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Rating Action:

Moody's takes rating actions on 17 Turkish banks

20 Mar 2017

Actions follows the change of outlook on the sovereign rating

London, 20 March 2017 -- Moody's Investors Service has today taken rating actions on 17 Turkish banks. The long-term debt and deposit ratings of 14 banks were affirmed and their outlook was changed to negative from stable. The ratings of one additional bank were downgraded with a negative outlook, while the ratings of two other banks were affirmed with outlooks unchanged.

The outlook change was prompted by the deterioration of the outlook for Turkey's credit profile as captured by Moody's decision to change the outlook on Turkey's Ba1 government issuer rating to negative from stable on 17 March, 2017. For details, please refer to the press release: https://www.moodys.com/research/--PR_363067

AFFIRMATION AND OUTLOOK CHANGES

Moody's decision to affirm and change the outlook to negative from stable on the long-term deposit and debt ratings of 14 banks reflects Moody's expectation that these banks' ratings will come under pressure from a combination of: 1) the weakening capacity of the government of Turkey to provide support in case of need, as implied by the negative outlook on the sovereign rating; and 2) the increasingly adverse macroeconomic environment in Turkey. Economic prospects have worsened significantly since Moody's last rating action on Turkish banks in September, and the rating agency expects this will negatively affect the banks' asset quality, earnings generation and capital and may lead to heightened foreign currency refinancing risk.

The affected institutions are: Akbank TAS, Alternatifbank A.S., HSBC Bank A.S. (Turkey), ING Bank A.S. (Turkey), Finansbank AS, 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., Turkiye IS Bankasi A.S., Turkiye Sinai Kalkinma Bankasi A.S., and the GRI Export Credit Bank of Turkey A.S..

RATING DOWNGRADE

Moody's has downgraded Sekerbank T.A.S. long-term deposit ratings to B2 from B1 and standalone Baseline Credit Assessment (BCA) to b2 from b1, and assigned a negative outlook to the long-term deposit ratings. The action captures Moody's expectations that the financial fundamentals of this bank will deteriorate more in the adverse operating environment than other rated Turkish peers.

AFFIRMATIONS WITH OUTLOOK UNCHANGED

Moody's has affirmed Burgan Bank A.S's local and foreign currency deposit ratings at Ba3, and its BCA at b2. The outlook on the long-term deposit ratings remains stable, given the expected resilience of the bank's financial fundamentals, despite the challenging environment.

Moody's also affirmed Denizbank A.S.'s local and foreign currency deposit ratings at Ba2, and its BCA at ba3. The long-term deposit ratings continue to have a negative outlook. The outlook reflects Moody's expectation that while the bank's fundamentals remain compatible with the current rating level, Denizbank shows some vulnerability to further deterioration amid the current operating environment.

Details of the rationales for individual bank rating actions are provided later in this Press Release.

Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_195033 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.

RATINGS RATIONALE

WEAKENING GOVERNMENT CREDITWORTHINESS AFFECTS CAPACITY TO SUPPORT

Although Moody's continues to incorporate one notch of government support for government-owned and systemically important banks, corresponding outlooks have been changed to negative from stable, in line with the negative outlook on the Ba1 sovereign rating. This reflects the potential weakening of the government's capacity to provide support to banks in case of need. Additionally, the negative outlook takes into account the government's limited foreign currency resources, with the Central Bank's net foreign currency reserves amounting to USD34 billion as at January 2017, which may result in the country's authorities becoming more selective in providing support to the banking system.

DETERIORATING DOMESTIC OPERATING ENVIRONMENT AFFECTING BANKS' STANDALONE CREDIT PROFILES

Another key driver for the negative outlook of the Turkish financial institutions' ratings is the increasingly adverse operating environment, which has emerged since the last rating action on Turkish banks taken in September 2016. Specifically, the operating environment has been characterised by particularly poor economic performance in the third quarter of 2016, the sudden and steep depreciation of the Turkish lira, as well as rapid inflation, which will suppress growth in the near-term. According to Moody's, these factors will exert pressure on the financial performance of Turkish banks' funding, capital, asset quality and profitability.

