Fitch considers Turkish banks to be resilient to stress

According to Fitch Ratings, Turkish banks could also withstand the strain of a prolonged conflict with Iran without needing additional capital injections from their shareholders.

This is the conclusion of a stress test conducted by the rating agency. Even in the most severe scenario, in which the USD/TRY exchange rate rises to 75 by the end of 2026 and the non-performing loan ratio increases to 7.5 percent, only one bank would fail to meet regulatory capital requirements: the state-owned Halkbank.

Fitch tests multiple stress scenarios

Under Basel III rules, Turkish banks must maintain a minimum common equity tier 1 (CET1) ratio of 4.5 percent. Fitch assessed the capital adequacy of nine major Turkish banks under significantly worse assumptions than in the baseline scenario.

In the baseline scenario, Fitch expects a USD/TRY exchange rate of 49.5 and a non-performing loan ratio of 3.4 percent by the end of 2026. From the agency’s perspective, these two factors are the most significant risks to the solvency of the Turkish banking sector.

The calculation of risk-weighted assets in foreign currencies also plays an important role. If the current regulatory tolerance were to be completely eliminated, exchange rate movements would have a greater impact on capital ratios.

Fitch estimates that a 10 percent depreciation of the lira would reduce the average CET1 ratio of the banks under review by about 50 basis points. A 1 percentage point increase in the NPL ratio would reduce the ratio by about 46 basis points by the end of 2026.

Only one bank falls below the threshold in the most severe scenario

In the more favorable stress scenario, with a USD/TRY exchange rate of 60 and a 2.5 percentage point increase in the NPL ratio, none of the banks under review would violate the statutory minimum requirements.

Only in the most severe scenario would a bank fall 108 basis points below the minimum ratio for common equity tier 1 capital. According to Fitch, state-owned banks currently have an average operating profit buffer of 5.5 percent of gross loans, while private banks have 7.2 percent.

The non-performing loan ratio stood at 2.5 percent at the end of 2025 and at 2.7 percent in mid-April 2026. While Fitch expects a further increase in 2026, it considers this to be manageable. Unsecured retail loans and loans to small and medium-sized enterprises remain particularly vulnerable, as they are more sensitive to economic cycles and high lira interest rates.

Fitch does not factor in any countermeasures by banks, additional regulatory relief, or shareholder support in its stress tests. However, the ratings themselves reflect the fact that foreign parent companies can typically support banks such as QNB Turkey, Denizbank, or Garanti BBVA. For state-owned banks, potential support from the Turkish authorities is also taken into account.

On January 1, the Turkish banking regulator BDDK had lifted two key relief measures regarding the calculation of risk-weighted assets. Fitch estimates that this will cause capital ratios to decline by an average of 170 to 200 basis points. However, such relief measures could be reintroduced if pressure intensifies.

According to Fitch’s assessment, profits remain an important buffer. Turkish banks could absorb credit losses through their operating income before impairment charges. These buffers are, on average, higher at private banks than at state-owned institutions. The buffer is strongest at QNB Turkey and weakest at Halkbank.