Moody's Investors Service announced today that it has assigned B3 long-term and Not Prime short-term foreign currency deposit ratings (stable outlook) to Yapi ve Kredi Bankasi (YKB), and a Bank Financial Strength rating of D (stable outlook). In addition, Moody's has assigned Baa2 and Prime-2 ratings to long-term and short-term deposits denominated in Turkish Lira.
Moody's said that the B3/Not Prime foreign currency deposit ratings are constrained by the ceiling for such deposits in Turkey. The stable outlook assigned to the long-term foreign currency deposits is in line with the country rating for such deposits which has recently been upgraded to stable from negative. Moody's added that the Baa2/P-2 local currency deposit ratings reflect primarily the likelihood of support from the Cukurova Group, YKB's largest shareholders, and the Turkish financial authorities.
The rating agency stated that the D FSR underpins the bank's strong and defensible franchise, demonstrated by its commanding position in retail banking and its leading position as one of the four largest private banks in Turkey. YKB's large and geographically well positioned branch network coupled with a strong brand name awareness in retail banking has allowed the bank to develop its deposit franchise, achieving more than 9% market share of all deposits in Turkey's banking sector in 2001. This was supported by the bank's technology infrastructure and the continued investment in this field that gives the bank a competitive advantage over most Turkish banks. Moody's cited YKB's high level of related party lending to various Cukurova Group companies as a primary concern and a key driver for the bank's ratings. The ratio of related-party cash loans to shareholder's equity reached 116.4% (according to September 2001 Turkish accounting standards figures) or 56.8% (according to IAS June 2001 figures), higher than any of the bank's peers. Moody's added that it takes a very cautious view regarding related-party lending, particularly in Turkey.
Moody's noted that in the past, both the Cukurova Group and the bank have taken steps to reduce related-party loans, including partial sales of the Group's assets to improve its financial condition and reduce its overall indebtedness. However the macro-economic situation in Turkey following the crises that occurred in 2000 and 2001, coupled with the depressed state of the capital market, made it difficult for the Cukurova Group to implement its strategy. The rating agency added that the consistency of such policies and a sufficiently long track record of such changes would be a positive rating driver for YKB.
Moody's said that the bank's net fees and commission income is higher than those of its peers, covering 164% of personnel expenses at the end of September 2001. The rating agency added that although the bank's efficiency levels have improved over the past few years, YKB is expected to report a loss in 2001 (in IAS accounts) similar to most Turkish banks.
As previously mentioned by Moody's in a recent press release, although there has been more stability in the macro-economic environment in Turkey and some impressive banking reforms have taken place, the operating environment remains weak making it difficult for banks to attain a rating higher than D+. Therefore, the operating environment in Turkey is not a constraining factor for YKB's D financial strength rating.
YKB is headquartered in Istanbul Turkey and had total IAS consolidated assets of USD 13.1 billion at the end of 2000.
Yapı Kredi / 17 Apr 2002