Fitch Ratings has upgraded Turkey-based Finansbank's Individual rating to D from D/E. At the same time, the agency has affirmed the bank's both foreign and local currency ratings at B- and changed the Outlook on these ratings to Positive from Stable.
Finansbank's Support rating of '5' and National rating of BBB+ have also been affirmed. The Outlook on the National rating remains Stable.
The upgrade of the Individual rating reflects Finansbank's improved asset quality, expanded core funding and healthier profitability. However, its liquidity remains relatively weak. The bank's capital, although improved, is still low in light of the volatile operating environment.
Finansbank was among the beneficiaries of the consolidation in Turkish banking sector in the last three to four years, which saw 20 banks, mostly mid-sized, taken over by the bank regulators. Finansbank's current branch network numbers 149 compared to 108 at end-2002, while its market shares in various banking segments have also markedly increased.
After reporting a net loss in 2001, the bank reported net income of $107 million in 2002 and $45 million for the first half of 2003. Its net fees and commissions, traditionally a more stable source of revenue, have increased to 21 percent of total operating income. Its asset quality also improved during the first half of the year with non-performing loans declining to four percenet of loans and reserve coverage increasing to 77 percent.
Nevertheless, Fitch remains concerned about borrower concentration within Finansbank's loan portfolio and a potential deterioration in loans quality as a result of rapid loans growth. The bank has reduced its liquid assets following the 2001 economic crisis to only 14 percent of total assets at the end of the first half of 2003. However, this is somewhat mitigated by the bank's more diversified core funding, as evidenced by a higher proportion of customer deposits in its liability structure.
Although Finansbank's capitalization has been strengthening, reflected in the regulatory capital adequacy ratio of 14.87 percent at end of first half 2003, Fitch does not consider the current level of equity to be very comfortable given the rapid loan growth in a volatile environment.
Finansbank is majority-owned by Fiba Group of Companies, which is mainly engaged in financial services and retailing business in Turkey and abroad. The bank ranked as the fifth largest among the privately owned commercial banks in Turkey and focuses on corporate, commercial and retail banking.
Finansbank's international financial subsidiaries had a 30 percent share in the bank's consolidated assets and contributed 39 percent of its operating profit in 2002. They also provide the bank with a natural hedge against the depreciation of the Turkish lira.
Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. National ratings are designed for use mainly by local investors in local markets. Specific letter grades are not therefore internationally comparable. — (menareport.com)
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