GARANTI FAKTORING Fitch Ratings has downgraded the Long-Term Foreign-Currency Issuer Default Ratings (LTFC IDRs) of subsidiaries of Turkish banks to 'B' from 'B+'.
The Outlooks are Negative. Fitch has also downgraded the Long-Term Local-Currency (LTLC) IDRs of subsidiaries of foreign-owned banks to 'B+' from 'BB-' and placed the LTLC IDRs of subsidiaries of local private banks on Rating Watch Negative (RWN). A full list of rating actions is below.
The rating actions follow the downgrade of
The companies' IDRs are equalised with those of their parents, reflecting Fitch's view that they are core and highly integrated subsidiaries. The Outlooks (and RWN) on the LT IDRs mirror those on the respective parents (see https://www.fitchratings.com/research/banks/fitch-downgrades-22-turkish-banks-ratings-outlooks-negative-25-02-2022).
Fitch has withdrawn the companies' Support Ratings as they are no longer relevant to the agency's coverage following the publication of its updated Non-Bank Financial Institutions Rating Criteria on
Key Rating Drivers
LT IDRs:
Subsidiaries of foreign owned banks:
Alternatif Finansal Kiralama AS
Deniz Finansal Kiralama A.S.
Garanti Finansal Kiralama A.S.
QNB Finans Faktoring A.S.
Subsidiaries of local banks:
Ak Finansal Kiralama A.S.
Yapi Kredi Faktoring A.S.
Yapi Kredi Finansal Kiralama A.O.
Yapi Kredi Yatirim Menkul Degerler A.S.
The ratings of the NBFI subsidiaries of Turkish banks reflect their roles in their groups, enhancing the parents' franchises, product offering and growth prospects, and that they are majority owned by their parents (or parent group companies). The subsidiaries offer core products and services (leasing, factoring and investment services) in the domestic Turkish market.
The Negative Outlooks (and RWN on the LTLC IDRs of local private banks' subsidiaries) mirror those on the parent banks. These in turn reflect operating environment pressures and the implications of the macroeconomic volatility on the credit profiles of their banking groups.
All of the companies in this review share the same branding as their parents, are highly integrated within their banking groups in terms of risk and IT systems, and draw most of their senior management and underwriting practices from parent banks. The subsidiaries benefit from the strong franchises of their parent groups and mostly share the same customer base, with a high share of referrals from their respective groups. In addition, the cost of support would be low as the subsidiaries are small relative to their parents, with total assets not exceeding 5% of group assets (mostly 2%-3%).
These factors lead Fitch to believe that the propensity of the parent banks to support their subsidiaries remains very high.
TEB Finansman A.S.:
TEB Finansman's ratings are driven by potential support from
SSRs AND NATIONAL RATINGS
The companies' 'b' SSRs are capped by the respective parents' creditworthiness and hence limited probability of support.
National Ratings reflect creditworthiness relative in local currency to other local issuers, which was not affected by the recent downgrade of the sovereign or by the increasing challenges in operating environment.
RATING SENSITIVITIES
The subsidiaries' ratings are sensitive to changes in the parents' ratings and Fitch's view of the ability and willingness of the parents to provide support in case of need.
Factors that could, individually or collectively, lead to negative rating action/downgrade or widening of notching with the parent:
The Negative Outlooks on the LT IDRs (as well RWN on LTLC IDRs of subsidiaries of local private banks) of the companies in this review mirror those on the parents and therefore are sensitive to further marked deterioration in the operating environment or a sovereign downgrade.
The ratings could be notched down from their respective parents if the subsidiaries become materially larger relative to the respective banks' ability to provide support; or the subsidiaries' strategic importance is materially reduced, for example, through a substantial reduction in business referrals, levels of operational and management integration, a reduced level of ownership or a prolonged period of underperformance. However, these considerations do not form part of Fitch's base case, given the subsidiaries' small sizes relative to their parents and key roles within their respective groups.
The LT IDRs are sensitive to negative sovereign rating action, particularly if triggered by further weakening in
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The Outlooks on the companies' LT IDRs could be revised in line with the parent banks to Stable, reflecting reduced operating environment risks.
Upgrades of all the companies' LT IDRs are unlikely in the short term.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
The ratings are driven by the support from their respective parents.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
RATING ACTIONS
Entity / Debt
Rating
Prior
LT IDR
B
Downgrade
B+
ST IDR
B
Affirmed
B
LC LT IDR
B+
Rating Watch On
B+
LC ST IDR
B
Affirmed
B
Natl LT
A+(tur)
Affirmed
A+(tur)
Support
WD
Withdrawn
4
Shareholder Support
b
New Rating
LT IDR
B
Downgrade
B+
ST IDR
B
Affirmed
B
LC LT IDR
B+
Downgrade
BB-
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VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.
APPLICABLE CRITERIA
Non-Bank Financial Institutions Rating Criteria (pub.
ADDITIONAL DISCLOSURES
Dodd-Frank Rating Information Disclosure Form
Solicitation Status
Endorsement Policy
ENDORSEMENT STATUS
Ak Finansal Kiralama A.S.UK Issued, EU Endorsed
Alternatif Finansal Kiralama A.S. EU Issued,UK Endorsed
Deniz Finansal Kiralama A.S. EU Issued,UK Endorsed
Garanti Faktoring A.S .UK Issued, EU Endorsed
Garanti Finansal Kiralama A.S.UK Issued, EU Endorsed
Is Finansal Kiralama Anonim Sirketi UK Issued, EU Endorsed
QNB Finans Faktoring A.S. EU Issued,UK Endorsed
QNB Finans Finansal Kiralama A.S . EU Issued,UK Endorsed
TEB Finansman A.S.UK Issued, EU Endorsed
Yapi Kredi Faktoring A.S.UK Issued, EU Endorsed
Yapi Kredi Finansal Kiralama A.O.UK Issued, EU Endorsed
Yapi Kredi Yatirim Menkul Degerler A.S.UK Issued, EU Endorsed
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