Fitch Highlights Turkey Risk Despite BBVA's Profitability

Global credit rating agency Fitch has issued a warning regarding BBVA, highlighting the structural risks stemming from its Turkish operations despite the Spanish banking giant's impressive recent financial performance.

The Engine of Profitability: Credit Expansion

In its latest assessment, Fitch emphasized that the primary driver behind the bank's strong profitability performance is rapid credit growth.

■The report notes that the aggressive expansion the bank has undertaken, particularly in competitive markets, has positively reflected on its financial statements.

■The increase in credit volume is cited as the most decisive factor supporting operational income.

Operational Risks and the Turkey Premium

Despite its financial success, the agency did not ignore risk factors in the geographies where the bank operates. Fitch recorded that the relatively weak asset quality in Turkey and activities in competitive markets with rapid growth constitute a significant risk factor.

■It was expressed that structural issues in Turkish operations have the potential to negatively impact the bank's overall risk profile.

■Concerns were raised regarding the quality of the growth sustained in markets with high competitive pressure.

Confidence Index on Capital Adequacy

Despite the emphasized risk factors, the Fitch report paints a positive picture of BBVA's financial resilience.

■It was highlighted that the bank's capital adequacy continues to remain above determined target levels.

■The view that its financial buffers against potential shocks remain strong and its risk management capacity is preserved was brought to the forefront.

From a fiscal policy perspective, the emphasis on "Turkey risk" by international rating agencies clearly extends beyond the banking sector. The rapid erosion of asset quality by credit growth is the most tangible indicator of financial instability seeping into the system. Even if profitability records are broken, the cost that assets with high underlying risk premiums will create on budget balances and inflationary pressures in the medium term is inevitable.