Fitch Ratings has assigned Sekerbank T.A.S.'s (Sekerbank; B/Positive/b) USD200 million additional Tier 1 (AT1) capital notes a final rating of 'CCC' with a Recovery Rating of 'RR6'.
The final rating is the same as the expected rating affirmed on July 16, 2025.
Key Rating Drivers
The rating assigned to the notes is three notches below Sekerbank's 'b' Viability Rating, in accordance with Fitch's 'Bank Rating Criteria.' Fitch has only notched the debt rating three times from Sekerbank's VR (twice for loss severity and only once for non-performance risk), instead of the baseline four notches, due to rating compression as Sekerbank's VR is below the 'BB-' anchor rating threshold. The 'RR6' Recovery Rating reflects poor recovery prospects in a default.
The notes are Basel-III compliant, perpetual, deeply subordinated, fixed rate resettable AT1 debt securities. The notes will have fully discretionary non-cumulative interest payments and be subject to full or partial write-down if the issuer or group's common equity Tier 1 (CET1) ratio falls below 5.125%. The principal write-down can be reinstated and written up at the issuer's discretion if a positive distributable net profit is recorded.
The notes will also be subject to permanent partial or full write-down on the occurrence of a non-viability event (NVE). An NVE is when it becomes probable that the bank will become non-viable as determined by the local regulator, the Banking and Regulatory Supervision Authority (BRSA). The bank will be deemed non-viable should it reach the point at which the BRSA determines its operating license is to be revoked and the bank liquidated or the rights of the bank's shareholders (except to dividends), and the management and supervision of the bank are transferred to the Savings Deposit Insurance Fund on the condition that losses are deducted from the capital of existing shareholders.
The notes have no fixed maturity, although Sekerbank will have the option (subject to BRSA approval) to repay the notes from the fifth anniversary of the issue date to and including the first reset date, or on any interest payment date thereafter.
Sekerbank's consolidated regulatory CET1 and Tier 1 ratios were 18.4% at end-1Q25, including regulatory forbearance on foreign currency risk-weighted assets, well above its regulatory minimum requirements of 7.0% and 8.5%, respectively. Excluding regulatory forbearance, the ratios would have been 17.7% and 17.8%, respectively.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
As the notes are notched down from Sekerbank's VR, their rating is sensitive to a downgrade of the VR. The notes' rating is also sensitive to an unfavorable revision of Fitch's assessment of incremental non-performance risk. This may result, for example, from a sharp decline in capital buffers relative to regulatory requirements.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
The notes' rating is sensitive to an upgrade of Sekerbank's VR.
Date of Relevant Committee
16-Jul-2025
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The ESG Relevance Score for Management Strategy of '4' reflects an increased regulatory burden on all Turkish banks. Management's ability across the sector to determine their own strategy and price risk is constrained by increased regulatory interventions and by the operational challenges of implementing regulations at the bank level. This has a moderately negative impact on the credit profile and is relevant to the rating in combination with other factors.
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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