S&P Global warns of risks and opportunities for Turkish banks

Regina Argenio, Director and Chief Analyst of Financial Institutions at S&P Global Ratings, has provided an assessment of the Turkish banking sector's outlook through 2027. While noting that risks remain significant, Argenio stated that the current situation is manageable due to progress in inflation reduction and an economic outlook that has proven more resilient than initially anticipated.

Key concerns include the potential impact of delays in the disinflation process on asset quality and the financial resilience of the real sector. Argenio also highlighted the importance of monitoring banks' ability to roll over significant external debt, noting that any disruptions in this area could be problematic. Regarding the recent fund crisis, she indicated it is largely under control due to effective policy combinations and low exposure within the banking sector, though the smooth liquidation of funds remains a critical factor.

Looking ahead, Argenio expects interest rate cuts to support bank profitability through 2027, primarily by reducing deposit costs. While lower rates may eventually compress net interest margins as lending rates also decrease, the overall effect is expected to be positive for the sector's financial position.