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
