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Turkish insurers are facing one of their most challenging operating environments of the past decade with earnings and capital adequacy likely to come under severe strain in 2022-2023, Fitch Ratings said in a report.
The effects of macroeconomic deterioration, soaring inflation and the continuing price cap on motor third-party liability (MTPL) insurance could push some insurers below minimum regulatory solvency levels, forcing them to raise capital or to be acquired by stronger competitors.
8.1.3 Banks news
The decision of Istanbul-listed Garanti BBVA (GARAN) not to call its $750mn worth of subordinated (Tier II) eurobond in May 2022 is a sign of building market pressure affecting banks in Turkey, Fitch Ratings said in a statement.
The decision is likely to have been driven primarily by economic considerations given higher refinancing costs amid market volatility.
The operating environment for banks in Turkey has deteriorated due to pressure on the lira, spiralling inflation and the negative implications of rising US interest rates on emerging markets.
In May, small-cap Sekerbank (SKBNK) also decided not to call its $85mn Tier 2 paper, instead extending the tenor.
Garanti’s decision is likely to have taken investors by surprise as the market norm for Turkish banks in recent years has been to call Tier 2 instruments.
The market norm for Turkish banks has generally been to call Tier 2 debt after five years, even when markets have been volatile.
32 TURKEY Country Report August 2022 www.intellinews.com