Finansbank Turkey ratings raised

Capital Intelligence, the international credit rating agency, has raised the long-term foreign currency rating of Turkey’s Finansbank A.S. (FB). That rating, which continues to be constrained by the country’s sovereign rating, was moved up to ‘BB’ from ‘BB-’ as a result of Capital Intelligence raising the country’s sovereign rating in May of this year. The bank’s short-term foreign currency rating is affirmed at ‘B,’ which is also constrained by the sovereign rating.
At the same time CI affirmed the financial strength rating (FSR) at ‘BBB+.’ All ratings carry a ‘stable’ outlook. In view of recent changes in the financial condition of the principal shareholder, the support level is adjusted to ‘3’.
Founded in 1987, the bank is now 95% owned by the National Bank of Greece (NBG). It is a retail bank, with that segment of its business dominating the bank’s asset structure. Moreover, that dominance has been increasing over the past few years, and expansion on the retail side continues to be very much the plan.
In corporate lending, the bank’s strategy has been directed toward the smaller-sized companies (commercial and SMEs).
The bank operates through its domestic branch network as well as through numerous financial subsidiaries, whose activities cover a wide range of financial activities; including leasing, asset management, brokerage, consumer finance, and insurance.
Alternative delivery channels include Internet banking, a call centre, as well as ATMs and POS, all of which have grown significantly since 2007.
FB’s balance sheet and income statement are consistent with its business model. That market segment generates strong levels of net interest but little in the way of NII. Despite the higher cost structure associated with consumer banking, FB continues to produce a very sound operating profit and high operating profitability.
Ratings are underpinned by the bank’s improving capitalisation and liquidity, and its low level of interbank borrowing. Despite success in attracting customer deposits, the bank’s liquidity ratios remain tight, as a result of the bank’s deliberate policy of maintaining a high net-loans-to-customer-deposits ratio. However, the use of alternative funding sources (capital and medium- and long-term borrowing) softens the importance of high loan to deposit ratios. Moreover, a good level of capital adds additional cover to the bank’s fully provided NPL portfolio.
The outlook has been changed from ‘negative’ to ‘stable’ because some previous concerns did not materialise in 2009 as regards further tightening of liquidity, the extent of asset quality deterioration, and the impact that the resultant loan-loss provisioning would have on earnings.
With total assets at year-end 2009 of TRY 30.1 bln (US$ 20.2 bln), FB is positioned at the top of the second tier of banks operating in Turkey, ranking eighth of the country’s 49 banks and the largest of Turkish banks with a majority foreign ownership. At year-end 2009 it operated a domestic network of 398 retail/consumer branches and 61 corporate/commercial branches.