Turkish Banks Poised for Stronger 1Q25 Earnings, Led by Core Revenue Growth
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Turkey’s banking sector is preparing to report a solid first quarter, with Akbank kicking off earnings season on April 25, followed by Garanti BBVA and Yapı Kredi. According to a recent analysis by Oyak Yatırım, banks under coverage are expected to deliver a 19% quarter-on-quarter (q/q) and 6% year-on-year (y/y) earnings increase for 1Q25, underpinned by core revenue strength and improving spreads.
Core revenues rise as funding costs fall
The report anticipates a 12% q/q rise in core revenues (net interest income + fees), attributed mainly to declining deposit and repo costs. A 2.1 percentage point widening in Turkish lira (TL) spreads is expected, with swap-adjusted net interest margins (NIMs) improving by 44 basis points.
Although swap costs are set to increase slightly by 4% q/q, the overall NIM expansion outperformed expectations—provided CPI-linker revenues don’t dip. Notably, while October 2024’s CPI stood at 49%, banks are assuming a more conservative 28-30% CPI estimate for October 2025.
Fee income and operating expenses in focus
Fee generation is projected to grow by 51% y/y and 7% q/q, driven by new loan disbursements and higher payment system activity. However, operating expenses are forecasted to increase by 43% y/y, pressured by wage hikes and persistent inflation. The fees-to-opex ratio is expected to normalize below 100%, indicating a return to healthier margins.
Additional support to non-core income is expected from subsidiaries and collection revenues, though the effect will be moderate.
Albaraka’s provisioning strategy reshapes outlook
Albaraka Türk is projected to stand out in terms of EPS performance, especially after reversing TL 7.3 billion in free provisions, as indicated by latest BRSA data. When adjusted for this reversal, Albaraka’s net income is projected at TL 830 million, marking a 50% q/q decline, yet a 35% y/y growth. This mixed result stems from macro model revisions tied to lower economic growth assumptions, which are expected to increase provisioning by 1 percentage point q/q.
Yapı Kredi and Akbank to shine among large-caps
Among the large-cap banks, Yapı Kredi and Akbank are likely to lead EPS growth on a quarterly basis, supported by robust spread expansion and strong fee performance.
Insurance Sector Sees Strong Premium and EPS Growth
Turkiye Sigorta and Agesa lead earnings momentum
The insurance sector also reflects positive momentum, with Turkiye Sigorta expected to post the highest q/q EPS growth in 1Q25, fueled by strong premium generation and investment gains. Meanwhile, Agesa is set to record the second-highest profit expansion, thanks to growth in life insurance premiums and pension fund assets under management (AUM).
In y/y terms, Agesa could emerge as the top performer, with an anticipated 65% surge in earnings, outpacing peers in the sector.