While Turkish banks continue to fund themselves in international markets, Moody's expects the cost of such funding sources to increase as US interest rates rise and heightened geopolitical risk in the region affects investor sentiment, which represents a key downside risk as the banks have a high dependence on foreign currency funding. Moody's estimates that the banking system's foreign currency borrowings are around USD 145 billion, just below 20% of the system's total liabilities at year-end 2016. Despite recent issuances of longer-term bonds by leading Turkish banks, up to 50% of the system's wholesale market borrowing remains short-term (less than one year). This makes the banking system particularly sensitive to a deterioration in investor sentiment, as these foreign currency liabilities must be refinanced on an ongoing basis.

Capital ratios have also been negatively affected by the Turkish lira's depreciation and remain vulnerable to: 1) further currency depreciation, as up to 40% of the institutions' assets are in foreign currencies, while Tier 1 capital buffers held against these assets are in Turkish liras; and 2) a weakening in the credit quality of the banks' Turkish sovereign exposures, which could trigger higher risk-weights for the purpose of calculating capital ratios as per international regulatory guidelines on capital requirements.

Moody's also considers that asset quality ratios will deteriorate at a faster pace than previously expected, as the economic slowdown and weakening creditor profiles will likely lead to higher levels of restructured and non-performing loans, especially from highly leveraged corporates and households. Moody's also notes that various regulatory measures (including restructuring of potential non-performing assets in the tourism and energy sectors) may result in under-reporting of the riskiness of banks' portfolios, reducing transparency and comparability to past data.

Profitability and, therefore, the internal capital generation capacity of the institutions are also likely to be affected by deteriorating asset quality and adverse economic conditions. In turn, this may reduce the institutions' credit growth and revenues, while higher funding and credit costs could exacerbate pressure on net earnings.

FOREIGN BANKS' AFFILIATE SUPPORT CONSIDERATIONS

Moody's considers that, despite the adverse operating environment, existing support assumptions regarding parent companies' capacity and willingness to provide support remain correctly positioned and are unaffected by this rating action. As a result, nine Turkish subsidiaries of foreign banks continue to benefit from an uplift above their BCA in the range of 1-3 notches.

WHAT COULD MOVE THE RATINGS UP/DOWN

Given the mostly negative outlooks on the long-term deposit and debt ratings of Turkish banks, upgrades are unlikely in the near future. There is also limited upside potential for the standalone BCAs of the banks given the recent rating actions. For banks with potentially weaker BCAs, standalone ratings could be downgraded if the deterioration in the operating environment leads to a significant weakening in refinancing capability, profitability and asset quality of the banks.

Long-term deposit or debt ratings, which incorporate an uplift from government support, could be affected by changes in the sovereign rating, Moody's views on the government's willingness to provide support, or sovereign ceilings.

Similarly, long-term deposit and debt ratings incorporating uplift from affiliate support could also be affected if Moody's views of parental rating and/or support incorporated into the ratings change. This could reflect a deterioration of operating conditions in Turkey leading to a parent having a lower incentive to provide support to subsidiaries in the country.

T.C. Ziraat Bankasi (Ziraat)

The long-term foreign currency debt and local currency deposit ratings of Ziraat Bank were affirmed at Ba1, and the outlook changed to negative from stable. The bank's foreign currency deposit rating was affirmed at Ba2 (constrained by the sovereign ceiling at Ba2), and the outlook changed to negative from stable. The BCA was affirmed at ba2.

The principal driver for the negative outlook is the change in the outlook of the Turkish government's Ba1 debt rating to negative from stable. While Moody's continues to assume a very high probability of support for this fully government-owned bank, the rating action reflects a potential weakening in the government's capacity to provide support in case of need, as signalled by the negative outlook on the Ba1 sovereign rating.

