The domestic strength rating of Yapi ve Kredi (YKB), one of the largest private banks in Turkey, has been downgraded to BB from BBB-, by emerging markets rating agency Capital Intelligence. The outlook was also placed on negative. Foreign currency ratings of B long-term and C short-term were maintained.
The agency commented the move follows the takeover of sister bank Pamukbank, by the Turkish State Deposit Insurance Fund (SDIF), on June 19, 2002. The agency believes that the move will have negative implications for YKB. The takeover of Pamukbank followed a failed proposed merger between the two banks in early June 2002.
The magnitude of Pamukbank’s equity shortfall meant that the Cukurova Group was not able or willing to support the bank. YKB, Pamukbank and the Cukurova Group were all closely connected through shareholdings and related party transactions.
Pamukbank owned over 10 percent of YKB and, as a result of its takeover, board changes have occurred at YKB with two SDIF representatives appointed and the removal of two previous members. Under Turkish banking law, holders of stakes of 10 percent or more in a seized bank lose their eligibility to conduct banking in that or any other bank. Consequently, the 48 percent stake of Cukurova in YKB is now controlled by the SDIF.
In addition, the financial profile of YKB weakened considerably in 2001, as was the case for all Turkish banks, with NPLs rising sharply and a likely loss recorded for the year. Capital Intelligence further added that the Turkish banking sector remains in poor shape with many challenges ahead. Further consolidation is inevitable. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
