RAM Ratings has assigned AA3/Stable/P1 financial institution ratings to Turkiye Finans Katilim Bankasi AS (the Group) and an AA3/Stable rating to the proposed RM3.0 billion Sukuk Murabahah MTN Programme (proposed Sukuk Programme) to be issued by the Group's wholly owned asset leasing subsidiary, TF Varlik Kiralama AS. The issue rating reflects Turkiye Finans' credit strength as it is the obligor of the proposed Sukuk Programme. Turkiye Finans is an Islamic bank in Turkey and extends financing mainly to SMEs and corporates. The Group's asset base was valued at TRY25.0 billion (approximately RM38.2 billion) as at end-December 2013.
"The assigned ratings reflect a high likelihood of extraordinary support from the Group's major shareholder, The National Commercial Bank (NCB), which holds a 66.3%-stake. NCB is Saudi Arabia's largest bank and is majority-owned by the Government of Saudi Arabia. Turkiye Finans is viewed to be strategically important to NCB and symbolises the latter's objective of expanding its Islamic banking business," elaborates Foo Su Yin, RAM's Chief Executive Officer. Turkiye Finans, NCB's largest investment outside of Saudi Arabia, has benefited from the latter's solid capital backing. The Group also derives technical support in risk management and product development. We expect the strong parental support to continue.
Turkiye Finans enjoys sound earnings which support its capital position. Turkiye Finans' profitability indicators have outperformed its Turkish peers'. The Group's strength in SME financing further supports its broad margins. Although its asset-quality indicators are healthy, they may weaken amid Turkey's more challenging economic and political backdrops. As at end-December 2013, the Group's gross impaired financing (GIF) ratio of 2.4% is considered low by industry standards due to its expanded financing base. On balance, its GIF coverage ratio of 107.5% is healthy.
On the other hand, Turkiye Finans' ratings are constrained by its limited domestic franchise (with only a respective 1.6% and 1.7% of the overall industry's deposits and net financing as at end-December 2013) and relatively weak funding position. The Group's credit expansion has outpaced its deposit growth, as evidenced by the high financing-to-deposit ratio of 119.8% (industry: 113.7%) as at end-December 2013. The Group's increasing reliance on external funding sources to support its growth may also pose refinancing risk in times of stress but comfort is derived from the high likelihood of liquidity support from NCB in times of need.
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Media contact
Chan Yin Huei
(603) 7628 118
yinhuei@ram.com.my
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