Turkish Banks: Sensitivity of capital ratios to currency and asset quality

We update our interactive spreadsheet to stress capital positions with Q3 results: The unfavourable outlook for the USD-TRY exchange rate (see Turkey: TRY weakness and macro risks, 23 November 2021) makes assessing banks’ capital buffers worthwhile. Our interactive spreadsheet, updated for Q3 2021 financials (click to request), can be used to calculate capital ratios under different assumptions. The spreadsheet allows users to plug in their own USD-TRY and NPL ratio assumptions. Buffers look robust at Akbank and Garanti: At Q3 2021, the fully loaded CET-1 ratios for Akbank and Garanti were 15.5% and 13.2%, respectively, ignoring regulatory forbearance. These are substantially above the regulatory requirements of c.8.5% and should allow these two banks to weather even the most stressed scenarios. Halkbank, however, has the lowest CET-1 among the listed large cap Turkish banks at 8.9%, which is only 30bps above the regulatory requirement. However, it enjoys significant shareholder support. The Turkish government has shown its willingness to support the bank by injecting CET-1 capital (without diluting minorities) and buying its AT1 and T2 bonds in the last three years. Elsewhere, capital buffers look satisfactory.     HSBC Global Research