Fitch Ratings indicated that it has a 'negative' outlook on 26 out of the 28 Turkish banks that it rates. It said that the 'negative' outlook reflects significant risks to the banks' credit profiles due to weaker growth prospects, the depreciation of the Turkish lira and the higher interest rates, which have weighed on the banks' asset quality, margins and capitalization metrics. It added that the 'negative' outlook points to refinancing and liquidity pressures, given the banking sector's reliance on foreign markets for funding, as well as to the risk of a reduction in market access amid the volatility of the Turkish operating environment and tightening global financing conditions. Fitch expected credit growth to be subdued in 2019, given the banks' low risk appetite and high pressure on asset quality. Also, it noted that the sector's non-performing loans (NPLs) ratio was at about 3% at end-September 2018. But it said that asset-quality risks have increased due to weaker growth prospects and high lending in foreign currency, as a weaker lira has weighed on borrowers' capacity to service their debt in foreign currency. It anticipated the NPLs ratio to rise to between 4% and 5% by end-2019, in the absence of significant shocks. Also, it noted that the banks' total regulatory capital ratio rose from 17% at end-2017 to 18.1% at end-September 2018, which mainly reflects regulatory forbearance and internal capital generation. But it said that the banks' real capital position has come under pressure from the depreciation of the lira and rising interest rates. 
Source: Fitch Ratings