IslamicFinance.de

The bidding process for Asya Katilim Bankasi A.S. - with a June 23 deadline - will end uncertainty over the future of the bank, but creditors face either its successful sale or its liquidation, says Moody's Investors Service in a report published today.
Bank Asya's creditors face two outcomes -- either a transfer of ownership to a successful bidder or the bank is liquidated and its banking license withdrawn," says Irakli Pipia, a VP - Senior Credit Officer at Moody's.
Moody's notes that the bidding process is nevertheless a positivedevelopment for creditors, as it provides a potential upside scenario.In the event of a winning bid by a new owner committed to recapitalizingthe bank, the rating agency would expect a rapid recovery in its credit profile.
"An acquisition of Bank Asya by a well-established player is likely to restore customer confidence in the bank and turn around the outflow of deposits," explains Mr. Pipia. "However, the likelihood of such an outcome is impossible to assess given the limited information about potential interest from bidders."
Furthermore, there is a lack of visibility on the current financial state of Bank Asya because the bank has not reported results since Q3 2015, according to Moody's. The rating agency therefore cannot exclude the possibility that its condition may have deteriorated further since that time.
In the case of liquidation, on the other hand, retail customers would largely be protected by the bank's performing loans and liquid assets, according to Moody's estimates. In addition, they would benefit from Turkey's deposit insurance which covers deposits up to 100,000 Turkish lira (USD35,000).
The recovery rate for losses on uninsured deposits (20% of totalliabilities), however, will depend on the liquidity of the bank's assets and the rate of further deterioration in the loan book. The quality of the loan book has worsened significantly since 2014, with nonperforming loans reaching 27% as at Q3 2015.
Bank Asya's financial strength has been sapped by deposit outflows since mid-2014, which eroded earnings and liquidity. Its assets shrank to TL9.5 billion (USD 3.1 billion) in the third quarter of 2015 from TL16.6 billion (USD7.3 billion) the year before and its loan book and deposit base have been in persistent decline. Total capital adequacy fell to 15.6% of risk-weighted assets and Tier 1 to 10.5% at September 2015 compared to 19.0% and 14.9% for the same period a year ago, just about sufficient to absorb ongoing losses.