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Tough Year Ahead For Turkish Banks, Fitch Says

18.04.2014 12:17

The Turkish banking sector, among most major emerging markets, will perform more weakly in 2014 than in recent years due to slower economic growth, higher rates and greater political uncertainty, a global ratings agency said on Thursday.Fitch Ratings said in the latest publication of its regular EM Banking.

The Turkish banking sector, among most major emerging markets, will perform more weakly in 2014 than in recent years due to slower economic growth, higher rates and greater political uncertainty, a global ratings agency said on Thursday.

Fitch Ratings said in the latest publication of its regular EM Banking System Datawatch report that despite the anticipated problems this year, it is expected that emerging market bank industries remain largely resilient “given mostly solid buffers and only moderate economic downturns."

“Downside risk is greatest in China and India, but has risen in Russia and Turkey,” Fitch said, adding that it is still less concerned about loan seasoning given banks' significant buffers in most major Asian emerging markets. "Turkish banks will face a tough year of weakening asset quality, tighter margins and lower growth, as loan books season against a background of higher rates, a weaker currency, a slower economy and political uncertainty. However, most banks can absorb moderate stress, and downward rating pressure should be limited," the Fitch report said.

Toward the end of January, the Central Bank of Turkey raised key interest rates significantly, leading to a meltdown in bank profitability and shares traded on Borsa İstanbul (BİST). Earlier in April, Fitch cut its growth forecasts for Turkey from 3.2 to 2.5 percent. The agency said it expected political noise to remain an enduring feature of Turkey ahead of presidential elections in August and parliamentary elections in June 2015, periodically clouding the economic outlook.

Rival ratings agency Moody's cut the outlook on Turkey's sovereign rating to a negative last week, a move that follows lingering political tension exacerbated by the harsh rhetoric used by Prime Minister Recep Tayyip Erdoğan against the opposition. Erdoğan said his political rivals will “pay for their treachery” following his ruling party's victory in the locals polls on March 30. Turkey is currently classed as investment grade by two agencies, yet the possibility of returning to junk status at Moody's deteriorates long-term prospects for foreign investors' confidence in the Turkish economy.(Cihan/Today's Zaman)



 
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