Although Moody's has affirmed Ziraat's standalone BCA given its current resilience, the rating agency expects that Ziraat's standalone credit profile will come under further pressure from the weakening economy, particularly 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 1.8% of total loans at Q3 2016, putting pressure on its currently strong net profitability. The bank's loss absorption capacity is supported by high provisioning coverage and still adequate capitalisation. Ziraat's capitalisation has weakened for the last three years (Moody's adjusted Tier 1 ratio has declined from 12.3%% at end-2015 to 11.5% as of Q3 2016) and may decline further due to fast loan growth and/or foreign currency volatility. Ziraat's dependence on wholesale funding, although increasing in recent years (market funds at 25.6% of tangible banking assets as at Q3 2016) is moderate compared with other Turkish banks, with manageable refinancing risk.

Akbank TAS (Akbank)

The long-term foreign and local currency debt and local currency deposit ratings of Akbank were affirmed at Ba1 and the outlook changed to negative from stable. The bank's foreign currency deposit rating was affirmed at Ba2 (constrained by the sovereign ceiling at Ba2), and the outlook changed to negative from stable. The BCA was affirmed at ba2.

The principal driver for the negative outlook is the change in the outlook of the Turkish government's Ba1 debt rating to negative from stable. While Moody's continues to assume a high probability of support for this systemically important bank, leading to one notch of uplift for the debt and local currency deposit ratings, the rating action reflects a potential weakening in the government's capacity to provide support in case of need, as signaled by the negative outlook on the Ba1 sovereign rating.

Moody's has affirmed Akbank's standalone BCA and expects that this will remain resilient to the weakening economy. Moody's expects the bank's asset quality to weaken only gradually from a low level of problem loans (at 2.3% of gross loans at end-2016), somewhat dampening its currently strong net profitability. The bank's loss absorption capacity is supported by high provisioning coverage and strong capitalisation. Akbank's capitalisation has weakened for the last three years (Moody's adjusted Tier 1 ratio has declined from 12.9% at end-2014 to 11.9% at end-2016) and may decline further due to fast loan growth and/or foreign currency volatility. Akbank's dependence on wholesale funding, although reducing in recent years, remains significant, with market funds at 29% of tangible banking assets, but with manageable refinancing risk.

Turkiye IS Bankasi A.S. (Isbank)

The long-term foreign currency debt and local currency deposit ratings of Isbank were affirmed at Ba1, and the outlook changed to negative from stable. The bank's foreign currency deposit rating was affirmed at Ba2 (constrained by the sovereign ceiling at Ba2), and the outlook changed to negative from stable. The BCA was affirmed at ba2.

The principal driver for the negative outlook is the change in the outlook of the Turkish government's Ba1 debt rating to negative from stable. While Moody's continues to incorporate one notch of uplift due to government support assumptions, given the systemic importance of Isbank as Turkey's largest private-sector institution, the rating action reflects a potential weakening in the government's capacity to provide support in case of need, as signalled by the negative outlook on the Ba1 sovereign rating.

Although Moody's has affirmed Isbank's standalone BCA given its resilience, the agency expects the bank's standalone credit profile to come under pressure from the weakening economy. Moody's expects the bank's asset quality to come under further pressure with problem loans currently at 2.3% as at end-2016. The bank's capitalisation has declined for the last three years (Moody's adjusted Tier 1 capital ratio has declined from 12% as at end-2015 to 10.8% as at end-2016). At the same time, the bank maintains a high level of provisioning coverage and, consequently, risk absorption capacity, which is in line with other leading Turkish banks. The bank has a proven track-record of refinancing its wholesale liabilities (market funds at 30% of tangible banking assets as at end-2016) during challenging periods and large holdings of liquid assets also mitigate the bank's refinancing risk while its profitability remains adequate.

