Fitch Ratings has assigned Turkey's MNG Bank long-term foreign and local currency ratings of B-. Additionally, the agency has assigned short-term foreign and local currency ratings of B, an individual rating of D/E, a long-term National rating of BBB, and a Support rating of 5. The outlook on all long-term ratings is stable.
The ratings reflect the company's above-average capital and improved profitability. This is, however, offset by weak asset quality, a small franchise and potentially volatile funding.
MNG Bank is a small-sized Turkish bank with approximately $120 million in total assets and six branches at end-June 2003. After undergoing several ownership changes in the early 1990's, the bank is currently 99 percent-owned by Mehmet Nazif Gunal, owner of MNG Group of Companies that are active in tourism, media, air cargo and construction.
Under previous management, MNG Bank aimed to diversify its operations into the retail sector but could never achieve the required economies of scale due to its small size. The bank has downsized considerably and now focuses entirely on commercial and corporate business.
After sustaining a net loss of 37.9 trillion Turkish Lira in 2001 due to higher loan loss provisions, substantial overhead costs and a large monetary loss, MNG Bank recorded a profit of TL 2.3 trillion in 2002 as the bank reduced its branches and workforce. The bank has a very high net interest margin because of its large capital position and does not maintain any meaningful open position.
Asset quality continues to be problematic as non-performing loans equaled 13.40 percent of the portfolio at end-2002. Reserve coverage improved to 63 percent but remains low. Because of its short-term deposit structure and small size, MNG Bank maintains relatively high liquidity in case of market difficulties. Despite previous expansion activities under problematic economic conditions, the bank did not experience any significant liquidity problems.
MNG Bank had regulatory and free capital ratios of 47 percent and 23 percent at end-2002, both among the highest of any Turkish bank rated by Fitch. It is important for the bank to maintain high levels of equity in light of its growth plans over the next several years, said the rating agency. The owner is committed to MNG's success and has added to capital frequently. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
