Bloomberg News

Goldman Turns Negative on Turkish Banks as Earnings Peak Seen

February 05, 2013

Goldman Sachs Group Inc. turned negative on Turkish bank stocks, saying it’s concerned that central bank tightening will hurt earnings while rising U.S. Treasury yields lure funds away from the country.

Turkish bank earnings will probably peak this quarter “and then decline sequentially,” Goldman Sachs analysts Dmitry Trembovolsky and Alexey Butylin said in an e-mailed report dated yesterday.

Yapi & Kredi Bankasi AS (YKBNK), part-owned by Italy’s UniCredit SpA (UCG), is most vulnerable to a retreat in its share price, the analysts said. The Turkish bank stock index has gained 42 percent in the past 12 months, outperforming the 7.8 percent gain by the MSCI Emerging Markets Financials Index (MXEF0FN) over the same period, according to data compiled by Bloomberg. Yapi & Kredi shares surged 93 percent last year.

The governor of the nation’s central bank, Erdem Basci, has said he’ll limit loan growth to 15 percent this year as he attempts to reduce the import-driven current-account deficit.

“The bear case for Turkish banks concentrates on three points: risks to earnings, sizable outperformance over the past 12 months and rising U.S. yields,” Goldman Sachs (GS:US) said. “As U.S. 10-year Treasury yields have moved to 2 percent, the key bull argument on fund flows has weakened. Repatriation of flows into the U.S. has potential to threaten Turkish macro stability, and could ultimately result in a much more hawkish Turkish central-bank response.”

The value of foreign investors’ holdings of Turkish stocks and bonds fell by more than $1 billion in the week to Jan. 25, according to data published by the central bank on Jan. 31. Foreign investors purchased $5.9 billion in Turkish stocks and $17.3 billion in Turkish bonds in the year to Jan. 25, according to the data.

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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