Turkiye Garanti Bankasi A.S. (Garanti)

The long-term foreign and local currency debt and local currency deposit ratings of Garanti were affirmed at Ba1, and the outlook changed to negative from stable. The bank's foreign currency deposit rating was affirmed at Ba2 (constrained by the sovereign ceiling at Ba2), and the outlook changed to negative from stable. The BCA was affirmed at ba2.

The principal driver for the negative outlook of the bank's ratings is the impact of the weakening operating environment on Garanti's standalone BCA. Moody's expects the bank's asset quality to weaken gradually in line with the market average. At the same time, Moody's acknowledges that the bank's profitability remains strong despite economic slow-down and headwinds from the operating environment. Although the bank's capitalisation is also one of the strongest among similarly-rated peers, with Moody's adjusted Tier 1 ratio at 12.2% as at end-2016, these buffers remain exposed to currency depreciation. 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. However, Moody's notes that the bank has demonstrated its ability to refinance its wholesale liabilities (market funds at 27% of tangible banking assets as at end-2016) during challenging periods.

Garanti's ratings continue to incorporate a moderate probability of affiliate support from Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) (BCA baa2/LT Bank Deposits A3 Stable ) leading to a one notch uplift from its standalone BCA. The current government support assumptions do not result in any additional uplift for the bank's long-term ratings.

Turkiye Halk Bankasi A.S. (Halkbank)

The long-term foreign currency debt and local currency deposit ratings of Halkbank were affirmed at Ba1, and the outlook changed to negative from stable. The bank's foreign currency deposit rating was affirmed at Ba2 (constrained by the sovereign ceiling at Ba2), and the outlook changed to negative from stable. The BCA was affirmed at ba2.

The principal driver for the negative outlook is the change in the outlook of the Turkish government's Ba1 debt rating to negative from stable. While Moody's continues to assume a very high probability of support for this majority government-owned bank, the rating action reflects a potential weakening in the government's capacity to provide support in case of need, as signalled by the negative outlook on the Ba1 sovereign rating.

Although Moody's has affirmed Halkbank's standalone BCA given its resilience, the agency expects Halkbank's credit profile will come under pressure due to the impact of the weakening economy. Moody's expects the bank's asset quality to weaken gradually with problem loans at 3.2% as at end-2016, in line with the market average. The bank's total capitalisation is somewhat weaker than for similarly-rated banks, with Moody's adjusted Tier 1 ratio declining to 10% as at end-2016 from 11.5% as at end-2015. At the same time, the bank's profitability is comparable with the highest rated peers in Turkey. Moody's notes that Halkbank successfully raised long-term funds in 2016 and lengthened its funding profile.

Yapi ve Kredi Bankasi A.S. (YapiKredi)

The foreign currency long-term debt and local currency deposit ratings of YapiKredi were affirmed at Ba1, and the outlook changed to negative from stable. The bank's foreign currency deposit rating was affirmed at Ba2 (constrained by the sovereign ceiling at Ba2), and the outlook changed to negative from stable. The BCA was affirmed at ba2.

The principal driver for the negative outlook is the impact of the weakening operating environment on YapiKredi's standalone BCA. Moody's expects the bank's asset quality to weaken further. With problem loans as percentage of total loans at 4.55% as at end-2016, it remains weaker compared with the leading Turkish banks. The bank's capitalisation (Moody's adjusted total Tier 1 ratio at 8.8% as at end-2016) compares unfavorably to similarly-rated peers, although Moody's notes that the bank's risk-absorption capacity was improved by about 6% with the issuance of USD500mn Basel III compliant Tier 2 instruments in March 2016. YapiKredi's dependence on the wholesale funding market with market funds (at 25% of tangible banking assets as at end-2016, which is in line with the system average), exposes it to shifts in investor sentiment. At the same time, Moody's notes that the bank's refinancing needs are relatively low given the longer average duration of its debt.

