Garanti Finansal Kiralama A.S.

Transcription

1 January 31, 2011 Garanti Finansal Kiralama A.S. Primary Credit Analyst: Magar Kouyoumdjian, London (44) ; Secondary Contact: Goeksenin Karagoez, Paris (33) ; Table Of Contents Major Rating Factors Rationale Outlook 1

2 Major Rating Factors Strengths: Owned by Türkiye Garanti Bankasi A.S. Leading commercial position in its niche market. Good asset quality. Counterparty Credit Rating BB/Positive/B Weaknesses: Risky economic and financial environment. Small size. Limited business and geographic diversification. Vulnerable wholesale funding profile. Rationale The ratings on Garanti Finansal Kiralama A.S. (Garanti Leasing) reflect Standard & Poor's Ratings Services' view of the risky operating environment in the Republic of Turkey (foreign currency, BB/Positive/B, local currency, BB+/Positive/B), the small size of the company, its limited business and geographic diversification, and vulnerable wholesale funding profile. Offsetting these negative factors are the company's ownership by, and strong expected financial support if needed from, Türkiye Garanti Bankasi A.S. (Garanti; BB/Positive/--), as well as its leading commercial position in its niche market and good asset quality. The long-term rating on Garanti Leasing benefits from a one-notch uplift from its stand-alone credit profile, as Standard & Poor's considers Garanti Leasing to be a core subsidiary of Garanti. Therefore, the ratings on Garanti Leasing are equalized with the ratings on Garanti. Garanti Leasing is the largest leasing company in Turkey. Although small in absolute size, with total assets of Turkish lira (TRY) 1.8 billion ($1.1 billion, at TRY1.58 to $1) at June 30, 2010, it controls about 9.9% of the domestic leasing market (by business volume) (17.3% in terms of contract numbers), specializing in small-ticket transactions. While the company's lease portfolio shows good diversification, its risk profile is high as customers are mainly midsize companies. Problem leases trended slightly upward during 2010 mainly due to the shrinking denominator (loan portfolio). Impaired lease receivables represented 4.2% of gross receivables (net of unearned interest) at mid-2010, and were 100% covered by provisions. We expect Garanti Leasing's asset quality, funding, and profitability to remain somewhat challenged due to lag effects from the deteriorated domestic economic environment and more difficult refinancing conditions on international markets. Garanti Leasing's profitability improved in the first half of 2010 despite lower revenues and business volumes. This was primarily due to reduced provisioning costs. We expect revenues to improve with growing volumes starting from the second half of The leasing penetration ratio remains low, suggesting that there is potential for fast-growing business volumes, as economic conditions continue to improve. The company mainly lends and borrows in hard currency to minimize currency risk, and has a negligible foreign 2

3 currency open position. Its funding profile is vulnerable, like that of domestic peers, as the institution is wholesale funded. However, it remains diversified in terms of both structure and investor type compared with peers. Although adjusted total equity to total assets appears strong (21.6% at mid-year 2010), the total equity base is small in absolute terms (about $240 million) and leaves Garanti Leasing vulnerable to risk concentrations and exceptional shocks. Capitalization, although improved, could also come under pressure if business volume increases rapidly with no capital injection. Outlook The positive outlook on Garanti Leasing reflects that on Garanti and on the sovereign. Standard & Poor's expects Garanti Leasing to remain focused on its domestic core business, thereby remaining vulnerable to Turkish economic cycles, with no change in its shareholding structure. Any rating actions on Garanti Leasing will mainly depend on the creditworthiness of its parent and, ultimately, on the economic situation in Turkey. Table 1 Garanti Finansal Kiralama A.S. Profitability Ratios (%) 2010* Net interest income/average earning assets Net interest income/revenues Fee income/revenues Market-sensitive income/revenues 4.6 (1.6) (0.7) (12.0) (11.3) Personnel expense/revenues Noninterest expenses/revenues New loan loss provisions/revenues (1.4) Net operating income before loan loss provisions/loan loss provisions 4, N.M. 1, Net operating income after loan loss provisions/revenues Pretax profit/revenues Tax/pretax profit 23.4 (60.0) (2.5) Core earnings/revenues Core earnings/average adjusted assets Noninterest expenses/average adjusted assets Core earnings/average risk-weighted assets N.M. N.M. N.M. N.M. N.M. Core earnings/average adjusted common equity Pretax profit/average common equity (%) *Data as of June 30. N.A.--Not available. N/A--Not applicable. N.M.--Not meaningful. Table 2 Garanti Finansal Kiralama A.S. Capital Ratios (%) 2010* Adjusted common equity/risk assets (%) N.M. N.M. N.M. N.M. N.M. Tier 1 capital ratio N/A N/A N/A N/A N/A Adjusted total equity/adjusted assets

