Fitch Rates Turkey's Fibabanka 'BB-'; Outlook Stable
OREANDA-NEWS. Fitch Ratings has assigned Turkey's Fibabanka A.S. (Fiba) Long-term Issuer Default Ratings (IDRs) of 'BB-', Short-term IDRs of 'B' and a National Long-term Rating of 'A+'. The Outlook on the Long-term IDRs is Stable. A full list of ratings is at the end of this rating action commentary.
KEY RATING DRIVERS - IDRs, VIABILITY RATING (VR) AND NATIONAL RATING
Fiba's Long-term IDRs, Short-term IDRs and National Rating are driven by its standalone creditworthiness, as reflected by its Viability Rating (VR) of 'bb-'. The VR reflects Fiba's limited franchise in an increasingly competitive Turkish banking sector, its small absolute size, and rapid growth since its acquisition in 2010. However, the VR also reflects Fiba's track record of reasonable financial metrics and sound execution.
Fiba accounted for a moderate 0.5%-0.6% of sector assets, loans and deposits at end-2015, and primarily offers banking services to corporate, commercial and SME customers in Turkey. Its strategy has been consistent since the bank was acquired in 2010 by the Fiba Group, a large Turkish conglomerate with diverse operations across multiple geographies. More recently, two international financial institutions (IFI), European Bank for Reconstruction and Development (AAA/Stable) and International Finance Corporation, have acquired minority stakes of 9.95% each and are looking to support the bank's growth plans.
Fiba's credit losses to date have been low and non-performing loans (overdue by 90 days or more) were a low 2% of the portfolio at end-1Q16, which compares well with peers and the sector average. The recent years of rapid loan growth mean that impairments could increase as the book seasons. However, Fitch notes that a significant portion of loans are extended on a short-term basis (67% of loans had maturities of one year or less at end-1Q16).
Regulatory capital ratios are currently reasonable (total capital ratio: 14% at end-1Q16), as supportive shareholders have helped the bank grow since acquisition in 2010 through frequent capital injections. Solid performance in recent years has also resulted in significant internal capital generation. However, core capital ratios (primarily measured by the Fitch Core Capital Ratio: 10% at end-1Q16) have been below the peer average and could come under pressure again with planned growth.
Fiba is mainly funded through customer deposits, which supports liquidity ratios. Diverse sources of wholesale funding, including an increasing share of IFI funding, are positive from a credit perspective. However, Fiba's foreign currency short-term liquidity position, as for most other Turkish banks, could come under pressure in case of a marked deterioration in foreign investor sentiment. This is not Fitch's base case.
KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR
Fiba's Support Rating of '5' and Support Rating Floor of 'No Floor' reflect Fitch's view that support from the Turkish state cannot be relied upon. This reflects the bank's lack of systemic importance in Turkey. Support from the bank's main shareholders appears possible based on the track record of capital injections. However, the shareholders' ability to support cannot be reliably assessed by Fitch.
A further strengthening of Fiba's franchise without a corresponding sharp increase in risk appetite or weakening of underwriting standards could result in upside potential for the bank's VR. A continued track record of successful strategy implementation by management and of capital support from shareholders could also result in upside potential for the ratings.
The VR could be downgraded in case of a significant deterioration in asset quality that puts pressure on capital ratios and performance. A sharp tightening of liquidity could also result in pressure on the VR. These scenarios are currently not envisaged by Fitch, given the Stable Outlook.
The rating actions are as follows:
Long-term Foreign Currency (FC) IDR: assigned at 'BB-'; Outlook Stable
Long-term Local Currency (LC) IDR: assigned at 'BB-'; Outlook Stable
Short-term FC IDR: assigned at 'B'
Short-term LC IDR: assigned at 'B'
Viability Rating: assigned at 'bb-'
Support Rating: assigned at '5'
Support Rating Floor: assigned at 'No Floor'
National Long-term Rating: assigned at 'A+(tur)'; Outlook Stable