Fitch issues risk warning for financial leasing and factoring in Turkey

International credit rating agency Fitch Ratings reported that financial leasing and factoring companies in Turkey will face increasing asset quality risks and weakening profitability margins in 2026 and 2027. In a report published on October 19, 2026, Fitch recalled that it had revised the outlook for the EMEA Emerging Europe financing and leasing sector, which also covers financial leasing and factoring companies in Turkey, to "deteriorating" in June. It was stated that this assessment was driven by slowing global growth, persistent inflation, high funding costs, and asset quality pressures stemming from small and medium-sized enterprises (SMEs).

Fitch reported that the direct impact of recent market volatility in Turkey on the financial leasing and factoring sectors has remained limited. It was noted that financial leasing companies have low direct risks, limited securities portfolios, and established funding channels. Factoring companies that are bank subsidiaries also benefit from shareholder support and stable funding facilities. However, it was noted that market stress could indirectly affect asset quality through borrowers, while rising Turkish lira interest rates and widening credit default swap (CDS) premiums could increase funding costs.

The new business volume of the financial leasing sector in Turkey increased by 48 percent year-on-year in US dollar terms in the first half of 2026. The share of sale-and-leaseback transactions in new business volume stood at 38 percent. Fitch stated that this situation indicates that demand is directed toward working capital financing rather than investments. While the sector's non-performing loan ratio declined to 1.9 percent, Fitch announced that it expects this ratio to rise gradually by the end of 2026 and 2027. Average return on equity stood at 30 percent, while it was stated that core profit margins may narrow. The leverage ratio rose to 4.9x from 3.8x at the end of 2025.

The transaction volume of the factoring sector increased by 33 percent in the first half of 2026 to 1.1 lira trillion. While Fitch expects 32 percent growth for the whole year, it projected that this rate will be generally in line with inflation and real growth will remain flat. Although the non-performing loan ratio in the sector materialized at 2.3 percent, it was stated that new problem loans and impairment charges remain high. Average return on assets fell to 6.4 percent from 8.1 percent in 2025, while the leverage ratio rose to 4.1x. Fitch assessed that this level is still moderate.