Turkish banks strong enough to face risks, Fitch Ratings say

ISTANBUL

Turkish banking sector is strong enough to face high interest rates, Fitch says.

Turkish banks may face pressure in 2014 from rising interest rates, slowing economic growth and a weakened Turkish lira, Fitch Ratings said. 

“These trends will contribute to a modest fall in margins and rise in loan impairment charges, but strong capitalization, healthy funding structures and liquid balance sheets will help minimize the impact on credit quality, leading to a stable rating outlook for the sector,” the rating agency said by a written statement on Dec. 20. 

Potential interest and currency rate shocks are the greatest risks to the Turkish banking sector as they would feed through to borrowers and weaken loan quality. 

But banks’ loan books are starting the year in good health and barring negative macro developments the agency expects any increase in impaired loans to be limited to 1%-2%. 

“Although the economy is likely to slow in 2014, we still expect GDP growth of 3.2 percent in 2014, against 3.7 percent in 2013,” Fitch said.