Fitch revises Turkish banks’ outlooks to negative on sovereign outlook change
New rating updates reflect Turkey’s sovereign outlook change
Dubai: Fitch Ratings has revised the outlooks of two state-owned development banks’ from stable to negative
In the latest outlook update, the rating agency has revised the outlooks of Turkiye Kalkinma ve Yatirim Bankasi (TKYB) and Turkiye Ihracat Kredi Bankasi’s (Turk Eximbank), Long-Term Foreign-Currency (LTFC) and Long-Term Local Currency (LTLC) Issuer Default Ratings (IDRs), to negative from stable.
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Fitch has also revised the outlooks on the LTLC IDRs of a further 18 Turkish banks and their respective financial subsidiaries, to negative from stable.
Sovereign outlook
The rating actions follow the revision of the Outlook on Turkey’s Long-Term IDRs to negative from stable on August 21.
The Outlook revisions on the Long-term IDRs of TKYB and Turk Eximbank mirror the sovereign rating action, given that the banks’ IDRs are driven by state support. The Negative Outlook on the two banks’ LTFC IDRs reflects increased risks to the ability of the Turkish authorities to provide support in foreign currency given the depletion in sovereign net foreign currency reserves and the risk of increased pressure on Turkey’s external finances amid heightened market volatility, Fitch said in a note.
The revision of the outlook to negative on the LTLC IDRs of a further eight banks, which also have LTLC IDRs driven by state support, mirrors the sovereign outlook revision.
“For the remaining 10 banks whose LTLC IDRs are driven by institutional support from higher-rated foreign parents, the negative outlook reflects our view that the likelihood of government intervention that would impede banks’ ability to service their obligations in local currency is not lower than the probability of a sovereign default in local currency,” Fitch said in a note.