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Turkish banks at a ‘turning point’ over asset quality, warn analysts

Can ComScore Break Nielsen's Near-Monopoly On Ratings?

Most TV Everywhere Viewing Is Live TV In The Home

Consumer Insights Online Video User Overview

Public Companies Going Private

Turkish banks at a ‘turning point’ over asset quality, warn analysts

As Turkish corporates grapple with foreign currency debt, a rapidly depreciating lira and moderating economic growth, the country's banks face a deterioration in asset quality, analysts warned.

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Isbank and Akbank, major lenders to the corporate sector, have reported sharp increases in Stage 2 or "underperforming" loans, a marker of declining asset quality. Isbank's stage 2 loans rose from 5.9% to 8.5% of gross loans in the first quarter of 2018, while Akbank's stage 2 loans rose from 5.4% to 10.2%.

Garanti Bank , another bank with large corporate exposures, had stage 2 loans worth 41 billion lira, or 16.1% of gross loans, at the end of the first quarter, though nearly half of this reflected the transition to IFRS 9.

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Nicholas Smallwood, a senior emerging markets credit analyst at ING, described the increase in Akbank's stage 2 loans as "startling."

For both Akbank and Isbank, the increase in stage 2 loans — classified as loans under close monitoring — was mainly attributable to corporate borrowers, according to earning calls.

Akbank disclosed that its stage 2 tally includes loans to Otas, the owner of Türk Telekom, and Yildiz Holding AS, a conglomerate that owns food manufacturing companies including Godiva Chocolatier.

Otas owes $4.8 billion, and Yildiz $6.5 billion, and along with six other corporates they are seeking to restructure loans totaling nearly $20 billion with multiple banks, Bloomberg News reported May 31.

"This could be the start of an unravelling picture regarding corporate debt restructuring," said Magar Kouyoumdjian, an associate director at S&P Global Ratings. "From a very rosy picture, [the sector] has suddenly started to show signs of pressure. It seems to be a turning point for Turkish banks especially in terms of asset quality."

S&P Ratings downgraded six Turkish banks on May 4 following a downgrade of the sovereign rating from BB to BB–. The largest risk for the banking system is its reliance on external debt, said Kouyoumdjian, but rising distress in the leveraged private sector was also a factor in the downgrades.

Currency weakness

The lira's dramatic weakening is expected to make it harder for some companies to meet their foreign currency denominated debt repayments. Nonfinancial corporates hold a net foreign exchange short position of $221.97 billion in March, according to the central bank.

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Nevertheless, high levels of dollarization in the economy clouds the view of the possible impact. Many large companies have some form of hedging in place, some are exporting companies earning in foreign currency, while part of the exposure is government-guaranteed finance, said Kouyoumdjian.

Loan maturation is the key factor: Most forex loans are long term. "Until a company needs to pay the loan back all of this will be an accounting loss. With all that volatility in-between, it is hard to pinpoint how much damage we might have for the large corporates," said Zekeriya Ozturk, the founder of iRes Independent Financial Research & Advisory in Istanbul.

Signs of deterioration

Turkish banks are well-positioned to absorb some damage. Since recovering from a 2001 economic crisis, asset quality indicators have been "squeaky clean," said Kouyoumdjian, and Turkish banks felt the impact of the 2008 financial crisis much less than those in other emerging markets.

NPL rates are low, and despite deteriorating asset quality, Moody's expects problem loans to grow from just 3% in 2017 to 4% in 2018 across the 17 banks it rates — still better than the average for Turkey's emerging market peers.

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This is partly because of denominator growth. Lending grew 21% in 2017, driven by a 250 billion lira government initiative to boost lending to SMEs, Ozturk said.

Most large Turkish banks also regularly sell problematic assets, while regulatory forbearance allows them to restructure problematic loans before they become nonperforming, preventing the deterioration of asset quality indicators on banks' books, Kouyoumdjian noted.

Despite the growing volume of loans to be restructured and potential for higher NPL ratios, Ozturk said that high levels of capitalization across the banking sector means a rise in problem loans would be a profitability issue rather than constitute a crisis.

