Bank shares in Turkey's private sector experienced a significant surge today, following an endorsement from Bank of America (NYSE:BAC). 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.
Analysts have forecasted that these private banks could generate returns on equity surpassing 30%, bolstered by improved core spreads and fee-based income. This optimistic outlook arrives after Turkey’s central bank raised its policy rate dramatically from 8.5% to 40%. Additionally, the central bank eliminated compulsory bond purchase requirements that served as punitive measures for banks that previously engaged in high lending rates or did not meet business loan quotas.
Alongside the rally in bank shares, Turkey’s broader stock market index also enjoyed an uplift, increasing about 1.4%. However, not all financial institutions shared in the positive sentiment; state-controlled banks like Halk Bankasi AS received Underperform ratings due to manageable asset quality issues. This contrasted with the more negative perspective seen earlier in the month when Citi issued a downgrade for these banks.
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