Turk­ish Bank­ing Sys­tem Out­look Is Neg­a­tive


LON­DON (Dis­patches) - The out­look for the Turk­ish bank­ing sys­tem is neg­a­tive due to down­side risks re­lated to fund­ing and as­set qual­ity, credit rat­ing agency Moody’s said.

The op­er­at­ing en­vi­ron­ment for Turk­ish banks will also re­main chal­leng­ing due to a com­bi­na­tion of fac­tors in­clud­ing slow­ing eco­nomic growth, in­ef­fec­tive mon­e­tary pol­icy, cur­rency de­pre­ci­a­tion and high un­em­ploy­ment, Moody’s said in a re­port pub­lished on Tues­day.

“These fac­tors will sup­press loan de­mand and pres­sure bor­row­ers’ ca­pac­ity to re­pay debt. Moody’s fore­casts that Turkey’s GDP will slow to 4 per­cent in 2018 and 3.5 per­cent in 2019 from 7 per­cent es­ti­mated last year,” Moody’s added in the re­port.

Not­ing that the over­all pic­ture sug­gests that the risk of an external shock to Turkey, while still quite low, had in­creased. “This makes its bank­ing sys­tem more sus­cep­ti­ble to a loss of in­vestor con­fi­dence,” Moody’s said.

“Banks’ as­set qual­ity will likely de­te­ri­o­rate due to the chal­leng­ing op­er­at­ing en­vi­ron­ment, fi­nan­cial dif­fi­cul­ties among some large bor­row­ers and the weak­en­ing con­struc­tion sec­tor. Prob­lem loans will likely rise to around 4 per­cent in 2018, from 3 per­cent in 2017. None­the­less, cap­i­tal lev­els should re­main ad­e­quate, even if the Turk­ish lira con­tin­ues de­pre­ci­at­ing and loan growth is above in­ter­nal cap­i­tal gen­er­a­tion.”

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