By Gokhan Kurtaran
LONDON
International credit rating agency Fitch Ratings expects Turkish banks to keep accessing to capital markets, Fitch Financial Institutions director Lindsey Liddell said on Friday.
Evaluating the Turkish banks’ outlook ahead of potential U.S. FED rate hikes, Liddell said they could impact the margins of Turkish banks, given their high dependence on U.S. dollar funding.
But Liddell believes that Turkey has the means to overcome the hardships and risks linked to the potential rate hike.
“Turkish banks will continue to enjoy good market access and be able to roll over foreign debt, while their available foreign currency liquidity should make them well-placed to cope with a short-lived market closure,” Liddell said. “However, a sharp and prolonged market closure could give rise to refinancing risks.”
Regarding the possible effects of a sharp volatility of the Turkish lira, Liddell pointed out that lending by the Turkish banking sector constituted a potential credit risk.
But most of those loans were given to prime corporates that have diversified business portfolios and revenues, which would help them deal with possible shocks and mitigate risks.
However “Turkish corporates are the most exposed among EMEA [Europe, Middle East, Africa] emerging markets to the risks of a rise in U.S. interest rates and a strengthening dollar(...). Over 85 percent of Turkish corporate debt is denominated in U.S. dollars, while the majority of revenues are in Turkish lira,” Liddell warned.
Prolonged political uncertainty as well as slower economic growth, lira depreciation, higher interest rates and weaker investor sentiment towards Turkey could all weigh on banks' credit profiles, according to Liddell.
“However, Fitch’s base case is that the deterioration in the operating environment will be moderate and the banks have sufficient capital and liquidity buffers to absorb mild shocks,” Liddell added.
In regards to effects of Greek liquidity crisis which Turkish Finansbank is feared to be negatively affected as the National Bank of Greece (NBG) owns 82.23 percent of its shares, Liddell said: “The bank’s asset exposures to NBG, or Greece more generally, are negligible, and funding from the parent is limited.”
