“Fitch Ratings has downgraded the Long-Term Foreign-Currency Issuer Default Ratings (LTFC IDRs) of 20 Turkish banks and their subsidiaries. The agency has also downgraded the Viability Ratings (VRs) of 12 banks,” said Fitch Ratings in a recent note.

Still Profitable

Amid a challenging environment, Turkish banks are remaining profitable.

“Despite the economic and market turmoil that engulfed Turkey earlier this year, its banks’ profitability has mostly held up,” according to Reuters. “Returns on equity at Akbank, Yapi Kredi, which is co-owned by Italy’s UniCredit, and Garanti, owned by Spain’s BBVA, average around 15 percent. But the situation is likely to deteriorate.”

Garanti is TUR’s largest holding at a weight of almost 9%. Data indicate Turkish banks are cheap, but that does not guarantee significant upside over the near-term.

“After price declines of between 22 percent and 41 percent this year, shares in Akbank, Garanti and Yapi Kredi trade below their estimated tangible book value, according to Refinitiv data. Superficially, that looks too low for banks making double-digit returns. But, as Akbank’s rights issue indicates, investors’ concerns are probably justified,” according to Reuters.

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