Fitch Ratings has reported that a slight recovery in the margins of the Turkish banking sector is expected in the second half of this year. The agency also mentioned that easing some measures as part of policy changes by authorities could help sustain banks' lending appetite.
According to a Datawatch report covering 13 banks, which represent 83% of the assets in the Turkish banking sector, Fitch Ratings noted that despite margin contraction, the operating profit/average risk-weighted asset ratio of these banks improved in the second quarter of the year.
The report highlighted expectations for a marginal recovery in margins in the second half of the year, despite pricing pressure on lira deposits. It noted that this anticipated recovery is due to high loan interest rates and inflation-linked bond yields. The report also mentioned that a significant increase in banks' foreign currency deposit shares is not expected in the second half of the year, attributed to the gradual decrease in FX reserves.
The report pointed out that the average shares of banks in foreign currency funding and non-equity funding have increased, reflecting the impact of increased market issuances following Turkish banks' low-risk premiums.
On the other hand, despite the normalization of monetary policy and a slowdown in credit growth for Turkish banks in the second quarter, as indicated in the report, it is expected that growth will remain weak in the second half of the year due to regulatory measures, despite recent policy changes.
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