Fitch Warns: Turkish Bank Margins Pressured by Funding Cost Increases Despite Steady CBRT Policy Rate

While the Central Bank of the Republic of Turkiye (CBRT) kept the policy rate constant at 50% in its last meeting, Fitch warned that funding costs were suppressing margins in banks.

Fitch Ratings’ quarterly Turkish Bank Datawatch report stated that a general decrease in the profitability of Turkish banks is expected in 2024.

The report cited margin pressure, rising deposit and swap costs, falling CPI-indexed earnings, loan impairment costs and inflationary pressures on operational expenses for the decline in profitability.

According to the news in Bloomberg, Fitch expects a moderate weakening in asset quality in 2024.

Warned Turkiye about fiscal expansion

Fitch had warned of fiscal expansion in a panel discussion on Turkiye this week.

Erich Arispe Morales, Senior Director and Turkiye Analyst of the international credit rating agency Fitch Ratings, stated that Turkiye’s financial stance is clearly in an expansionary position.

Erich Arispe Morales said in the institution’s online panel on Turkiye that fiscal policy adjustment was necessary to support the tightening of monetary policy.

Morales stated that the fragilities in the Turkish economy have decreased and the current account deficit continues to narrow.

Morales stated that the decline in Turkiye’s energy and gold imports was reflected in the current account deficit and said that international reserves had risen to the levels of the beginning of March.

Source: / Prepared by Irem Yildiz

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