BofA on Turkish bank stocks: Why domestic-retail investors shouldn’t be  a worry

Fears of possible overhang as retail clients feel squeeze

One issue that frequently comes up during meetings is the outlook for domestic investors. These stakeholders have come to dominate the Turkish stock market over the  past three years, with the number of retail accounts exceeding 8mn (vs. <1.2mn in early 2020) and domestic ownership reaching multi-decade high levels. The key concern is a  potential overhang in light of past years’ gains and the revival of alternative products  (+40% rates in deposits and bonds) as affordability becomes a growing problem. While  this could be a drag for the broader stock market performance, large-cap private banks are likely to be less affected (see below). We reiterate our positive view.

Company Update Report: Galata Wind (GWIND)

Retail investors +5x since 2020; affordable inflation hedge

The absence of alternative investment products and constraints on buying big-ticket  tangible assets have positioned stocks as an attractive and ‘affordable’ inflation hedge for a broad audience. Retail accounts now exceed 8mn from 1.2mn in 2020.

Rising demand and regulatory actions have also led local institutional investors to raise  their equity exposures. The percentage of foreign ownership has declined to multi-decade lows. Meanwhile, corporates have reaped the benefit of the increased popularity of the stock market, and IPO and SPO numbers have risen steeply.


Flood of retail investors not a concern for large-cap banks

The Turkish stock market may seem to have the usual ingredients for an inflated market:  rising popularity among retail investors; continuing IPO wave; and triple-digit real returns  in various indices. We argue that this top-down approach is misleading as it is not a  widespread theme across sectors. Incremental retail demand has mostly targeted small  caps and IPOs. Our focus is blue-chip bank stocks and we see limited risks for a domestic-retail driven overhang, particularly for Buy-rated private  banks.

Higher free-float market caps, decent trading volumes and benign performance  and valuation levels suggest to us that retail involvement in these stocks is limited.

Buy Akbank, Garanti, Isbank and Yapi


Turkish private banks have performed well in 2023 versus EM peers, though  recovering off a low base. Their longer-term performances remain significantly below  EM banks as well as Turkish Industrial companies. We think  valuations remain attractive within the EEMEA and GEM universe. We  reiterate our Buy ratings for Akbank, Garanti, Isbank and Yapi.

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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and and has contributed to the financial daily Referans and the liberal daily Radikal.