In its research report, Bank of America indicated an improvement in the condition of Turkish banks. The report stated that the average target prices have been updated upwards by 110%, and it recommended a ‘buy’ rating for Garanti and Yapı Kredi.
According to the report published by Bank of America (BofA) on Turkish banks, it was noted that the condition of the banks has started to improve, but caution should continue to be exercised.
The bank mentioned that, for the first time in the past decade, Turkish banks are expected to trade at a price-to-book value ratio of 1.0.
BofA stated that they anticipate an upward trajectory in the price-to-book value ratio for private banks over a 12-month period, expecting that supportive regulations will boost equity profitability and an increase in political stability will lower the cost of equity. They mentioned that a price-to-book ratio of 1.2 would be a reasonable estimate for these banks.
According to the report, the U.S. bank expects that by 2025, the average return on equity for private banks will exceed both inflation and the cost of equity.
BofA recommended a “Buy” rating for Yapı Kredi and Garanti BBVA, expecting their return on equity to be above 30% in 2025. They also noted that for Akbank, the relaxation of regulations reduced the pressure on its operations, and it was considered reasonably valued.
Regarding İş Bankası, the report maintained an “Underperform” rating based on relative valuation reasons. For public banks, it was mentioned that lower performance was expected due to the risk associated with the high number of outstanding shares.
The report indicated a 110% increase in the average price target due to improvements in macro credit quality. The expected per-share return for the period between 2023 and 2025 was set between 36% and 52%.
The report stated that the return to Orthodox policies and the well-designed Medium-Term Program have increased international credibility. It was mentioned that the inflation forecast for 2023 is 70%, and for 2024, it is expected to peak at 78% in May, with inflation reaching 40% by the end of the year.