International rating agency Fitch Ratings has assigned ratings to Anadolubank A.S. as follows: Long-term foreign and local currency ratings of 'B-' (B minus), Short-term foreign and local currency of 'B', Individual of 'D', Support of '4T' and a National rating of 'BBB(tur)'. A Negative Outlook is in place for the Long-term ratings in line with the sovereign rating.
Anadolubank's license was purchased from the government's Privatization Administration in 1997 by Habas Group. Habas, the core company of the Group is the country's dominant producer of industrial and medical gases and a large exporter of long steel. It is rated 'B-' (B minus) Long-term foreign currency/'B+' L-tm local currency and 'A+(tur)' National.
Anadolubank mainly focuses on corporate banking, providing short-term loans to medium and large sized companies that have large external trade business. The total number of branches reached 49 in 2002, including three branches purchased from Savings Deposits Insurance Fund (SDIF) and branches cover 85 percent of Gross National Product (GNP). The management plans a maximum of 60 branches by the end of 2006 in order to cover a larger population and increased economic activity.
Fitch notes that while Anadolubank's profitability improved in 2002—due to improved adjusted net interest income and an increase in non-interest income despite narrowed margins—it was still mediocre, and followed a net loss in 2001.
On the other hand, the quality of its loan book remained better than those of its peers and the sector average. NPLs equated to 2.87 percent of loans at end-2002 (2001: 5.22 percent) and reserve coverage increased to only 73 percent from a low 51 percent.
Government securities were reduced during the year but still equated to 49 percent of assets at end-2002 (2001: 51 percent), a percentage Fitch considers to be high given Turkey's low sovereign rating. The bank's liquid assets, excluding the trading securities portfolio, decreased to 18 percent of assets at end-2002 and covered only 22 percent of customer deposits (2001: 32 percent), reflecting a deteriorating liquidity that is somewhat mitigated by the resilience of core deposits.
Capital was adequate at end-2002 and the bank's regulatory capital adequacy ratio, including market risk, equated to 15.29 percent (2001:14.80 percent), with 97 percent in Tier 1. Total free capital equated to 4.01 percent of assets at end-2002, better than that of some of its peers.
Anadolubank, being a lower medium sized bank with a relatively small branch network, has limitations in improving its profitability and efficiency because of economies of scale. In the presence of its large government securities portfolio and deteriorated liquidity coupled with structural maturity mismatch, Fitch notes that the effectiveness of newly upgraded risk management systems has yet to be tested.
Nevertheless, the quality of the loan book, which has been good, the shareholder support of the strong and committed owners and quality of adequate capital are encouraging factors for the positive prospects of the bank. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
