Bad news for Turkish banks from JPMorgan... 'It will get even worse'

As attention in domestic markets turns to second-quarter financial results, JPMorgan's analysis of banking balance sheets has indicated that the second quarter will be the bottom point.

In a report dated July 23 prepared by Mehmet Sevim, Samuel Goodacre, and Sukanya Khan, it was stated that core trends in the banking sector would worsen in the second quarter as macroeconomic adjustments impact bank balance sheets, and that this quarter could mark a bottom point for the sector.

The report projected that the average return on tangible equity for banks in the second quarter would be around 20 percent, noting that with annualized inflation at 35 percent in the same quarter, this situation is shaped by intense pressure on net interest margins.

'PART OF THE RECOVERY JOURNEY'

However, analysts predicted that this quarter would be a bottom point in this regard, and that net interest margins would expand starting from the third quarter. It was stated that this would bring about a recovery in return on tangible equity towards the end of the year.

According to JPMorgan's analysis, Garanti is on the positive side with a 29 percent return on tangible equity due to higher margins compared to its competitors. While analysts said they were less concerned about short-term balance sheet pressures at the sectoral level, they viewed these as part of the recovery journey.

Nevertheless, stating that they see limited upside potential, JPMorgan analysts noted that revaluation from this stage onwards would come with more pronounced disinflation, and that a few quarters must pass for a recovery in medium-term return on tangible equity to materialize.

News Source: 12punto