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TEXT-Fitch affirms Turkey's large private banks
July 2, 2012 / 3:13 PM / in 5 years

TEXT-Fitch affirms Turkey's large private banks

July 2 - Fitch Ratings has affirmed the Long-term foreign currency Issuer
Default Ratings (IDRs) of Turkey's four largest privately-owned banks - Turkiye
Is Bankasi A.S. (Isbank), Turkiye Garanti Bankasi A.S. 
(Garanti), Akbank T.A.S. (Akbank) and Yapi ve Kredi Bankasi A.S.
 (Yapi Kredi) - at 'BBB-'. At the same time, Fitch has affirmed the
ratings of several of their subsidiaries whose ratings are driven by parental
support. A full list of rating actions is at the end of this comment.

The four banks' foreign currency IDRs are driven by their standalone financial
strength, reflected in their Viability Ratings (VRs), all at 'bbb-'. The IDRs of
Yapi Kredi, a 50-50 joint venture between UniCredit S.p.A. (UC; 'A-'/Negative)
and Koc Holding, are also underpinned by potential support, if needed, from UC.

The banks' ratings reflect their broad and stable franchises; sound financial
metrics, in terms of capitalisation, asset quality, performance and liquidity;
generally strong management and risk management, in particular for emerging
market banks; and the relatively low level of systemic risks and imbalances in
the Turkish banking sector as a whole.

At the same time, Fitch's analysis of the banks also takes into account the
still relatively high sovereign risks (Turkey is rated 'BB+'/Stable) and
considerable volatility in the country's macroeconomic indicators; the sharp
ongoing slowdown in domestic economic growth following a rapid credit build up
at the banks in 2011; and the high proportion of foreign currency loans in
corporate portfolios at all four banks (albeit this is significantly mitigated
by the hedged currency positions of many borrowers).

Fitch's base case expectation remains that the Turkish economy will achieve a
'soft landing' in 2012, although the agency forecasts GDP growth to slow to 2.8%
from 8.5% in 2011, before rising again to 4.5% in 2013. The four banks' asset
quality will probably weaken as loan books start to season in a less benign
economic environment, but in Fitch's view the deterioration should be moderate,
given still positive economic growth, generally sound credit underwriting, the
still moderate degree of leverage in both corporate and household sectors and
the absence of any marked asset price bubbles. At end-Q112, the banks reported
non-performing loan ratios between 1.6% (Akbank) and 3% (Yapi Kredi).

Fitch expects profitability in 2012 to moderate somewhat from levels reported in
2011 (return on average assets of 2%-2.2% at Akbank, Garanti and Yapi Kredi;
1.4% at Isbank), mainly due to lower credit growth, normalisation of loan
impairment charges and lower fee income. However, internal capital generation
should still be relatively robust, and broadly in line with the more moderate
credit growth targeted in 2012 (circa. 15%) at the four banks, compared to
27%-43% in 2011).

Capitalisation and liquidity are generally comfortable at each of the four
banks, but following the recent credit expansion these are no longer the marked
rating strengths as they were two-three years ago. Fitch core capital ratios at
end-Q112 were strongest at Akbank (15.6%) and Garanti (14.7%), a solid 13% at
Isbank and a more moderate 10.7% at Yapi Kredi. Loan/deposit ratios were between
109% and 113% at Akbank, Garanti and Isbank, and a slightly higher 121% at Yapi
Kredi, reflecting access to UC funding.

Fitch rates the four banks above the Turkish sovereign, reflecting their
relatively strong credit profiles, and the agency's view that they would
probably be sufficiently robust to remain solvent and liquid even in case of a
high level of sovereign/macroeconomic stress. At the same time, Fitch caps the
banks' VRs at 'bbb-', one notch above the sovereign IDRs, due to their
inevitably high exposure to the domestic economy and the banks' large holdings
of government debt.

If the sovereign is upgraded (not anticipated at present, given the Stable
Outlook) reflecting a moderation of macroeconomic risks, and the banks'
stand-alone credit metrics remain robust, then the VRs and IDRs of Akbank,
Garanti and Isbank could also be upgraded, to 'BBB'. Yapi Kredi's foreign
currency Long-term IDR is currently constrained by Turkey's Country Ceiling of
'BBB-', and could also be upgraded to 'BBB' if the sovereign rating and Country
Ceiling are raised, reflecting potential support from UC. The four banks' IDRs
and VRs would likely be downgraded in case of a lowering of the sovereign rating
and Country Ceiling.

