Moody's Investors Service downgraded the long-term foreign currency senior unsecured debt and local currency deposit ratings of YapiKredi to Ba2 from Ba1, with negative outlook.
According to the agency, the bank's long-term foreign currency deposit rating was downgraded to Ba3 from Ba2, with negative outlook (constrained by the lower sovereign ceiling at Ba3). The BCA was downgraded to ba3 from ba2.
The principal driver for the downgrade is the impact of the weakened operating environment on YapiKredi's standalone financial fundamentals, as expressed in the lower Macro Profile for Turkey. Despite the improving trends in 2017, Moody's expects the bank's asset quality to weaken given its exposure to the unsecured retail segment. With problem loans as percentage of total loans at 4.1% as at end-2017 the bank's asset quality remains weaker compared with the leading Turkish banks.
In addition, Moody's into account the bank's improving profitability trends, although this may come under pressure due to the macro-economic volatility.
The negative outlook on the long-term senior unsecured debt and deposit ratings is due to Moody's expectation that the challenging operating environment could further weaken the bank's standalone credit profile.
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