Moody's downgraded 6 banks' covered bond rating
Concluding its review for 17 Turkish financial institutions, Moody's Investors Service has downgraded the long-term debt and deposit ratings of 14 entities and confirmed the ratings of three financial institutions. The action follows the downgrade of the government's debt rating to Ba1 from Baa3.
The institutions affected by the international credit rating agency's long-term debt and deposit ratings downgrade are Akbank, Alternatifbank, HSBC, ING Bank, Ziraat Bank, Halkbank, Vakifbank, TEB, Garanti Bank and Yapı Kredi.
Moody's also downgraded the long-term debts ratings of İş Bank, Şekerbank, TSKB and Turkish Eximbank. The credit ratings of three Turkish subsidiaries of foreign banks; Burgan Bank, Denizbank and Finansbank- have been confirmed by Moody's as well.
Moody's statement suggests that 15 out of the 17 banks under assessment have a stable outlook while only Denizbank and Şekerbank have a negative outlook.
Following the downgrade of Turkey's credit rating, Moody's also cut the covered bond ratings issued by six Turkish banks including Akbank, Denizbank, Garanti Bank, Şekerbank, Vakıfbank and Yapı Kredi Bank.
Moody's noted that the review for the potential downgrade of Vakıfbank bonds is still in progress. Moody's announced that its decision followed Turkey's credit rating cut on Sept. 23.
Demand for Turkish bonds quadruples
After suggesting in an earlier statement on Sept. 21 that Turkish economy got over the coup attempt shock, and later downgrading Turkey's credit rating below the investable level on the night of Sept. 23 upon 'instruction', Moody's received the best response from the markets. Despite Moody's negative perspective campaign towards Turkey, demand for the bonds were approximately four times the size of the issues, and the interest rates stood below the expectations.
Treasury held three biddings on Monday as a part of September borrowing program. While the total amount of offers in three biddings reached TL 19.5 billion including the non-competitive ones, the amount of sales including the public acquisition hit TL 5.8 billion.
Investors' great interest in especially the long-term papers during the biddings proved their trust in Turkey's future. Demand for the bond, maturing on January 14, 2026, was almost five times the size of the issue worth TL 10.5 billion. On the other hand, by issuing TL 2 billion worth of Sukuk on Tuesday, Treasury revealed investors' trust in Turkey.
Noting that it would be incorrect to ask foreign investors to make busy sales and completely empty their portfolios, Kapital FX Research Expert Enver Erkan said if the drawn statements were true, no bond request would have come to the biddings.
Highlighting that very strong results were gained at the biddings, Integral Securities Research Director Tuncay Turşucu said the interest rates are below the expectations, which is a sign of trust. Suggesting that Treasury might have even made small sales on purpose, Turşucu said credit downgrade does not mean Turkey will not fulfill its obligations.
Turkey has investment grade status: Japan Credit Rating
Turkey still retains the status of an investment grade country even after Moody's recent rating cut, Eurasia administrative council director of Japan Credit Rating Agency (JCR), Orhan Ökmen, told Anadolu Agency yesterday. Credit ratings agency Moody's recent decision saw Turkey's rating downgraded to non-investment grade.
Ökmen said for the great majority of pension funds to be able to invest in a country's economy, investment grade status needed to be confirmed by at least two international rating agencies, regardless of recognition. "Those credit agencies being renowned more or less is not a criterion. The basic criterion is being a 'Nationally Recognized Statistical Rating Organizations [NRSRO],'" Ökmen said.
Of the 10 Nationally Recognized Statistical Rating Organizations currently recognized by the Securities and Exchange Commission (SEC) in the U.S., two have Turkey's sovereign credit rating as investment grade, according to Ökmen. "One of those agencies is Fitch and the other is JCR. Thereby, Turkey still retains its investment grade position," he said. Ökmen also added that foreign exchange liquidity in Turkey was resilient and sufficient in case of possible shocks. "[There is] no problem in the ease of access to funds, public debt and the interest burden are at very reasonable levels. Therefore, in terms of financial stability Turkey is [...] in place," he added.
Ernst & Young: Moody's rate cut to 'not stop investments in Turkey'
The credit rating agency Moody's recent rate cut would not deter investors from Turkey since the country offers great investment opportunities, head of the multinational audit firm Ernst & Young, Turkey chapter, Metin Canoğulları, said Tuesday. Speaking at a press conference Canoğulları said: "Where will the capital flow? How many countries are there that offer such opportunities? Interest in Turkey will never die." He said investors would continue to invest here since there were few countries at par with Turkey in terms of opportunities.
He said many sectors in Turkey provided great investment potential due to the country's dynamic structure. Also, he noted that Turkish firms would be the most probable candidates during the reconstruction phase in Syria once the civil war there comes to an end.
"Turkey is not a market from which you can easily return once you get out. That's why they should think and plan very carefully and have a big vision," he said.