Fitch analysis of the Turkish economy
In stress tests conducted by international credit rating agency Fitch, the capital buffers of 9 major Turkish banks were examined against exchange rate fluctuations and non-performing loan ratios. The findings revealed that the banking sector generally maintains its strength unless there is a sharp increase in the exchange rate and the non-performing loan ratio.
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In a new analysis published by Fitch, the capital resilience of 9 leading banks in Turkey was tested under different economic conditions. In the baseline scenario, the dollar/TL exchange rate is projected to be 49.5 by the end of 2026, and the non-performing loan (NPL) ratio is expected to be 3.4 percent. The report underscored that fluctuations in foreign exchange and the rise in non-performing loans are the most decisive risks to the banks' solvency.
It was stated that in the mildest stress environment, if the exchange rate reaches 60 and there is a 2.5 percentage point increase in the NPL ratio, no bank would violate its regulatory capital requirement. However, warnings were reiterated against the possibility of severe volatility in exchange rates and a noticeable deterioration in credit quality. When considering the most severe scenario, it was noted that if the dollar/TL climbs to 75 and the non-performing loan ratio rises by 7.5 percentage points, one bank's core capital ratio would fall below the minimum threshold of 4.5 percent.
The analysis highlighted that public banks have lower capital buffers above the regulatory minimum capital level compared to private banks. According to Fitch, this difference is influenced by the fact that public banks have weaker initial capital positions and limited advantages in pre-impairment operating profit. On average, the ratio of capital buffers to gross loans for public banks was calculated at 5.5 percent, while it was 7.2 percent for private banks.
Fitch's analysis determined that every 10 percent depreciation in the Turkish lira would lead to a decline of approximately 50 basis points in the total core capital ratio of the 9 banks tested. Every 1 percent increase in non-performing loans also causes an average decline of 46 basis points in the CET1 ratio.
While the non-performing loan ratio in the banking sector was 2.5 percent at the end of 2025, it rose to 2.7 percent by mid-April 2026. The agency expects this ratio to increase further throughout the year, particularly due to individual unsecured loans and SME portfolios. If regional geopolitical tensions persist, it is assessed that pressures could increase across all areas of the banking sector.
Fitch also stated that while support from shareholders for foreign-owned banks and potential support from Turkish authorities for public banks are included in their credit ratings, these mechanisms were not taken into account in the stress test results.