Turkey’s banking sector has adequate buffers to manage funding and liquidity risks, the Central Bank said in a report released on Friday. A JP Morgan note concurred, stating it sees no signs of funding stress in Turkey’s banking system at present and recommended going overweight on some subordinated bonds issued by lenders Garanti and Akbank.
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“The outlook for the asset quality of the banking sector remains positive,” Sahap Kavcioglu, the bank’s governor, said in the preface of the 33rd Financial Stability Report.
The sector’s profitability, which has improved with the increase in net interest income, backs up capital adequacy, he said.
The report said Turkey’s current account balance has improved significantly thanks to buoyant exports and recovering services revenues, particularly in tourism.
“Strong economic activity has been mirrored favorably in the corporate sector’s turnover, profitability, and liquidity indicators,” read the report.
It said the total and short-term foreign exchange positions of the corporate sector have continued to improve, while the corporate sector and household indebtedness ratios also declined to pre-pandemic levels.
JPMorgan: No signs of funding stress in Turkey banking system
JPMorgan said it sees no signs of funding stress in Turkey’s banking system at present and recommended going overweight on some subordinated bonds issued by lenders Garanti (GARAN.IS) and Akbank (AKBNK.IS).
“We think credit risks in Turkey haven’t increased materially in the recent weeks,” JPMorgan’s Konstantin Rozantsev wrote in a note to clients published late on Thursday, adding stabilising market conditions offered higher upside on these bonds.
“There are no signs of a funding stress in the banking system at present. The bigger credit concern, in our view, is that the FX move can trigger deposit volatility or an external debt rollover issue, but these risks appear distant in our view.”
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