Turkish Banks: 4Q 2015 Earnings Preview

Turkish banks are up 3.5% on average year-to-date with tailwinds from a better outlook for 2016 and easing regulation standards. However, since last year, Turkish banks have performed remarkable worse in a MENA context. The “exciting” period regarding the political risks and the continuation of downward trend in profitability were the key reason for the exceptionally weak performance.

Turkish Banks vs MENA Peers

This year has signs of relief for the industry with strong projected EPS growth figure after a tough year. Even if the most banks guided prudently on volume growth and asset quality for 2016, the bottom line are likely to improve with the help of higher fee income and lower operational expenses. That said, Akbank (BIST:AKBNK) remained as the most optimistic lender with aggressive growth expectations for the upcoming period. Easing regulations will somehow help all the banks to growth their businesses and to record lower provision expenses despite some NPL additions in the horizon. Having said that, accelerating earnings growth is enough to make a permanent optimist, as expected ROEs would still be held back this year.

I continue to prefer Akbank (BIST:AKBNK) and TSKB (BIST:TSKB). I believe Akbank is set for profitable growth in 2016 and should perform relatively better than its peers. TSKB is still a defensive pick against foreign exchange volatility and its top line will be supported by stronger CPI-linker revenues this year.

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