October 12, 2016 / 3:11 PM / a year ago

Fitch Affirms 2 Turkish Development Banks at 'BBB-'; Outlook Negative

(The following statement was released by the rating agency) LONDON, October 12 (Fitch) Fitch Ratings has affirmed Turkiye Kalkinma Bankasi's (TKB) and Turkiye Ihracat Kredi Bankasi's (Turk Eximbank) Long-Term Issuer Default Ratings (IDRs) at 'BBB-' with Negative Outlooks. A full list of rating actions is available at the end of this commentary. Fitch does not assign Viability Ratings to these development banks, as their business model and operations are largely determined by their policy roles. KEY RATING DRIVERS IDRS, NATIONAL RATINGS AND SENIOR DEBT The Long-Term IDRs of TKB and Turk Eximbank are equalised with those of the Turkish sovereign (BBB-/Negative). The equalisation with the sovereign rating reflects the policy roles of the two banks, government support of the banks' funding and majority state ownership. Treasury-guaranteed funding comprised 96% of TKB's funding and central bank facilities made up 57% of Turk Eximbank's liabilities at end-1H16. The Negative Outlook on the IDRs reflects that on the sovereign rating. TKB's current focus as a development bank is on direct and apex lending (the latter channelled through commercial banks) to Turkish SMEs and corporates, in sectors and in regions deemed strategic by the government. In September 2016, the Treasury announced plans to increase the share capital of TKB to further support its ability to fulfil its development bank mandate. The policy role of Turk Eximbank is well-established, as it acts as the country's official credit export agency, and its focus is on short-term trade finance of Turkish exports, which it typically refinances with central bank facilities. Turk Eximbank enjoys regulatory privileges linked to its policy role where losses due to political risks are compensated by the Turkish Treasury and the bank is exempt from corporate taxes and loan loss reserve requirements. The Turkish Treasury guarantees most funding at TKB and provides guarantees for Turk Eximbank's third-party funding. Development banks, alongside other state-owned banks and enterprises, have access to USD4bn of Treasury guarantees, which are allocated based on banks' applications and funding needs. RATING SENSITIVITIES IDRS, NATIONAL RATINGS AND SENIOR DEBT The ratings of TKB and Turk Eximbank are primarily sensitive to a change in Turkey's sovereign ratings. The rating actions are as follows: TKB, Turk Eximbank: Long-Term Foreign Currency IDRs: affirmed at 'BBB-'; Negative Outlook Long-Term Local Currency IDRs: affirmed at 'BBB-'; Negative Outlook Short-Term Foreign and Local Currency IDRs: affirmed at 'F3' Support Ratings: affirmed at '2' Support Rating Floors: affirmed at 'BBB-' National Long-Term Ratings: affirmed at 'AAA(tur)'; Stable Outlook Senior long-term unsecured debt (Turk Eximbank): affirmed at 'BBB-' Contact: Primary Analyst Sandra Hamilton Director +44 20 3530 1266 30 North Colonnade London E14 5GN Secondary Analyst Huseyin Sevinc Analyst +44 20 3530 1027 Committee Chairperson James Watson Managing Director +7 495 956 6657 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. 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