
from a one to two-notch uplift of government support, from
two to three previously. This reflects an unchanged probability
of government support and a narrower gap between the banks' BCA
and Turkey's sovereign debt rating.
For the other banks, the rating agency continues to maintain a low
probability of government support, which does not provide any rating
uplift.
FOREIGN CURRENCY COUNTERPARTY RISK RATINGS (CRR) AND SENIOR UNSECURED
RATING ARE IN SOME CASES CONSTRAINED BY THE FOREIGN CURRENCY BOND CEILING
Moody's lowered the long-term foreign currency bond ceiling for
Turkish banks to B2 from B1 on 11 September 2020, in line with the
sovereign downgrade. As a consequence, the long-term
foreign currency CRR of Alternatifbank, QNB Finansbank and TEB and
the senior unsecured rating of QNB Finansbank were downgraded and are
constrained at B2.
VERY WEAK + MACRO PROFILE IS UNCHANGED
The BCAs and other ratings and assessments of Turkish banks are unaffected
by this rating action because of the unchanged Macro Profile and Moody's
affiliate support assumptions.
Moody's has maintained the Very Weak + Macro Profile it assigns
to Turkish banks, reflecting the rating agency's unchanged
view on the operating environment for banks. Despite a challenging
economic environment and funding market conditions for Turkish banks,
Moody's notes that Turkish banks' reliance on short term wholesale
foreign funding has reduced moderately (USD44 billion at end-June
2020, from USD64 billion available at end-April 2019) while
foreign currency liquidity has been maintained at broadly similar levels
(USD90 billion at end-June 2020). As a result of this,
Moody's reduced the negative adjustment it applies for Funding Conditions
and maintained the Very Weak + Macro Profile. Moody's
also notes that Turkish banks have continued to maintain access to the
syndicated loans market throughout the coronavirus pandemic.
NEGATIVE OUTLOOK
All long-term deposit, senior and issuer ratings have a negative
outlook, in line with the negative outlook on the sovereign rating.
The outlook reflects the downside risks associated with the authorities'
inadequate reaction function, which makes Turkey more likely to
suffer a balance of payments crisis, which might lead to capital
controls and restrictions on foreign currency outflows.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade is unlikely, given the current negative outlook.
The outlook could be changed to stable following a stabilisation of Turkey's
sovereign outlook, an improvement of the operating environment,
which would stabilise the banks' stock of problem loans and profitability,
and a further structural reduction of the banks' reliance on foreign
currency funding.
A downgrade could be driven by a downgrade of the sovereign rating,
deterioration in Turkey's operating environment, a higher-than-expected
deterioration of asset quality and profitability, or a material
decline in capital ratios.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology
published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
The local market analyst for QNB Finansbank A.S.,
Alternatifbank A.S. and Denizbank A.S. ratings
is Nitish Bhojnagarwala, +971 (423) 795-63.
REGULATORY DISCLOSURES
The List of Affected Credit Ratings announced here are a mix of solicited
and unsolicited credit ratings. Additionally, the List of
Affected Credit Ratings includes additional disclosures that vary with
regard to some of the ratings. Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL432558
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:
• Endorsement
• Rating Solicitation
• Issuer Participation
• Participation: Access to Management
• Participation: Access to Internal Documents
• Disclosure to Rated Entity
• Lead Analyst
• Releasing Office
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
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 rating analyst and the Moody's legal entity that has issued
the ratings.
The person who approved T.C. Ziraat Bankasi A.S.,
Turkiye Is Bankasi A.S., Turkiye Garanti Bankasi A.S.,
Akbank T.A.S. and Yapi ve Kredi Bankasi A.S.
credit ratings is Henry MacNevin, Associate Managing Director,
Financial Institutions Group, Journalists 44 20 7772 5456,
Client Service 44 20 7772 5454. The person who approved Turkiye
Halk Bankasi A.S., Turkiye Vakiflar Bankasi T.A.O.,
QNB Finansbank A.S., Denizbank A.S.,
Export Credit Bank of Turkey A.S., Turk Ekonomi Bankasi
A.S., HSBC Bank A.S. (Turkey) and Alternatifbank
A.S. credit ratings is Sean Marion, MD - Financial
Institutions, Financial Institutions Group, Journalists 44
20 7772 5456, Client Service 44 20 7772 5454.
The relevant office for each credit rating is identified in "Debt/deal
box" on the Ratings tab in the Debt/Deal List section of each issuer/entity
page of the website.
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.
Carlo Gori
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Sean Marion
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454
