Goldman Sachs Sees Further Re-Rating Potential for Turkish Banks; Reiterates Buys on YKB and Akbank, Upgrades Isbank

Goldman Sachs says Turkish banks could see further valuation upside over the medium term, supported by a sustained disinflation trend and falling interest rates. The bank reiterates Buy ratings on Yapi Kredi and Akbank, upgrades Isbank to Buy, and keeps Garanti at Neutral.

Room for Further Re-Rating?

Turkish banks have already enjoyed a strong year-to-date re-rating, with the average 12-month forward price-to-book (P/B) ratio rising to 1.05x, driven by robust 4Q25 earnings and a constructive macro backdrop.

However, Goldman Sachs believes that while the near-term (2026E) risk-reward profile appears balanced, there is meaningful upside potential over the medium term (2027E).

The key drivers:

• A sustained disinflation path

• A downward trajectory in policy rates

• Significant Net Interest Margin (NIM) expansion

These factors are expected to be particularly favorable for liability-sensitive banks, supporting strong profitability dynamics through 2026 and into 2027.

Goldman projects Turkish banks to deliver high-20s return on equity (ROE) through 2027E. This underpins an average target P/B of around 1.2x, compared with the current implied 0.8x 2027E P/B — suggesting notable re-rating potential.

What Could Trigger the Next Leg Higher?

A major catalyst, according to Goldman Sachs, would be a return to positive “Real ROE” — defined as ROE exceeding inflation — from the second half of 2026.

That would mark the first such period in nearly a decade.

A positive Real ROE environment would:

• Enable banks to grow profits and book value in U.S. dollar terms

• Reverse prior erosion trends

• Benefit from mark-to-market (MTM) gains on Available-for-Sale (AFS) securities

Goldman expects that the return of positive Real ROE would contribute to a further unwind in the Cost of Equity (COE) and a re-rating of valuation multiples, potentially drawing incremental capital inflows.

Sensitivity analysis suggests that:

• Every 25 basis point move in NIM or Cost of Risk (CoR)

• Could shift ROE by ±2.5 percentage points

• And alter target P/B by ±0.15x to 0.20x

The base-case target P/B stands at 1.2x.

Ratings: YKB and Akbank Remain Buys; Isbank Upgraded

Goldman Sachs raised its earnings per share (EPS) estimates by approximately 18% on average for 2026–2028.

• Yapı Kredi – Buy (maintained)

• Akbank – Buy (maintained)

• Türkiye İş Bankası – Upgraded to Buy from Neutral

• Garanti BBVA – Neutral (maintained)

Goldman cites Yapi Kredi and Akbank’s strong positioning for NIM expansion, operational leverage, and sustained ROE growth as key reasons for maintaining Buy ratings.

Isbank was upgraded to Buy due to:

• A high asset-liability duration gap

• The lowest share of CPI-linked securities among peers

• A low Turkish lira loan-to-deposit ratio (LDR)

• Relatively cheaper valuation metrics

The bank also expects the ROE gap between Isbank and peers to narrow.

Garanti BBVA remains Neutral, as Goldman sees more limited incremental ROE expansion given its already high base. However, the report highlights Garanti’s high-quality franchise and resilience in a challenging macro environment.

Medium-Term Outlook

In Goldman’s base case, a supportive macro trajectory — characterized by disinflation and easing monetary policy — could drive a structural improvement in profitability and valuations across the sector.

While near-term upside may be more measured, the bank sees scope for a broader re-rating cycle through 2027 if Real ROE turns sustainably positive.

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