YapiKredi's ratings continue to incorporate a moderate probability of affiliate support from UniCredit S.p.A. (BCA ba1/LT Bank Deposits Baa1 Stable ) leading to a one notch uplift from its standalone BCA. The current government support assumptions do not result in an additional uplift for the bank's long-term ratings.

Turkiye Vakiflar Bankasi TAO (VakifBank)

The long-term foreign currency debt and local currency deposit ratings of VakifBank were affirmed at Ba1 and the outlook changed to negative from stable. The bank's foreign currency deposit rating was affirmed at Ba2 (constrained by the sovereign ceiling at Ba2), and the outlook changed to negative from stable. The BCA was affirmed at ba2.

The principal driver for the negative outlook is the change in the outlook of the Turkish government's Ba1 debt rating to negative from stable. While Moody's continues to assume a very high probability of support for this government-owned bank, leading to one notch of uplift for the debt and local currency deposit ratings, the rating action reflects a potential weakening in the government's capacity to provide support in case of need, as signaled by the negative outlook on the Ba1 sovereign rating.

Although Moody's has affirmed VakifBank's standalone BCA given its current resilience, Moody's expects that VakifBank's standalone credit profile will come under further pressure from the weakening economy. Moody's expects the bank's asset quality to deteriorate from a relatively high level of problem loans (4.3% of gross loans at end-2016), dampening its currently adequate net profitability. The bank's loss absorption capacity is constrained by moderate capitalisation, albeit accompanied by adequate provisioning coverage. VakifBank's capitalisation has remained broadly stable for the last three years (Moody's adjusted Tier 1 ratio has declined from 10.3% at end-2014 to 10% at end-2016) but may come under pressure from fast loan growth and/or further foreign currency volatility. VakifBank's dependence on wholesale funding, although slightly declining in recent years, remains significant, with market funds at 28% of tangible banking assets, but with manageable refinancing risk.

Turk Ekonomi Bankasi A.S. (TEB)

The long-term local currency deposit rating of TEB was affirmed at Ba1 and the outlook changed to negative from stable. The bank's foreign currency deposit rating was affirmed at Ba2 (constrained by the sovereign ceiling at Ba2) and the outlook changed to negative from stable. The BCA was affirmed at ba3.

The principal driver for the negative outlook on the foreign currency deposit rating is the change in the outlook of the Turkish government's Ba1 debt rating to negative from stable. The government's own foreign currency deposit ceiling of Ba2 constrains the bank's long-term foreign currency deposit rating.

The principal driver for the negative outlook on the local currency deposit rating is Moody's view on the possible evolution of affiliate support. While Moody's continues to assume a high probability of affiliate support from BNP Paribas (BCA baa1/LT Bank Deposits A1 Stable), over the next 12-18 months the rating agency could lower its assumptions in this regard in the event that the operating environment deteriorates to such an extent that the parent reconsiders its support for TEB. This could reduce the current two-notch uplift from TEB's standalone BCA.

Moody's has affirmed TEB's standalone BCA given its resilience. Moody's expects that TEB's standalone credit profile will remain compatible with its ba3 level despite the weakening economy. Moody's expects the bank's asset quality to deteriorate only gradually, from a low level of problem loans (3% of gross loans as at end-2016), dampening its currently satisfactory net profitability. The bank's loss absorption capacity is constrained by modest provisioning coverage and weak capitalisation. TEB's capitalisation has remained broadly stable for the last three years (Moody's adjusted Tier 1 ratio increased from 9.9% at end-2014 to 10% at end-2016) but may decline due to foreign currency volatility. TEB's dependence on wholesale funding, broadly unchanged in recent years, remains at an acceptable level, with market funds at 22% of tangible banking assets, and refinancing risk further mitigated by some parent funding.

Turkiye Sinai Kalkinma Bankasi A.S. (TSKB)

The long-term foreign currency debt ratings of TSKB were affirmed at Ba1 and the outlook changed to negative from stable. The bank's BCA was affirmed at ba2.

