Turkish Equities 1Q26 Preview: Banks to Lead Earnings Growth as Iran War Adds Uncertainty

Türkiye’s 1Q26 earnings season kicks off with expectations of solid year-on-year growth, led by banks, while non-financial companies show mixed performance amid early signs of disruption from the Iran conflict. Rising funding costs, energy risks, and margin pressures are likely to shape investor sentiment going into the second quarter.

Earnings season begins with strong bank outlook

The first-quarter 2026 earnings season for Turkish companies under coverage is set to begin with Turkiye Sigorta and run through May 11.

Analysts project that the banking sector will deliver 30% year-on-year growth in earnings per share (EPS), with a 6% quarter-on-quarter increase. Despite geopolitical headwinds, banks are expected to remain the primary drivers of earnings growth.

For non-financial companies, earnings are forecast in U.S. dollar terms to ensure comparability, particularly for firms not subject to inflation accounting. In this segment, analysts estimate 67% year-on-year EPS growth, although this reflects a sharp 50% decline on a quarterly basis. EBITDA is projected to rise 17% year-on-year, but fall 22% quarter-on-quarter.

Borsa Istanbul Outlook: War will test resilience

Banks: Growth intact despite rising funding costs

The banking sector’s quarterly performance is seen as resilient, though it would likely have been stronger in the absence of the Iran conflict.

Aggregate earnings for the seven banks under coverage are expected to grow both annually and sequentially. However, higher operating expenses and a decline in CPI-linker income contributions weighed on quarterly comparisons.

Rising Turkish lira funding costs, particularly toward the end of the quarter, exerted pressure on profitability. Nevertheless, net interest margins (NIM) continued to expand, supporting overall earnings growth.

Looking ahead, concerns around funding costs are expected to weigh on sentiment in the second quarter.

Among individual banks:

• Yapi Kredi stands out with improving profitability trends.
• Isbank is projected to post a 95% year-on-year increase in net profit, driven by a low base in 1Q25 and solid operational performance.
• Garanti BBVA continues to deliver strong results, though its historically robust performance limits further upside relative to peers.

Non-financials: Strong annual growth, weak quarterly momentum

Non-financial companies are expected to deliver strong year-on-year growth but weaker sequential performance.

In dollar terms, EPS is forecast to expand 67% year-on-year, while declining sharply quarter-on-quarter. EBITDA growth is also expected to remain positive annually but weaker sequentially.

Companies have begun to feel the early effects of the Iran conflict, which started in late February, although the overall impact on first-quarter results remains limited so far.

Strong performers: Airlines, manufacturing, and consumer names lead

Several companies are expected to outperform in the first quarter:

• Astor Enerji is projected to deliver strong growth driven by increased deliveries and operational momentum.
• Turkish Airlines is expected to benefit from strong passenger traffic and improved yields, partly due to disruptions affecting Gulf carriers. Oil price pressures are likely to emerge more clearly in the second quarter.
• Tofas continues to benefit from production ramp-up and the Stellantis merger.
• Ebebek is expected to post double-digit real revenue growth supported by strong volume momentum and improving margins.
• Coca-Cola Icecek should benefit from robust international sales, particularly in Central Asia, alongside improved pricing and product mix.
• MLP Care is forecast to maintain strong EBITDA margins through effective cost management.
• Turk Altin is expected to continue benefiting from elevated gold prices and delayed production effects.

Weak performers: Margin pressure emerges in select sectors

On the downside, several companies are expected to face headwinds:

• Pegasus Airlines is likely to experience margin pressure due to declining passenger yields following the Iran war.
• Aksigorta may see its bottom line impacted by mark-to-market losses in fixed-income portfolios.
• Ulker is expected to face margin pressure due to unfavorable hedging at peak prices and a high comparison base from 1Q25.
• Turk Traktor is projected to see declines in both revenue and EBITDA, driven by a sharp drop in domestic sales volumes.

Outlook: Geopolitics and costs to shape 2Q sentiment

While first-quarter results remain broadly resilient, the outlook for the second quarter is increasingly shaped by geopolitical risks and cost pressures.

The Iran conflict, rising energy prices, and higher funding costs are expected to weigh on margins and investor sentiment in the months ahead.

Source:  Ünlü & Co equity research report

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