Capital Intelligence Ratings (CI Ratings or CI), the international credit rating agency, has affirmed the ratings of QNB Finansbank (QNBF) based in Istanbul, Turkey.
In June this year, the Bank’s Long-term Foreign Currency rating (FCR) was affirmed at ‘BB+’ and the Short-Term FCR at ‘B.’ CI Ratings affirmed it yesterday. At the same time, the Outlook on the Long-Term FCR was changed to ‘Negative’ from ‘Stable.’ This action was taken because of a change in the Sovereign Ratings of Turkey.
In the current rating action, the bank’s Financial Strength Rating (FSR) is maintained at ‘BBB’. The rating is supported by the Bank’s sound capital profile, strong and improving operating profitability, and by the benefits to be obtained from its new ownership. The rating is constrained by the Bank’s tight liquidity and the current operating environment.
The Long-Term FCR is affirmed at ‘BB+’, while the Short-Term FCR is affirmed at ‘B’. In view of the Bank’s prominent position in the Turkish banking sector, official support is expected to be forthcoming in the event it is needed.
QNBF is the new name of the former Finansbank – the second-largest of Turkey’s foreign-owned banks and Turkey’s ninth-largest bank. The name change occurred because of the June 2016 sale of 99.8 percent of its shares by the National Bank of Greece S.A. (NBG) to Qatar National Bank (QNB). The change of ownership removed a major cloud hanging over the Bank in respect of its ability to increase capital, which in turn would allow for a reduction in NPLs, as well as measured growth, the ratings agency noted yesterday.
The Bank continues to pursue its traditional consumer market on a measured basis, while continuing to expand its SME business. Its financial profile reflects its business model, in that it includes what might be expected from that marketing effort: weaker asset quality, a large investment in fixed assets and infrastructure, and higher operating expenses. The model also includes a large net interest margin (NIM), high levels of interest income and resultant high operating profitability, which is to some extent offset by a higher cost of risk.
QNBF’s consistently strong gross income is the result of the peer group’s highest NIM, which more than compensates for a somewhat weak performance in the area of non-interest income. Costs remain relatively high, but close to appropriate for the business model; moreover, they are on a trend line of improvement and showed improvement in both 2016 and Q1 2017.
With total assets at year-end 2016 of TRY103.0bn (equivalent $29.2bn) – a market shares of about 3.5 percent – QNBF is positioned near the top of the second tier of banks operating in Turkey.