The principal driver for the negative outlook is the change in the outlook of the Turkish government's Ba1 debt rating to negative from stable. While Moody's continues to assume a very high probability of support for this development bank, leading to one notch of uplift for the debt ratings, the rating action reflects a potential weakening in the government's capacity to provide support in case of need, as signaled by the negative outlook on the Ba1 sovereign rating.

Moody's has affirmed TSKB's standalone BCA given its resilience. Moody's expects that TSKB's standalone credit profile will remain resilient to the weakening economy. The rating agency expects the bank's asset quality to deteriorate only marginally, from the lowest level of problem loans among Turkish rated banks (0.3% of gross loans at September 2016), somewhat dampening its currently strong net profitability. The bank's loss absorption capacity is also supported by full provisioning coverage and strong capitalisation. TSKB's capitalisation has, however, weakened for the last three years (Moody's adjusted Tier 1 ratio has declined from 16% at end-2014 to 13.1% at September 2016) and may decline further due to foreign currency volatility. As a non-deposit taking institution, TSKB is fully dependent on wholesale funding, however, its refinancing risk is mitigated by access to long-term supranational funding sources, largely under government guarantees.

Sekerbank T.A.S.

The long-term foreign and local currency deposit ratings of Sekerbank were downgraded to B2 from B1. The outlook remains negative. The BCA was downgraded to b2 from b1.

The principal driver for the downgrade is Moody's view that Sekerbank's fundamentals are in line with a b2 BCA. Sekerbank continues to have one of the highest levels of problem loans amongst Turkish rated banks (6.1% of gross loans at September 2016), exacerbated by concentration towards the real estate sector, and very low net profitability. The bank's loss absorption capacity is also severely constrained by weak and declining provisioning coverage and one of the weakest capitalisations among rated Turkish banks. Sekerbank's capitalisation has weakened over the last three years (Moody's adjusted Tier 1 ratio declined from 11.2% at end-2014 to 10.5% at September 2016). Sekerbank's dependence on wholesale funding, stable in recent years, remains significant, with market funds at 26% of tangible banking assets at September 2016, with high refinancing risk because liquid assets continue to be insufficient to cover wholesale funding.

The principal driver for the negative outlook is Sekerbank's sensitivity to the deteriorating operating environment. Moody's expects that Sekerbank's standalone credit profile will come under further pressure from the adverse economic conditions, with asset quality in particular likely to deteriorate, impairing the bank's net profitability. The bank's capitalisation may also decline further due to net losses or foreign currency volatility

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

The long-term foreign currency debt rating of Turk Eximbank was affirmed at Ba1 and the outlook changed to negative from stable. The bank's BCA was affirmed at ba2.

The principal driver for the negative outlook is the change in the outlook of the Turkish government's Ba1 debt rating to negative from stable. While Moody's continues to assume a very high probability of support for this government-related institution, leading to one notch of uplift for the debt rating, the rating action reflects a potential weakening in the government's capacity to provide support in case of need, as signalled by the negative outlook on the Ba1 sovereign rating.

Moody's has affirmed Turk Eximbank's standalone BCA given its resilience. Moody's expects Turk Eximbank's standalone credit profile to remain resilient to the weakening economy. Moody's expects the bank's asset quality to deteriorate only marginally, and from a negligible level of problem loans (0.4% of gross loans at June 2016), somewhat dampening its currently adequate net profitability. The bank's loss absorption capacity is also supported by extremely strong provisioning coverage and the strongest capitalisation among rated Turkish banks. Turk Eximbank's capitalisation has, however, declined for the last three years (Moody's adjusted Tier 1 ratio has declined from 23% at end-2014 to 16.3% at June 2016) and may decline further due to foreign currency volatility. Turk Eximbank is fully dependent on wholesale funding, consistent with the bank's wholesale profile and public policy mission. However, its refinancing risk is mitigated by funding provided by the central bank or the treasury.

