Turkey bank stocks soar in Q3 amid economic policy U-turn

Banks in Turkey registered sharp share price growth in the third quarter, fueled by increasing investor interest and monetary policy changes.

Türkiye Is Bankasi AS, Akbank TAS, Türkiye Vakiflar Bankasi Türk Anonim Ortakligi and Yapi ve Kredi Bankasi AŞ generated shareholder returns of between 40% to 81% in the three months to September-end, and the Turkish BIST Banks Index rose more than 61% over the quarter. The stock price of QNB Finansbank AS, the Turkish subsidiary of Qatar National Bank QPSC, increased nearly 833%, although only 0.12% of its shares are publicly traded, which means it can be subject to extreme volatility.

A weak lira and re-accelerating inflation have made Turkish assets more attractive to both local and foreign investors, while a recent shift by the government to a more orthodox monetary policy is also pushing stocks up. For the country's financial sector, the policy reversal, along with the easing of several central bank regulations, is expected to help restore some equilibrium.

Switzerland-based UBS Group AG was also on the best-performing list, with a share price return of 25%. It now ranks as Europe's second-largest bank by market cap as of Sept. 30.

UK-headquartered Standard Chartered PLC also made the list, with returns of 11.7%. The bank in July upgraded its 2023 income forecast to be in the range of 12% to 14%, versus a range of 8% to 10% previously, and outlined a new $1 billion share buyback plan.

– Access economic and demographic data for Turkey and Greece on the S&P Capital IQ Pro platform. – Access indexes including regional bank indexes on the CapIQ Pro platform.

Meanwhile, Greek banks' strong share price growth in the first half took a turn in the third quarter. Alpha Services and Holdings SA, National Bank of Greece SA and Piraeus Financial Holdings SA were among the worst-performing banking stocks for the three-month period, with negative shareholder returns ranging from 6% to 17%.

Poland's Bank Handlowy w Warszawie SA, Bank Polska Kasa Opieki SA and PKO Bank Polski SA were also in the red, on the back of an EU Court of Justice ruling in June on Swiss franc-denominated mortgages that meant banks will have to take higher legal risk provisions.

Belgium-based KBC Group NV also logged a negative shareholder return of 7.5%.

In general, European banks have outperformed their counterparts in Asia and the US. The S&P Europe BMI Banks index rose 21%, while the S&P Pan Asia BMI Banks index ticked up 5%. The US banks index dropped 9%.