The core tier one capital ratio averaged 12.46% across all Turkish banks in 2017, up slightly on the 11.88% reported in 2016, according to S&P Global Market Intelligence data.

Economic outlook

A dip in growth could add further strain to corporate earnings and the ability to services loans.

Economic worries are expected to shape the outcome of Turkey's June 24 elections, with some reports suggesting Recep Erdogan may face a run-off vote on July 8 to regain the presidency.

Turkey's GDP will grow around 4.0% in 2018 and 4.6% in 2019, the Economist Intelligence Unit forecasts. Moody's expects growth of only 3.5% in 2019. In 2017, the State Institute of Statistics of Turkey reported growth of 7.3%.

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Bank loan books will remain healthy at growth of 3% or more, said Kouyoumdjian. "The problems would start if we saw very low or negative growth. That would be quite problematic for asset quality."

Ozturk pointed to falling consumer confidence, weak housing sales, high inflation and rates pressure, as signs that Turkey's economy is hitting the limitations of "leverage-driven private sector growth."

"The pressure is clear," said Ozturk. "What matters for those corporates with dollar debts who invested in Turkish domestic consumption, tourism, and so on, [is that] Turkey needs to grow in dollar terms so that those dollar debts can be easily repaid."

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.

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Technology, Media & Telecom
Can ComScore Break Nielsen's Near-Monopoly On Ratings?


The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Sep. 17 2018 — Advertising agencies are becoming increasingly frustrated with the inability of Nielsen Holdings PLC's Nielsen Media Research to convince the major media companies to embrace its new cross-platform measurement system, called Total Audience Measurement. This creates a huge opportunity for comScore Inc., formerly Rentrak.

ComScore is trying to reinvent itself following its delisting in 2017 — it was relisted June 1 — following an accounting scandal. The company's stock has fallen from $65 per share intraday on Aug. 17, 2015, to close at just $18.06 per share on Sept. 6. It currently has a total enterprise value of less than $1.2 billion, paltry in comparison to Nielsen Holdings' $12.9 billion.

In April, comScore named Bryan Wiener, previously executive chairman of Dentsu's digital media agency 360i LLC, as its CEO. On Sept. 5, the company announced that it hired Sarah Hofstetter to serve as president and head up commercial strategy, including sales and marketing.

Wiener and Hofstetter have worked together for two decades, most recently at 360i, where Hofstetter was CEO and chairwoman. The two executives' deep ties to the advertising community may be just what is needed to bring a competing cross-platform measurement system to the broadcast and cable network industries.

Cable network ad revenue grew for decades before stumbling, albeit modestly, during the last recession. More recently, despite a booming economy the cable network ad industry has faltered, in part due to cord cutting and cord shaving but also because current ratings do not include all of online viewing and out-of-home viewing.

Currently, the ratings only include online viewing within a three-day period, which includes the exact same commercial load as linear. Many media companies do not believe that online viewers will tolerate the huge ad load that exists on linear TV and do not include the same commercial pods that appear on linear TV when serving up the shows online.

Although negotiations between Nielsen Media Research and the major media companies have been going on for some time, many in the industry are tired of the delays in adopting a new system and are looking at alternate ways to measure viewing.

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Technology, Media & Telecom
Most TV Everywhere Viewing Is Live TV In The Home


The following post comes from Kagan, a research group within S&P Global Market Intelligence. To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Summary: subscribers to telco operators were more likely to indicate they streamed TV Everywhere content compared to cable and DBS subscribers.

Sep. 17 2018 — Streaming live TV Everywhere to a mobile device inside the home is the TV Everywhere activity most often performed at 52% of multichannel TV respondents, according to data from Kagan’s MediaCensus online consumer survey.

While 58% of respondents surveyed in multichannel homes viewed TV Everywhere in the last three months, just 46% did so out of their home. Click here for the full Kagan report.

Viewing live TV inside the home was not only the TV Everywhere activity performed by the most respondents; it was also the most frequently performed.

