Still, Fitch doesn’t see itself having to downgrade the viability ratings of the GCC banks that have Turkish subsidiaries, as it says “those banks have good loss-absorption capacity.”
It also doesn’t expect them to leave Turkey altogether, largely because there aren’t enough potential buyers, despite Turkish banks trading at half of their original book value.
“GCC banks would be willing and able to provide their Turkish subsidiaries with financial support, if needed, and this is reflected in the ratings of the subsidiaries,” Fitch wrote, adding that its outlook for their exposure remains credit negative in particular due to the growing risk of government intervention in Turkish banks.
Ratings agency Fitch calculates that GCC banks with Turkish subsidiaries posted net losses of roughly $950 million in the first half of 2022.