Turkish participation banks increased their share of the domestic banking market in 2025, with total assets rising to 9.2% from 8.1% in 2024, according to Fitch Ratings’ Turkish Islamic Banks Monitor: 2026 report.
The agency expects market share gains to continue in 2026, supported by internal capital generation and sustained growth appetite.
Fitch noted that three recently established private participation banks, including two digital institutions, recorded strong growth in the first nine months of 2025.
Investment in digital participation banking from Gulf Cooperation Council countries highlights potential for further regional investment.
The planned establishment of new participation banks, together with the rapid expansion of newer entrants from small bases, could reshape the segment’s competitive landscape in 2026.
Participation banks were active in external funding markets in 2025, issuing both subordinated and senior unsecured sukuk.
Fitch expects issuance to continue on an opportunistic basis, although growth caps may limit volumes.
The banks maintain adequate capitalisation relative to their risk profiles, supported by internal capital generation.
Fitch anticipates a moderate increase in non-performing financings in 2026 as inflows remain elevated.
The segment’s non-performing financings (NPF) ratio rose to 2% at end-2025, from 1.2% at end-2024, but remained below the sector average of 2.5%.
Fitch forecasts a further, moderate increase in the ratio in 2026. The common equity Tier 1 ratio declined to 14.6% at end-2025 from 16.3%, reflecting tighter forbearance measures and weaker profitability.
The phase-out of forbearance measures is expected to reduce reported capital ratios by around 150bp–200bp in 2026.
All five support-driven participation banks carry ratings in line with the sovereign at ‘BB-’.
Fitch recently revised their Outlooks to Positive following its sovereign rating action, while a separate recent upgrade reflected Fitch’s improved assessment of the operating environment in Türkiye.
Featured image credit: Edited by Fintech News Middle East, based on image by SohagShantonur and leoaltman via Freepik
