What Fee Restriction Would Mean for the Stocks

Huseyin Aydin, head of the Turkish Banks’ Association, said that he expects the regulator to publish new rules that limit fees and commission charged by the banks (read the Bloomberg story here). This has been longstanding topic in the industry and eventually it will be likely made come true by the regulator.

This will also have an impact on industry, especially on banks capitalized by non-state investors. Additionally, we will probably see a switch by many analysts into state-run lenders. The chart below shows shares of fees and commissions in total income in both state-run and private sector banks.

Turkish Banks - Fee and Commission Income

According to analysts, as much as 20 per cent of bank’s fee generation may be at stake for a typical retail bank. This would lead an decrease of 3% in profits reported the by the banks. Not surprisingly this will be followed by lowered target prices and banks stock sell-off. Additionally earnings have already plummeted by 9% at the first half of the year on yearly basis.

It is speculated that government aims to become more dominant in the industry with implying new blocks to the foreign entrants. The new rule will also help the state-run lenders relatively perform better compared to others. This is providing important insight on shape of things in Turkish banking universe to come.