Garanti Bank led Turkish stocks lower after Moody’s put the most of the country’s banks on negative outlook. The rating agency wrote: “The long-term foreign and local currency debt and local currency deposit ratings of Garanti were affirmed at Ba1, and the outlook changed to negative from stable. The bank’s foreign currency deposit rating was affirmed at Ba2 (constrained by the sovereign ceiling at Ba2), and the outlook changed to negative from stable. The BCA was affirmed at ba2.
“The principal driver for the negative outlook of the bank’s ratings is the impact of the weakening operating environment on Garanti’s standalone BCA. Moody’s expects the bank’s asset quality to weaken gradually in line with the market average. At the same time, Moody’s acknowledges that the bank’s profitability remains strong despite economic slow-down and headwinds from the operating environment. Although the bank’s capitalisation is also one of the strongest among similarly-rated peers, with Moody’s adjusted Tier 1 ratio at 12.2% as at end-2016, these buffers remain exposed to currency depreciation. Garanti’s loan-to-deposit ratio is broadly in line with the Turkish system average of about 120% and the bank is exposed to volatility in investor sentiment. However, Moody’s notes that the bank has demonstrated its ability to refinance its wholesale liabilities (market funds at 27% of tangible banking assets as at end-2016) during challenging periods.”