{"id":90894,"date":"2024-04-15T00:00:00","date_gmt":"2024-04-15T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/uae\/its-going-to-get-worse-before-it-gets-better-for-gcc-banks-with-turkish-subsidiaries\/"},"modified":"2024-04-15T00:00:00","modified_gmt":"2024-04-15T00:00:00","slug":"its-going-to-get-worse-before-it-gets-better-for-gcc-banks-with-turkish-subsidiaries","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/uae\/2024\/04\/15\/its-going-to-get-worse-before-it-gets-better-for-gcc-banks-with-turkish-subsidiaries\/","title":{"rendered":"It\u2019s going to get worse before it gets better for GCC banks with Turkish subsidiaries"},"content":{"rendered":"

Gulf banks with subsidiaries in Turkey are expected to incur higher net losses <\/strong>this year, before disinflation in Turkey begins to reduce the lenders\u2019 losses<\/strong>, Fitch Ratings<\/a> said in a research note. <\/p>\n

FOR CONTEXT-<\/strong> GCC banks\u2019 Turkish subsidiaries adopted hyperinflation reporting in 1H FY 2022 in response to cumulative inflation in Turkey exceeding 100% over three years. This reporting requires banks to include the net monetary losses in their income statements by restating their non-monetary assets and liabilities to reflect the impact of hyperinflation. <\/p>\n

Emirates NBD was among the hardest-hit, along with Qatar National Bank (QNB)<\/strong>, with both lenders seeing their risk-weighted assets ratios, Fitch\u2019s core profitability metric, fall by 60-70 bps.<\/p>\n

The outlook:<\/strong> Banks are now expected to turn in net losses of USD 2.8 bn this year \u2014 up from USD 2.6 bn in 2023 \u2014 on the back of high inflation in Turkey, which is expected to average at 53% this year. Fitch had previously forecasted<\/a> 2024 net losses for these banks would come in at USD 1.3 bn. However, net losses are expected to halve next year to USD 1.4 bn as disinflation takes hold in Turkey, with Fitch expecting inflation to cool to 29%. <\/p>\n

GCC banks are expected to no longer rely on hyperinflation reporting from 2027<\/strong>, as disinflation should reduce the subsidiaries\u2019 net monetary losses,'' according to Fitch. Additionally, \u201cslower TRY depreciation should reduce the adverse capital impact from currency translation losses,\u201d as the firm predicts the Turkish Lira\u2019s depreciation against the USD to slow down by 22% in 2024 and 7% in 2025 resulting in \u201csmaller currency translation losses and less capital erosion\u201d over the two years.<\/p>\n

Traditional monetary policy will do some good:<\/strong> The banks\u2019 losses will gradually fall in tandem with the decline in economic risks and the implementation of \u201ctraditional monetary policies,\u201d head of Middle East Banks at Fitch Redmond Ramsdale told Asharq Business (watch, runtime, 5:23<\/a>). Fitch upgraded the ratings of 18 Turkish banks, including GCC lenders\u2019 subsidiaries, following Turkey\u2019s sovereign rating upgrade to \u2018B+\u2019 with a positive outlook from \u2018B\u2019 with a stable outlook in March<\/a>, signaling growing confidence in inflation falling on the back of the policies the country has been implementing since June 2023.<\/p>\n","protected":false},"excerpt":{"rendered":"

Emirates NBD\u2019s risk-weighted assets fell by some 60-70 bps<\/p>\n","protected":false},"author":1,"featured_media":90895,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"newspack_ads_suppress_ads":false,"newspack_popups_has_disabled_popups":false,"newspack_sponsor_sponsorship_scope":"","newspack_sponsor_native_byline_display":"inherit","newspack_sponsor_native_category_display":"inherit","newspack_sponsor_underwriter_style":"inherit","newspack_sponsor_underwriter_placement":"inherit","ep_exclude_from_search":false,"_primary_brand":0,"newspack_featured_image_position":"","newspack_post_subtitle":"","newspack_article_summary_title":"Overview:","newspack_article_summary":"","newspack_hide_updated_date":false,"newspack_show_updated_date":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1618],"tags":[159,260,7,693,285,257],"brand":[],"newspack_spnsrs_tax":[],"class_list":["post-90894","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking","tag-banking","tag-emirates-nbd","tag-enterpriseam-uae","tag-fitch-ratings","tag-inflation","tag-turkey","wpautop","entry"],"acf":{"mongo_id":"23ff520e-2a2b-4733-a9d9-80e24a61fe85","is_powered_by":false,"story_type":"1","photo_url":"https:\/\/ent.news\/2024\/4\/797.jpg","photo_position":"above","homepage_title":"","full_issue_title":"GCC banks\u2019 Turkish subsidiaries to face higher losses in 2024 before disinflation kicks in -Fitch","related_issue":[90879],"teaser":"Emirates NBD\u2019s risk-weighted assets fell by some 60-70 bps","voice_url":"https:\/\/s3.us-east-1.amazonaws.com\/ent.news\/audio\/2024\/4\/.034b83f7-3b7d-44e5-8d77-2112e3690526.mp3"},"yoast_head":"\nIt\u2019s going to get worse before it gets better for GCC banks with Turkish subsidiaries - 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