Correction: Fitch Affirms Support-Driven Ratings of 7 Turkish Banks

  Correction: Fitch Affirms Support-Driven Ratings of 7 Turkish Banks

Business Wire

LONDON -- November 12, 2013

This announcement corrects the version that was published earlier today. The
Viability Ratings of the five state-owned banks should be 'bbb-' and not
'bb+'.

Fitch Ratings has affirmed the support-driven Issuer Default Ratings (IDR) of
seven Turkish banks. The banks include five state-owned banks and two banks
owned by more highly rated foreign banks. The rating actions follow the recent
affirmation of Turkey's sovereign ratings (see 'Fitch Affirms Turkey at
'BBB-', Outlook Stable', 24 October 2013). A full list of rating actions is
provided at the end of this rating action commentary. Fitch will separately
review the Viability Ratings (VR) of these banks.

KEY RATING DRIVERS - IDRS, NATIONAL RATINGS, SUPPORT RATINGS, SUPPORT RATING
FLOORS AND SENIOR DEBT RATINGS OF FIVE STATE-OWNED BANKS

The IDRs and senior debt ratings of the five state-owned banks - T. C. Ziraat
Bankasi A.S. (Ziraat), Turkiye Halk Bankasi A.S. (Halkbank), Turkiye Vakiflar
Bankasi T.A.O. (Vakifbank), Turkiye Kalkinma Bankasi A.S. (TKB) and Turkiye
Ihracat Kredi Bankasi A.S. (Turk Eximbank) - are aligned with those of the
Turkish sovereign.

This reflects Fitch's opinion that the probability of state support for these
banks in case of need is high. This in turn reflects their state ownership,
systemic importance (in the cases of Ziraat, Halkbank and Vakifbank), policy
roles (most notably for Turk Eximbank and TKB), the track record of support to
date and the still moderate size of the banks relative to Turkey's GDP.

The degree of state ownership at the five banks varies. Turk Eximbank, Ziraat
and TKB are fully state-owned, while state ownership at Halkbank (51%) and
Vakifbank (58%) is lower. However, Fitch believes there are currently no plans
to further privatise Halkbank and Vakifbank and expects them to remain
majority state-owned for the foreseeable future.

Fitch views the systemic importance of Ziraat, Halkbank and Vakifbank as high
as they have deep franchises and extensive nationwide branch networks, and
together control one-third of the country's customer deposits. Ziraat and
Halkbank are the sole distributors of subsidised loans to the agricultural and
SME sectors, respectively, although these represent a moderate proportion of
the banks' total lending. In addition, only state-owned commercial banks are
eligible to receive savings deposits from state-owned companies and entities
and only these banks pay out state pensions. High-ranking government officials
have recently also encouraged retail depositors to move deposits to
state-owned banks.

TKB and Turk Eximbank are not commercial banks, but development institutions
with primary policy roles. TKB specialises in the provision of long-term
development finance while Turk Eximbank is the country's official export
credit agency and implements the government's official export strategies. The
latter enjoys privileges, notably Treasury compensation of losses suffered as
a result of political risks, and exemption from corporate taxes and loan loss
reserve requirements. The Turkish Treasury also guarantees most funding at TKB
and also when required provides guarantees for Turk Eximbank's funding.

Turkey's banking sector remains moderate in size, and the combined assets,
loans and equity of the five state-owned banks covered in this commentary were
equal to, respectively, 30%, 16% and 3% of GDP at end-June 2013. The five
banks' foreign funding was equal to a significant 16% of Turkey's projected
foreign currency reserves at end-2013, but reasonable diversification of this
funding by maturity and source means that even in a systemic crisis the
sovereign is unlikely to have to cover the majority of these obligations in a
short space of time, in Fitch's view.

Turkey, as a member of the G20 countries, has endorsed principles aimed at
shifting the onus of bailing out banks in future away from taxpayers.
Furthermore, the Banking Regulation and Supervision Agency (BRSA), the Savings
Deposit Insurance Fund (SDIF) and the Central Bank are discussing the
introduction of resolution legislation in Turkey. However, in Fitch's view,
adoption of such legislation is unlikely to be imminent, and ties between the
government and state-owned banks are likely to remain strong for the
foreseeable future. The current banking law includes provisions regarding
rehabilitation, corrective and other measures to be adopted in respect of
ailing banks but does not provide for statutory bailing in of creditors.

National ratings are assigned by Fitch based on a matrix which references
Local Currency Long-term IDRs. The corresponding National Long-term Ratings
for the state-owned banks are 'AAA(tur)', indicating that these are the best
relative credit risks in Turkey.

RATING SENSITIVITIES - IDRS, NATIONAL RATINGS, SUPPORT RATINGS, SUPPORT RATING
FLOORS AND SENIOR DEBT RATINGS OF FIVE STATE-OWNED BANKS

An upgrade or downgrade of Turkey's sovereign ratings (not currently expected
given the Stable Outlook) would likely result in similar rating actions on
each of the five state-owned banks.

