JCR Eurasia Rating has reviewed and revised the credit ratings of Şeker Finansal Kiralama A.Ş. and its subsidiary’s consolidated structure as ‘BBB+(Trk)/Stable’ on the Long Term National Scale and affirmed the Long Term International Scale as ‘BBB-/ Stabl

JCR Eurasia Rating has reviewed and revised the investment grade credit ratings of “Şeker Finansal Kiralama A.Ş. and its subsidiary’s consolidated structure” as ‘BBB+ (Trk)’ on the Long Term National Scale and as ‘A-2 (Trk)’ on the Short Term National Scale along with an assigned ‘Stable’ outlook. JCR Eurasia Rating has also affirmed the Long Term International ratings as ‘BBB-’. Other notes and details of the ratings are given in the table below:

Long Term International Foreign Currency

:

BBB- / (Stable Outlook)

Long Term International Local Currency

:

BBB- / (Stable Outlook)

Long Term National Local Rating

:

BBB+ (Trk) / (Stable Outlook)

Short Term International Foreign Currency

:

A-3 / (Stable Outlook)

Short Term International Local Currency

:

A-3 / (Stable Outlook)

Short Term National Local Rating

:

A-2 (Trk) / (Stable Outlook)

Sponsor Support

:

2

Stand Alone

:

AB

The Turkish Leasing Sector continued to create value for the national economy through the financing of machinery and equipment investments. Moreover, with reinforced representative capability and power brought by recent legislation, the Leasing Sector, one of the leading sectors in the Non-Banking Financial Sector has contributed significantly to the improvement of working capital and financing of investments of SMEs via accelerated transaction volume due to tax exemptions introduced in 2013 and noteworthy transaction volume of recently developed sell & lease back products. The sector maintained its positive outlook for the upcoming years and improved its systemic support level through its comparatively low penetration level and creation of an alternative funding channel for non-banking financial sector companies through the Takasbank (Istanbul Settlement and Custody Bank) Money Market membership regulation, despite the probable adverse effects of volatile market conditions derived from overseas and domestic economic and political developments.

Şeker Finanasal Kiralama A.Ş. has a comparatively high compliance level to Corporate Governance Principles as one of the few publicly traded leasing companies and carries out its domestic operations through its headquarters, three branches and the branch network of its majority shareholder Şekerbank T.A.Ş. The Company takes advantage of its strong and reputable shareholding structure in terms of funding alternatives, costs and terms, customer base and access network in a Non-Banking Financial Sector dominated by bank-affiliated companies. Unlike the sector composition, the Company exhibited a long-term structure in the funding of its assets and relieved further its liquidity management and lowered risk level through short-term funding needs satisfied with debt instrument issuances materialized at the end of the last month. Şeker Leasing kept the profit generation capacity of average total assets and equity alive through its continuously above sector interest margin. The Company managed to balance its asset quality and risk level suppressed due to increasing NPL ratio and exceeding equity overdue loans through its remarkably high collateral level and relatively high collection capability of its overdue loans, generating a potential positive contribution to future profitability.

The comparatively low equity level and standard ratio, characteristic of bank-related companies, holds true for the Company. Remarkably below sector annual and first quarter contraction leading to shrinking market share in line with the Company’s cautious management strategy, continuously below sector pre-tax profit generation capacity of total income and profitability ratios due to above sector average patterns in operating and financial expenses together with remarkable deterioration in the last year via increasing provisions, overdue loans exceeding equity level and volatility potential on future profitability figures derived from increasing share of other operating income in total income have been major factors resulting in the revision of the Company ratings. On the other hand, it is expected that the initiated studies regarding the reduction of risk concentration through the strategy aiming to expand its asset base through numerous small scale transactions at SME level, the expansion of the branch network, beefing up of the IT infrastructure for improving operational efficiency and increasing bank synergy together with probable future collections from overdue loans will positively contribute to the Company’s future trading volume and profitability indicators.

It is considered that the major controlling shareholder, Şekerbank T.A.Ş., has the willingness and experience to ensure long term liquidity and equity within their financial capability when required and to provide efficient operational support to Şeker Finansal Kiralama A.Ş. In this regard, the Company's Sponsor Support Grade has been affirmed as (2).

Additionally, taking into account the Company’s organizational structure, liabilities composition, asset quality, risk and corporate governance practices and track record, we, as JCR Eurasia Rating, are of the opinion that Şeker Finansal Kiralama A.Ş. has reached the level of adequate experience and facilities to manage the incurred risks on its balance sheet regardless of any assistance from the shareholders, provided that it improves its market efficiency. Within this context, the Stand Alone Grade of the Company has been determined as (AB) in the JCR Eurasia Rating notation system.

For more information regarding the rating results you may visit our internet site http://www.jcrer.com.tr or contact our analyst Mr. Gokhan IYIGUN.

JCR EURASIA RATING

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