Turkish banks have solid capital buffers that can absorb a significant rise in loan losses, a senior analyst from Moody's says.
Turkish banks have good potential for the long term, Moody’s senior analyst, Irakli Pippia, said Friday.
For one thing, they have solid capital buffers against significant increases in non-performing loans, Pippia said.
"I think this pretty positive as far as I am concerned. Capital levels offer good shock absorption capacity. Turkish banks retain strong capital buffers," Pippia said.
Moody's has published a negative outlook assessment for Turkish banks, but Pippia said that it is only for the short-term.
It is important to distinguish between short term and long-term trends, Pippia explained.
The banking system outlook is a short-term view of the operating conditions for the next 12 months, while the long-term view is quite different Pippia noted.
“The negative outlook says that operating conditions will remain challenging for the next 12 months." Pippia said.
"But if you are an investor, and taking a longer view in terms of the profitability, the investment potential in Turkish banks is a long-term view."
Pippia said that, while assessing the Turkish banks, they take into account the Turkish lira’s volatility, more expensive funding potential, lower growth and lower GDP outlook.
However, Turkish banks have shown a sufficient loss-absorption capacity in stress tests, Pippia said.
"We have analyzed two different scenarios. The banks, according to the base-case scenario, were very resilient."
Resource: Anadolu Agency, March 27, 2015