ISTANBUL (Turkey), April 17 (SeeNews) – Fitch Ratings said on Thursday that Turkish banks will face weakening asset quality, tighter margins and lower growth this year as loan books season on the backdrop of higher rates, a weaker currency, a slower economy and political uncertainty.
However, most Turkish banks can absorb moderate stress, and downward rating pressure should be limited, Fitch said in a statement accompanying its EM Banking System Datawatch report.
Fitch says in the report that most major emerging market (EM) banking sectors will have a weaker performance in 2014 than in recent years due to slower economies, higher rates, seasoning loan books and greater political uncertainty.
“However, bank credit metrics and ratings should be 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,” the report said.
The report also notes that “sector [non-performing loans] NPLs remain high in Slovenia even after the 'bad bank' transfers in the last quarter of 2013, limiting upside for low bank ratings. Asset quality declined again in Romania in 2013, but shows signs of plateauing in other weak Central and Eastern Europe markets”.