Turkiye Is Bankasi AS (ISCTR), Akbank TAS (AKBNK) and Turkiye Garanti Bankasi AS (GARAN) led gains on the Borsa Istanbul today as bond yields dropped the most in more than 14 months, helping cut their funding costs.
Isbank, Turkey’s third-biggest lender by market value, added 4.3 percent, rising for the first time in six days, to close at 6.74 lira in Istanbul. Akbank climbed 1.8 percent, the most since March 26, to 9.14 lira. Garanti, the lender co-owned by Spain’s Banco Bilbao Vizcaya Argentaria SA (BBVA), rose 3.1 percent, also the first advance in six days, to 9.32 lira. The 16-member banking index surged 2.4 percent in its biggest advance since March 8, leading gains on the Borsa Istanbul National 100 (XU100) index, which rallied 1.6 percent.
Two-year benchmark bond yields plunged as much as 31 basis points, the most since January 2012, to 5.78 percent. Earlier in the day, the Treasury in Ankara sold 3.08 billion liras ($1.72 billion) of five-year debt at an average yield of 6.38 percent, down from 6.54 percent in a March 18 sale of the same-maturity debt.
“The continuing decline in yields is having a positive effect on banking stocks,” Alpay Dinckoc, an analyst at Oyak Securities in Istanbul, said in a phone interview today. The drop helps cut their cost of deposits, he said.
Standard & Poor’s upgraded Turkey to one level below investment grade on March 27, matching the rating from Moody’s Investors Service. Fitch Ratings raised Turkey to investment grade in November.
“Until the last week of March, there was a pronounced slowdown in foreign capital inflows,” Gizem Oztok Altinsac, an economist at Garanti Investment in Istanbul, said in a note to investors today. This picture changed after the March 27 rating upgrade from S&P, Altinsac said, noting that the acceleration in capital inflows would correspond to an “increase in loans and recovery in the economy.”
The average annual interest rate that Turkish banks pay savers for one-year deposits dropped to 6.63 percent today, down from 7.05 percent at the start of the year, according to data compiled by Bloomberg. That compares with investor expectations of 5.64 percent annual inflation, as implied by the two-year breakeven rate.