Turkish Banks Lead Stock Surge on US Payrolls; Bonds Rally

Turkey’s banks including Turkiye Halk Bankasi AS (HALKB) and Yapi & Kredi Bankasi AS (YKBNK) led the country’s benchmark gauge to the highest in more than a year after U.S. payrolls rose more than forecast. Bond yields plunged.

The ISE National 100 Index (XU100) climbed 2.4 percent to 65,303.64, the highest since May 2011, at the close in Istanbul as the banking measure surged 3.4 percent. Yields on benchmark two-year government bonds dropped 18 basis points, or 0.18 percentage point, to 7.49 percent, the lowest in more than 1 1/2 years. The lira appreciated 1.3 percent to 1.7793 against the dollar, the biggest gain this year.

Gains were led by state-run lender Halkbank, which surged 5.9 percent, the most in almost a year, to a record high 16.25 liras. Payrolls in the U.S. climbed a more-than-forecast 163,000 in July, according to data released today, sending stocks in the U.S. and across Europe higher. Turkey led gains in eastern Europe, where 13 of 17 stock exchanges tracked by Bloomberg gained.

“Turkish banking sector fundamentals have been improving and it looks like the third quarter will not be as bad as we had forecast, necessitating an upward revision to full-year earnings forecasts,” Funda Afacan, a banking analyst at brokerage BGC Partners in Istanbul, said by e-mail. A drop in the central bank’s effective funding rate will boost the banks’ earnings, she said.

The average cost of central bank funding fell to 7.52 percent today from an average of 9.02 percent in June as central bank Governor Erdem Basci has provided more financing from the lower end of his so-called interest rates corridor, which allows him to vary rates on a daily basis between 5.75 percent and 11.5 percent.

Turkiye Garanti Bankasi AS (GARAN), Turkey’s largest lender by market value, rose 3.1 percent, and Turkiye Is Bankasi (ISATR) AS, the largest bank by assets, increased 3.9 percent. Yapi Kredi, part- owned by UniCredit SpA (UCG), added 4.6 percent, the most in more than a month.

To contact the reporter on this story: Benjamin Harvey in Istanbul at bharvey11@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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