Posted on 14 February 2011
Turkish banks still ‘safe bet,’ Credit Suisse says
Turkish banks remain a good investment in 2010, according to a new report by Credit Suisse. Although investing in Turkish banks is not as cheap as it was last year, the report remained positive that Turkish banks are a better investment than their counterparts in Europe, the Middle East and Africa, or EMEA.
Turkish lenders “still provide a better long-term risk/reward than the overall EMEA banks universe,” according to the report, released last week.
Last year, banks in Turkey outperformed MSCI’s EMEA banking index by 15.4 percent. As a result of this performance, stock prices have risen relative to net income, reducing their attractiveness as investments. Despite this correction, Credit Suisse analysts believe Turkish banks will continue to outperform in 2010.
“Turkish banks offered the region’s best earnings growth in 2009 and benefited from a large drop in cost of equity,” the report said. “Our analysis indicates that Turkish banks, despite their strong performance in 2009, still have better risk/reward profiles than most of their EMEA peers. Thus, we are maintaining our long-standing positive stance for the time being.”
This year, Credit Suisse is most bullish on Garanti and Isbank.
“When we look at current valuations … two banks — Garanti and Isbank — seem to offer better risk/reward profiles than their peers, and we select these banks as our top picks for 2010,” said the report.
Both banks are predicted to have high earnings and relatively low price-to-equity ratios.
The analysts were somewhat concerned about what political risks on Turkey’s unpredictable domestic scene mean for economic development. Tension between the “secularist establishment” and the governing Justice and Development Party, or AKP, was only one concern. Another concern was that there has been “no regulatory response” in Turkey’s banking system following the global financial crisis.
According to the report, “These factors signify a regulatory risk … which could be triggered by political influences. Given the approaching parliamentary elections in 2011 and the tendency of governments to implement populist measures pre-elections, we believe the regulatory risk for the Turkish banking sector is not negligible.”
14 March 2010 Source Hurriyet Daily News