Turkish banks still vulnerable to investor sentiment: Fitch

Turkish banks still vulnerable to investor sentiment: Fitch

Turkish banks still vulnerable to investor sentiment: Fitch

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Banks’ role as Turkey’s largest external borrowers, with their debt the primary source of finance for the country’s considerable current account deficit, leaves them vulnerable to sharp changes in investor sentiment, Fitch Ratings said in a written statement on April 9. 

“A narrowing current account gap, largely due to slacker credit growth and savings on oil imports, helped slow growth in Turkey’s external debt, and that of the country’s banks, in 2014. But the smaller increase in banks’ external liabilities, which rose by $17 billion in 2014 compared to $34 billion in 2013, was partly also the result of a strong U.S. dollar, which resulted in negative revaluation of banks’ euro and Turkish lira debt,” it said. 

“A shift towards longer-term debt maturities in new borrowing is positive for Turkish banks’ risk profiles, but short-term facilities still comprise most of their outstanding foreign liabilities. Furthermore, the overall foreign-currency liquidity positions of Turkey’s banks remained largely unchanged in 2014, with no significant build-up in foreign-currency liquid assets,” the agency added. 

Fitch estimated, based on an established track record of high rollover rates, that Turkish banks will retain good access to foreign credit markets. 

“We also believe their foreign-currency liquidity should be sufficient to deal with a short-lived market closure. But the banks’ vulnerability to a more prolonged lack of access remains significant,” Fitch added.