Alternatifbank A.S. (ABank)

The long-term local currency deposit rating of ABank was affirmed at Ba1 and the outlook changed to negative from stable. The bank's long-term foreign currency deposit rating (constrained by the sovereign ceiling at Ba2) was affirmed at Ba2 and the outlook changed to negative from stable. The BCA was affirmed at b1.

The principal driver for the negative outlook on the foreign currency deposit rating is the change in the outlook of the Turkish government's Ba1 debt rating to negative from stable. The government's own foreign currency deposit ceiling of Ba2 constrains the bank's long-term foreign currency deposit rating.

The principal driver for the negative outlook on the local currency deposit rating is the potential weakening of the BCA. While Moody's assumes a very high probability of affiliate support from Qatar's The Commercial Bank (Q.S.C.) (BCA baa3/LT Bank Deposits A2 stable), resulting in a three-notch uplift from ABank's standalone BCA, a lowering of the BCA would result in a downgrade of the local currency deposit rating.

Although Moody's has affirmed ABank's standalone BCA given its current resilience, Moody's expects that ABank's standalone credit profile will come under pressure from the weakening economy. Moody's expects the bank's asset quality to deteriorate, from a relatively high level of problem loans (5.6% of gross loans at end-2016), impairing its currently low net profitability. The bank's loss absorption capacity is also constrained by adequate provisioning coverage but one of the weakest capitalisations among rated Turkish banks. ABank's capitalisation has declined for the last three years (Moody's adjusted Tier 1 ratio has declined from 9.6% at end-2014 to 7.6% at June 2016) and despite the strengthening at end-2016 may decline further due to foreign currency volatility. ABank's dependence on wholesale funding, although decreasing in recent years, remains significant, with market funds at 32% of tangible banking assets at June 2016, with high refinancing risk offset by some parental funding.

Finansbank AS (Finansbank)

The foreign currency long-term debt and local currency deposit ratings of Finansbank were affirmed at Ba1, and the outlook changed to negative from stable. The bank's foreign currency deposit rating was affirmed at Ba2 (constrained by the sovereign ceiling at Ba2), and the outlook changed to negative from stable. The BCA was affirmed at ba3.

The principal driver of the negative outlook is the impact of the weakening operating environment on Finansbank's standalone BCA. Moody's expects the bank's asset quality to weaken gradually in line with the market average. With problem loans as percentage of total loans at 5.8% as at end-2016, it remains weaker compared with the leading Turkish banks. At the same time the bank maintains its solid capital ratios and risk-absorption capacity despite a relatively weak asset quality ratios. The bank's Moody's adjusted Tier 1 capital ratio at 11.3% as at end-2016 has declined for the past two years remains sensitive to foreign currency devaluation. Moody's expect the bank's profitability to stabilise, 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) (BCA baa1; LT Bank Deposits Aa3 Negative) leading to two notches of uplift from its standalone BCA.

Denizbank A.S. (Denizbank)

The local and foreign currency deposit ratings of Denizbank were affirmed at Ba2, and continue to have a negative outlook. The BCA was affirmed at ba3.

Denizbank's deposit ratings continue to benefit from a high probability of affiliate support from its 99% shareholder, Russia's Sberbank (BCA ba1/LT Bank Deposits Ba1 Stable), leading to one notch of uplift from its standalone BCA (ba3).

The principal driver for maintaining the negative outlook on the ratings is the impact of the weakening operating environment on Denizbank's standalone BCA. Moody's expects the bank's asset quality to weaken given the headwinds in the operating environment and the relatively high concentration in the bank's loan portfolio. With problem loans as percentage of total loans at 3.9% as at Q3-2016, it remains weaker compared with the leading Turkish banks. At the same time the bank's risk absorption capacity was enhanced with its improved capitalisation, with Moody's adjusted Tier 1 ratio at 9.1% as at Q3-2016, benefitting from an injection of Tier 1 capital in June 2016. The bank's refinancing risk is relatively low with market funds at 18% of tangible banking assets as at Q3 2016.

