Fitch Ratings has assigned Turkey's Tekstilbank Long-term foreign and local currency ratings of B-. Additionally, the agency has assigned Short-term foreign and local currency ratings of B, an Individual of D/E, a Long-term National rating of BBB, and a Support of 5 to the bank. The Outlook on all Long-term ratings is Negative.
The ratings reflect the bank's improved loan quality, reduced market risk and a stable deposit base. This is, however, offset by a low level of capital, reduced liquidity and a difficult operating environment.
Tekstilbank reported net earnings of 59.5 trillion Turkish lira ($) in 2002, benefiting from better margins, lower overhead costs and tax credits. This compares to a net loss of TL 227.3 trillion in the previous year due to foreign exchange losses associated with an on-balance sheet open position that was several times its equity.
The loss reduced the bank's regulatory capital ratio to below the required minimum of eight percent at end-2001. In order to rectify the shortfall, shareholders injected new cash capital, raising Tekstilbank's capital ratio to 14.8 percent at end-2002.
The bank is primarily a corporate and commercial lender to trade finance companies. During 2002 cash loans increased briskly, after the bank had reduced the portfolio sharply in 2001 to build liquidity. Growth in loans in 2003 is expected to be substantial and could result in deterioration in asset quality. Consolidated non-performing loans declined to 2.26 percent of gross loans at end-2002 with reserve coverage improving to 84 percent from 69 percent.
After a substantial outflow of deposits purchased from the Savings Deposit Insurance Fund during 2001, which has since been offset by lower cost funds, Tekstilbank's customer deposits stood at 76 percent of liabilities at end-2002. The bank increased its borrowings to 17 percent of assets at end-2002 and was forced to reduce liquid assets. Government securities currently represent an above-average 44 percent of total resources.
Tekstilbank was established in 1986 and is 75 percent-owned by GSD Holdings. GSD is one of the leading groups in trade finance and financial services.
Fitch Ratings's Support and Individual Ratings for Banks Fitch's Individual ratings assess how a bank would be viewed if it were entirely independent and could not rely on external support. Its Support ratings deal with the question of whether a bank would receive support from its owners or from the state if it were to get into difficulty. These ratings are not debt ratings but rather, respectively, an assessment of the intrinsic strength of a bank and of any level of outside support that may, or may not, be available to it.
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. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets. Specific letter grades are not therefore internationally comparable. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