Isbank is the largest bank in Turkey with 14% share in assets and a broad and
diversified franchise. Isbank Group is a financial conglomerate, where Isbank is
the main financial body. The bank is 40.43% owned by the Isbank Pension Fund and
31.48% is broadly held at end-2011. A 28.09% stake (commonly known as the
Ataturk shares) is held by the Republican People Party, with restricted
ownership rights, in particular as regards receipt of dividends.

Garanti is the second largest private bank with a 13% share in assets. It has
expanded its franchise in the growing, high-margin retail and SME segments.
Dogus Group, a leading Turkish conglomerate, holds a 24.2% stake in the bank and
Banco Bilbao Vizcaya Argentaria (BBVA; 'BBB+'/Negative) controls 25.01%. These
shareholders, working in a strategic partnership and equally represented on
Garanti's board, are long-term investors. The remaining shares are broadly held.

Akbank is the third largest private bank with a 12% share in assets. It has an
established franchise in corporate and retail banking and is looking to increase
penetration in the high growth SME segment. Sabanci Holding, affiliated
institutions and individuals, a leading Turkish conglomerate, is the
longstanding strategic shareholder of the bank, with a 49% stake.

Yapi Kredi is the fourth largest private bank in Turkey, with a 9% market share
in assets. The bank's core activity and major contributor to revenues is retail
banking. An 81% stake in the bank is held by Koc Financial Services, which is a
50-50 joint venture between UniCredit Bank Austria AG ('A+'/Stable; a subsidiary
of UC) and Koc Holding (unrated, the largest conglomerate in Turkey by
turnover). Although both strategic shareholders have proven supportive of YKB,
Fitch bases the bank's support driven ratings on those of UC.

Fitch equalises the ratings of Is Yatirim Menkul Degerler A.S. (an investment
banking arm of Isbank) and Is Finansal Kiralama A.S., Garanti Finansal Kiralama
A.S. and Ak Finansal Kiralama A.S. (leasing subsidiarieas of Isbank, Garanti and
Akbank) with those of their parent institutions. The equalisation of the ratings
reflects the subsidiaries' high level of integration with their parents; the
fact that they are providing some of the groups' core products and services to
target client groups; the subsidiaries' small size; their common branding with
the parent institutions; and significant levels of parent funding to varying
degrees. The ratings of these companies are highly likely to move in line with
those of the parent banks in the future.

The 'BB+' Long-term IDR of Turkiye Sinai Kalkinma Bankasi A.S. (TSKB) is driven
by potential support from its 50% shareholder, Isbank. The rating is one notch
lower than that of Isbank due to the high level of minority ownership, the
moderate degree of integration with the parent, TSKB's niche franchise in
development lending and the lack of common branding. Fitch also views sovereign
support for TSKB as probable given the bank's policy role and the fact that a
large majority (93%) of its non-equity funding is already guaranteed by the
Turkish sovereign.

The ratings actions are as follows:

Isbank

Long-term foreign currency IDR: affirmed at 'BBB-'; Outlook Stable
Long-term local currency IDR: affirmed at 'BBB-'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'F3'
Short-term local currency IDR: affirmed at 'F3'
National Long-term rating: affirmed at 'AAA(tur)'; Stable Outlook
Viability Rating: affirmed at 'bbb-'
Support Rating: affirmed at '3'
Support Rating Floor: affirmed at 'BB'
Senior unsecured debt: affirmed at 'BBB-'

Garanti

Long-term foreign currency IDR: affirmed at 'BBB-'; Outlook Stable
Long-term local currency IDR: affirmed at 'BBB-'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'F3'
Short-term local currency IDR: affirmed at 'F3'
National Long-term rating: affirmed at 'AAA(tur)'; Stable Outlook
Viability Rating: affirmed at 'bbb-'
Support Rating: affirmed at '3'
Support Rating Floor: affirmed at 'BB'
Senior unsecured debt: affirmed at 'BBB-'

Akbank

Long-term foreign currency IDR: affirmed at 'BBB-'; Outlook Stable
Long-term local currency IDR: affirmed at 'BBB-'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'F3'
Short-term local currency IDR: affirmed at 'F3'
National Long-term rating: affirmed at 'AAA(tur)'; Stable Outlook
Viability Rating: affirmed at 'bbb-'
Support Rating: affirmed at '3'
Support Rating Floor: affirmed at 'BB'
Senior unsecured debt: affirmed at 'BBB-'

