Fitch Downgrades 4 Turkish Banks Over Increased Risks

The Fitch ratings agency on Tuesday downgraded its assessment of four Turkish banks due to increased risks after the lira’s slump and higher chances of a “hard landing” for the Turkish economy.

Fitch said the downgrade affected Anadolubank, Fibabanka (Fiba), Sekerbank and Odeabank.

The move comes after ratings agency Moody’s last month downgraded its credit rating on 20 Turkish financial institutions over the increased risk of a “downside funding scenario”.

Fitch said its downgrades reflected the “increased risks to the banks’ performance, asset quality, capitalization, liquidity and funding profiles following the recent period of market volatility”.

The downgrades take into account “the increased risk of a hard landing”, Fitch added.

The agency said the move took into account the “deterioration” in investor sentiment, noting risks to financial stability that “remain significant given unpredictability in the policy framework and Turkey’s large external financing requirements”.

Fitch downgraded Anadolubank and Fibabanka to B+ from BB-, Sekerbank to B from B+ and Odeabank (Odea) to B from BB-.

Moody’s, along with fellow ratings agency Standard and Poor’s, had cut the debt rating of the Turkish government deeper into junk on similar concerns last month.

Turkey’s economy growth slowed to 5.2 percent in the three months through June, official data showed on Monday, down from 7.3 percent growth in the first quarter.

Concerns remain over the health of the Turkish economy and the direction of monetary policy under President Recep Tayyip Erdogan.

U.S. sanctions against two Turkish ministers last month after a bitter spat between the NATO allies as well as fears over Erdogan’s choice of his son-in-law as finance minister led to a drastic fall in the lira against the U.S. dollar.

Despite the currency crisis and high inflation, the nominally independent central bank has not raised interest rates with analysts accusing Erdogan of exerting pressure.

Erdogan has previously said interest rates are “the mother and father of all evil”, and he has gone against economic orthodoxy arguing that high rates cause high inflation.

But the bank said last week it would make an adjustment at the next meeting of the monetary policy committee on Thursday.