US agencies have announced more negative ratings for Turkey's international creditworthiness generally, and for local banks in particular.
The US' Duff & Phelps Credit Rating Company (DCR) downgraded its rating of international foreign currency obligations to BB from BB- on 10 March.
The agency cited an accumulation of negative macro-economic trends, continuing fiscal imbalances and a lack of concerted government action over the past three years to address underlying structural weaknesses. However, DCR also revised its outlook for Turkey from negative to stable, removed its rating from its watch-down, and said Turkey's economic prospects for the remainder of 1997 are somewhat improved.
DCR the following day also lowered its credit rating on five commercial institutions, Korfezbank, Demirbank, Garanti Yatirim Fonu, Alternatifbank and Turk Ekonomi Bankasi. This follows a downgrade by the US' Standard & Poor's (S&P) of its risk rating for seven leading banks to a speculative grade of Bpi.
They are: Akbank, Pamukbank, Emlak Bank, Halk Bank, Is Bank, Vakiflar Bank and Yapi Kredi Bank. The banks' large portfolios of government debt instruments left them at the mercy of the state's monetary policies and vulnerable to potential payments problems, S&P said.
S&P had already downgraded Turkey's long-term debt to B from B+ in December. The other main US risk ratings agency for Turkey, Moody's Investors Service, is expected to send an assessment mission to Turkey in late March or early April.
Bankers say borrowing costs on short-term external loans have gone up by at least 15 basis points as a result of worsening perceptions of Turkey. The leading Garanti Bankasi, for example, has launched a $150 million syndicated loan with an all-in price of 85 basis points over the London interbank offered rate (Libor), compared with a $150 million loan raised in September at an all-in cost of 70 basis points over Libor.