Progress in reducing inflation is helping Türkiye’s banks withstand global and regional shocks, keeping the risks manageable despite pressure from high financing costs, an S&P Global Ratings director said.
Regina Argenio, a director and lead analyst for financial institutions at S&P, told Anadolu at the Türkiye Capital Markets Conference in Istanbul on Oct. 22 that the economy was performing better than the agency had expected at the start of the Middle East war.
S&P is monitoring banks’ ability to refinance their substantial external debt, she said, warning that disruptions could cause difficulties. She also welcomed the removal of regulatory relief measures introduced over the past year.
High real interest rates were constraining lending and making financing harder to afford for small and medium-sized businesses and retail borrowers, creating risks to banks’ asset quality, Argenio said.
Lending could improve in 2027 if interest rate cuts feed through to loan pricing. She also expects net interest margins to improve as lower rates reduce lira funding costs, although foreign-currency funding could become more expensive.
The outlook depends on the timing and pace of rate cuts and the success of the disinflation program. Sustained reductions in inflation and greater economic stability could improve asset quality and returns on capital in real terms, even if nominal profitability weakens, she added.
On the recent investment fund investigations, Argenio said the impact should remain limited if the problems stay isolated. She described the policy response as strong, with liquidity support to banks helping contain the effects.
It was still too early to assess the impact on external borrowing costs, she said. Turkish borrowers could face a small increase in risk premiums, depending on how effectively and quickly the situation is contained.
