Leasing and Factoring Sectors Weather TRY Volatility: Fitch

The Turkish leasing and factoring sectors have weathered the risks of currency volatility and have reported resilient profitability, Fitch Ratings says.

The two sectors are dominated by bank-owned entities with the largest five leasing companies accounting for 62% of sector assets at end-2020, while the factoring sector is more fragmented with the five largest bank-owned captives controlling 43% of sector assets.

Bank-owned captives benefit from parent banks’ distribution channels parent which support their operating efficiency and funding flexibility, while independent companies benefit from the higher margins typical of their higher-risk target market.

This results in resilient sector-level profitability even in the recent high-stress environment.

Unlike the factoring sector, the leasing sector has historically had high exposure to foreign currency (FC) due to limited access to longer-term TRY funding. This in turn has led to elevated currency-induced credit risk and depressed business volumes when currency volatility rises.

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