Bloomberg News

Turkey Bank Shares Cut to ‘Equal-Weight’ at Morgan Stanley

October 21, 2011

(Updates with bank shares in seventh paragraph.)

Oct. 21 (Bloomberg) -- Turkish banks were cut to “equal- weight” from “overweight” in the regional banking portfolio at Morgan Stanley, which cited a deteriorating earnings outlook, higher risk and rising inflation.

“We are now more neutral towards Turkish banks, without being extreme bears,” Morgan Stanley analysts Magdalena Stoklosa and Samuel Goodacre wrote in the report e-mailed today. “We think the transition to a full normalization in the maturing system, now operating in a lower interest rate scenario, will not be smooth.”

Bank earnings may contract 5 percent to 30 percent in 2011 and remain flat in 2012, according to the Morgan Stanley report. Return-on-equity is expected to decline next year.

“With 2012 return on equity profiles at the Turkish banks now down to 11 percent to 16 percent, we see better value in Russia for growth and South Africa for its defensive qualities,” the analysts wrote.

Turkiye Garanti Bankasi AS, Turkey’s largest bank by market value and part-owned by Banco Bilbao Vizcaya Argentaria SA, was downgraded to “equal-weight” from “overweight,” with the analysts citing “limited upside” and falling earnings.

Among Turkish banks, only Yapi & Kredi Bankasi AS, a joint venture between UniCredit SpA and Koc Holding AS, was maintained at “overweight.” The bank is “the most mispriced Turkish bank,” with an underestimated “return profile” that’s less volatile than peers, the report said.

Garanti rose 2.6 percent to 6.44 liras at the 5:30 p.m. close in Istanbul, paring its loss this week to 7.2 percent. Yapi Kredi was unchanged at 3.65 liras. Turkiye Halk Bankasi AS, which dropped 7 percent yesterday, gained 3.5 percent to 11.75 liras.

The overall index of banking shares gained 2.1 percent, paring its weekly loss to 7.3 percent.

--Editors: Linda Shen, Alex Nicholson

To contact the reporter on this story: Benjamin Harvey in Istanbul at

To contact the editor responsible for this story: Gavin Serkin at

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