Fitch warns of shrinking profit margins at Turkish banks

According to its Turkish Banks Monitor report, the average operating profit-to-risk-weighted assets ratio among the banks reviewed fell from 3.9% in the first quarter of 2026 to 2.6% in the second quarter. Across the banking sector, the same ratio declined from 4.6% to 3.3%. Fitch also noted that higher swap costs and inflation-driven operating expenses have negatively affected profitability.

Fitch also highlighted deteriorating asset quality, reporting that the average non-performing loan ratio among the banks covered by its report increased from 3.3% to 3.5%. Meanwhile, the Tier 1 capital adequacy ratio remained stable at 11.5%. Fitch expects elevated Turkish lira interest rates and inflationary pressures to continue limiting bank profitability throughout 2026. However, the agency forecasts that these pressures could ease in 2027 if interest rate cuts resume toward the end of the year.