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

The local currency deposit rating of ING-TR's was affirmed at Ba1, and the outlook changed to negative from stable. The bank's foreign currency deposit was affirmed at Ba2 (constrained by the sovereign ceiling at Ba2), and the outlook changed to negative from stable. The BCA was affirmed at b1.

The principal driver for the negative outlook is the impact of the weakening operating environment on ING-TR's standalone BCA. Moody's expects the bank's asset quality to weaken further, albeit from low levels of non-performing loans. With problem loans as percentage of total loans at 3.4% as at Q3-2016, it is comparable with its peer group. Moody's adjusted Tier 1 capital at 9.5% as at Q3-2016 is comparable to its peer group, although the bank is dependent on the parent for its capital needs 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 market funds at 42% of tangible banking assets as at Q3 2016 is one of the highest among its peers, indicating its dependence on market funding. However, a significant portion of market funding is obtained from the parent.

ING-TR's deposit ratings continue to incorporate a very high probability of affiliate support from its 100% shareholder ING Bank N.V. (LT Bank Deposits A1 Positive, ST Bank Deposits Prime-1; BCA baa1) leading to three notches of uplift.

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

The foreign and local currency long-term deposit ratings of HSBC-TR's were affirmed at Ba3, and the outlook changed to negative from stable. The BCA was affirmed at b2.

The principal driver for the negative outlook is the impact of the weakening operating environment on HSBC-TR's standalone financial fundamentals. Moody's expects the bank's asset quality to weaken further. With problem loans as percentage of total loans at 7.8% as at Q3-2016, it is one of the weakest within its peer group. The bank's total capitalization, with Moody's adjusted Tier 1 ratio at 9% as at Q3 2016 is relatively weak and has declined over the past years due to on-going losses. The bank's refinancing risk remains manageable with the loan-to-deposit ratio at 114% as at Q3 2016 somewhat better than the market average. In Moody's view its affiliation with the HSBC group further reduces its refinancing risk in case of need.

HSBC-TR's deposit ratings continue to incorporate a high probability of affiliate support from its 100% shareholder HSBC Holdings plc (Senior Unsecured A1 Negative) leading to two notches of uplift.

Burgan Bank A.S. (Burgan)

The local and foreign currency deposit ratings of Burgan were affirmed at Ba3, with a stable outlook. The BCA was affirmed at b2. Burgan's deposit ratings continue to incorporate a very high probability of affiliate support from its 99% shareholder, Kuwait's Burgan Bank K.P.S.C. (BCA ba2/LT Bank Deposits A3 Stable) leading to two notches of uplift from its standalone BCA.

The affirmation of the bank's ratings with a stable outlook is driven by the resilience of the bank's standalone BCA at the current b2 level. The affirmation takes into account improving profitability metrics, the low level of problem loans at 2.3% of total loans as at Q3 2016 and low refinancing risk given its affiliation with its 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 weak Tier 1 capitalisation, which stood at 8.15% as at Q3-2016. Moody's notes that the bank's total capitalisation, however, is supported by long-term subordinated debt provided by the parent, which improves the bank's loss-absorption capacity.

PRINCIPAL METHODOLOGY

The principal methodology used in rating Akbank TAS, Turkiye Vakiflar Bankasi TAO, Turkiye Is Bankasi A.S., Turkiye Halk Bankasi A.S., Turkiye Garanti Bankasi A.S., T.C. Ziraat Bankasi, Yapi ve Kredi Bankasi A.S., Turk Ekonomi Bankasi A.S., Finansbank AS, Denizbank A.S., Turkiye Sinai Kalkinma Bankasi A.S., HSBC Bank A.S. (Turkey), Sekerbank T.A.S., Burgan Bank A.S., ING Bank A.S. (Turkey), and Alternatifbank 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 Rating 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_1060333.

REGULATORY DISCLOSURES

Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_195033 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

• 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.

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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