Subscribers to telco operators were more likely to indicate they streamed TV Everywhere content compared to cable and DBS subscribers. Subscribers to some operators are more likely to stream TV Everywhere content, with AT&T U-verse (64%) being the highest and WOW! (42%) the lowest among operator subscribers surveyed.

Younger subscribers, especially Millennials, were more likely to stream TV Everywhere content compared to older subscribers.

For more information about the terms of access to the raw data underlying this survey, please contact

Data presented in this article is from the MediaCensus survey conducted in February 2018. The online survey included 20,035 U.S. internet adults matched by age and gender to the U.S. Census, with additional respondents subscribing to the top multichannel video operators in the U.S. The survey results have a margin of error of +/-0.7 ppts at the 95% confidence level. Generational segments are as follows: Gen Z: 18-20, Millennials: 21-37, Gen X: 38-52, Boomers/Seniors: 53+.

Consumer Insights is a regular feature from Kagan, a group within S&P Global Market Intelligence's TMT offering, providing exclusive research and commentary.

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Technology, Media & Telecom
Consumer Insights Online Video User Overview


49% of survey respondents use more than one SVOD service.

Sep. 14 2018 — Data from Kagan’s U.S. online consumer surveys shows that 23% of respondents exclusively use one service, while almost half (49%) use more than one SVOD service. The service which is most commonly used exclusively is Netflix, while users of smaller services almost always use at least one other service.

Netflix is so universally used that it is both the most exclusively used service and the service most often used in conjunction with another service. In terms of demographics, Netflix users are very similar to the general population compared to smaller services that tend to have a younger user base.

With the exception of Netflix, most respondents indicated they have never subscribed to the top four services, including Netflix, Hulu, Amazon Prime Video and HBO NOW. Among those who indicated they dropped one of the top services, price was a principal reason for dropping, although content-specific reasons differed by service. Content is one of the most defining characteristics of online streaming services, which can be seen in the content viewed and most enjoyed on each service. In large part users of Netflix, Hulu and Amazon Prime Video most enjoy the content each service is known for.

A broader overview of this data was presented in a recent webcast.

Data presented in this blog is from U.S. Consumer Insights surveys conducted in September 2017 and March 2018. The online survey included 2,526 (2017) and 2,523 (2018) U.S. internet adults matched by age and gender to the U.S. Census. The survey results have a margin of error of +/-1.9 ppts at the 95% confidence level.

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Capital Markets
Public Companies Going Private

Sep. 14 2018 — The recent tweet from Elon Musk has understandably made big news, but it is worth pointing out that the appetite for taking public companies private has been a key area of activity this year. S&P Global Market Intelligence’s data shows that 2018YTD is already at 39% of 2017 numbers, standing at €17.8bn of deal value across 32 completed deals, globally. Going-private closed deal count is at a healthy 49% compared to full 2017 numbers.

In terms of most popular sectors for going-private deals, since 2013 - Information Technology has been leading the pack with €108.9bn of aggregate deal value recorded across 104 deals, while Consumer Discretionary* is trending as a distant second with €49.7bn of total deal value.

The top target location for going private deals is the US, and interestingly – China comes in at second place, with UK following. The three regions have seen total deal size of €218.8 during the period of 2013 through 2018YTD. The popularity of these locations is further supported by the fact that after going private, average target’s EBITDA values have increased compared to when those companies were public. The US-based going private targets grew their EBITDA by average of 56% since leaving the public market, while Chinese and the UK-located companies grew EBITDA by 10% and 38%, respectively. Overall, the going private moves proved to be successful for ex-public companies globally within the 2013 – 2018YTD deals’ time frame, where their average Net Income values grew by 58% while EBITDA values grew by a smaller but yet attractive 29%.

In terms of the deal pipeline, 18 going-private deals were announced globally since 1st January 2018 and would add €25.8bn of aggregate deal value to already closed €17.8bn.

The following was originally published on Angel News on August 16, 2018: Public companies going private, S&P Global comment

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