Credit ratings agency Moody's has confirmed the long-term deposit rating of Bank Asya, while downgrading its standalone baseline credit assessment (BCA), according to a press release from Moody's on Monday.
The Caa1 long-term rating was confirmed while the Islamic lender's BCA was downgraded from Caa3 to Ca.
“The confirmation of the long-term deposit ratings reflects Moody's view that Bank Asya's strong capitalization -- a Tier 1 ratio of 14.2% as at Q3 2014 -- and sizeable liquid-assets, limit the likelihood of depositors having to absorb losses in the event that the bank were to default. Moody's also notes that the bank's shareholders' meeting, in November 2014, approved a capital increase of TL 225 million that would, if completed, further improve the bank's risk-absorption capacity. The bank expects this to be finalized by end-January 2015,” said Moody's in the press release.
The government has waged a campaign to force Bank Asya out of business due to its ties with the Islamic scholar Fethullah Gülen-inspired Hizmet movement. Following the severe corruption allegations against key government figures that surfaced on Dec. 17 and 25, 2013, the ruling Justice and Development Party (AK Party) convinced friendly firms as well as public institutions to withdraw deposits from the bank in order to damage its financial integrity. Throughout the year the government has taken a variety of strikes at the lender, and at one point President Recep Tayyip Erdoğan claimed that the bank had “already sunk.”
Moody's said that while a short-term upgrade is not likely to be made, in the event of an acquisition or merger, the bank's long-term deposit rating could be hiked. “This could, depending on the acquiring entity's credit strength and extent of potential support for Bank Asya, exert upward pressure on the deposit ratings. Sustained trends in improving financial fundamentals would also exert upward pressure on current ratings,” said Moody's.
Published on Today's Zaman, 16 December 2014, Tuesday