Yapi Kredi

Long-term foreign currency IDR: affirmed at 'BBB-'; Outlook Stable
Long-term local currency IDR: affirmed at 'BBB'; Outlook Negative
Short-term foreign currency IDR: affirmed at 'F3'
Short-term local currency IDR: affirmed at 'F3'
National Long-term rating: affirmed at 'AAA(tur)'; Outlook Stable
Viability Rating: affirmed at 'bbb-'
Support Rating: affirmed at '2'
Senior unsecured debt: affirmed at 'BBB-'

TSKB

Long-term foreign and local currency IDR: affirmed at 'BB+'; Outlook Stable
Short-term foreign currency and local currency IDR: affirmed at 'B'
National Long-term rating: affirmed at 'AA+(tur)' Outlook Stable
Support Rating: affirmed at '3'

Is Yatirim Menkul Degerler A.S.

National Long-term rating: affirmed at 'AAA(tur)' Outlook Stable

Is Finansal Kiralama A.S.

Long-term foreign and local currency IDR: affirmed at 'BBB-'; Outlook Stable
Short-term foreign currency and local currency IDR: affirmed at 'F3'
National Long-term rating: affirmed at 'AAA(tur)'; Outlook Stable
Support Rating: affirmed at '2'

Garanti Finansal Kiralama A.S.

Long-term foreign and local currency IDR: affirmed at 'BBB-'; Outlook Stable
Short-term foreign currency and local currency IDR: affirmed at 'F3'
National Long-term rating: affirmed at 'AAA(tur)'; Outlook Stable
Support Rating: affirmed at '2'

Ak Finansal Kiralama A.S.

Long-term foreign and local currency IDR: affirmed at 'BBB-'; Outlook Stable
Short-term foreign currency and local currency IDR: affirmed at 'F3'
National Long-term rating: affirmed at 'AAA(tur)'; Outlook Stable
Support Rating: affirmed at '2'

Contact:

Primary Analyst (Garanti and TSKB)
Janine Dow
Senior Director
+33 (0)1 4429 9138
Fitch France SAS
60 Rue de Monceau
Paris 75008

Primary Analyst (Isbank, Akbank and Yapi Kredi)
Banu Cartmell
Director
+44 203 530 1109
Fitch Ratings Limited
30 North Colonnade
London E14 5GN

Primary Analyst (Is Yatirim Menkul Degerler A.S.)
Turda Ozmen
Director
+90 212 284 7882
Fitch Turkey Finansal Derecelendirme Hizmetleri A.S.
Is Kuleleri, Kule 2, Kat 4
Levent 34330 Istanbul

Primary Analyst (Is Finansal Kiralama A.S., Ak Finansal Kiralama A.S. and
Garanti Finansal
Kiralama A.S.)
Zubaida El-Muttardi
Analyst
+44 203 5301192
Fitch Ratings Limited
30 North Colonnade
London E14 5GN

Secondary Analyst (Garanti, Yapi Kredi, Garanti Finansal Kiralama A.S.)
Levent Topcu
Director
+90 212 284 7829

Secondary Analyst (Isbank, Akbank, TSKB, Is Finansal Kiralama A.S. and Ak
Finansal Kiralama A.S.)
Turda Ozmen
Director
+90 212 284 7882

Secondary Analyst (Is Yatirim Menkul Degerler A.S.)
Zubaida El-Muttardi
Analyst
+44 203 5301192

Committee Chairperson
James Watson
Managing Director
+ 7 495 956 9901

Media Relations: Michelle James, London, Tel: +44 0203 530 1574, Email:
Michelle.James@fitchratings.com.

Additional information is available at www.fitchratings.com.

The ratings above were solicited by, or on behalf of, the issuer, and therefore,
Fitch has been compensated for the provision of the ratings.

Applicable criteria, 'Global Financial Institutions Rating Criteria' dated
August 2011, 'National Ratings
Criteria' dated January 2011, 'Rating Financial Institutions Above the Local
Currency Sovereign
Rating' dated December 2011 and 'Rating Foreign Banking Subsidiaries Higher than
Parent Banks and
Parent Bank Holding Companies' dated June 2011 available at
www.fitchratings.com.

Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
National Ratings Criteria
Rating Financial Institutions Above the Local Currency Sovereign Rating
Rating Foreign Banking Subsidiaries Higher Than Parent Banks or Bank Holding
Companies

Our Standards:The Thomson Reuters Trust Principles.
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