State-run Islamic banks in Turkey may need more capital support, according to a Fitch Ratings report.
“Further capital injections are likely to be needed to fund growth at the state-owned Islamic banks” in Turkey, Fitch said in the report. Islamic banking is “of strategic importance to the Turkish authorities and offers reasonable medium-term prospects,” according to the report.
The government is planning to increase the share of the Islamic finance segment to 15% of the banking sector assets by 2025 from 4.9%.
Islamic banking’s high financing growth is expected to outpace the banking sector’s performance in 2018, given the rapid expansion of 2 recently-established state-run Islamic banks, the report said.
Islamic banks’ capitalisation is adequate “but capital ratios are sensitive to further non-performing financing growth and Turkish lira depreciation”. The refinancing risk at Fitch-rated Islamic banks in Turkey are “manageable” while foreign currency external funding is below the sector average, the report said.
A money changer counts Turkish lira bills at a currency exchange office in Istanbul. Islamic banking is u201cof strategic importance to the Turkish authorities, offering good medium-term prospects,u201d according to a Fitch report.