4 Table 2 Garanti Finansal Kiralama A.S. Capital Ratios (cont.) Adjusted total equity/managed assets Adjusted total equity plus loan loss reserves (specific)/customer loans (gross) Common dividend payout ratio *Data as of June 30. N.A.--Not available. N/A--Not applicable. N.M.--Not meaningful. Table 3 Garanti Finansal Kiralama A.S. Summary Balance Sheet (Mil. TRY) 2010* Assets Cash and money market instruments Securities Trading securities (marked to market) N/A N/A Nontrading securities Mortgage-backed securities included above Loans to banks (net) Gross receivables, nui 1, , , , ,348.6 Loan loss reserves Net receivables 1, , , , ,337.0 Earning assets 1, , , , ,362.4 Equity interests/participations (nonfinancial) N/A N/A N/A N/A 0.0 Investments in unconsolidated subsidiaries (financial companies) N/A N/A N/A N/A 0.0 Intangibles (nonservicing) Interest-only strips N/A N/A N/A N/A 0.0 Fixed assets Derivatives credit amount Accrued receivables N/A N/A All other assets Total assets 1, , , , ,383.7 Intangibles (nonservicing) Minus insurance statutory funds Adjusted assets 1, , , , ,382.6 Liabilities Total deposits 1, , , , ,147.3 Noncore deposits 1, , , , ,147.3 Core/customer deposits Acceptances N/A N/A Repurchase agreements N/A N/A N/A N/A 0.0 Other borrowings Other other borrowings Other credit reserves N/A N/A N/A N/A N/A Other liabilities Total liabilities 1, , , , ,

5 Table 3 Garanti Finansal Kiralama A.S. Summary Balance Sheet (cont.) Total shareholders' equity Manditorily convertible securities N/A N/A Limited life preferred and quasi equity Enhanced trust preferred N/A N/A Minority interest-equity N/A N/A N/A N/A N/A Common shareholders' equity (reported) Share capital and surplus Revaluation reserve N/A N/A 0.0 N/A N/A Retained profits Other equity N/A N/A 0.0 N/A N/A Total liabilities and equity 1, , , , ,383.7 *Data as of June 30. TRY--Turkish lira. N.A.--Not available. N/A--Not applicable. N.M.--Not meaningful. Table 4 Garanti Finansal Kiralama A.S. Equity Reconciliation Table (Mil. TRY) 2010* Common shareholders' equity (reported) Plus minority interest (equity) Minus dividends (not yet distributed) Minus revaluation reserves Minus nonservicing intangibles (1.9) (1.7) (1.8) (1.2) (1.1) Minus interest-only strips (net) Minus tax loss carryforwards Minus postretirement benefit adjustment Minus other adjustments N/A N/A Adjusted common equity Plus admissible preferred and hybrids Plus general reserves Plus unrealized gains N/A N/A Minus equity in unconsolidated subsidiaries Minus capital of insurance subsidiaries N/A N/A Minus adjustment for securitized assets Adjusted total equity *Data as of June 30. TRY--Turkish lira. N.A.--Not available. N/A--Not applicable. N.M.--Not meaningful. Table 5 Garanti Finansal Kiralama A.S. Profit And Loss (Mil. TRY) 2010* Net interest income Interest income Interest expense

6 Table 5 Garanti Finansal Kiralama A.S. Profit And Loss (cont.) Operating noninterest income Fees and commissions Net brokerage commissions N/A N/A Trading gains (0.4) Other market-sensitive income 4.5 (20.1) (2.5) (24.7) (8.1) Net insurance income Equity in earnings of unconsolidated subsidiaries N/A N/A Other noninterest income Operating revenues Noninterest expenses Personnel expenses Other general and administrative expense Net operating income before loss provisions Credit loss provisions (net new) (1.5) Net operating income after loss provisions Nonrecurring/special income N/A N/A Nonrecurring/special expense N/A N/A Amortization of intangibles N/A N/A Impairment of intangibles N/A N/A Pretax profit Tax expense/credit 13.4 (21.3) (1.7) Net income (before minority interest) Minority interest in consolidated subsidiaries N/A N/A N/A N/A 0.0 Net income before extraordinaries Net income after extraordinaries *Data as of June 30. TRY--Turkish lira. N.A.--Not available. N/A--Not applicable. N.M.--Not meaningful. Table 6 Garanti Finansal Kiralama A.S. Core Earnings Reconciliation Table (Mil. TRY) 2010* Net income (before minority interest) Minus nonrecurring/special income Plus nonrecurring/special expense Plus or minus tax impact of adjustments Plus amortization/impairment of goodwill/intangibles Minus preferred dividends Plus or minus other earnings adjustments N/A N/A Core earnings *Data as of June 30. TRY--Turkish lira. N.A.--Not available. N/A--Not applicable. N.M.--Not meaningful. 6

7 Ratings Detail (As Of January 31, 2011)* Garanti Finansal Kiralama A.S. Counterparty Credit Rating Counterparty Credit Ratings History 22-Feb Sep Nov Aug Apr Jun-2006 Sovereign Rating Turkey (Republic of) Foreign Currency Local Currency Turkish National Scale Related Entities Turkiye Garanti Bankasi A.S. Issuer Credit Rating Certificate Of Deposit BB/Positive/B BB/Positive/B BB-/Stable/B BB-/Negative/B BB-/Stable/B BB-/Negative/B BB-/Stable/B BB/Positive/B BB+/Positive/B traa+/--/tra-1 BB/Positive/-- *Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable across countries. Standard & Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country. BB Additional Contact: Financial Institutions Ratings Europe; [email protected] Additional Contact: Financial Institutions Ratings Europe; [email protected] 7

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