International credit rating agency Moody’s Monday forecast that Turkish banking sector profits will be hit significantly in 2017 by rising non-performing loans.
“We expect asset quality trends to worsen in this year, driven by the combination of high inflation, lira depreciation, and the general worsening of the investment climate because of security issues and geopolitical tensions,” Moody’s said in a report.
Moody’s said that it expects gross non-performing loans – in which the debtor has not made payments for at least 90 days – to be above 4 percent by year’s-end, “which will require increased provisioning expenses and will reduce banks’ profitability.”
“Increased nonperforming loans, leading to higher loan loss charges on these segments, would therefore have a significant effect on the profitability of Turkish banks,” it said.
The collapse in the Turkish Lira, which has been relentless since last summer’s failed coup, has only accelerated in 2017, when the Turkish currency tumbled more than 2% against the dollar – its single worst day since the July 19 military coup attempt – sliding as low as 3.73, down over 5% so far in 2017, and over 23% in the past 12 months.