GCC banks with Turkish exposure recorded net losses – Fitch

GCC banks with Turkish exposure recorded net losses – Fitch

GCC banks that have Turkish subsidiaries recorded $950 million of net monetary losses in the first half of 2022 as exposure to the country is increasingly credit negative, ratings agency Fitch said today (Tuesday).

Emirates NBD (ENBD) and Kuwait Finance House (KFH) were worst-affected in terms of the operating profit or risk-weighted assets ratio, which is Fitch’s core profitability metric.

Their ratios fell by about 70 basis points when the net monetary losses were included, Fitch said, with ENBD’s Turkish exposure 16% while KFH’s is 28%.

In an update today, Fitch said the banks’ exposure to Turkey is increasingly credit negative due to the deteriorating operating conditions in the country.

However, the risks are largely reflected in GCC banks’ viability ratings (VRs) and exposures are decreasing due to Turkish lira depreciation, the agency said.

Turkish banks were downgraded to B- from B in July following the downgrade of Turkey’s sovereign rating from B Negative from B+ Negative as inflation has spiraled and macroeconomic and external risk has increased.

Fitch said the net monetary losses at ENBD and KFH, as well as at Kuwait’s Burgan Bank, accounted for more than 15% of the banks’ operating profit in the first half of 2022.

“The losses would have been even