The Support Ratings and Support Rating Floors (SRFs) of Ziraat, Halkbank and
Vakifbank could also be downgraded in case of (i) the introduction of
resolution legislation in Turkey which seeks to limit the use of public funds
to rescue failed banks, including state-owned institutions; (ii) the
privatisation of the banks (this would likely result in a one notch downgrade
of SRFs to 'BB+', the same level as the SRFs of the largest privately-owned
banks unless privatisation results in the banks being owned by a strong
shareholder); or (iii) any significant reduction in the sovereign's financing
flexibility which would limit its ability to provide support to the banking
sector. However, downgrades of Support Ratings and SRFs would not by
themselves lead to downgrades of the banks' Long-term foreign currency IDRs
and senior debt, as these are underpinned at the 'BBB-' level by the Viability
Ratings of Ziraat, Halkbank and Vakifbank, reflecting their standalone
strength. Privatisation would result in a decoupling of state-owned banks'
ratings from those of the sovereign.

KEY RATING DRIVERS AND SENSITIVITIES - IDRS, NATIONAL RATINGS, SUPPORT RATINGS
AND SUKUK RATINGS OF KUVEYT TURK AND TURKIYE FINANS

The ratings of Kuveyt Turk Katilim Bankasi A.S. (Kuveyt Turk) and Turkiye
Finans Katilim Bankasi A.S. (Turkiye Finans) are based on Fitch's view of the
high probability of support being available from their majority shareholders,
namely Kuwait Finance House and National Commercial Bank, respectively (both
rated A+/Stable). Fitch believes the Turkish subsidiaries are strategically
important to their parents and that integration between parent banks and
subsidiaries is high.

The Long-term foreign currency IDRs of Kuveyt Turk and Turkiye Finans are
constrained by Turkey's 'BBB' Country Ceiling and broader Turkish country
risks and are sensitive to any changes in the Ceiling, Turkey's sovereign
ratings or Fitch's view of these risks. The banks' ratings could also be
downgraded in case of a multi-notch downgrade of one of the parent banks, or a
marked reduction in the strategic importance of either of the subsidiaries for
their parents, but neither of these is currently anticipated by Fitch.

The rating actions are as follows:

T. C. Ziraat Bankasi A.S., Turkiye Halk Bankasi A.S., Turkiye Vakiflar Bankasi
T.A.O., Turkiye Kalkinma Bankasi A.S., Turkiye Ihracat Kredi Bankasi A.S.:

Long-term foreign currency IDR: affirmed at 'BBB-'; Stable Outlook

Long-term local currency IDR: affirmed at 'BBB'; Stable Outlook

Short-term foreign and local currency IDR: affirmed at 'F3'

Support Rating: affirmed at '2'

Support Rating Floor: affirmed at 'BBB-'

National Long-term Rating: affirmed at 'AAA(tur)'; Stable Outlook

Senior unsecured debt issues (Halkbank, Vakifbank): affirmed at 'BBB-'

Viability Ratings (Ziraat, Halkbank and Vakifbank): unaffected at 'bbb-'

Kuveyt Turk Katilim Bankasi A.S. and Turkiye Finans Katilim Bankasi A.S.:

Long-term foreign currency IDR: affirmed at 'BBB'; Stable Outlook

Long-term local currency IDR: affirmed at 'BBB+'; Stable Outlook

Short-term foreign currency IDR: affirmed at 'F3'

Short-term local currency IDR: affirmed at 'F2'

Support Rating: affirmed at '2'

National Long-term Rating: affirmed at 'AAA(tur)'; Stable Outlook

Viability Rating: unaffected at 'bb-'

TF Varlik Kiralama A.S., KT Sukuk Varlik Kiralama A.S.

Senior unsecured debt issues (sukuk): affirmed at 'BBB'

Additional information is available on www.fitchratings.com.

Applicable criteria, 'Global Financial Institutions Rating Criteria' dated 15
August 2012, 'Rating FI Subsidiaries and Holding Companies' dated 10 August
2012, 'Rating Financial Institutions Above the Sovereign' dated 12 December
2912, 'National Scale Ratings Criteria' dated 30 October 2013, 'Country
Ceilings' dated 9 August 2013, 'Assigning Ratings to Bank Subordinated and
Hybrid Securities' dated 5 December 2012 and 'Rating Sukuk' dated 9 August
2013 are available at www.fitchratings.com.

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria - Effective Aug. 16, 2011 to
Aug. 15, 2012

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

National Scale Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082

Country Ceilings

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715618

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=807794

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.

Contact:

Fitch Ratings
Primary Analysts
Janine Dow (Halkbank, Turk Eximbank, Kuveyt Turk, Turkiye Finans)
Senior Director
+44 20 3530 1464
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
or
Banu Cartmell (Ziraat, TKB, Vakifbank)
Director
44 203 530 1109
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
or
Secondary Analysts
Janine Dow (TKB, Ziraat, Vakifbank)
Senior Director
+44 203 530 1464
or
Banu Catmell (Halkbank, Turk Eximbank, Kuveyt Turk, Turkiye Finans)
Director
+ 44 203 530 1109
or
Committee Chairperson
James Watson
Managing Director
+7 495 956 6657
or
Media Relations:
Hannah Huntly, London, +44 20 3530 1153
hannah.huntly@fitchratings.com
 
Press spacebar to pause and continue. Press esc to stop.