Bullish recommendations from BoFA,  Goldman propel Istanbul Stock Exchange to new highs

Bank shares in Turkey’s private sector experienced a significant surge today, following an endorsement from Bank of America. The recommendation came on the heels of Turkey’s central bank adopting more orthodox monetary policies, leading to a notable increase in the Borsa Istanbul Banks Index by up to 4.5%. Key players such as Akbank TAS and Yapi ve Kredi Bankasi AS saw considerable gains in their share prices, reported Bloomberg on Monday morning. The  main index BIST-100 closed the day  up by 1.8% on expectations of  foreign funds increasing equity positions.

BoFA wrote:

Positive on private banks – Buy ratings across the board

We believe Turkish private banks’ RoEs should settle north of 30%. This is higher than  our long-term CoE assumptions. With c65% total return in TRY terms or +25% in USD  terms, we think valuations are attractive. We have Buy ratings on Akbank (upgraded from  Neutral), Isbank (upgraded from Underperform), Garanti and Yapi. We reiterate our  Underperform ratings on Halk and Vakif given lower profitability, limited capital buffers  and above-sector PB multiples.


While Goldman analysts commented that

We make changes to our estimates for Turkish banks incorporating 3Q23 results and for the latest macro and banking sector trends. We maintain our cautious view on Turkish banks on the back of the challenging macro backdrop. An improving and stable macro backdrop could make us more constructive on the operating outlook, and by extension a more stable FX and operating outlook could improve investor risk/reward perception around Turkish banks.

We increase our EPS estimates for our Turkey banks coverage by c.7% on average for 2023-25E on the back of higher revenue estimates (mainly from improving non-interest income) on average and lower credit costs on average, which is partly offset by higher expenses growth. Our price targets are up c.5% on average for the Turkish banks.

The team recommends Akbank, while staying neutral on Garanti and Is Bank.  It rated state-owned Halk and Vakifbank as “sell”.

Bank shares also received a boost from the government, which delayed the transition to inflation accounting for all financial companies for two years, a step certain to bloat profits on virtue of 60% +CPI.

The inflows from foreign funds exceeded $200 mn over the last two data weeks. BIST-100 could test new records, if as reported by Bloomberg, UAE agreed to buy sukuk from Turkish Treasury. On the other hand rising TL deposit rates are an obstacle to a sustained rally.  Borsa Istanbul gained over 5 million new investors over the last two years, tripling the total, a large portion of which are savers not used to the roller-coaster ride of equities and can be expected to sell at the first bad news or correction.


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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 www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.