Bank chief issues stark warning on rating
Posted by meb at August 27th, 2008
Although foreign investors inflow to Turkey has been rising over the past few years, the country’s ‘non-investment grade’ level remains unchanged. This is not only a problem for foreign investors; it also is a problem for all newborn children in Turkey, says Ersin Özince, the Banks Association of Turkey chairman, urging change…
There is no need to grade the Turkish government’s economic performance separately, as Turkey’s current credit rating is already an indicator of its economic report card, according to the chairman of the Banks Association of Turkey.
Both prior to and following the court case to possibly close down the ruling Justice and Development Party, or AKP, Turkey’s credit rating in the eyes of all rating agencies remained at a “non-investment grade” level, said Ersin Özince, the managing director of İşbank, Turkey’s largest publicly traded bank.
“No matter how many foreign investors have entered Turkey in recent years, the situation has yet to change,” Özince said.
“The unchanging grade of this rating is not just a problem for foreign investors; it also is a problem for all newborn children in Turkey,” he said, adding that other indicators, such as a rise in foreign trade, the number of investors and privatizations, do not, by themselves, make a difference.
“No matter what economic and social programs indicate, I think management that would move Turkey toward [an investment] grade would be successful,” Özince said.
Long-term program required
According to Özince, Turkey needs long-term programs. He said a concrete schedule, including economic and social targets, should be announced at certain intervals.
“If some of the developing countries are overtaking us, then we are, relatively, not advancing, he said.
Turkey significantly benefited from events in recent years, said Özince. However, there is a global economic slowdown and Turkey will certainly be influenced negatively by that slowdown in the global market.
“Apparently, we will experience this process for a while. Furthermore, Turkey does not have many possibilities and – also, apparently – has little intention to create opportunities from this period,” he said.
Growth in banking to continue
Regardless of negative global and domestic conditions, the Turkish banking industry, unlike the country’s overall economy, had significant potential to increase capacity, Özince said.
The development of the banking sector is, as a whole, robust. However, Turkey’s banking industry was still very shallow and small compared to Europe’s, Özince said. The country’s banking sector would continue to grow for years with its capital structures strengthened via more accurate banking rules, as well as improved technology and knowledge, he said.
Answering a question regarding the weaker aspects of Turkish banks, Özince said he did not think Turkish banks have weak aspects.
“At the most, it could be the shallowness of financial markets, the disruption of political and economic stability or that Turkey’s credit rating is not at an investment grade,” he said. “Other issues include the risks banks take in proportion to their strength and in line with their risk management principles. And, the banking authority is regulating and supervising these accordingly.”
İşbank attains high profit
İşbank increased its net profit in the first half of the year by 50 percent to YTL 1.15 billion, compared to the same period last year. The bank’s success in profitability stemmed from changes in policies implemented last year, Özince said.
“We shifted to a slightly different policy as of the third quarter of last year. From our previous aggressive growth policy, we have shifted to a profit and customer-focused strategy,” he said.
“Our profit-oriented strategy has kept us separated from the excessive and unfruitful competition. In particular, we abstained from high-interest fixed deposits. We did not take much of a chance with interest rates in loan interests. As a result, we only experienced market share losses of 1-2 points,” he said.
“However, we displayed a competitive attitude, particularly in our YTL balance sheet. Hence, we were able to keep the balance between the interests we obtain and issue. Consequently, our not pursuing an aggressive policy had a positive impact on our profitability.”
Board urges rating agencies to abide by the rules:
Ratings issued for Turkey by the International Rating Agencies have been a hot topic of discussion for several years. Just last Sunday, the Capital Markets Board of Turkey, or SPK, warned international ratings agencies, such as Standards and Poor’s, Moody’s, Fitch and Riskmetrics, to show “the utmost attention and care” to abide by the SPK’s declaration of rules related to the “Ratings Operations and Ratings Agencies in the Capital Markets.” Fitch’s Long Term Issuer Default Rating for Turkey stands at BB-. The firm says Turkey maintains a “stable” outlook. Moody’s rating for Turkey outlook is also stable and government bonds rating is Ba3. Standard & Poor’s back in January revised its outlook on Turkey, affirming the country’s credit rating at ‘BB-’.
source: Referans via Turkish Daily News
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