Turkish banks resilient, Fitch says

ISTANBUL - Reuters

This photo shows New York premises of Fitch Ratings. AP photo

In a new special report, Fitch Ratings says that Turkish banks’ credit profiles have remained sound in 2011 despite considerable market and regulatory challenges. Fitch continues to view the medium-term outlook for the sector as favourable. However, the near-term outlook for the Turkish economy is uncertain, which in turn clouds immediate prospects for the banks.
Rapid credit growth has created risk management challenges, and led to a moderation of previously very strong capital and funding ratios. However, in Fitch’s view, underwriting standards have generally remained robust, and leverage in the system is still contained. Furthermore, credit growth began to slow in the year’s third quarter, due to regulatory measures and the weaker global outlook, reducing the potential for a rapid build up of risk in the near term.
Turkish banks are having to adapt to a leaner environment, triggered by lower, yet volatile, interest rates and more rigorous regulatory oversight. Margin compression, competition for profitable consumer and SME business, and lower yields on Turkish government securities have all combined to worsen operating conditions. However, performance has still remained solid due to low impairment charges, tight cost controls and the short-term nature of much lending, which permits swift repricing.