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Turkish bank shares are outpacing gains by non-financial stocks at the fastest pace in a year and a half as strong earnings momentum and a less volatile currency help to stoke investor demand.
The Borsa Istanbul Banks Index surged 47% over the past month, compared with an 18% advance for the Borsa Istanbul Industrials Sector Index. That’s the strongest outperformance by lenders against non-financial firms since February 2021.
A robust earnings performance by Turkish lenders and the fact that the lira has been trading in a narrow trading range over the past month has helped to pique the interest of investors, according to Bulent Sengonul, a banking analyst at Is Investment. The country’s banks raked in combined first-half profit that exceeded by fivefold what they earned in the same period a year ago, data from the country’s banking regulator showed this month.
“They have increased their profitability the most among other sectors this year, which is why we’re seeing this strong outperformance, although it’s rather cyclical,” Batuhan Ozsahin, Ata Investment’s chief strategist, said. “Until there’s an imminent trigger, such as a significant deterioration in the Turkish lira, the solid performance of banks is likely to continue.”
The Turkish banks index surged as much as 7.7% on Wednesday, the most since December, a day before the country’s central bank meets to discuss interest rates. Policy makers are expected to keep rates unchanged, according to a Bloomberg survey.
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