Standard & Poor's Ratings Services raised its long-term foreign currency counter party credit rating on Turkey’s TC Ziraat Bankasi (Ziraat) to B- from CCC+. At the same time, the rating agency affirmed its C short-term counter party credit rating on Ziraat. The outlook is stable.
In addition, Standard & Poor's revised its outlook on Turkiye Is Bankasi (Isbank) to stable from negative and affirmed its B-/C long- and short-term counter party credit ratings on the institution.
"The rating action on Ziraat reflects the progress in its restructuring process, which has had a positive effect on the bank's profitability, liquidity, and capitalization," said Standard & Poor's credit analyst Emmanuel Volland. Ziraat has rapidly cut back its branch network and staff, but still faces the triple challenge of improving its level of automation, increasing its loan leverage, and diversifying its revenues.
While the government plans to privatize Ziraat in the near term, the process would probably take longer than expected and it is unlikely that a strategic majority shareholder will be brought to the bank.
"The outlook revision on Isbank reflects the improving economic and financial environment in which the bank operates. Economic growth, fuelled by increasing domestic confidence, should increase the bank's business opportunities over time," added Volland.
The stable outlook on Ziraat reflects that on the Republic of Turkey. The newly elected government appears to have gained some market confidence and interest rates have already declined significantly.
"If these trends continue, Ziraat will benefit from the lower cost of funds and increasing lending opportunities. Conversely, if confidence deteriorates and real interest rates rise, the bank will have to continue to cope in a difficult financial environment," said Volland.
Ziraat's creditworthiness will therefore continue to depend on the economic environment and on management's ability to restructure the bank to make it competitive with private-sector banks in Turkey.
"The outlook on Isbank balances the improving economic prospects with the deteriorated financial profile of the bank," said Volland. The newly elected government has gained some market confidence and real interest rates have declined rapidly, in line with economic improvements. If this trend continues, the bank will benefit from the lower cost of funds and an increase in lending opportunities.
Conversely, if confidence deteriorates and real interest rates rise, it will have to cope with an adverse financial environment with a financial profile that has not yet recovered from the previous crises. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
