Moody’s maintains negative outlook on Turkish banking system
Challenging operating conditions will limit government capacity to support financial institutions
Though Turkish bank financials were resilient through early 2017, Moody’s Investor Service sees political tensions, currency depreciation and weakening investor confidence all weighing on the sector’s outlook, reports Bloomberg.
Profitability is likely to decline as higher funding and foreign currency hedging costs, along with slower lending growth and higher loan-loss provisioning weaken return on risk-weighted assets.
Disturbances to cost and access to FX wholesale funding remain a key risk for the sector, which is highly reliant on short-term FX funding.